Nigeria: Workers Buck IMF

Publisher Name: 
Financial Times

The Nigerian Labour Congress yesterday threatened to render Africa's most
populous nation ungovernable if President Olusegun Obasanjo went ahead with
plans to phase in the deregulation of fuel supplies in an attempt to end
chronic shortages.

Speaking at a rally in Lagos, the commercial capital, Adams Oshiomole, the
uncompromising leader of the congress, the country's umbrella trade union
movement, heaped abuse on Mr Obasanjo's government, saying it had failed on
all counts to improve the lives of Nigerians since the corrupt and
incompetent rule of the military ended nearly two years ago.

The government was now planning, he said, to make life even more difficult
by allowing petrol prices to rise above their current subsidised level of
N22 (13 pence) a litre to a rate determined by the world oil market.

"We cannot pay world prices because we do not earn world incomes," Mr
Oshiomole said. "When the day comes (deregulation), if monkey goes to
market, he will not return," he threatened with a local proverb meaning
that those who stir up trouble find them-selves in trouble first.

The rally was sparsely attended by Lagos standards. But members of a
1,000-strong crowd said there should be no mistaking the determination of
Nigerians to resist another fuel price rise.

The precedents are there. Mr Obasanjo was forced to back down last year
when his attempt to increase prices by 50 per cent resulted in a violent
general strike. This in turn strengthened the hand of the unions, which
have won back a place at the negotiating table under Mr Oshiomole's
charismatic leadership and with the new-found freedom of civilian rule.
Barely off the ground Mr Obasanjo's programme of economic reforms is facing
rising opposition.

The unions oppose the principle of liberalisation, because of the likely
rise in the price of basic necessities controlled, albeit with disastrous
consequences, by the government.

Conservatives in the establishment are quick to take advantage of this
because eliminating the inefficiencies that exist in the current climate of
subsidies and state monopolies will end their access to government patronage.

Yet this year may provide Mr Obasanjo with his last opportunity to drive
through painful measures, which could engender improvements in
infrastructure and supplies, before the electoral cycle begins again, and
all issues become increasingly politicised.

Of these, there is none more sensitive than the fuel crisis. Nigerians have
come to believe that governments unable to provide other basic services
with the proceeds of Nigeria's 2.2m b/d oil industry, should at least
provide cheap fuel.

Unfortunately the state has proved unable even to do that. For the first
quarter of this year, the pumps at petrol stations have been dry. The
premium-priced black market, which usurped the formal one under the corrupt
control of past regimes, has taken over. Smuggling to neighbouring
countries where profit margins are greater is continuing at its usual pace.

Africa's leading oil producer could be awash with cheap fuel. Its four
refineries have the capacity to produce a third more than domestic
requirements of 300,000 b/d. Yet last year, 82 per cent of these were
imported.

Despite tens of millions of dollars of state investment, little progress
has been made in repairing the refineries, which were allowed to collapse
in the past because of the commissions enjoyed by officials involved in the
lucrative import trade.

An exasperated Mr Obasanjo said recently that Nigeria was "jinxed" and that
he would have to "consult the elders" to find a solution. The former
military ruler, who presided when head of state in the 1970s over the
nationalisation of Nigerian industries, has since become a passionate
advocate of deregulation.

"We have to make it competitive to produce locally. No one in their right
mind will set up a refinery to sell at the subsidised price, or to import.
And some of the people say 'don't deregulate' because they benefit directly
from regulation," he argued recently. But there is logic, too, to Mr
Oshiomole's counter-argument, which is certainly more popular. If the
government was prepared to break up the state-run Nigerian National
Petroleum Corporation, NNPC, he says, and stop corruption at the
refineries, it could sell Nigeria's cheap-to-produce "Bonny light" crude to
the private sector at the same rate of Dollars 9.50 (Pounds 6.60) a barrel
it sells it to the NNPC. Then it would be possible both to maintain low
prices and to fill the pumps.

It has become a chicken and egg sitution, because the refineries have
proved impossible to fix while under state control. Yet they are unlikely
to sell at more than give-away prices, say officials charged with
privatising Nigeria's ailing state enterprises, unless the government first
deregulates distribution and supplies.

This time, Mr Obasanjo appears determined to push ahead with a gradual rise
over the next year towards market determined fuel prices. But as Mr
Oshiomole has warned, he risks in the process making Nigeria even more
ungovernable. For regional reports, http://www.ft.com/mideastafrica.

AMP Section Name:Energy
  • 107 Energy
  • 194 World Financial Institutions