NIGERIA: Authorities scrap fuel subsidies with immediate effect throwing a political bombshell in a country where the majority of people struggle to survive on two dollars a day. Unions have called for mass strike action and demonstrations

Record ID: 235427

  • Title: NIGERIA: Authorities scrap fuel subsidies with immediate effect throwing a political bombshell in a country where the majority of people struggle to survive on two dollars a day. Unions have called for mass strike action and demonstrations
  • Date: 3rd January 2012
  • Summary: (SOUNDBITE) (English) IBRAHIM SOLILE, TAXI DRIVER IN LAGOS, SAYING: "No one is able to do anything for Nigeria except God, so there is nothing to fight for, the Christians are in government the Muslims are in government, but God will help us, not these people, so no fault of government, everything is in the hand of God"
  • Embargoed: 18th January 2012 12:00
  • Keywords:
  • Location: Nigeria, Nigeria
  • Country: Nigeria
  • Topics: Economy,Politics
  • Reuters ID: LVA6SYU12T7M4RSHAI4ECCHTPUL3
  • Story Text: Nigerian authorities scrapped fuel subsidies with immediate effect on Sunday (January 1), angering motorists and prompting unions to call for a repeat of the strikes and street protests that thwarted previous attempts to end the scheme.
    Many Nigerians see cheap fuel as the only benefit they get from living in Africa's top crude oil exporter.
    A statement by the Petroleum Products Pricing Regulatory Agency (PPPRA) announced the "formal removal of the subsidy on Premium Motor Spirit".
    Many fuel stations in the capital Abuja and main commercial city Lagos were shut on Monday while they waited to figure out how to adjust their prices. Those that were open were jammed with queues and selling at prices of up to 150 naira (0.92 US dollars) per litre, up from a fixed price of 60 naira before.
    Opposition leaders, unionists and local rights groups have condemned the move by the state's fuel regulator, which they say will heave up prices in a nation already to expensive for the majority of its citizens living on less than 2 US dollars per day.
    Pricilla Adeyanju, a nurse in Lagos said the removal was unfair at a time when most of the country's infrastructures were decaying or non-existent and salaries stagnant.
    "I have been here for one hour, I should be attending to patients you can see I am in scrubs, I am supposed to be on duty. Suppose there is an emergency in a country where things are not working well, if you want to remove fuel subsidy, we are not saying you shouldn't do it, do it at the right time where you have put the road in order, make all the employers get results from what they are working for, put electricity in order, school fees are going to increase, I know how much I pump out for my sibling in school," she said.
    The hike has inflamed people already disillusioned by the government's ability to provide for its people and risks bringing public wrath down on President Goodluck Jonathan, who says it is needed to reform the economy.
    The Trades Union Congress and Nigerian Labour Congress called on Sunday for mass action to repeat strikes and street protests that thwarted previous attempts to end Ibrahim Aliu, a businessman in Lagos, cautioned the government against misusing the extra income saying he hoped the leadership would use extra cash to improve people's standard of living.
    "I believe some countries their price is more than this, but their government is doing well, but if our government will follow like other countries, then fine, we don't have problem, but if they know that they can not be able to do well for the masses, then I believe they have to reduce it," said Aliu.
    Others, like 71 year-old Ibrahim Solile, said he had no faith in politicians, only in God.
    "No one is able to do anything for Nigeria except God, so there is nothing to fight for, the Christians are in government the Muslims are in government, but God will help us not these people, no fault of government, everything is in the hand of God," said Solile.
    Going ahead with the plan will save the treasury over 1 trillion naira (6.13 billion US dollars) in 2012, according to the government - money that critics such as the International Monetary Fund (IMF) said mostly benefited fuel importers.
    Central Bank Governor Lamido Sanusi said Nigeria used 16 billion US dollars of its foreign reserves on imported fuel in the first 11 months of last year - half of it sold by the bank to petroleum importers, the other half spent by the Treasury on the subsidy.
    Bismarcke Rewane, managing director Financial Derivatives, a Lagos based consultancy said the removal of the fuel, although a neccessary measure, would have a minimal effect on the country's inflation.
    "The impact in general terms in our assessment will come to almost a 2 percent increase in the Consumer Price Index in the sense that urban transportation cost will increase, cost of petrol generators by artisans will increase, the motorcycles, the buses within the cities will increase, apart from the general psychology of an increase in cost and a reduction in income means people make some adjustments," said Rewane.
    He added that the present crisis was borne out of mistrust of government by the people of Nigeria and that government would have no option this time but to meet their promises.
    "The crisis today is not because of fuel subsidy, the crisis is that the governments in Nigeria, subsequent governments in the past have always underperformed people's expectations, so the people claim that the government has no moral or coat justification for removing this subsidy because they can feel it, and if you remove it where is the guarantee that what they are going to get in return is going to put them in a better position," he said.
    Nigeria produces over 2 million barrels per day of crude oil but a lack of investment in refineries and infrastructure means almost all of this is exported, while refined products such as petrol have to be imported at great cost.
    Finance Minister Ngozi Okonjo-Iweala has admitted that letting markets determine the pump price of petrol will push it up to 120 naira (0.74 US dollars) per litre, from 65.
    Central Bank Governor Lamido Sanusi said Nigeria used $16 billion of its foreign reserves on imported fuel in the first 11 months of last year - half of it sold by the bank to petroleum importers, the other half spent by the Treasury on the subsidy.
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