Nigeria’s fuel regulator announced the end of the subsidy on January 1 as part of efforts to cut government spending and encourage badly needed investment in local refining.
Those who support scrapping the subsidy say it only served to fill the fuel tanks of the rich and middle classes at the expense of the poor, fed corruption and siphoned off billions of dollars of public funds to a cartel of fuel importers.
“It was 25 percent of total expenditure in the budget, the single biggest item – more than education, health and agriculture combined,” said Bismarck Rewane, chief executive of Lagos-based consultancy Financial Derivatives. “As long as they spend the money right, removing the subsidy has to be good.”
But unions and ordinary Nigerians are furious that overnight, the price of a litre of petrol has shot up to around 150 naira from about 65 naira before.
Last week thousands of Nigerians gathered in cities, including the capital Abuja and commercial hub, Lagos, to show their anger, and mass demonstrations by ordinary Nigerians are planned to coincide with the strike on Monday.
Oil industry experts say the strikes are unlikely to have an impact on oil output as production is largely automated and installations well guarded.
President Goodluck Jonathan pleaded with Nigerians to support the removal of subsidies in a live televised speech on Saturday and the lower house of parliament urged both sides to back down in an emergency session on Sunday.
That looks unlikely, with unions reiterating their threat to strike for as long as it takes to force a government U-turn, despite a court ruling that the industrial action is illegal.
“We hope and pray that President Goodluck Jonathan will listen to the loud voice of the Nigerian people … by immediately suspending the fuel price hikes,” the unions said in a joint statement.
Most people in Nigeria live on less than $2 a day and many – the poor and well-off car owners alike – see cheap fuel as the only tangible benefit they derive from an oil-rich state where corruption bleeds billions of dollars from state coffers.
Critics say wealthy politicians could have found savings within government first and tackled oil industry corruption, before imposing a sharp hike in fuel prices on the public.
But Nigeria’s oil sector has been badly distorted by the subsidy.
Until the new pricing regime came in, economists say there was no incentive to invest in its oil refineries and reverse disrepair caused by decades of corrupt mismanagement.
That means that despite producing 2 million barrels of crude every day, the country is forced to import costly refined fuel.
The subsidy also spawns smuggling into neighbouring nations like Benin and Cameroon where fuel is more expensive.
The government estimates it will save 1 trillion naira this year by eliminating the subsidy. Reuters