Nigeria ends fuel subsidies, angering unions

Reuters News
Posted: Jan 01, 2012 3:03 PM
Nigeria ends fuel subsidies, angering unions

By Felix Onuah and Camillus Eboh

ABUJA (Reuters) - Nigerian authorities scrapped fuel subsidies with immediate effect on Sunday, 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."

"Petroleum products marketers are to note that no one will be paid a subsidy on PMS discharges after 1st January 2012," said the statement signed by the agency's executive director, Reginald Stanley.

The Trades Union Congress and Nigerian Labour Congress called for mass action.

"We alert the populace to begin immediate mobilisation towards the D-Day for the commencement of the strikes, street demonstrations and mass protests across the country," they said in a joint statement.

"This promises to be a long drawn battle; we know its beginning, but we do not know its end or when it will end. But we are confident that the Nigerian people will triumph."

Going ahead with the plan will save the Treasury over 1 trillion naira ($6.13 billion) in 2012, according to the government - money that critics such as the International Monetary Fund (IMF) said mostly benefited fuel importers.

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) 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.

Labour and transport unions, human rights groups, market traders, taxi drivers and lawyers' associations are all bitterly opposed to having the subsidy removed.

"The government has deceived us," said Peter Udor, an Abuja electrical engineer. "They told us that the subsidy will be removed after the budget approval by the national assembly in March or April ... This shows that the government is insensitive to the plight of (the) majority of Nigerians. It's unfair."

Rosemary Abiogu, a nurse, said: "Subsidy removal signals more hardship for (a) majority of Nigerians. Prices of fuel will not only go up but also those of other essential goods. They should have put the palliatives in place before removing the subsidy."

The government has said that any increase in the cost of goods will be offset in the medium term by economic reforms, such as more efficient customs clearance at ports, that should reduce the cost of imports. Analysts agree.

"There will be an impact on inflation - my forecast is that at most CPI goes up by a modest 2 percent - but the productivity gain is that the price of petrol will be efficient," said Bismarke Rewane, managing director for Lagos-based consultancy Financial Derivatives.

"It will attract more investments into the sector like building of refineries, pipelines, storage facilities etc. and all these will translate into efficiency gains for the economy." ($1 = 162.3000 naira)

(Reporting by Felix Onuah and Camillus Eboh; Additional reporting by Chijioke Ohuocha in Lagos; Writing by Tim Cocks; Editing by Alessandra Rizzo)