The End of Nigeria’s Strike May Not Calm Oil Markets

On New Year's Day, Nigerian President Goodluck Jonathan ended the country's decades-old federal petroleum subsidy, which had kept gasoline and other petroleum products available to Nigerians at substantially below market price. In days, a liter of gas more than doubled to 93 cents. Despite the country's abundance of crude oil (it extracts more than 2 million barrels a day), Nigeria lacks refining capacity and has to spend billions (in the first quarter of last year, $1.34 billion, to be exact) importing fuel not only for transportation, but also to power the diesel generators that provide much of the country's electricity.

Economists and much of the international banking community argue the costs of the fuel subsidy impede development and lay an unsustainable burden on Nigeria's finances. The Jonathan administration says the subsidy costs his government more than $8 billion annually. Dating back to the aftermath of the 1966-70 civil war, successive governments have tried, and failed, to eliminate it.

But everyday Nigerians see the fuel subsidy as their only benefit from one of the world's largest oil industries that has otherwise enriched just a small number of oligarchs. That is why they have been pouring into the streets to protest. Prominent religious leaders, such as the Roman Catholic Archbishop of Abuja, have long defended the subsidy as a moral and ethical right. Based on the country's long history of corruption and financial mismanagement, today Nigerians are dubious of any claims that the average person will benefit from spiking it. 

After January 1 when oil prices shot up, and along with them the cost of everyday goods, the country's revived trade unions called a general strike to demand the restoration of the subsidy. With the support of many civil society groups, the strike effectively shut down Nigeria's economy. But it wasn't just the unions -- Nigeria's largest cities saw plenty of people unaffiliated with the labor movement march in the streets, suggesting the issue was important, but so was graft and mismanagement. Further evidence of the strike's broad appeal: they have united a country notoriously divided by religion and ethnicity. For example, in recent weeks the Muslim irregular police, the Hisbah, hitherto notorious for anti-Christian pogroms, have protected churches in Kano, the most important Muslim city in the North. Icons such as the Nobel-winning author Wole Soyinka and his fellow literary lion Chinua Achebe, who have long been critics of Nigeria's corruption and bad government, voiced their support as well.

Last Thursday, Jonathan, members of the National Assembly, and trade union leaders began negotiating a compromise that would, over time, reinstate the subsidy while spending money on new refineries and other infrastructure projects. The talks stalled through the weekend, but on Monday Jonathan reinstated about half of the subsidy while saying he was still looking to abolish it altogether, perhaps as soon as April. He blamed the unions for the negotiation's impasse and said his political enemies had hijacked the chaos to gain an edge. The trade unions, in turn, suspended their strike. However, they emphasized the Jonathan administration's decision was unilateral and that they capitulated, "in order to save lives and in the interest of national survival."

But in many ways this is where the story begins. Jonathan may have been willing to return some of the subsidy, but now he appears to be turning to repression. The same day he announced a compromise, he sent the military to protest venues in Lagos. Security services raided news offices, including those of the BBC and CNN. Jonathan called for the arrest of a list of prominent human rights activists, and there have been allegations that Niger Delta militants were hired to intimidate trade union officials. The governor of Lagos has already criticized Jonathan's strong-arming. In a few places, police had actually joined the protestors, but for now the military appears to remain loyal to the regime. At least twenty people have been killed and more than 300 have been injured, many by the security services.

But there may be another reason that Jonathan is playing hardball. Reports about Christian and Muslim solidarity in Kano and elsewhere notwithstanding, the radical Islamic movement Boko Haram has continued its attacks on Christians in the predominately Muslim North. In parts of the mostly Christian South, vigilante groups have vowed to take revenge for Christian deaths on local Muslims. As a consequence, significant numbers of Christians are leaving the North and Muslims are leaving the South, potentially worsening the government's burden of caring for internally displaced people and exacerbating the country's longstanding geographical and religious divisions.

On one level, fuel subsidies and the violence of Boko Haram are not directly linked. However, as Jonathan's government botches both issues, the question over his government will move from one of corruption to one of competency. Should the military, police, and security services ramp up the repression quotient to quiet discontent over fuel subsidies, anger will rise. At the same time, in the north, many have resented Abuja since the elections last April that they considered fraudulent; they could see this as a vulnerable moment.

Taken together, Jonathan is in danger of losing control of two volatile situations. All parties see only weakness. That could further embolden Boko Haram or militants in the Niger Delta who continue to threaten mayhem if their regions do not receive a larger proportion of oil revenues. Considering that organized labor has demonstrated that it can shut down Nigeria, should they cultivate the backing of the wider population, there is potential for real turbulence ahead. If Jonathan reneges on his promises to improve oil infrastructure and tackle corruption, it could mean a new round of strikes. This time, the oil production workers did not carry out their threat to close down exports, which provides the government with eighty percent of its revenue, and millions of barrels to global markets. In a future strike Jonathan might not be so lucky.