Nigeria and the Politics of Price

Long before the Occupy movement forced economic and class inequality onto the political agenda in the U.S., Nigeria had its own “We are the 99%” rallying cry. According to the World Bank, more than 80 per cent of the vast oil revenues flowing into the country – $59 billion in 2010, accounting for “more than 80 per cent of government revenues and 95 per cent of foreign exchange income” – were captured by one per cent of the population. The spectacle of political, military, and commercial elites participating in a corrupt and explosive struggle for oil wealth highlights the deep rupture between rulers and ruled in a large, complex, oil-rich state of 160 million people, where 70 per cent of the population lives in poverty and life expectancy stands at 47 years.

Nigeria is typically held up as the worst example of virtually every species of developmental failure: rampant official corruption, corporate bribery, decaying social and physical infrastructure, military indiscipline, ethnic and religious insurgencies, industrial and agricultural decay, and deplorable health indicators. Yet the country’s demonstrated failure to effectively produce any industrial good – even electric power – has blocked any ability to resuscitate the national economy. The seventh most populous country in the world has roughly as much grid power as Stockton, CA.

Against this backdrop of failed oil development, the untold misery of millions in the slum worlds of Lagos and Port Harcourt, and the utter desolation of village life in the Nigerian countryside, it is perhaps no surprise that President Goodluck Jonathan’s rash and abrupt decision on Jan. 1 to abolish petroleum subsidies (which, by the government’s account, cost the administration $8 billion a year, more than a quarter of the total government budget) and raise fuel prices from N65 to N141 overnight produced such an explosive reaction on the streets.

The popular reaction to the cuts was swift. Strikes led by the Nigeria Labour Congress and popular protests across the country brought the Nigerian economy to its knees. The government responded quickly, sending a large military presence onto the streets in all of the major cities (at least 20 people were killed and more than 300 injured, mostly in Lagos and Kano). Unions’ strike action – in part driven by the oppositional political parties – and civil-society groups’ massive popular mobilization compelled Jonathan to back down. On Jan. 16, after five days of protest and escalating tensions with the prospect of the major oil union going on strike, the government inevitably capitulated and reinstated about half of the subsidy, lowering the cost of fuel to N97 per litre in recognition of the “hardships being suffered.” While the immediate pressures surrounding the politics of price have been reduced, popular sentiment rejected the compromise struck by the unions, and further protests are planned over the government’s militarization of the cities.

The fuel strikes signal much deeper structural problems. Nigeria faces two homegrown insurgencies, both driven by a deeply frustrated population of youth confronting limited job prospects and a profoundly insecure future. In the Muslim north, rising inequality and poor governance have nurtured a popular Islamist insurrectionary movement labelled Boko Haram (roughly meaning “western education is forbidden,” though its official Arabic name translates to “People Committed to the Propagation of the Prophet’s Teachings and Jihad”). Boko Haram draws on historical Islamic traditions of popular justice and, in less than a decade, has significantly expanded its ability to launch assaults against security forces. It makes headlines for its spectacular jailbreaks and political assassinations, but the movement’s real strength arises from energy generated by the demographic time bomb ticking within the region: a gigantic youth bulge driven by a high fertility rate, coupled with social and economic collapse (a low adult literacy rate and the collapse of textiles, once the region’s largest employer). Impoverished and uneducated, the rural poor flee to the northern cities, often assuming the guise of Quranic students who share common urban religious spaces with unemployed secondary and university graduates.

Life in the oil-producing Niger delta is not much better. The oil fields have been crippled by the gradual emergence of a welter of militant groups operating under the sign of the Movement for the Emancipation of the Niger Delta (MEND), proclaiming resource control, self-determination, and a desire to lock in oil production. MEND operates on a wide field of violence, encompassing chieftaincy disputes, inter-ethnic animosity over territory and oil-bearing property, deep conflicts between communities and the oil companies, violence surrounding the delimitation of electoral wards and the constitution of local government councils, and the terror perpetrated by state military forces. Like in the north, the central issue remains a movement that combines greed and grievance and a disenfranchised class of uneducated poor and frustrated school and university graduates facing a deep structural unemployment and poverty problem.

Into this firmament, the fuel subsidy carries enormous political symbolism and economic advantage. In a society where the direct benefits of oil are captured by so few, cheap fuel carries a deep political valence among the poor: It means cheaper access to food (through lower costs of transporting food staples to urban markets) and lower commuting costs, and makes burning fuel an affordable compensation for a virtually non-existent national electrical grid. Nevertheless, a disproportionate share of the subsidy is captured by car-owning middle-class families and fuel importers/smugglers. Twenty-four million litres of imported fuel are lost every day, most of which is assumed to be smuggled out of Nigeria to its neighbours in a multi-billion-dollar illegal trade. (This is an echo of the famous oil theft (bunkering) business in the Niger delta in which well-connected military officials, politicians, and traders steal billions of dollars of oil each year while impoverished and isolated communities in the delta may pay N200-300 per litre.)

Nigeria’s corrupt subsidy system rests upon the state’s staggering inability to organize the effective and efficient refining of a significant amount of a resource it actually produces. In this sense, the reinstallation of the fuel subsidy is something of a hollow victory.

Naturally, the politics of the price of oil has animated civil-society and labour groups in important ways. There is no question that the government’s rash action further calcified “the cynicism of a people who are already very cynical.” But it also exhibited Nigerian civic democracy in action. The subsidy removal triggered wide-ranging resentments over, and hostility to, Nigerian crony capitalism – the reservoir of anger among the poor runs very deep. Some observers, such as Oxford economist Paul Collier, have radically underestimated the Nigerian popular classes’ ability to understand who benefits from oil and oil subsidies. These citizens are fully aware that their benefits represent a small part of the oil pie. But what choice do they have? Abandon the subsidy with the belief that the Nigerian state will deliver immediate and tangible compensating benefits by infrastructural investment? The poor were not presented with a viable alternative by which they could retain their right benefits and entitlements while at the same time abandoning the class inequities of the fuel-subsidy system as a whole. This is precisely what the protests in Lagos and elsewhere are addressing.

Any long-term resolution of the problems driving these insurgencies and the politics of fuel prices can only be resolved if Nigeria drastically restructures economic and social policies. Boosted by oil and gas prices, the economy currently grows at about seven per cent per annum. But this figure masks deep stagnation within the agricultural, manufacturing, and small-scale industrial sectors. Industrial employment alone has shrunk by 90 per cent over the last decade. Despite the fact that just over 50 per cent of the population lives in rural areas, Nigeria can no longer feed itself. This means at least a billion dollars’ worth of rice must be imported annually.

What is needed is an alliance of oil and maize in which each region develops industries that promote its regionally based resources. For the oil- and gas-producing regions like the Niger Delta, this means passing and implementing a serious petroleum reform bill (which has now been languishing in the House of Representatives for four years), encouraging firms to develop downstream industries and rationalizing the natural-gas collection system to stop the flaring of natural gas, which should be used as a resource for promoting small-scale industries. In the north, industrial linkages must be generated with the lagging agricultural sector.

The Jonathan administration handled the subsidy issue very badly. It announced its decision rashly, with no political preparation, at a time of increasing costs of living and against a wider backdrop of enormous political and economic insecurity. The danger is that the combination of class resentments, the lingering protests around fuel politics, and the deepening security crisis in the north surrounding Boko Haram will allow the government hawks to further militarize a Nigeria tottering on the brink. A heavy-handed response by a discredited military would further enervate the insurgents and alienate a vast swath of the Muslim poor who are already estranged from the northern ruling elites that have failed them. The consequences would be disastrous.

Photo courtesy of Reuters.