Wednesday, January 18, 2012

Nigeria reels after oil subsidy row turns into country's biggest ever protest

Lagos market traders. The government recently backed down from a plan to end Nigeria’s long-standing fuel subsidy after widespread protests. Photograph: Sunday Alamba/AP

Bisola Edun's electricity generator sits outside her small Lagos fashion shop and factory, noisily churning out heat and fumes for five hours every day. It is just one of an estimated 160m such machines across Nigeria – roughly one per person in Africa's top oil economy.

Guzzling $1,200 (£780) worth of diesel each month, Edun's generator is an unavoidable expense in a country that produces only 40 watts of power for each inhabitant – enough to run a single vacuum cleaner among 25 citizens.

"It seems normal to us, but looking at the amount I spend ever year on the generator alone, I just think Jesus Lord! If I could spend that amount on stock I'd be in a very good place," she said.

As Edun prepared to re-open her shop for the first time since Nigeria was convulsed by the biggest protests in its history, she hoped things would change for the better, but admitted: "From where I stand now, I'm not terribly optimistic."

When the government abruptly announced on 1 January an end to subsidies that kept fuel prices around $0.40 (25p) a litre, it hoped to fix the country's many basic infrastructure problems. Crumbling power plants would be revamped, potholed roads smoothed and the education system fixed if the "cancer" – in the form of the $6bn fuel subsidy – was removed, said the president, Goodluck Jonathan.

Economists and multinational organisations, such as the International Monetary Fund, have long said such painful shock-therapy economics are necessary if Nigeria is to haul itself into the middle-income bracket. But the overnight doubling of prices at the petrol pump unleashed years of festering anger and the ensuing eight days of strikes brought much of the country to a halt.

The protests coincided with a fresh campaign of attacks by the militant Islamic group Boko Haram in the north of the country, and after a week in which the country appeared to be teetering on the brink of disaster, the government was forced to back down, agreeing once again to use its vast oil wealth to cap prices. The move was enough to make trade unions call off a plan to stop the country's oil production, but analysts say the root causes underlying the outrage remain.

Despite pumping 2m barrels of oil daily, decades of top-level mismanagement have left four national refineries barely functional, forcing Nigeria to import refined fuel that is then sold at around half the market rate to citizens. A bloated civil service and entrenched patronage system mean there is no way of controlling where the money flows. Meanwhile, a bill aimed at streamlining the labyrinthine oil sector has languished for decades.

"People cannot believe that the government will not just use the money to line their own pockets," said financial consultant Hamar Kamza. "They removed the diesel subsidy a few years back and nothing improved. Before that, they removed the kerosene subsidies and nothing changed at all."

"The same problems will keep coming back until the patronage system is broken," he added.

Petrol sales resumed on Tuesday, but many Nigerians believe the strikes could resurface. At a filling station in the choked commercial capital, Lagos, retired secretary Muyiwa gestured at scuffles between motorists who paid bribes to jump the queue and black marketeers filling plastic bottles to resell the fuel. "All this is because of corruption. If there was light, water, all those basic things, you wouldn't see people behaving like this. But nothing works in Nigeria so we are forced to manage anyhow we can."

A bulging middle class with access to the internet swelled the protests through an Occupy Nigeria movement based on similar ones in Europe and the US, but many citizens were forced to cheer from the sidelines.

Ibitoye watched events unfold on television in a cramped shack. Transport fares for a bus to attend the rallies were out of the question in a neighbourhood where communal boreholes provide water and tiny generators are only used sparingly to recharge mobile phones.

"When we see [the protesters on] television, we say 'amen!'" she said in faltering English. Her husband sent her to Lagos from their remote northern home state of Borno after the recent Boko Haram attacks left more than 60 dead.

"My husband was going to join me here after Christmas but he can't anymore because of the fuel increase. We are just praying," Ibitoye said.

Confidence in the government's ability to tackle the Islamists was further undermined when the main suspect in the bombings escaped police custody the day after his arrest.

Boko Haram, which is fighting to impose a strict interpretation of Islamic Sharia law across a nation evenly split between Muslims and Christians, is only the most high-profile of several militant groups. For years government troops have also faced a low-level insurgency in the southern Niger delta. Analysts say local residents are lured into rebel groups amid scarce job opportunities, despite the 2m barrels of oil pumped daily from its swampy creeks.

To a large majority of Nigerians mired in the same poverty, members of both movements are regarded as little more than opportunists funded by politicians tapping into local grievances.

Still, both the militancy and the cynicism with which it is regarded are symptomatic of a failure to deal with economic ills that keep 70% of Nigerians in poverty.

"Boko Haram isn't al-Qaida or anything like that," said the former US ambassador to Nigeria, John Campbell. "But the Jonathan government is weakened, not least because the trade unions have shown they have the ability to shut down the Nigerian economy. They are more likely to be more militant in future and the fact that the government has shown itself to be weak may or may not have an effect on how Boko Haram and militants in the Niger Delta react.

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