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

How Jonathan's Strong-Arming Could Backfire

(Akintunde Akinleye / Courtesy Reuters)

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

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