IRIN Focus on the deregulation of fuel prices

A major political and industrial crisis looms in Nigeria over President Olusegun Obasanjo’s plan to deregulate fuel prices. Presenting his 2000 budget proposals to the national assembly in November, Obasanjo had said the decision was with immediate effect but it has not yet been implemented. The reasons include threats of industrial unrest and the fact that the measure is unpopular with Nigerians. Obasanjo insists fuel prices must be freed from government control in order to end the acute shortages of recent years and corrupt practices associated with fuel distribution in Africa’s biggest oil-producing country. If the prices do not increase - which they are expected to do when the deregulation is actually implemented - they would remain much lower than those of neighbouring countries. “This will lead to a lot of smuggling of our products,” Obasanjo said, giving one of his reasons for the plan. Government officials say the smuggling of petroleum products to neighbouring West African countries costs Nigeria an estimated US $1.7 billion yearly. Opponents of the deregulation, including the country’s trade union umbrella, the Nigeria Labour Congress (NLC), say the same reasons have always been given since former military ruler General Ibrahim Babangida began increasing fuel prices in 1987. As the price of petrol rose from 0.20 naira a litre in 1987 to the current 20 naira ($0.2) a litre, each successive hike was greeted by riots that claimed lives in various parts of the country. Inflationary spirals usually followed as well since the country is largely dependent on road transport for the movement of goods and people. This time the NLC has threatened to call a general strike of its member unions, including the powerful oil workers’ unions, any time higher prices are announced. The national assembly has expressed concern and urged caution because of the threat industrial unrest might pose to the country’s young democracy after more than 15 years of military rule, which ended in May 1999. “To trigger any increase in fuel prices is to compound the level of poverty in this country and that will not be helpful,” Adams Oshiomhole, president of the NLC, told IRIN. “People’s real income must first improve before you do that.” He said it was wrong for the government to contemplate higher fuel prices when the minimum wage was just 3,000 naira ($30). In December, Oshiomhole led thousands of workers to the presidential villa to protest the moves to increase fuel prices. The demonstrators carried placards declaring Obasanjo a hostage to the International Monetary Fund, which has urged the freeing of fuel prices among market reforms that would qualify Nigeria for relief on its external debt, estimated at over $30 billion. However, the protesters were stopped by the police, who fired tear gas to disperse them. Under the former military rulers during whose reign the previous price increases were made, such a protest would have been unthinkable. Late dictator Sani Abacha, who seized power after the military annulled elections held in 1993, banned the NLC and detained key trade union leaders for long spells after they initiated a paralysing strike in 1994 to make him relinquish power. After Abacha’s sudden death in June 1998, the labour unions regained their freedom and their bite. Obasanjo invited labour leaders to a meeting late in December, from which both parties emerged restating previous positions but agreed to remain in consultation. “Right now we are waiting for the government to announce its next move, which will determine our own response,” a senior labour leader told IRIN. In the meantime, IMF managing director Michel Camdessus has come out to defend his organisation’s position on the matter. “There are measures which when contemplated in the short run may not be attractive due to negative impact,” he told journalists in the Nigerian capital, Abuja, on a tele-video conference earlier this month. “But I can tell you that in the long run measures which appeared harsh in the short run yield better results.”