Democratic Socialist Movement

For Struggle, Solidarity and Socialism in Nigeria

By - DSM

NIGERIAN ECONOMY IN DOLDRUMS: Harder Times Ahead for the Working People

NIGERIAN ECONOMY IN DOLDRUMS: Harder Times Ahead for the Working People

By Peluola Adewale

Ordinary Nigerians have been told to prepare for even harder times ahead. The Minister of Finance, Ngozi Okonjo-Iweala was reported to have told the Federal Executive Council on June 13, 2012 that the country should prepare for economic recession in view of the slide in oil price and crisis in Greece and Spain. The warning of the Okonjo-Iweala was relayed to the journalists by the minister of information, Labran Maku.

“The Minister of Finance briefed the Council about the global economy environment and generally, Council was told that there were some difficult moments out there in the international economy, particularly because of the crises in Greece and Spain.

“She said the crises had begun to impact on the global economy and one of the things we were informed by the minister was that we noticed some downward slide in oil prices in recent weeks. The Minister of Finance told us to buckle up and ensure proper management of available resources to prepare Nigeria in case there is any recession.” (Punch, June 14, 2012).

The oil fell from $127 in March to $83 in June while price of oil for August delivery is $78.58. The benchmark of the of Nigeria’s 2012 budget is $72. It means there is reduction in the excess crude account which is the difference between the oil revenue and the budget benchmark. This account is ostensibly established to prepare for a rainy day but it is shared monthly among the tiers of the government without appropriation. This has also come at a period when there is unprecedented high in the theft of oil in the Niger Delta. Nigeria is said to lose $1bn monthly to oil theft which has incidentally increased after the government has spent several millions of dollars on the ex-Niger Delta militants through the amnesty program.

Apart from the Eurozone crisis which has seen Spain Greece, Portugal Ireland and Cyprus requesting financial help, the slowdown in manufacturing in China and United States has also contributed to the slide in oil prices. Of course the financial crisis in Europe has already hit the real economy, according to CNNMoney, the manufacturing index in the continent has remained at a three-year low (CNNMoney June 21, 2012).

The Financial Times quoted an oil consultant firm JBC Energy predicting that “the current cocktail of crude stockbuilds, weak economic data from the world’s major economies and an ever deepening sovereign debt crisis in Europe will be a strong force to overcome in the short term” (Financial Times June 1, 2012). In other words, there is no immediate respite for oil-dependent economies like Nigeria. It is unfortunately that the poor working people who did not benefit when there was huge revenue that would be made to suffer for the slump.

It cannot be forgotten that even during the recent period of high oil export prices the mass of Nigerians have not benefited. In February the chief of the government’s National Bureau of Statistics reported that “Using the absolute poverty measure, 54.7 per cent of Nigerians were living in poverty in 2004 but this increased to 60.9 per cent or 99.284 million Nigerians in 2010”. In fact ordinary Nigerians are still groaning under the pain of the January hike in the fuel price which has increased the cost of living. Indeed, according to the National Bureau of Statistics (NBS) the inflation, which is 12.7% as of May, is expected to trend up in 2012 mostly due to the lingering effects of the partial removal of the fuel subsidy on food and non food prices as a result of higher transportation costs. Inflation rates could trend even higher if the PMS subsidy is fully removed, as expected, towards the end of the year (Review of the Nigerian Economy in 2011 & Economic Outlook for 2012 – 2015).

Besides, the neo-liberal capitalist agenda which has reduced spending on social services has meant that the working people are paying more and more part of their income on education and health care. The recent increase in electricity tariff means that they are paying more for a product that is not available. The planned privatization of the PHCN, the public electricity company, will lead to further increases in the electricity tariff and finally deny the poor access to electricity, even on the few occasions that it is available. The high cost of business occasioned by the use of generators with expansive fuel in the absence of efficient public electricity has forced many artisans like barbers, hairdressers and welders out of the business.


Therefore, to working people and the poor of Nigerian who already confront on daily basis the harsh reality of these anti-poor economic policies, the warning of a recession is like being told to get set to be flung from frying pan to fire. The fact is that by telling the government to “buckle up and ensure proper management of available resources to prepare Nigeria in case there is any recession” Okonjo is asking it to unleash further neo-liberal attacks on the poor working people.

The warning of Okonjo-Iweala came out against the background of additional $4bn the government has said it requires to continue to finance its so-called fuel subsidy program in 2012 after it had already spent more than half of this year allocated budget to settle the arrears of the 2011 claims by the oil marketers. Of the N881bn ($5.54bn) budgeted for the fuel subsidy in 2012, Nigeria has so far spent N451bn ($2.84bn) paying off arrears for 2011 as of May 2012 (Financial Times June 18, 2012).

The report of the fuel subsidy probe has revealed that the fuel subsidy administration is a monumental fraud. It could not have been accidental that the “subsidy” payment rose outrageously by 150% in 2011 from the 2010 without corresponding increase local demand of petrol. 2011 was an election year and most of these oil marketers are patrons of the ruling PDP who contributed to the campaign fund of the President Goodluck Jonathan.

Okonjo-Iweala paints a clearer picture of her warning when she told the Financial Times “We are vulnerable if there is a contagion from Greece. We can afford to keep paying the subsidy but it means we will be very thin on buffers” (Financial Times June 18, 2012).

In other words, her warning to the FEC is that in order to avoid being “very thin on buffers” the government should “ensure proper management of available resources” by stopping paying the so-called fuel subsidy when the budget allocation is exhausted. Of course this will be just a part of bigger package of cuts in social spending. Certainly, there will be no advice for cuts in outrageous pay of the political office holders. It should be recalled that Okonjo-Iweala had once told Nigerians she was doing the country a huge favour for receiving her jumbo salary and allowance in dollar!

It is very limited social program and capital projects of the government that will suffer. Already, Steve Oronsaye Committee on reduction of cost of governance has recommended among other things the introduction of tuition in universities and other tertiary institutions which would see students paying as high as N500, 000 per session. Unsurprisingly, the committee does not recommend reduction in the jumbo pays of the political office holders which constitute the huge portion of the recurrent expenditure of the government (76% of the 2012 budget). Indeed, the analysis of the 2012 budget has shown that over 90 percent of the revenue generated from oil and taxes is spent on the recurrent expenditure and servicing of debts. N540bn was budgeted for servicing for over $40bn public debt (with domestic debt constitute the bulk) even though there is no evidence on ground of infrastructure on which the loans have been allegedly spent.

The leadership of labour and pro-masses organizations must prepare to lead the working people against this plan to unleash a further attack. The plan for another increase in fuel price cannot be ruled out. Already according to NBS the so-called subsidy petrol is expected to be fully removed towards the end of the year (NBS: Review of the Nigerian Economy in 2011 & Economic Outlook for 2012–2015). It was January struggle, the biggest in the history of Nigeria that forced the Jonathan government to reduce the pump price of petrol to N97 from N140 it had previously increased it to. The strike and mass protest did not achieve total reversal of the price hike to N65 because the pro-capitalist labour leadership betrayed the struggle midway having lacked both a working class political alternative to capitalism and the determination to struggle for change.

Ordinarily, the slump in oil price should translate into reduction in landing cost of petrol. But the past experiences have shown this does not apply to fuel subsidy administration which is a big racket of monumental fraud. If the fear of another mass protest prevents it from increasing the fuel price, the government would attack the areas like education’ health care and jobs. This is why the labour must always show interest in fight against all forms of the neo-liberal attacks on the working people.

It is unfortunate that the trade unions do not have a fighting leadership. Already the electricity tariff has been increased without the labour leadership lifting even a finger. Besides, the labour leadership appears to have abandoned the struggle for the full implementation of the new national minimum wage of N18,000. It is on record that no state government has fully implemented the new pay which took the labour more the three years to win. However, while at least the public sector workers in some states have held one form of struggles or the other to force the government to implement something, the situation is worse in private sector where the law of new national minimum wage is flagrantly disobeyed.

Even though at present we are not in official recession, the economy is already in doldrums. The banking sector relies on the government bailout and patronage to remain in business. It is the business transaction with the government that is the main source of the super profit of the banks. For instance, the banks hold almost 60% of the domestic debt through government bond and treasury bills. The banks don’t lend the manufacturing companies loans for business. The interest rate is usurious and excruciating. It is more than 20%. The recent bank crisis largely caused by fraud and corrupt practices perpetrated by the banks chiefs has led to several thousands of bank workers losing their jobs in the last one year.

The poor state of infrastructure especially the electricity and high cost of credit have forced many factories to close shop or relocate out of the country. For instance, the textile industry which used to the second largest employer of labour after the government has been reduced to shadow of itself. All this is with attendant loss of jobs which has continued to worsen the unemployment and poverty levels. Already the NBS reports that about 70 percent of Nigerians live in relative poverty conditions.

The record the NBS also shows that the manufacturing contributes paltry 1.12 percent to the Gross Domestic Products (GDP) in the last quarter, (i.e. between January and March). This is typical of what has obtained in more than a decade. This partly explains why the fabled economic growth in the last one decade has not translated to reduction in the rate of unemployment. Rather the joblessness has kept moving northward. The advent of civil rule in 1999 has witnessed the biggest oil boom in the history of the country. But as a result of the neo-liberal capitalist agenda of the successive governments, the huge revenue has not translated into improvement for the working people and economy in term of infrastructure development and social program. Therefore, it is not a surprise that Nigeria is said to have the lowest ranking in Human Development Index among Organisation of Petroleum Exporting Countries (OPEC) (Reuters July 1, 2012).


There must be holistic fight against the neo-liberal capitalist agenda and attacks. But we need a fighting leadership of trade unions to steer the movement. It is unfortunate that labour, whose a major slogan in the 1980’s was “Nigeria is not for sale”, has abandoned the struggle against privatisation. For instance, instead of labour leading the fight against the privatization of the PHCH its approach through the committee led by Hasssan Sunmonu, a former President of NLC, is to help government hold down the workers resistance to the agenda under the guise of resolving the so-called labour matters like settlements of workers that would be retrenched. Besides, the labour leaders have seats on the National Council on Privatization (NCP) which presides over the sales of the public assets at give away prices.

But the struggle against the neo-liberal agenda and attacks as much as necessary and desirable can only win concessions on a short-term basis. This is why it is imperative for workers, youths and students to link the various struggles for improvement or against neo-liberal capitalist attacks to the urgent need for a working people political alternative.

We need a political party of the working people to wrest power from the anti-poor politicians and replace the iniquitous capitalist agenda with a socialist program. This means that we need in power the government of the working people that would commit the resources of the society to the provision of functional education, health care, decent housing, decent jobs, infrastructure, etc. In order to mobilize adequate resources to achieve this, the commanding heights of the economy must be put under public ownership with democratic management and control of the working people, while the public officers who are subject to recall must receive the average salary of civil servant.