Falling Oil Price: Working People must prepare to resist Attacks

By Peluola Adewale

Ordinary Nigerians, whose daily life is like being in a frying pan with hot vegetable oil, should be prepared to resist any attempt by the government to fling them into fire. This is as a result of the decline in the oil price. The Minister of Finance Ngozi Okonjo-Iweala told the Financial Times that a sustained slump in oil price would necessitate more painful measures (Financial Times, London, October 27, 2014).

As the past experiences have shown, it is the working people and poor who did not benefit anything from high crude oil price that would be made to bear the pain of the slump. Already the Minister of Petroleum, Diezani Alison-Madueke, has announced the plan to increase fuel price under the guise of the oil subsidy removal. This has been supported by all the state commissioners of finance.

However, given the propensity of the bourgeois politicians to sheathe sword and pretend to be pro-masses as elections approach, it is not likely that fuel price will be hiked in the immediate. This also explains why the government did not mention any overtly anti-poor measure when Okonjo-Iweala announced the plan to cut expenditure on November 16. But labour, socialist and pro-masses’ organizations must be prepared to mobilize and lead the working people and youths to resist all the measures that would intensify neo-liberal attacks on the poor masses.

The oil price which for almost two years was stable between $100 and $110 per barrel has recently plummeted to around $80 with potential for a further decrease. Indeed for a period of about three months between August 1, 2014 and October 28, 2014 the average crude price by the Organisation of Petroleum Exporting Countries (OPEC) collapsed from $104 to about $82 per barrel. Besides, the benchmark American oil price broke below $76 a barrel on November 4, representing its lowest level since October 2010, before recovering a bit (New York Times, November 4).

Shale oil

This is as a result of development and use of new technologies such as horizontal drilling and hydraulic fracturing, or fracking in the exploration and production of shale oil in the United States which has reduced its oil imports as the domestic production rises. For instance, the US has stopped buying oil from Nigeria, which used to be its fifth largest oil supplier, since July. According to the US Department of Energy this is the first time since records start in1973 that Nigeria has not exported a single barrel of crude to US-based refiners, the biggest consumers of the commodity from Nigeria (Financial Times, London, October 2). Ironically, it is the high quality of Nigeria’s oil, sweet crude, which has knocked it out of the US market. It is of the same quality as the shale oil being pumped in North Dakota and Texas.

Nigeria has now increased its oil sales to the Asia’s four largest oil importers – China, Japan, India and South Korea. This is said to have risen more than 40 per cent so far this year over the 2013 level. But China which has one of the largest reserves of shale oil is said to be also working towards production of the shale oil with new technologies. Britain and other countries in Europe which is currently the largest consumers of Nigeria’s oil have also intensified the process for development and production of shale oil. All this will further cut the price and reduce the market for exports from the OPEC countries including Nigeria.

Reservoir for Looters

The Minister of Finance has said that the country through the excess crude account (ECA), which is the saving from difference between the oil price and the budget benchmark, has the capacity to withstand the effect of the continued fall in the oil price for two or three months. This account, which is purportedly meant for rainy day savings, is in reality a reservoir for looters. It is shared monthly between the federal and state governments, without budgetary appropriation, in addition to the statutory monthly allocation to all tiers of the government. In less than a year the ECA has been depleted from $9bn to $4.1bn without anything to show for it in terms of infrastructural development and social spending. It is not accidental that Nigeria is ranked the least on Human Development Index among the OPEC countries.

It also means that what is in the account at present is $2bn short of even the IMF recommendation as the fiscal buffer for decline in oil revenue. The ability to build up the ECA up to recommended level, given the continued decline in oil price, commercial scale oil theft and official looting of the account monthly in the name of sharing, is seriously in doubt. The budget benchmark of the 2014 budget is $77.5 per barrel.

It should be however stressed that even a huge fund in the ECA is not a buffer against more neo-liberal attack on the masses. On the basis of capitalist neo-liberal policies, it is clear that Jonathan government will not commit public resources to infrastructure development and basic needs of poor working people, more so now there is slump in the oil revenue.

Besides, the run-up to 2015 elections means that official looting will reach a fever pitch. The bourgeois politicians are dire need of petrol dollars to outspend rivals for patronage and electoral manipulations. This also means that there will be agitation for more voracious sharing of the ECA by the state governors in order to have more public loot to fund their return to office or emergence of their proxies.

All this has meant that the government response to falling oil price will be more attacks on the working people. As the William Wallis of the Financial Times wrote, a sustained slump in world oil prices would necessitate either greater borrowing to finance the deficit, or budget cuts (Financial Times, October 28). Either way it is the masses that will be at the receiving end.

“We will have to look very hard at recurrent expenditure, and identify overlapping agencies. When the price is heading down everyone sees the necessity but that doesn’t stop them hating you,” Okonjo-Iweala said.

The share of the recurrent expenditure in the annual budget is outrageous. It is for instance 76% of the 2014 budget. It is the outrageous, jumbo pays of the top government functionaries, which are said to be among the highest in the world, that accounts for the huge recurrent budget at the expense of capital expenditure every year. But to the Minister of Finance the reason for the rise in 2014 recurrent expenditure is the pension implication of increase in salaries of civil servants in 2011. With such mindset the target of any cut in recurrent expenditure and “overlapping agencies” will be pensioners and workers, and definitely not the over-bloated top government functionaries who live as leeches on the collective resources. Already, Oyo state governor Abiola Ajimobi has warned that “most states may not be able to pay workers’ salaries let alone carry out other development programmes.” Labour must resist attacks on jobs, wage and conditions of workers as well as pension, and rather demand significant cut in the jumbo pays and hangers-on of the top government functionaries at all levels and the democratic control of allocations, funds and projects by elected representatives of workers, relevant professionals and communities.

Subsidy for casino market

Incidentally, 24 hours after the Financial Times published the warning of belt tightening to Nigerians by Okonjo Iweala as a result of drop in revenue, there was report in the Nigerian newspapers of the gazetteing of a five-year VAT exemption for commissions on transactions at the Nigeria Stock Exchange. This is a subsidy for casino market.

The stock market is essentially a casino with NSE acting as bookies that collect commission or cut on the bet whether players lose or win. This tax exemption is in addition to a debt forgiveness of about N22.6bn the government earlier granted to stock brokers who borrowed the so-called margin loans at banks to gamble on stocks. It should be recalled that margin lending contributed to collapse of some banks which has attracted up till date over N3 trillion of bail-out funds in various forms.

Sadly, many ordinary Nigerians who were lured into gambling den lost their life savings to the collapse of the stock market in 2008. Besides, it took six month of ASUU and closure of universities before the government, which freely gifted private banks N3trillion, was forced to give N200bn to universities. The subsidy and bail-out fund to the stock market, which hardly creates real values especially at the secondary market, is to gratify the Jonathan government’s obsession for vainglory and false impression of robust economic activities.

Nigeria is perhaps accurse with the most virulent specie of the parasitic capitalist ruling elite. This explains why the country does not have functional and adequate refineries despite being the continent biggest oil producer and having huge resources at its disposal. Worse still, the country’s four refineries operated at an average of 10.46 per cent of their combined capacity of 445,000 barrels per day in June, according to the Nigerian National Petroleum Corporation (Punch, November 8).

Besides, since 2002, the government has issued licenses to 18 private sectors to build refineries. Till date none of the refineries has taken off. The importation of refined oil products which guarantee quick and super profits explains the lack of investment in the refineries.

For a Working People Alternative

Labour and pro-masses’ organisations must demand the investment of public resources on building of new refineries and comprehensive repair of the existing ones side by side with the democratic control of the projects and their operations, when they come on stream, by the elected representatives of workers and relevant professionals. As against the planned increase in fuel price, there must be demand for lowering of the price given the fall in crude oil price and the concomitant decrease in landing cost of the imported fuels. It should be recalled the major argument for the fuel price in 2012 was the high price of crude oil in the world market.

The trade union leadership must also demand a new minimum wage as the inflation has already eaten up the current wage. It should be recalled that the new minimum wage had been introduced before the hike in fuel price in January 2012. Unfortunately, the labour leadership has not done anything serious to enforce even the full implementation of the current minimum wage.

Also importantly, labour leadership must show interest in all neo-liberal capitalist attacks including privatization, casualisation, high school fees, commercialization, etc and resolve to lead fightback. But the fight against neo-liberal attacks is not enough, it has to be linked with struggle to wrest power from the rapacious ruling elite. Indeed, the failure of the ruling elite is so egregious despite the huge oil wealth at their disposal that even the Guardian, a pro-establishment newspaper, has to make a scorching rebuke of “those at the helm of the management of the Nigerian economy” in its editorial of November 3. It writes, inter alia, “having exhibited incapability of bringing about a desirable outcome, those at the helm of the management of the Nigerian economy have done more than enough damage to the country. This should stop. Or they should quit.”

They will not willingly quit; they have to be chased away. But there is no desirable alternative for the working masses in the APC. There are as anti-poor as the PDP. The labour, socialist and left organizations should mobilize workers, youths and poor masses for the formation and building of a fighting mass working peoples’ party, with a socialist program, that could defeat all the anti-poor capitalist ruling elite at all levels and commit resources to basic needs of all and infrastructural development. Such a party, when in power, has to take into public ownership, the commanding heights of economy with democratic management and control by working people in order to mobilize adequate resources to finance social programs and development.