Democratic Socialist Movement

For Struggle, Solidarity and Socialism in Nigeria

By - DSM

Reduction in the Price of Petrol is a Gimmick for Full Deregulation of the Oil Sector

Reduction in the Price of Petrol is a Gimmick for Full Deregulation of the Oil Sector

  • The removal of subsidy on kerosene is anti-poor
  • Labour must go beyond scratching the surface and commence immediate mobilization against deregulation and privatization of the oil sector
By Abbey Trotsky

For over two decades now, a combination of international capitalist forces (IMF, World Bank, IEA, oil corporations and cartels) and their local collaborators have been waging a protracted, sometimes ferocious, war with the labour movement and the entire Nigeria working people to remove subsidy on petroleum products. The main aim of this is to put the oil sector, the mainstay of the Nigeria economy, under the total control of profit merchants in the name of deregulation and privatization.

Despite the unfortunate level of incoherence and timidity often displayed by most labour leaders, the mass of the working people, who are often victims of the brutal effects of every neo-liberal and anti-poor economic policy of Nigeria’s thieving ruling elite, had through numerous mass actions such as strikes and protests checkmated this agenda of the capitalist ruling class

After several unsuccessful attempts by imperialism and their local collaborators to remove subsidy and fully deregulate fuel prices, the recent growing anger and mass dissatisfaction among the working people against the shocking degree of corruption and open looting of public resources being perpetrated by various sections of the ruling elite in the name of subsidy payment has now offered the capitalist ruling elite as a whole an opportunity to complete its age-long, profit-first and neo-liberal agenda in the oil sector.


After the January 2012 mass protests and general strike against the New Year hike in pump price, a probe was launched into the subsidy payment in response to the demands of the mass movement. This revealed that over $1.1 billion had been looted and embezzled by oil marketers, government officials and politicians in the name of subsidy payment. This shocking revelation, among other mind-boggling scandals in the oil sector, has helped to fuel agitations among the working people against the regime of subsidy payment. For some, subsidy can be removed so long money saved from it will be invested in education, infrastructure and other areas that can impact positively on the poor masses. But just as the experience of the privatization of the electricity sector in 2013 has now shown, any hope that the capitalist ruling elite would utilize whatever money saved from subsidy removal to improve the lot of the masses would soon be dashed.

However, it is obvious that the APC-led FG is being mindful and fearful of possible mass action that could be provoked by any hike in pump price resulting from the removal of subsidy on the pump price of petrol. This is the import of the announcement made by PPPRA on the 30th December, 2015 reducing the pump price of petrol from N87 to N86 for retail outlets of the Nigerian National Petroleum Corporation (NNPC) and N86.50k for retail outlets operated by private marketers.


But the reduction in the pump price was just a smokescreen! Its sole motive is to give a false impression that the removal of subsidy and full deregulation of prices of petrol may not necessarily lead to hike in pump price, thus weakening the basis upon which labour movement over time has resisted the several attempts by successive pro-capitalist governments to hand over the oil sector to oil multinationals, fuel importers and marketers who have always made it a past-time to subject Nigerians to chronic agony through artificial fuel scarcity in order to boost their profit. But the government would not have been able to do this were it not for the prevailing slump in crude oil price on the world market. With the over 60 percent crash in crude oil price, landing cost of imported refined fuel has in turn crashed to N55.23 per litre making it possible for pump prices to go down. But what happens when crude oil prices go up?

Also taking advantage of the growing anger against the fraudulent subsidy regime, the PPPRA nevertheless revealed that the current pump price is not going to be static but to be quarterly reviewed through a “price modulation” band that will be determined by prevailing market trends (the prevailing price of crude oil in the international market). This is a skillful and dubious way to prepare the mind of Nigerians towards a possible upward review of the current pump price by 31st of March 2016, when it will be due for a review. This is because against the background of weak local refinery capacity, an increase in crude oil price will automatically lead to increase in the landing cost of imported refined fuel.


Except a mere verbal rejection expressed by the Nigeria Labour Congress (NLC) on the pages of national newspapers, there is no visible and concrete plan of mass action to resist this dubious and conscious attempt by pro-capitalist ruling elites to perfect their age-long plan to remove the fuel subsidy and completely hand over the oil sector to both international and local private oil marketers.

In the absence of any concrete programme of action to resist this onslaught on the working people, the Buhari-led Federal Government got emboldened and in less than a month interval also removed completely the subsidy on kerosene. This development will no doubt compound the economic woes of the working masses as the price of kerosene, which millions of poor and working class home depend upon for cooking has gone from N50 to N83.

This hike in the price of kerosene following the removal of subsidy gives an indication of a possible upward review of the new price of petrol especially when it has already been revealed that the prevailing price of crude oil in the international market will hence forth determine the subsequent prices of petrol.

Ordinarily, the domestic petroleum markets of any OPEC countries are not supposed to be influenced by the international prices of petroleum products. The prices of petroleum products in Nigeria, being a member of the Organization of Petroleum Exporting Countries (OPEC), are supposed to be calculated based on the cost of production in the oil producing nation.

It is so disheartening to note that, except in Nigeria, prices of petroleum products in other OPEC countries are determined by cost of production. This is the reason the price of petroleum product is far higher in Nigeria compared to other OPEC countries. As a matter of fact, experts in oil sectors have revealed through various empirical analyses that the pump price of petrol in Nigeria should not have been more than N39.30 if it were to be calculated based on cost production.

Going by this background, it is very obvious that the reduction of the pump price which is occasioned by the drop in the international price of petroleum products does not threaten the profit margin of both the international and local oil importers. Instead, it helps to set a booby trap for the mass of the working people by using it to end the regime of subsidy payment.

This means that any future sharp rise in the international price of crude oil will mean, now that the subsidy regime exists no more, that Nigerians will be expected to also pay more for pump price of petrol. Even when the international price of crude oil stabilizes for a long period, it will not automatically translate to stability in the local price of petrol as long as the country continues to rely on importation of petroleum products as the major means to meet up with its daily domestic consumption of petroleum products. Also the continuous depreciation of the naira, including the possibility of an official devaluation of the currency at some point, poses the inevitability of a hike in the pump price of petrol. This, if it happens, will spell more economic doom for the mass of working masses as there will be astronomic increase in the cost of transportation, education, housing, general services and goods.

Given this background, it is very obvious that there is no easy way out for the working masses. However, as much as it is true that only members of the ruling elite fully benefitted from the subsidy regime, the labour movement and the entire working masses must not for a single moment accept the argument that the best way to resolve this is by putting an end to subsidy thus exposing petrol and kerosene prices to the vagaries of the world oil market. We must argue that we reject any situation that imposes more hardship on the vast majority of the working and toiling masses who benefitted nothing but were instead victims of subsidy frauds while the few beneficiaries of subsidy frauds are not even brought to book.

Except all the local refineries are revamped and new ones are built to encourage local refining of petroleum products, no reform in the oil sector will have any positive effect on the working masses.

This is why the leadership of the NLC and TUC must go beyond scratching the surface and commence immediate mobilization of the working people in a struggle to oppose this agenda to deregulate the oil sector through the backdoor.

In addition to this, there is also a need for an open investigation by labour and democratic organizations into both the fuel subsidy scandal and the wider question of what has happened to huge income from oil and gas exports. This is very important especially when government enquiries into corruption cases in the past have shown that, the real thieves are either being covered up or simply concentrate on the ruling party’s opponents. Labour must demand the opening of the books and an open investigation, involving workers’ representatives, to examine what happened as well as seizure of assets and freezing of accounts of any individual or corporation that are indicted. This will help to recover the loot from them with a view to invest same to revamp the existing four refineries and build new ones to ensure that the estimated 40 million liters of petrol allegedly needed for daily domestic consumption are refined locally.

With this approach, combined with a democratically controlled and accountable economic plan, there are more prospects that the avoidable subsidy payment will automatically disappear without bringing any economic hardship on the Nigerian working masses. It will even open up the possibility for the pump price to be much cheaper than the so-called deceitful N86.50k pump price announced by the Federal government. At the same time, this will bring an end to the dubious regime of fuel importation by oil marketers and middlemen. It will also reduce undue demands for foreign exchange thus opening up the prospect for the value of Naira to be boosted.

More importantly, there is the need for the labour movement to come to a clear ideological conclusion that without the working class taking over the reins of governance and the commanding heights of the economy and building a mass political movement to achieve this task, there is no way out for the working people.