The Unbearable Stubbornness of Fuel Subsidies. A flashback to 2012. A veiled warning/advice/ reminder to Nigerians. Part 1

  
The series of events that just transpired in Nigeria makes for a familiar tale – and a telling lesson. The tale tells of a poor, developing nation endowed with oil riches that, on the advice of international economists, tries to eliminate fuel subsidies. The lesson is that the populations of oil-producing nations will inevitably erupt in rage against any such notions.
Nigeria is the biggest oil producer in Africa, pumping out 2.2 million barrels of crude oil a day to sit 10th in the global crude-production standings. But the average Nigerian gets little benefit from his country’s oil riches. There is an enormous gap between rich and poor in Nigeria, mostly because 80% of the economic benefits from producing all that oil flow to just 1% of the population. Politicians in the country’s infamously corrupt government elite over the years have pocketed billions in oil profits, while three-fourths of Nigeria’s 160 million people live on about a dollar a day.
For the poor, a fuel subsidy provides the direct benefits of cheap fuel plus an important indirect benefit: a small sense of ownership in a national resource. That statement is true from Venezuela to Nigeria, from Indonesia to Ukraine. And if ever a politician – undoubtedly a member of that elite group who has felt the benefits of a thriving domestic oil industry – tries to take those benefits away, there will be hell to pay.
Nigerians have been enjoying subsidized fuel since 1973. Subsidized gasoline not only reduces transportation costs, it also lowers food costs and fuels the millions of small generators that provide homes and shops with power in a nation with a failed power grid.
  The subsidy was eliminated on January 1 2012. Within a week fuel prices had more than doubled, shooting up from $1.70 a gallon to at least $3.50. Demonstrations against the dramatic price increase soon turned into riots. By January 8, Nigeria’s labor unions had launched an indefinite, nationwide strike in protest. Then police shot three people dead and wounded 24 others while dispersing protestors in the commercial hub of Lagos. The next day the strike gained momentum, with banks, gas stations, and airports closed down. Oil workers did not join the strike, though they threatened to do so, immediately adding a premium to the Brent benchmark price of oil.
On January 16, President Jonathon reduced the subsidy cuts in a terse announcement, saying he recognized that people were rightfully angry about the suddenness of the change but adding that “other interests beyond the implementation of the deregulation policy have hijacked the protests.” In response, the Nigeria Labor Congress and Trade Union Congress told workers to return to work. It seemed the crisis has abated.
Subsidies will now reduce the price of gas to about US$2.27 a gallon, still more than 50¢ a gallon higher than it was 16 days earlier. With fuel prices still elevated and the government having deployed troops into the streets to quell what many viewed as valid demonstrations in a young democracy with a sensitive history of military coups, many Nigerians are not appeased. And President Jonathon insinuated that the partial subsidies reintroduced on Monday are temporary and will be phased out in perhaps April, at which point the riots could well start again.