January 1, 2012. The country received a rude shock when the Petroleum Products Pricing Regulatory Agency (PPPRA) announced that the fuel subsidy on premium motor spirit (petrol) has been removed. Within minutes, petrol stations closed shop. After a few hours a few of them resumed business after changing the price at the pumps from N65 per litre to between N140 and N290 per litre across the country. That was the New Year gift Nigerians received from the Federal Government of Nigeria.
January 2, 2012: #OccupyNigeria was born.
January 9, 2012: The labour unions under the umbrella of Nigeria Labour Congress (NLC) and Trade Union Congress of Nigeria (TUC) declared a nationwide strike.
Today makes it day 3 of the national strike. Banks are closed. Filling stations are closed. Markets are closed. Supermarkets are closed. A few vulcanizers and mechanics are open but there is no business. How long can the masses cope? Time will tell.
The government has engaged the masses using all available media. The labour unions are in talks with the government and lawmakers night and day. How true this is will forever remain unknown. For all we care, they may hide behind closed doors laughing, eating biscuits and drinking orange juice. By the way, orange juice futures have probably been the best performing financial asset this year after gaining 17% year to date on the back of safety concerns from Brazil. [http://www.reuters.com/article/2012/01/11/us-markets-juice-idUSTRE80A1TY20120111]
The question now is who will be the first to blink?
Meanwhile the government holds the aces while the masses hurt themselves; oil production is still at full capacity and the country continues to generate revenues from its major source, which is the exportation of crude oil. The government can survive without a month taxes from its citizens if the private sector grinds to halt. Can the masses survive without petrol, food, electricity, money and water for one month? The critical arm of the labour union, which is Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has decided to go on a strike on January 13th, 2012; these are the people in charge of Nigerian oil production.
A recent poll revealed that 82% of Nigerians do not support the removal of the fuel subsidy. [http://twtpoll.com/3vdyst] Many of these Nigerians are in Nigeria and many of them are on the streets protesting. I have studied the groups on the streets and noted that there are five main groups of Nigerians that have hit the streets for the #OccupyNigeria protests.
The protest is primarily driven by young Nigerians who can cope with the increase in fuel prices and the expected rise in cost of living. They are highly educated, live in urban areas and mobilized themselves through social media using the Egyptian model. They all share the belief that fuel subsidy should be removed ultimately but they insist that the cost of governance should reduce drastically and government should be more efficient and transparent. They are dreamers and idealists and they make no apologies.
The second group of protesters is the labour unions. They may have been compromised long before the battle began as evidenced by the fact that oil production is in full swing. The labor leaders pander to populist demands half heartedly and they strongly believe that social benefits are their rights regardless of the cost to the government. They simply want pump prices to revert to N65 so they can move on with their lives.
The third set of protesters is made up of an odd mix of politicians, who latch on anything that is anti-government, with the hopes of advancing their political careers. In this group can be found the businessmen who enjoyed free money from the subsidy racket; they are ready to fight tooth and nail in order to retain their juicy businesses. These are power brokers with deep pockets and they have less than honorable intentions. The trend shows that they are beginning to take over the protest from the first group of protesters. Little wonder bomb explosions have reduced and the mother of all bombings as promised by the illusive boko haram has not seen the light of day.
The fourth group of protesters has no idea what is going on. They wonder why fuel has increased in price, why transportation cost has doubled and pure water is now selling at N10. In the last group, one can find a subset made of social deviants who take advantage of any situation to rob and vandalize properties.
The last group is the lawmakers in both upper and lower houses. They have endorsed the agitation for reversion of prices back to N65. They gave the president 24 hours to revert. The ultimatum has expired and nothing has happened. They are, well, politicians who are in the race to protect their hides.
The pro-subsidy removal can be broken down into three groups. The first group is the government headed by the president, Jonathan Goodluck, and his cabinet. It is obvious that they mean well for the country but they have parried and failed to address concerns about their ridiculous salaries and allowances. They have lost the confidence of the masses and their attempts to win them over are at best, feeble.
The second group is the 18% of Nigerians according to the poll. They know all about the benefits of the subsidy withdrawal and support it. They know that the government is corrupt but believe that there is little than can be done to address it at the moment. Most of them can afford the increase in cost of goods and services and are ready to make the sacrifices.
The last group is made up of protesters who are in favor of the subsidy removal. They have no idea of what is going on but are willing to sell their souls to the devil, if the price is right, for an instant gratification regardless of the long term effects.
I have wondered how the government arrived at N141 per litre of fuel and developed a small model for it. The model also factored in the N40 per litre as cost of production that was published by Tam David-West. An input of current price of dated Brent, which is closer to bonny light, of $112.44 throws out a cost price of N153.10 per liter. To make any kind of profit, it means that petroleum marketers should sell petrol at N160. In order to arrive at the cost price of N131 as provided by the PPPRA, I had to reduce the price of crude oil to $90 per barrel. Presently, the cheapest brand of crude oil, which is the WTI Cushing, is selling at $100.90 per barrel. At the end of the day, even at the price of N141, the government will still end up subsidizing the consumption of fuel for Nigerians!
I went further to develop a matrix to determine the most likely outcome of the face off between Nigerians and the government and I arrived at a conclusion. A major assumption made was that the chances that PENGASSAN would end up joining the strike is only 35%. The matrix revealed that chances of reverting the price back to N65 is just 13.0%. The likelihood that the price will stay put at N141 is 22.5% while there are 64.5% chances that the price will be revised downwards to between N80 - N120 per litre. The expected outcome will likely happen before the end of this month.
The takeaways I have gotten from this experience are enumerated below.
Nigerians can show a unity of purpose that transcends religious and tribal sentiments. The assumption that the country is can be comfortably divided into a Christian south and a Muslim north has been tested and found wanting.
A strong message has been sent to the government and political wannabes that Nigerians have a threshold over which they will throw the mantra of the happiest people into the dustbin and push back in defiance.
2012 has barely started and it is already becoming a blast.