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Nigeria Struggles with Opposition to Removal of Fuel Subsidies

Nigeria's government is facing strong public opposition to its removal of fuel subsidies, a condition of international loans. Analysts say removing subsidies was the only way to save the national oil company, which is in financial ruin. But they also caution that higher fuel prices could also fuel inflation, further burdening people struggling to make ends meet.

Nigerian President Olusegun Obasanjo says the government has spent more than $1 billion on fuel subsidies to offset high oil prices. But he says the subsidies are unsustainable.

Although Nigeria is one of the top 10 oil producers in the world, it cannot refine a sufficient amount of oil to meet domestic needs, and is forced to import fuel. World oil prices have remained high, and this week pushed to nearly $70 per barrel in the wake of the hurricane that hit the southeastern United States.

With oil prices at such record highs, Nigeria's decision to lift oil subsidies at this time means Nigerians are being hit particularly hard.

Nigerian journalist Gilbert da Costa says people are struggling to cope with the high prices. Although the official price of fuel is 45 cents per liter, some fueling stations have put prices as high as 52 cents per liter. "The economic situation in the country is extremely difficult. I mean, for the average Nigerian, making ends meet is quite a big deal, really, and so, people are extremely agitated," he said.

But analyst Olivia Amaewhule, with the London-based World Markets Research Group, says it is unlikely that the Nigerian government will go back on its decision, because getting rid of fuel subsidies was a condition of IMF loans.

She says the government tried to get rid of subsidies in 2003, but faced with strong opposition, it shifted responsibility for the subsidies onto the state-owned oil company, the NNPC. Now, NNPC is in financial ruin because of the cost of subsidies. "The NNPC has not been making enough money to cover the losses that it has had to bear from the subsidies. And, at this point, the NNPC director has stated that the NNPC is going bankrupt. And, if the subsidies are not taken out, it will certainly go bankrupt," she said.

Ms. Amaewhule says she is worried about the effect increased fuel prices will have on inflation. She says that, as the prices of transport have increased, this will have a ripple effect on prices of food and other products in the market.

President Obasanjo has promised that money from increased fuel prices will be used to eradicate poverty. Nigerian oil analyst Tunde Martins is hopeful that this will benefit Nigerians, and lessen hardship. "It is not going to be a bad thing for the people of Nigeria, if only (the) government keeps to its plan to divert the subsidies into creating employment opportunities and improving the situation at the health facilities," he said.

However, the leader of the NLC coalition of trade unions, Adams Oshiomhole, says he is considering calling a general strike to protest the lifting of subsidies. "For there can be no questions that we cannot afford to rest, for as long as the pain persists. Our commitment to resist remains strong and firm," he said.

Since the latest round of oil price hikes began in June 2003, the unions have called about six general strikes.

Nigeria's economy and oil industry have suffered through years of mismanagement under corrupt military dictatorships. President Olusegun Obasanjo is under pressure to put the country through both economic and political reforms, and diversify Nigeria's petroleum dependent economy.