Source: Boiling Frogs Post
Nigeria,
Africa’s most populous nation and its largest oil producer, is from all
evidence being systematically thrown into chaos and a state of civil
war. The recent surprise decision by the government of Goodluck Jonathan
to abruptly lift subsidies on imported gasoline and other fuel has a
far more sinister background than mere corruption and the
Washington-based International Monetary Fund (IMF) is playing a key
role. China appears to be the likely loser along with Nigeria’s
population.
Despite
its oil riches, Nigeria remains one of Africa’s poorest countries. The
known oilfields are concentrated around the vast Niger Delta roughly
between Port Harcourt and extending in the direction of the capital
Lagos, with large new finds being developed all along the oil-rich Gulf
of Guinea. Nigeria’s oil is exploited and largely exported by the
Anglo-American giants—Shell, Mobil, Chevron, Texaco. Italy’s Agip also
has a presence and most recently, to no one’s surprise, the Chinese
state oil companies began seeking major exploration and oil
infrastructure agreements with the Lagos government.
What
has been buried from international accounts of the unrest is the
explicit role the US-dominated International Monetary Fund (IMF) played
in the situation. With suspicious timing IMF Managing Director Christine
Lagarde was in Nigeria days before the abrupt subsidy decision of
President Jonathan.[5]
By all accounts, the IMF and the Nigerian government have been careful
this time not to be blatant about openly announcing demands to ends
subsidies as they were in Tunisia before food protests became the
trigger for that country’s Twitter putsch in 2011.
Making
the sudden decision to end the domestic fuel subsidy even more
suspicious is the manner in which Washington and the IMF are putting
pressure on only select countries to end subsidies. Nigeria, whose oil
today sells for the equivalent of $1 a liter or roughly $3.78 a US
gallon, is far from cheap. Brunei, Oman, Kuwait, Bahrain, Qatar, Saudi
Arabia all offer their petrol very cheap to their people. The Saudis
sell their oil at 17 cents, Kuwait at 22 cents.[10] In the US gasoline averages 89 cents a liter.[11]
# # # #
F. William Engdahl
Nigeria,
Africa’s most populous nation and its largest oil producer, is from all
evidence being systematically thrown into chaos and a state of civil
war. The recent surprise decision by the government of Goodluck Jonathan
to abruptly lift subsidies on imported gasoline and other fuel has a
far more sinister background than mere corruption and the
Washington-based International Monetary Fund (IMF) is playing a key
role. China appears to be the likely loser along with Nigeria’s
population.
The recent strikes protesting the government’s abrupt elimination of
gasoline and other fuel subsidies, that brought Nigeria briefly to a
standstill, came as a surprise to most in the country. Months earlier
President Jonathan had promised the major trade union organizations that
he would conduct a gradual four-stage lifting of the subsidy to ease
the economic burden. Instead, without warning he announced an immediate
full removal of subsidies effective January 1, 2012. It was “shock
therapy” to put it mildly.
Nigeria today is one of the world’s most important producers of
light, sweet crude oil—the same high quality crude oil that Libya and
the British North Sea produce. The country is showing every indication
of spiraling downward into deep disorder. Nigeria is the fifth largest
supplier of oil to the United States and twelfth largest oil producer in
the world on a par with Kuwait and just behind Venezuela with
production exceeding two million barrels a day. [1]
The curious timing of IMF subsidy demand
Despite
its oil riches, Nigeria remains one of Africa’s poorest countries. The
known oilfields are concentrated around the vast Niger Delta roughly
between Port Harcourt and extending in the direction of the capital
Lagos, with large new finds being developed all along the oil-rich Gulf
of Guinea. Nigeria’s oil is exploited and largely exported by the
Anglo-American giants—Shell, Mobil, Chevron, Texaco. Italy’s Agip also
has a presence and most recently, to no one’s surprise, the Chinese
state oil companies began seeking major exploration and oil
infrastructure agreements with the Lagos government.
Ironically, despite the fact that Nigeria has abundant oil to earn
dollar export revenue to build its domestic infrastructure, government
policy has deliberately let its domestic oil refining capacity fall into
ruin. The consequence has been that most of the gasoline and other
refined petroleum products used to drive transportation and industry,
has to be imported, despite the country’s abundant oil. In order to
shield the population from the high import costs of gasoline and other
refined fuels, the central government has subsidized prices.
Until January 1, 2012, that is. That was the day when, without
advance warning President Goodluck Ebele Azikiwe Jonathan announced
immediate removal of all fuel subsidies. Prices for gasoline shot up
almost threefold in hours from 65 naira (35 cents of a dollar) a liter
to 150 naira (93 cents). The impact rippled across the economy to
everything including prices of grains and vegetables.[2]
In justifying the move, Central Bank Governor Lamido Sanusi insisted
that “The monies will be used in provision of social amenities and
infrastructural development that will benefit Nigerians more and save
the country from economic rift.”[3]
President Goodluck Jonathan says he is phasing out the subsidy as a
part of a move to “clean up the Nigerian government.” If so how he plans
to proceed is anything but apparent.
The huge unexpected price hike for domestic fuel triggered nationwide
protests that threatened to bring the economy to a halt by mid-January.
The president deftly took the wind out of protester sails by announcing
a partial rollback in prices, still leaving prices effectively double
that of December. The trade union federation immediately called off the
protests. Then, revealingly, Goodluck Jonathan’s government ordered the
military to take to the streets to “keep order” and de facto prevent new
protests. All that took place during one of the bloodiest waves of
bombings and murder rampages by the terrorist Boko Haram sect creating a
climate of extreme chaos.[4]
The smoking gun of the IMF
What
has been buried from international accounts of the unrest is the
explicit role the US-dominated International Monetary Fund (IMF) played
in the situation. With suspicious timing IMF Managing Director Christine
Lagarde was in Nigeria days before the abrupt subsidy decision of
President Jonathan.[5]
By all accounts, the IMF and the Nigerian government have been careful
this time not to be blatant about openly announcing demands to ends
subsidies as they were in Tunisia before food protests became the
trigger for that country’s Twitter putsch in 2011.
During her visit to Nigeria Lagarde said President Jonathan’s
‘Transformation Agenda’ for deregulation “is an agenda for Nigeria,
driven by Nigerians. The IMF is here to support you and be a better
partner for you.” [6] Few Nigerians were convinced. On December 29 Reuters
wrote, “The IMF has urged countries across West and Central Africa to
cut fuel subsidies, which they say are not effective in directly aiding
the poor, but do promote corruption and smuggling. The past months have
seen governments in Nigeria, Guinea, Cameroon and Chad moving to cut
state subsidies on fuel.” [7]
Further confirming the role US and IMF pressure on the Nigerian
government played, Jeffery Sachs, Special Adviser to the United Nations
(UN) Secretary General, during a meeting with President Jonathan in
Nigeria in early January days after the subsidy decision, Sachs declared
Jonathan’s decision to withdraw petroleum subsidy “a bold and correct
policy.” [8]
Sachs, a former Harvard economics professor became notorious during
the early 1990’s for prescribing IMF “shock therapy” for Poland, Russia,
Ukraine and other former communist states which opened invaluable state
assets for de facto plundering by dollar-rich western multinationals. [9]
Making
the sudden decision to end the domestic fuel subsidy even more
suspicious is the manner in which Washington and the IMF are putting
pressure on only select countries to end subsidies. Nigeria, whose oil
today sells for the equivalent of $1 a liter or roughly $3.78 a US
gallon, is far from cheap. Brunei, Oman, Kuwait, Bahrain, Qatar, Saudi
Arabia all offer their petrol very cheap to their people. The Saudis
sell their oil at 17 cents, Kuwait at 22 cents.[10] In the US gasoline averages 89 cents a liter.[11]
That means the IMF and Washington have forced one of the poorest
economies in Africa to impose a huge tax on its citizens on the
implausible argument it will help eliminate corruption in the state
petroleum sector. The IMF knows well that the elimination of subsidies
will do nothing about corruption in high places.
Were the IMF and World Bank genuinely concerned with the health of
the domestic Nigerian economy, they would have provided support for
rebuilding and expanding a domestic oil refinery industry that has been
let to rot so that the country need no longer import refined fuels using
precious state budget resources to do so. The easiest way to do that
would be to expedite a two-year-old deal between China and the Nigerian
government to invest some $28 billion in massive expansion of the oil
refinery sector to eliminate need for importing foreign gasoline and
other refined products.
Quite the opposite—the criminal cabal inside NNPC and the Government
making huge profits on the old subsidy system are suddenly making double
and potentially triple more to maintain the old corrupt import system,
and, of course, to sabotage Chinese refinery construction that could put
an end to their gravy train.
Cutting their nose to spite the face…
Rather than benefit ordinary Nigerians as the IMF proclaims to want,
the elimination of the subsidies has further pauperized the 90 per cent
living on less than $2 a day, according to Mallam Sanusi Lamido Sanusi,
the Nigerian Central Bank governor.[12] An estimated 40 million Nigerians are unemployed in the country of 148 million.
Because transport costs are a significant factor in delivery of food
to the cities, food price inflation has soared along with costs of
public transportation for the majority of poorer Nigerians. According to
the Nigerian Leadership Sunday, “prices of commodities which
shot up as a fallout of the fuel pump price increase have refused to
come down.” Everything from street vegetable sellers to carwashes to
roadside photographers are feeling the shock of the rise in fuel prices.
Unemployment is rising as small businesses fold. [13]
The argument of the IMF and the Jonathan Administration is that by
freeing fuel prices, funds would be available to more social services
and rebuild Nigeria’s “infrastructure.” Both the IMF and the Government
know it would have been far more economically viable to replace the
current corrupt system of importing refined gasoline and fuels with
investing in rebuilding Nigeria’s domestic refining capacity.
Son Gyoh of the Nigerian Awareness for Development organization
stated, “Would it not be more expedient to pressure government to
service the refineries to full production capacity given the
implications on overhead and competitiveness for local industries?” [14]
Gyoh pointed to the source of the problem: “Why have successive
governments left the refineries in a state of disrepair while spending
huge on subsidy? Is there any chance that the savings from subsidy
withdrawal will go directly into rehabilitating the refineries? Does
deregulation imply NNPC will no longer operate a monopoly in importation
of refined petroleum product or is this lobby a self-serving lifeline
to continue its monopoly? ” He concludes, “In any case, there is good
reason to doubt subsidy removal will solve the fuel scarcity problem as
the cabal will only regroup to change tactics, a fact Nigerians are only
too aware of.” [15]
After Nigeria partly nationalized its oil sector in the late 1970’s
they also took control of Shell Oil’s Port Harcourt I refinery. In 1989
Port Harcourt II refinery was built. Both refineries fell into serious
disrepair after 1994 when the Abacha military dictatorship cut the
“take” of the Nigerian National Petroleum Company (NNPC) from domestic
sale of refined oil products such as gasoline from 84% to 22%. That
caused a cash crisis for NNPC and a halt to refinery maintenance. Today
only one of four refineries operates at all. [16]
What developed since was a system of NNPC importing foreign gasoline
and other refined products for Nigeria’s domestic needs, naturally at a
far more expensive cost. The price subsidies were to relieve that higher
import cost, hardly a sensible solution but a very lucrative one for
those corrupt elements in the state and private sector making a killing,
literally, off the import process.
NNPC criminal enterprise
The IMF is well aware of the real cause of Nigeria’s fuel industry
problems. A Nigerian legislative committee examining the sources of the
industry’s problems recently released a report documenting that at least
$4 billion annually is taken from taxpayers in fuel industry corruption
with the state Nigerian National Petroleum Company (NNPC) at the
center. According to the commission, “every day, fuel importers drop off
59 million liters of fuel. The country consumes 35 million liters
daily. That leaves 24 million liters of oil available for smugglers to
export, paid for by government fuel subsidies. This costs the Nigerian
people roughly $4 billion yearly, according to Reuters.” [17]
The Nigerian government has said that the 7.5 billion dollars spent
yearly on fuel subsidies could be used to provide desperately needed
infrastructure. But they omit any mention of the rampant siphoning off
of $4 billion of oil by black market smugglers, reportedly with
connivance of high NNPC government officials, to sell to neighboring
countries at a hefty profit. The refined imported fuel is reportedly
smuggled into neighboring countries like Cameroon, Chad and Niger where
petrol prices are far higher, according to Abdullahi Umar Ganduje,
Deputy Governor of Kano State.[18]
China as IMF target?
One major geopolitical factor that is generally ignored in recent
discussion of Nigerian oil politics is the growing role of China in the
country. In May 2010 only days after President Jonathan was sworn in,
China signed an impressive $28.5 billion deal with his government to
build three new refineries, something that in no way fit into the plans
of either the IMF or of Washington or of the Anglo-American oil majors.[19]
China State Construction Engineering Corporation Limited (CSCEC)
signed the deal to build three oil refineries with Nigerian National
Petroleum Corporation (NNPC), in the biggest deal China has made with
Africa. Shehu Ladan, head of NNPC, said at the signing ceremony that the
added refineries would reduce the $10 billion spent annually on
imported refined products. As of January 2012 the three Chinese refnery
projects were still in the planning stage, reportedly blocked by the
powerful vested interests gaining from the existing corrupt import
system.[20]
A report in China Daily last November quoted Nigeria’s
Olusegun Olutoyin Aganga, the minister of trade and investment that
Nigeria was seeking added Chinese investors for its energy, mining and
agribusiness industries. Last September on a visit to Beijing, Nigeria
central bank governor Lamido Sanusi announced his country planned to
invest 5 percent to 10 percent of its foreign exchange reserves in
China’s currency, the renminbi (RMB) or yuan, noting that he sees the
yuan becoming reserve currency. In 2010 China’s loans and exports to
Nigeria exceeded $7 billion, while Nigeria exported $1 billion of crude
oil, Sanusi stated. [21]
Until now Nigeria has held some 79% of her foreign currency reserves
in dollars, the rest in Euro or Sterling, all of which look dicey given
their financial and debt problems. The move of a major oil producer away
from dollars, added to similar moves recently by India, Japan, Russia,
Iran and others, augurs bad news for the continued role of the dollar as
dominant world reserve currency. [22] Clearly some in Washington would not be happy with that.
The Chinese are also bidding to get a direct stake in Nigeria’s rich
oil reserves, until now an Anglo-American domain. In July 2010, China’s
CNPC (China National Petroleum Corporation) won four prospective oil
blocks -two in the Niger Delta and two in the frontier Chad Basin, with
plans to become core investor in the Kaduna refinery, and construction
of a double track Lagos-Kano railway.[23] As well China’s oil company, CNOOC Ltd has a major offshore production area in Nigeria.
The IMF and Washington pressure to lift subsidies on imported fuels
is at this point in question as is the future of China in Nigeria’s
energy industry. Clear is that lifting subsidies in no way will benefit
Nigerians. More alarming in this context is the orchestration of a major
new wave of terror killings and bombings by the mysterious and
suspiciously well-armed Boko Haram. This we will look at next in the
context of Nigeria’s recent transformation into a major narcotics hub.
F. William Engdahl is author of A Century of War: Anglo-American Oil Politics in the New World Order. He may be contacted through his website at www.engdahl.oilgeopolitics.net where this article was originally published.
Endnotes:
[1]John Campbell, Nigeria’s Turmoil and the Outside World, January 12, 2012, accessed in http://blogs.cfr.org/campbell/2012/01/12/nigeria%E2%80%99s-turmoil-and-the-outside-world/#more-3994.
[2] Chika Otuchikere and Chibunma Ukwu, Nigeria: Aftermath of Subsidy Crisis Food Prices Hitting Roof Tops, 22 January, 2012, accessed in http://allafrica.com/stories/201201231627.html.
[3] Mustapha Muhammad, Nigeria: Billions Siphoned by Corruption Could Have Been Used to Maintain Fuel Subsidy, Inter Press Service, January 11, 2012, accessed in http://www.globalissues.org/news/2012/01/11/12407.
[4] Mike Oboh, Boko Haram Islamist Insurgents Kill at Least 178 in Nigeria’s Kano, January 22, 2012, International Business Times, accessed in http://www.ibtimes.com/articles/285620/20120122/boko-haram-islamist-insurgents-kill-178-nigeria.htm.
[5] Christine Lagarde, Statement by IMF Managing Director Christine Lagarde at the Conclusion of her Visit to Nigeria, IMF, Washington, Press Release No. 11/478, December 20, 2011, accessed in http://www.imf.org/external/np/sec/pr/2011/pr11478.htm.
[6] Ibid.
[7] Quoted in Idris Ahmed and Kate da Costa, Nigeria: IMF Pushing the Country to End Subsidy – - Report, 30 December 2011, accessed in http://allafrica.com/stories/201112300791.html.
[8] Olutayo Olubi, Fuel subsidy: International conspiracy against Nigerians, National Daily, 15 January 2012, accessed in http://nationaldailyngr.com/index.php?option=com_content&view=article&id=2825:fuel-subsidy-international-conspiracy-against-nigerians&catid=306:business-news&Itemid=561.
[9] Ibid.
[10] Ibid.
[11] Ibid.
[12] Ibid.
[13] Chika Otuchikere and Chibunma Ukwu, Nigeria Aftermath of Subsidy Crisis: Food Prices Hitting Roof Tops, 22 January 2012, accessed in http://allafrica.com/stories/201201231627.html.
[14] Son Gyoh, Nigeria: The case against removal of fuel subsidy and the argument for deregulated petroleum sub sector, accessed in http://awarenessfordevelopment.org/index.php?option=com_content&view=article&id=66:nigeria-fuel-subsidy.
[15] Ibid.
[16] MBendi, Oil Refining in Nigeria–An Overview, accessed in http://www.mbendi.com/indy/oilg/ogrf/af/ng/p0005.htm.
[17] Heather Murdock, Nigeria finds 4 billion dollars in fuel corruption, January 20, 2012, accessed in http://www.globalpost.com/dispatch/news/regions/africa/nigeria/120119/nigeria-oil-fuel-corruption.
[18] Mustapha Muhammad, Nigeria: Billions Siphoned by Corruption Could Have Been Used to Maintain Fuel Subsidy, Inter Press Service, January 11, 2012, accessed in http://www.globalissues.org/news/2012/01/11/12407.
[19] Kerri Shannon, China Continues Its Run on African Commodities With $23 Billion Nigeria Oil Deal, Money Morning, May 15, 2010, accessed in http://moneymorning.com/2010/05/15/nigeria-oil-deal/.
[20] Gavin du Venage, Everyone is a loser in Nigeria’s fuel subsidy cut and partial restoration, The National, January 24, 2012, accessed in http://www.thenational.ae/thenationalconversation/industry-insights/energy/everyone-is-a-loser-in-nigerias-fuel-subsidy-cut-and-partial-restoration.
[21] China Daily, Nigeria seeking Chinese capital, November 12, 2011, accessed in http://www.chinadaily.com.cn/cndy/2011-11/12/content_14082411.htm.
[22] Xinhua, Nigeria bank chief sees yuan becoming reserve currency, September 6, 2011, accessed in http://europe.chinadaily.com.cn/world/2011-09/06/content_13641562.htm.
[23] Kayode Ekundayo, Nigeria: China, 2010 Budget and Oil Blocks, Daily Trust (Abuja), 12 July 2010, accessed in http://allafrica.com/stories/201007121319.html
