Updated: Jan. 13, 2012 at 9:00 a.m. EST
President Goodluck Jonathan is living the toughest week of his political career as tens of thousands of Nigerians take to the streets in the longest national strike in the nation's history, at the same time as an increasingly deadly Islamist group continues its relentless sectarian onslaught, prompting an upsurge in Christian-Muslim violence. The crises presented by the protests against gasoline-subsidy cuts and the communal violence may be quite different, but both are symptoms of years of government abuse and corruption. After four days of deadlock, Jonathan has begun negotiating with labor unions, hoping to end the strike that has paralyzed the country. But if the government refuses to back down on subsidy cuts that have doubled the fuel price, Nigeria's main oil union warned that it would shut down on Sunday the oil-and-gas production that is the country's economic lifeline. And late on Thursday, the negotiations between labor unions and the government ended without an agreement to restore fuel subsidies. The talks are due to resume Saturday.
But on Friday, union officials announced there would be a weekend suspension of the strike to let protesters return home to stock up on food and water. A union official urged demonstrators to take a break, and said stores would reopen to allow them to replenish supplies. But the Sunday deadline to shut down oil production remains in effect unless the government and labor unions reach agreement, he said.
Nigeria has until now subsidized the import of gasoline, which accounts for most of its consumption despite being Africa's largest oil producer because of the country's lack of refining capacity. And the subsidy has long been rife with corruption as subsidized imports are siphoned off and sold to neighboring countries where unsubsidized fuel costs three times the Nigerian price.
"The subsidy created distortions in the economy ... and created room for rent-seeking and shortages because fuel prices were not deregulated," according Razia Khan, Africa head of research for Standard Chartered Bank, who said fuel subsidies held back foreign investment in local refining. Nigeria will save an estimated $7 billion a year from removing the subsidies, say advocates of the move. "The case for reform is overwhelming ... if efforts to reform a failing system do not succeed, there is a risk of increased instability," says Antony Goldman of Nigerian-focused PM Consulting. "The challenge for the presidency will be to take on vested interests that have so benefited from a failed political culture and seem so reluctant to adapt to a more effective way of managing Nigeria." (Moderate estimates suggest that $4 billion to $8 billion is lost through corruption from Nigeria's state coffers every year.)
But among the "vested interests" that have benefited from the fuel subsidy are the vast majority of ordinary Nigerians who struggle to make ends meet while unscrupulous, politically connected elites amass fortunes, and the ordinary citizens appear to bear the cost of reforming the economy. "We are O.K. with subsidy removal, we don't have a problem with it," said 30-year-old accountant Aki Balogun. "But we are saying that there's so many problems in the economy they need to fix and there's so many other avenues government can explore to improve the life of citizens before subsidy removal. So it's supposed to be the last thing, but they are starting with it."
The strike comes as the government struggles to suppress Boko Haram, an Islamist organization responsible for a wave of attacks on Christians in northern Nigeria in recent weeks, including bombings on Christmas Day that killed over 40 people. Boko Haram, whose name translates as Western Education Is Sacrilege, is fighting for the wider application of an austere version of Shari'a. And the group has found growing support amid the poverty, deprivation and corruption with which most Nigerians contend. Only a small core of the group are believed to be ideologically hardened jihadists, but if the wider social conditions in which the group has thrived are left untreated, its numbers could grow.
"We believe that Boko Haram's campaign remains at a fairly early stage in its curve, and that the changes needed to address the root causes of the problem such as perceived northern marginalization present few short-term solutions," says Ashley Elliot, an analyst at Control Risks. The leader of Boko Haram, Abubakar Shekau, said in a video posted on YouTube this week that recent killings of Christians were justifiable revenge attacks. Shekau also said President Jonathan had no power to stop the group's insurgency. The group's threat is an increasing worry for President Jonathan, who claimed Boko Haram sympathizers had infiltrated his government. "Some continue to dip their hands and eat with you, and you won't even know the person who will point a gun at you or plant a bomb behind your house," he said on Sunday. Lacking a clear tactical and strategic response to the Boko Haram challenge, Jonathan has responded with a heavy-handed military strategy that some fear could exacerbate the problem.
"Nigeria is at a cross-roads," warns Goldman of PM Consulting. "The erosion of law and order, the failure of public administration, all point to a status quo that is increasingly unsustainable."
There's no easy solution for Jonathan, though: on one hand he needs to defuse the protests, but on the other he needs to redirect oil revenues to invest in infrastructure and development in regions facing growing radicalization. And, of course, many of those who have benefited most from diverting subsidized fuel are believed to be among the President's key backers. "Those both within government agencies as well as the private sector who have abused the subsidy regime have to be investigated and brought to book very soon to help rally the public to [the government's] side," says Kayode Akindele, partner at Lagos-based investment firm 46 Parallels. Investors see several reforms to the petroleum sector and sovereign wealth fund, as well as privatization of electricity utilities proposed for 2012, as key to Nigeria's ability to improve its growth prospects and make a meaningful difference to poverty. But getting those implemented will require the government cutting powerful interests out of the fuel-subsidy skimming game, and finding some measure of consensus with unions and others representing the increasingly indignant working poor.