The Struggles Of Nigerian Workers Against Inflation

 By Izielen Agbon

The inflation rate in Nigeria is currently at 20.5% according to CBN. The prices of bread, cereals, potatoes, yam and other tubers, fish, meat, oil and fat have increased dramatically. The Consumer Price Index has increased from 100 in 2009 to 465 in 2022. However, nominal or monetary wages have remained stagnant. The real wages or purchasing power of workers have reduced. Nigerian workers must examine past struggles to learn the strategies and tactics used by workers in the past in their struggles against inflationary trends in the economy. A look at the struggles of Nigerian workers against inflation in 1941 offers a few lessons.

Consumer Prices had generally doubled in Lagos between 1939 and 1940. In February of 1941, under the Defence Regulations (Public Notice No.15) of 1941, the Colonial State imposed price control measures on essential food items in Lagos. The prices of items such as pepper, gari and beans were controlled by the State. In March of 1941, other food items such as egusi (melon seed), rice, beef, mutton and pork were added to the list. The price control measures were also extended to provincial markets.

Fuel Subsidy – Who Is Subsidizing Who?

By Izielen Agbon

“Who is subsidizing who? The Nigerian oil industry was developed with Nigerian capital. Most of the experts are Nigerians, if you go to the fields. It is Nigerian capital; it is Nigerian oil. What I understand that Nigeria should charge Nigerians is the cost of 1 barrel at the wellhead and then the cost of transportation to the refinery, the cost of refining it and its cost at the pump. If anybody says he is subsidizing anything, he is a fraud. So all these people talking about subsidy, who is subsidizing who?”

*Buhari 

A first year student of refinery economics knows that the “crack spread” is a simple way to determine the profitability of a refinery at the margin. The crack spread is the difference between the sales prices of the refined products (PMS, AGO, HHK) and the price of crude oil. A 3:2:1 crack spread means that at the margin, 3 barrels (bbls) of crude oil will produce 2 bbls of Premium Motor Spirit (PMS) and 1 bbl of Automotive Gas Oil (AGO) or Household Kerosine (HHK). A barrel of Nigerian oil now cost about $40. One bbl of PMS at N87/litre cost N14159 or $71.87 at a CBN exchange rate of N197/$1. The PPPRA product pricing template of December 3, 2015 put the cost of AGO at N96.91/litre or N15772 ($80.06) per bbl. 

Thus, the gross cracking margin for an average refinery in Nigeria is [(2*71.87) + 80.06 – (3*40)] or $103.8 per bbl. The 3:2:1 crack spread is $103.8/3 or $34.6 per bbl. We can substitute HHK for AGO. At N50/litre, one bbl of HHK cost N8137.5 or $41.31. Therefore, the gross cracking margin using PMS and HHK is [(2*71.87) + 41.31– (3*40)] or $65.05 per bbl. The 3:2:1 crack spread is $65.05/3 or $21.68 per bbl. It is empirically impossible to convince anyone that Nigerian refineries cannot operate profitably under an incorruptible efficient management or that a fuel subsidy exists. What exist is the looting of public resources by a cabal aided by a corrupt bureaucracy and gross mismanagement.

Today, you can buy a gallon of PMS from a Valero gas station in Houston, Texas for as low as $1.55 or N78.8 /litre. Prices range from $1.55 to $1.99 per gallon throughout the state. The $1.55/gallon price consists of USA Federal/State taxes (19%), Distribution and Marketing (11%), Refining Cost/Profits (13%) and Crude oil cost/profit (56%). Therefore, without any taxes, the PMS in Houston would cost 19% less or N63.83/litre. Unconvectional (shale) oil production has replaced all oil imports in Texas. They produce all their oil like Nigeria.