The Nigeria Labour Congress (NLC), an umbrella group that represents most of Nigeria’s labour unions, has announced that its members will embark on a conditional strike action on June 7th.

Bola Tinubu, Nigeria’s president, is facing a test of his ability as a statesman and reformer after barely a week in power. The NLC wants Mr Tinubu to reverse a recent increase in the price of petrol—to N557 (US$1.2) per litre, from a previous average of N254/litre—implemented by NNPC Limited, the state oil firm. 

Unions regularly intervene to prevent petrol price increases in Nigeria and always succeed; repeated attempts to end the petrol subsidy over recent decades have failed. In his inaugural address on May 29th Mr Tinubu declared that Nigeria would have to live without the subsidy, although no precise date was given for its expiry. We believe that Mr Tinubu wants to sound out the degree of opposition to his plan before deciding how quickly to proceed. However, events have overtaken him. NNPC Limited unilaterally raised the regulated pump price after Mr Tinubu’s speech, recognising it as an opportunity; according to the firm’s chief executive, the subsidy is unaffordable and the company is owed about N2.8trn (US$6bn) in missed payments from the government. Portraying NNPC Limited as opportunistic or wayward would give Mr Tinubu a chance to reverse the recent price increase without officially changing policy, but in our view, his botched handling of the subsidy stoppage has burned through his limited political capital.

With Mr Tinubu yet to form a cabinet, nationwide strikes would be crippling, and could morph into a broader movement against the president himself. A legal case over the February 2023 election result is ongoing, with a ruling expected in August. One of the complainants, Peter Obi, is an NLC affiliate; protests would give him an ideal platform to drag the question of the government’s legitimacy back into the spotlight. We expect Mr Tinubu to compromise, in an early climb-down that will undermine his authority in future. 

We expect the subsidy to be lessened gradually; the government has been able to raise prices in small increments without major backlash. A 650,000‑barrel/day (b/d) mega‑refinery was recently commissioned, and should be able to fully meet domestic petrol consumption by 2024. Assuming that local supply increases and wholesale costs (which are currently exposed to foreign-exchange movements) lessen, conditions will be better suited for market pricing. The Tinubu administration should therefore, without expending vast effort, be more successful than its predecessors in reducing the fiscal burden of the subsidy bill, which currently comprises about a fifth of the national budget.

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