NIGERIA

Nigeria is a major oil producer, yet imports nearly all of its refined products. These are heavily subsidised, which means that one of the country's biggest businesses is smuggling those cheap products across the border to neighbouring countries, where they are sold for closer to a proper price. The subsidies cost the Government about US$8 billion a year, a lot of money in a poor country; yet most of it eventually ends up in the pockets of a few well-connected people.

President Goodluck Jonathan understandably wants to get rid of this charade, abolishing the subsidy and using the money saved to invest in infrastructure, not least refining capacity and improvements to the electicity supply. The problem is that in doing so, the pain is immediate and certain; while the benefits come later and are uncertain. Given Nigerian Governments' lamentable track record, it is not surprising that the average citizen is sceptical, to say the least, about the trade-off.

The President decided to go for a big bang solution, abolishing the subsidy at a stroke on 1 January. Protests and demonstrations duly followed, some of them violent. Today he backed down, and restored roughly half of the subsidy; the price first went from 65 naira per litre to 140 naira, and is now back to 97, or US$0.60, still very cheap seen with European eyes. The protests have been called off.

Both sides can claim victory. The people have shown that their Government has to earn their trust. While the President has managed to save a couple of US$ billion, which goes a long way in Africa. He now has to show that he can spend it wisely.

Walter Blotscher