Unlike in South Africa, when the prices of petroleum products - kerosene, petrol and diesel - go up, in Nigeria, it is not the owners of transport vehicles, private and public, alone who feel the economic pinch.

Millions of ordinary Nigerians who operate tyre repair shops, mill corn and wheat for their neighbours, run hair salons, maintain small restaurants and provide electricity for their homes, have to pay more to produce their electricity. Also, tens of thousands of unemployed graduates in the country buy motorcycles which they use for ferrying people in cities and towns and from one village to another.

Any increase in the price of petrol reaches the grassroots of the country. There are said to be about 160million generators in the country, or one for each Nigerian. Here, each individual and each household is a municipality, providing its own electricity, water, transport and security system. This is because no infrastructure exists to provide these services.

So, when on January 1 this year, the government announced that the price of petroleum products would increase from 65 naira to 130 naira, the Nigerian Labour Congress and the Nigerian Union of Labour went on strike. The point they were anxious to make is that government must continue to keep the price of petrol at the level of 65 naira, whatever economic idiocy this might imply.

Nigeria is surrounded by French-speaking countries where petrol is far more expensive. This means that anybody in Nigeria with the necessary resources can buy petrol in bulk , drive in any direction - west to Benin Republic, north to Niger Republic or east to the Cameroon Republic - and make tons of money. This happens every day.

But there are far more sophisticated forms of this money-making racket. For years the four refineries in Nigeria owned by the parastatals in charge of the petroleum industry have not refined any petrol. It is not because they can't, but because those in charge do not want them to do so. As a result, Nigerian crude is exported to be refined outside the country. The refined product is imported into Nigeria at a cost subsidised by government to make it cheap for ordinary Nigerians. Those who import the refined petrol - they are all Nigerians - are paid by the Nigerian government so they can recover their investment The government, by cancelling this subsidy, had to increase the price of petrol.

These importers of petrol have been called many names, including a cabal, saboteurs, criminals and blood-sucking capitalists. But no law-enforcement agency has ever named these people.

The current government claims that the money saved from removing the subsidy would be used for infrastructure. Subsidies were taken off diesel and kerosene years ago, but what happened to that money saved by the government?

In a country where in the past 40 years 20000 federal, state and local government infrastructure projects - including hospitals, schools, roads, bridges and town halls - have been abandoned, it is difficult to believe government when it talks of spending on infrastructure.

Current president Goodluck Jonathan's government claims it is through lifting the subsidy on petrol he can deal with corruption. But the important thing to remember is that corruption is not the problem. The problem is unpunished corruption.

Unpunished corruption creates problems of law enforcement for any country. For one thing, breaking the law and spending the rewards of crime become more blatant, and leads to the rise of vigilantism.

What about making the Nigerian refineries function? What about getting those in charge to do the right thing? Or face prosecution?

These are not important questions as far as the government is concerned. In Nigeria, "principle" is a good word in the mouth, but "compromise" sounds better.

The sum of 97 naira per litre is the compromise announced by Jonathan after a week of protests. In Nigeria, unlike in South Africa, when the price of petrol goes up, it never comes down.

• Omotoso is Director of Research, Africa Diaspora Research