Nigerian President Goodluck Jonathan announced a cut in petrol prices to 97 naira ($0.60) a litre on Monday, a gesture that prompted unions to suspend mass protests to allow further negotiations with the government.
But the main labour unions said strikes that paralysed Africa's second-largest economy last week would resume pending further talks, and residents of Nigeria's largest city Lagos reported soldiers in the streets in an apparent security move.
They are searching vehicles. It looks like they want to maintain law and order, one resident said.
Oil output by Nigeria, Africa's biggest crude exporter, has not been affected so far by the labour unrest, which began after a fuel subsidy was lifted on January 1, more than doubling the pump price of petrol to 150 naira per litre from 65 naira.
Jonathan met union leaders late on Sunday in search of a compromise to end the strikes but he said later the talks had yielded no tangible result and he would pursue a policy of removing subsidies seen as breeding waste and corruption.
The government will continue to pursue full deregulation of the downstream petroleum sector. However, given the hardships being suffered by Nigerians, and after due consideration and consultations ... the government has approved the reduction of the pump price of petrol, he said in a national broadcast.
Chika Onuegbu, a senior official at Nigeria's umbrella Trade Union Congress and its main oil union PENGASSAN, said further talks with the government would be held on Monday morning and he hoped for progress that would allow a suspension of strikes.
PENGASSAN previously said it would cut oil production if there was a complete breakdown of labour-government talks.
Workers had suspended strike action over the weekend to give space for talks and allow protesters to rest.
NO OIL CUT
Global oil prices were boosted by fears of reduced supplies from Nigeria late last week. A serious production outage would push them sharply higher, traders and analysts say.
Several people were killed in clashes between strikers and police last week and 600 were treated for wounds, according to the International Red Cross.
The government and unions had a first round of talks on January 12 and a second round two days later, with both sides reporting progress but saying that more deliberations were needed.
Unions said they wanted the government to immediately bring the petrol price back down to 65 naira, at which point they would cancel strikes and protests and talks could continue.
But it would be a politically damaging climbdown for the government to slash the pump price back to 65 naira without any assurance of subsidies being removed in the future.
Economists said the subsidy should be dropped because it was wasteful and open to corruption. Protesters have countered that argument by asking the government to work harder to tackle graft and waste before rescinding public benefits.
Jonathan gave approval on Sunday for an investigation. Oil Minister Diezani Alison-Madueke said she had written to the Economic and Financial Crimes Commission inviting the regulator to examine the subsidy procedure.
The state oil company NNPC and fuel regulators have come under fire for a lack of transparency and mismanagement from independent reports, including one by KPMG. Alison-Madueke pledged to review these reports.
Nigeria produces more than 2 million barrels of crude oil a day but decades of graft and mismanagement have forced it to import almost all its needs for refined fuel.
Alison-Madueke said she would meet legislators in the next week to seek progress towards passing a wide-ranging Petroleum Industry Bill (PIB) that has been stuck in parliament for years, costing Nigeria billions of dollars in lost investment.
Africa's most populous nation holds the world's seventh largest gas reserves but infrastructure only provides enough power to support a medium-sized European city, meaning most of the country's 160 million people live without electricity.
(Additional reporting by Camillus Eboh, James Jukwey; Writing by Joe Brock; Editing by Mark Heinrich)