OIL: Spills are common in Nigeria and are often caused by oil thieves and saboteurs who tap into the hundreds of kilometers of unguarded pipelines that vein through the vast waterways, creeks and swamplands of the Niger Delta. (Photo: ZUMA Press)
Nigerian workers will begin a national strike today after fuel costs more than doubled, threatening to shut ports and disrupt output from Royal Dutch Shell Plc (RDSA) and Chevron Corp. (CVX) in Africa’s largest crude producer.
The Nigerian Labor Congress and Trade Union Congress, representing more than 8 million workers, called an indefinite strike to force President Goodluck Jonathan to reverse a decision to scrap fuel subsidies. The Petroleum and Natural Gas Senior Staff Association of Nigeria, the oil workers’ union, ordered its 24,000 members to stay away from work.
Gasoline prices in Nigeria, where two-thirds of the population of about 164 million live on less than $1.25 a day, surged after Jonathan abolished 1.2 trillion naira ($7.4 billion) of subsidies on Jan. 1. The price had been capped at 65 naira a liter, undermining investment in refineries that resulted in the West African nation importing about 70 percent of its fuel.
“I am determined to leave behind a better Nigeria, that we all can be proud of,” Jonathan said in a televised speech on Jan. 7. “We must act in the public interest, no matter how tough, for the pains of today cannot be compared to the benefits of tomorrow.”
Nigeria produced an average 2.2 million barrels of crude a day in December, according to data compiled by Bloomberg, and is the fifth-largest provider of oil imports to the U.S. At least 90 percent is pumped by Shell, based in The Hague, Exxon Mobil Corp. (XOM), San Ramon, California-based Chevron, Total SA (FP) and Eni SpA (ENI) in joint ventures with the state-owned Nigerian National Petroleum Corp.
The protests come as Jonathan battles to contain violence in the north by suspected Islamic militants of the Boko Haram group, which is fighting to impose religious rule. At least 16 people were killed in three separate attacks in northern states on Jan. 6, including 12 church worshippers in Yola. Jonathan declared a state of emergency in some northern areas after a Christmas Day bombing at a church in Abuja, the capital, killed at least 43.
“Getting to work is hell” as transport costs surged, Pius Owoeye, a chauffeur for a family in Abuja, said in an interview yesterday. Protests may be “the only avenue where the government will listen.”
The U.S. embassy said on its website that citizens in Nigeria should stock up on food, water and fuel for at least three days in case the nationwide strike shuts shops. Air travel may also be disrupted, according to the embassy.
Crude oil has gained 11 percent in New York since the beginning of this year and was trading as high as $102.80 a barrel on Jan. 6.
Nigel Cookey-Gam, spokesman for Exxon in Nigeria, said in an e-mail the company is “hopeful of a resolution” and will monitor the situation. Shell spokesman Tony Okonedo declined to comment when called on his mobile phone.
Nigerian lenders, including Diamond Bank Plc (DIAMONDB) and Standard Chartered Plc (STAN), will run limited branch services from today, according to officials at the companies. Members of the Lagos- based Manufacturers Association of Nigeria, such as Nampak Nigeria Plc (NAMPAK) and Flour Mills of Nigeria Plc (FLOURMIL), will likely be affected by the strike, the group’s president, Kola Jamodu, said in a phone interview.
“The import bill for Nigeria is a joke, you spend half of what you earn in foreign currency to import fuel, fuel that you already produce,” Abdulrahman Yinusa, chief financial officer at Lagos-based Diamond Bank, said in a phone interview.
Port workers will heed the national strike, the Maritime Workers Union of Nigeria said in an e-mailed statement from Lagos on Jan. 6. The National Ports Authority, which manages six harbor complexes, including Lagos and Port Harcourt, said in a statement it will be “open for business as usual.”
“Nigerians cannot afford the high fuel prices and will not accept the hyper-inflation this misguided policy has created,” the Nigeria Labor Congress and Trade Union Congress said in a joint statement on Jan. 7.
Jonathan responded to the labor criticism on Jan. 7 by pledging to cut the pay of executive-branch politicians by 25 percent in 2012 and reduce overseas travel. That wasn’t enough to call off the strike, according to the unions, which plan to defy an order from the National Industrial Court to halt the labor action.
Inflation (NGCPIYOY), which was unchanged at 10.5 percent in November, will probably accelerate to the “mid-teens” in 2012, Yvonne Mhango, an economist at Renaissance Capital in Johannesburg, wrote in an e-mailed note on Jan. 6. Nigeria’s central bank has raised its benchmark interest rate by 6 percentage points to a record 12 percent since September 2010.
“The impact of the petrol price hikes will go beyond simply pushing up transport costs,” Mhango said. While the government will probably stick to its plan, it may “still bow to popular pressure and phase out rather than simply scrap the subsidy.”
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