Bloomberg News

Nigeria Oil Shutdown ‘Last Resort’ as Strike Enters Second Week

January 15, 2012

Jan. 16 (Bloomberg) -- Nigerian oil union Pengassan said it will only shut down oil output as “a last resort” in Africa’s top crude producer to give more time for negotiations with President Goodluck Jonathan’s government to end a strike now in the second week.

The Nigeria Labour Congress and the Trade Union Congress, the country’s two biggest labor federations, called the strike to protest against higher fuel prices after the government said on Jan. 1 it was ending subsidies it said cost 1.2 trillion naira ($7.4 billion) last year.

The two federations have asked Pengassan “to defer the shutting down of oil production and export,” the union said in an e-mailed statement yesterday. The “the postponement will enable labor and civil society groups explore ongoing consultations and negotiations in resolving the current nationwide strike.”

The work stoppage, which began Jan. 9, has limited trade in stocks and the naira, closed ports and banks and sparked street protests. The cost to sub-Saharan Africa’s second-biggest economy may be more than $1 billion a day, according to Gregory Kronsten, head of macroeconomic research at FBN Capital Ltd. in London.

While oil output and exports remain unaffected by the strike, Pengassan is poised “to execute immediately the systematic shutdown of oil production should the negotiation with the government break down,” the Lagos-based union said yesterday in an e-mailed statement.

Daily Output

Nigeria pumped about 2.2 million barrels of oil a day last month, according to data compiled by Bloomberg. At least 90 percent of Nigeria’s crude is produced by Royal Dutch Shell Plc, based in The Hague; Exxon Mobil Corp.; San Ramon, California- based Chevron Corp.; Total SA and Eni SpA in joint ventures with the state-owned Nigerian National Petroleum Corp.

“We’re holding the necessary consultations,” Labor Minister Chukwuemeka Wogu told reporters in Abuja yesterday. “We expect to have an agreement soon.”

The government’s offer to reduce fuel prices falls short of the unions’ demand for a full reversal and is unlikely to restore normalcy, the NLC and the TUC said in a joint statement yesterday. “For the avoidance of any doubt, the indefinite strikes, rallies and protests continue nationwide” as of Jan. 16.

Jonathan, who won a four-year term in April, had pledged to use savings to invest in power plants and roads in Africa’s most populous country, which is roughly split between a mainly Muslim north and a predominantly Christian south.

Religious Violence

At the same time, he faces an increase in religious violence in parts of the north where he has declared a state of emergency and says Islamic militants pose a worse threat to the country than the 1967-70 civil war.

More than 85 people have died in bomb and gun attacks since Christmas Day on churches in Abuja and in the north that the authorities blame on Boko Haram, a militant Islamic group inspired by Afghanistan’s Taliban movement.

Gasoline prices in Nigeria, where two-thirds of the population of about 164 million live on less than $1.25 a day, had been capped at 65 naira a liter (0.3 gallon), leading to a shortage of investment in refineries that forced the West African nation to import about 70 percent of its fuel.

In opposing Jonathan’s reform, union leaders and protest groups have focused their criticisms on government waste and corruption, especially those associated with fuel imports and distribution.

Investigation of Payments

The president has approved the investigation of fuel-import payments and the prosecution of those found to have engaged in “any incidence of malfeasance, fraud, over-invoicing and related illegalities,” Petroleum Minister Diezani Alison- Madueke said yesterday in an e-mailed statement.

“No matter what happens, the government’s credibility is seriously dented, and they’ll have to earn it back,” Bismarck Rewane, analyst and chief executive officer of Lagos-based Financial Derivatives Co., said by phone. “The reality is that this is the beginning of new dispensation. People will demand proper governance, people will demand honesty.”

--With assistance from Chris Kay in Abuja. Editors: Dulue Mbachu, Alex Devine, Chris Thompson

To contact the reporter on this story: Elisha Bala-Gbogbo in Abuja at ebalagbogbo@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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