US embassy cable - 03LAGOS2061

UNCLAS LAGOS 002061 
 
SIPDIS 
 
 
SENSITIVE 
 
 
E.O. 12958: N/A 
TAGS: ECON, ELAB, NI 
SUBJECT: BETWEEN THE HAMMER AND THE ANVIL:  THE PROPOSED 
WAGE HIKES 
 
 
1.  (SBU) The likely wage increases looming over the Nigerial 
fiscal landscape will affect the already difficult situation 
of both the federal and state governments.  The federal 
government has (apparently) committed itself to a 12.5 
percent increase in workers' salaries, at least at the lowest 
levels of the pay scale.  The federal government is being 
deliberately vague about its understanding of the agreement 
(if that is what it is), possibly because it can't really 
afford to pay what it is already paying.  The federal 
government is going increasingly into debt just to meet its 
current obligations, but most of the 36 states are in much 
worse shape, and view a federal wage hike with unadulterated 
dread.  Their workers will want the same deal, but many of 
the states are already in the process of fiscal collapse. 
Some are bankrupt or as good as, and often pay their workers 
intermittently.  State workers in Anambra state recently went 
six months without pay, while Osun and Lagos states fell 
three months behind; Kogi, Kwara, and several other states 
are a year in arrears. 
 
 
2.  (SBU)  The states are really between the hammer and the 
anvil.  With the exception of the oil producing states and 
Lagos, they have little control over their incomes.  They 
live month-to-month on allotments from the federal government 
and spend almost their entire budgets on salaries.  Since 
most states have few non-salary expenses to cut to stay 
within budget, the prospect of matching a federal wage hike 
is a real threat.  The 36 governors, meeting recently to 
consider the situation, issued a statement saying they were 
unable to match the federal government's pay raise.  Last 
week, however, two northern states (Nasarawa and Zamfara) 
broke ranks in a fit of bravado (or one-upsmanship they can't 
afford, as they are among the poorest) to announce they will 
pay the increase.  Some of the oil-producing Delta states are 
reported to be able to pay but the hapless majority echo the 
federal government in warning that the pay increase must 
inevitably result in layoffs. 
 
 
3.  (SBU)  The unions, of course, have seen this coming, and 
are warning against reductions.  It's not that the state and 
federal governments don't have the money to pay wage 
increases, they say, it's that they waste the money through 
mismanagement and corruption, and their incompetence and 
corruption aren't the union's problem.  The unions have a 
point; without endemic corruption and mismanagement the 
governments could pay the increase and perhaps much more. 
 
 
4.  (SBU)  COMMENT:  Part of the governments' mismanagement, 
however, is that they have too many workers, an inconvenient 
fact the unions ignore.  Furthermore, the unions want wage 
increases now.  It isn't at all clear when the federal and 
state governments will actually get rid of mismanagement and 
corruption, but it is overwhelmingly obvious that it isn't 
going to be "now."  Or even soon.  So the stage is set for a 
confrontation; a similar showdown in 2000 resulted in 
nationwide strikes and concessions by the governments. 
Ultimately, the state and federal governments will agree to 
spend more than they can, governments will borrow more and 
pay back less, and their workers will be paid less often. 
Services will suffer, and civil servants will continue to 
moonlight and resort to corruption to survive.  Thus the can 
gets kicked down the road, and nothing substantial changes. 
HINSON-JONES