US embassy cable - 04LAGOS2574

UNCLAS SECTION 01 OF 03 LAGOS 002574 
 
SIPDIS 
 
DOT PASS TO USTR 
 
E.O.  12958: N/A 
TAGS: ECON, SOCI, PGOV, NI 
SUBJECT: Person-on-the-street in Lagos: How's the 
Economy? 
 
 
1.  (U) Summary: Official statements and statistics 
emanating from the GON give a picture of an economy on 
the rebound.  However, the official position is at 
variance with what one hears in the market stalls and 
living rooms of Lagos.  Consulate staff interviewed a 
cross-section of Lagosians, soliciting their overall 
impressions of the economy.  The verdict -- bad.  High 
fuel costs, lack of a reliable power supply, and 
increased costs of living were universally cited as top 
concerns.  Discussants blamed the federal government 
and President Obasanjo for these problems.  They voiced 
severe skepticism about the economic reforms, which the 
government vaunts are paving the way for economic 
growth.  This report, by definition, is 
impressionistic.  However, this person-on-the-street 
perspective is reflective of the mood in Lagos and 
probably of the mood throughout most of southern 
Nigeria.  In other words, most Nigerians think times 
are hard and getting harder.  End Summary. 
 
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Fuel, Power, and the High Cost of Living 
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2.  (U) Almost every individual complained most 
vociferously about fuel costs.  To our surprise, there 
was no variance by income level.  The teacher, street 
vendor, mid-management banker, all cited fuel costs as 
their number one concern and claimed the recent fuel 
price increases significantly drained their disposable 
income.  (Note: In October, as part of downstream 
deregulation reforms, the GON raised the price of 
gasoline from N43 to N53 per liter.  The GON then 
lowered the official price to N49 in November following 
a four-day national strike.  Increases in fuel costs 
have a ripple effect leading to price hikes across a 
wide range of sectors, including consumer goods and 
comestibles.  Some increases may be warranted, but many 
appear opportunistic.  End note.) 
 
3.  (U) Electricity, or rather the lack thereof, was 
the second most-cited concern.  Lagosians with the 
wherewithal to have generators at home have relied 
almost exclusively on these auxiliary sources of power 
for the past several months.  The cost is high.  A mid- 
level sales manager for a Nigerian beer company told us 
he spent N7, 000 to run his generator in the month of 
November.  This cost is in addition to the tariff he 
will still have to pay the non-performing National 
Electric Power Authority (NEPA).  The generator costs 
represent almost 10 percent of the manager's monthly 
net salary of N72,000.  Yet he was among the fortunate 
minority.  Most Lagosians simply remained in the dark 
at night; they lived by candles.  Televisions remained 
off; air conditioners and fans were not on for weeks. 
Sections of Lagos were eerily dark and quiet.  People 
were bored and hot in the evenings.  During the day, 
those small businesses that relied on NEPA as their 
exclusive power supply ground to a halt.  Many 
Lagosians did not make money during the extended power 
shortage that was the prelude to this holiday season. 
 
4.  (SBU) A printer, who produces office supplies and 
is a member of the Nigerian Association of Small and 
Medium Enterprises (NASME), said fuel price increases 
and insufficient power supply were twin scourges of the 
Nigerian economy.  Most production is done from 
auxiliary power sources, and the fuel for these 
generators is increasingly expensive.  She said that 
most small and medium enterprises (SMEs) pass the extra 
costs to consumers, since they do not have the 
economies of scale to absorb these shocks.  To further 
reduce overhead, some SMEs have resorted to hiring only 
part-time workers.  NASME members would produce more 
and generate more employment if the power supply were 
sufficient and reliable, this member said. 
 
5.  (U) Complaints about the high cost of living and 
low purchasing power were on the lips of all our 
interlocutors.  The price of 50 kg of imported rice, a 
staple here, has increased 20 percent to N6,000 ($45) 
in less than a year.  The price of 10 kg of imported 
frozen chicken increased 33 percent to N4,000 ($30). 
Many Lagosians have had to buy cheaper foods and reduce 
their consumption of meat in order to put enough food 
on the table to feed their families.  Housing costs 
have spiraled in commercial centers like Lagos. 
Claiming they too are only trying to cope with the 
rising cost of living, many landlords have raised rents 
significantly even though they have made no 
improvements to the accommodations.  An FSN reported 
her annual rent for a standard three-bedroom apartment 
increased from N150,000 ($1,128) for 2003 to about 
N250,000 ($1,880) for 2004.  A parking lot attendant 
said he and other tenants in a densely populated area 
of the city now pay as much as N2,000 ($15) monthly for 
a single room on the mainland, up from N800-N1000 
($6.00-$7.50) previously.  Additionally, many landlords 
are asking for one to three years' lease payment in 
advance, putting many long-standing tenants in a bind. 
With a banking sector characterized by high interest 
rates, people have to borrow money from relatives and 
friends.  Often, people have been forced to move. 
 
6.  (SBU) A sales representative from a multinational 
manufacturer of household care products said the low 
purchasing power of Nigerian consumers is noticeably 
affecting company sales.  The effect is doubly 
worrisome since her company produces many basic, not 
luxury, goods.  Despite a national population of over 
120 million people, the company estimates the effective 
market size for a given product line in Nigeria is 
300,000.  This reduced market results in a profit 
margin lower than in other African countries far less 
populous than Nigeria, she said. 
 
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A Peek into the Education Sector 
-------------------------------- 
 
7.  (U) A schoolteacher in a public secondary school 
told us that he is  "highly disappointed."  Salaries 
are not paid regularly.  Classrooms, laboratories, and 
other facilities are dilapidated.  Many teachers now 
supplement their salaries with other businesses, such 
as organizing extra classes for students or selling 
clothes and other items.  The teacher added that many 
students have to help contribute to their family's 
income.  Thus, the children work (primarily petty 
trading) in the morning and then walk to school, 
because of high transportation costs.  Understandably, 
these worker-students arrive tired and are inattentive 
in class. 
 
8.  (SBU) A retired teacher from the Oyo state service 
said retirees fare no better than employed teachers. 
She said pensioners have to be physically present to 
collect their pensions, which are usually paid two or 
three months in arrears.  She asserted that current 
teachers, understandably, lack motivation.  "If serving 
teachers are already suffering and they see what 
retirees are going through after teaching all these 
politicians and professionals, how can anybody expect 
them to be dedicated?" 
 
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A Peek into the Health Sector 
----------------------------- 
 
9.  (U) A recently hired nurse in a private health 
center told us she now earns N15,000 ($113) monthly, 
after working at a state-owned clinic for three years, 
where she earned  N8,000 ($60) a month.  Recounting her 
experience in public service, she said the irregularity 
of salary payments caused more hardship than the low 
amount of the salary.  She and her self-employed 
electrical technician husband and two children 
practically lived on credit, hoping the government 
would pay arrears when promised. 
 
10.  (U) The nurse said the 88 percent salary increase 
has been depleted by the incessant rise in prices of 
basic goods and services.  Like most Lagosians with a 
reasonably well-paid job, she is besieged with requests 
from destitute friends and relatives.  She shared a 
remark commonly heard in Lagos: each gainfully employed 
individual supports at least twenty other people.  She 
wondered aloud how she survived on N8,000 for so long, 
when N15,000 now is insufficient. 
 
11.  (U) Regarding the provision of health care, 
patients in public hospitals usually receive bad 
service from demoralized medical personnel.  A Lagos 
FSN whose mother is hospitalized described his ordeal. 
He said relatives have to search the city to find 
prescribed drugs unavailable in the hospital pharmacy. 
Nurses refused to attend to the elderly woman's needs 
and advised the family to designate someone to stay 
with her at the hospital.  The FSN remarked that 
government hospitals only provide "lodging" for the 
sick; care and attention must come from the family.  He 
further noted that in addition to coping with the 
stress of his mother's illness, he has been without 
electricity for four months, and is thus relying on 
generator power, incurring even more expenses. 
 
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Nigeria Imports What It Has; Exports What It Doesn't 
Have 
--------------------------------------------- ------- 
 
12.  (SBU) A water treatment officer with the Nigerian 
ports authority (who also is owed several months' 
salary) wondered why the country defies basic economic 
laws - "importing what it has, and exporting what it 
lacks."  With vast agricultural lands, Nigeria imports 
foodstuffs like rice, she observed.  While Nigeria 
supplies the Niger Republic with electricity, Nigerians 
cannot get reliable power, she lamented.  (Note: The 
NEPA transmits electricity to the Niger Republic under 
an extended contract with Niger Electric Company.  Many 
Nigerians believe they pay more for electricity than 
consumers in the Niger Republic and that NEPA does a 
better job supplying the Niger Republic than it does 
taking care of its home base.) 
 
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Comment 
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13.  (U)  The attitude of most Nigerians toward the 
economy and their immediate economic future is gloomy. 
Fuel price increases, lack of electricity, rising food 
and consumer prices, unemployment, poor public health 
and education services, and an unfriendly housing 
market have contributed to feelings of widespread 
anxiety and fear among Lagosians about the trajectory 
of Nigeria's economy.  All this is occurring against a 
backdrop of historic oil prices and the accumulation of 
an unprecedented level of foreign exchange reserves. 
They shudder at what would happen if the bottom fell 
out in the oil market.  Thus, when they hear government 
officials trumpet economic reform and assert that the 
country's economic fundamentals are on the mend, this 
news has a hollow ring to them. 
 
14.  (U) The "ordinary Lagosian's" perspective on 
economic reform is very ambivalent.  There is universal 
support for ending rampant corruption and increasing 
transparency.  In addition, support reform initiatives, 
which they perceive as resulting in better services, 
such as telecommunications deregulation.  However, they 
are conflicted about measures that may help the country 
in the long run, but harm their personal interests in 
the short to medium term.  Downstream petroleum 
deregulation is an example.  Lagosians seemed to 
understand the sector must be deregulated in order to 
attract private investment and rehabilitate the 
country's oil refineries.  Yet, they bristle at 
increased fuel prices. 
 
15.  (U) In the final analysis, most Lagosians, like 
most people anywhere, will judge the efficacy of 
economic reform by how it improves their economic 
standing.  Thus far, most people believe this year has 
been a bad one economically and their glimpses into the 
future have not fueled optimism.  If the Lagosians we 
spoke to are representative of the country, support for 
the GON economic policies will continue to truncate 
unless the GON is viewed as taking steps to alleviate 
the average person's economic diminution.  People will 
be looking toward policies that spell job creation, 
arrest the rise in consumer prices, and bring more 
reliable electrical power generation.  Unfortunately, 
some of these goals point to economic policies that 
would be inconsistent with each other and with some 
existing economic reform measures.  If public support 
for reform is a GON objective, it will have to do a 
delicate balancing act. 
 
Browne