US embassy cable - 05LAGOS1350

UNCLAS SECTION 01 OF 02 LAGOS 001350 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ELAB, EPET, KDEM, PGOV, NI 
SUBJECT: PETROLEUM INDUSTRY STRIKE THREAT LOOMS ON 2 FRONTS 
 
 
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 SUMMARY 
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1. (U) The petroleum industry, the dominant force in the 
Nigerian economy, has recently been hit with threats of labor 
disruption.  While labor allegations about government 
implementation of refinery privatization produced threats of 
a stoppage by oil workers, retail price hikes have been 
responded to by calls for disruption on a national scale. 
These suggestions of labor strikes are worrisome but 
organized labor has not fared well in its last few encounters 
with government and public confidence in labor has waned in 
recent months.  It will be hard for labor to organize any 
effective action.  End Summary. 
 
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PRIVATIZATION THREATS 
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2. (U) On August 17, local newspapers reported Nigerian 
National Petroleum Corporation (NNPC) workers gave the GON a 
14-day strike ultimatum.  The workers, members of the 
Petroleum and Natural Gas Senior Staff Association of Nigeria 
(PENGASSAN) and National Union of Petroleum and Natural Gas 
(NUPENG), claimed the GON has neglected labor issues in 
pursuit of privatization of government-owned oil refineries. 
The workers accuse the Bureau of Public Enterprises (BPE) of 
ignoring certain GON privatization guidelines.  The ultimatum 
also called for BPE to withdraw its personnel from the Port 
Harcourt Refinery and Eleme Petrochemical Company, both 
slated for privatization by December 2005. 
 
3. (U) BPE Assistant Director Gordon Gofwan confirmed the 
workers' ultimatum, but claims the workers' major concerns of 
job security and payment of post-privatization benefits have 
been addressed.  While asserting the workers will not be 
allowed to dictate the terms of refinery privatization, 
Gofwan said BPE has met NNPC Group Managing Director (GMD) 
Funsho Kupolokun to address these concerns.  Gofwan says the 
NNPC plans to shift some workers from the refineries to other 
NNPC subsidiaries, and will promptly pay terminal benefits to 
those workers the NNPC cannot retain elsewhere. 
 
4. (U) PENGASSAN Secretary Bayo Olowosile confirmed union 
leaders and the BPE have held a series of meetings since 
August 17 to address workers' concerns, with no agreement 
reached so far.  According to Olowosile, "oil sector unions 
are not really against the privatization of the refineries, 
but are worried about the fate of their members when the 
refineries are sold off."  He said the unions fear their 
members may be treated like Nigerian Airways employees who 
were denied terminal benefits when the airline was liquidated. 
 
5. (U) Gofwan stated the NNPC GMD is expected to address 
protesting workers soon.  Olowosile asserted the ultimatum 
stands until a compromise is reached.  In the meantime, BPE 
has concluded all investor inspections of the refineries, and 
workers have not hindered this process in any way. 
 
6. (U) Comment: In the first phase of refinery privatization, 
the GON plans to cede 51 percent equity in its four moribund 
refineries to private investors.  The second phase may 
involve floating the remaining 49 percent on the Nigerian 
stock market.  With none of the refineries operating at more 
than 50 percent capacity, a strike probably will not 
significantly reduce the supply of refined products, since 
Nigeria presently imports most of its domestically consumed 
petroleum products.  Moreover, the workers' fears may be 
overstated; in contrast to other GON enterprises, the NNPC 
has so far been able to meet pension obligations.  However, 
it is unclear how well the parastatal will do if faced with 
mass redundancy.  End comment. 
 
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NATIONAL LABOR BACKLASH FROM PRICE HIKE 
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7. (U) In a related issue, NNPC, after approval from the 
Petroleum Products Pricing Regulatory Agency (PPPRA), 
increased the price of petroleum products, because existing 
subsidized rates did not cover the cost of importing the 
products.  Citing climbing world prices, NNPC GMD Kupolokun 
claimed subsidizing the 30 million liters of products 
consumed daily in Nigeria costs NNPC Naira 600 million per 
day, or N22 per liter per day.  This is more than four times 
the daily subsidy per liter from September 2004, when prices 
were increased to N49.90. 
 
8. (U) PPPRA approved a 43 percent increase from the present 
Naira 50.50 to Naira 72.  Meanwhile, labor organizations and 
civil society groups have again spoken against any price 
hike.  The Nigerian Labor Congress (NLC) has asked Nigerians 
to resist any hike in fuel prices, and the Trade Union 
Congress of Nigeria (TUC) asked members to prepare for mass 
action and protests. 
 
9. (U) Comment: Though major strikes have occurred after 
previous price increases, the last hike in first quarter 2005 
was grudgingly accepted by Nigerians who seemed more 
concerned about finding ways to manage with the price 
increase than in participating in a strike that had less than 
an even chance of success.  While Nigerians are clearly 
unamused by the current increase, they also have had their 
fill of ineffective labor strikes.  The perception that the 
most recent strikes were not successful will be a significant 
brake on labor's chance to organize a strike this time 
around.  End comment. 
BROWNE