US embassy cable - 03ABUJA1091

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001091 
 
SIPDIS 
 
 
STATE FOR AF/W, INR AND EB 
STATE PASS USTR 
 
 
E.O. 12958: DECL: 06/20/2013 
TAGS: EPET, ENRG, ELAB, PINS, PGOV, NI 
SUBJECT: NIGERIA: FUEL PRICE INCREASE MAY TRIGGER VIOLENCE 
 
 
Classified by Ambassador Howard F. Jeter; Reasons 1.5 (B) and 
(D) 
 
 
1. (C) SUMMARY: On June 20, the GON announced a 65 percent 
fuel price hike, increasing consumer prices from 26 naira to 
40 naira per liter.  Most Nigerians expected a rise in costs, 
but did not expect the announcement to come so quickly nor 
probably did not expect its magnitude.  The move however is a 
dual victory for deregulation of the downstream sector and 
for easing the GON's fiscal position.  However, many 
Nigerians will be unhappy due to the expected rise in 
transportation and some food prices.  Nigeria Labour Congress 
(NLC) leadership told Econoff that they had not yet decided 
how to respond.  END SUMMARY. 
 
 
2. (C) On June 20, the GON announced the immediate increase 
in the official price of gasoline from 26 naira a liter 
($0.75 a gallon) to 40 ($1.25 a gallon), diesel from 26 naira 
to 38 and kerosene from 24 naira to 38. The decision, though 
expected by most Nigerians and in the offing for months, will 
be unpopular.  One of the reasons why it was announced on 
Friday was so that negative passions might cool over the 
weekend.  Nigeria's urban poor, who rely on private 
transportation, will see an immediate increase in prices. 
The prices of many commodities will climb. 
 
 
NLC Left in the Dark 
-------------------- 
3. (C) Senior Nigerian National Petroleum Corporation (NNPC) 
official Austen Oniwon told Econoff on June 20 the GON did 
not consult with labor after making the decision to raise 
prices. 
 
 
4. (C) An Embassy source said he spoke with NLC President 
Adams Oshiomole in Geneva last week. Oshiomole confirmed the 
NLC was discussing the fuel price hikes with the GON and 
would probably accept an increase of 5 to 7 naira. Oshiomole 
was still in Switzerland, the source stated. 
 
 
5. (C) On June 16, Econoff met with the NLC's Senior 
Assistant General Secretary Olaitan Oyerinde.  He opposed the 
proposed hikes but was resigned to a slight increase. 
Oyerinde asserted the GON's argument that a price increase 
would cut smuggling, encourage investment in oil refineries, 
and reduce government expenditures was erroneous.  He 
complained that Obasanjo had used the NNPC to bilk billions 
of naira from the country, and was lifting the "so-called" 
fuel subsidy to allow his cronies to profit even more. 
 
 
6. (C) NLC's Salihu Lukman, Senior Assistant General 
Secretary, Education and Training, confirmed that the NLC was 
 
SIPDIS 
resigned to an increase but warned that a steep increase 
could spark a spontaneous public reaction.  If the increase 
were too much, Lukman was fearful that some workers, 
especially food market workers, would riot in protest of 
rising costs. 
 
 
7.  (C) COMMENT: The GON announced the fuel price on a 
Friday, hoping that tempers will cool over the weekend.  The 
GON assured the public that the estimated $2 billion dollars 
that will be saved on the fuel subsidy will be channeled to 
health care, schools and roads.  However, many Nigerians are 
skeptical.  Cheap fuel prices have been a benefit all 
Nigerians have come to expect from the country's petroleum 
industry.  Now, that benefit is evaporating and many people 
will not like it.  Obasanjo's political opposition will 
likely also try to capitalize on this.  However, a price hike 
was inevitable.  The downstream sector needs the incentive 
that any price liberalization can give.  Moreover, the GON's 
loss of revenue (primarily due to reduced oil production 
caused by unrest around Warri) made the increase even more 
imperative.  Lastly, Obasanjo learned a lesson from the 100 
days of his first Administration.  In Nigeria, it is easier 
to enact unpopular reforms at the beginning of an 
Administration than later when the electorate is less 
forgiving. Consideration needs to dominate. 
 
 
8. (C) COMMENT CONTINUED: Right now, we do not know how the 
NLC will respond.  There does not seem to be much eagerness 
for a strike among members of the leadership with whom we 
have talked.  Yet, reaction among the general membership 
could be strong.  If the NLC strikes, this would be the first 
major challenge of the new Administration.  If it does not 
strike, Obasanjo will achieve a major victory.  Without the 
NLC taking the lead, chances of massive national protest 
become remote, although localized disturbances remain 
possible.  END COMMENT. 
 
 
JETER