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Cablegate: Between the Hammer and the Anvil: The Proposed

This record is a partial extract of the original cable. The full text of the original cable is not available.

031814Z Oct 03

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

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