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Cablegate: Petroleum Industry Strike Threat Looms On 2 Fronts

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

291716Z Aug 05

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


-------
SUMMARY
-------

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.

---------------------
PRIVATIZATION THREATS
---------------------

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.

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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.

---------------------------------------
NATIONAL LABOR BACKLASH FROM PRICE HIKE
---------------------------------------

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

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