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Cablegate: Nigeria: Labor Strike Hits Economy Hard

VZCZCXRO7951
PP RUEHMA RUEHPA
DE RUEHUJA #1367/01 1781530
ZNR UUUUU ZZH
P 271530Z JUN 07 ZDK
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 0055
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 7261
RUEHWR/AMEMBASSY WARSAW 0408
RUEHCD/AMCONSUL CIUDAD JUAREZ 0409
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 001367

SIPDIS

SIPDIS

DEPARTMENT PASS TO USTR (AGAMA)
DEPT OF ENERGY FOR CAROLYN GAY
DEPT OF COMMERCE FOR 3317/ITA/OA/KBURRESS
DEPT OF LABOR FOR SUDHA HALEY

E.O. 12598: N/A
TAGS: ECON ELAB NI
SUBJECT: NIGERIA: LABOR STRIKE HITS ECONOMY HARD

REF: A. ABUJA 1342

B. ABUJA 1326
C. ABUJA 1319
D. ABUJA 1317
E. ABUJA 1303
F. ABUJA 1302
G. ABUJA 1294
H. ABUJA 1278
I. ABUJA 1155

ABUJA 00001367 001.2 OF 002


1. Summary. The four-day nationwide strike that ended on June 23
impacted the Nigerian economy negatively in diverse ways. Many
businesses were completely paralyzed; important government and
business operations were suspended; and most commerce via ports was
shut down. With fuel unavailable for airplanes, cars, buses and
taxis, movement ground to a halt in the country. Entrepreneurs, who
normally depend on diesel-powered generators owing to limited
electricity supply, were also badly affected. Nigerian economic
analysts agree that the nation lost a considerable sum to the strike
but estimates vary of the exact amount. End Summary.

2. The Nigerian Labor Congress (NLC) and the Trade Union Congress
(TUC) called a nationwide strike that began June 20 to press home
various demands of the NLC and TUC (see reftels). In spite of the
economic hardship suffered, most Nigerians supported the strike.
.
Economic Analysts - The Loss Is Huge
-------------------------------------
.
3. The Lagos Chamber of Commerce and Industry (LCCI) estimated the
nation lost at least 50 billion naira ($392 million) daily during
the strike. LCCI arrived at the figure by dividing last year's GDP
of Naira 18 trillion naira ($141 billion) by 365 days. This view
was corroborated by Sam Ohuanbuwa, Chairman of the Nigerian Economic
Summit Group (NESG). Some economic analysts suggested the loss
could be higher than the LCCI/NESG estimates. Most businesses
reported that they would only be able to quantify the loss they
suffered when they did their end-of-month accounting on a monthly
basis.
.
Petroleum Products Unavailable
------------------------------
.
4. The strike led to a severe scarcity of petroleum products,
especially gasoline and aviation fuel. Tanker drivers went on
strike earlier than the general strike and did not transport fuel
from depots to retail outlets, while the very few gasoline stations
that had fuel experienced queues miles long. Many people waited in
line for days in order to purchase fuel. As a result of fuel lines,
a black market quickly emerged with a four liter jerry can (1.06
gallons) of gasoline selling for as much as 2,500 naira ($20) as
against 260 ($2) naira at the former official price of 65 naira (50
cents U.S.) per liter. The city of Lagos, normally a permanent
traffic jam, had eerily empty streets.
.
Aviation Sector Badly Hit
-------------------------
.
5. The aviation sector was seriously hampered during the strike.
Most domestic airlines had to cancel their flights because aviation
fuel was scarce and passengers did not turn up at the airports since
they could not get fuel to move around. Foreign airlines also had to
cancel some flights because aviation fuel was unavailable. Some
foreign airlines that continued to operate refueled in Accra, Ghana
with the attendant costs of additional parking fees in Accra and
fuel. Other airlines flew with full tanks to ensure sufficient fuel
for a roundtrip.

6. Domestic and international carriers were also hampered by short
staffing. Airline and airport staff were frequently intimidated by
striking workers on their way to and from work. One contact said
that, to maintain enough staff at the Lagos International Airport to
support a daily flight, his airline housed essential employees in
the business class lounge for the duration. This, in addition to
sourcing fuel in Nigeria at rates more than four times the normal
price, contributed significantly to increased operating costs and
cut into profits.
.
Seaports Closed
---------------
.

ABUJA 00001367 002.2 OF 002


7. The seaports were completely shut down during the strike.
Importers complained of suffering losses, while ships could not
berth, leading to a build up of cargo. The Nigerian Ports Authority
had to establish a task force after the strike to clear out the
backlog of cargo that had built up during the strike. Some
importers complained that the new port concessionaries charged
demurrage fees for goods that could not be cleared during the
strike. Lucky Amiwero, President of the National Council of
Managing Directors of Licensed Customs Agents, told the local press
that new port concessionaries were charging 4,000 naira ($31) daily
for each day the strike lasted, contrary to the law that in
situations of public holidays or industrial action importers were
not to be levied extra charges.
.
Banks Closed
------------
.
8. Banks branches were closed throughout the strike. Customers
could not withdraw money or make transfers. As a result,
businessmen who needed money were unable to get money from the
banks. Embassy consular activities were also hampered because most
visa applicants could not pay their visa fee at the designated
banks. Most banks had senior staff at headquarters buildings who
could provide limited services to large customers.
.
Informal Sector Groans
----------------------
.
9. Artisans, small traders, and others in the informal sector were
affected, because they earn their income from daily transactions.
During the strike they couldn't earn money because many customers
remained in their homes. Food vendors that provide lunch for
workers lost custom because businesses were closed. GSM recharge
card sellers had a drop in sales because most people did not know
how long the strike would last, and cut down on unnecessary
expenses.
.
Employers Worse Off
--------------------
.
10. The strike resulted in a substantial loss of productive man
hours. This was exacerbated by the fuel scarcity that hit the
nation just before the nationwide strike. Gasoline was unavailable
for people who would have wanted to defy the stay at home call by
the unions and go to work. Transport fares rose by over 100% on
various routes nationwide, thus discouraging workers from going to
work. Employers with unionized employees will have to pay their
workers the full monthly salaries irrespective of the strike. Some
companies managed to remain open by running skeletal services, but
had to buy diesel from the black market because they rely on
diesel-powered generators due to erratic electricity supply.
Companies that had existing supplies had to cut down on fuel
consumption because they did not know how long the strike would
last.
.
Comment
--------
.
11. The strike impacted both ordinary Nigerians and large
businesses with real losses for the Nigerian economy. It highlighted
the vulnerability of Nigeria's oil supplies, already affected by
insecurity in the Niger Delta that has shut down hundreds of
thousands of barrels of crude oil exports per day. That
vulnerability is matched in the economy at large as virtually no
sector went unaffected. CAMPBELL

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