Threat to shut down Nigerian oil output

2012-01-12 07:54
Abuja - The threat of disruption to Nigerian oil output may force President Goodluck Jonathan's government to negotiate with unions as an indefinite, nationwide strike over fuel subsidy cuts enters its fourth day on Thursday.

Tens of thousands have taken to the streets in cities up and down Africa's most populous nation this week to protest against the January 01 removal of the subsidy, which more than doubled the price of petrol to around 150 naira ($0.93) a litre.

Nigeria's biggest oil union said on Wednesday it was ready to halt oil output if the government did not reinstate the subsidy.

Jonathan has shown no sign of weakening in the face of protests similar to those that have derailed past attempts to scrap the fuel subsidy, but may have to consider a compromise if the strike extends to the vital oil industry.

Any drop in oil revenue, which provides the country with over 90% of its foreign currency earnings, would raise the stakes significantly in Africa's second-largest economy and biggest oil producer.

Nigeria exports about 2 million barrels of crude oil per day and is a key supplier to the United States and Europe. Output has been unaffected so far but concerns about Nigerian supply can move global oil prices.

"We believe that a government that is alive to its responsibilities will not allow this strike to degenerate thus far ... we hereby direct all production platforms to be on red alert in preparation for total production shutdown," a statement from oil union PENGASSAN said.

Information Minister Labaran Maku told Reuters the government was "worried about the threat" and asked labour to "dialogue", but industry officials said Nigeria had oil in storage and they doubted unions could shut down crude exports completely.

Fairly confident

Nigeria's main union remained defiant, insisting it would continue its strike until fuel price subsidies were reinstated.

"We are certainly continuing with protests [Thursday]. We won't surrender until the pump price of petrol is reverted to 65 naira," Owei Lakemfa, general secretary of the National Labour Congress, told Reuters by phone in Abuja.

Economists say the subsidy fuelled corruption and keeping it in place would have forced Nigeria into huge external borrowing, but most Nigerians, who live on less than $2 a day, saw it as their most tangible welfare benefit.

"If there is any disruption to oil production it would be a serious escalation and the government would be likely to use legal or enforcement means to stop it. But I think it is unlikely oil output will be affected," said Kayode Akindele, partner at Lagos-based investment firm 46 Parallels.

"The government will be fairly confident that as long as the security services can keep things under control, then people will have to start going back to work. Most people don't have savings so they can't afford to lose out on days of pay."

Nigeria is one of the world's biggest crude oil exporters, but decades of graft and mismanagement have left it unable to refine its own fuel. The public argue Jonathan and his team should be fighting corruption and investing in repairing and building refineries, not cutting subsidies.

Jonathan is now facing two major security headaches - opposition to the fuel price spike and an increasingly deadly Islamist sect carrying out almost daily attacks in the north.

The leader of Boko Haram, which wants sharia, Islamic law, more widely applied across Nigeria, appeared in an online video on Tuesday saying Jonathan did not have the capability to stop the sect's insurgency.

Read more on:    boko haram  |  goodluck jonathan  |  nigeria  |  west africa

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