Threat to shut down Nigerian oil output
12 January 2012, 10:42
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
Nigeria's biggest oil union said on Wednesday it was ready to halt oil output if the government did not reinstate the subsidy.
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
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
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
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.
Nigeria's main union remained defiant, insisting it would continue its strike until fuel price subsidies were reinstated.
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
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.
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.