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[email protected] Yola, Nigeria

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LABOR STRIKE AND NIGERIA'S DEVELOPMENT AGENDA

he organized Labor in Nigeria had proposed to go on an indefinite strike in November 2004 to protest the fuel hike at the time. Government responded to the threat by constituting the Senator Mantu Committee to look into the issues involving pricing of petroleum products and related matters. Labor was invited to be part of the committee.

I wrote an article entitled "One strike too many" about the proposed strike which was published on November 9th 2004. I find that article still very applicable to the nation-wide strike that began on June 20th 2007.

Permit me to quote a portion of the article:

"The Senator Mantu committee is more than a committee to reduce prices of fuel in Nigeria. The Senator revealed to Nigerians about a week ago that the deregulation of the oil sector is flawed. He said that his committee discovered that some government officials in the oil sector were frustrating companies that were given licenses to build refineries in Nigeria. I agree with the senator's reasoning that if the Tele-communication sector was deregulated under the supervision of the Nigeria Communication Commission (NCC) and not under NITEL- which would have felt threatened by competition and so frustrated potential competitors like MTN, GLOBACOM, VMOBILE etc-the NNPC should not be allowed to have such an overbearing weight in the deregulation of the oil sector. And the same formula adopted in the deregulation of the Tele-communication sector should be applied to all other sectors like oil, power, and railway.

I believe there is a lot that the NLC can contribute to that committee, more so now that senator Mantu has said he has got clarification from the President that the committee's powers are unlimited. It is simplistic to think that price fixing is the main problem facing the committee and Nigerians now. I believe and have written before that one important step to resolving the erratic problems in the downstream oil sector is the building of more refineries. But then senator Mantu has just told Nigerians that his committee has invited companies issued with licenses to build refineries to come and explain their ordeal to them. The NLC should be part of the process of removing every impediment to the emergence of private refineries in Nigeria (which will generate more jobs for the people). Furthermore, Senator Mantu pledged that the matter would get the attention of the President who has demonstrated that he believes in the private sector as an engine of economic growth. In fact, I believe government has no business in business; rather, proper security, legal structures, and investment-friendly policies should be put in place to drive the private sector which in turn will drive the economy.

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Although going on strike is the right of Nigerian workers, and the NLC has become notorious for this, the present situation demands caution. I believe the NLC does not want the destruction of anything dear to the nation. The threat by the NLC to shut down crude oil export for instance, during the proposed strike reminds me of the Egyptian magicians who in an attempt to prove their power, also produced by magical powers some of the plagues that Moses brought upon Egypt. This was folly on their part because their demonstration of power only succeeded in worsening the situation and compounding the suffering of the Egyptians. The NLC must not become like those Egyptian magicians.

The interim palliative measures recommended by the Mantu committee should not be despised by Nigerians. They are yet to complete their task; the NLC too should re-join the committee since every avenue of negotiation should be welcomed by it rather that repulsed. Productivity is what will help us develop as a nation, and so if there is any avenue of dialogue and deliberations where the NLC is given opportunity to be part of the solution, I suppose every reasonable argument will support the NLC making good use of such. At the end of it all, it should be seen that strikes are not used indiscreetly".

The organized Labor in Nigeria gave the government of President Yaradua a 14-day ultimatum to:

1. Reverse the Value Added Tax to 5 % from the 10% to which it was hiked

2. Pay the 15% salary raise announced by the Federal government with effect from January 2007

3. Reverse the sale of the Kaduna and Port Harcourt refineries

4. Reverse the hike in petroleum products prices (For instance, that the price of Premium Motor Spirit (PMS) should be reverted to N65 per liter from the newly hiked price of N75 per liter).

The Federal government granted requests numbers 1, 2 fully and partially granted request number 3, reducing the prices of petroleum products to the old prices except of PMS, which it reduced from N75 per liter to N70 per liter. The government asked Labor to meet with the Bureau of Public Enterprises (BPE) to look into the processes leading to the sale of the two refineries in Kaduna and Port Harcourt.

Some Analysts and public Commentators had thought that given the concessions by government, Labor would shelve the proposed strike action. How wrong they were! Labor still declared an indefinite strike insisting that government bring down the price of PMS to N65 per liter.

Facts that must be known:

1. None of the 18 companies granted licenses to build refineries over 3 years ago has done so.

2. Nigeria needs over 30 million liters of liquid fuel per day.

3. All the four refineries in Nigeria producing at 100% capacity can only refine 18 million liters of liquid fuel a day.

4. Although Nigeria is an oil producing country, foreign oil companies dominate the sector, as they produce the millions of barrels of oil in Nigeria. And the product sharing contract requires them to get a certain percentage of the crude oil sold at international market prices. Those foreign oil companies have invested billions of dollars in prospecting and mining of oil and must get returns on investment in order to continue.

   v. Fixing prices of petroleum products by fiat without considering the refining costs and safe profit margins will never attract the private sector to build and run refineries. This fact may explain fact (i) above.

   vi. As at May this year refining profits stood at $28.75 per barrel (A barrel of crude oil produces about 159 liters of liquid fuel).

Deductions and Analysis:

1. At an average of $70 per barrel of crude oil, when the refining profit margin of $28.75 and other costs like freight and taxes are added, the least the consumers shall pay for a liter of PMS in Nigeria will be N90 per liter.

2. The prices of petroleum products could be cheaper if all of them are produced in Nigeria. But to do this, we must not depend only on the four refineries in Nigeria, which have not been operating at full capacities.

3. In order to attract private investment in the building and operation of refineries in Nigeria, government through the Petroleum Products Pricing and Regulatory Agency (PPPRA) must not fix prices that will fall short of the production costs and profit margins of the prospective refineries.

4. Why has the private sector been reluctant in getting involved in the refinery business? One of the reasons is that the prices fixed by PPPRA are not realistic and business-friendly. Another reason is that the organized Labor has frustrated this initiative through belligerent and intemperate posturing which is completely shorn of wisdom and reason.

5. Even at N65 per liter, majority of Nigerians have not bought PMS at that price for a long time, especially in the Northern part of Nigeria where the service stations belonging to the major marketers are known more for the scarcity of the products than their availability. The incontrovertible fact which Labor has refused or neglected to help address is that those major marketers supply the products to black marketers who have been charging exorbitant prices.

6. The federal, state, and local governments pay N30 per liter of PMS sold in Nigeria. This translates to about $2.5 billion subsidy a year. The sad thing is that many Nigerians do not benefit from this since they paid between N80 and N120 per liter even when officially PMS was supposed to sell at N65 per liter.

7. I did some Mathematics and discovered that should the federal government pay each of its employees some additional N20, 000 a month, the additional annual wage bill will be less than $2.5 billion. Even at N95 per liter of PMS (which the nation must brave up for), workers shall not spend up to N20, 000 a month on liquid fuel.

Labor intends to bring down the economy of the nation because they want N5 off a liter of PMS. Their claim is that the hike did not "follow due process". The government had proposed to Labor the setting up of a joint committee to understudy the mechanism applied for the fuel price increment and to recommend whether or not it was realistic and acceptable. Labor rejected this offer.

I would appeal to Labor to make the following demands of government, which in my opinion will rob off positively on the whole nation rather than get stuck on a N5 differential:

1. Labor should request that mass transit infrastructure (Railways) should be built in the country from the money saved on fuel subsidy and excess crude account (some legislation will be needed). For a start, Labor must negotiate and agree with the government on a supervised time frame for selected mega cities like Lagos, Port Harcourt, Kaduna, Kano, Ibadan, Onitsha-Enugu-Aba axis in phase I, followed by other phases. (This could be integrated in the on-going Railway development project).

2. A minimum living wage should be negotiated after the strike is called off to arrive at what should be able to keep the Nigerian worker (with hordes of dependants) comfortable. Labor should negotiate for an hourly wage instead of monthly wage (This will be beneficial to both the employers and employees).

Reversal of the sale of the Kaduna and Port-Harcourt refineries will not be done. Since about 4 years ago the sale of those refineries has been an issue in Nigeria. Not many investors were interested, especially given their state and the prices of petroleum products in the country. We have been able to sell them this year to a group of investors (including the government of Rivers state), who have put on the table $3 billion dollars with the balance of $7 billion to be sourced in order to not only expand the capacities of the refineries, but also build a 5000MW electricity generation plant and a fertilizer plant.

The private-public partnership is working in Nigeria. We have seen its success in the steel sector (I remember how some Labor groups kicked against the concessioning of the Ajaokuta steel factory to a private investor-I had done an article about it); we have seen it work at the Eleme Petro-chemical plant; it is working in the Telecommunication sector. It is now beginning to look up in the Power sector with the National Electricity Regulatory Commission (NERC), headed by Dr. Rowland Owan, having swung into action. With trepidation, it will also succeed in the Energy sector as we get more Nigerian companies into the exploration and refining aspects of the business.

I would appeal to the government to make plans to throw in some subsidies when fuel prices climb above a certain level, like N95 per liter. As we develop strategies for our Financial System and overall national development towards attaining a position among the 20 largest economies by the year 2020, strong convictions must be accompanied with compassion. This marriage is the hallmark of great leadership.

Should Labor insist on the puerile and irresponsible in spite, then I should expect a more assertive response from the government in order to save the economy and drive forward the vehicle of national development. Besides, Labor must not force people to go on strike nor stop people who want to work from doing so; this would be undemocratic. The Nigerian's right of choice must be respected by Labor just as they make same demands of government.

I believe that many Nigerians who have manifested unrestrained emotions over the hike in prices of petroleum products have done so more out of ignorance than mischief; but this is not to rule out some veneer of mischief. Nigerians deserve protection from government if they choose to work or do their business in spite of Labor strikes just as they also must be educated by both Labor leadership and government. Government must use multi-media channels to inform and educate Nigerians about the petroleum products pricing and government's revenue position.

People need to be educated that the huge foreign reserves of Nigeria are not all there for the taking by the Federal government. Nigerians need to be educated that the Central bank of Nigeria currently controls over 80% of the Reserves (The remaining 20% presently is co-owned by the State and Federal governments), which government cannot access unless it borrows (which is also a sign of poor economic management). We are not in a military dictatorship where Military dictators take money at will from the vaults of their country's Central bank.

Can Labor guarantee that they could enforce the sale of petroleum products in all parts of Nigeria at their desired prices with the same fervor they have tried to enforce compliance with their declared strike action? A N5 per liter decrease in prices cannot be enforced by Labor all over Nigeria even if government capitulates (They did not do so before the commencement of the strike, even with the ubiquitous sale of petroleum products on our roads at outrageous rates in spite of government's subsidy). The problem is that of availability, which cannot be solved except through appropriate pricing. Usually, value is increased through scarcity. Labor should not miss the opportunity to negotiate a good deal for Nigerian workers. But they may pass this up through effusive emotions rather than mature approach to leadership.

Leonard Karshima Shilgba, is an Assistant Professor of Mathematics, Abti-American University of Nigeria, Yola.