Minister of Labour, Chukwuemeka Wogu

The federal government, labour and civil society groups have been locked in a battle of wits over the withdrawal of the subsidy on petrol leading to a nationwide strike and protests. But their respective positions on the matter may have worsened the situation in a nation battling the scourge of Boko Haram, report Festus Akanbi and Malachy Agbo

As last week's general strike and protests called by organised labour, with the support of civil society groups, to kick against the removal of petroleum subsidy dragged into the weekend, the untold economic damage and paralysis brought about by the crisis will haunt the nation's economy for the rest of year.

The Nigerian Labour Congress and Trade Union Congress, the two umbrella labour unions, called the action to force the federal government to reverse a decision to scrap fuel subsidies, a government policy announced by the Petroleum Products and Pricing Regulatory Agency on January 1.

Concerns were specifically raised that the crisis coincided with the dislocation of people from certain parts of the north as a result of the Boko Haram onslaught.

With the expiration of a three-day ultimatum to Christians and southerners to vacate the northern part of the country, the religious fanatics had embarked on a killing spree a fortnight ago, forcing many people, most especially people of southern origin to leave the troubled spots with the attendant collapse of their businesses.

Economy Grinds to a Halt

Reports indicated that business ground to a halt at the ever busy Tin-Can and Apapa last week as importers and their clearing agents deserted the ports while the strike lasted. The situation was the same at the Apapa port. All the terminals at the ports were said to have been deserted by importers and their agents.

Meanwhile, a maritime expert, Mr. Tunde Folarin, in a radio programme monitored in Lagos last Wednesday said the industry was bound to suffer a demurrage crisis by the time the strike was over.

According to him, some of the importers will try to resist the payment of demurrage as they are bound to argue that they were not the cause of the crisis which made goods clearance at the ports impossible.

The impact of the strike was also felt by the various airline operators. These included Air Nigeria, Chanchangi Airlines, Aero Contractors, IRS Airlines, Dana Air, Associated Aviation, and Overland Airways, among others.

Aviation sources said these airlines, on a normal day, would operate about 200 flights which amount to hundreds of millions of naira for scheduled passenger and cargo operations. The situation was said to be worse for the airlines that fly into the West African coast. The list includes Arik Air, Air Nigeria and Aero Contractors. 

In the same vein, the effect of the crippling protests and strike was profound on the nation's money market as banks remained under lock and key while the strike lasted. A leading operator in the financial sector, who spoke on the condition of anonymity, said what the nation lost to the crisis in the first three days of the strike was enough to pay Nigeria's external debt and according to an economist at Renaissance Capital, Yvonne Mhango, inflation, which was unchanged at 10.5 percent in November, will probably accelerate to the "mid-teens" in 2012.

Central Bank Governor, Lamido Sanusi Lamido put the loss incurred during the period of strike at $617million daily, translating into about  N100 billion.

However, managing director, Wema Bank Plc, Mr. Segun Oloketuyi, who put the loss suffered from the crisis at several billions of naira said whenever there is any strike or work to rule, it is everybody in the economy that suffers. He told THISDAY in an interview last week that “customers expected to have come to bank last week to transact business. But since they couldn't do that because of the strike, it means they have lost out for that week because next week is different from last week.

“The bank has lost something too. Those who were supposed to open shop to make transactions last week could not do so and yet they are expected to pay their bills. Production that was supposed to take place last week, which could not happen cannot be done next week. There are things that cannot be done in arrears once the opportunity to do them is lost.” 

On his part, MD/CEO of XL Management Services Ltd, Charles Nwodo, who spoke with THISDAY on the effects of the general strike on the economy said: “We can estimate the monetary value by dividing the annual GDP by 365 days to get what the daily loss is.” He however pointed out that there are other losses in the form of schools, hospitals, shops, markets, airports that have remained closed thus depriving citizens of not only sources of their livelihood but also avenues for learning, caring for the sick and injured, and meeting private and business commitments.

In his own assessment, chairman Manufacturers Association Nigeria, Ikeja Chapter and president, Nigerian Economic Summit Group, Mazi Sam Ohuabunwa, acknowledged that apart from worsening the hardship of the people, the crisis has also depleted the nation's GDP.

He said: “We are worsening the economic situation in the country. We are worsening the hardship everyday that we are not working. Instead of creating wealth, we are depleting it. It reduces GDP. Assets have been priced and purchased at a price. Whether you work or not, it is running. International trade is disrupted. We are hurting ourselves.” Ohuabunwa therefore called on the labour to give government a chance to respond to their demands.

Another economic commentator who raised the alarm on the effect of the protests and strikes that literally shut down the economy for a week was managing director, Financial Derivatives Company Limited, Mr. Bismarck Rewane. He described the impacts of the strike as horrendous. According to him, several billions of naira was lost to the strike which led to the closure of business premises in many parts of the country.

Apart from the loss of revenue, Rewane believed that the unrest in the northern part of the country and the industrial disharmony that gripped the country were capable of destroying investors' confidence which he said Nigeria needs badly. But the economist maintained that at the end of the day when all parties to the dispute settle down for negotiations, the crisis would have assisted the country to address some of the issues that triggered the confusion.
“When you begin to think of the gains accruable from the present crisis, then the nation's economy will be better off,” Rewane said.

No More Business as Usual

In his opinion, last week's strike and protests will make the economy more efficient, adding that it was certain that government will no longer take people for granted in its decisions in the near future. “Government can no longer just do what they like. It is no longer an excuse to inherit one problem or the other. Even when they do, it is necessary for them to look for ways of solving it rather than to shift the blame on their predecessors,” he said.

He, however, stressed the need for government to adopt a mid-way approach, explaining that it will not be in the interest of government to back out completely as doing so will lead to a loss of credibility. He pointed out also that government can no longer be rigid given the desperation of the labour and the Nigerian people. He said the Subsidy Reinvestment Empowerment Committee set up to manage the funds accruable from the subsidy removal should be credible.

The FDC boss appealed to labour to tread softly on the issue, saying the total loss of purchasing power occasioned by the price adjustment was much lower than what could be lost if there was a currency adjustment by the monetary authorities. This, he explained, would become inevitable if demand for foreign exchange by oil importers continues to exert downward pressure on the nation's currency, which was prevalent throughout 2011.

Chief executive, GTB Securities Limited, Mr. John Ogar, however, warned that the general strike and the security situation in the country could destabilise the country. He said, “The twin problem of the prospects of a religious war in the north of Nigeria and a general strike are potential catalysts for national instability. The religious sentiments being canvassed by Boko Haram have the potential to rattle Nigeria's fragile security situation, because it could lead to reprisal attacks in other parts of the country and lead to various kinds of agitation, especially if the public thinks that the government is not on top of the situation, and Boko Haram remains unchecked. The impact of the mass protests and general strike is the massive loss of productivity.”

He explained that the Nigerian economy is going to bleed as it will lose billions of naira in productivity depending on how long the strike last. On the impact on the inflow of investment into the country, Ogar said that it was capable of scaring potential investors from Nigeria. “Of course, no foreign investor will rush to invest in a country where there is no peace and security, or where it is perceived that there is massive crisis and the government seems unable to contain it,” he said.

As a way out, Ogar said there was need to carry the people along in order to douse the tension created by the subsidy removal. “The way out is for the Goodluck Jonathan administration to actively engage and negotiate with all relevant stakeholders and avoid all forms of hubris or this attitude of take-it-or-leave it. Such a fait accompli approach, he said, would further heighten tensions, and drag the country further down to the precipice, and pose a huge security challenge and a great risk to the survival of Nigeria as a corporate entity.

In his submission, managing director, Resources and Trust Company Limited, Mr. Opeyemi Agbaje, said Nigeria is at a very dangerous point in its history. Frowning at the unrest in the northern part of the country and the attendant slaughter of southerners by Boko Haram insurgents, Agbaje said the economic implications of the development will jolt the nation.

The Boko Haram problem, according to him, “is a symptom of our unresolved national issues - a federal system that guarantees equality, self-determination, fiscal autonomy and regional self-rule, the Sharia, civil war, deployment of violence as a tool of politics, devolution of power, equitable access to power and resources, etc.”

Agbaje, who threw his weight behind the deregulation policy of the federal government, however, faulted the process being adopted by government. He said, “The deregulation of downstream petroleum sector is a needed economic measure to help realise our full economic potential. Unfortunately, the measure has been accompanied with such instability that the expected economic benefits may be deferred if not lost. National economic productivity is being sacrificed and foreign investors and even domestic ones may be skeptical.”

He believed that the strike could send the wrong signals to the international community. Agbaje said: “Most certainly, investment flows will be negatively affected, especially by increased terrorism and sectarian violence. Investors may be persuaded that the oil subsidy strike is a temporary response to a painful but necessary policy, but the threat of terror and national instability will be a more potent deterrent to investment.”

To check the threat to the economy, Agbaje insisted that government must fight corruption and radically restructure governance and spending and gain the trust of the people. “But government should also do what is right, rather than what is expedient. I hope government will somehow persuade the populace to support downstream oil sector deregulation,” he stated.