Nigeria’s Jonathan in Deadlock With Striking Unions Over Subsidy

Nigerian President Goodluck Jonathan and striking unions are deadlocked over their demands that the government reverse its decision to lift fuel subsidies that more than doubled the price of gasoline.

The strike, which enters its third day today, shut down banks, businesses and ports across the West African nation, limited the trade in the naira and helped push up cocoa prices. While the action hasn’t slowed oil exports from Africa’s top crude producer, government troops guarded oil company offices and facilities in Port Harcourt and military helicopters and boats patrolled the Niger River delta.

Jonathan, who won a four-year term in April, has pledged to use savings from the 1.2 trillion naira ($7.4 billion) subsidy to invest in power plants and roads in sub-Saharan Africa’s second-largest economy. He’s also vowed to curb wages and create a sovereign wealth fund.

“Any backing away from the issue now will raise quite profound credibility issues with the government,” Antony Goldman, the head of London-based PM Consulting, which specializes in risk analysis in West Africa, said in a phone interview yesterday. “By contrast if they get this through, maybe people will start believing the transformational agenda is something more that just rhetoric.”

Thousands of protesters marched yesterday for a second day through the streets of major cities, led by union leaders, displaying banners and signs denouncing Jonathan’s government and demanding the reversal of fuel-price increases. In the southern city of Warri, a key base of oil companies, protesters blocked off the road access to its port for hours.

Population Skeptical

“The initial protests and strikes are not surprising as many Nigerians feel the subsidy is the only benefit they get from the country’s oil wealth and are skeptical about how the government will spend the money saved by ending the subsidy,” Fitch Ratings said yesterday in an e-mailed statement.

Jonathan may decide to try to start negotiations to remove the subsidy gradually when the Cabinet meets tomorrow, Babatunde Obaniyi, head of market risk at Lagos-based Greenwich Trust Group Ltd., said in a phone interview yesterday.

While Labor Minister Emeka Wogu told reporters in Abuja, the capital, that “the option of dialog is still open,” Goldman doesn’t see much scope for compromise.

“I don’t know how much middle ground there is when neither side really wants to look like they’re making concessions,” he said.

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