• Wednesday, June 19, 2024
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BusinessDay

Oil production at risk as labour threatens shutdown

Oil glut on horizon as non-OPEC supply surges, IEA warns

Nigeria’s crude production is at risk as the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) plans to shut down oil and gas facilities in the coming days to demand a new national minimum wage.

Read also: Strike: NLC raises alarm over deployment of soldiers to institutions

The organised labour, comprising the Nigeria Labour Congress (NLC) and Trade Union of Nigeria (TUC), are insisting on N494,000, down from an initial demand of N615,000 as the new national minimum wage for workers in Africa’s most populous country. Nigeria’s current minimum wage is N30,000.

The Federal Government, a major party to the now broken-down tripartite negotiation for the new minimum wage, has offered N60,000, up from N48,000, its initial proposal.

The third party to the negotiation – the organised private sector, offered to pay N57,000. The labour has rejected both proposals, citing the country’s cost-of-living crisis and spiralling inflation.

Lumumba Okugbawa, secretary-general of PENGASSAN, told BusinessDay on Monday that the process of deactivating oil and gas facilities has begun, and can only be halted if the government shows commitment to the labour’s demand.

“The process has already started. And if the government does not show traction, it will lead to zero production of oil,” said Okugbawa.

“In the next two days, oil production will stop. So, let no one take us for a ride,” Benson Upah, head of the information department of the Nigeria Labour Congress, also told BusinessDay.

Read also: NMA opts out of nationwide strike, says doctors will be on duty

Upah was part of the NLC enforcement team, which shut down the NNPC headquarters in Abuja on Monday, the first day of the indefinite strike.

“We have the capacity to shut down the entire nation unless the government intervenes on time,” Upah said, explaining that the labour couldn’t call off the strike on Sunday night after they met with the leadership of the National Assembly because the lawmakers offered nothing concrete.

“They only told us to suspend the strike for about eight weeks to allow them to plead with President Bola Tinubu to add something to the N60,000 that the government has offered and our members are angry. Should we suspend the strike because they offered us garden eggs, water and groundnuts?”Upah said.

The NLC and TUC officials moved around Abuja to enforce the strike in major establishments, including the federal secretariat, to ensure workers complied.

Implication for Nigeria’s economy

The standoff between the labour unions and the Federal Government has raised concerns about the country’s 2024 petrodollar income amid the lingering foreign exchange crisis in the country.

Disruption in oil production has implications for government revenue, budget planning, and overall economic stability, as oil is a major source of income for Nigeria.

Nigeria currently struggles with 1.2m barrel per day oil production, unable to meet its Organisation of the Petroleum Exporting Countries (OPEC) quota due to insecurity in the Niger Delta, crude theft and declining investments.

As a result, the country remains in short supply of the much-needed foreign exchange to defend the naira, its national currency.

Crude oil export accounts for about 80 percent of the country’s foreign exchange earnings, and any further disruption in production is bound to put the economy in dire straits.

In the 2024 budget, the government has planned with the anticipation that oil will sell above $78 per barrel and Nigeria will produce at least 1.78 million barrels per day (bpd).