LEAD: Nigeria's economy hit by fuel hike strike

Jan 10, 2012, 15:04 GMT

Abuja - Nigeria's economy took a hit Tuesday during a second day of nationwide strikes against the removal of fuel subsidies.

Most banks have been closed since Monday and commercial activities have ground to a halt in some towns and cities. Traffic returned to the streets of Abuja Tuesday, but many shops and businesses remained closed.

The price of cocoa has dropped more than 40 per cent as a result of the strike, which also affected other agricultural exports.

The protests did not affect the export of the estimated 2 million barrels of crude oil per day that Nigeria produces, but sources at the National Petroleum Corporation told Nigerian newspaper The Moment that the oil sector could be affected if the strike continues.

Political and economic expert Saddiq Abubakar said the nation's losses could run into the millions of dollars.

'All the state capitals are at a standstill,' he said. 'What do you expect, when the strike has brought untold hardship to the people?'

Nigerian unions urged people on Tuesday to keep up protests against the removal of fuel subsidies, after talks between President Goodluck Jonathan and workers failed to make progress.

As the strike continued Tuesday, a police officer who shot and killed a protester in Lagos on Monday was arrested.

Protesters are demanding the government reverse a decision on January 1 to stop subsidies on imported petrol, prompting fuel prices to double to the equivalent of 0.80 dollar per litre.

Although some companies urged their workers to resume work on Tuesday or risk being sacked, the Nigerian Labour Congress said workers' rights must be respected.

Jonathan continues to defend the decision to remove the subsidies, stressing that it will free up cash to spend on infrastructure and social services.

'Jonathan is being misled by his economic team, even if the subsidy scrap is meaningful,' said university lecturer Alice Bako. 'It doesn't reflect the realities on ground.'

Nasir el Rufai,a former government economist, said Jonathan had 'consulted widely with experts who advised him against [the decision].'

But Nigerian Labour Minister Emeka Wogu said 'the benefits of the subsidy scrap will soon manifest in new jobs.'

Wogu added that the decision was not made in conjunction with the IMF or World Bank, which have advised developing countries to cut fuel subsidies in order to better deal with the effects of climate change.