Person-on-the-street in Lagos: How's the

UNCLAS SECTION 01 OF 03 LAGOS 002574

SIPDIS

DOT PASS TO USTR

E.O. 12958: N/A
TAGS: ECON SOCI PGOV NI
SUBJECT: Person-on-the-street in Lagos: How's the
Economy?



1. (U) Summary: Official statements and statistics
emanating from the GON give a picture of an economy on
the rebound. However, the official position is at
variance with what one hears in the market stalls and
living rooms of Lagos. Consulate staff interviewed a
cross-section of Lagosians, soliciting their overall
impressions of the economy. The verdict -- bad. High
fuel costs, lack of a reliable power supply, and
increased costs of living were universally cited as top
concerns. Discussants blamed the federal government
and President Obasanjo for these problems. They voiced
severe skepticism about the economic reforms, which the
government vaunts are paving the way for economic
growth. This report, by definition, is
impressionistic. However, this person-on-the-street
perspective is reflective of the mood in Lagos and
probably of the mood throughout most of southern
Nigeria. In other words, most Nigerians think times
are hard and getting harder. End Summary.

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Fuel, Power, and the High Cost of Living
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2. (U) Almost every individual complained most
vociferously about fuel costs. To our surprise, there
was no variance by income level. The teacher, street
vendor, mid-management banker, all cited fuel costs as
their number one concern and claimed the recent fuel
price increases significantly drained their disposable
income. (Note: In October, as part of downstream
deregulation reforms, the GON raised the price of
gasoline from N43 to N53 per liter. The GON then
lowered the official price to N49 in November following
a four-day national strike. Increases in fuel costs
have a ripple effect leading to price hikes across a
wide range of sectors, including consumer goods and
comestibles. Some increases may be warranted, but many
appear opportunistic. End note.)


3. (U) Electricity, or rather the lack thereof, was
the second most-cited concern. Lagosians with the
wherewithal to have generators at home have relied
almost exclusively on these auxiliary sources of power
for the past several months. The cost is high. A mid-
level sales manager for a Nigerian beer company told us
he spent N7, 000 to run his generator in the month of
November. This cost is in addition to the tariff he
will still have to pay the non-performing National
Electric Power Authority (NEPA). The generator costs
represent almost 10 percent of the manager's monthly
net salary of N72,000. Yet he was among the fortunate
minority. Most Lagosians simply remained in the dark
at night; they lived by candles. Televisions remained
off; air conditioners and fans were not on for weeks.
Sections of Lagos were eerily dark and quiet. People
were bored and hot in the evenings. During the day,
those small businesses that relied on NEPA as their
exclusive power supply ground to a halt. Many
Lagosians did not make money during the extended power
shortage that was the prelude to this holiday season.


4. (SBU) A printer, who produces office supplies and
is a member of the Nigerian Association of Small and
Medium Enterprises (NASME),said fuel price increases
and insufficient power supply were twin scourges of the
Nigerian economy. Most production is done from
auxiliary power sources, and the fuel for these
generators is increasingly expensive. She said that
most small and medium enterprises (SMEs) pass the extra
costs to consumers, since they do not have the
economies of scale to absorb these shocks. To further
reduce overhead, some SMEs have resorted to hiring only
part-time workers. NASME members would produce more
and generate more employment if the power supply were
sufficient and reliable, this member said.


5. (U) Complaints about the high cost of living and
low purchasing power were on the lips of all our
interlocutors. The price of 50 kg of imported rice, a
staple here, has increased 20 percent to N6,000 ($45)
in less than a year. The price of 10 kg of imported
frozen chicken increased 33 percent to N4,000 ($30).
Many Lagosians have had to buy cheaper foods and reduce
their consumption of meat in order to put enough food
on the table to feed their families. Housing costs
have spiraled in commercial centers like Lagos.
Claiming they too are only trying to cope with the
rising cost of living, many landlords have raised rents
significantly even though they have made no
improvements to the accommodations. An FSN reported
her annual rent for a standard three-bedroom apartment
increased from N150,000 ($1,128) for 2003 to about
N250,000 ($1,880) for 2004. A parking lot attendant
said he and other tenants in a densely populated area
of the city now pay as much as N2,000 ($15) monthly for
a single room on the mainland, up from N800-N1000
($6.00-$7.50) previously. Additionally, many landlords
are asking for one to three years' lease payment in
advance, putting many long-standing tenants in a bind.
With a banking sector characterized by high interest
rates, people have to borrow money from relatives and
friends. Often, people have been forced to move.


6. (SBU) A sales representative from a multinational
manufacturer of household care products said the low
purchasing power of Nigerian consumers is noticeably
affecting company sales. The effect is doubly
worrisome since her company produces many basic, not
luxury, goods. Despite a national population of over
120 million people, the company estimates the effective
market size for a given product line in Nigeria is
300,000. This reduced market results in a profit
margin lower than in other African countries far less
populous than Nigeria, she said.

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A Peek into the Education Sector
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7. (U) A schoolteacher in a public secondary school
told us that he is "highly disappointed." Salaries
are not paid regularly. Classrooms, laboratories, and
other facilities are dilapidated. Many teachers now
supplement their salaries with other businesses, such
as organizing extra classes for students or selling
clothes and other items. The teacher added that many
students have to help contribute to their family's
income. Thus, the children work (primarily petty
trading) in the morning and then walk to school,
because of high transportation costs. Understandably,
these worker-students arrive tired and are inattentive
in class.


8. (SBU) A retired teacher from the Oyo state service
said retirees fare no better than employed teachers.
She said pensioners have to be physically present to
collect their pensions, which are usually paid two or
three months in arrears. She asserted that current
teachers, understandably, lack motivation. "If serving
teachers are already suffering and they see what
retirees are going through after teaching all these
politicians and professionals, how can anybody expect
them to be dedicated?"

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A Peek into the Health Sector
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9. (U) A recently hired nurse in a private health
center told us she now earns N15,000 ($113) monthly,
after working at a state-owned clinic for three years,
where she earned N8,000 ($60) a month. Recounting her
experience in public service, she said the irregularity
of salary payments caused more hardship than the low
amount of the salary. She and her self-employed
electrical technician husband and two children
practically lived on credit, hoping the government
would pay arrears when promised.


10. (U) The nurse said the 88 percent salary increase
has been depleted by the incessant rise in prices of
basic goods and services. Like most Lagosians with a
reasonably well-paid job, she is besieged with requests
from destitute friends and relatives. She shared a
remark commonly heard in Lagos: each gainfully employed
individual supports at least twenty other people. She
wondered aloud how she survived on N8,000 for so long,
when N15,000 now is insufficient.


11. (U) Regarding the provision of health care,
patients in public hospitals usually receive bad
service from demoralized medical personnel. A Lagos
FSN whose mother is hospitalized described his ordeal.
He said relatives have to search the city to find
prescribed drugs unavailable in the hospital pharmacy.
Nurses refused to attend to the elderly woman's needs
and advised the family to designate someone to stay
with her at the hospital. The FSN remarked that
government hospitals only provide "lodging" for the
sick; care and attention must come from the family. He
further noted that in addition to coping with the
stress of his mother's illness, he has been without
electricity for four months, and is thus relying on
generator power, incurring even more expenses.

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Nigeria Imports What It Has; Exports What It Doesn't
Have
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12. (SBU) A water treatment officer with the Nigerian
ports authority (who also is owed several months'
salary) wondered why the country defies basic economic
laws - "importing what it has, and exporting what it
lacks." With vast agricultural lands, Nigeria imports
foodstuffs like rice, she observed. While Nigeria
supplies the Niger Republic with electricity, Nigerians
cannot get reliable power, she lamented. (Note: The
NEPA transmits electricity to the Niger Republic under
an extended contract with Niger Electric Company. Many
Nigerians believe they pay more for electricity than
consumers in the Niger Republic and that NEPA does a
better job supplying the Niger Republic than it does
taking care of its home base.)

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Comment
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13. (U) The attitude of most Nigerians toward the
economy and their immediate economic future is gloomy.
Fuel price increases, lack of electricity, rising food
and consumer prices, unemployment, poor public health
and education services, and an unfriendly housing
market have contributed to feelings of widespread
anxiety and fear among Lagosians about the trajectory
of Nigeria's economy. All this is occurring against a
backdrop of historic oil prices and the accumulation of
an unprecedented level of foreign exchange reserves.
They shudder at what would happen if the bottom fell
out in the oil market. Thus, when they hear government
officials trumpet economic reform and assert that the
country's economic fundamentals are on the mend, this
news has a hollow ring to them.


14. (U) The "ordinary Lagosian's" perspective on
economic reform is very ambivalent. There is universal
support for ending rampant corruption and increasing
transparency. In addition, support reform initiatives,
which they perceive as resulting in better services,
such as telecommunications deregulation. However, they
are conflicted about measures that may help the country
in the long run, but harm their personal interests in
the short to medium term. Downstream petroleum
deregulation is an example. Lagosians seemed to
understand the sector must be deregulated in order to
attract private investment and rehabilitate the
country's oil refineries. Yet, they bristle at
increased fuel prices.


15. (U) In the final analysis, most Lagosians, like
most people anywhere, will judge the efficacy of
economic reform by how it improves their economic
standing. Thus far, most people believe this year has
been a bad one economically and their glimpses into the
future have not fueled optimism. If the Lagosians we
spoke to are representative of the country, support for
the GON economic policies will continue to truncate
unless the GON is viewed as taking steps to alleviate
the average person's economic diminution. People will
be looking toward policies that spell job creation,
arrest the rise in consumer prices, and bring more
reliable electrical power generation. Unfortunately,
some of these goals point to economic policies that
would be inconsistent with each other and with some
existing economic reform measures. If public support
for reform is a GON objective, it will have to do a
delicate balancing act.

Browne