Nigerian unions threatened to disrupt power and water supplies on Friday after talks collapsed on the third day of a general strike to protest against a rise in fuel prices.
The strike in Africa's top oil producer has stopped most sectors of the economy, including ports, airlines, public transport, government offices and large companies, but vital oil exports have so far been spared.
Talks between the government and unions broke down shortly before dawn.
I don't know which word is stronger, deadlock or stalemate ... The strike continues, said Abdulwahed Omar, head of the Nigeria Labour Congress, the union umbrella body.
The government said it would no longer tolerate street blockades and intimidation by unionists, setting the stage for a more hostile face-off between workers and authorities in Africa's most populous nation.
The dispute has ended a honeymoon for newly inaugurated President Umaru Yar'Adua, who took office on May 29 inheriting the highly unpopular price increase from his predecessor, Olusegun Obasanjo.
Streets in the central business district of the largest city Lagos were deserted on Friday, but for a few small groups of street gangsters and hawkers selling consumer goods.
Government offices and most private businesses, including banks and markets, were closed.
The majority of oil workers also complied with the strike directive, but Western multinationals sustained production and exports by replacing union staff with management.
So far we don't have any problem. All our terminals are loading, said Aminu Baba-Kusa, head of crude oil marketing at state company Nigerian National Petroleum Corp.
Unions issued a statement threatening to interrupt power and water supplies unless the government reversed in full a 10-naira (8-cent) increase in the price of petrol.
The government has offered to cut the price by 5 naira, among other concessions.
Government will now consider all other options which it had so far been reluctant to apply to ensure that labour laws are fully respected, said Babagana Kingibe, the government's chief negotiator.
The government would no longer turn a blind eye to illegal union practices, such as chasing workers from offices and barricading streets and fuel depots, he added.
Analysts said Yar'Adua's handling of the first crisis of his presidency had been poor.
His defense of Obasanjo's price increase reinforced popular impressions that he was under the influence of the man who picked him from obscurity to make him president.
Having offered concessions that were rejected, Yar'Adua has left himself very little room to maneuver and capitulation will make him look weak.
He is in a no-win situation and I think he will have to give in, said Bismark Rewane of consultants Financial Derivatives Co.
The general strike was preceded by a separate strike by road tanker drivers, which has caused a nationwide fuel scarcity that strengthened the union's hand.
Public transport has been affected in many parts of the country and most filling stations no longer have fuel.
(Additional reporting by Tom Ashby and Tume Ahemba in Lagos)