US embassy cable - 03LAGOS1870

UNCLAS SECTION 01 OF 02 LAGOS 001870 
 
SIPDIS 
 
 
USDOC PASS TO USITC FOR DAN LEAHY 
 
 
E.O. 12958: N/A 
TAGS: ETRD, EINV, EFIN, NI, XA 
SUBJECT: NIGERIA: USITC STUDY ON U.S. - SUB-SAHARAN 
AFRICA TRADE AND INVESTMENT 
 
REF: STATE 224559 
 
 
1. (U) U.S. Mission Nigeria is pleased to provide the 
following information in response to reftel. 
 
 
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DEVELOPMENTS IN NIGERIAN ECONOMIC, TRADE AND INVESTMENT 
POLICIES 
-------------------------------------------- 
 
 
2. (U) In August 2003, the GON unveiled a new economic 
plan, the National Economic Empowerment and Development 
Strategy (NEEDS), that outlines strategies for 
attaining macro-economic stability (with emphasis on 
low inflation and stable interest and exchange rates) 
as well as achieving annual GDP growth of 5-7 percent. 
The ambitious plan emphasizes the GON's commitment to 
fiscal discipline and public sector reforms, places 
special emphasis on health, education and agriculture, 
and aims to raise the rate of industrial capacity 
utilization from 40 to 80 percent. 
 
 
3. (U) Despite its stated commitment to an open and 
rules-based trading system, Nigeria's trade policy 
remains inconsistent.  In March 2003, the GON cut 
duties on many line items (mostly raw materials and 
capital equipment) but raised them on others (primarily 
finished goods and agricultural products).  This 
followed similar year-on-year cuts and increases, often 
on the same goods.  A protectionist bent is 
increasingly evident in Nigerian trade policy, as many 
items - including frozen poultry, certain printed 
fabrics, cassava, ice cream, fruit juice in retail 
packs, toothpicks, beer and pasta - are simply banned, 
ostensibly to foster domestic production (even though 
domestic industries are unable to meet demand). 
 
 
4. (U) Nigeria reduced its port taxes in 2001 and 2003 
and has begun to remove administrative obstacles that 
hamper efficient operations.  Port congestion and 
clearance rates, particularly at Lagos's Apapa Port, 
which handles over 40 percent of Nigeria's trade, have 
improved significantly, as have efforts to enforce the 
GON's policy of inspecting 100 percent of imports for 
contraband.  In addition, the GON intends to implement 
a destination inspection regime for valuation of import 
duties in January 2004 (after several failed attempts 
in recent years), but the Nigerian Customs Service's 
capacity to handle that responsibility is questionable. 
 
 
5. (U) The GON offers export incentives ranging from 
grants to guaranteed loans to tax concessions, but few 
Nigerian firms benefit from them.  Some businesses, 
however, have begun to take advantage of the Calabar 
and Onne free trade zones (FTZs).  The latter has 
become increasingly attractive to oil and gas 
companies, which use it as a bonded warehouse for 
supplies and equipment and liquefied natural gas 
exports.  The GON now allows products assembled in the 
Calabar FTZ from reduced-tariff imports to be sold in 
Nigeria free of import duties.  Nigeria remains the 
primary market for Calabar FTZ products. 
 
 
6. (U) Investment remains concentrated in the oil and 
gas sector, which continues to attract funds for oil 
and gas exploration and production, liquefied natural 
gas projects and related activities.  The 
telecommunications sector has grown at an explosive 
pace, and some investment is being channeled into 
manufacturing and industry. 
 
 
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DEVELOPMENTS IN MAJOR REGIONAL GROUPINGS 
---------------------------------------- 
 
 
7. (U) No significant changes have occurred.  Nigeria 
remains an active member of ECOWAS and other regional 
economic, commercial and financial organizations. 
 
 
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UPDATED INFORMATION ON NIGERIAN PRIVATIZATION EFFORTS 
--------------------------------------------- -------- 
 
 
8. (U) More than 30 enterprises - including cement 
manufacturing firms, banks and hotels - have been 
privatized since the GON's 1999 launch of a three-stage 
privatization program.  Attempts to privatize the NICON 
Hilton Hotel and Nigeria Telecommunications Limited 
(NITEL), however, have been unsuccessful.  The GON 
recently selected a Dutch consortium, Pentascope 
International, to manage NITEL until mid-2006 and now 
expects to divest at least 51 percent of its shares at 
the expiration of that contract. 
 
 
9. (U) The privatization of Nigeria's National Electric 
Power Authority (NEPA) continues to move slowly.  Given 
the complexities of the sale, NEPA's poor financial 
condition, and strong public opposition, the 
privatization could take time.  NEPA is moving slowly 
to unbundle its services.  The company will be split 
into several autonomous firms encompassing power 
generation, transmission, distribution, and billing. 
 
 
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MAJOR AGOA-RELATED DEVELOPMENTS 
------------------------------- 
 
 
10. (U) Nigeria has not capitalized on AGOA trade 
preferences to any discernible degree (oil and gas 
products continue to dominate U.S. imports under the 
program) and has yet to adopt a visa regime that will 
allow it to take advantage of AGOA's textile and 
apparel benefits.  The GON has, however, amended the 
1990 Customs and Excise Management Act to base the 
valuation of imports on actual transaction values and 
to penalize transshipment of goods by imposing fines of 
up to three times the value of the goods involved.  The 
legislation thereby moves Nigeria closer to satisfying 
AGOA-related rules of origin requirements. 
 
 
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EXAMPLES OF U.S. TRADE CAPACITY-BUILDING EFFORTS 
--------------------------------------------- --- 
 
 
11. (U) The USG continues to work with Nigerian trade 
associations and businesses to facilitate bilateral 
trade and investment.  Post supports the Nigerian 
Investment Promotion Commission in its efforts to lower 
or remove barriers to investment and maintains ongoing 
contact with the Nigerian-American Chamber of Commerce, 
the Lagos Chamber of Commerce and Industry, and other 
trade promotion organizations. 
 
 
12. (U) The U.S. Commercial Service hosts two week-long 
trade fairs annually to showcase U.S. goods and 
services available to Nigerian businessmen and holds an 
annual agent-distributor forum to explore ways of 
improving market access through lower tariffs, more 
thorough product certification, and improved local 
business practices.  In early 2003, the U.S. Commercial 
Service also launched its Global Trade and Investment 
Management (GTIM) program.  GTIM supports Nigerian 
entrepreneurs by providing access to online market 
development training and trade and investment 
information.  The program also provides access to a 
series of business service centers. 
 
 
HINSON-JONES