US embassy cable - 03LAGOS1966

UNCLAS SECTION 01 OF 02 LAGOS 001966 
 
SIPDIS 
 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, NI 
SUBJECT: NIGERIA: THE TENTH ECONOMIC SUMMIT: NEW PLANS, 
NEW HOPES, OLD DOUBTS 
 
 
1. (U) Summary. The Nigerian Economic Summit Group's 
tenth annual summit ended on September 12 on a 
cautiously optimistic note.  Delegates from business, 
academia and the public sector recognized the need for 
far-reaching economic reforms and seemed optimistic 
that they might be implemented under the leadership of 
President Obasanjo's new economic team, but their 
optimism was tempered by doubts about the efficacy of 
previous summits and subsequent attempts at reform. 
End summary. 
 
 
2. (U) The president's new chief economic advisor 
(appointed last June), Dr. Charles Soludo, emerged as 
one of the summit's leading advocates of reform; to a 
large extent, the summit bore his stamp.  Soludo said 
bluntly that Nigeria's economy would remain stagnant 
unless the GON undertakes drastic changes.  Without 
reform, he said, achieving the GON's target of 5-7 
percent GDP growth will be virtually impossible, 
particularly as Nigeria has never sustained even 5 
percent growth for more than three consecutive years. 
Soludo argued that the current situation - one of low 
productivity, low investment, low GDP growth and 
widespread poverty - is unsustainable and expressed 
dismay at the GON's poor policy coordination, lack of 
fiscal and monetary discipline, and failure to root out 
corruption and rent seeking behavior.  Soludo painted a 
harsh but accurate picture of the Nigerian economy; 
others echoed it and used it to push for reform. 
 
 
3. (U) With the new Minister of Finance, Soludo figures 
prominently in President Obasanjo's new economic team. 
The group is widely perceived as competent and 
knowledgeable, and many believe this to be one of the 
GON's best chances for implementing reform.  Soludo 
himself believes that with executive buy-in, new 
cooperation among federal and state governments 
(facilitated by the governing party's control of 28 of 
Nigeria's 36 states), a receptive and responsive 
legislature, and strong stakeholder support, the time 
is ripe for change.  Toward that end, Soludo emphasized 
the importance of a concise and coherent reform agenda 
focused on a handful of priorities: establishing sound 
fiscal and monetary policies, facilitating private 
sector growth and investment, and improving the 
delivery of basic public services. 
 
 
4. (U) Soludo urged the GON to minimize ever-growing 
budget deficits by establishing overall expenditure 
limits and setting aside excess oil earnings to 
stabilize revenues (both reforms would require 
appropriate enabling legislation).  He also called for 
careful monitoring of the GON's debt profile and 
greater fiscal policy coordination among federal and 
state governments - particularly since many states are 
technically bankrupt or on the verge of bankruptcy - 
and urged governments at all levels to tie their 
budgets to agreed-upon spending priorities.  Soludo 
went on to stress the need for stable exchange rates 
and controlled growth in the money supply, thus echoing 
the Central Bank's stated goals of stable monetary 
policy and single-digit inflation. 
 
 
5. (U) Along with other GON officials, Soludo called 
for a series of reforms to facilitate private sector 
growth and investment, suggesting first and foremost 
that the GON move forward with the privatization of 
major public enterprises and continue efforts to 
liberalize the downstream petroleum sector.  He also 
emphasized the importance of stronger anti-corruption 
laws, sound competition policy, and well-defined and 
transparent regulatory regimes, pointing out that the 
latter is crucial to any attempt to attract private 
sector investment. 
 
 
6. (U) Summit delegates widely acknowledged the GON's 
failure to effectively deliver public services. 
Nigeria's poor infrastructure and lack of readily 
available healthcare and education are among the 
country's biggest obstacles to growth, and along with 
other speakers, Soludo emphasized the need for improved 
power supplies, expanded transportation and 
telecommunications networks, and more (and better) 
schools and healthcare facilities.  The World Bank's 
country director, Dr. Mark Tomlinson, pointed out, 
however, that improving the delivery of public services 
would require massive investment - investment that the 
GON simply cannot afford.  Financing Nigeria's much- 
needed 6,000-megawatt increase in power generating 
capacity will alone require $6 billion, and many 
billions of dollars more are needed to finance 
improvements in roads, railways, ports, 
telecommunications networks, schools and healthcare 
facilities. 
 
 
7. (U) Given the GON's limited resources, Soludo and 
other summit participants called on the private sector 
to play a greater role in financing investment and 
emphasized the need for more numerous public-private 
partnerships.  They recognized, however, that even 
private sector investment would be insufficient.  Both 
Soludo and Tomlinson said bluntly that consumers would 
have to shoulder more of the burden of providing public 
services, particularly since they now pay for only 30 
to 40 percent of all power generated and enjoy 
surprisingly low charges for water delivery (Nigerians 
pay only $0.04 per cubic meter of water, as compared to 
$1.52 in Burkina Faso, $1.10 in Mauritania and $0.75 in 
Mali).  Even the price of fuel is heavily subsidized. 
Unfortunately, transferring financial responsibility to 
consumers may be easier said than done, particularly 
when previous price increases have been met by strong 
resistance. 
 
 
8. (U) Comment. Although Nigeria's economic landscape 
is littered with failed reform initiatives, summit 
delegates seemed remarkably optimistic that under the 
government's new economic team, things might be 
different; perhaps the tenth time is the charm.  Many 
believe that the GON's reform agenda now enjoys 
unprecedented support both within and outside the 
government.  Soludo himself is acutely aware of 
Nigeria's history of failed reform attempts, but he 
stressed in a recent newspaper interview that the 
chances for successful reform are greater now than in 
the past.  Rather than being an ivory tower exercise, 
he said, the current agenda is grounded in political 
reality and enjoys the support of the "highest levels." 
Post certainly hopes so; if even a handful of its 
recommendations are implemented, Nigeria may be looking 
at a brighter economic future.  But as a veteran 
participant in these summits told us a few days after 
this one ended, "been there, done that, bought the T- 
shirt."  End comment. 
 
 
HINSON-JONES