US embassy cable - 03ABUJA1720

UNCLAS SECTION 01 OF 03 ABUJA 001720 
 
SIPDIS 
 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, ELAB, PGOV, NI 
SUBJECT: NIGERIA:  AGOA ELIGIBILITY REVIEW 
 
 
REF: A. STATE 263702 
     B. 02 ABUJA 2803 
     C. LAGOS 2023 
     D. ABUJA 1113 
 
 
1. To answer any questions that might arise from the Ref C 
submission, the Mission provides the following 
supplementary discussion. 
 
 
--------------------------------------------- ---- 
Economic policies: improvement, for the most part 
--------------------------------------------- ---- 
 
 
2. President Obasanjo has put in place a highly reputable 
economic reform team since his April reelection.  This 
team, led by Finance Minister Dr. Ngozi Okonjo-Iweala and 
Presidential Economic Advisor Dr. Charles Soludo, has 
reformist credentials.  Many observers question, however, 
whether the President himself can prevail against 
entrenched interests such as his political allies and the 
unions.  The official GON reform blueprint, called the 
National Economic Empowerment and Development Strategy 
(NEEDS), is to be released in November.  According to 
former head of the Bureau of Public Enterprises (BPE) and 
member of the economic reform team Nasir el-Rufai (now 
Minister for the Federal Capital Territory), the reform 
strategy will be painful and will emphasize fiscal 
discipline.  Politically difficult moves will be taken to 
end fuel subsidies and to reform the public sector. 
 
 
3. Nigeria continues to make progress toward establishing a 
market-based economy that protects private property rights 
and minimizes government interference.  Between the 
beginning of privatization efforts in 1999 and mid 
September of this year, the GON had privatized twenty-five 
formerly state-owned enterprises.  Unfortunately, the 
planned privatizations of the National Electric Power 
Authority (Ref B) and Nigeria Telecommunications Limited 
appear to have stalled. 
 
 
4. On the energy side, the GON has announced a deregulation 
of gasoline prices and plans to privatize the Petroleum 
Product Marketing Company (PPMC), which buys and sells both 
domestic and imported fuel and petroleum products.  The GON 
is also considering privatization of its refineries.  The 
complicated tangle of GON officials involved financially in 
the energy sector will likely make this a daunting task. 
 
 
--------------------------------------------- ------- 
Barriers to U.S. trade and investment: mixed signals 
--------------------------------------------- ------- 
 
 
5. Progress toward establishing a rules-based open trading 
system has continued, but not without setbacks.  The GON 
still tends to change tariff rates suddenly and 
arbitrarily.  In March, it once again cut duties on many 
items (mostly raw materials and capital equipment) and 
raised them on others (primarily finished goods and 
agricultural products).  A number of imported items - 
frozen poultry, certain printed fabrics, cassava, ice 
cream, fruit juice in retail packs, toothpicks, beer and 
pasta - were all officially banned just before Nigeria's 
national elections, ostensibly to foster domestic 
production even though domestic industry cannot meet the 
demand for these products.  And most of these imported 
items were and are still readily available for reasonable 
prices in local markets despite the continuing ban, raising 
rule of law questions about the implementation of trade 
regulations (see ref D). 
 
 
6. In August the GON closed its borders with Benin for one 
week, and the influential chairman of the ruling People's 
Democratic Party (PDP) as well as other officials have 
stated on multiple occasions that the GON may close its 
borders with other countries.  The stated rationale was a 
crackdown on illicit trade.  The impromptu closure evinced 
the GON's inclination to control trade, as well as its 
tendency to arbitrary action. 
 
 
7. The GON in September passed legislation that appears to 
bring Nigeria's trade law into compliance with the Act.  In 
particular, the new legislation appears to establish an 
enforceable visa mechanism to combat transshipment of 
goods.  Such a provision, if found to be in compliance with 
the Act, would likely render Nigeria eligible for benefits 
under AGOA provisions for textiles and apparel.  (Post has 
sent copies of the new Nigerian legislation to USTR for 
review.) 
 
 
8. Other than the pre-election bans (and the detrimental 
effects of an arbitrary tariff policy), the GON has not 
generally discriminated against U.S. goods or services. 
Foreign firms in general are allowed to invest in all 
sectors of the Nigerian economy as long as they have 
Nigerian partners.  Investors who abide by regulations 
governing the establishment of businesses are, both in law 
and in practice, assured national treatment. 
9. While foreign exchange can be moved across Nigeria's 
borders, selected political elites are rumored to benefit 
greatly from the "illegal" parallel market rates.  The 
introduction last summer of a modified Dutch auction 
mechanism has gone a long way toward reducing the spread 
between official and parallel market exchange rates.  As 
President Obasanjo noted in his Independence Day speech 
October 1, his administration "does not condone such 
criminal activities as foreign exchange manipulation, 
under-invoicing and money laundering, which generally 
compromise our financial system." 
 
 
10. The GON is working toward better protection of 
intellectual property rights (IPR).  Nigeria is party to 
numerous IPR conventions and agreements, and Nigerian law 
generally favors intellectual property owners and imposes 
criminal penalties on IPR violators.  The GON has 
introduced legislation to create a quasi-independent IPR 
commission and to bring Nigeria into full compliance with 
the WTO TRIPS agreement.  Nigeria is a member of WIPO and 
signatory to several IPR treaties.  Despite these legal 
measures, enforcement remains weak.  Scarce resources and a 
lack of expertise are at least a part of the problem. 
 
 
--------------------------------- 
Poverty reduction: no results yet 
--------------------------------- 
 
 
11. The GON recently unveiled a new economic plan, the 
National Economic Empowerment and Development Strategy, the 
details of which have not yet been released.  Obasanjo's 
economic team have outlined strategies for attaining 
macro-economic stability (with emphasis on low inflation 
and stable interest and exchange rates), achieving annual 
GDP growth of 5-7 percent, and reducing poverty.  Skeptics, 
of which there are many, point out, though, that this 
Strategy follows two other poverty reduction programs in t 
he past four years that made little or no impact on the 
more than two-thirds of Nigerians living in poverty. 
 
 
12. The GON continues to promote the development of private 
enterprise through its Small and Medium Industries Equity 
Investment Scheme, under which banks are required to set 
aside 10 percent of before-tax profits for equity 
investments in industrial enterprises.  80 banks have 
reportedly set aside 103 million USD, but only ten percent 
of the available funds had been invested as of December 
2002. 
 
 
------------------------------------------- 
Combating corruption: the jury is still out 
------------------------------------------- 
 
 
13. Nigeria continues to be considered one of the most 
corrupt countries in the world, second only to Bangladesh 
in the most recent Transparency International study. 
Officials continue to see government service as a path to 
personal enrichment, and companies continue to report that 
doing business without paying bribes puts one at a distinct 
disadvantage. 
 
 
14. A federal anti-corruption commission is now in place. 
The GON awards contracts through an "open tender system" 
that is beginning to show some transparency.  Federally 
funded contracts worth over 10,000 USD are legally subject 
to due diligence.  Some observers believe these measures 
have reduced or will reduce the forms of corruption that 
most affect foreign trade and investment, but corruption is 
still rife in the daily life of most Nigerians.  In his 
Independence Day speech October 1, President Obasanjo 
stated "The (anti-corruption) crusade here will continue 
until the Nigerian society is rid of this major impediment 
to our economic prosperity and development, and there will 
be no sacred cow." 
 
 
--------------------------------------------- ------------ 
Rule of law and political pluralism: continuing evolution 
--------------------------------------------- ------------ 
 
 
15. Ethnic and religious tensions pose significant 
challenges to the establishment of rule of law and 
political pluralism.  Communal clashes have resulted in 
numerous injuries and deaths, and Nigeria's under-funded, 
under-trained and under-equipped police force is often 
hard-pressed to stop or prevent violence.  The Nigerian 
military has calmed some particularly violent areas by its 
presence, but looting and indiscriminate killing (sometimes 
also committed by other security services and local 
civilians) have marred its efforts in the past. 
 
 
16. Civil and criminal cases move through Nigeria's courts 
slowly, in large part as a result of a crippling lack of 
resources and administrative expertise.  Public confidence 
in the judicial system is low across the country, and has 
contributed over the past few years to the adoption of 
Islamic Law (Shari'a) in 12 of Nigeria's northern states. 
17. Nigeria in April held its second national and state 
elections since the country returned to civilian rule in 
1999.  Although 30 parties were allowed to contest (up from 
three in 1999), the elections were marred by allegations of 
widespread fraud and questions, from both domestic and 
international observers.  The leading opposition party, the 
All Nigerian People's Party, filed a lawsuit to have the 
election victory of President Obasanjo overturned. 
Although the suit was filed immediately after the election, 
the Court of Appeals only began hearing substantial 
arguments on the case in late September.  Local elections 
that were due have still not been held.  President 
Obasanjo's ruling People's Democratic Party (PDP) dominates 
national and local politics, controlling close to seventy 
percent of elected positions at all levels of government. 
Still, the vast majority of Nigerians continue to support 
democratic practices. 
 
 
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Human rights have made progress 
------------------------------- 
 
 
18. The GON's human rights record has improved, yet serious 
problems remain and there is also a lack of accountability 
for past abuses.  The security services have been involved 
in fewer violations of human rights this year, but they 
still all too often fail to protect the rule of law in 
rural areas.  Despite pressure from the international 
community (including Section 557-reduced USG security 
assistance), the GON has not held accountable those 
responsible for the October 2001 military killings of over 
100 civilians in Zaki-Biam, Benue State. 
MEECE