US embassy cable - 04LAGOS605

UNCLAS SECTION 01 OF 02 LAGOS 000605 
 
SIPDIS 
 
STATE PLEASE PASS TO EX-IM FOR MSCURRY 
ENERGY FOR CGAY 
 
E.O. 12958: N/A 
TAGS: EPET, ENRG, EAIR, ECON, NI 
SUBJECT: NIGERIA ECONOMIC UPDATE, MARCH 19 
 
REF: 03 LAGOS 1690 
 
1. (U) This update includes: 
 
-- Overland Links Inland Airports 
-- NEPA Improves Collection Efficiency 
-- GON to Revive Liquefied Petroleum Gas Sector 
 
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Overland Links Inland Airports 
------------------------------ 
 
2. (U) Overland Airways now connects Abuja and Lagos to 
Nigeria's less frequented inland airports.  Planes link 
Abuja to the southwestern cities of Ibadan, Ilorin, and 
Akure and ferry passengers between Abuja and Bauchi, a 
northeastern city expected to attract increasing 
numbers of tourists to the nearby Yankari Game Reserve. 
 
3. (U) Overland's Managing Director, Captain Edward 
Boyo, says the company is taking a new approach to 
domestic transportation.  The company's 18-seat Beech 
1900D aircraft will ultimately link Nigeria's four 
corners to Abuja and Lagos in a sophisticated hub and 
spoke system, improving mobility and ease of travel and 
sparing passengers time-consuming inconveniences. 
Already, Ibadan residents no longer have to make the 
two-hour drive to Lagos to catch a flight to Abuja, and 
Ilorin and Akure residents can fly to Abuja without 
transiting Lagos.  Boyo eventually hopes to acquire a 
fourth and fifth plane, achieve nationwide coverage, 
and construct a corporate aircraft maintenance facility 
outside Lagos (reftel). 
 
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NEPA Improves Collection Efficiency 
----------------------------------- 
 
4. (U) The Managing Director of Nigeria's National 
Electric Power Authority (NEPA), Joseph Makoju, said on 
March 18 that NEPA's collection efficiency improved 
from 50 to 75 percent over the last four months, a 
change due in part to the January 1 decentralization of 
the company's distribution sections.  NEPA's revenue 
collection now averages N5 billion ($37 million) per 
month.  Makoju expects revenues to increase with the 
drive to install pre-payment meters in government 
establishments by the end of 2004 (despite criticism of 
recent installations at the legislative quarters in 
Abuja) and to ensure that all customers are metered by 
2006. 
 
5. (U) Makoju told EconSpec that NEPA plans to 
introduce a multi-year tariff order (MYTO) system to 
review the agency's tariffs at least once a year. 
This, he said, "would provide comfort to investors by 
ensuring that tariffs are indexed to changes in non- 
controllable costs, thereby guaranteeing `real' returns 
on investments."  When asked about the process of 
unbundling NEPA, Makoju said he expected the 
transmission section to become a semi-autonomous unit 
in April 2004, with the generating section unbundled by 
the fourth quarter. 
 
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GON to Revive Liquefied Petroleum Gas Sector 
-------------------------------------------- 
 
6. (U) The GON recently inaugurated a ten-man committee 
to devise a plan to revive the country's liquefied 
petroleum gas (LPG) sector.  The Special Adviser to the 
President on Energy and Petroleum Matters, Edmund 
Daukoru, publicly stated that the need to revive the 
sector is driven by the high cost of imported LPG, or 
cooking gas.  The Liquefied Petroleum Gas Marketers 
Association of Nigeria (LPGMAN) claims the GON loses 
N2.9 billion ($21 million) annually from the import of 
LPG.  Many LPG marketers claim that the 30 per cent 
import duty, 7 per cent port surcharge, and 5 per cent 
value added tax on imported LPG unduly raise prices and 
object to having to pay duties and taxes when oil 
importers do not.  Nigeria imports LPG largely because 
it cannot convert enough of its natural gas to LPG. 
Domestic supplies of LPG have contracted from 160,000 
tons per year in the late 1980s to some 40,000 tons in 
2002. 
 
7. (U) Nigeria's LPG utilization for domestic and 
industrial purposes is relatively low.  The GON seeks 
to bring per capita consumption levels in line with the 
West African average of 3.7 kg per year over the next 
five years.  This, Daukoru says, would represent a 
seven-fold increase and could result in sales worth 
about N47 billion ($348 million) annually.  To 
facilitate the sector's growth, the GON plans to 
construct nine strategically located LPG storage depots 
and revamp the country's ailing refineries.  The GON's 
ten-man steering committee will oversee these efforts 
and coordinate attempts to identify, appraise, and 
implement business development opportunities in the LPG 
sector.  The committee will also promote and monitor 
the implementation of a domestic gas sector blueprint 
and assist in developing an LPG policy and a proper 
regulatory and institutional framework. 
 
HINSON-JONES