US embassy cable - 04LAGOS1093

UNCLAS SECTION 01 OF 02 LAGOS 001093 
 
SIPDIS 
 
STATE PLEASE PASS FCC 
PLEASE ALSO PASS TO DOT (KSAMPLE) AND EX-IM (MSCURRY) 
 
E.O. 12958: N/A 
TAGS: ECPS, EAIR, EINV, EFIN, ECON, NI 
SUBJECT: NIGERIA ECONOMIC UPDATE, MAY 21 
 
REF: (A) LAGOS 170, (B) LAGOS 125 
 
1. (U) This update includes: 
 
-- Econet and Vodacom Sign Five-Year Management Deal 
-- SAA Accepts Memorandum of Understanding 
-- New Money Laundering Law Signed 
 
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Econet and Vodacom Sign Five-Year Management Deal 
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2. (U) South Africa's Vodacom Group and Econet Wireless 
Nigeria Limited, Nigeria's second largest mobile 
service provider, signed a five-year management 
contract on April 1, sealing a deal expected since mid- 
December (ref A).  Econet has adopted a transitional 
name, V-Networks Nigeria Limited, and relinquished 
management control to Vodacom, which will provide 
support for procurement, network design, rollout, 
marketing, and other group services.  Executives expect 
Vodacom to supply $250 million in equity by the end of 
the third quarter, with investment reaching as much as 
$600 million over the next five years.  A reconstituted 
firm, Vodacom Nigeria Limited, will then enter the 
market. 
 
3. (U) Comment: Executives close to the deal expect 
Vodacom's entry to improve existing network operations 
and enable the firm to compete more aggressively in the 
Nigerian telecommunications sector.  Vodacom's expected 
injection of funds may alleviate the firm's chronic 
money problems and allow it to improve services and 
expand more rapidly than it has in the past, rapidly 
enough, perhaps, to threaten its one major competitor, 
MTN Nigeria Communications Limited.  End comment. 
 
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SAA Accepts Memorandum of Understanding 
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4. (U) South African Airways' (SAA) board accepted a 
memorandum of understanding on March 24, clearing the 
way for the firm to take up its position as Nigerian 
Eagle Airlines' technical partner (ref B).  The 
agreement gives SAA management control and a 49 percent 
stake in Nigerian Eagle Airlines, Nigeria's new flag 
carrier.  Core investors will likely hold 40 percent of 
the airline's $60 million equity, with private 
shareholders taking the remaining 11 percent in an 
initial public offering. 
 
5. (U) Executives at Financial Derivatives Company 
Limited, the Lagos-based economic think tank acting as 
the project's financial advisor, expect Nigerian Eagle 
Airlines to begin domestic flights in the fourth 
quarter.  SAA has prepared a detailed launch plan, they 
say, and company executives expect Nigerian Eagle 
Airlines to offer frequent flights between Lagos, 
Abuja, and other major cities.  The airline eventually 
hopes to add services to London, Dubai, Jeddah, 
Johannesburg, and New York. 
 
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New Money Laundering Law Signed 
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6.  (U) The GON's newly signed money laundering law 
repeals the Money Laundering Act of 2003 and states 
that "no person or body corporate shall, except in a 
transaction through a financial institution, make or 
accept cash payment of a sum exceeding: (a) N500,000 or 
its equivalent, in the case of an individual, or (b) 
N2,000,000 or its equivalent, in the case of a body 
corporate."  Individuals who violate the law will face 
prison terms of two years or more and fines of at least 
N250,000 ($1,900), a figure likewise applied to 
corporations. 
7. (U) Comment: The GON adopted the original money 
laundering law in an attempt to avoid sanctions from 
the Financial Action Task Force (FATF) on Money 
Laundering.  The new version is designed to ensure 
Nigeria is eventually removed from the FATF's list of 
countries whose anti-money laundering programs fail to 
meet internationally recognized standards.  The law may 
be difficult to enforce given the poor organizational 
and institutional capacity of the Economic and 
Financial Crimes Commission and related bodies, but it 
represents a step toward reducing cash transactions and 
increasing financial system transparency.  It will have 
little effect, though, unless banks cooperate with law 
enforcement agencies to identify possible criminal 
activity, something they have so far been reluctant to 
do.  End comment. 
HINSON-JONES