US embassy cable - 04LAGOS1153

UNCLAS LAGOS 001153 
 
SIPDIS 
 
DEPT PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: EAIR, ECPS, ETRD, ECON, NI 
SUBJECT: NIGERIA ECONOMIC UPDATE, JUNE 1 
 
1. (U) This update includes: 
 
-- New International Routes for Local Airlines 
-- NITEL Introduces New Tariffs Effective June 1 
-- Recharge Cards Import Ban Effective January 2005 
 
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New International Routes Approved for Local Airlines 
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2. (U) Six local airlines were recently approved by the 
GON to operate new international routes. Four of the 
airlines - Aviation Development Company (ADC), Afrijet, 
Bellview and Kabo may operate intercontinental flights 
from Lagos to Brussels, Madrid, Bombay and Rome 
respectively. Aero Contractors and Chanchangi Airlines 
may run flights to various West African cities 
including Accra, Douala, Malabo and Sao Tome. 
 
3. (U) The Aviation Ministry directed that the airlines 
assigned intercontinental routes must increase their 
capital base to N1 billion ($7.2 million), while those 
on West African routes must increase theirs to N500 
million ($3.6 million) by April 2005. 
 
4. (U) Managing Director of Afrijet, Dr. Harold 
Demuren, said his company, which is recruiting 
crewmembers and procuring equipment, intends to build a 
multi million-naira hangar in Lagos. These upgrades, he 
said, will prepare Afrijet for competition with Iberia, 
as the Spanish airline begins a thrice-weekly flight 
from Lagos in June. 
 
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NITEL Introduces New Tariffs, Effective June 1 
--------------------------------------------- - 
 
5. (U) The state-owned Nigerian Telecommunications 
Limited, NITEL, introduced new tariffs for local and 
trunk calls effective June 1. Tariffs on local calls 
increased 51 percent from N4.30k/min to N6.50k/min, 
while trunk calls were reduced 49 percent, from N43/min 
to N22/min. 
 
6. (U) Ig Nwangwu, Public Relations manager of NITEL 
Lagos, said tariffs on calls to GSM networks were 
reduced 13 percent from N30/min to N26/min. But NITEL 
subscribers' monthly access charge was increased 40 
percent from N500 ($3.60) to N700 ($5.10). 
 
7. (U) Comment: The new tariff regime is NITEL's 
response to the keen competition in the sector. Other 
private telecom operators, who have their tariffs 
pegged to the NITEL rate, may also adjust their charges 
appropriately. The effect of the reduction in GSM call 
rates is significant given the prevalence of mobile 
telephony and the GON's call for lower tariffs. End 
comment. 
 
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Recharge Cards Importation Ban, Effective January 2005 
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8. (U) Minister of Communications Cornelius Adebayo 
recently announced a GON ban on imported recharge cards 
by telecom companies. The ban, which did not come as a 
surprise to most telecom operators, is effective from 
January 1, 2005. 
 
9. (U) Most of the major players in the sector, 
including MTN, Vodacom and the state-owned NITEL now 
import recharge cards. Others like Cellcom and Mtel 
print locally. Joke Giwa of MTN said the company would 
meet the deadline by implementing recommendations of 
the feasibility study it commissioned in September 
2003, on local production of recharge cards. In the 
interim, the company has introduced a Virtual Top Up 
(VTU) method of recharging, which allows subscribers to 
buy airtime without using cards. Nwangwu of NITEL 
stated that the company, which is introducing prepaid 
landlines, will comply with the directive. 
 
10. (U) As the telecom companies jostle to meet the 
deadline, Masterstrokes and Cards Technology, the two 
major local producers of recharge cards are positioning 
for more transactions. The ban is designed to encourage 
foreign firms to establish manufacturing plants in 
Nigeria to take advantage of the huge market. 
 
Hinson-Jones