US embassy cable - 04LAGOS1639

UNCLAS SECTION 01 OF 03 LAGOS 001639 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
STATE PLEASE PASS TO DOT AND EX-IM 
 
E.O. 12958: N/A 
TAGS: EWWT, SENV, EINV, EFIN, ECON, NI 
SUBJECT: NIGERIA ECONOMIC TIDBITS, AUGUST 11 
 
REF: LAGOS 1106 
 
1. (U) This update includes: 
 
-- Maritime Stakeholders Support Cabotage Law 
-- WAGP Environmental Impact Assessment and 
Resettlement Plan Released 
-- Nigerian Economic Summit Group Leaders Support 
Economic Reform 
-- Local Professor/Journalist Confirms Obasanjo's 
Economic Dream Team Lacks Potential Clout 
 
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Maritime Stakeholders Support Cabotage Law 
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2. (U) The Nigerian Cabotage Law 2003 (reftel) 
continues to generate interest from various 
stakeholders. At a recent forum focusing on 
"Implementation Guidelines of the Cabotage Law: the 
Role of Financial Institutions", domestic stakeholders 
claimed the law will help the Nigerian maritime 
industry. Many Nigerians believe effective 
implementation of the law could bolster the proposed 
new National Shipping Policy of the GON, which is being 
formulated by the National Assembly and the Transport 
Ministry in conjunction with some private sector 
operators. (A new shipping policy would update the 
National Shipping Policy Decree 1987.  It identified 
Nigeria's maritime interests and established the 
Nigerian Maritime Authority as the implementing agency 
of the policy.) 
 
3. (SBU) Most Nigerian maritime operators believe that 
opportunities exist for collaborations and partnerships 
with US maritime technical experts. They believe there 
is a need to build indigenous capacity in shipbuilding, 
port management, dry dock services and maritime 
security. They also believe that establishing direct 
shipping route between the two countries would promote 
rapid development of the maritime sector and thus 
validate the enactment of the cabotage act. 
 
4. (U) Dissenting voices among local maritime operators 
have criticized of the implementation of the policy. 
They claim the Transport Ministry has granted waivers 
to most foreign firms for their vessels to operate 
under the cabotage law. They believe these vessels are 
being allowed to operate in areas now legally reserved 
for Nigerian-owned vessels. (The Minister of Transport 
may waive provisions of the Cabotage Act if there is no 
Nigerian-owned vessel suitable and available to perform 
a specific activity.  Likewise, the Minister may issue 
waivers if no Nigerian shipbuilder can construct a 
vessel of a particular type and size needed. Foreign- 
owned or foreign-crewed vessels participating in the 
domestic coastal trade must be licensed.  Persons 
residing in Nigeria may apply for licenses on behalf of 
a foreign-owned vessels if waiver and other 
administrative criteria are met.) 
 
5. (U) An official of Italy's Grimaldi Lines told us 
that local maritime operators lack capacity in the 
areas in which most of the foreign waivers have been 
granted. He said that although local capacity may be 
enhanced by the implementation of the cabotage law over 
time, they currently cannot meet the requirements of 
the Nigerian shipping industry. Foreign vessels will 
thus remain relevant for some time.  It is in 
recognition of this fact that the waiver clause was 
added to the law. 
 
6. (SBU) Comment: The cabotage law requires majority 
Nigerian ownership of almost all intercoastal shipping 
concerns.  Since US firms supply workboats and trawlers 
to Nigeria, this law could have a negative impact on 
our commercial interests in this sector.  Additionally, 
the waiver regime is susceptible to political 
interference.  That possibility may make many 
investors, foreign and domestic, reluctant to play in 
the sector.  Belgian and Dutch investors have told us 
that the law, at best, will not encourage investment, 
and most likely, will cause shipping companies to 
rethink their investment plans. End comment. 
 
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WAGP Environmental Impact Assessment and Resettlement 
Plan Released 
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7. (U) In June 2004 the West African Gas Pipeline 
Company and Chevron Nigeria Limited published Nigeria's 
final drafts of the West African Gas Pipeline (WAGP) 
Environmental Impact Assessment (EIA) and Resettlement 
Action Plan (RAP). The proposed WAGP will transport 
natural gas from Nigeria to Benin, Togo and Ghana.  In 
compliance with World Bank requirements, the general 
public now has 60 days to comment on the EIA and RAP. 
 
8. (U) The WAGP's EIA lists many potential benefits 
including infusion of funds into the Nigerian economy, 
development of the regional energy infrastructure and 
related economic development. On whole, the 
environmental impact will be positive.  The WAGP will 
reduce gas flaring and, concomitantly, air pollution 
and greenhouse gas emissions. Inducing end-users to 
switch to gas fuel from other fossil fuels will provide 
additional reductions in greenhouse gas emissions. 
Potential negative environmental impacts involve 
conversion of farmland to pipeline easements; 
disturbance of habitats and changes to hydrology caused 
by trenching in wetlands; and changes in habitats, 
soils/sediments, topography, and hydrology associated 
with heavy equipment delivery. Many of these problems 
arise in the project's construction phase.  The EIA 
indicates that no permanent high severity negative 
impact will remain after planned mitigation measures 
are applied. No negative socioeconomic impacts of high 
severity are anticipated from the project. 
 
9. (U) The RAP states the WAGP will affect 23 
communities (about 2,500 land owners and tenants) in 
Ogun and Lagos states. All land owners and tenants have 
been contacted by the WAGP contract surveyors as well 
as the independent surveyors hired by the affected 
populations. The affected people were offered two 
options: in-kind or cash compensation. All chose cash 
compensation. The project also will adopt specific 
measures to minimize impacts. 
 
10. (U) Chevron representatives told EconOff that they 
expect World Bank approval of the project, as the EIA 
and RAP meet all of the Bank's project criteria. They 
said the local communities also support the project. 
Opposition to the WAGP comes primarily from one 
organization, Environmental Rights Action, they added. 
 
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Nigerian Economic Summit Group Leaders Support Economic 
Reform 
--------------------------------------------- --------- 
 
11. (U) In a recent meeting with CG and Econoff 
(notetaker), the Nigerian Economic Summit Group (NESG) 
Executive Director and board members pledged continued 
support for economic reform in Nigeria.  The NESG 
agenda for the near future involves (1) capacity 
building, (2) lobbying on priority issues, and (3) 
increased research. 
 
12. (U) A priority area for NESG is business 
disincentives such as bureaucracy and regulatory 
constraints.  Chairman Mazi Sam I. Ohuabunwa relayed 
the group sentiment that it is important that the US 
mission in Nigeria and NESG continue to work together 
to ensure business growth, regulatory change, and 
economic reform. 
 
13. (U) The NESG expressed dismay over the newest DOS 
travel warning for Nigeria.  The warning "ruffled 
feathers" within the local business community and was 
seen as a slight by the US government.  They asserted 
the warning had caused several US companies to pull out 
of the joint CCA/NESG Conference scheduled for 
September in Abuja.  Most of all, they worried that the 
travel warning would discourage US trade and 
investment.  CG responded that the statement was not 
intended to stop travel to Nigeria, but to warn 
travelers of the real difficulties they would face in 
Nigeria.  Our top priority is the welfare of US 
citizens abroad, the CG stressed.  However the USG 
continues to encourage and promote trade and investment 
in Nigeria.  The greatest obstacle to US investors was 
not the travel warning but the frequent "bureaucratic 
anomalies" and opaque regulatory environment they find 
in Nigeria, he added. 
 
14. (U) FYI: The NESG was formed 11 years ago as an 
expression of private sector determination to reform 
Nigeria's economy.  Although the organization had a 
slow start, reviews from government and other agencies 
and companies illustrate that NESG has steadily 
enhanced its influence since its inception.  It is 
known as a growing presence in the country's economic 
policy topography. End FYI. 
 
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Local Professor/Journalist Confirms Obasanjo's Economic 
Dream Team Lacks Potential Clout 
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15. (SBU) The prolific and influential Lagos Business 
School (Pan-African University) professor, Pat Utomi, 
recently discussed the GON's economic team with the CG 
and Econoff (notetaker).  Utomi endorsed the widely- 
held view that the country's touted economic team lacks 
independent political power.  They are completely 
dependent on President Obasanjo to provide political 
muscle to push any reform forward.  However, having 
been appointed governor of the Central Bank, Charles 
Soludo may be carving out a niche for himself, Utomi 
commented. 
 
16. (SBU) Utomi said, given their lack of political 
clout, the team should have spent much more time 
building a constituency inside government and the 
private sector for their reform program.  Instead they 
have acted like technocrats, unmindful of the realities 
of Nigeria's political economy.  Team members are 
perceived as arrogant and unrealistic due to a head-in- 
the-clouds approach to the country's economic reform 
process.  While the team has the ear of the President, 
they are estranged from the rest of the system. 
Because of their lack of political and bureaucratic 
panache, Utomi predicted the team will have a very 
tough time obtaining the support needed for their 
reform measures. 
BROWNE