US embassy cable - 05LAGOS474

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 000474 
 
SIPDIS 
 
DEPARTMENT PLEASE PASS TO EXIM, OPIC 
 
E.O. 12958: DECL: 03/23/2015 
TAGS: ECON, EINV, EFIN, PGOV, NI 
SUBJECT: MEGA CORPORATION COULD HELP AND HURT NIGERIA AT 
THE SAME TIME 
 
Classified By: BRIAN BROWNE FOR REASONS 1.4 (B) AND (D) 
 
 1. (C) Summary. On March 1, a cadre of Nigeria ,s 
business elite presented plans to the Government of 
Nigeria (GON) to establish the Transnational 
Corporation of Nigeria (TCN).  Deemed a mega- 
corporation, TCN's initial capital would consist of 
naira 4.2 billion (USD 31.5 million) including naira 
100 million each (more than USD 750,000) in 
contributions from 42 private investors, many of whom 
have connections at the highest level of government. 
  TCN is further testimony of active government 
involvement in business and of a close beneficial 
nexus between the GON and the pro-Obasanjo business 
elite, contradicting GON ,s claims that Nigeria is a 
free market economy with an even playing field.  End 
summary. 
 
2. (U) On March 1, a cadre of Nigeria ,s business 
elite presented plans to the Government of Nigeria 
(GON) to establish the Transnational Corporation of 
Nigeria (TCN).  Deemed a mega-corporation, TCN's 
initial capital would consist of naira 4.2 billion 
(USD31.5 million) including naira 100 million each 
(more than USD750,000) in  contributions from 42 
private investors, notably Aliko Dangote, CEO, 
Dangote Group; Dr. Ndi Okereke-Onyiuke (Onyiuke), 
Director General, Nigerian Stock Exchange (NSE); Jim 
Ovia, CEO, Zenith Bank; Jacobs Moyo Ajekigbe, CEO, 
First Bank; and Femi Otedola, CEO, Zenon Petroleum 
and Gas.  The TCN expects to raise its initial 
capital to naira 14 billion (over USD100 million) 
after an April or May 2005 listing on the NSE, and 
contemplates an eventual capital base of USD500 
million. 
 
3. (U) This projected USD500 million capital base 
would give TCN a larger financial capacity than any 
other Nigerian private company.  It would help its 
Nigerian business moguls and the GON to collectively 
meet investment goals that were previously out of 
their reach even to them as wealthy individuals.  TCN 
investors could then take on large projects such as 
refineries, gas pipelines, and vertically-integrated 
agricultural processing with an eye to exports.  For 
the GON, TCN's success would be a point of 
nationalistic pride.  It also might attract foreign 
direct investors who now reason that if Nigerians 
are not investing in their own country, why should 
they? 
 
4. (U) In the light of the GON's economic aspirations, 
the TCN has the potential to help increase revenue, 
trade, and employment.  Furthermore, the mega 
corporation could become a prime customer of the 
large banks that will result from the Central Bank's 
directive that banks in Nigeria must have a minimum 
capital base of naira 25 billion (over USD185 
million) by December 31, 2005. 
 
5. (C) There is an apparent downside, however.  TCN 
signifies a stronger partnership between GON and 
Nigeria ,s business elite contrary to the free market 
model Nigeria claims it supports.  The modus operandi 
of the corporation has yet to be seen though the 
cozy relationship between many of its investors and 
the GON will lead to questions about insider trading, 
corruption, and transparency. Most of TCN ,s 
investors move in the highest political circles, 
including that of President Obasanjo.  (Aliko 
Dangote reportedly was the highest contributor to 
Obasanjo's 2003 presidential campaign.) Already, 
TCN seems to have been given an unfair advantage: 
its director and  &team leader 8, Onyiuke, wielding her 
power as NSE director general, is trying to get TCN 
listed on the NSE as early as April 2005. Usually, 
NSE and Nigerian Securities Exchange Commission (SEC) 
regulations require companies be operational for 
three years before being listed.  Media reports also 
indicate that TCN expects GON  &concessions 8 to buy a 
GON oil refinery and other public enterprises in 
line with TCN's objectives. The TCN has plans and 
expects favorable treatment in its efforts to build 
a new refinery and petrochemical plant, to operate 
an independent power plant, and to gain tax breaks 
through pioneer status for investing in agriculture. 
(Comment.  The speed at which the TCN will be listed 
on the NSE should indicate whether regulatory 
institutions in Nigeria like SEC have the wherewithal 
to maintain a fair playing field for firms listed on 
the exchange.  End comment.) 
6. (SBU) The announcement publicizing the TCN was 
contemporaneous to a statement by the Manufacturer ,s 
Association of Nigeria (MAN) indicating that 90 
percent of Nigeria ,s manufacturing firms are 
distressed.  MAN's Director General Jide Mike said he 
welcomes the TNC because it will contribute to 
economic growth and generally be a point of pride 
for Nigerians, but will not compete directly with 
Nigeria's actual manufacturers. 
 
7. (SBU) Mansur Ahmed, the Executive Director of 
the Nigerian Economic Summit Group, is less sanguine. 
  He speculates that TCN's consolidation may worsen 
Nigeria's unequal distribution of wealth, as TNC ,s 
wealthy investors become even wealthier and crowd 
out smaller investors and firms in the sectors which 
TCN wants to invest. 
 
8. (SBU) Comment: If it takes off, the TCN is apt 
to become the bellwether of Nigerian firms.  It's 
potential for dominance reflect the strong 
interplay between economics and politics on a field 
that is less than level.  End comment. 
BROWNE