US embassy cable - 02ABUJA1810

UNCLAS ABUJA 001810 
 
SIPDIS 
 
 
E.O. 12958: N/A 
TAGS: EINV, ETRD, ECON, NI, AGOA 
SUBJECT: NIGERIA: AN AGOA POWERHOUSE AFTER ALL? 
 
 
1.  Summary.  In contrast to the widespread view that 
Nigeria is ill prepared to benefit from the Africa 
Growth and Opportunity Act (AGOA), a survey by textile 
and apparel consultants Jack S. Smith and Heidi 
Scheller suggests the Nigerian textile and apparel 
industry could become a primary AGOA beneficiary. End 
Summary. 
 
 
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Nigerian Textile and Apparel Industry Findings 
--------------------------------------------- - 
 
 
2.   On June 7, Smith and Scheller briefed POL/C, 
EconOff, and Tom Hutcheson of USAID about their survey 
of the Nigerian textile and apparel industry.  The 
level of sophistication of the industry surprised the 
consultants.  They concluded Nigerian textiles had 
tremendous export potential and could play an 
important role in filling the entire continental quota 
under AGOA.  At the same time, they noted the apparel 
industry is underdeveloped, almost non-existent.  That 
situation, however, might be quickly turned around 
through direct investment, which could be generated if 
the textile section took off. 
 
 
3.    From 2005 on, cloth for apparel entering the 
U.S. under AGOA must either be produced in the U.S. or 
in an eligible sub-Saharan country.   Thus apparel- 
producing nations such as Mauritius and Lesotho that 
are using Asian textiles will have to find another 
source.  Nigeria could easily put itself in position 
to capitalize.  Even before 2005, Nigerian textile 
manufacturers could profit under AGOA if they would 
seek to establish business relations with apparel 
producers in the AGOA-active countries.  They believe 
that Nigeria cotton production would need to be 
quickly increased to meet the greater demand. The 
consultants also stated that Nigeria has ample labor 
at competitive rates and its ports have competitive 
container rates that would facilitate export. 
However, the consultants identified problems such as 
uncertain regulatory/political environment, high 
interest rates, poor exchange rates, low labor 
productivity, no incentive-based payroll tradition 
(being paid by the piece) in the textile or garment 
industry, and Nigeria's lack of experience in global 
marketing.  They also emphasized that both the textile 
and apparel industries are extremely time sensitive. 
Orders must be filled in a timely manner.  To do this, 
Nigeria must streamline export procedures, 
particularly port clearance operations. 
 
 
4.  Mr. Smith and Dr. Scheller concluded that, based 
on their experience in Central America and other parts 
of the world, Nigeria's problems could be overcome and 
the country could easily become one of the biggest 
beneficiaries of AGOA. 
 
 
5.  Comment: This gives a fresh perspective to 
Nigerian textiles, an industry hard hit by second-hand 
clothing and the smuggling of Asian cloth into the 
market.  Before Nigeria can obtain the benefits 
envisioned, the GON must complete its textile visa 
process.  A critical part of that process is 
legislation creating new and adequate penalties for 
trans-shipment.  Despite reports that this bill will 
be passed any day, there has been no movement in the 
National Assembly.  We confirmed this during a 
subsequent call on House Finance Committee Chair 
Mohammed Sanusi Daggash, who, nevertheless, promises 
the legislation will be ready by the end of June. 
Despite its bureaucratic difficulties in passing the 
AGOA visa system, Nigeria still holds great export 
potential in textiles.   Because of the difficulty for 
other African countries to replicate the capital- 
intensive sophisticated textile production sites in 
Lagos, Kaduna and Kano, Nigeria will almost certainly 
benefit from the 2005 changes in AGOA.  However, to 
reap the full benefits of AGOA would require the 
development of the apparel sector.  The necessary 
direct investment to energize that sector will not 
come in until there is a working textile visa system, 
and an improvement in export infrastructure, 
especially ports.  This will require continued 
engagement with the GON to reform export policy, and 
improved performance by Customs, the Nigerian 
Investment Promotion Council, the Nigerian Export 
Promotion Council, the Ministry of Transport and the 
Ministry of Commerce. End comment. 
ANDREWS