US embassy cable - 02ABUJA2411

UNCLAS SECTION 01 OF 02 ABUJA 002411 
 
SIPDIS 
 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, PREL, PGOV, NI 
SUBJECT: NIGERIA: A/S KANSTEINER MEETS NEXT GENERATION OF 
NIGERIAN LEADERS 
 
 
1.  Summary:  At a 25 dinner hosted by Ambassador Jeter, 
Assistant Secretary Kansteiner met with a group of 
Nigeria's "best and brightest," young but influential 
advisors in the Obasanjo Administration today, to discuss 
Nigeria's economic and political challenges.  The 
participants outlined the damage done by years of 
destructive military rule and diverted oil revenue, which 
eroded government institutions and decimated the civil 
service.  Even considering the obstacles, this dynamic 
group expressed confidence that a second Obasanjo term 
could make inroads solving the country's problems through 
increased privatization, economic reform, and an overhaul 
of Nigeria's once highly professional civil service.  This 
group of young, highly educated, articulate and deeply 
committed professionals represent the next generation of 
Nigerian leaders and give us hope about the future of 
Nigeria.  End Summary. 
 
 
2.  Participants in the meeting were: Steve Oronsaye, 
Principal Secretary for the President; Oby Ezekwesili, 
Special Assistant on Political Affairs; Aliyu Moddibo Umar, 
Special Assistant to the Chief of Staff; Magnus Kpakol, 
Chief Economic Advisor; Nasir El-Rufai, Director of Bureau 
of Public Enterprises; Pat Utomi, Director of the Lagos 
Business School.  Ambassador Jeter, Consul General Hinson- 
Jones, A/S Senior Advisor Jim Dunlap, PolCouns, the 
Ambassador's Special Assistant and Econoff (notetaker) also 
attended. 
 
 
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Exchange Rate: A Sentimental Favorite 
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3.  In today's Nigeria, all economic conversations start 
with the recent depreciation of the naira. Ezekwesili, 
stressed the need to educate the public on the benefits of 
a market driven exchange rate, so that people would not 
think the government had "abandoned them." El-Rufai 
asserted that Nigerians have a sentimental attachment to a 
high naira dollar exchange rate and often judged economic 
performance based on the stability in that exchange. The 
truth, participants agreed, was that an overvalued naira 
had subsidized an already wealthy class of elite 
businessmen, importers and consumers, leaving the domestic 
manufacturing sector unable to compete on the world market. 
 
 
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Institutional Capacity and Management of Resources 
--------------------------------------------- ----- 
 
 
4.  Conversation then focused on Nigeria's lack of 
institutional capacity and poor performance in managing 
resources, topics that repeat like a broken record in any 
conversation of the country's economic ills.  Ezekwesili 
pointed out that when the system fails in the US, like with 
Enron, people turn to the law for a remedy to fix the 
"broken" institution. She complained that in Nigeria, 
decades of colonialism, military rule and corruption fueled 
by huge revenues from the sale of oil had eroded 
traditional institutions that checked government excesses 
and mismanagement. When the Ambassador asked if the Nigeria 
would ever develop an institutional system of checks and 
balances, the participants said yes, but the process would 
take time. 
 
 
5.  Participants also cited the gross mismanagement of 
resources as a major contributor to economic stagnation. 
For too long, a small number of people reaped huge benefits 
from oil revenues, without having to engage in economically 
productive activity.  One area most affected by a lack of 
resources was the civil service.  In the early days of the 
Republic, civil servants received adequate and regular pay; 
moreover, they joined the government out of a deep sense of 
patriotism and national commitment.  This situation has 
changed dramatically.  Years of poorly paid government 
employees has created a diminished and lethargic, atavistic 
bureaucracy, prone to corruption.  Now, Rufai said, the 
Bureau of Public Enterprises (the agency responsible for 
privatizing public companies) said he must pay 3 times the 
salary of the private sector to lure qualified individuals. 
High salaries have paid off, he said, by creating a highly 
motivated and competent work force. 
 
 
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Nigeria's Future: What Will Obasanjo Do Next? 
--------------------------------------------- 
 
 
6. Considering all the problems mentioned, the Ambassador 
wondered what Obasanjo's first year in office would look 
like, if he were re-elected.  One participant quickly 
replied that he would be a true statesman and would push 
for real economic reform.  El-Rufai commented that 
privatization would continue at a determined pace. 
Ezekwesili promised civil service reform would be a 
priority, hoping the government could create a team of 
"brain boxers", or a competent bureaucratic corps through 
higher wages and merit based employment. 
 
 
7. Comment:  Listening to this influential and intelligent 
group of dedicated civil servants and professionals, one 
wonders why the Nigerian economy is still in crisis.  The 
existence of such a group within the government and their 
efforts to reform the system gives hope for progress. 
Several USAID programs have attempted to tap into this 
commitment, including assistance to the Bureau of Public 
Enterprises (BPE), the Vice President's Economic Policy 
Coordinating Committee(EPCC), and the Debt Management 
Office in the Ministry of Finance.  Still, many in Nigeria 
do not share this commitment to reform and Obasanjo will 
face steep opposition, even if given the luxury of a second 
term.  End Comment. 
JETER