US embassy cable - 02ABUJA2803

UNCLAS SECTION 01 OF 03 ABUJA 002803 
 
SIPDIS 
 
 
DEPARTMENT FOR AF/EPS - WENDELL ALBRIGHT, PASS TO USTR 
- C. HAMILTON, COMMERCE/ITA - G. GELDMAN, TREASURY - 
E. BARBER 
 
 
E.O. 12958:  N/A 
TAGS: ECON, ETRD, PGOV, NI, AGOA 
SUBJECT:  NIGERIA: AGOA ELIGIBILITY REVIEW 
 
 
REF:  (A) STATE 171150;    (B) 01 ABUJA 02856; 
      (C) 00 STATE 110733; (D) 00 STATE 127971; 
      (E) 00 STATE 126813 
 
 
1. In response to Ref A, the following is an update of 
the information provided previously in Nigeria's AGOA 
eligibility (Ref B.) 
 
 
PROGRESS TOWARD A MARKET ECONOMY 
--------------------------------------------- --------- 
 
 
Item 4.1.1A: The GON continues to make incremental 
progress toward establishing a market-based economy 
that protects private property rights, incorporates an 
open rules-based trading system and generally reduces 
government interference in the economy.  Despite the 
failure of winning bidders to obtain the financing 
necessary to pay the purchase price for the 
telecommunications monopoly NITEL and the 
disintegration of the joint partnership that won the 
bid on the ship repair facility Nigerdock, the GON 
remains committed to the privatization process. 
Efforts to privatize two large, modern hotels in 
Abuja, as well as newsprint, sugar and tractor 
manufacturing companies are proceeding apace.  After 
the GON successfully auctioned three GSM licenses in 
2001, a second national telecommunications carrier was 
designated in August 2002. 
 
 
In July, the Central Bank of Nigeria (CBN) re- 
introduced a modified Dutch Auction System (DAS) for 
foreign exchange which tied officially traded Naira to 
a market mechanism,  greatly reducing the discount 
between the parallel market and officially traded 
Naira.  Prior to the DAS, the spread between the two 
rates had risen to 17-20 percent, thus  diverting a 
significant amount of banking activities  from 
investment  into non-productive arbitrage activities. 
 
 
For the current fiscal year 2002, the Executive agreed 
to the CBN request to cap  deficit spending at 12.5 
percent of the total expected revenue for the year. 
This established a hard-line of debt, beyond which the 
government cannot spend.  The result has been periodic 
halts to all government payments for capital projects 
and delays on recurrent expenditures until the CBN 
receives revenues so as to remain within the 12.5 
percent deficit band. 
 
 
The Presidency established in 2001 an office to review 
all capital projects of more than USD $10,000.  This 
new "due diligence" requirement has reduced  some of 
the  most blatant forms of corruption in new capital 
projects, but it is time consuming , not  widely 
understood by many  contractors or civil servants and 
still can be circumvented. 
 
 
Government  policies helped lower year-to-year 
inflation rates (from 19.5 to 16.5 percent) and 
reduced growth of the money supply to within CBN 
targets, both improvements over last year's 
performance.  They also demonstrated commitment to a 
significant degree of economic reform and fiscal 
discipline by the Obasanjo Administration at 
considerable political cost during the build up to the 
2003 elections. 
 
 
POLITICAL PLURALISM AND THE RULE OF LAW 
--------------------------------------- 
 
 
Item 4.1.1 B: The elected civilian government is now 
in its fourth year.  The GON has repeated its 
commitment to the rule of law, human rights and 
democracy and has established a commission to 
investigate abuses by security forces related to 
ethnic violence between the Tivs and Jukun ethnic 
groups in 2001. 
 
 
 Despite the Executive-Legislature impasse over budget 
and spending processes, and the threatened impeachment 
proceedings against the President, all key political 
figures and the vast majority of Nigerians 
steadfastly support the democratic process. 
 
 
Three new political parties have been registered, and 
a voter registration program was conducted in 
September 2002, albeit with widespread complaints that 
large numbers of Nigerians were unable to register due 
to a lack of materials and other irregularities with 
the process.  National, including Presidential and 
state elections, are planned for 2003.  Local 
elections will take place in late 2002 or early 2003. 
A USG-supported police modernization project was 
launched in July 2002 with ICITAP personnel on the 
ground in several cities providing training and 
technical assistance. 
 
 
The Supreme Court made landmark decisions in early 
2002 that affirmed its role as the final arbiter of 
the national constitution in the ongoing process of 
the development of Nigerian democratic federalism. 
While the Supreme Court and Appellate Courts have 
distinguished themselves, the overall the judicial 
system lacks the resources and administrative 
capability to function effectively.  This results in 
long delays in resolving civil and criminal cases. 
 
 
In several instances in the year, local Shari'a courts 
have imposed stoning sentences against women for 
adultery, which is a crime under the new Shari'a code 
in many States in Nigeria.  Several of the cases have 
been dismissed.  In the highly publicized case of 
Safiya Husseini, the stoning sentence was overturned 
by a State Appellate Court in March.  Another well- 
publicized stoning case is in the appellate process. 
The Federal Government has stated its opposition to 
these sentences; under the Nigerian constitution, it 
must allow these matters to be resolved by the 
judicial system. 
 
 
Ethnic and religious tension continued in 2002, though 
at a lower level than 2001.  Communal clashes resulted 
in dozens of deaths and injuries, and displaced 
hundreds of people.  The GON has established and 
supports commissions and other groups working to end 
communal violence. 
 
 
NONDISCRIMINATION IN TRADE 
-------------------------- 
 
 
Item 4.1.1C: Nigeria generally does not discriminate 
against U.S. goods or services and allows for the free 
movement of foreign exchange into and out of the 
country.  The GON continues to move toward policies 
eliminating barriers to US trade and investment, 
although tariffs were amended and revised upwards in 
2002. The GON is moving toward lower tariffs on 
manufacturing inputs and reduced the duty on wheat to 
5%, but prohibitive tariffs were implemented in 2002 
on other imports, notably detergents, rice, poultry 
and printed fabrics and other items were banned 
outright.  The GON continues to work toward 
restructuring the intellectual property rights regime, 
with legislation pending to create a quasi-independent 
IPR commission and to bring Nigeria into full 
compliance with the WTO TRIPS agreement.  Nigeria is 
party to numerous conventions and agreements regarding 
patent, trademark and copyright protection, and the 
country' s laws generally favor protection of 
intellectual property owners and provide criminal 
penalties for violation of their rights.  Even though 
significant progress has been made in strengthening 
IPR laws and regulations, enforcement of IPR laws is 
weak due to scarce resources and a lack of expertise 
by the courts and enforcement officials.  Limited 
progress has been made in regard to licensed materials 
such as software and optical media. 
 
 
POVERTY REDUCTION 
------------------ 
 
 
Item 4.1.1D: Poverty alleviation progresses at a slow 
pace.  GDP growth was at 3.9% for 2001, while the 
country's population grew at 3.1%.  After a slow 
start, the GON is now engaged with the World Bank and 
donor community in preparing a Poverty Reduction 
Strategy Paper with a view towards coordinating its 
own anti-poverty efforts with those of the 
international community.  Other parts of the GON 
Poverty Alleviation program include an on-again, off- 
again program of paying small stipends to a limited 
number of the unemployed and Universal Basic 
Education, which is building two schools in each of 
Nigeria's 774 local government areas.  The Niger Delta 
Development Commission (NDDC), a publicly funded 
entity, was created to better promote development in 
the eight states of the oil-producing region, one of 
the poorest in the country.  As of September 2002, the 
NDDC had received N32 billion ($254 million US) over 
the 20 months ending September 2002. 
CORRUPTION 
---------- 
 
 
Item 4.1.1E: Corruption remains a perceived and real 
problem throughout Nigerian institutions, and the GON 
maintains efforts to combat corruption, with uneven 
results.  An anti-corruption commission is in place, 
and the GON continues to audit public enterprises. 
Since 2001, all federally funded capital projects over 
USD $ 10,000 must pass a due diligence test before 
funding and implementation. 
 
 
U.S. NATIONAL SECURITY 
---------------------- 
 
 
ITEM 4.1.F.2: The GON does not engage in activities 
that undermine US national security or foreign policy 
interests.  Nigeria has been one of our staunchest 
anti-terrorism allies in Africa. 
 
 
CHILD LABOR 
----------- 
 
 
ITEM 5: In 2002 President Obasanjo signed the 
instruments of ratification for ILO Convention 182, 
Worst form of Child Labor, Convention138, Minimum Age 
for Employment, and Convention 111, Equality of 
Occupation.  Existing legislation prohibits children 
under 15 years to work in most sectors and outlaws 
forced or compulsory labor, but enforcement remains 
weak. Draft legislation was under review in the 
National Assembly that would make trafficking in 
persons (including children) a crime; however, no 
action was taken on it by year's end. There were few 
statistics available to determine the success of 
ongoing antitrafficking campaigns. 
 
 
JETER