US embassy cable - 05ABUJA1692

UNCLAS ABUJA 001692 
 
SIPDIS 
 
SENSITIVE 
 
TREASURY FOR SEVERENS 
USDOC FOR 3317/ITA/OA 
STATE PASS USTR 
 
E.O.  12598: N/A 
TAGS: ETRD, EINV, EFIN, NI 
SUBJECT: NIGERIAN PRESIDENT ABOLISHES EXPORT INCENTIVES 
 
 
1. (U) The federal government of Nigeria has withdrawn the 
Bona-fide Manufacturers Scheme, and Manufacturer-in-Bond 
Export Scheme - two incentives the government extended to 
local manufacturers to be more competitive due to their 
alleged abuse. The Bonafide Manufacturers Scheme allowed 
manufacturers of certain products to import inputs duty-free 
or at reduced duty.  Under the Manufacture-In-Bond Scheme, 
raw materials may be imported duty-free for the production 
of export goods, on the basis of a bond issued by a 
recognized financial institution.  The bond is discharged 
upon production of proof of export and repatriation of 
foreign exchange.  The incentives are administered by the 
Nigeria Customs Service (NCS) under the supervision of the 
Ministry of Finance.  Government sources claimed that 
Nigeria lost about N87 billion to malpractices in the 
administration of such import duty waivers and concessions 
in the last one and a half years. They also alleged that 
some importers posed as industrialists, in connivance with 
corrupt officials.  Obasanjo cancelled all outstanding 
approvals under the two schemes and apparently opposes any 
import duty waivers on principle, aside from the potential 
abuse. The President has mandated the Federal Executive 
Council to re-appraise the schemes. 
 
2. (SBU) The revocation of the schemes will throw many 
manufacturers' production plans into disarray and make some 
exports less competitive.  The Pharmaceutical Manufacturers 
Group of the Manufacturers Association of Nigeria (PMG-MAN) 
has appealed to the President to rescind his decision to 
save the manufacturing sector from further distress. 
Similarly, MAN expressed shock over the decision, stating 
that it would cause confusion in the manufacturing sector. 
 
3. (SBU) Though U.S. companies have not yet brought concerns 
to the Mission, most who have manufacturing concerns here, 
whether they export or not, use these schemes to import 
needed inputs. For example the MD of Nestle told the 
Commercial Counselor recently that these incentives as very 
important to his company here, though did not export much. 
Coca Cola and Proctor and Gamble have used Embassy advocacy 
in the past to help get needed import waivers. 
 
4. (SBU) Comment: The constantly changing trade policy is a 
serious problem for domestic and foreign manufacturers 
alike.  The high trade barriers make it impossible to do 
many kinds of manufacturing without waivers, which are in 
turn create a great opportunity for corruption.  On the 
other hand, poor infrastructure makes manufacturing more 
expensive in Nigeria, leading to demands for protection. 
Thus manufacturers oppose the plan to move to a common 
ECOWAS tariff which would lower trade barriers. They prefer 
to manufacture behind high protective walls, with individual 
waivers.  We can expect that some companies will be coming 
to us asking for advocacy to help restore their particular 
waivers. CAMPBELL