US embassy cable - 02ABUJA3202

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 003202 
 
SIPDIS 
 
 
STATE FOR AF/W, AF/EPS 
STATE PASS USTR 
STATE PASS DEPARTMENT OF ENERGY 
 
 
E.O. 12958: DECL: 11/25/2012 
TAGS: ECON, EFIN, ETRD, SENV, EINV, NI 
SUBJECT: NIGERIA: ECONOMIC ROUNDUP NOVEMBER 27 
 
 
REF: ABUJA 2961 
 
 
Classified by DCM Timothy D. Andrews, reasons 1.5 b and 
d 
 
 
1. This periodic economic report includes: 
--U.S./U.K. Team Bids on Management Contract for Nigerian PTT 
--Nigeria Buys U.S.-Made Buses 
--World Bank to Work Closer with States 
--Environmental Success Story: Getting the Red Out in the 
Delta 
 
 
U.S./U.K. Team Bids on Management Contract for NITEL 
--------------------------------------------- ------- 
2. New Jersey-based Africa Consortium is one of four 
finalists for the three-year management contract for Nigerian 
Telecommunications Limited (NITEL). The Consortium's bid 
features Lucent, as well as the consulting branch of British 
Telecom (BT), as principal vendors for the project. Chris 
Vaios, Africa Consortium's Managing Director, told Econoff 
that the three-year management contract could result in sales 
of as much as $2 billion for the two companies. Lucent and BT 
representatives, however, were careful to stress that their 
companies have no equity stake in the consortium 
 
 
3. Vaios contends that his group is the most technically 
competent of the bidders. He is confident that it will win 
the competition unless political factors influence the 
contract award. 
 
 
4. (C) Comment: Africa Consortium has its work cut out. As is 
the wont of most businessmen, Vaios may have exaggerated the 
group's technical edge over its competitors, some of whom are 
also backed by European PTTs. More important, Africa 
Consortium has no agent in Nigeria. The group's visit was 
handled by a recently appointed State of New Jersey commerce 
official who was unable to arrange a meeting with the Vice 
President, even though Atiku was in town and normally would 
have met this caliber of delegation. Business names are 
important in Nigeria, and reticence to bill Lucent and BT as 
part of the consortium may also hurt. Nevertheless, the 
Bureau of Public Enterprise has a good track record on 
transparency and the group should remain in the running. 
However, as Vaios seems to understand, it would not be 
unheard of for politics to intrude at some point. End Comment. 
 
 
Nigeria Buys U.S.-Made Buses 
------------------------------ 
5. Sofitel Capital Corporation USA, Inc., a capital 
investment company in Maryland, and Innochris Nigeria, Ltd., 
one of the largest transportation companies in Nigeria, 
signed a $12.9 million loan agreement to purchase 35 
U.S.-made buses. U.S. EX-IM Bank is expected to guarantee the 
loan and Motor Coach Industries (MCI), the largest luxury bus 
manufacturer in America, will supply the buses. This will 
mark the very first time U.S.-manufactured buses will share 
the roadways with the Mercedes Benz and Volvo buses that have 
dominated this sector of the Nigerian transportation sector. 
Sofitel is currently negotiating two similar deals with other 
Nigerian transportation companies for the purchase of 60 
U.S.-made buses for a total value near $25 million, as well 
as a loan for a company to provide airline services in 
Nigeria. 
 
 
World Bank to Work Closer with States 
------------------------------------- 
6. (C) World Bank Representative Mark Tomlinson recently told 
Econoffs that the Bank is providing technical assistance to 
the GON to improve Nigeria's capacity to absorb the nearly 
$757 million in bank loans approved for the country. 
Tomlinson explained that only $25 million of the approved 
loan portfolio has been spent so far because of the lack of 
institutional capacity at all levels of government to 
implement projects under the Bank's strict fiduciary and 
performance standards. Absent this institutional weakness, he 
estimated that $75 million would have been spent by now. 
 
 
7. (C) Comment: Tomlinson points the finger at the GON for 
the slow implementation of bank loans. We believe that 
Tomlinson was not so much concerned with the GON's ability to 
spend as its ability to account for what is spent. GON 
officials see their relationship with the bank differently. 
They complain bitterly that the bank has not worked 
diligently to honor its commitments to Nigeria. Instead, the 
bank has engaged in an incessant game of "moving the goal 
posts" that continually has placed new requirements on 
Nigeria to tap into bank funds. True, Tomlinson may not 
always be at his diplomatic best when dealing with the 
relationship between the bank and the GON. However, given 
legitimate concerns about malfeasance and corruption, the GON 
should not have been totally surprised that the bank 
presented stringent conditions for the release of funds. End 
Comment. 
8. (C) Tomlinson has complained that the GON is unreceptive 
to the Bank's attempts to build institutional capacity at the 
federal level. The Nigerians have been insisting instead that 
the Bank engage in more hands-off project financing. Because 
of this difference in philosophy with the federal government, 
Tomlinson has begun to focus more of the Bank's efforts at 
the state level, where institutional responsibility for many 
aspects of poverty alleviation rests. Tomlinson also told 
Econoffs that before Bank spending can pick up again, Nigeria 
must improve its macroeconomic fundamentals, adding that a 
fresh agreement with the IMF would be a curative step. 
 
 
9. (C) Comment: The Bank has also been frustrated by GON 
slowness in moving the Poverty Reduction Strategy Paper 
(PRSP) process forward. The GON likewise was further 
disappointed by the Bank's decision to lower the level of its 
lending program in Nigeria. A low point probably came in 
September when Minister of Agriculture Bello publicly 
criticized the Bank in front of Tomlinson and the press for 
rejecting a $200 million loan for agriculture. 
 
 
10. (C) It is highly unlikely the Bank will find working with 
the States any easier. Conventional democratic theory assumes 
that state and local government will be more responsive to 
local needs. However, what is in the textbooks differs from 
actual practice in many if not most Nigerian states. The 
spendthrift behavior of many states makes the federal 
government look fiscally responsible. Few if any states have 
developed the minimal due diligence and fiduciary standards 
found at the federal level. End Comment. 
 
 
Environmental Success Story: Getting the Red Out in the Delta 
--------------------------------------------- ---------------- 
11. (SBU) Ken Clary, Managing Director of the Washington 
State-based Environmental Distribution Network (EDN), cites 
his organization as a model for others who wish to get 
environmental contracts from the Niger Delta Development 
Corporation (NDDC). EDN has signed a $1.7 million contract 
for a water treatment program for eight villages and 
anticipates additional projects. 
 
 
12. (SBU) Clary claimed he was able to avoid many of the 
political pitfalls that have befallen others who wanted to 
work with the NDDC and its widely discredited predecessor 
OMPADEC (Oil Mineral Producing Areas Development Commission). 
Working with a Nigerian associate, Clary insisted the NDDC 
fund all of his expenses up front. Clary says a major selling 
point of his water treatment system was its ability to remove 
iron from the ground water. "People got excited when they saw 
that they could wash white clothes without the red tinge and 
that sprinklers stopped staining the bottoms of white walls." 
 
 
13. (SBU) Clary sees oil service companies as even better 
potential clients than the NDDC. "Many of the companies 
operating in the Delta are in an environmental time warp. 
They don't know about recent advances in the technologies 
which are not only cleaner but more cost effective as well." 
He says that despite tens of millions of dollars spent on 
environmental projects in the Delta, very little visible 
progress has been made. 
 
 
14. (SBU) Clary believes there has been a change of attitude 
about the environment in the Delta, and there is now a grass 
roots demand for real progress. People are demanding NDDC and 
others restore water quality; Delta inhabitants are not just 
settling for leveraging more money out of the government and 
oil companies. Clary believes his company and other smaller 
U.S. firms have almost unlimited opportunities if they hold 
their ground and get the Nigerians to play the game on U.S. 
standard business practice terms. Comment: Post applauds 
Clary's enthusiasm for doing business in Nigeria, but our 
experience here suggests that he may face more ruts and bumps 
in the road ahead than he anticipates. End Comment. 
ANDREWS