US embassy cable - 03ABUJA600

UNCLAS SECTION 01 OF 05 ABUJA 000600 
 
SIPDIS 
 
 
STATE FOR AF/W AND EB/TPP 
SATE PASS USTR 
COMMERCE FOR ITA/MAC 
 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, EINV, NI 
SUBJECT: NIGERIA: TARIFF AND BAN INFORMATION 
 
 
REF: USDOC 00785 
 
 
Introduction and Comment 
------------------------ 
1. Mission provides the following clarifications on 
GON trade policy measures as requested by reftel. 
Mission understands that Washington agencies will use 
this information to prepare a formal high-level 
demarche to deliver to the GON. The timing of the 
demarche will be key to its effectiveness. To a large 
degree, the recent protectionism has been a product of 
electoral politics as the GON seeks the support of 
important business constituencies. GON officials will 
be pre-occupied with the election until the April 19 
polls; delivering a demarche before then likely will 
be ineffective and unproductive. While the campaign is 
in full pitch, arguments for freer trade and tariff 
reduction will be overshadowed by electoral 
considerations, which usually favor protection. We 
suggest that the demarche be post-election, preferably 
right after the new government is inaugurated. End 
Introduction and Comment. 
 
 
Mosquito Nets 
------------- 
2. Trade Measure: 40 percent tariff. (2003 Fiscal 
Policy Measures and Tariff Amendments, February 25, 
2003) 
 
 
Background: In April 2000, President Obasanjo hosted 
the first African Summit on Roll Back Malaria. Along 
with 32 other African Chiefs of State, he promised to 
reduce taxes and tariffs on mosquito nets and related 
goods. The GON reduced the tariff on mosquito nets (HS 
code 6304.9100-9900) to 5 percent in the 2001 Fiscal 
Policy Measures and Tariff Amendments, January 4, 
2001. In contrast, all other textile imports were 
subject to a 50 percent duty. The 2002 tariff schedule 
increased the tariff for all fabrics to 75 percent, 
without including the exception for mosquito netting. 
 
 
On February 14, Ambassador Jeter wrote the President, 
reiterating an earlier request to eliminate the tariff 
on mosquito netting and related goods, in line with 
the President's April 2000 commitment. On February 16, 
the Ambassador raised the issue directly with 
President Obasanjo, who said the tariff would be 
removed immediately. However, the 2003 tariff 
schedule--approved at a meeting of the Federal 
Executive Council subsequent to the Ambassador's 
conversation with Obasanjo--incorporated only a 
partial reduction of the tariff, to 40 percent. 
 
 
Impact on U.S. Exports: There are no known U.S. 
exports of mosquito netting to Nigeria. However, from 
a public health perspective, this high tariff damages 
important USG goals to support economic and social 
(health care) development in Nigeria. 
 
 
Pharmaceuticals 
--------------- 
3. Trade Measures: Ban on imports of pharmaceuticals 
via land borders. Imports are allowed only through 
Calabar and Apapa seaports and Lagos and Kano 
airports. (2003 Fiscal Policy Measures and Tariff 
Amendments, February 25, 2003) 
 
 
Background: Counterfeit drugs are widely available 
throughout Nigeria and pose a major public health 
hazard. There are frequent reports of deaths and 
illnesses caused by counterfeit drugs. The ban on 
overland trade is an attempt to reduce the 
availability of substandard drugs smuggled in from 
neighboring states. It is unclear whether this ban 
will be properly enforced. History suggests it might 
not be. 
 
 
Impact on U.S. Exports: U.S. pharmaceutical companies 
exporting to Nigeria do not typically use land routes. 
Most land-border imports of pharmaceuticals are 
substandard or counterfeit products entering through 
the Republic of Benin. They are smuggled in order to 
avoid paying duties or securing National Agency for 
Food and Drug Administration and Control (NAFDAC) 
approval. As such, this ban is not expected to 
substantially impact U.S. exports of legitimate 
pharmaceuticals to Nigeria. 
 
 
4. Trade Measure: All locally made and imported 
pharmaceuticals must be registered with National 
Agency for Food and Drug Administration and Control 
(NAFDAC). The registration process appears relatively 
straightforward and forms are readily available, but 
there is a registration fee of 1,000,000 naira 
(approximately $8,000) for imported over-the-counter 
drugs and 250,000 naira (approximately $2,000) for 
prescription medicines. The fee for locally made 
drugs, over-the-counter and prescription, is 75,000 
naira (approximately $600). Registration is valid for 
five years. (National Agency for Food and Drug 
Administration and Control Tariff Charges Regulations 
2001, January 2, 2002) 
 
 
Background: This registration process replaces one 
dating from 1994. There is little information 
available about the previous process. 
 
 
Impact on U.S. Exports: Local importers of 
prescription drugs report that they have already 
complied with NAFDAC registration requirements and 
that they do not find the requirements onerous. From a 
trade policy perspective, registration fees are 
relatively low but the lack of national treatment is 
potentially problematic. 
 
 
Fruit Juice 
----------- 
5. Trade Measure: Fruit juice may be imported in bulk 
concentrate form only. (2003 Fiscal Policy Measures 
and Tariff Amendments, February 25, 2003) The ban 
includes fruit flavored drinks, non-alcoholic wines, 
and flavored yogurt drinks. (NAFDAC letter, March 3, 
2003) 
 
 
Background: Information Minister Jerry Gana announced 
on January 29 that Nigeria's Federal Cabinet would ban 
the import of fruit juices in retail packs effective 
immediately. Gana continued: "Juices to be imported 
into the country must be in drums and must be 
processed in the country to generate income and 
employment. Packaged fruit juices imported into the 
country will be destroyed at the point of entry unless 
the consignment is in drums." Industry sources 
indicate that the ban aims to protect local producers 
and a few importers of juice concentrates. The ban is 
confirmed in the 2003 tariff schedule. 
 
 
Impact on U.S. Exports: Nigeria's overall import 
figures are not readily available; however, import 
demand increased markedly over the past four years. 
The ban has cut off growing U.S. exports of fruit 
juices to Nigeria, which totaled $304,000 (U.S. trade 
data) last fiscal year. However, U.S. market share in 
this hundred million dollar-plus sector remains small. 
 
 
Sugar 
----- 
6. Trade Measure: 30 percent tariff and 5 percent 
sugar development levy on sugar. (Nigeria Customs 
Service Circular, February 6, 2003) 
 
 
Background: The Nigeria Customs Service issued a 
circular January 15, 2003 increasing the duty on 
imported sugar (H.S. Codes 1702.1100 - 9900 and 
1701.1100 - 9900) from 15 percent to 50 percent. This 
duty was reduced to 30 percent within weeks, after 
lobbying by domestic interests. An additional 5 
percent sugar development levy remains in force. The 
effective duty rate is more than 40 percent when port 
surcharges and other tax assessments are included. 
 
 
Impact on U.S. Exports: The United States does not 
export sugar. Coca-Cola Nigeria, a franchisee of the 
U.S. company, reports the increase has significantly 
raised its costs, but is unable to provide data. 
 
 
Detergent 
--------- 
7. Trade Measure: 100 percent tariff on detergents. 
(2002 Fiscal Policy Measures and Tariff Amendments, 
March 21, 2002) 
 
 
Background: Domestic manufacturers of detergent 
pressured the GON to increase detergent tariffs in 
2002 to 100 percent. According to Proctor & Gamble 
(P&G), this undermined a commitment it believed it had 
from the GON to maintain detergent tariffs at 40 
percent. 
 
 
Impact on U.S. Exports: P&G Nigeria--a joint venture 
with the U.S. company--imports Ariel detergent from 
sources outside the United States, so U.S. exports are 
not affected by this tariff. However, the company 
claims that profits from the import of Ariel were to 
be a substantial component of a $10 million investment 
in a diaper factory that began operating in 2002 and a 
$4 million facility to manufacture feminine pads, 
which is currently under construction. The viability 
of the two projects is questionable if profits from 
Ariel can no longer be realized and included in the 
financial investment package. The company points out 
that its import duty payments on Ariel have risen from 
$4.0 to $5.0 million a year while sales of Ariel have 
dropped 25 percent. P&G is interested in building a 
detergent factory in Nigeria and has written to the 
GON pledging to construct the factory if detergent 
duties were to be reduced to 20 percent until 2005. 
The company says that an investment plan worth $40 
million over three years is at stake. 
 
 
Poultry 
------- 
8. Trade Measure: Frozen poultry imports are banned. 
(2003 Fiscal Policy Measures and Tariff Amendments, 
February 25, 2003) 
 
 
Background: To revive its poultry sector, the GON 
banned poultry imports in August 2002. Before the ban, 
virtually all imported frozen poultry entered Nigeria 
illegally to evade the 75 percent tariff. Nigeria's 
poultry production does not meet demand, and industry 
sources estimate its undocumented imports of frozen 
poultry at approximately 25,000 metric tons/year, 
about 20 percent of national consumption. 
 
 
Impact on U.S. Exports: Without a ban, U.S. exports 
would meet about 40 percent of the 25,000 metric ton 
deficit, at an estimated value of about $6 million. 
Some U.S. poultry is likely still being imported 
illegally, just as it was prior to the ban. 
 
 
Sorghum, Millet, and Cassava 
--------------------------- 
9. Trade Measure: Sorghum and millet imports are 
banned. (GON Import Prohibition List, 1998) Cassava 
imports are banned. (2003 Fiscal Policy Measures and 
Tariff Amendments, February 25, 2003) 
 
 
Background: Sorghum, millet, and cassava are crops 
important to subsistence farming in Nigeria and the 
GON has banned their import for many years. Nigeria 
has plans to be a major cassava exporter. (Cassava is 
used for tapioca pudding and industrial starch.) 
 
 
Impact on U.S. Exports: The ban is believed to have a 
minimal impact on U.S. exports of sorghum and millet. 
 
 
Vegetable Oil 
------------- 
10. Trade Measure: Imports of food-grade vegetable oil 
in bulk are banned. (2002 Fiscal Policy Measures and 
Tariff Amendments, March 21, 2002) 
 
 
Background: Vegetable oil imported in retail packs 
faces a 60 percent tariff. GON trade officials 
complained that bulk food grade oil imports were being 
passed off as industrial grade, thus paying a lower 
duty. These officials claim that banning bulk imports 
of food grade oil makes the tariff easier to enforce. 
However, industry sources say that raw and refined 
palm oil is smuggled from Malaysia in bulk. 
 
 
Impact on U.S. Exports: The United States exports 
soybean oil to Nigeria in retail packs. We have 
insufficient information on local demand for vegetable 
oils to determine the volume of U.S. vegetable oil in 
bulk that might be exported should the ban be lifted. 
 
 
Flour 
----- 
11. Trade Measure: Flour imports are banned. (GON 
Import Prohibition List, 1998) 
 
 
Background: In an effort to encourage local 
agricultural processing, the GON has banned flour 
imports for many years. 
 
 
Impact on U.S. Exports: Nigeria is a large export 
market for U.S. wheat, and removal of the ban on flour 
could be detrimental to this trade. Were the ban to be 
lifted, it is unclear that U.S. flour would be cost- 
competitive with flour milled in other countries. 
 
 
Printed Fabric 
-------------- 
12. Trade Measure: Certain printed fabrics known 
locally as African prints may not be imported. (2003 
Fiscal Policy Measures and Tariff Amendments, February 
25, 2003) 
 
 
Background: The ban on African prints was announced in 
an August 27, 2002, Ministry of Finance circular. 
Customs Service Circular No. 25/2002, dated September 
24, 2002, directs customs offices to implement the 
ban. Subsequently, Ministry of Commerce officials--who 
claimed the ban was necessary to meet AGOA trans- 
shipment requirements--reported it had been lifted and 
replaced by a complicated import licensing system. The 
Standards Organization of Nigeria and the Customs 
Service, the would-be implementers of the system, 
could provide no details on how it would work. The 
2003 tariff schedule states that the printed fabric 
import ban will remain in effect for 2003. It does not 
differentiate between African prints and other types 
of printed fabrics. 
 
 
Impact on U.S. Exports: Post is unaware of any U.S. 
exports of African prints prior to the ban. U.S. trade 
data indicates the Unites States exported $400,000 in 
woven cotton fabrics to Nigeria in 2002. Although 
these U.S. goods are not targeted by the ban, it is 
possible that confusion surrounding the extent of the 
ban could result in cancelled orders, impounded 
shipments, or other difficulties that might reduce 
U.S. exports. 
 
 
Used Clothing 
------------- 
13. Trade Measure: Used clothing imports are banned. 
(Unknown source) 
 
 
Background: Customs Service officials say a ban on 
imports of used clothing has been in effect since the 
1970's. However, the ban has been poorly enforced, and 
these goods continue to pour over the Benin border. 
 
 
Impact on U.S. Exports: The impact on U.S. exports 
appears to be minimal due to widespread lack of 
enforcement. 
 
 
Rice 
---- 
14. Trade Measure: The GON applies a 100 percent 
tariff on rice imports. (2002 Fiscal Policy Measures 
and Tariff Amendments, March 21, 2002) 
 
 
Background: Rice is a staple of the Nigerian diet. GON 
officials believe the country has the potential to be 
self-sufficient in rice production. To date, the GON's 
policy instrument of choice to encourage rice 
production in Nigeria--high tariffs--has proven 
unsuccessful. It has substantially raised prices for 
the average consumer without significantly increasing 
domestic production. 
 
 
Impact on U.S. Exports: U.S. rice exports to Nigeria 
currently approximate 5,500 metric tons/year, which 
excludes the 12,500 metric tons sold to an NGO in 2003 
for monetization under a USDA food aid program. 
Nigerian rice imports total about 2 million metric 
tons annually. Industry sources say U.S. raw rice 
would be competitive, but Nigeria imports mostly 
finished, parboiled rice. U.S. finished rice sells for 
$30 to $40 a metric ton more than Indian and Thai 
rice, so even if the duty were lower, U.S. exporters 
would be unlikely to increase their market share. 
Industry sources report that the GON is considering 
proposals by investors who would be prepared to mill 
rice in Nigeria if the duty on unfinished rice were 
lowered to 5 percent. Such a scenario could help U.S. 
rice exporters. 
 
 
Bottled Water, Biscuits (Cookies), Noodles, Spaghetti, 
and Toothpicks 
--------------------------------------------- --------- 
15. Trade Measure: Imports of Bottled Water, Biscuits 
(Cookies), Noodles, and Toothpicks are banned. 
(Customs Service Circulars, March 3, 2003) 
 
 
Background: President Obasanjo announced bans on these 
goods at a campaign stop in early March. A supporter 
of the governing party, Dangote Industries, 
manufactures spaghetti. There are numerous water, 
cookie, and toothpick manufacturers in Nigeria. 
 
 
Impact on U.S. Exports: Industry sources say the 
United States exports biscuits to Nigeria, but data to 
support that claim is not readily available. Clearly, 
the ban would affect whatever exports there are. The 
United States did not export bottled water, noodles, 
or toothpicks to Nigeria in 2002. Ironically, the ban 
on biscuits and noodles could bolster U.S. wheat 
exports. 
 
 
JETER 
 Please begin to type the body of the report. Typical steps you might d 
are: 
 
 
1.Insert the standard sections headers. Use Insert|File. 
2.Insert a PSD table. Use Insert|Spreadsheet|Create Link 
3.Insert a Trade Matrix or a Prices table. Use 
Insert|Spreadsheet|Create Link