US embassy cable - 03ABUJA1113

UNCLAS SECTION 01 OF 03 ABUJA 001113 
 
SIPDIS 
 
 
STATE FOR AF/W, AF/EPS AND EB/TPP 
SATE PASS USTR PCOLEMAN 
TASHKENT FOR BURKHALTER 
COMMERCE FOR ITA/MAC 
 
 
E.O. 12958: N/A 
TAGS: ETRD, PGOV, PREL, NI, USTR 
SUBJECT: NIGERIAN GOVERNMENT DEFENDS IMPORT BANS 
 
Summary 
------- 
1. In June 9 and 10 meetings with Nigerian officials, 
Assistant U.S. Trade Representative for Africa Florie 
Liser and USTR Director for African Affairs Patrick 
Coleman highlighted U.S. concern with the expansion of 
Nigeria's import bans and its frequently changing 
tariff schedules. With the exception of the Ministry 
of Commerce, GON officials defended the bans, claiming 
they were the only route to increasing domestic 
agricultural and manufacturing production. 
Unfortunately, this protectionist mind-set is gaining 
currency, and convincing the GON to reverse its 
illiberal trade policy will be difficult. 
 
 
USTR Message 
------------ 
2. In June 9 meetings with officials from the Office 
of the President, Ministry of Commerce, Ministry of 
Industry, and Ministry of Finance, Assistant U.S. 
Trade Representative for Africa Florie Liser and USTR 
Director for Africa Patrick Coleman highlighted U.S. 
concern with a growing list of Nigerian import bans 
and fluctuating tariff schedules. In particular, Liser 
cited textiles and apparel, ice cream, fruit juices, 
poultry, and mosquito netting as key areas. 
 
 
3. In addition to constraining U.S. exports, Nigeria's 
inconsistent trade policy was also diluting U.S. 
investors' interest in the country, Liser noted. 
Investors seek a stable regulatory environment; trade 
bans and fluid tariff schedules make investors fear 
they might not be able to import inputs required for 
their investment, she cautioned. Liser also pointed 
out that the bans were inconsistent with Nigeria's WTO 
commitments. She suggested WTO-consistent tariffs that 
earn revenue for the government would be a better way 
to provide some protection for domestic industry. She 
pointed out that many of the banned goods continue to 
be smuggled into the country across Nigeria's overland 
borders. 
 
 
4. Liser also pushed Nigerian officials to encourage 
their National Assembly to pass legislation making 
Nigeria eligible for AGOA textile and apparel 
benefits. She said other African countries were 
creating thousands of jobs due to AGOA and that 
Nigeria's window of opportunity would soon close. 
 
 
Ministry of Commerce 
-------------------- 
5. Liser met Director of the Ministry of Commerce 
External Trade Department Fred Agah and other members 
of his staff. Agah explained that in the 1970s, 
Nigeria sought to use oil revenues to build a self- 
sufficient economy through import substitution and 
large projects to produce steel, paper, aluminum, 
petrochemicals, and other goods. He said the collapse 
of oil prices in the 1980s forced successive 
governments to abandon these projects. Subsequently, 
an IMF structural adjustment program in the late 1980s 
focused on demand reduction completed the shift from 
an economy based on production to one based on 
speculation, according to Agah. He said imports 
skyrocketed, and in response the government imposed 
import bans on as many as 3,000 products by the early 
1990s. 
 
 
6. Agah said there had been some progress eliminating 
trade barriers and claimed few remained. He pointed to 
Nigeria's 2002 trade policy documents as evidence of 
an overall commitment to trade liberalization. 
However, Agah explained that a command and control 
approach to economic policy still existed among 
government leadership. That approach, coupled with 
demands from politically influential domestic 
producers, meant that trade barriers on certain goods 
would be around for some time. Agah acknowledged the 
negative impact the bans had on investment, both 
domestic and foreign, but said that his Ministry was 
essentially powerless on the issue. 
 
 
7. On AGOA, Agah said both Houses had passed 
legislation to strengthen the trans-shipment penalty, 
a change necessary to Nigeria's eligibility for AGOA 
apparel benefits. He said the National Assembly would 
send the bill to the President for signature after 
harmonizing the Senate and House versions. Agah blamed 
the United States for the delay in getting the 
legislation through, saying that we were not 
consistent in providing information on what provisions 
were necessary to make Nigeria eligible for apparel 
benefits. 
 
 
8. Agah requested information on our positions on key 
issues within the Doha round of WTO negotiations. He 
understood our basic proposals, but wanted to know the 
issues on which we would be amenable to compromise and 
those on which our position is non-negotiable. Agah 
claimed this knowledge would help Nigeria better 
support us on areas where Nigeria and the United 
States have common interests. 
 
 
9. In response to an inquiry from Liser, Agah said a 
U.S.-Nigeria TIFA in early July would not be feasible. 
Agah noted that a Minister likely would not have been 
confirmed by then, so he proposed postponing the 
meeting until September. Liser agreed to coordinate 
with Washington to fix a date. 
 
 
Ambassador's Luncheon 
--------------------- 
10. Ambassador Jeter hosted a luncheon for Nigerian 
officials where--in addition to discussion of broader 
issues such as poverty alleviation and corruption-- 
Liser made her key points on trade policy 
inconsistency and AGOA eligibility. At the lunch were 
Head of the President's National Price Intelligence 
Committee Oby Ezekwesili, Director General of the 
Bureau of Public Enterprises Nasir El-Rufai, Former 
Chief Economic Advisor Magnus Kpakol (now Special 
Advisor on Poverty Alleviation), and Special Advisor 
to the Vice President for Economic Affairs Hamilton O. 
Isu. 
 
 
11. Kpakol attempted to defend the import bans and 
tariff increases saying that they were relatively few 
and were necessary to supporting domestic production. 
He aknowledged Liser's point that in some cases the 
bans protected only one manufacturer, but insisted 
that the bans were part of a well-considered plan to 
promote domestic manufacturing capacity. (Comment: 
Last year, Kpakol was a free trader and an ally-- 
although often ineffective--in our attempts to tilt 
the GON toward greater trade liberalization. However, 
he appears fully converted to the protectionist 
congregation. His conversion eliminates a formerly 
reformist voice from within senior policy circles. It 
also demonstrates the strength of the protectionists 
within the GON. End Comment.) 
 
 
Ministry of Finance 
------------------- 
12. At the Ministry of Finance, Liser met Director for 
Budget Implementation, Monitoring, and Evaluation C. 
D. Gali and Director for Fiscal Policy Haliru Aliyu. 
Gali said import bans were counterproductive because 
they were impossible to enforce and brought in no 
tariff revenue. 
 
 
13. Aliyu disagreed, saying buyers preferred imports 
over local goods. Because there is local production, 
he cited toothpicks, water, biscuits, and textiles as 
"needless imports."  Aliyu added that there was 
"nothing really permanent" about the bans. On mosquito 
netting, Aliyu said he recently met netting 
manufacturers who claimed they are overstocked with 
yarn. He concluded there was therefore no need to 
import mosquito netting, since local manufacturing 
capacity was underutilized. 
 
 
Ministry of Industry 
-------------------- 
14. Ministry of Industry Permanent Secretary Haruni 
Sanusi and his staff also received Liser's trade 
policy message. Sanusi explained that Nigeria's 
industrial policy is to use trade policy to protect 
domestic industry. He said bans were necessary to 
encourage growth and allow domestic goods to gain 
market share. He pointed to fruit juice as one example 
of a ban that was successful in building sales for a 
local producer. 
 
 
15. Sanusi acknowledged that smuggling was a problem 
but insisted that stronger enforcement effort would 
all but eliminate smuggling. He said the bans were 
temporary and more may follow, but insisted they would 
be closely monitored to assess their impact. 
 
 
Ministry of Agriculture 
----------------------- 
16. On June 10, Patrick Coleman met Ministry of 
Agriculture Permanent Secretary O. A. Idachi and staff 
to discuss trade policy. Idachi insisted the bans were 
important to food security in Nigeria. He said Nigeria 
hoped to be a net food exporter again, and recognized 
that agricultural development was key to poverty 
alleviation. Idachi identified several priorities for 
Nigeria: rice, vegetable oil, and livestock. He said 
trade policy would be used to protect domestic 
production in those areas. 
 
 
17. Idachi's staff said trade policy was the only tool 
available to protect Nigerian farmers from intense 
competition from developed countries that subsidize 
their farmers. They complained trade liberalization 
only benefits developed countries. Coleman countered 
that USTR's position was to eliminate export subsidies 
and greatly reduce domestic support in the Doha round. 
 
 
Comment 
------- 
18. Economic growth and industrialization based on 
import substitution, a development strategy that has 
failed more often than it has worked, has become 
policy in Nigeria. Without question, Nigeria has great 
economic potential. It possesses abundant natural 
resources and a large domestic market. That potential 
has been underutilized thus far. Instead of 
identifying internal structural flaws that obstruct 
domestic production, the GON has decided to blame 
unfair international competition, a convenient fall 
guy. This sentiment is held not only by those in 
government, but many people in society. Ask an average 
Nigerian about the recent ban on fruit juice, and they 
will answer "why should we import what we can make at 
home?" 
 
 
19. This nationalistic sentiment, however, does not 
duly consider economic realities nor the negative 
impact on the consumer. Some goods--such as fruit 
juice--are in short supply because domestic producers 
cannot meet demand. Consumers now have no choice but 
to purchase inferior quality goods. Meanwhile, 
investors who could help local manufacturers build 
capacity or improve quality hold their money outside 
Nigeria, fearing that trade or other economic policy 
will change again abruptly putting them on the wrong 
side of a trade barrier. 
 
 
20. Given the relatively strong consensus for the 
import substitution strategy, Nigeria will not likely 
turn from its protectionist course very quickly. In 
fact, additional items will probably be added to the 
prohibited list in the months to come. However, we 
hope that our harping and the patent ineffectiveness 
of the protectionist approach will, sooner rather than 
later, cause the GON to enter into a new romance with 
trade liberalization. End Comment. 
 
 
Jeter