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Cablegate: Review of Needs and Development of Needs-2

VZCZCXRO6820
PP RUEHMA RUEHPA
DE RUEHUJA #0953/01 1361124
ZNR UUUUU ZZH
P 161124Z MAY 07
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 9517
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 6861
RUEHWR/AMEMBASSY WARSAW 0337
RUEHCD/AMCONSUL CIUDAD JUAREZ 0333
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 03 ABUJA 000953

SIPDIS

SIPDIS

DEPARTMENT PASS TO USTR FOR LAGAMA
TREASURY FOR DAN PETERS
USDOC FOR 3317/ITA/OA/KBURRESS
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS
DOE FOR CAROLYN GAY

E.O. 12958: N/A
TAGS: ECON EFIN ETRD ENRG PINR NI
SUBJECT: REVIEW OF NEEDS AND DEVELOPMENT OF NEEDS-2

REF: ABUJA 887

ABUJA 00000953 001.2 OF 003


1. Summary. On May 3, 2007, the Government of Nigeria
(GON) presented a review of its National Empowerment and
Development Strategy (NEEDS) and the status of its
successor, NEEDS-2. NEEDS exceeded it targets but
development challenges remain. NEEDS-2 takes a medium- term outlook
from 2008-2011 aimed at reducing poverty by
30%, generating an average annual GDP growth rate of 10%,
and creating 10 million new jobs. Agriculture is the
"engine" expected to drive the economy, eliminate food
imports, and generate $3 billion in exports. Massive
investments totaling $12.8 billion for infrastructure and
tapping large gas reserves in the Niger Delta expected to
generate $10 billion yearly are contingent on continued
economic reforms and a favorable political environment.
The final draft of NEEDS-2 is scheduled to be presented
to the President by May 18, who will review it and hand
it over to the new administration before May 29, 2007.
Stay tuned. End Summary.

2. On May 3, 2007, Senator Abdulla Wali, Deputy Chairman
of the National Planning Commission presented a review of
its National Empowerment and Development Strategy (NEEDS)
and the status of its successor, NEEDS-2. NEEDS covered
2003-2007. Its gross domestic product (GDP) growth rate,
non-oil sector growth, poverty incidence and inflation
targets were exceeded in 2004-2006. Another key area,
oil sector growth, was targeted at "zero" increases, but
exceeded the targets for every year except 2006, when
sabotage in the Niger Delta resulted in a 4.5% loss.
Exchange rates have been stable and parallel and official
rates converged with the introduction of the Wholesale
Dutch Action. External reserves grew from $7.68 billion
in 2004 to $42 billion at the end of 2006 (446%
increase!) vs. the NEEDS target of 26% growth from 2004-
2007. From 2004-2006 agriculture was the largest contributor to
GDP followed by petroleum, solid minerals,
telecommunication, and manufacturing. Telecoms,
manufacturing, solid minerals, agriculture and petroleum
led the overall growth rate.

Poverty Reduction and Wealth Creation
-------------------------------------

3. The 2006 Core Welfare Indicator Survey, a national
survey that monitors poverty and living standards at the
national, state and local levels, showed living standards
had improved with increased access to drinking water
(84%, NEEDS target was 70%) and electricity (54%). The
NEEDS report claims progress in reducing poverty; in 1996
there was a poverty incidence level of 65.6% based on a
population of 102.3 million and in 2004 the poverty
incidence level dropped to 54.4% with a population
increase of over 126 million. Adult Literacy rate is
64.2%, youth literacy rate 76.5%, with access to primary
education at 74.6% and secondary education at 46.3%. The
target for increasing the adult literacy rate from 57%-
65% was accomplished. (Comment: Much of the "poverty
reduction" is achieved by redefining the poverty line
down to about two-thirds of the previous level. On
education, access is not the same as enrolled. The
Education Ministry provided numbers estimating 50% of
primary school-age children were attending school. End
Comment)

4. There have been 110 privatization transactions and 21
port concessions completed between 1999-2006 with over $4
billion from sales between 2005 and 2006. Since pension
reforms were introduced in 2004, funds have reached close
to 1 billion naira. The Economic and Financial Crimes
Commission and the Independent Corrupt Practice
Commission have worked to curb corruption and graft.
Public service reforms are being extended after an
initial nine pilot government agencies reduced staff by
35% and eight thousand ghost workers were discovered and
removed.

NEEDS 2
-------

ABUJA 00000953 002.2 OF 003

5. NEED-2 hopes to reduce poverty in a growing population
by dealing with massive unemployment, increase
development in the Niger Delta, bridge human and physical
infrastructure gaps, and link science, technology and
research to real sector performance. As in the initial
NEEDS, NEEDS-2 will have a four-year timeframe from 2008-
2011 to address employment generation, poverty reduction,
and wealth creation. NEED-2 aims to reduce poverty by
30% by 2011, support an average 10% GDP growth rate, and
generate 10 million new jobs in the informal and formal
sectors. It assumes continued economic reforms,
macroeconomic stability, improved infrastructure,
favorable oil prices, single digit inflation and
investment of 9%-10% annually. The major drivers will be
the agriculture, manufacturing, infrastructure,
communications and oil and gas sectors. All of this is
also contingent on a favorable political environment. The
final draft is scheduled to be presented to the President
by May 18. President Obasanjo is expected to review and
hand over the plan to the incoming administration prior
to the May 29 handover.

6. Agriculture is expected to grow at an average of 11%
annually, with a zero net food imports by 2011. This is
in line with GON commitment to make agriculture the
"engine" to drive rapid economic growth, poverty
alleviation, non-oil exports and job creation. Proposed
strategies to achieve this include progressive
elimination of food imports, and fast tracking credit to
the rural level. In manufacturing, NEEDS-2 hopes to
increase growth rates above 10% annually, and capacity
utilization from 55% to 80% by 2011. The strategies
include targeted incentives to link production and
research institutions, improved infrastructure and better
access to credit for small and medium enterprises.
(Comment: Food import bans have encouraged smuggling
rather than increased food production, and specialized
credit programs have a poor track record. End Comment.)


7. The NEED-2 offers very aggressive targets in
infrastructure. Electrical generation is to grow to
17,000 megawatts (mw) by 2011, raising existing per
capita consumption from 105 kilowatts per hour (kwh) to
over 500kwh all requiring a minimum investment of $12.8
billion. It also calls for the development of alternative
energy; public/private sector partnerships and a new
pricing framework. In communications, the targets are to
increase teledensity to half of the national population
by providing up to 90 million fixed and cellular
telephone lines and broad band service to 75% of
residents in state capitals. (Note: The Nigerian
Communications Satellite (NIGCOMSAT-1) was launched by
China. This is the first time that a foreign power has
purchased a Chinese satellite and its launching service.
The satellite is expected to offer broadcasting,
telecommunications and broadband internet services for
Africa. End note)

8. In the oil and gas sector, crude oil reserves are
expected to increase to 40 billion barrels and production
capacity to 4.5 million barrels per day. Gas flaring is
slated to end and Nigeria hopes to tap its large gas
reserves to contribute $10 billion per year. The
government is targeting 70% local content in this sector
by 2011. The plan calls for competitive and transparent
bidding and allocation of oil blocks, alternative funding
schemes, a comprehensive oil and gas policy, long-term
financing for local content and cost effective domestic
pricing.

9. The education sector is supposed to increase basic
educational enrollment by 6% annually and achieve a
teacher/pupil ratio of 1:35 in primary school, and see
all students move from primary to junior secondary
school. Enrollment in "quality" tertiary education
institutions is to rise from 1.3 million to 2.5 million
students; girls' enrollment is to rise by 50% in six
states. Other targets address science and technology, and

ABUJA 00000953 003.2 OF 003


information technology education.

10. In the health sector NEED-2 seeks to reduce the
current infant mortality rate of 113 per 1000 births, and
the under five mortality rate of 201 per 100 births.
Strategies are to strengthen public health centers and
routine immunization; promote community partnerships for
all health stakeholders and improve health research.
Recent surveys show rates of HIV/AIDS, malaria and polio
declining; however, there is some concern about the
national immunization program that is being consolidated
under the Ministry of Health, where it might get less
attention.
CAMPBELL

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