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Cablegate: U.S. Rice Exporters Fail to Respond to Gon Lifting Rice

VZCZCXRO6024
OO RUEHMA RUEHPA
DE RUEHUJA #0893/01 1371017
ZNR UUUUU ZZH
O 161017Z MAY 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2856
RUEHRC/DEPT OF AGRICULTURE WASHDC IMMEDIATE
INFO RUEHOS/AMCONSUL LAGOS IMMEDIATE 9231
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 000893

SENSITIVE
SIPDIS

USDA/FAS/OTP CHRISTIAN FOSTER
USDA/FAS/OCRA CHARLES ALEXANDER
USDA/FAS FOR ASIF PATRICIA SHEIKH
USDA/FAS/OFSO RON VERDONK
DEPARTMENT FOR EE/TPP/ABT/ATP SPECK
DEPARTMENT PASS TO USTR AGAMA
TREASURY FOR PETERS AND HALL
DOC FOR 3317/ITA/OA/KBURRESS, 3130/USFC/OIO/ANESA/DHARRIS

E.O. 12958: N/A
TAGS: ETRD ECON EAGR EAID PREL NI
SUBJECT: U.S. RICE EXPORTERS FAIL TO RESPOND TO GON LIFTING RICE
DUTY AND INTEREST IN U.S. RICE

REF: A. ABUJA 817

B. ABUJA 760

1. (U) This is an Action Request for USDA/FAS/OTP Deputy
Administrator Christian Foster and USDA/FAS/OCRA Charles Alexander.
Please see paragraph 9.

2. (SBU) Summary: Nigeria's Federal Executive Council (FEC) on May
7 approved the suspension of customs tariffs for six months to allow
for the duty-free import of rice. The Nigerian Government (GON)
expects this will lead to a fall in the price of imported rice,
which has been steadily rising. The decision triggered panic
selling of parboiled rice in Benin Republic which is a major
gate-way for re-exports to Nigeria. The USG has been pressing the
GON to remove bans and lower tariffs on agricultural products and
this first step may signal more positive changes in the near future.
Furthermore, in a May 5 meeting between the Ambassador and the
Minister of Agriculture, the Minister expressed interest in
purchasing rice from the U.S. However, a USA Rice Federation
representative told the U.S. Trade Representative's office that U.S.
firms most likely would not be interested in supplying rice as
Nigeria is unlikely to be a long-term market. We recommend that
U.S. rice exporters seize the fruitful opportunity to enter the
Nigerian market now without tariffs, while we work with the GON to
make lifting of the tariffs permanent as part of our efforts on the
Trade Investment Framework Agreement (TIFA) and the bilateral
investment treaty (BIT) negotiations. We have an opening to make
progress on our trade agenda and should take full advantage of this.
End Summary.

3. (SBU) After a Federal Executive Council (FEC) meeting on May 7,
Sayyadi Ruma, Minister of Agriculture and Water Resources announced
a decision to suspend the 109 percent import duty on rice. The
suspension is for the next 6 months ending October 31, 2008 and
possibly could be extended much longer. He said the decision to
adopt the measure followed the recent meeting between President
Yar'Adua and the 36 state governors.

4. (SBU) In a May 5 meeting between the Ambassador and Minister
Ruma, the Ambassador underscored USG interest to work with Nigeria
on its rice initiative by encouraging U.S. industries to
participate. Minister Ruma contended that the government is hard
pressed to improve market supply and deal with the continuing price
increases. The Minister expressed interest in purchasing rice from
the U.S, but noted action must be taken quickly. Minister Ruma
added that he would be willing to visit the U.S. if he can secure at
least 250,000 mt of rice with delivery before August 1 (start of
local harvest). He is also planning to visit traditional suppliers
(Thailand and India). Ruma indicated his interest in purchasing
industrial equipment for agriculture from U.S. suppliers. He then
requested the following information on U.S. rice as soon as
possible:
-- Price indication (C&F Lagos) for white, brown, parboiled rice.
-- Quantity that can be supplied by the U.S. (NOTE: The U.S. Foreign
Agricultural Service is gathering this information. END NOTE).

5. (SBU) M. O. Olowu, Director Fiscal Policy of the Budget Office of
the GON, on May 8 informed EconOff that the rice import duty
suspension will be implemented. Olowu said that in December 2007
the FEC instructed the Ministers of Commerce and Finance to
harmonize their views regarding the pending fiscal policies and
submit a proposal to the FEC, which included suspending the rice
import duty. Olowu noted that the May 7 decision by the FEC would
accelerate ongoing work on the 2008 fiscal policy and would result
in an earlier release of the fiscal policy program. (Note: Revenue
from duties and tariffs represent the second largest source of GON
income after oil production. The Ministry of Finance has oversight
of both customs collection and budget preparation, which results in
trade policy playing a major role in setting fiscal policy - and
vice versa. End Note).

6. (SBU) A U.S. Trade Representatives Office's (USTR) contact in the
USA Rice Federation commented on May 8 that U.S. firms would not/not
be interested in this 500,000 mt tender because Nigeria would not be
a long term market for them, according to an email received by post
from USTR. The USA Rice Federation rep reported that the order of
priority is taking care of their best customers first, working with
potential repeat customers second, and lastly supplying one-time

ABUJA 00000893 002 OF 002


customers.

7. (SBU) Despite the 109% rice duty, large scale imports continue,
with the majority smuggled from neighboring countries such as Benin.
Export figures from the U.S. Foreign Agriculture Service for 2007
show that Thailand shipped three times as much rice to Benin
(population 8 million) as to Nigeria (population 145 million).
Regarding the market effect of the GON lowering rice tariffs,
traders are reporting panic selling of parboiled rice in Benin, a
major gate-way for re-exports to Nigeria. According to importers,
the price of parboiled rice decreased 15 to 20 percent in Benin
within the last few days. This is expected to dampen prices in
Nigeria at least in the short run. There are already indications of
this.

8. (SBU) Comment: The removal of the rice duty is a positive step.
The USG has been pressing the GON to remove bans, and lower tariffs
and this first step may signal positive changes in the near future.
We have been told by GON trade officials that new trade policies
could be implemented as part of the TIFA action plan, which shows
positive signs of moving forward since our last TIFA discussions on
April 10, 2008. Nigeria will continue to be a major rice importer
for sometime. We recommend that U.S. exporters take advantage of
this opportunity as we work with the GON to make the lifting of the
tariff permanent. Doing so could ease prices and dampen
inflationary pressures. We have an opening to make progress on our
trade agenda and should take full advantage of it. Rice and other
grain prices are already high enough to provide production
incentives to Nigerian farmers. End Comment.

9. (SBU) Action for USDA/FAS/OTP Deputy Administrator Christian
Foster and USDA/FAS/OCRA Charles Alexander: USDA should solicit
U.S. rice exporters and urge them to take advantage of this
important opportunity to meet Nigeria's request for 250,000 mt of
rice. If Washington colleagues can persuade U.S. exporters to take
advantage of this immediate opportunity, that would give us
credibility towards getting the GON to reform its onerous bans and
high tariffs on food commodities.

SANDERS

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