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Cablegate: Nigeria: U/S Jeffery's Meeting with Ministry of Finance

VZCZCXRO6271
PP RUEHMA RUEHPA
DE RUEHUJA #1564/01 2210925
ZNR UUUUU ZZH
P 080925Z AUG 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 3597
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHOS/AMCONSUL LAGOS 9747
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 001564

SENSITIVE
SIPDIS

DEPARTMENT PASS TO USTR AGAMA
TREASURY FOR PETERS, RHALL
DOC FOR 3317/ITA/OA/KBURRESS
DOC FOR 3130/USFC/OIO/ANESA/DHARRIS

E.O. 12958: N/A
TAGS: EFIN ETRD PREL ECON EINV PGOV NI
SUBJECT: NIGERIA: U/S JEFFERY'S MEETING WITH MINISTRY OF FINANCE
OFFICIALS

REF: A. ABUJA 630
B. ABUJA 372

SENSITIVE BUT UNCLASSIFIED - PLEASE HANDLE ACCORDINGLY

1. (SBU) Summary: In a July 24 meeting with visiting Under Secretary
for Economic Affairs Reuben Jeffery, senior Finance Ministry
officials said their priorities were the Niger Delta, increasing
power generation and transmission, and improving Nigeria's
infrastructure to strengthen transportation links. They reiterated
that while the Government of Nigeria (GON) welcomed foreign
investment in all sectors of the economy, lowering tariffs and
completely removing import bans on food commodities were not
possible until local industries could compete in the international
marketplace. The GON's position could change, one official said, if
it could find more effective ways to expand its industrial base, and
he requested the USG send a technical trade team to discuss
WTO-compliant subsidies and other incentives to nurture industries.
The Finance Minister inquired about the status of Treasury Secretary
Paulson's Africa Strategy. End Summary.

2. (SBU) Under Secretary Reuben Jeffery (U/S), and the Ambassador
met with Minister of State for Finance (MOSFIN) Remi Babalola and
briefly with Finance Minister Shamsuddeen Usman in Abuja on July 24
to discuss the status of economic reforms, barriers to foreign
direct investment, Nigeria's trade regime, and efforts to enhance
fiscal responsibility.

3. (SBU) MOSFIN Babalola explained that the GON is focused on three
main issues - violence in the Niger Delta, increasing electricity
supplies and how to pay for it, and improving infrastructure to
strengthen transportation links. He said the Niger Delta issues
were "brewing over from there to the rest of the country," and that
bringing prosperity to the region was part of the solution.
Referring to specific programs, the Ambassador stressed that the USG
had offered to help, but was waiting for concrete responses from the
GON.

4. (SBU) Babalola contended the investment climate in the power
sector was robust, the general outlook for investment and growth was
bright, and that U.S., Indian, and Chinese companies were investing
in Nigeria. In addition, he said, India and South Africa would be
providing technical experts for the transportation sector,
especially for road building and railway construction. Babalola
stressed that the economy could not function without the free
internal movement of goods and services.

5. (SBU) On food security, Babalola argued that the GON actively
encouraged investment in domestic industries and maintained high
tariffs to protect them. Once domestic industries were further
developed and able to compete in the international market, then the
GON would consider lowering tariffs and removing import bans, he
said. Econ Counselor emphasized that World Trade Organization (WTO)
standards favored other economic incentives to support expansion of
the manufacturing sector as opposed to relying on high tariffs and
import bans. In response, Babalola requested that the USG send a
technical trade team to discuss WTO-compliant mechanisms to nurture
industries.

6. (SBU) The U/S noted the GON's foreign ownership restrictions on
Nigerian banks and encouraged officials to consider the long-term
detrimental implications of such constraints, which may deter
foreign direct investment (FDI). He said an open and free
international investment regime was vital for a stable and growing
economy. Babalola replied that banking restrictions prevented
multinational banks ("big boys") from taking over domestic banks and
dominating the sector, but stressed that investment in the sector --
short of mergers with, and acquisitions of, Nigerian banks -- was
welcome. He underscored that these restrictions would likely stay
in place for the time being (reftel B).

7. (SBU) Babalola was upbeat about the Nigerian macroeconomic
situation, reporting that Nigerian foreign debt was four percent of
GDP, and domestic debt was less than ten percent of GDP. He
expressed concern about the 12 percent inflation level reported in
July 2008, but predicted it would decrease to 9.4 percent by
December 2008. He hinted at possible changes in President
Yar'Adua's cabinet, but did not go into details.

8. (SBU) In a subsequent drop-by meeting with the Finance Minister,
Usman highlighted GON efforts to attract foreign investment and
agreed to exchange information with the Ambassador on
investment-related conferences sponsored either by the Ministry or

ABUJA 00001564 002 OF 002


by U.S.-based industry associations. Usman also inquired about the
status of Secretary Paulson's Africa Strategy, which the Treasury
Secretary had discussed in his meeting with African finance
ministers on the margins of the Spring 2008 Bank/Fund Meetings.

PIASCIK

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