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Cablegate: Nigeria: Bi-Weekly Pol/Econ Updates for August 1-15, 2008

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UNCLAS SECTION 01 OF 04 ABUJA 001695

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DEPARTMENT PASS TO USTR-AGAMA
DOE FOR GPERSON, CHAYLOCK

E.O. 12958: N/A
TAGS: PGOV KDEM ECON EPET MOPS NI
SUBJECT: NIGERIA: BI-WEEKLY POL/ECON UPDATES FOR AUGUST 1-15, 2008

1. (U) The following is a joint Embassy Abuja/ConGen Lagos
compilation of August 1-15 political/economic highlights, which did
not feature in our other reporting, covering:

--Elections
--National Assembly
--Economic and Business
--Oil and Gas
--Other News

--------------------------------------------
Election Tribunals, Election Reform
--------------------------------------------

2. (U) ELECTION COMMITTEE TERM EXTENDED. At the request of the
Electoral Reform Committee (ERC), President Yar'Adua extended its
tenure by four months. The committee will now submit its report in
December. The Guardian newspaper reported on August 13 that the
committee chairman, former Chief Justice of Nigeria, Muhammadu
Uwais, said the committee requested more time because Nigerians
"bombarded" the panel with memoranda. He said the extension will
enable the ERC to complete its work.

3. (SBU) ELECTION REFORM COMMITTEE TELLS OF PLANS. ERC members told
Lagos Poloff on June 18 that the ERC report will recommend an
Independent National Electoral Commission with separate funding, an
improved voter registration process, a modified open secret ballot
voting process and more democratic political parties. One member
commented that non-democratic political parties are 80 percent of
the problem and the ERC cannot fix them under current law.

4. (U) ELECTION HEARINGS DRAW AUDIENCE. The June 16-18 ERC hearings
in Owerri, Imo State, drew a wide variety of presenters, including
the former governor of Abia State, Orji Kalu, and the former and
current governors of Imo State. Current Governor Ikedi Ohakim
(Peoples' Progressive Alliance) of Imo gave the opening address,
simultaneously praising President Yar'Adua for convening the ERC and
condemning "incorrigible" Nigerian politicians for causing crime and
arming thugs to win elections.

-----------------
National Assembly
-----------------

5. (SBU) LEGISLATURE SETS UP COMMITTEE TO STUDY NIGER DELTA. The
Guardian newspaper reported on August 13 that the House of
Representatives will establish an ad hoc committee on the Niger
Delta crisis to hold public hearings on the issue. While some
question the impact of such a committee, House members claim this
approach is novel and the results will be brought to the full House
which will then pass them to the President for implementation.
(Comment: This approach is not novel; countless legislative
committees to investigate a variety of issues have been announced in
the past year. The result is typically a few weeks of newspaper
headlines and little else. End Comment.)

---------------------
Economic and Business
---------------------

6. (U) CLINTON FOUNDATION TO ASSIST LAGOS WITH WASTE MANAGEMENT. At
an investment forum in Lagos on August 6 the Managing Director of
the Lagos State Waste Management Agency reported that the Clinton
Foundation will provide $36 million to improve waste management in
the state. The Clinton Climate Initiative is working with four
large cities in Africa: Lagos, Addis Ababa, Cairo, and Johannesburg,
to reduce greenhouse gas emissions through energy saving, building
retrofits, waste management programs and other measures.

7. (U) NIGERIAN AGENCY DESTROYS COUNTERFEIT DRUGS. The National
Agency for Food and Drug Administration and Control (NAFDAC)
destroyed counterfeit drugs, substandard food and other fake
products valued at $2.1 million in Gombe State in early August.
Dora Akunyili, NAFDAC Director General, told the media the main
purpose of the destruction exercise was to prevent counterfeit drugs
and substandard products from finding their way into the homes of
innocent and unsuspecting customers.

8. (U) REMITTANCES AND THE NIGERIAN DIASPORA. Commercial banks
reported that in 2006, remittances for overseas Nigerian were

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estimated at $4.2 billion dollars, representing 700,000 transactions
and a 30 percent increase from 2005. The overwhelming majority of
remittances came from the United States, UK, and Italy. Nigerian
banks are encouraging recipients of remittances to invest a portion
of the money, instead of consuming it all. Nigerians in Diaspora
Organization, Europe (NIDOE) has set up a $200 million Diaspora
Investment Fund, and PHB Asset Management Limited, a subsidiary of
Bank PHB, manages the account.

9. (U) CIVIL AVIATION UPDATE. On August 4, the Ministry of
Transportation directed Virgin Nigeria Airways (VNA) to relocate its
operations from the international wing of Murtala Mohammed
International Airport (MMIA) to the new domestic terminal by August
11. (Note: The two terminals are on opposite sides of the airfield
and are not physically connected. A cumbersome shuttle service is
in place to move passengers making connecting flights. End Note.)
On August 9, the Minister of Transportation directed aviation
authorities to ground all domestic flights departing from MMIA.
Richard Aisuebeogun, Managing Director of the Federal Airports
Authority of Nigeria told EconOff on August 5 that VNA had been
given every chance to relocate to the new domestic terminal. As a
result of the directive, all VNA domestic flights were suspended
August 12-13 while VNA moved its operations to MMA2. Chairman of
Virgin Group Richard Branson denounced the GON's heavy-handed
approach and questioned the country's ability to attract foreign
investment. On August 13, the Federal Executive Council reversed
the relocation directive, but VNA decided to continue its domestic
operations out of MMA2 pending a court hearing in October.
President Yar'Adua warned VNA on August 17 against waging "negative
media campaigns" against the government.

10. (SBU) Nigeria's Accident Investigation Bureau (AIB) investigator
Captain Muhtar Usman told EconOff that AIB is working with the U.S.
National Transportation Safety Board (NTSB) to complete the
investigation of an incident involving a Chanchangi Boeing 737 which
ran off the runway at Port Harcourt International Airport on July
14. Nigeria is bringing the Flight Data Recorder and Cockpit Voice
Recorder to the NTSB Headquarters in Washington DC on August 25 for
analysis.

11. (SBU) CENTRAL BANK REVERSES DECISION. On August 5, the Central
Bank of Nigeria (CBN) decided to rescind the December 2009 common
year-end requirement for banks, leaving it to the discretion of the
banks. The requirement would have required all banks to use the
calendar year as the fiscal year for accounting purposes. Banks
currently uses a variety of fiscal years, making comparisons
difficult and allowing the banks to massage their accounting numbers
at the end of the year. Bismarck Rewane, Managing Director of
Financial Derivatives, said the reversal of the common year-end
requirement signifies the rapidly waning influence and weakening
position of CBN Governor Chukwuma Soludo.

12. (SBU) BUSINESS ENVIROMENT IN LAGOS DETERIORIATING. On August 8,
officials from three U.S. manufacturers, Pfizer, Motorola, and
Coca-Cola, told Consul General and EconOffs that unpredictable
power, the rising cost of fuel to power generators, increasingly
hostile policies adopted by Lagos State Government (LASG), and poor
security have prompted many companies to consider moving their
operations to Abuja. Pfizer downgraded Nigeria from being the
company's regional headquarters and has set up a reporting and
evaluation structure for Nigeria separate from the rest of West
Africa, given the rising costs and risks of operating in Lagos. The
Coca-Cola official said the company may stop producing syrup in
Nigeria because of rising costs. All three companies said they have
considered moving to Abuja, but a lack of skilled manpower in Abuja
and concentration of customers in Lagos are two primary reasons
keeping manufacturing companies in Lagos.

13. (U) On August 13 the Lagos State Government presented a new
infrastructure master plan for its Lekki sub-region. The plan calls
for a 10,380 hectare Lekki City to check the haphazard development
currently going on in the Lekki corridor. The plan highlights the
provision of electricity, roads, and waste management as priorities
for the new city. According to Lagos State Governor Fashola (who
attended the presentation), the new area will be have areas zoned
for commercial, light industrial, residential, tourism, and
environmental conservation use. (Comment: The plan, though
laudable, is a massive project that will require serious government
commitment. Governor Fashola's administration has a poor track
record on following through on its plans, and has yet to start on

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other projects, like the Fourth Mainland Bridge, promised during
last year's election. End comment.)

-----------
Oil and Gas
-----------

14. (U) SALE OF TEXACO ON HOLD. A local paper reports that Zenon
Petroleum, a Nigerian downstream company, obtained a temporary
injunction from a Nigerian federal court halting Chevron's sale of
its Texaco downstream subsidiary. Chevron owns 60 percent of
Texaco, which operates 381 gasoline stations throughout Nigeria.
(Note: Texaco is 40 percent Nigerian-owned, the result of a 1978
decree mandating increased Nigerian participation in local
businesses. End Note.) Zenon, which owns 19 percent of Texaco, has
sought to block the deal, which it says will leave the new company
with too much debt and will endanger minority shareholders. The
proposed sale by Chevron has attracted interest from Zenon's top
rivals, Oando Plc and African Petroleum.

15. (SBU) REPORTED ATTACK ON NATURAL GAS PIPELINE. Reuters reported
that militants destroyed part of a Nigerian National Petroleum
Corporation (NNPC)-owned natural gas pipeline in Rivers State on
August 10. A spokesman for the "militant" umbrella group MEND told
Reuters that a MEND "diving unit" was responsible for the operation.
In the press, a NNPC spokesman could not confirm an attack on its
pipeline and speculated that a pipeline serving the Bonny Nigeria
Liquefied Natural Gas (NLNG) plant may have been the target.
However, a contact at NLNG told EnergyOff that none of its supply
pipelines had been attacked and the company was operating normally.

16. (SBU) NIGERIA'S OIL RESERVES FALL. In a public statement on
August 15, NNPC Group Managing Director Abubakar Yar'Adua said
Nigeria's proven oil reserves stand at 33.6 billion barrels.
(Comment: The wire service Agence France-Presse reported this as a
12 percent increase in Nigeria's reserves over the previous year,
but on the Energy Information Agency's website, Oil and Gas Journal
estimates Nigeria's 2007 proven reserves at 36.2 billion. That
would make the claimed 33.6 billion barrels a seven percent decrease
in reserves. NNPC-generated briefs seen by EnergyOff have typically
put Nigeria's reserves at 36 billion barrels. Instead of
progressing toward its stated goal of increasing proven oil reserves
to 40 billion barrels by 2010, Nigeria is seeing its reserves
dwindle because of ongoing violence, a lack of investment, and
NNPC's cumbersome contracting process. End Comment.)

17. (U) PIPELINE REPAIRS DELAYED. A Shell spokesman acknowledged
that ongoing violence in the Niger Delta is preventing the company
from repairing a crucial oil pipeline damaged in a militant attack
earlier this summer. The pipeline, located in Rivers State, is a
trunk line that feeds oil from onshore fields to Shell's Bonny
export terminal. Shell maintains force majeure on a portion of its
exports of Bonny Light crude oil due to the outage.

18. (U) ILLEGAL REFINERIES IN NIGER DELTA. Various Nigerian
newspapers report that units from the Joint Task Force have
uncovered about 200 "illegal refineries" operating in the swamps in
Rivers State. While details are scarce, the press is reporting that
the refineries make gasoline and diesel for sale to local consumers.
(Comment: Mission has not been able to confirm the reports. While
there are good reasons to be skeptical of the stories, if true they
would be an interesting example of oil thieves expanding their
business from midstream to downstream. End Comment.)

19. (SBU) KEROSENE SCARCE AFTER PROMOTION. Predictable flaws in
African Petroleum's (AP) plan to sell kerosene for 50 naira/liter
have emerged. Press reports abound of kerosene shortages at AP gas
stations as black marketers rush to buy the cheap fuel (which
typically sells for 65-150 naira per liter at legitimate retail
outlets) and resell it on the street. An AP gas station manager in
Lagos told EnergyOff that his station has not had kerosene for
weeks, although lines of hopeful customers still form at the
kerosene pumps. Because of the lack of electricity and increasing
shortage of firewood, kerosene is widely used for cooking and
lighting. (Comment: It has never been clear who or what was behind
AP's sale of kerosene. President Yar'Adua publicly lauded the
promotion and encouraged other downstream companies to follow AP's
example. Unlike gasoline, the price of kerosene is largely
deregulated. Whether AP is receiving an unofficial subsidy from the
GON is uncertain. What is certain is that the black marketing was

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an inevitable result of AP's promotion. End Comment.)

-----------
Niger Delta
-----------

20. (SBU) NDDC COMMITTEE MEMBERS SEES NEED FOR A CRACKDOWN. Justin
Rewane of the President's Monitoring Committee of the NDDC told
Lagos PolOff in a meeting August 4 that militants were essentially
gangsters and they needed to be "taken out." Rewane favored a
military solution to the militants saying, "After Odi, we had
peace." (Note: The reference is to the destruction of the village
of Odi by the Nigerian military in 1999. End Note.) He added that
as long as the militants were paid off, they would remain powerful,
intimidating peaceful inhabitants of the Delta. Rewane also
theorized that the militants were threatening German construction
company Julius Berger to prevent the construction of roads in the
Niger Delta; roads, he said, could be used by the military to attack
the militants. According to Rewane "Once you have roads, it will be
the end of the militants. If there are no militants, there will be
no illegal bunkering." (Comment: Justin Rewane is the brother of
prominent Nigerian businessman Bismark Rewane. His views on how to
solve the problem in the Niger Delta are decidedly antiquated and
hopefully do not reflect the wider views of the monitoring
committee. End Comment.)

----------
Other News
----------

21. (U) GON NEGLECTS FEMALE EDUCATION. During a two-day national
conference on girls' education held in Kaduna State on August 13-14,
the Minister for Education acknowledged that the Federal Government
has paid relatively little attention to vulnerable groups, including
female children. She noted that the in the North girls are far
behind boys in terms of enrollment and completion of education. She
identified inaccessibility, geographic disparities, and funding as
dimensions to the problem. The governor of Kaduna State said
poverty, early marriage, teen pregnancy, inadequate facilities, and
misinterpretation of Islamic and cultural tenets inhibit girls'
education. The conference commended some states for the
establishment of "Second Chance Schools" which provide educational
opportunities for young mothers and women who wish to re-enter
school after dropping out at an ealier age.

PIASCK

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