Cablegate: Nigeria: A/S Kansteiner Meets Next Generation Of

This record is a partial extract of the original cable. The full text of the original cable is not available.



E.O. 12958: N/A

1. Summary: At a 25 dinner hosted by Ambassador Jeter,
Assistant Secretary Kansteiner met with a group of
Nigeria's "best and brightest," young but influential
advisors in the Obasanjo Administration today, to discuss
Nigeria's economic and political challenges. The
participants outlined the damage done by years of
destructive military rule and diverted oil revenue, which
eroded government institutions and decimated the civil
service. Even considering the obstacles, this dynamic
group expressed confidence that a second Obasanjo term
could make inroads solving the country's problems through
increased privatization, economic reform, and an overhaul
of Nigeria's once highly professional civil service. This
group of young, highly educated, articulate and deeply
committed professionals represent the next generation of
Nigerian leaders and give us hope about the future of
Nigeria. End Summary.

2. Participants in the meeting were: Steve Oronsaye,
Principal Secretary for the President; Oby Ezekwesili,
Special Assistant on Political Affairs; Aliyu Moddibo Umar,
Special Assistant to the Chief of Staff; Magnus Kpakol,
Chief Economic Advisor; Nasir El-Rufai, Director of Bureau
of Public Enterprises; Pat Utomi, Director of the Lagos
Business School. Ambassador Jeter, Consul General Hinson-
Jones, A/S Senior Advisor Jim Dunlap, PolCouns, the
Ambassador's Special Assistant and Econoff (notetaker) also

Exchange Rate: A Sentimental Favorite

3. In today's Nigeria, all economic conversations start
with the recent depreciation of the naira. Ezekwesili,
stressed the need to educate the public on the benefits of
a market driven exchange rate, so that people would not
think the government had "abandoned them." El-Rufai
asserted that Nigerians have a sentimental attachment to a
high naira dollar exchange rate and often judged economic
performance based on the stability in that exchange. The
truth, participants agreed, was that an overvalued naira
had subsidized an already wealthy class of elite
businessmen, importers and consumers, leaving the domestic
manufacturing sector unable to compete on the world market.

--------------------------------------------- -----
Institutional Capacity and Management of Resources
--------------------------------------------- -----

4. Conversation then focused on Nigeria's lack of
institutional capacity and poor performance in managing
resources, topics that repeat like a broken record in any
conversation of the country's economic ills. Ezekwesili
pointed out that when the system fails in the US, like with
Enron, people turn to the law for a remedy to fix the
"broken" institution. She complained that in Nigeria,
decades of colonialism, military rule and corruption fueled
by huge revenues from the sale of oil had eroded
traditional institutions that checked government excesses
and mismanagement. When the Ambassador asked if the Nigeria
would ever develop an institutional system of checks and
balances, the participants said yes, but the process would
take time.

5. Participants also cited the gross mismanagement of
resources as a major contributor to economic stagnation.
For too long, a small number of people reaped huge benefits
from oil revenues, without having to engage in economically
productive activity. One area most affected by a lack of
resources was the civil service. In the early days of the
Republic, civil servants received adequate and regular pay;
moreover, they joined the government out of a deep sense of
patriotism and national commitment. This situation has
changed dramatically. Years of poorly paid government
employees has created a diminished and lethargic, atavistic
bureaucracy, prone to corruption. Now, Rufai said, the
Bureau of Public Enterprises (the agency responsible for
privatizing public companies) said he must pay 3 times the
salary of the private sector to lure qualified individuals.
High salaries have paid off, he said, by creating a highly
motivated and competent work force.

Nigeria's Future: What Will Obasanjo Do Next?

6. Considering all the problems mentioned, the Ambassador
wondered what Obasanjo's first year in office would look
like, if he were re-elected. One participant quickly
replied that he would be a true statesman and would push
for real economic reform. El-Rufai commented that
privatization would continue at a determined pace.
Ezekwesili promised civil service reform would be a
priority, hoping the government could create a team of
"brain boxers", or a competent bureaucratic corps through
higher wages and merit based employment.

7. Comment: Listening to this influential and intelligent
group of dedicated civil servants and professionals, one
wonders why the Nigerian economy is still in crisis. The
existence of such a group within the government and their
efforts to reform the system gives hope for progress.
Several USAID programs have attempted to tap into this
commitment, including assistance to the Bureau of Public
Enterprises (BPE), the Vice President's Economic Policy
Coordinating Committee(EPCC), and the Debt Management
Office in the Ministry of Finance. Still, many in Nigeria
do not share this commitment to reform and Obasanjo will
face steep opposition, even if given the luxury of a second
term. End Comment.

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