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Cablegate: Nigeria: Agoa Eligibility Review

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

071813Z Oct 03

UNCLAS SECTION 01 OF 03 ABUJA 001720

SIPDIS


E.O. 12958: N/A
TAGS: ETRD ECON ELAB PGOV NI
SUBJECT: NIGERIA: AGOA ELIGIBILITY REVIEW


REF: A. STATE 263702
B. 02 ABUJA 2803
C. LAGOS 2023
D. ABUJA 1113


1. To answer any questions that might arise from the Ref C
submission, the Mission provides the following
supplementary discussion.


--------------------------------------------- ----
Economic policies: improvement, for the most part
--------------------------------------------- ----


2. President Obasanjo has put in place a highly reputable
economic reform team since his April reelection. This
team, led by Finance Minister Dr. Ngozi Okonjo-Iweala and
Presidential Economic Advisor Dr. Charles Soludo, has
reformist credentials. Many observers question, however,
whether the President himself can prevail against
entrenched interests such as his political allies and the
unions. The official GON reform blueprint, called the
National Economic Empowerment and Development Strategy
(NEEDS), is to be released in November. According to
former head of the Bureau of Public Enterprises (BPE) and
member of the economic reform team Nasir el-Rufai (now
Minister for the Federal Capital Territory), the reform
strategy will be painful and will emphasize fiscal
discipline. Politically difficult moves will be taken to
end fuel subsidies and to reform the public sector.


3. Nigeria continues to make progress toward establishing a
market-based economy that protects private property rights
and minimizes government interference. Between the
beginning of privatization efforts in 1999 and mid
September of this year, the GON had privatized twenty-five
formerly state-owned enterprises. Unfortunately, the
planned privatizations of the National Electric Power
Authority (Ref B) and Nigeria Telecommunications Limited
appear to have stalled.


4. On the energy side, the GON has announced a deregulation
of gasoline prices and plans to privatize the Petroleum
Product Marketing Company (PPMC), which buys and sells both
domestic and imported fuel and petroleum products. The GON
is also considering privatization of its refineries. The
complicated tangle of GON officials involved financially in
the energy sector will likely make this a daunting task.


--------------------------------------------- -------
Barriers to U.S. trade and investment: mixed signals
--------------------------------------------- -------


5. Progress toward establishing a rules-based open trading
system has continued, but not without setbacks. The GON
still tends to change tariff rates suddenly and
arbitrarily. In March, it once again cut duties on many
items (mostly raw materials and capital equipment) and
raised them on others (primarily finished goods and
agricultural products). A number of imported items -
frozen poultry, certain printed fabrics, cassava, ice
cream, fruit juice in retail packs, toothpicks, beer and
pasta - were all officially banned just before Nigeria's
national elections, ostensibly to foster domestic
production even though domestic industry cannot meet the
demand for these products. And most of these imported
items were and are still readily available for reasonable
prices in local markets despite the continuing ban, raising
rule of law questions about the implementation of trade
regulations (see ref D).


6. In August the GON closed its borders with Benin for one
week, and the influential chairman of the ruling People's
Democratic Party (PDP) as well as other officials have
stated on multiple occasions that the GON may close its
borders with other countries. The stated rationale was a
crackdown on illicit trade. The impromptu closure evinced
the GON's inclination to control trade, as well as its
tendency to arbitrary action.


7. The GON in September passed legislation that appears to
bring Nigeria's trade law into compliance with the Act. In
particular, the new legislation appears to establish an
enforceable visa mechanism to combat transshipment of
goods. Such a provision, if found to be in compliance with
the Act, would likely render Nigeria eligible for benefits
under AGOA provisions for textiles and apparel. (Post has
sent copies of the new Nigerian legislation to USTR for
review.)


8. Other than the pre-election bans (and the detrimental
effects of an arbitrary tariff policy), the GON has not
generally discriminated against U.S. goods or services.
Foreign firms in general are allowed to invest in all
sectors of the Nigerian economy as long as they have
Nigerian partners. Investors who abide by regulations
governing the establishment of businesses are, both in law
and in practice, assured national treatment.
9. While foreign exchange can be moved across Nigeria's
borders, selected political elites are rumored to benefit
greatly from the "illegal" parallel market rates. The
introduction last summer of a modified Dutch auction
mechanism has gone a long way toward reducing the spread
between official and parallel market exchange rates. As
President Obasanjo noted in his Independence Day speech
October 1, his administration "does not condone such
criminal activities as foreign exchange manipulation,
under-invoicing and money laundering, which generally
compromise our financial system."


10. The GON is working toward better protection of
intellectual property rights (IPR). Nigeria is party to
numerous IPR conventions and agreements, and Nigerian law
generally favors intellectual property owners and imposes
criminal penalties on IPR violators. The GON has
introduced legislation to create a quasi-independent IPR
commission and to bring Nigeria into full compliance with
the WTO TRIPS agreement. Nigeria is a member of WIPO and
signatory to several IPR treaties. Despite these legal
measures, enforcement remains weak. Scarce resources and a
lack of expertise are at least a part of the problem.


---------------------------------
Poverty reduction: no results yet
---------------------------------


11. The GON recently unveiled a new economic plan, the
National Economic Empowerment and Development Strategy, the
details of which have not yet been released. Obasanjo's
economic team have outlined strategies for attaining
macro-economic stability (with emphasis on low inflation
and stable interest and exchange rates), achieving annual
GDP growth of 5-7 percent, and reducing poverty. Skeptics,
of which there are many, point out, though, that this
Strategy follows two other poverty reduction programs in t
he past four years that made little or no impact on the
more than two-thirds of Nigerians living in poverty.


12. The GON continues to promote the development of private
enterprise through its Small and Medium Industries Equity
Investment Scheme, under which banks are required to set
aside 10 percent of before-tax profits for equity
investments in industrial enterprises. 80 banks have
reportedly set aside 103 million USD, but only ten percent
of the available funds had been invested as of December
2002.


-------------------------------------------
Combating corruption: the jury is still out
-------------------------------------------


13. Nigeria continues to be considered one of the most
corrupt countries in the world, second only to Bangladesh
in the most recent Transparency International study.
Officials continue to see government service as a path to
personal enrichment, and companies continue to report that
doing business without paying bribes puts one at a distinct
disadvantage.


14. A federal anti-corruption commission is now in place.
The GON awards contracts through an "open tender system"
that is beginning to show some transparency. Federally
funded contracts worth over 10,000 USD are legally subject
to due diligence. Some observers believe these measures
have reduced or will reduce the forms of corruption that
most affect foreign trade and investment, but corruption is
still rife in the daily life of most Nigerians. In his
Independence Day speech October 1, President Obasanjo
stated "The (anti-corruption) crusade here will continue
until the Nigerian society is rid of this major impediment
to our economic prosperity and development, and there will
be no sacred cow."


--------------------------------------------- ------------
Rule of law and political pluralism: continuing evolution
--------------------------------------------- ------------


15. Ethnic and religious tensions pose significant
challenges to the establishment of rule of law and
political pluralism. Communal clashes have resulted in
numerous injuries and deaths, and Nigeria's under-funded,
under-trained and under-equipped police force is often
hard-pressed to stop or prevent violence. The Nigerian
military has calmed some particularly violent areas by its
presence, but looting and indiscriminate killing (sometimes
also committed by other security services and local
civilians) have marred its efforts in the past.


16. Civil and criminal cases move through Nigeria's courts
slowly, in large part as a result of a crippling lack of
resources and administrative expertise. Public confidence
in the judicial system is low across the country, and has
contributed over the past few years to the adoption of
Islamic Law (Shari'a) in 12 of Nigeria's northern states.
17. Nigeria in April held its second national and state
elections since the country returned to civilian rule in
1999. Although 30 parties were allowed to contest (up from
three in 1999), the elections were marred by allegations of
widespread fraud and questions, from both domestic and
international observers. The leading opposition party, the
All Nigerian People's Party, filed a lawsuit to have the
election victory of President Obasanjo overturned.
Although the suit was filed immediately after the election,
the Court of Appeals only began hearing substantial
arguments on the case in late September. Local elections
that were due have still not been held. President
Obasanjo's ruling People's Democratic Party (PDP) dominates
national and local politics, controlling close to seventy
percent of elected positions at all levels of government.
Still, the vast majority of Nigerians continue to support
democratic practices.


-------------------------------
Human rights have made progress
-------------------------------


18. The GON's human rights record has improved, yet serious
problems remain and there is also a lack of accountability
for past abuses. The security services have been involved
in fewer violations of human rights this year, but they
still all too often fail to protect the rule of law in
rural areas. Despite pressure from the international
community (including Section 557-reduced USG security
assistance), the GON has not held accountable those
responsible for the October 2001 military killings of over
100 civilians in Zaki-Biam, Benue State.
MEECE

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