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Cablegate: Nigeria Economic Update, March 19

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

UNCLAS SECTION 01 OF 02 LAGOS 000605

SIPDIS

STATE PLEASE PASS TO EX-IM FOR MSCURRY
ENERGY FOR CGAY

E.O. 12958: N/A
TAGS: EPET ENRG EAIR ECON NI
SUBJECT: NIGERIA ECONOMIC UPDATE, MARCH 19

REF: 03 LAGOS 1690

1. (U) This update includes:

-- Overland Links Inland Airports
-- NEPA Improves Collection Efficiency
-- GON to Revive Liquefied Petroleum Gas Sector

------------------------------
Overland Links Inland Airports
------------------------------

2. (U) Overland Airways now connects Abuja and Lagos to
Nigeria's less frequented inland airports. Planes link
Abuja to the southwestern cities of Ibadan, Ilorin, and
Akure and ferry passengers between Abuja and Bauchi, a
northeastern city expected to attract increasing
numbers of tourists to the nearby Yankari Game Reserve.

3. (U) Overland's Managing Director, Captain Edward
Boyo, says the company is taking a new approach to
domestic transportation. The company's 18-seat Beech
1900D aircraft will ultimately link Nigeria's four
corners to Abuja and Lagos in a sophisticated hub and
spoke system, improving mobility and ease of travel and
sparing passengers time-consuming inconveniences.
Already, Ibadan residents no longer have to make the
two-hour drive to Lagos to catch a flight to Abuja, and
Ilorin and Akure residents can fly to Abuja without
transiting Lagos. Boyo eventually hopes to acquire a
fourth and fifth plane, achieve nationwide coverage,
and construct a corporate aircraft maintenance facility
outside Lagos (reftel).

-----------------------------------
NEPA Improves Collection Efficiency
-----------------------------------

4. (U) The Managing Director of Nigeria's National
Electric Power Authority (NEPA), Joseph Makoju, said on
March 18 that NEPA's collection efficiency improved
from 50 to 75 percent over the last four months, a
change due in part to the January 1 decentralization of
the company's distribution sections. NEPA's revenue
collection now averages N5 billion ($37 million) per
month. Makoju expects revenues to increase with the
drive to install pre-payment meters in government
establishments by the end of 2004 (despite criticism of
recent installations at the legislative quarters in
Abuja) and to ensure that all customers are metered by
2006.

5. (U) Makoju told EconSpec that NEPA plans to
introduce a multi-year tariff order (MYTO) system to
review the agency's tariffs at least once a year.
This, he said, "would provide comfort to investors by
ensuring that tariffs are indexed to changes in non-
controllable costs, thereby guaranteeing `real' returns
on investments." When asked about the process of
unbundling NEPA, Makoju said he expected the
transmission section to become a semi-autonomous unit
in April 2004, with the generating section unbundled by
the fourth quarter.

--------------------------------------------
GON to Revive Liquefied Petroleum Gas Sector
--------------------------------------------

6. (U) The GON recently inaugurated a ten-man committee
to devise a plan to revive the country's liquefied
petroleum gas (LPG) sector. The Special Adviser to the
President on Energy and Petroleum Matters, Edmund
Daukoru, publicly stated that the need to revive the
sector is driven by the high cost of imported LPG, or
cooking gas. The Liquefied Petroleum Gas Marketers
Association of Nigeria (LPGMAN) claims the GON loses
N2.9 billion ($21 million) annually from the import of
LPG. Many LPG marketers claim that the 30 per cent
import duty, 7 per cent port surcharge, and 5 per cent
value added tax on imported LPG unduly raise prices and
object to having to pay duties and taxes when oil
importers do not. Nigeria imports LPG largely because
it cannot convert enough of its natural gas to LPG.
Domestic supplies of LPG have contracted from 160,000
tons per year in the late 1980s to some 40,000 tons in
2002.

7. (U) Nigeria's LPG utilization for domestic and
industrial purposes is relatively low. The GON seeks
to bring per capita consumption levels in line with the
West African average of 3.7 kg per year over the next
five years. This, Daukoru says, would represent a
seven-fold increase and could result in sales worth
about N47 billion ($348 million) annually. To
facilitate the sector's growth, the GON plans to
construct nine strategically located LPG storage depots
and revamp the country's ailing refineries. The GON's
ten-man steering committee will oversee these efforts
and coordinate attempts to identify, appraise, and
implement business development opportunities in the LPG
sector. The committee will also promote and monitor
the implementation of a domestic gas sector blueprint
and assist in developing an LPG policy and a proper
regulatory and institutional framework.

HINSON-JONES

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