Cablegate: Nigerian Consultant Explains Gon Thinking On

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

231234Z Dec 04





E.O. 12958: N/A

REF: ABUJA 002119

1. (SBU) Begin summary. On December 6, Embassy Economic
Officer and Consulate Economic Specialist met in Lagos with
Bismarck Rewane, the financial adviser to Nigeria's Federal
Ministry of Aviation in attracting investors for a new
national air carrier, the planned Virgin Nigeria Airways.
Rewane discussed the Ministry's hopes for this airline and
the high stock Nigerian officials place in its success, as
well as Virgin Nigeria's having become ensnared in the US-UK
disagreement over U.S. airlines' landing rights in the
United Kingdom. End summary.

2. (SBU) On December 6, Embassy Economic Officer and
Consulate Economic Specialist met in Lagos with Bismarck
Rewane, the lead financial adviser to the Government of
Nigeria (GON) in attracting investors for a new national air
carrier, the planned Virgin Nigeria Airways. Rewane
discussed the GON's hopes for this airline and the high
stock Nigerian officials place in its success. In
discussing the GON's determination that Virgin Nigeria
Airways succeed, Rewane said the airline's possible failure
-- in the context of failing to gain U.S. landing rights --
would be "demoralizing" to President Obasanjo and Nigeria's
bureaucrats. Rewane also predicted that the airline's
failure would strengthen the hand of "anti-reformers" in
Nigeria. In referring to the US-UK "open skies" dispute,
Rewane said GON bureaucrats "underestimated" this
"particular technicality" in terms of its effect on Virgin
Nigeria's quest for U.S. landing rights.

3. (SBU) Rewane expressed his hope the USG would grant
Virgin Nigeria U.S. landing rights. He suggested the USG
could grant the airline "conditional approval" to operate in
the United States and give it six months to demonstrate by
"clear indications" it has actual Nigerian management and
control. Rewane explained that Virgin Nigeria's business
model does not depend entirely on the airline obtaining U.S.
landing rights but that doing so would aid the company. In
discussing the attributes of Virgin Nigeria, Rewane said the
airline would boost economic growth in Nigeria. He also
asserted that Virgin Nigeria's success in West Africa would
aid the Gulf of Guinea oil sector, strengthen the region's
private sector, and increase regional stability.

4. (SBU) Rewane said Virgin Nigeria expects to have an
initial public offering (IPO) of its stock in 2007. The
consultant noted that with this IPO, the Nigerian public
could buy stock in the company, while Virgin Atlantic
Airways through its Virgin Group could not increase its 49-
percent stake. Rewane added that the plan is for Virgin
Nigeria to finish its IPO prior to Nigeria's 2007 elections
to avoid becoming entangled in domestic politics.

5. (U) On December 22, Virgin Nigeria published a full-page
notice in Nigeria's The Guardian newspaper informing the
public that "an information memorandum on Virgin Nigeria
will be distributed on a strictly private basis to qualified
institutional investors in early January 2005 by Investment
Banking and Trust Company Limited, the appointed issuing
house. The private placement process will be concluded
before the end of February 2005, with Virgin Nigeria
majority-owned by Nigerian institutional investors (51
percent) with Virgin Atlantic Limited holding 49 percent.
This private placement will only be open to a select number
of qualified Nigerian institutional investors.... [Those]
who meet the specified eligibility criteria (which have been
consented to by the Federal Ministry of Aviation) will have
the opportunity purchase a total of 51 percent of the issued
share capital of Virgin Nigeria through the private
placement. To participate..., interested institutional
investors will need to meet the following criteria, amongst

-- be Nigerian registered institutions that have been in
existence for at least three years before 1 January 2004,
with minimum total net financial assets of naira 350
million, and must not hold any material interest in an
airline competing with Virgin Nigeria (i.e., any airline
registered in Nigeria by the NCAA as a Nigerian carrier and
operating with Nigeria as its home base)."

6. (U) The Guardian announcement confirmed that "at a later
point in time, Virgin Nigeria will undertake an initial
public offer (IPO) and seek quotation on the Nigerian Stock
Exchange. The IPO will be open to the Nigerian investing
public to enable interested Nigerian citizens [to] own a
stake in the flag carrier."

7. (SBU) Based on his discussions with GON Minister of
Aviation Isa Yuguda, Rewane said Yuguda's main priorities
are, in descending order: (1) Virgin Nigeria Airways'
successful launch and its attainment of U.S. landing rights;
(2) the U.S. Federal Aviation Administration's Category I
certification of Nigeria's civil-aviation sector; and (3)
Nigeria's expansion of its tourism-sector infrastructure, to
benefit from and support its airline industry.

8. (U) Begin comment: Bismarck Rewane did not understate
the difficulties posed to the launch of Virgin Nigeria by
the US-UK "open skies" dispute. Nevertheless, Rewane was
hopeful the USG would show understanding for Nigeria's
position. Rewane did not suggest any other foreign airline
as a possible replacement partner for Virgin Atlantic
Airways. End comment.


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