Celebrating 25 Years of Scoop
Special: Up To 25% Off Scoop Pro Learn More



Cablegate: Imf Hears Out Nigerian Private Sector

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

Ref: (A) Abuja 497, (B) Abuja 392

1. (U) Summary. During the IMF Mission Team's Article
IV consultations in Nigeria (ref A), U.S. private
sector firm representatives told the IMF team the
operating environment in Nigeria remains challenging.
Port delays and improprieties, arbitrary political
decisions, and currency payment issues continue to
hinder business. Some Nigerian businesspeople gave the
IMF team anecdotal evidence the GON's 2004 economic
performance measures which suggest a real GDP increase
of 6 percent, may not accurately reflect the real
decline of output in many sectors of the economy. End

2. (SBU) The IMF team that visited Abuja and Lagos in
March met U.S. businessmen on March 14 and Nigerian
entrepreneurs the following day. The meetings
highlighted factors leading to the high cost of doing
business in Nigeria. During their meeting with US
businesspeople, three prominent challenges surfaced: 1)
bureaucratic hold-ups and improprieties at the ports,
2) unpredictable political decision-making causing
uncertainty that complicates long-term strategic
planning and investment; for example, import bans and
local content laws, and 3) currency and payment issues.

Advertisement - scroll to continue reading

Are you getting our free newsletter?

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.

3. (SBU) Port problems and sudden changes in the
playing field due to policy shifts did not surprise the
IMF visitors, who seemed to understand the quirkiness
of the Nigerian business environment. The currency and
payment issues were news to the IMF team. Cargill
representative said the dual exchange rate system is
affecting Cargill's cocoa exports earnings, making his
company less profitable than other ventures that resort
to the parallel market. While the naira has been
trading at between naira 130 to 133 to the dollar at
the official Dutch auctions, the parallel market rate
is usually five percent higher. The result that the
Nigerian exporters who play both markets repatriate
their dollar proceeds at the higher unofficial rate.
Harris Corporation (Harris) said its currency problems
stem partly from an increasingly competitive telecom
equipment market. As equipment suppliers compete for
the growing yet limited numbers of contracts, the
prospective customers force the competing suppliers
into bidding wars and ask for increasingly better terms
including stipulations that payments be in naira
instead of US dollars. Harris sees itself accumulating
millions of dollars worth of naira useable only in
Nigeria. Also, because of the state of the banking
sector, buyers are looking to Harris to self-finance

4. (SBU) Continental Airlines' local company
representative, Chris Amenechi, explained how political
issues burdened Continental's market entry. He said
the company's continuing presence in Nigeria was not a
matter of normal market forces, but rather rested in
the hands of one person, Obasanjo. Despite the US-
Nigeria Open Skies Agreement, Continental might not be
able to continue much longer the long, expensive,
uncertain process in which it is engaged (Ref B).

5. (SBU) On March 15 thirty Nigerian business leaders
discussed with the IMF Mission team Nigeria's reported
2004 macroeconomic indicators and the outlook for 2005.
The IMF team said the country's macroeconomic
performance in 2004 had been stable, in part because of
a good budget and a consistent monetary policy that led
to increased foreign exchange reserves and decreased
inflation. The team estimated Nigeria's real gross
domestic product rose six percent in 2004, sustained by
growth in the oil and gas sector, the capital market,
and telecommunications. However, some of the Nigerian
participants blackened this picture, noting the
sluggish real growth in sectors or in some instances
real decline in production, as well as the high cost of
commodities, and no growth in personal consumption.
These participants expressed disappointment about the
low growth in income per capita, the highly skewed
income distribution, and the insignificant decline of
poverty despite the 2004 excess crude revenue windfall.
These Nigerians further asserted that non-oil sectors
of the economy -- manufacturing, education, and
agriculture -- experienced only minimal growth despite
these sectors being of critical importance to the
economy. In short, the positive growth in the energy
capital and telecom sector did not filter through the
rest of the economy.

6. (SBU) The private sector participants in the talks
with the IMF team projected three to four percent
growth in 2005 and greater volatility of the economy
than in the previous year. Among the developments they
would like to see are increased government capital
expenditures rather than the continuing accumulation of
government savings, policies to halt the decline of
value-added production, federal and sub-national fiscal
policy harmonization, reduction in GON financial
leakages (e.g., corruption), implementation of the
fiscal responsibility bill, and bank implementation of
the Small and Medium Industries Equity Scheme.

7. (U) The IMF team was led by Menachem Katz. U.S.
business participants included Fuad Abdullah, Head of
Direct Product Supply for Sub-Saharan Africa, Procter &
Gamble; Aedo Van der Weij, Managing Director, Cargill;
Jules Harvey, MD/CEO, Texaco Nigeria; Chris Amenechi,
Continental Airlines Representative in Nigeria; Peter
Yap, Managing Director, Harris Communications Nigeria;
and Katie Christie, Vice-President Sales Finance,
Credit & Collections and Contracts, Harris
Communications Nigeria. Among the participants
representing the Nigerian private sector were Sola
Oyinlolo, CEO, Schlumberger; Mohammed Hayatu-Deen,
Chairperson, Nigerian Economic Summit Group; Mansur
Ahmed, Director General, Nigerian Economic Summit
Group; Bismarck Rewane, CEO, Financial Derivatives;
Thierry Dumont, CEO, Nigerite; Albert Alos, Vice
Chancellor, Pan-African University; Ayo Teriba, CEO,
Economic Associates; and Tanko Osamwanyi, Nigerian
Stock Exchange.


© Scoop Media

Advertisement - scroll to continue reading
World Headlines


Join Our Free Newsletter

Subscribe to Scoop’s 'The Catch Up' our free weekly newsletter sent to your inbox every Monday with stories from across our network.