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Cablegate: Nigeria Economic Update, May 2005

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

200905Z May 05





E.O. 12958: N/A

1. (U) This economic update includes:

-- American Business Leaders Discuss Local AmCham
-- Stock Market Affected by Banking Reform
-- Shipping Dinner Reveals Hands Behind Cabotage Act
-- GON Introduces Presidential IPR Initiative: STRAP
-- Nigeria Census 2005, Plan for the Worst and Hope for
the Best

--------------------------------------------- ---------
American Business Leaders Discuss Start-Up of Local
--------------------------------------------- ---------

2. (SBU) American businesses in Nigeria decided to form
an official American Chamber of Commerce (AmCham) to
represent their interests in Nigeria. On May 10,
Ambassador John Campbell and Dick Kramer, Head of
Strategic Research and Investments, convened about 30
US business executives -- nearly all of them at the
Managing Director-level -- to discuss establishing an
AmCham. The group expressed unanimous support for an
AmCham. The businesses, including oil companies, felt
an AmCham could be a strong advocate of their interests
and that, in many instances, have the AmCham, as an
organization representing a wide range of business
interests, weigh in on certain issues would be more
effective than single businesses advocating solely on
their own behalf -- it is harder to accuse an AmCham of
self-interest than it is a single company.

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3. (SBU) The prospective AmCham's relationship with the
pre-existing Nigerian-American Chamber of Commerce
(NACC) will be a sensitive issue that must be
addressed. NACC has seen itself as the organizational
link between American businesses and Nigeria, when in
reality NACC has been more of a venue for small to
medium size Nigerian businesses seeking products from
America. Consequently, NACC has not been involved in
advocacy for the US business community in Nigeria. In
fact NACC has taken positions like endorsing GON trade
bans and tariffs that are inimical to American business
interests. Attendees at the May 10 meeting agreed they
will have to deal with NACC sensitively in the move to
develop a separate organization to represent US
business interests. The Ambassador and the Foreign
Commercial Service in Lagos have already laid the
groundwork for that sensitive approach through recent
interactions, including a keynote speech the Ambassador
gave at the NACC Business Day in March. Sustained
attention to the matter will be vital.

Stock Market Affected by Banking Reform

4. After a bumpy second half in 2004, Nigerian Stock
Exchange (NSE) growth indices remained stable in early
2005, with the market gaining 6.6 percent in the second
quarter. The primary market segment has retained
buoyancy through various bank initial public offers
(IPOs) as banks seek to meet a Central Bank of Nigeria
(CBN) naira 25 billion (USD 192 million) capitalization
requirement by December 2005.

5. (U) Banking sector changes initially caused
uncertainty and lack of confidence. Market
capitalization, over naira 2 trillion (USD 15 billion)
in June 2004, fell nearly five percent to naira 1.898
trillion (USD 14.3 billion) in July when the
recapitalization policy was announced. Though
uncertainty remained, banks in many cases had no
alternative but to look to the stock market to meet the
recapitalization requirement. Since July 2004, more
than a dozen banks have issued IPOs. Surprisingly,
even to industry experts and the CBN, the NSE reports
17 companies, mostly banks, raised over naira 217.1
billion (USD 1.63 billion) from the market in the first
quarter of 2005 in contrast to 32 companies raising
naira 227.4 billion (USD 1.71 billion) in 2004. This
shows there may be more Nigerians with capital who are
willing to invest domestically than most observers

6. (U) Today the banking sector remains active though
experts say the large number of bank IPO issues have
flooded the market, depressed prices, and adversely
affected secondary market activities. As more IPOs
arise, investors have been selling off a lot of
secondary stocks to buy new issues. Also, the recent
declarations of lower profits by blue chip companies
like Nigerian Breweries, Nigerian Bottling Company and
Guinness, have significantly cooled activities in the
secondary market.

6. Comment: Investors may be becoming inured with each
subsequent bank issue. Banking share prices have
decreased by as much as 50 percent. Better results are
expected in the medium term as investors take advantage
of current low stock prices. However, local experts
believe positive correction in the market will follow
the banking sector December deadline. This is not
certain, however, as there is no guarantee the banking
sector changes will quickly result in stronger banks
that perform better. End comment.

--------------------------------------------- ----
Shipping Dinner Reveals Hands Behind Cabotage Act
--------------------------------------------- ----

5. (U) During the Nigerian Chamber of Shipping (NCS)
annual dinner, outgoing president Olisa Agbakoba, told
the audience about the influential roles of several NCS
members in the recently enacted Nigerian Cabotage Act.
The Act states that shipping companies operating in
Nigeria must be at least ten percent owned by
Nigerians. Agbakoba said he, Aliko Dangote, and
Senator Musa Adede worked closely with the drafters of
the Act to ensure that Nigerian interests were
promoted. He repeated in his speech several times that
the Act is not meant to keep out foreign firms but to
ensure Nigerians profit sufficiently as well.

6. (SBU) The dinner was officially a hand-over ceremony
of the NCS presidency from Agbakoba to Nigerian diesel
baron, Femi Otedola. Evoking Agbakoba's belief that
Nigerians can participate in the shipping industry,
Otedola has told Econoffs separately that foreign firms
simply repatriate funds out of Nigeria and contribute
little to the country.

7. (SBU) Comment. Nigeria does not have the capacity to
meet the new cabotage requirements. Consequently, many
foreign companies have received waivers to operate
without a Nigerian ownership contingent. The Act's
effects will grow as Nigerian shipping firms actively
pursue their ten percent shares. Some industry
watchers believe the Act will only lead to more
Nigerian front companies to give shippers the
appearance of complying with the Act. In the end, the
Act reflects the GON's nationalist economic philosophy.
Whether it will produce the intended benefit or
backfire is another question. End comment.

--------------------------------------------- --
GON Launches Presidential IPR Initiative: STRAP
--------------------------------------------- --

8. (U) On May 3, the Nigerian Copyright Commission
(NCC) launched a new presidentially-led Intellectual
Property Rights (IPR) initiative called STRAP:
Strategic Action Against Piracy. STRAP has four "core
principles": 1) "combat" piracy and copyright abuse, 2)
create an environment where a legitimate copyright
system can work, 3) lure investors through a copyright-
friendly environment, and 4) help restore a good image
of Nigeria. The NCC noted three vehicles for STRAP's
implementation: a) public outreach for IPR awareness,
b) enforcement of the Nigerian Copyright Act including
raids, destruction of pirated goods, and arrests and
prosecution of offenders, and c) new administrative
measures including regulation of optical disc
manufacturing plants, hologram registration, a "video
rental scheme", and a database of copyrighted works.
9. (SBU) Comment. Neither during the three-hour long
STRAP launch nor in STRAP program materials does the
NCC provide a plan to execute the core principles and
three implementation components. Lack of IPR program
funding is a key hurdle in Nigeria's enforcement of its
copyright legislation. During the STRAP launch no
mention was made of how much funding is being dedicated
to the program. Unless provided more funding, this
initiative will be cash-strapped and ineffective in
fighting Nigeria's active pirating industry.

--------------------------------------------- ---------
Nigeria Census 2005, Plan for the Worst and Hope for
the Best
--------------------------------------------- ---------
11. (SBU) Nigeria's planned December 2005 national
census count will be the first since 1991. Adebayo
Ajagunna, Trade Development Manager at the British High
Commission, predicts it will be the most accurate in
Nigeria's history. Ajagunna tracks census progress in
stewarding the British Department for International
Development (DFID) funding for satellite imagery used
in determining where communities and residences exist.
In places where a head count cannot be conducted, due
to remoteness or reluctance of local population to be
counted, for example, satellite imagery will help
estimate population.

12. (SBU) Though census preparation was set back three
to four months by a lag in GON funding for the Nigerian
Population Commission (NPC), Ajagunna said EU funding
of USD 120 million (60 percent of total census funding)
and DFID satellite imagery contributions to the project
helped get the project back on track. Preparations, he
said, have accelerated. Planners have made up for lost
time in procuring vehicles, computers, cartography and
other equipment, as well as a "good portion" of the
required 800,000 personnel.

13. (SBU) Each of Nigeria's three censuses since
independence have been hotly disputed because the
census materials affect important regional political
interests. States, localities, and geopolitical zones
consider census data as key to gaining power and
resources. The census is also looked at as an
indicator of voting strength -- and thus political
power. The census is a zero sum political game where
both the South and North have adamantly claimed to have
been undercounted in the past. This exercise, coming
with elections on the 2007 horizon, promise to be
little different. However, attempting to make this
census less controversial, the NPC will not gather
information on ethnicity and religion as has been done
previously. EU and NPC officials will monitor census
activity. This may indeed be the most accurate
Nigerian census to date, but it waits to be seen if
this will give credibility to the results.


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