Cablegate: Nigeria - 2010 Agoa Eligibility Review
VZCZCXRO7867
PP RUEHMA RUEHPA
DE RUEHUJA #1865/01 2851440
ZNR UUUUU ZZH
P 121440Z OCT 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7197
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 2076
RUEHZK/ECOWAS COLLECTIVE
UNCLAS SECTION 01 OF 06 ABUJA 001865
SIPDIS
DEPARTMENT FOR AF/EPS (MALLORY)
DEPARTMENT PASS TO USTR (HAMILTON)
DEPARTMENT PASS TO COMMERCE (BOYD)
DEPARTMENT PASS TO TREASURY (IERONIMO)
E.O. 12598: N/A
TAGS: ETRD AGOA ECON NI
SUBJECT: NIGERIA - 2010 AGOA ELIGIBILITY REVIEW
REF: STATE 97769
1. Country: NIGERIA
Current AGOA Status: Eligible
2. Country Background Summary: Estimated population of 151.3
million. 2008 GDP was $212.1 billion; 2008 GNI per capita was
$1,160 (World Bank 2009 data). Nigeria continues to struggle to
consolidate its fragile democracy following a civilian-to-civilian
handover of power in its national and state elections in April 2007,
which were seriously marred by irregularities and fraud. The
government is making slow progress in developing an open economy,
minimizing government interference, and promoting free market
principles. On September 25, 2008 the Ministry of Finance announced
a new tariff policy that reduced the number of banned import
categories from 44 to 26 items and reduced tariffs on a wide range
of products.
Comments on Eligibility Requirements - Market-based Economy
--------------------------------------------- -------
3. Major Strengths Identified: The government has committed to
transitioning from a state-directed economy to one that is driven by
market forces. The economy has witnessed overall macroeconomic
stability in recent years. The foreign exchange rate remains fairly
stable, although the domestic currency, the naira, depreciated
during the last quarter of 2008 as a consequence of lower oil prices
arising from the global economic crisis. The "Wholesale Dutch
Auction" system of foreign exchange trading was introduced in early
2006, and led to a sharp reduction in the spread between the
official and parallel market exchange rates. The government has
also restructured its domestic debt portfolio from 91-day Treasury
Bills to Bonds with one to ten-years' duration.
4. The government maintains a cordial and productive relationship
with the IMF. Discussions are ongoing on a successor program to the
Policy Support Instrument (PSI) which ended in August 2007. In July
2009, the IMF conducted an Article IV assessment of the Nigerian
economy. The IMF assessment team considered the overall economic
outlook as positive. However, it forecasts that economic growth
will be slower than previous years because of revenue constraints
resulting from lower oil prices, and lower credit to the private
sector arising from banking reforms that have forced domestic banks
to properly classify loans and withhold credit to the private
sector. The Nigerian Electricity Regulatory Commission (NERC) has
issued 25 licenses to private companies involved in electricity
generation and distribution. A Multi-Year Tariff Order (MYTO) for
the determination of charges and tariffs for electricity generation,
transmission and retail tariffs is being implemented. The MYTO,
which is to be implemented from July 1, 2008 to June 30, 2013, will
result in the upward adjustment of the electricity tariff to market
rates to ensure that investors in the power sector recover their
investments and turn a reasonable profit. Some ports have been
concessioned and an international company was awarded the concession
to manage the country's largest port--Apapa Port in Lagos.
5. The Fiscal Responsibility Act to ensure transparency in the use
of government revenue and a Public Procurement Act to ensure
transparency and value for money in government procurement were
passed in 2007. The Fiscal Responsibility Act has also been passed
in 11 states of the federation, while it is at various stages of
enactment in the remaining 25 states. Some states have also passed
Qenactment in the remaining 25 states. Some states have also passed
the Public Procurement Act.
6. The National Economic Empowerment & Development Strategy
(NEEDS), a medium-term economic reform program (2003-2007) focused
on privatization, good governance, macroeconomic stability,
anti-corruption, and public service reforms, is undergoing review to
incorporate President Yar'Adua's 'Seven Point Agenda', which focuses
on energy, food security, land reforms, wealth creation, education,
security, and transportation. The expected new economic reform
document christened "Vision 20-20-20" is due to be presented to the
public before the end of October 2009. Vision 20-20-20 will develop
implementable programs aimed at making Nigeria emerge as one of the
top twenty economies in the world by the year 2020. Savings from
crude oil sales above the budget benchmark price have been put into
a special reserve account, called the Excess Crude Account (ECA),
rather than being used to fuel fiscal expansion. The government
budget process is taking its rightful position as an economic policy
and management tool and the President has promised an earlier
submission of the draft budget for the coming year with the
expectation that the National Assembly would pass the budget
earlier. The budget deficit has been kept in check. However,
current revenue constraints resulting from lower oil prices arising
from the global economic crisis and insecurity in the Niger Delta
may lead to higher budget deficits as the three tiers of government
look for alternative sources to finance their respective budgets and
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resort to borrowing in the domestic money and capital markets.
There are concerns about the degree of execution of the Capital
Budget. Failure to execute fully is a drag on infrastructure
investments. There are ongoing discussions about creating a
Sovereign Wealth Fund, although the modalities and the form it will
take have not been finalized.
7. Financial sector reforms are ongoing. The Central Bank of
Nigeria (CBN) recently concluded a special audit of the 24 domestic
banks to ascertain whether they have classified their loans in line
with mandated prudential guidelines and whether they are also
well-capitalized. The outcome of the special audit led to the
replacement of the executive management of 8 banks, while 2 banks
have been ordered to raise additional capital. The CBN also
provided 620 billion naira ($4.13 billion) in liquidity support and
long-term loans to the 8 banks that were sanctioned to boost their
liquidity. The remaining 14 banks were given a clean bill of health
but were still asked to make further provisions for loans granted to
petroleum product importers and capital market operators. Some
domestic banks have received regulatory approval to raise additional
capital. Pension and insurance reforms are also moving forward.
8. A Trade and Investment Framework Agreement (TIFA) with the U.S.
provides a mechanism to address trade and investment issues.
Nigeria is a top destination for U.S. investment in Africa,
primarily due to investment in the petroleum sector. In 2008, U.S.
exports to Nigeria increased 48 percent from 2007.
9. Major Issues/Problems Identified: Militant and criminal
activities in the oil-rich Niger Delta have led to the shut-in of
oil production, thereby reducing fiscal revenues to the Government
of Nigeria (GON) with its attendant negative impact on budget
implementation. An amnesty program that expired on October 4, 2009,
led to a significant decline in militant violence and the partial
restoration of shut-in production. However, the longer-term impact
of the government's Delta peace efforts is unclear. Criminal
activity in the Delta remains a serious concern. Building on the
gains of the amnesty program, it is hoped that the government will
intensify efforts to promote economic development in the region.
10. Inadequate and unreliable infrastructure is a major barrier to
private sector activity. The GON has adopted a
Public-Private-Partnership (PPP) strategy for infrastructure
provision. An Infrastructure Concession and Regulatory Commission
has been established to regulate infrastructure PPP. However, a
national policy on PPP has not been approved.
11. The Petroleum Industry Bill (PIB) is an omnibus legislation
that will replace the existing 16 oil sector laws with one legal
framework with clear rules, procedures, and institutions. The
stated objective of the PIB is to bring about transparency, good
governance, and reduce corruption. The international oil companies
agree to the reform efforts. However, they have major concerns with
specific elements of the bill that threaten profit and future
investment. The bill has completed two readings in the National
Assembly and public comment was completed July 27-31, 2009. A
committee report is expected by October 23, 2009.
12. A court challenge was raised regarding whether the GON has the
constitutional authority to set aside oil revenues that are above
the budget benchmark price into the ECA. The constitution requires
Qthe budget benchmark price into the ECA. The constitution requires
that all oil revenue should be deposited into the Federation Account
and then shared among the federal, state and local governments.
Despite this, the ECA was established in 2003 by the GON without
passage of an enabling law. The government plans to introduce
legislation that would legalize the ECA but a constitutional
amendment may be required.
13. A large and inefficient public sector dominates and inhibits
faster development of the formal sector. Much of the nation's
wealth is concentrated in the hands of a tiny group of political and
commercial elites through corruption and non-transparent government
contracting practices.
14. Regulatory and tax regimes are arbitrarily enforced, and
regulatory bodies are weak and ineffective. Oil and gas receipts
account for 85 percent of government revenues and over 95 percent of
foreign exchange earnings. Fuel subsidies are not budgeted or
transparent, and fuel prices continue to be regulated and
subsidized. Economic data and statistics are of unreliable quality
and availability.
15. The establishment of the Nigerian Intellectual Property
Commission (NIPCOM) that was announced in early 2007 is without
passage of an enabling law. The 1978 Land Use Act mandates state
ownership of land; private use of land is restricted to a 99-year
lease and subject to government confiscation without Certificate of
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Occupancy or Governor's Consent. Conveyance of land requires
high-level government approval, promoting corruption and inhibiting
property transactions.
16. The Ministry of Finance announced on September 25, 2008 that
the number of banned import categories would decrease from 44 to 26
items. Nevertheless, the continued existence of any ban is in
violation of WTO rules. These import bans affect the import of many
agricultural and manufactured products and encourage smuggling.
Import bans accompanied by sole source importation rights for
favored companies impede competition and are major impediments to
the imports of a wide range of U.S. products. The Ministry of
Finance has also stated that there may be tariff reductions on a
wide range of products in the future. Comprehensive trade reform
brought about by adoption of the ECOWAS Common External Tariff (CET)
was agreed to in the last quarter of 2005. However, the government
is presently reviewing its implementation of the CET. In line with
the review, on September 25, 2008 the Ministry of Finance proposed a
fifth band duty rate of 35 percent. This new proposed duty rate is
a decrease from the GON's earlier proposal of 50 percent.
17. Some U.S. firms with contracts with government entities at the
federal, state and local levels face problems receiving timely
payments. The GON's procurement process lacks transparency.
Nigeria's Cabotage Law is a barrier to trade and investment and has
compelled U.S. shipping firms to exit Nigeria.
18. The GON wants existing oil and gas operators to invest in power
production or refining, in an attempt to bring about investment in
these sectors. Fuel subsidies distort the local market,
discouraging investment in downstream oil and gas activities. Draft
legislation mandating high levels of local content in oil and
gas-related activities is in the National Assembly and may impose
additional costs on investments.
19. The GON sometimes employs predatory negotiating tactics,
including threats to block access to inputs, customs and other legal
approval processes, and threats to transfer contracts to entities
that cannot uphold contract terms. Foreign exchange repatriation
regulations are enforced arbitrarily and hinder the transfer of
funds. The Manufacturers-in-Bond Scheme has been canceled, and the
Export Expansion Grant is the only export incentive available for
exporters.
Political Reforms/Rule of Law/Anti-Corruption
---------------------------------------------
20. Major Strengths Identified: Elections were held in April 2007
for the President, national legislators, and state governors and
assemblies. The elections represented the first transition from one
civilian elected government to another since Nigeria's independence
in 1960, but were deeply flawed. The Nigerian judiciary made
several landmark decisions in 2007 and again in 2008, affirming its
role as an independent arbitMwYDQQxhe gubernatorial
elections were nullified, necessitating a re-run in those five
states. Three gubernatorial election cases remain open pending
appeals at the appellate court.
21. Nigeria has established programs to combat corruption, many of
which receive support from bilateral and multilateral donors. The
QEconomic and Financial Crimes Commission (EFCC) has arrested several
high-level officials in connection with corruption cases since its
establishment five years ago and is reported to have seized over $5
billion in assets. The governor of Bayelsa State was impeached in
December 2005 for money laundering and misappropriation of funds and
had been on trial. He was released through a plea bargain that
resulted in the forfeiture of several of his properties and bank
accounts both locally and internationally. The EFCC claims it is
continuing to investigate ongoing corruption charges against several
former state governors and their associates. Approximately ten
former state governors are currently facing corruption charges, and
the cases against them are in varying stages of completion. Three
former ministers and a serving senator are currently facing trial.
22. In 2005, the former Inspector-General of Police and the
Minister of Education were fired for corruption. The former
Inspector General was tried and subsequently jailed. The former
Senate President was removed from his leadership post for
corruption, though he retained his Senate seat. In 2007, the
Speaker of the House of Representatives was removed from her
position under allegations of corruption and misappropriation of
House funds, although she retained her House seat. In 2008, two
former Ministers of Aviation and the standing Minister of Health
were charged with corruption, as well as the Director of the Police
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Equipment Fund.
23. Major Issues/Problems Identified: The elections of 2007 were
marred by serious irregularities and fraud, with violence in some
areas. International and domestic observers pointed to widespread
corruption throughout the electoral process, including ballot
stuffing, intimidation and violence, deliberate miscounting, results
tampering, and exclusion of opposition candidates. More than 1,200
petitions were filed with the electoral tribunals contesting the
announced results. The Independent National Electoral Commission
(INEC), the body charged with the conduct of elections, is not
independent, and it was alleged to have conspired with the ruling
Peoples Democratic Party (PDP) to manipulate the outcome of the
elections. Politicians continue to solicit support from, use, and
manipulate militias and vigilante groups for their own interests.
24. Police and security forces continue to use excessive and
sometimes lethal force to beat protesters, suspects, detainees, and
prisoners, and to conduct arbitrary arrest and detention.
Perpetrators of violence frequently enjoy impunity for their deeds.
The judicial system remains inefficient, corrupt, and in need of
serious reforms, despite some recent improvement. Judges are
subject to both extortion and intimidation, if not violence. Some
judges are corrupt. Prolonged pretrial detention is an ongoing
problem. The government does not provide citizens the right to a
speedy and fair trial. Prison and detention conditions remain harsh
and life-threatening. Some prisons held 200 to 300 percent more
persons than their designated capacity.
25. Corruption remains an overwhelming problem at all levels of
government and throughout the security forces. Despite the arrest of
several high-ranking Nigerian officials by the EFCC, allegations
continue that agency investigations target individuals that are
out-of-favor with the government, while those that are in-favor
continue their activities with impunity. The EFCC's inability to
bring a number of corruption investigations to closure; the
replacement of its internationally respected Chairman; and the
transfer of many of its senior personnel have raised questions about
the GON's commitment to fighting corruption.
26. An amnesty program for militants in the oil-rich Niger Delta
ended on October 4. Early reports indicated the amnesty program led
to a significant decline in militant violence, although criminal
activity remained a serious concern. The longer-term impact of the
government's Delta peace efforts is unclear.
27. Illegal oil bunkering has fueled corruption, arms trafficking,
and political instability. There are anecdotal reports that the
efforts of the GON's military Joint Task Force (JTF) have reduced
illegal bunkering in certain areas.
Poverty Reduction
-----------------
28. Major Strengths Identified: The National Planning Commission
is reviewing NEEDS-2, Nigeria's homegrown Poverty Reduction
Strategy. The National Poverty Eradication Program (NAPEP) is being
implemented at the local government level, and is focusing on
micro-enterprise development and other programs. A Microfinance
Policy was launched by the CBN in 2005, with a requirement that all
community banks convert to microfinance banks by December 31, 2007.
Since 2007, at least 600 microfinance banks have met the stipulated
requirements and have been licensed by the CBN. Some of the
microfinance banks have been reported to be insolvent.
Qmicrofinance banks have been reported to be insolvent.
29. Food and energy prices are increasing, putting pressure on poor
families. The government has developed a program to start
addressing agriculture and rural-led economic growth.
30. Major Issues/Problems Identified: Serious structural problems
remain with unequal growth for the general public and high income
disparities between rich and poor. The government's poverty
strategy does not clearly link goals and methods; serious concerns
remain about fiscal transparency; and human capacity for project
implementation is weak. The GON is implementing the poverty
reduction program slowly.
31. The country has been slow to meet its commitment to develop a
compact to implement the Comprehensive African Agriculture
Development Program (CAADP). Federal and state-level commitment to
health and education reforms remains weak and progress against the
key Millennium Development Goals is poor.
Workers' Rights/Child Labor/Human Rights
----------------------------------------
32. Major Strengths Identified: The Nigerian constitution protects
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the right of association and the right to organize and bargain
collectively, but statutory restrictions remain. Most workers,
except for members of the armed forces, police, employees designated
essential by the government, and employees in export processing
zones may join trade unions and strike, but the law limits the
justifications for strikes.
33. In 2002, Nigeria signed the International Labor Organization
(ILO) Convention 182 on the Worst Forms of Child Labor, Convention
138 on Minimum Age for Employment, and Convention 111 on Equality of
Occupation. Worker rights and child labor laws have been enacted.
The Child Rights Act was approved in 2003, but has been enacted by
only 20 of the 36 states. Nigerian law prohibits forced or bonded
labor, forbids the employment of children younger than age 15 in
commerce and industry, and restricts other child labor to home-based
agricultural or domestic work for a maximum of eight hours a day.
34. The Ministry of Employment, Labor, and Productivity employs
nearly 400 inspectors for all business sectors, but fewer than 50
inspect factories. The Ministry also sponsored awareness-raising
and law-familiarization training programs for local law enforcement,
customs, and other government officials. In 2003, new legislation
outlawing human trafficking was passed, and the National Agency for
the Prohibition of Trafficking in Persons (NAPTIP) was established.
35. The country made progress in the area of human rights,
including making several arrests for trafficking in persons.
However, serious problems remain, such as the continued lack of
accountability for past abuses. The Constitution provides for
freedom of religion, and the government generally respects that
right, although some state governments place restrictions on freedom
of religion.
36. The GON's relationship with the two union federations (the
Nigerian Labor Congress and the Trade Union Congress) has improved
with the swearing in of President Yar'Adua's administration. A
national labor strike in June 2007 was peaceful, with security
forces and labor members showing considerable restraint. The
Yar'Adua administration reversed several labor-opposed policies of
the Obasanjo government as a result of the strike. These include a
partial reduction of the fuel price increase and a guarantee not to
raise the price further for one year, a reversal of the VAT
increase, a review of the Port Harcourt and Kaduna refinery sales,
and an agreement to pay an owed civil servant salary increase.
37. Major Issues/Problems Identified: The Trade Unions Act does
not ensure the workers' right to form and join unions of their own
choosing, deems all registered trade unions to be affiliated with a
central labor organization, and violates the ILO convention on the
Right of Association. The Trade Unions (Amendment) Decree of 1996
makes check-off payment of dues conditional on a "no-strike" clause
during the lifetime of the collective agreement. The Trade Unions
Amendment Act of March 2005 criminalizes meetings between labor and
civil society organizations and bans nation-wide strikes on issues
of national economic policy. However, these sections of the law
have not been enforced in practice.
38. Labor rights have been limited by targeted layoffs and
terminations of labor activists, by intimidation to press workers to
leave unions, and by the increased use of casual labor, especially
in the oil industry. Several statutory restrictions on the right of
Qin the oil industry. Several statutory restrictions on the right of
association and on trade unions restricted the right to form or
belong to any trade union or association. There are no laws to
prohibit retribution against strikers, but strikers who believed
they were victims of unfair retribution could submit their cases to
an Industrial Arbitration Panel (IAP). The decisions of these
bodies infrequently carried the force of law.
39. The labor laws apply to legal foreign workers, but not all
companies respected these laws in practice. Payments of salaries to
federal, state and local government workers are often several months
in arrears and workers who protest or strike over arrearages face
dismissals, threats of layoffs, and pressure to agree to lower
minimum wages. The GON places limits on freedom of assembly and
association, citing security concerns.
40. Nigeria is a source, destination, and transit country for
persons trafficked for forced labor and sexual exploitation. Young
boys were trafficked primarily to work as forced bondage laborers,
street peddlers, and beggars, while girls were trafficked for
domestic service and commercial sexual exploitation. Child labor
continues to be a problem. The Child Rights Act has only been
ratified by 20 states. Domestic violence and discrimination against
women remain widespread, underreported, and socially acceptable.
Police rarely intervene in cases of domestic abuse. Rape and sexual
harassment are common. Women and girls in all parts of the country
are subjected to female genital mutilation (FGM), which the
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government publicly opposes, but has taken no legal action to curb.
Laws protecting the rights of the child are inadequate and seldom
enforced. Child abuse, abandonment, and exploitation for labor or
sex remain serious problems.
41. The law prohibits homosexuality; homosexual practices are
punishable by prison sentences of up to 14 years. Adults convicted
of having engaged in homosexual intercourse are subject to execution
by stoning in the 12 northern states that have adopted Shari'a law.
However, this sentence has not yet been handed down in practice.
Persons living with HIV/AIDS experienced widespread discrimination
in seeking employment and health care services.
International Terrorism/U.S. National Security
--------------------------------------------- -
42. Major Strengths Identified: In June 2007, the Nigerian
Financial Intelligence Unit (NFIU) was admitted as a member of the
Egmont Group of FIUs. In June 2006, Nigeria was de-listed from the
Financial Action Task Force list of Non-Cooperative Countries and
Entities. The NFIU, EFCC, CBN, Securities and Exchange Commission,
and other regulators in the financial services industry are
collaborating to identify and freeze terrorist assets in Nigeria.
43. Major Issues/Problems Identified: Militant activities in the
Niger Delta have led to a reduction in oil production, reducing
revenues to the federal government and hampering effective
implementation of the national budget. Events in Nigeria can
negatively affect world oil supplies and prices.
44. There are concerns about the president's health and the impact
it has on the administration of government. Some Nigerians opine
that the current administration is too slow in implementing its
programs.
MCCULLOUGH