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Cablegate: Kano's Infrastructure Problems Contribute to Economic

VZCZCXYZ0000
PP RUEHWEB

DE RUEHUJA #1990/01 3031241
ZNR UUUUU ZZH
P 301241Z OCT 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7362
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 2193
RUEHNM/AMEMBASSY NIAMEY 0208

UNCLAS ABUJA 001990

ECOWAS COLLECTIVE

DEPT OF COMMERCE WASHDC
DEPT OF AGRICULTURE WASHDC

SENSITIVE
SIPDIS

DEPT PASS TO USTR-AGAMA
DEPT PASS TO USAID AFR/SD FOR CURTIS AND ATWOOD
DOC FOR 3317/ITA/OA/BURRESS AND 3130/USFC/OIO/ANESA/CREED
USDA FOR FAS/OTP MCKENZIE

E.O. 12958: N/A
TAGS: ECON EIND EAGR ENRG ETRD EAID PGOV NI
SUBJECT: KANO'S INFRASTRUCTURE PROBLEMS CONTRIBUTE TO ECONOMIC
DECLINE

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SUMMARY
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1. (SBU) Representatives of Kano's Chamber of Commerce told USTDA
visitors that the state's irregular power supply and poor
infrastructure have contributed to business closures and high
unemployment. Agricultural activity suffers from the lack of
improved agricultural inputs and a well-developed and integrated
value chain. Local government and business would welcome investment
in the rehabilitation of infrastructure. END SUMMARY.


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ASSESSMENT OF KANO'S ECONOMIC SECTORS
-------------------------------------

2. (U) Kano is the second-most populous state in Nigeria after
Lagos, with a population of over 12 million. The state is the
citadel of Islamic civilization and political activism in Nigeria.
Its main economic sectors are agriculture, commerce, and
manufacturing. Kano was a commercial hub in the 1970s and 1980s for
Nigeria and the entire West Africa region. The former center of
manufacturing and commerce with a diverse religious, social, and
cultural mix is now in social and economic decline.

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AGRICULTURE
-----------

3. (U) Agriculture is the economy's largest sector and largest
employer. Over 70 percent of the work force is directly or
indirectly engaged in agriculture and animal husbandry. There are
over 24 dams in the state, the primary ones being the Challawa and
Tiga Dams, which provide water for irrigation activities.

4. (U) Principal agricultural products include: groundnuts
(peanuts), guinea corn, maize, sugarcane, gum arabic, rice, honey,
ginger, pepper, and different kinds of vegetables. The livestock
consists of cattle, sheep, goats, donkeys, camels, and horses.
Kano's Dawanau grain market is the largest grain market in West
Africa. Agricultural products support the food needs of the state,
provide raw materials for its industries, and generate employment
for its growing population. Agricultural growth slowed in the 1970s
due to the oil boom that shifted the government's focus to oil and
gas production and away from other sectors.

5. (U) Agriculture is faced with a shortage of improved
agricultural inputs such as seeds, equipment, and financing. It
also suffers from the lack of a well-developed and integrated value
chain, desertification, and deforestation.

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COMMERCE
--------


6. (U) Commerce is the second largest sector. The state once
benefited from the growth of large, medium and small-scale
commercial enterprises, but now commercial activities focus on the
sale and distribution of primarily imported goods such as textiles,
cosmetics, chemicals, pharmaceuticals, spare parts, vehicles,
buildings materials, and electronics. Commercial activities are
hindered by poor transportation infrastructure, including poorly
maintained roads, inoperable railway lines, and a long-neglected
international airport.

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MANUFACTURING
-------------

7. (U) Kano is still Nigeria's second largest manufacturing center


after Lagos. However, its manufacturing sector has been stagnant
for 20 years largely due to an irregular power supply. Kano's
textile industry faces serious challenges from smuggled products
from China and other Asian countries, according to the Kano Chamber
of Commerce.

8. (U) Kano's manufacturing sector witnessed strong growth during
the early 1980s because the state government provided manufacturing
incentives such as free land and tax exemptions for prospective
manufacturers. However, the state experienced a massive decline in
manufacturing in the mid-1980s due to the removal of manufacturing
subsidies as well as high production costs arising from the lack of
infrastructure.

--------------------------------------------- ----
THE BUSINESS COMMUNITY LAMENTS INDUSTRIAL DECLINE
--------------------------------------------- ----

9. (SBU) The Governor's Special Adviser on Economic Development and
the Private Sector, Abdullahi Rabiu Mai Kano, acknowledged during a
recent round table with the Kano business community that power
generation is the main problem hindering industrial growth in the
state. He regretted the low water level in the rivers, which
adversely affects power generation, and said the state government
has signed a memorandum of understanding with a Chinese firm to
generate 49 megawatts of hybrid power, a combination of wind and
oil, to boost power generation. Mai Kano said the irregular power
supply has forced companies to rely on costly diesel generators and
has reduced work days from seven to five.

10. (U) USTDA African Business Development Manager Jason Nagy
explained that the agency's goal is to support project development
in developing countries by funding feasibility studies that will
further create business opportunities. He also briefed the business
community on USTDA's technical assistance to the Nigerian
Electricity Regulatory Commission (NERC), which involved developing
health and safety standards that are being implemented and enforced
by the NERC. Nagy also noted that the USTDA is funding a
feasibility study for the Kiri Dam in Adamawa State.

11. (SBU) Dala Foods Nigeria Limited Managing Director Ali Madugu,
who doubles as the Chairman of the Kano Chapter of the Manufacturers
Association of Nigeria, appealed for private investment in
transportation, particularly the rehabilitation of railroad
infrastructure, the construction of rural roads, and the
modernization of airports to boost economic activity. Madugu
described the deplorable state of the Aminu Kano International
Airport, which prevents foreign airlines such as British Airways and
Lufthansa from flying to Kano, and called for private investment in
airport modernization. The Transportation Officer underscored the
U.S mission's collaboration with the Government of Nigeria in
enhancing aviation safety to attain United States Federal Aviation
Administration Category 1 status, which would enable Nigerian
airlines to fly directly to the United States.

12. (SBU) Madugu also requested a feasibility study for railroad
rehabilitation to facilitate commerce and trade within and outside
the state. He also encouraged investment in waste recycling for the
conversion of human waste to electricity and natural fertilizers.

----------------------------------------
THE DILEMMA FOR MANUFACTURING INDUSTRIES
----------------------------------------

13. (SBU) The delegation visited several manufacturing sites where
inadequate power supply and poor infrastructure were major
constraints to industrial growth. Northern Nigeria Flour Mills
Deputy Managing Director Bob Cameron said that "over 50 percent of
Northern Nigeria Flour Mills' operations depend on diesel
generators."

14. (SBU) Officials from Gongoni Industry, a major manufacturer of
insecticides and chemical agents, lamented the influx of inferior
counterfeit products from China and Malaysia. The Gongoni officials
said the company is spending large sums of money fighting product
piracy. Industry sources also complained about the government's
failure to stop the dumping of pirated and smuggled products.

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COMMENT


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15. (SBU) Kano's economic decline is painful for those businessmen
who remember the city's past glory as the prosperous commercial
capital of Northern Nigeria. However, the problems that Kano faces
are common to almost every other city in Nigeria.

16. (U) The Embassy coordinated this telegram with ConGen Lagos.

SANDERS

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