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Cablegate: Nigeria - 2010 National Trade Estimate Report On Foreign

VZCZCXRO9646
PP RUEHMA RUEHPA
DE RUEHUJA #2210/01 3411659
ZNR UUUUU ZZH
P 071659Z DEC 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7684
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 2451
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 05 ABUJA 002210

SIPDIS

DEPARTMENT PASS TO USTR (AGAMA, JDOHERTY AND JWEISS)
TREASURY FOR DPETERS, AIERONIMO, AND ABARCAN
USDOC FOR 3317/ITA/OA/KBURRESS
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS

E.O. 12598: N/A
TAGS: ECON ETRD EFIN NI
SUBJECT: NIGERIA - 2010 NATIONAL TRADE ESTIMATE REPORT ON FOREIGN
TRADE BARRIERS AND REPORT ON SANITARY AND PHYTOSANITARY AND
STANDARDS-RELATED FOREIGN TRADE BARRIERS

REF: STATE 106353

1. (U) Trade Summary: The U.S. goods trade deficit with Nigeria was
$34 billion in 2008, an increase of $4 billion from $30 billion in
2007. U.S. goods exports in 2008 were $4.1 billion, up 47.7 percent
from the previous year. Corresponding U.S. imports from Nigeria
were $38.1 billion, up 16.2 percent. Nigeria is currently the 44th
largest export market for U.S. goods. The stock of U.S. foreign
direct investment (FDI) in Nigeria was $190 million in 2006 (latest
data available).

Import Policies - Tariffs
-------------------------

2. (U) The Government of Nigerian (GON) issued the 2008-2012 Common
External Tariff (CET) Book that harmonizes its tariffs with its West
African neighbors' under the Economic Community of West African
States (ECOWAS) Common External Tariff (CET), in September 2008.
Nigeria has been partially implementing the CET since 2005. The
tariff regime has five tariff bands and import duties were reduced
on a number of items, such as rice, cigars, and manufactured
tobacco. The five CET tariff bands are: zero duty on capital goods,
machinery, and essential drugs not produced locally; 5 percent on
imported raw materials; 10 percent on intermediate goods; 20 percent
on finished goods; and 35 percent on goods in certain sectors. The
fifth band proposed by the GON has been accepted by ECOWAS member
countries as part of the CET, but each member country can include
products it deems appropriate. Adoption of the CET is part of
ongoing economic reforms aimed at improving Nigeria's trade and
investment environment and harmonization of economic policies in the
sub-region. There is some resistance within the GON and the private
sector against deepening trade reforms.

3. (U) Companies state that high tariffs, non-transparent valuation
procedures, frequent policy changes and unclear interpretations by
the Nigerian Customs Service (NCS) continue to make importing
difficult and expensive, and often create bottlenecks for commercial
activities. Some importers complain that tariffs are excessively
high and that the GON sometimes uses arbitrary reference prices for
valuation purposes. This problem is aggravated by Nigeria's
dependence on imported raw materials and finished goods and affects
most manufacturers. Many importers reportedly resort to
undervaluing and smuggling to avoid paying full tariffs.
Transparent and proper implementation of the CET would be an
important step toward resolving most of these problems.

Non-Tariff Measures
-------------------

4. (U) The GON continues to ban certain imports, citing the need to
protect local industries. The new CET book reduces the number of
items on the import prohibition list from 44 to 26. Items removed
from the list include corn, sorghum, millet, wheat flour, crude
vegetable oil, biscuits, sugar confectioneries (including white
chocolate), fresh and dried fruit, flowers (both fresh and plastic),
toothpaste, envelopes, diaries, greeting cards, exercise books,
bentonites, barites, calendars, cutlasses, axes, pick axes, spades,
shovels, fully built mudguards, wheel barrows, and electric
generating sound proof casings.

5. (U) Items remaining on the import prohibition list include:
Q5. (U) Items remaining on the import prohibition list include:
bird's eggs, cocoa butter, powder and cakes, pork, beef, live birds,
frozen poultry, refined vegetable oil and fats, cassava, bottled
water, spaghetti, noodles, fruit juice in retail packs,
non-alcoholic beverages (excluding energy drinks), certain textile
products, and bagged cement. Companies were awarded concessions to
import bagged cement until December 2008 to bridge supply gaps. A
new cement policy was announced in October 2009. The policy bans
the importation of bagged cement, but provides some concessions to
cement producers. Such concessions include duty exemption on
imported machinery and raw materials such as gypsum.

Customs Administration
----------------------

6. (U) Nigeria practices a destination inspection policy for
imports. Under this policy, all imports are inspected upon arrival
into Nigeria, rather than at the ports of origin. Nigeria's port
practices continue to present major obstacles to trade. The
country's list of items prohibited for import, coupled with
incorrect declaration of goods by importers, result in 95 percent of
containers being physically examined. This delays the clearing
process and increases costs. Nigeria's uneven application of import

ABUJA 00002210 002 OF 005


and labeling regulations make importing high-value perishable
products difficult. Disputes between Nigerian agencies over the
interpretation of regulations often cause delays, and frequent
changes in customs guidelines slow the movement of goods through
Nigerian ports. Importers report erratic application of customs
regulations, lengthy clearance procedures, high berthing and
unloading costs, and corruption. These factors can contribute to
product deterioration and may result in significant losses for
importers of perishable goods.

7. (U) Realizing that delays at the ports significantly increase the
cost of doing business in Nigeria, the GON plans to implement a
48-hour cargo clearance policy at the ports. Roads coming in and
out of the ports are decaying, and overuse results in
around-the-clock traffic congestion. There is no rail system
transporting freight in and out of ports. This congestion leads to
ships queuing up to berth at cargo terminals and containers waiting
to be transported out of the ports. The port operator for Lagos
ports, APM Terminals, made significant improvements in regards to
off-loading ships in 2009. Containers now come off of ships at a
much faster rate but then have to wait for up to 45 days to be
processed through customs. This is true for all privately run
ports. The bottlenecks resulting from the lack of infrastructure in
and around the ports affect the efficiency at which goods can be
processed for import. Over 15 agencies are represented at the
ports.

8. (U) In a bid to achieve the 48-hour cargo clearance target at the
ports, the GON plans to withdraw all agencies, except the NCS, from
the ports and improve the technical capacity of NCS to handle
special cargos through continuous training of personnel. There are
also plans to automate all customs payments. Private sector sources
complain that corruption in the ports contributes to delays in
clearing containers and that payment of illegitimate fees can speed
up the process.

Export Subsidies and Other Export Promotion Programs
--------------------------------------------- -------

9. (U) The GON administers various export incentive programs such as
tax concessions, export development funds, capital asset
depreciation allowances, and foreign currency retention programs in
addition to operating Free Trade Zones and Export Processing Zones.
According to the 2008-2012 CET Book, most concessions, waivers or
exemptions on imports have been stopped. However, the Nigerian
Export Promotion Council will continue to implement the Export
Expansion Grant scheme to improve non-oil export performance.

Standards, Testing, Labeling, and Certification
--------------------------------------------- --

10. (U) Regulations for sanitary and phytosanitary standards,
testing, and labeling are well defined in Nigeria. The National
Agency for Food and Drug Administration and Control (NAFDAC) is
responsible for administering sanitary and phytosanitary (SPS)
standards which are mostly the application of the Codex Alimentarius
Commission, European Union, and U.S. Food and Drug Administration
standards.

11. (U) Nigeria requires that all food, drug, cosmetic, and
pesticide imports be accompanied by certificates of analysis from
Qpesticide imports be accompanied by certificates of analysis from
manufacturers and appropriate national authorities, regardless of
origin. Specified animal products, plants, seeds, and soils also
must be accompanied by proper inspection certificates. Items
entering Nigeria must be labeled exclusively in the metric system,
as specified by law. U.S. producers and exporters note that
relabeling goods to meet this requirement is expensive and could
limit U.S. exports to Nigeria. NCS is charged with preventing the
entry of products with dual or multiple markings, but such items are
often found in Nigerian markets.


12. (U) NAFDAC's responsibilities include protecting Nigerian
consumers from fraudulent or unhealthy products. The agency
continues to pay special attention to eliminating the illicit
importation of counterfeit and expired pharmaceuticals, particularly
from East and South Asia. NAFDAC's limited capacity for carrying
out inspections and testing contributes to what critics have
characterized as an occasionally heavy-handed or arbitrary approach
to regulatory enforcement which sometimes leads to delays in
clearance of legitimate food imports. NAFDAC does not have a
specific regulation on packaging but is in the process of developing
one.

ABUJA 00002210 003 OF 005

13. (U) The Standards Organization of Nigeria (SON) administers
product standards through the Standards Organization of Nigeria
Conformity Assessment Program (SONCAP). SONCAP requires exporters
to Nigeria to obtain both a product certificate, which is issued
after the submission of an acceptable test report to the local SON
office in the exporter's country, and a shipment certificate on a
shipment-by-shipment basis. Products covered by SONCAP include
toys; electrical and electronic products such as household
appliances, communication products, and lighting products; used
motor vehicles; vehicle spare parts; tires; automotive glass;
chemical products such as motor oils, paints, and bitumen; tobacco;
construction materials, mechanical devices and gas appliances such
as taps and valves, ceramic and sanitary ware, pressure cookers,
aluminum products, and cement; paper and stationery items;
protective safety equipment such as firefighting equipment; and
mosquito nets.

14. (U) The government is generally supportive of biotechnology.
Nigeria has no laws governing the application of biotechnology. A
draft biosafety legislation is being considered by the National
Assembly. The draft legislation portrays biotechnology products as
safe for human and animal consumption but includes a mandatory
labeling requirement.


15. (U) U.S exporters do not complain that Nigeria's SPS regulations
and standards are barriers to exporting U.S. goods to Nigeria.
However, they complain about bureaucratic delays in product
registration, as well as bottlenecks and inefficiencies at the ports
and cite them as disincentives to exporting to Nigeria.

Government Procurement
----------------------

16. (U) The GON continues to take steps towards improving public
procurement. An amendment to the Public Procurement Act is being
considered by the National Assembly. The proposed amendment
contains provisions for decentralizing government procurement and
increasing the procurement authorization limits for ministries,
department, and agencies, unlike the earlier legislation which
created a central clearinghouse for issuing and monitoring all
government procurement above 50 million naira ($333,333). The 36
state governments have also agreed to enact the Public Procurement
Act in their respective states.


17. (U) Foreign companies incorporated in Nigeria receive national
treatment in government procurement, government tenders are
published in local newspapers, and a "tenders" journal is sold at
local newspaper outlets. U.S. companies have won government
contracts in several sectors. Budget delays often result in both
local and foreign companies experiencing delays in getting paid for
contracts done for the GON. This has contributed to financial
difficulties for the suppliers of some goods and services.

18. (U) The National Petroleum Investment and Management Services
(NAPIMS) agency's approval is required for all procurement in the
energy sector with a value above $500,000. Approval processes are
slow and can significantly increase the time and resources required
for a given project. Nigeria is not a signatory to the WTO
Agreement on Government Procurement.

Intellectual Property Rights (IPR) Protection
QIntellectual Property Rights (IPR) Protection
---------------------------------------------


19. (U) Nigeria is a party to the World Intellectual Property
Organization (WIPO) Convention, the Berne Convention for the
Protection of Literary and Artistic Works, the Paris Convention for
the Protection of Industrial Property, the Patent Cooperation
Treaty, and the Patent Law Treaty. Nigeria has also signed the WIPO
Copyright Treaty and the WIPO Performances and Phonograms Treaty.
Legislation intended to establish a legal framework for an IPR
system consistent with WTO obligations has been pending in the
National Assembly for several years.

20. (U) GON's lack of institutional capacity to address IPR issues
is a major constraint to police enforcement. GON IP agencies suffer
from low morale, inadequate training, and limited resources. Piracy
remains a problem despite Nigeria's active participation in the
conventions cited above and growing interest among Nigerians in
seeing their intellectual property protected. Counterfeit

ABUJA 00002210 004 OF 005


automotive parts, pharmaceuticals, business and entertainment
software, music and video recordings, and other consumer goods are
sold openly, and piracy of books and optical disc products is a
problem. Industry reports contend that intellectual property
infringers from other countries appear active in using Nigeria as a
base for producing pirated goods. Industry sources claim that
Nigeria has the capacity to make an estimated 800 million CDs/DVDs a
year.

21. (U) Patent and trademark enforcement remains weak, and judicial
procedures are slow and reportedly subject to corruption. However,
the GON is taking steps to improve enforcement. Efforts to combat
the sale of counterfeit pharmaceuticals, for example, have yielded
some results. The GON also included pirated materials in the list
of prohibited imports in the 2008-2012 CET Book, which provides NCS
the authority to seize pirated works if imported into the country.
In addition, the GON has requested training to improve its
enforcement efforts. In 2008 and 2009, the United States responded
by providing training assistance on IPR enforcement to GON officials
in several sectors, with a focus on copyright piracy, border
enforcement, counterfeiting, patents, and trademarks. The United
States intends to continue IPR training assistance to Nigeria in
2010.

22. (U) Nigeria's broadcast regulations do not permit rebroadcast or
excerpting of foreign programs unless the station has an affiliate
relationship with a foreign broadcaster. This regulation is
generally complied with, but some cable providers illegally transmit
foreign programs. The National Broadcasting Commission monitors the
industry and is responsible for punishing infractions.

23. (U) Widespread pirating of foreign and domestic videotapes
discourages the entry of licensed distributors. In 2004, the
Nigerian Copyright Commission (NCC) launched an anti-piracy
initiative named "Strategic Action against Piracy." The Nigerian
police force, working closely with the NCC, has raided enterprises
producing and selling various pirated works such as software, books,
and videos. The NCC obtained two convictions on broadcast piracy
and software piracy in 2009. About 60 cases are currently being
prosecuted against IPR violators in various courts in the country.
However, inconsistent application of legal and law enforcement
measures remain deterrents to IPR enforcement.

Services Barriers
-----------------

24. (U) Foreign energy services suppliers are confronted with a
number of barriers in Nigeria, particularly with respect to movement
of personnel. Nigeria imposes quotas on foreign personnel based on
the issued capital of firms. Such quotas are especially strict in
the oil and gas sector and may apply to both production and services
companies. Oil and gas companies must hire Nigerian workers unless
they can demonstrate that particular positions require expertise not
found in the local workforce. Positions in finance and human
resources are almost exclusively reserved for Nigerians. Certain
geosciences and management positions may be filled by foreign
workers with the approval of NAPIMS. Each oil company must
negotiate its foreign worker allotment with NAPIMS. Delays in this
Qnegotiate its foreign worker allotment with NAPIMS. Delays in this
process and in the approval of visas for foreign personnel present
serious challenges to the energy industry in acquiring the necessary
personnel for their operations.

Investment Barriers
-------------------

25. (U) Investment in the petroleum sector is limited to existing
joint- ventures or production-sharing agreements. Foreign investors
may invest in any Nigerian firm except those firms on an exemption
list, which includes companies that manufacture firearms,
ammunition, and military and paramilitary apparel. Foreign
investors must register with the Nigerian Investment Promotion
Commission after incorporation.

26. (U) Potential investors must contend with complex tax
administration procedures, confusing land ownership laws,
overlapping land ownership claims, arbitrary application of
regulations, power shortages, poor roads, corruption, and crime.
The sanctity of contracts is often violated and Nigeria's court
system for settling commercial disputes is weak and can be biased.
There were at least three prominent cases in 2009 where the judicial
system or law enforcement agencies where manipulated by local
companies in order to exert undue pressure on U.S. companies and
individuals for commercial advantage.

ABUJA 00002210 005 OF 005

27. (U) International oil companies are under significant pressure
to increase procurement from domestic firms. The GON, through the
Nigerian Content Division (NCD) of the Nigerian National Petroleum
Corporation (NNPC), has set a target of 70 percent local content for
oil-related projects by 2010. The GON did not meet its 2008 target,
and will likely not meet its 2009 target due to infrastructure
challenges such as power shortages, and insecurity in the
oil-producing Niger Delta. Sufficiently trained personnel and
physical infrastructure do not exist in many cases to meet the GON's
local content targets. Some domestic firms possess adequate
technical expertise, but managerial and financial capabilities are
often lacking. New legislation to codify mandatory levels of
Nigerian content in specific petroleum activities is pending in the
National Assembly. The proposed legislation would have a strong
negative impact on the operations of international energy services
companies already operating in Nigeria and could lead to higher
costs for international oil companies.

28. (U) The vast majority of natural gas flaring in Nigeria is done
in older, on-shore, and near-off-shore oilfields. International oil
companies typically operate those fields in a joint-venture
arrangement with the NNPC as the majority partner. Funding for
joint-venture operations, maintenance, and equipment upgrades comes
from joint-venture partners in proportion to their equity ownership.
The GON has failed to fully fund its share of the joint-venture
costs during the past several years, reducing the ability of the
operating partners to install new anti-flare technology in these
older oilfields.

29. (U) The proposed Petroleum Industry Bill (PIB) would increase
the government share of oil and gas revenues from mandated joint
ventures and thereby affect the investment climate for the oil and
gas sector. Stakeholders in the sector, including international oil
companies (IOCs) and oil and gas service providers, as well as
Nigerian firms, have been advocating change in the fiscal and
non-fiscal terms of the proposed bill to make it more attractive to
private sector investment. Other issues of concern include sanctity
of contract, mediation, and dispute settlement. Investment in the
oil and gas sector, especially IOC investment, has slowed pending
the passage of the final bill.

Other Barriers
--------------


30. (U) The GON has made efforts to eliminate financial crimes such
as money laundering and advance fee fraud (also known as "419
fraud," after the relevant section of the Nigerian Criminal Code).
In June 2006, the Financial Action Task Force removed Nigeria's name
from the list of non-cooperating countries and territories in the
fight against money laundering and other financial crimes. In May
2007, Nigeria was admitted into the Egmont Group of Financial
Intelligence Units.

31. (U) Nigeria was ranked 130 out of 180 countries in Transparency
International's 2009 Corruption Perception Index (CPI) dropping nine
places from its 121 ranking in the 2008 CPI. Nigeria's corruption
levels remain high and its main anti-corruption institution, the
Economic and Financial Crimes Commission has faltered recently in
QEconomic and Financial Crimes Commission has faltered recently in
its commitment on the issue. The World Bank's Doing Business 2010
report also ranked Nigeria 125 out of 183 countries surveyed for
ease of doing business, a decline from its 120 position out of 183
countries surveyed in Doing Business 2009. Some U.S. suppliers
believe they lose sales when they refuse to engage in illicit or
corrupt behavior. Other U.S. exporters say Nigerian businessmen and
officials understand that U.S. firms must adhere to the U.S. Foreign
Corrupt Practices Act, and they believe that the law's restrictions
help minimize their own exposure to corruption.

SANDERS

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