Cablegate: Nigeria: Codel Watts and Bizdel Discuss Investment

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

UNCLAS SECTION 01 OF 03 ABUJA 002235

SIPDIS

E.O. 12958: N/A
TAGS: EINV ECON OVIP NI
SUBJECT: NIGERIA: CODEL WATTS AND BIZDEL DISCUSS INVESTMENT
CLIMATE WITH PRESIDENT OBASANJO

1. Summary: Ambassador Jeter accompanied Codel Watts, AUSTR
Whitaker and executives from Phillips Petroleum, Syntroleum,
Proctor and Gamble and Qualcomm to breakfast with President
Obasanjo. Pointing to the need for foreign investment in
non-oil sectors, the President encouraged the U.S. companies
present to invest in solid minerals, telecommunications,
information technology, agricultural processing, and
manufacturing. Obasanjo was extremely engaged throughout the
meeting, asking questions regarding AGOA and supporting
resolution on P&G's advocacy requests. Following the
breakfast, Nigeria's President met with the entire business
delegation. End Summary.

2. On August 30, Congressmen J.C. Watts (R-Oklahoma), John
Lewis (D-Georgia), William Jefferson (D-Louisiana) and Eva
Clayton (D-North Carolina) joined President Obasanjo for
breakfast at his residence. Ambassador Howard Jeter, AUSTR
Whitaker and visiting executives from Phillips, Syntroleum,
Proctor and Gamble and Qualcomm executives accompanied the
congressional delegation. EconOff attended as notetaker.

3. Obasanjo welcomed the U.S visitors and thanked them for
traveling to Nigeria at an "auspicious time" for foreign
investment, as Nigeria "moves away from the ills of the
past." The GON was in the process of reconstituting both
Nigeria,s human and physical capital infrastructure, he
said. However, Nigeria was "not only looking inward, but
outward." Obasanjo expressed the need for Nigeria to engage
foreign investors outside the oil and gas sector -- in
telecommunications, information technology, manufacturing and
the exploitation of solid minerals. Employing all the right
buzzwords, Nigeria's President stated that the Nigerian
market needs more "purchasing power" in order to be more
active in the world economy.

4. Congressman Watts thanked the President for returning
early from China to host the delegation. The Congressman
explained that he was pleased to have fulfilled the promise
made during his May visit to Abuja that he would return with
potential U.S. investors. In order to fulfill his
commitment, Watts said, he had brought together the "Trade
Aid Coalition," comprised of U.S. companies with an interest
in promoting trade between the United States and Africa. The
purpose of the Coalition would be to enhance trade with, and
economic growth in, Africa.

5. Looking around the room inquiringly, the President noted
that no serious U.S. construction companies were now active
in Nigeria. Ambassador Jeter responded that, while no U.S.
construction companies had entered the Nigerian market, U.S.
companies were attempting to enter other non-oil sector
markets. The Ambassador specifically pointed to a U.S.
telecommunications company (read Motorola) that had
unsuccessfully attempted to enter the market for supplying
GSM equipment.

6. Philippe Bovay of Proctor and Gamble noted his company,s
interest in investing USD 30 million in a new manufacturing
facility in Ibadan. Bovay commented that he was currently
working with the Federal Ministry of Industries to resolve
the problems of high tariffs on P&G,s manufacturing inputs
and on one P&G product -- Ariel detergent. The President
became immediately engaged, began discussing the particulars
of the proposed investment and said, &I want resolution on
this issue.8 Bovay explained that P&G had asked for a
tariff reduction from 30 to zero percent on the manufacturing
equipment and inputs for its proposed facility. Although the
GON had agreed to reduce these tariffs to 10 percent, P&G
would still like the tariffs reduced to zero. P&G had also
requested lower tariffs on its high-quality detergent, Ariel,
which it would like to manufacture at the new facility.
Bovay said that P&G had sent a letter asking for resolution
on this issue in July to the Minister of Industries, but had
not yet received a response. Obasanjo commented that he had
received a similar letter from Proctor and Gamble and
reiterated that he would like resolution on this issue as
soon as possible.

7. The President then turned to the need to resolve the
remaining issues for Nigeria's compliance with the textile
visa requirements under the Africa Growth and Opportunity Act
(AGOA). Ambassador Jeter noted that Nigeria was very close
to completing the AGOA requirements. The Ambassador
commented on the benefits that AGOA could provide within the
textile manufacturing sector and asked AUSTR Rosa Whitaker to
explain further. Whitaker cited Lesotho, a small land-locked
African nation, as an excellent example: Lesotho had
attracted over USD 100 million of investment in its textile
industry in the past several months because of AGOA.
Whitaker agreed that Nigeria was very close to fulfilling the
textile visa requirements, explaining that the one unresolved
issue involved the penalties applied to illegal transshipment
of goods. Currently, Whitaker said, Nigeria,s customs code
only imposed a duty of one-half of the value of the goods )
not a sufficient deterrent. She noted that the countries
that have successfully met AGOA,s requirements were imposing
a penalty of at least three times the value of the goods.
The President reiterated his desire to reach resolution on
these issues and said that once a bill revising the customs
code was drafted, he would personally take it to the National
Assembly and see that it was enacted.

8. Henry McGee of Phillips Petroleum introduced himself and
said that his company expected to sign the LNG proposal with
NNPC as early as the week of September 3. (NOTE. The MOU
was signed on September 5. END NOTE.) Seemingly familiar
with the project, President Obasanjo asked whether Phillips
would be able to complete the project by 2005. McGee replied
that the target date was late 2006/early 2007. However, if
all project phases proceed smoothly, Phillips could possibly
shave six to nine months off that time and complete the
project by early 2006. President Obasanjo appeared pleased
with this news.
9. Larry Weick of Syntroleum then took the opportunity to
introduce his company as a prospective investor. He
explained that his company could assist Nigeria in three
areas: to reduce gas flaring, to increase electricity
production as a byproduct of flared gas, and to more
effectively use Nigeria,s natural resources through the
production of clear diesel fuel. He described Syntroleum's
Gas-to-Liquid (GTL) process as one that uses air and,
therefore, was safer than other GTL processes. President
Obasanjo held up the small clear vial of Syntroleum,s diesel
and appeared amazed at how clean the fuel looked. Obasanjo
asked whether the fuel would be targeted for export. Weick
replied that the diesel could be for both domestic
utilization and for export to markets in the U.S. and Europe.
Obasanjo inquired what quantity of electricity could be
produced from such a project. Weick responded that it would
be dependent upon the location of the projects, adding that
the NNPC was choosing possible sites based on the need for
electricity. Obasanjo asked how expensive the clear diesel
process was compared with normal diesel refining. Weick
replied that Syntroleum's diesel fuel was competitive with
world oil prices of $18-$20 per barrel. Seemingly pleased by
these answers, Obasanjo commented that OPEC was trying to
maintain prices at roughly $27/barrel, which would make this
venture worthwhile.

10. After breakfast, President Obasanjo led the group to his
Council chambers where the remaining members of the business
delegation were present. At this larger meeting, which Vice
President Atitku Abubakar also attended, President Obasanjo
again welcomed the Congressional and trade delegations to
Nigeria and noted the need for Nigeria to institute changes
on the inside while the international community helped
Nigeria from the outside. He identified the sectors in
Nigeria that might most attract foreign investment:
infrastructure, where he said rehabilitation was already
underway; agriculture ("ready for modernization"); solid
minerals, such as aluminum, lead, and zinc; and oil and gas,
"although more gas than oil," he said. The President
explained that the GON was working hard to take advantage of
the benefits offered by AGOA. He said he wanted to take all
steps necessary to make Nigeria internationally competitive.
The President asked that those present not hesitate to let
him know, directly or through the U.S. Ambassador, what
Nigeria needed to do to attract foreign investment.

11. Because Congressman Watt,s was indisposed at this time,
Ambassador Jeter offered remarks on his behalf. The
Ambassador said that, during his visit in May, Congressman
Watts had promised to return to Nigeria with a trade
delegation. With this trip in August, Watts had fulfilled
that commitment. The Ambassador commented that there was
nothing else he would rather see than an increase in U.S.
investment in Nigeria. He admitted that there were
peculiarities to the Nigerian market that had to be overcome.
However, the U.S. ) Nigeria strategic relationship must
include a greater commercial relationship with an emphasis on
developing the non-oil sectors of the economy.

12. President Obasanjo then opened the floor to comments or
questions from the 30-plus business representatives. One
U.S. businessman asked about the legal and regulatory issues
surrounding the privatization of the national
telecommunications company, NITEL. Obasanjo commented that
the GON had ensured that the future of Nigeria's
telecommunications market would be driven by the private
sector; three of the four GSM licenses were granted to
private companies with one reserved for NITEL. The President
referred the legal and regulatory question to Vice President
Abubakar in his role as Chairman of the National Council on
Privatization. Abubakar explained that the GON had already
received expressions of interest in NITEL from eleven
international telecommunications companies. Meanwhile, the
National Council on Privatization had forwarded to the
National Assembly a draft bill to strengthen the regulatory
authority of the Nigerian Communications Commission. Once
NITEL had been privatized, the Vice President explained, a
second carrier would be licensed to establish strong
competition in the domestic telecommunication market.

13. Comment. Having just returned from China at 4:00am that
morning, President Obasanjo surprisingly remained highly
engaged throughout the meetings. He was well versed in the
issues raised by the U.S. companies present at the breakfast
and expressed strong interest in seeing these issues
resolved. The high level of access granted to visitors and
Mission officers is consistent and demonstrates the emphasis
that the Obasanjo Administration places on increasing
bilateral trade and investment with the United States. Post
was very pleased to host the U.S. business delegation in
Abuja. The wide-ranging interests of participants made it
difficult to effectively "match-make" them with Nigerian
businessmen and GON officials, however. A tighter focus on a
few specific sectors, such as those identified by the
President -- agriculture/processing, solid minerals,
telecommunications and infrastructure -- would make future
trade delegations even more effective tools for strengthening
bilateral economic relations. End Comment.

14. This cable was not cleared with the CODEL.
Andrews

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