This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 ABUJA 002685
FOR DEPARTMENT, PLEASE PASS TO EXIM, USTDA, USAID, USTR
E.O. 12958: N/A
TAGS: EFIN EINV ECON ETRD ECIN NI
SUBJECT: NIGERIA: GON AND PRIVATE SECTOR ENTHUSIASTIC ABOUT
REGIONAL CAPITAL MARKET CLEARING SYSTEM
1. Summary: In mid-August, Special Advisor for the
Department of the Treasury's Government Debt Issuance and
Management (GDIM) program, Thomas Briggs visited Nigeria,
presenting a proposal on the establishment of a regional
securities clearing and settlement facility for sub-Saharan
Africa to senior Government of Nigeria officials, private
sector leaders and senior U.S. mission personnel. Briggs'
model, AfriClear, would help open the door to the level of
capital in-flows necessary to spur greater private sector on
the continent. Because the feasibility study for such a
clearing mechanism would require a high degree of cooperation
among relevant USG agencies, post strongly recommends that
State, USAID, Treasury, USTR, EXIM, and other relevant
offices consider this project as a priority item for further
development. End Summary.
2. Thomas Briggs visited Nigeria during the week of August
18, 2002 to discuss with various stakeholders a proposal to
establish a regional securities clearing and settlement
facility for Sub-Saharan African countries.
3. Briggs has dubbed the proposal Africlear. It would
establish an international/regional clearing and settlement
facility for Africa, similar to Euroclear and Clearstream,
the international central securities depositories (ICSDs)
that serve the northern hemisphere international capital
markets. The proposed system would be a capital markets
clearing and settlement facility operating across Africa to
provide access to African capital markets for investors from
the rest of the world.
4. Briggs believes current technical barriers to capital
market development in Africa are not amenable to bilateral,
private or public sector solutions by any individual actor.
These technical barriers must be overcome to realize any hope
of cross-border liquidity and significant portfolio
investment inflows. The AfriClear initiative would ease the
way of capital flows into Africa, and lay the necessary
financial groundwork for the kind of private-sector led
growth experienced in Latin America and Southeast Asia.
Nigeria as a Part of AfriClear
5. Nigeria is one of three potential stakeholder countries
for the proposed facility. It possesses the second largest
securities market in the region (after South Africa) and
could potentially contribute, along with South Africa, the
transactions volume that could make the facility
6. Furthermore, Nigeria, and especially President Olusegun
Obasanjo, are leaders of the New Partnership for Africa,s
Development (NEPAD). The NEPAD agenda specifically lists as
key priorities "the deepening of financial markets (
cross-border harmonization and integration ( risk reduction
and speeding up of financial market integration through
establishing an international standard legislative and
regulatory framework and creating a single African trading
Results of Meetings
6. Briggs separately met chief executives/senior
representatives of the Nigerian Stock Exchange (NSE), Central
Securities Clearing System, Economic Community of West
African States (ECOWAS), Ministry of Integration and
Cooperation in Africa, New Partnership for African
Development (NEPAD), Office of the President of the
Government of Nigeria, and the United States Agency for
International Development (USAID).
5. The reaction of Nigerian interlocutors to AfriClear was
universally positive. Executives from the Nigerian Stock
Exchange discussed the utility and relevance of AfriClear to
plans to grow their market. The exchange has already begun
cross-border listing initiatives with the Johannesburg Stock
Exchange, the kind of synergies that would be enhanced with a
facility such as AfriClear.
6. The chief executive of the Central Securities Clearing
System (CSCS), the organization responsible for clearing
securities transactions generated on the floor of the
Nigerian Stock Exchange, welcomed the prospect of feeding
CSCS into a wider regional securities settlement network. He
also discussed present difficulties in attempts by smaller
regional players to piggy-back on Nigeria,s stock market
operations infrastructure. The CSCS Chief Exceutive believes
a facility like AfriClear would address these types of
constraints and facilitate cross-border transaction flows.
7. Minister for Integration and Cooperation in Africa, Dr.
Bimbo Ogunkelu, as well as the head of Nigeria,s NEPAD team,
Ambassador Isaac Aluko-Olokun, were receptive to the proposal
and agreed it would enhance economic development and directly
promote regional integration. In separate meetings, they
both recommended the initiative as a NEPAD agenda item.
Ambassador Aluko-Olokun subsequently discussed the idea with
NEPAD counterparts in South Africa, and issued a formal
invitation letter asking for the proposal to be presented for
discussion at the Africa Union/NEPAD Regional Conference in
Cameroon in October 2002
8. Briggs met Steven Oronsaye, Principal Secretary to the
President, and Dr. Oby Ezekwesili, Special Adviser to the
President on Budget Matters. Oronsaye said he would bring
the proposal to the attention of President Obasanjo with a
recommendation that he support it for its potential impact on
portfolio investment into the region.
9. Ambassador Jeter and the USAID Mission Country Director
lend their support to including this project in our efforts
to assist economic development and integration in Africa. It
is hard to overestimate the role that private sector
investment might play in Africa. AfriClear would make
private sector direct and portfolio investment attractive not
only to foreign investors, but also to the Nigerians and
other African investors.
10. The feasibility study for such a clearing mechanism would
require considerable technical expertise, much of which
resides in differing USG agencies. Post believes this is a
worthwhile project and would ask that relevant USG agencies,
including State, USAID, Treasury, USTR, and EXIM, take it
under consideration as a priority item for further