Cablegate: Nigeria: Economic Roundup March 13

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 000495

SIPDIS

STATE FOR AF/W
STATE PASS OPIC, TDA, AND EXIM
STATE PASS USTR AND DOT
COMMERCE FOR ITA/MAC
STATE PASS USTR

E.O. 12958: N/A
TAGS: PGOV KCRM EINV BEXP EFIN ETRD KPRV ECON NI
SUBJECT: NIGERIA: ECONOMIC ROUNDUP MARCH 13

REF: ABUJA 257

1. This periodic economic report from Abuja and Lagos
includes:
--GON Bans Import of Toothpicks, Water, Biscuits, Spaghetti,
and Noodles
--Obasanjo Sacks Author of Controversial Audit Report
--Central Bank Warns of Excess Liquidity
--Nigerian Customs Posts Banner Year
--GON to Sell Steel Rolling, Palm Oil, and Brick Firms

GON Bans Import of Toothpicks, Water, Biscuits, Spaghetti,
and Noodles
--------------------------------------------- -------------
2. With the elections approximately six weeks away, bad
economic policy has become a good way to garner votes. As a
consequence, protectionism seems to be governing the GON's
course for now. At a recent campaign stop, President Obasanjo
stated, "For a start, we are going to ban the importation of
tooth-picks, bottled water, biscuits, spaghetti and noodles
and every six months, we will meet to look at other things we
can ban to encourage local production. It is unacceptable
that we spend up to $13 million to import toothpicks and up
to $30 million to import bottled water."

3. Chief Economic Advisor Magnus Kpakol confirmed the press
report, but declined to offer immediate comment. Meanwhile,
Econoff in Lagos obtained a copy of a customs circular dated
March 3 banning, with immediate effect, the import of
"toothpicks in any form, table drinking water (spring or
sparkling), all types of biscuits, and spaghetti and
noodles." Post will report further on these bans Septel,
including an assessment of their impact on U.S. exports to
Nigeria.

Obasanjo Sacks Author of Controversial Audit Report
--------------------------------------------- ------
4. The GON announced February 12 it would not extend Vincent
Azie's tenure as Acting Auditor General of the Federation. In
January, Azie had authorized the release of the 2001 Audit
Report that contained a list of allegations of billions of
naira of financial impropriety and other malfeasance in the
management of public accounts by the three arms of government
(Reftel). President Obasanjo had directed all Ministries to
explain to the National Assembly the anomalies identified in
the document. However, many Ministers publicly and privately
condemned Azie for grandstanding and seeking to embarrass
them. Apparently, the angry voices of these red-faced
officials were heard when it came time to decide on Azie's
extension.

5. Joe Ajiboye, bypassed for the job six months ago, was
named Azie's replacement. Ajiboye is a Yoruba, like Obasanjo,
and the Senate refused to confirm him over concerns that
there were already too many Yoruba in senior GON financial
positions. (Note: The Central Bank Governor and Accountant
General are also Yoruba. End Note.) Minister of Finance Adamu
Ciroma claims the GON is putting Ajiboye forward again based
on the recommendation of the Civil Service Commission, which
gives Ajiboye an edge over Azie because Azie faces mandatory
retirement in October. However, Ciroma also said "What the
former Auditor-General did was gross insubordination and
incompetence," hinting that there may have been more to the
decision than retirement plans.

6. Comment: Over the past two weeks, there has been some
public unhappiness over Azie's removal, with many newspapers
criticizing the move, saying it will deter whistle blowers
from stepping forward. Many Embassy contacts say that the
charges of incompetence are unfounded. Meanwhile, the
National Assembly has kept quiet about the report, and is
unlikely to look at it seriously until after elections, if at
all. Unless the GON produces evidence to support the
assertion of insubordination, public confidence in the
probity of public officials will not be enhanced by Azie's
dismissal. End Comment.

Central Bank Warns of Excess Liquidity
--------------------------------------
7. The Central Bank of Nigeria (CBN) recently warned that
inflation might increase in 2003 because of higher government
spending. CBN Governor Joseph Sanusi said in a speech before
the Bankers' Committee that while the naira remained
relatively stable at 126 to 128 to the dollar and the CBN
hard-curreny reserves had rebounded by the end of 2002,
excess liquidity would be a problem in 2003. He predicted
that, based on past election-year experience and the
government's current fiscal policy, the CBN would find it
difficult to manage liquidity and maintain macroeconomic
stability in 2003.

8. Sanusi also noted that in 2002, private sector lending
rose by 22.6 percent, compared to 43.5 percent the previous
year. The smaller increase in lending, he said, contributed
to the slowdown in economic growth for 2002. The CBN reported
real GDP growth of 3.3 percent for the year, compared to 3.9
for 2001. At the same time, the CBN reported that inflation
moderated to approximately 13.2 percent for 2002, down from
18.9 the previous year. (Note: The IMF reported there was a
real GDP contraction of 0.9 percent over 2002. The IMF figure
seems more realistic. End Note.)

Nigerian Customs Posts Banner Year
----------------------------------
9. The Nigerian Customs Service (NCS) posted record revenues
for 2002, according to Customs Comptroller-General Alhaji
A.A. Mustapha. NCS collected N184.39 billion for the year,
slightly surpassing the target of N180 billion. Mustapha
credits the surplus to enforcement of the 100 percent
examination regime and greater and more effective
anti-smuggling efforts.

10. Comment: In addition to mandatory examinations and
contraband raids, Customs' revenue collection benefited from
protectionist GON trade policies enacted over the last year.
High tariffs, value added taxes, and additional levies on
certain imports such as sugar all add to the government
coffers, at the expense of importers and consumers. Arguments
in favor free trade and AGOA benefits are easily drowned out
by some GON officials and economic advisors who view higher
duties and import surcharges as a good source of federal
revenue and beneficial to local industry. End Comment.

GON to Sell Steel Rolling, Palm Oil, and Brick Firms
--------------------------------------------- -------
11. The Bureau of Public Enterprises (BPE) informed Post
February 19, 2003, that it is seeking core investors to
submit expressions of interest to buy (1) 51 percent shares
in three steel rolling mills, (2) 70 percent shares in two
palm oil processing mills, and (3) 100 percent shares in
seven brick manufacturing firms. Further information may be
obtained at www.bpeng.org.
JETER

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