INDEPENDENT NEWS

Cablegate: Nigeria Economic Update, May 21

Published: Fri 21 May 2004 04:16 PM
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 LAGOS 001093
SIPDIS
STATE PLEASE PASS FCC
PLEASE ALSO PASS TO DOT (KSAMPLE) AND EX-IM (MSCURRY)
E.O. 12958: N/A
TAGS: ECPS EAIR EINV EFIN ECON NI
SUBJECT: NIGERIA ECONOMIC UPDATE, MAY 21
REF: (A) LAGOS 170, (B) LAGOS 125
1. (U) This update includes:
-- Econet and Vodacom Sign Five-Year Management Deal
-- SAA Accepts Memorandum of Understanding
-- New Money Laundering Law Signed
--------------------------------------------- ----
Econet and Vodacom Sign Five-Year Management Deal
--------------------------------------------- ----
2. (U) South Africa's Vodacom Group and Econet Wireless
Nigeria Limited, Nigeria's second largest mobile
service provider, signed a five-year management
contract on April 1, sealing a deal expected since mid-
December (ref A). Econet has adopted a transitional
name, V-Networks Nigeria Limited, and relinquished
management control to Vodacom, which will provide
support for procurement, network design, rollout,
marketing, and other group services. Executives expect
Vodacom to supply $250 million in equity by the end of
the third quarter, with investment reaching as much as
$600 million over the next five years. A reconstituted
firm, Vodacom Nigeria Limited, will then enter the
market.
3. (U) Comment: Executives close to the deal expect
Vodacom's entry to improve existing network operations
and enable the firm to compete more aggressively in the
Nigerian telecommunications sector. Vodacom's expected
injection of funds may alleviate the firm's chronic
money problems and allow it to improve services and
expand more rapidly than it has in the past, rapidly
enough, perhaps, to threaten its one major competitor,
MTN Nigeria Communications Limited. End comment.
---------------------------------------
SAA Accepts Memorandum of Understanding
---------------------------------------
4. (U) South African Airways' (SAA) board accepted a
memorandum of understanding on March 24, clearing the
way for the firm to take up its position as Nigerian
Eagle Airlines' technical partner (ref B). The
agreement gives SAA management control and a 49 percent
stake in Nigerian Eagle Airlines, Nigeria's new flag
carrier. Core investors will likely hold 40 percent of
the airline's $60 million equity, with private
shareholders taking the remaining 11 percent in an
initial public offering.
5. (U) Executives at Financial Derivatives Company
Limited, the Lagos-based economic think tank acting as
the project's financial advisor, expect Nigerian Eagle
Airlines to begin domestic flights in the fourth
quarter. SAA has prepared a detailed launch plan, they
say, and company executives expect Nigerian Eagle
Airlines to offer frequent flights between Lagos,
Abuja, and other major cities. The airline eventually
hopes to add services to London, Dubai, Jeddah,
Johannesburg, and New York.
-------------------------------
New Money Laundering Law Signed
-------------------------------
6. (U) The GON's newly signed money laundering law
repeals the Money Laundering Act of 2003 and states
that "no person or body corporate shall, except in a
transaction through a financial institution, make or
accept cash payment of a sum exceeding: (a) N500,000 or
its equivalent, in the case of an individual, or (b)
N2,000,000 or its equivalent, in the case of a body
corporate." Individuals who violate the law will face
prison terms of two years or more and fines of at least
N250,000 ($1,900), a figure likewise applied to
corporations.
7. (U) Comment: The GON adopted the original money
laundering law in an attempt to avoid sanctions from
the Financial Action Task Force (FATF) on Money
Laundering. The new version is designed to ensure
Nigeria is eventually removed from the FATF's list of
countries whose anti-money laundering programs fail to
meet internationally recognized standards. The law may
be difficult to enforce given the poor organizational
and institutional capacity of the Economic and
Financial Crimes Commission and related bodies, but it
represents a step toward reducing cash transactions and
increasing financial system transparency. It will have
little effect, though, unless banks cooperate with law
enforcement agencies to identify possible criminal
activity, something they have so far been reluctant to
do. End comment.
HINSON-JONES
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