Cablegate: Nigeria Economic Tidbits, August 11

Published: Wed 11 Aug 2004 01:09 PM
This record is a partial extract of the original cable. The full text of the original cable is not available.
E.O. 12958: N/A
1. (U) This update includes:
-- Maritime Stakeholders Support Cabotage Law
-- WAGP Environmental Impact Assessment and
Resettlement Plan Released
-- Nigerian Economic Summit Group Leaders Support
Economic Reform
-- Local Professor/Journalist Confirms Obasanjo's
Economic Dream Team Lacks Potential Clout
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Maritime Stakeholders Support Cabotage Law
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2. (U) The Nigerian Cabotage Law 2003 (reftel)
continues to generate interest from various
stakeholders. At a recent forum focusing on
"Implementation Guidelines of the Cabotage Law: the
Role of Financial Institutions", domestic stakeholders
claimed the law will help the Nigerian maritime
industry. Many Nigerians believe effective
implementation of the law could bolster the proposed
new National Shipping Policy of the GON, which is being
formulated by the National Assembly and the Transport
Ministry in conjunction with some private sector
operators. (A new shipping policy would update the
National Shipping Policy Decree 1987. It identified
Nigeria's maritime interests and established the
Nigerian Maritime Authority as the implementing agency
of the policy.)
3. (SBU) Most Nigerian maritime operators believe that
opportunities exist for collaborations and partnerships
with US maritime technical experts. They believe there
is a need to build indigenous capacity in shipbuilding,
port management, dry dock services and maritime
security. They also believe that establishing direct
shipping route between the two countries would promote
rapid development of the maritime sector and thus
validate the enactment of the cabotage act.
4. (U) Dissenting voices among local maritime operators
have criticized of the implementation of the policy.
They claim the Transport Ministry has granted waivers
to most foreign firms for their vessels to operate
under the cabotage law. They believe these vessels are
being allowed to operate in areas now legally reserved
for Nigerian-owned vessels. (The Minister of Transport
may waive provisions of the Cabotage Act if there is no
Nigerian-owned vessel suitable and available to perform
a specific activity. Likewise, the Minister may issue
waivers if no Nigerian shipbuilder can construct a
vessel of a particular type and size needed. Foreign-
owned or foreign-crewed vessels participating in the
domestic coastal trade must be licensed. Persons
residing in Nigeria may apply for licenses on behalf of
a foreign-owned vessels if waiver and other
administrative criteria are met.)
5. (U) An official of Italy's Grimaldi Lines told us
that local maritime operators lack capacity in the
areas in which most of the foreign waivers have been
granted. He said that although local capacity may be
enhanced by the implementation of the cabotage law over
time, they currently cannot meet the requirements of
the Nigerian shipping industry. Foreign vessels will
thus remain relevant for some time. It is in
recognition of this fact that the waiver clause was
added to the law.
6. (SBU) Comment: The cabotage law requires majority
Nigerian ownership of almost all intercoastal shipping
concerns. Since US firms supply workboats and trawlers
to Nigeria, this law could have a negative impact on
our commercial interests in this sector. Additionally,
the waiver regime is susceptible to political
interference. That possibility may make many
investors, foreign and domestic, reluctant to play in
the sector. Belgian and Dutch investors have told us
that the law, at best, will not encourage investment,
and most likely, will cause shipping companies to
rethink their investment plans. End comment.
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WAGP Environmental Impact Assessment and Resettlement
Plan Released
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7. (U) In June 2004 the West African Gas Pipeline
Company and Chevron Nigeria Limited published Nigeria's
final drafts of the West African Gas Pipeline (WAGP)
Environmental Impact Assessment (EIA) and Resettlement
Action Plan (RAP). The proposed WAGP will transport
natural gas from Nigeria to Benin, Togo and Ghana. In
compliance with World Bank requirements, the general
public now has 60 days to comment on the EIA and RAP.
8. (U) The WAGP's EIA lists many potential benefits
including infusion of funds into the Nigerian economy,
development of the regional energy infrastructure and
related economic development. On whole, the
environmental impact will be positive. The WAGP will
reduce gas flaring and, concomitantly, air pollution
and greenhouse gas emissions. Inducing end-users to
switch to gas fuel from other fossil fuels will provide
additional reductions in greenhouse gas emissions.
Potential negative environmental impacts involve
conversion of farmland to pipeline easements;
disturbance of habitats and changes to hydrology caused
by trenching in wetlands; and changes in habitats,
soils/sediments, topography, and hydrology associated
with heavy equipment delivery. Many of these problems
arise in the project's construction phase. The EIA
indicates that no permanent high severity negative
impact will remain after planned mitigation measures
are applied. No negative socioeconomic impacts of high
severity are anticipated from the project.
9. (U) The RAP states the WAGP will affect 23
communities (about 2,500 land owners and tenants) in
Ogun and Lagos states. All land owners and tenants have
been contacted by the WAGP contract surveyors as well
as the independent surveyors hired by the affected
populations. The affected people were offered two
options: in-kind or cash compensation. All chose cash
compensation. The project also will adopt specific
measures to minimize impacts.
10. (U) Chevron representatives told EconOff that they
expect World Bank approval of the project, as the EIA
and RAP meet all of the Bank's project criteria. They
said the local communities also support the project.
Opposition to the WAGP comes primarily from one
organization, Environmental Rights Action, they added.
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Nigerian Economic Summit Group Leaders Support Economic
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11. (U) In a recent meeting with CG and Econoff
(notetaker), the Nigerian Economic Summit Group (NESG)
Executive Director and board members pledged continued
support for economic reform in Nigeria. The NESG
agenda for the near future involves (1) capacity
building, (2) lobbying on priority issues, and (3)
increased research.
12. (U) A priority area for NESG is business
disincentives such as bureaucracy and regulatory
constraints. Chairman Mazi Sam I. Ohuabunwa relayed
the group sentiment that it is important that the US
mission in Nigeria and NESG continue to work together
to ensure business growth, regulatory change, and
economic reform.
13. (U) The NESG expressed dismay over the newest DOS
travel warning for Nigeria. The warning "ruffled
feathers" within the local business community and was
seen as a slight by the US government. They asserted
the warning had caused several US companies to pull out
of the joint CCA/NESG Conference scheduled for
September in Abuja. Most of all, they worried that the
travel warning would discourage US trade and
investment. CG responded that the statement was not
intended to stop travel to Nigeria, but to warn
travelers of the real difficulties they would face in
Nigeria. Our top priority is the welfare of US
citizens abroad, the CG stressed. However the USG
continues to encourage and promote trade and investment
in Nigeria. The greatest obstacle to US investors was
not the travel warning but the frequent "bureaucratic
anomalies" and opaque regulatory environment they find
in Nigeria, he added.
14. (U) FYI: The NESG was formed 11 years ago as an
expression of private sector determination to reform
Nigeria's economy. Although the organization had a
slow start, reviews from government and other agencies
and companies illustrate that NESG has steadily
enhanced its influence since its inception. It is
known as a growing presence in the country's economic
policy topography. End FYI.
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Local Professor/Journalist Confirms Obasanjo's Economic
Dream Team Lacks Potential Clout
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15. (SBU) The prolific and influential Lagos Business
School (Pan-African University) professor, Pat Utomi,
recently discussed the GON's economic team with the CG
and Econoff (notetaker). Utomi endorsed the widely-
held view that the country's touted economic team lacks
independent political power. They are completely
dependent on President Obasanjo to provide political
muscle to push any reform forward. However, having
been appointed governor of the Central Bank, Charles
Soludo may be carving out a niche for himself, Utomi
16. (SBU) Utomi said, given their lack of political
clout, the team should have spent much more time
building a constituency inside government and the
private sector for their reform program. Instead they
have acted like technocrats, unmindful of the realities
of Nigeria's political economy. Team members are
perceived as arrogant and unrealistic due to a head-in-
the-clouds approach to the country's economic reform
process. While the team has the ear of the President,
they are estranged from the rest of the system.
Because of their lack of political and bureaucratic
panache, Utomi predicted the team will have a very
tough time obtaining the support needed for their
reform measures.
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