VZCZCXRO2980
RR RUEHMA RUEHPA
DE RUEHOS #0414/01 1521607
ZNR UUUUU ZZH
R 011607Z JUN 07
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 9042
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 8854
RUEHCV/AMEMBASSY CARACAS 0040
RUEHWR/AMEMBASSY WARSAW 0405
RUEHCD/AMCONSUL CIUDAD JUAREZ 0384
RUEHIT/AMCONSUL ISTANBUL 0383
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEFDIA/DIA WASHINGTON DC
UNCLAS SECTION 01 OF 02 LAGOS 000414
SIPDIS
SIPDIS
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DEPT PLEASE PASS TO TDA
E.O. 12958: N/A
TAGS: ECPS ECON EINV PGOV PREL NI
SUBJECT: RISK ASSESSMENT TOOL FOR INDIVIDUAL STATES
REF: LAGOS 413
LAGOS 00000414 001.2 OF 002
1. (U) Summary: On May 24, risk analysis firm Economic
Associates organized a seminar during which Country and State
Risk Analyst, Economic Associates, Olly Owen, presented a
risk-assessment tool developed by Economic Associates that
rates all 36 Nigerian states on economic, societal,
political, and security risks to investors. End summary.
2. (U) On May 24, risk analysis firm Economic Associates
organized a seminar during which Country and State Risk
Analyst, Economic Associates, Olly Owen, presented a
risk-assessment tool developed by Economic Associates that
rates all 36 Nigerian states on economic, societal,
political, and security risks to investors. The assessment
was developed using continuous monitoring, as well as
interview, fieldwork, and documentary research, it provides a
comprehensive window into the investment climate of
individual states.
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Diversity Necessitates State-Specific Analysis
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3. (U) Nigerian states are diverse not only culturally,
ethnically, and religiously, but also politically,
demographically, and economically. Nigeria's federal system
devolves significant powers of decision- and policy-making to
state governments, which have independent fiscal powers to
tax, spend, and issue debt. Nigeria is beginning to
experience more internal competition for investment.
4. (U) States' revenues have increased significantly in the
past several years. Most states derive the majority of
revenue from the federal government, with the notable
exception of Lagos State, which generates more revenue
internally than it receives from the federal account. Given
this diversity, analysis that examines the state, rather than
federal, environment is a valuable tool for investors and
observers.
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Assessing The 36 States
-----------------------
4. (U) The risk-assessment model examines economic, societal,
political, and security risks. Each of these dimensions is
comprised of sub-factors. A preliminary sketch of these is
presented below.
-- Economic Risk: This includes the presence and availability
of natural resources; infrastructure; urbanization; human
resources; environment; and drivers of growth. Paradoxically,
higher urbanization is considered a greater risk factor, as
high-density areas are more prone to outbreaks of violence
and political disruption. The worst-rated states are mainly
northern, given their environmental marginality. Kano and
Lagos States, while they are economic centers, are not the
best-rated due to significant problems with infrastructure.
The best-rated states are Ogun, Enugu, and Cross-River. All
of these states have been successful in attracting new
investment.
-- Societal Risk: This is comprised of ethnicity; religion;
and social dynamics. The last of these includes a measure for
income inequality and unemployment, which are thought to
define and exacerbate conflict along the fault lines of
ethnicity and religion. The highest-risk state in this
category is Plateau State, which is marked by
indigene-settler conflicts and ethnic and religious warfare.
Communal conflicts are often driven by youth unemployment,
which is a risk factor in itself. Social consensus is
important in reducing conflict, and is characteristic of
Sokoto and Ekiti States. However, not all socially peaceful
states are ethnically or religiously homogeneous, examples
are Kwara State and the Federal Capital Territory.
LAGOS 00000414 002.2 OF 002
-- Political and Governance Risk: This includes corruption;
local governance; national and party politics; and current
issues. This dimension presents some interesting changes
resulting from the recently-held elections. Before the
elections, the Niger Delta states were considered the highest
risk. However, election-day activities and post-election
public reaction have been such that the Southwest and
Southeast, namely, Enugu and Ekiti, are now considered the
highest risk states. The states that are middle-ranked in
this category are ranked that way because of consistently
poor governance. The lowest-risk states are northern states
such as Bauchi, Katsina, and the Federal Capital Territory,
because they are relatively well-governed. Lagos and Kano
States are democratic but are high-risk states due to the
fact that they are governed by opposition parties.
-- Security Risk: The three sub-factors that constitute
security are crime; communal violence; and law enforcement.
While the prevalence of kidnapping is examined, security is
understood to be broader than this. Three core Delta States,
Rivers, Delta, and Bayelsa, are among the five highest-risk
states. Edo State has the highest risk from conventional
crimes, including bank raids and armed robbery resulting from
limited police capacity. Ondo is currently the highest
security risk state due to violence in the conduct of the
recent elections. Policing is marginally better in the North.
However, there are a greater number of parallel security
companies in the South, which improves the security rating.
5. (U) More information on investment risk across Nigeria can
be found at www.econassociates.com.
LATIMER