This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 ABUJA 001026 
 
SIPDIS 
 
 
STATE FOR AF/W 
STATE PASS OPIC, TDA, AND EXIM 
STATE PASS USTR 
COMMERCE FOR ITA/MAC 
 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV EAIR EPET NI
SUBJECT: NIGERIA: ECONOMIC ROUNDUP JUNE 13 
 
REF: A. LAGOS 524 
     ¶B. ABUJA 576 
     ¶C. ABUJA 440 
 
 
¶1. (U) This periodic economic report from Abuja and Lagos 
includes: 
--Obasanjo Highlights Economy in Inaugural Speech . . . But 
Disputes Poverty Figures 
--Obasanjo Holds Off Naming Cabinet 
--GON Bans Import of Baryte, Mineral Used for Oil Drilling 
--World Airways Lands in Lagos 
--Parallel Market Exchange Rate Premium Widens 
--Central Bank Buys U.S. Equipment 
 
 
Obasanjo Highlights Economy in Inaugural Speech . . . 
--------------------------------------------- -------- 
¶2. (U) In his May 29 inaugural speech, President Obasanjo 
highlighted corruption, infrastructure, power supply, 
industrialization, agriculture, healthcare, and education as 
key issues for his next term. 
 
 
¶3. (U) On corruption, the President said he would strengthen 
the Independent Corrupt Practices Commission Act to improve 
the handling of corruption cases in court. He pledged to 
construct more roads and better maintain existing ones and 
said his government aims to increase electrical generation to 
at least 10,000 megawatts a day by 2007. (Note: Current 
installed capacity is 6,000 megawatts a day; however, output 
as of January 2003 fluctuated from around 3,000 to 4,000 
megawatts a day. End Note) 
 
 
¶4. (U) Privatization and assistance to small and medium 
enterprises would be the focus for industrialization policy, 
Obasanjo stated. For the agricultural sector, the President 
said achieving food security through increased crop and 
livestock productivity would be the priority. The President 
also stressed the importance of better marketing strategies 
to improve returns for farmers. 
 
 
¶5. (U) The President said more resources will go to hospitals 
and healthcare delivery systems, while in education the GON 
will focus on refurbishing educational institutions and 
implementing the World Bank's $101 million Universal Basic 
Education Project. 
 
 
. . . But Disputes Poverty Figures 
---------------------------------- 
¶6. (U) At a May 28 Children's Day event in Abuja, President 
Obasanjo disputed claims that 70 percent of Nigerians are 
living in poverty, declaring that such claims by economists 
do not reflect reality. Obasanjo said, "I was told that in 
1992 it was 42 percent of Nigerians and in 1996, it jumped to 
70 percent. I don't believe it . . . but if I had been 
informed that it was 42 per cent before the (July 2000 to 
October 2001 IMF) Structural Adjustment Program, and after 
SAP it jumped, I would gladly have accepted it." 
 
 
¶7. (U) While contesting the poverty figure, Obasanjo 
acknowledged "intolerable poverty among our people both in 
rural and urban areas." However, he said that despite rural 
poverty, "people in villages eat relatively well and also 
have schools to send their children to, have feeder roads and 
dispensaries at their disposal at certain levels." 
 
 
¶8. (SBU) Comment: Obasanjo's questioning of poverty 
statistics and readiness to blame the IMF was an unfortunate 
statement made for domestic political consumption. Coming on 
the eve of his inauguration, Obasanjo may have been 
attempting to shield his previous administration from blame 
for the Nigerian economy's poor performance and lack of 
progress in poverty alleviation. The attempt to shift blame 
is understandable but not very helpful. However, while 
Obasanjo may disagree with the actual poverty figures and 
grumble about the IMF, he knows that poverty is a huge 
problem and economic growth is a must. The priorities he 
outlined in his inaugural speech are useful steps to 
alleviate poverty and in line with the Mission's economic 
policy recommendations. End Comment. 
 
 
Obasanjo Holds Off Naming Cabinet 
--------------------------------- 
¶9. (U) The President said he will hold off on formally 
announcing his new Cabinet until the National Assembly 
reconvenes on June 24. Meanwhile, Abuja is buzzing with 
speculation on who will get what roles on Obasanjo's new 
economic team. 
 
 
¶10. (SBU) Ngozi Okonjo-Iweala, a Vice President at the World 
Bank, is being considered for the top position at the 
Ministry of Finance. Okonjo-Iweala, educated at Harvard and 
MIT, has been with the World Bank since 1982. In 2000, she 
took time off from the World Bank to assist President 
Obasanjo in establishing a Debt Management Office. Mission 
contacts say Okonjo-Iweala has asked Obasanjo to appoint 
Charles C. Soludo as Chief Economic Advisor. Soludo, now 
Executive Director of the African Institute for Applied 
Economics, has consulted extensively for multilateral 
development organizations as well as USAID. Magnus Kpakol, 
the President's former Chief Economic Advisor, has confirmed 
that he will hold a new position devoted exclusively to 
poverty alleviation. 
 
 
¶11. (SBU) Saidu Samaila Sambawa, who lost the Kebbi State 
governor's race as the PDP's candidate, appears to be slated 
to head the Ministry of Agriculture. Sambawa is an 
accountant, banker, and international businessman who holds a 
Master's Degree in Business Administration from the 
University of Wales. Recent press reports, however, indicate 
that Sambawa may be upstaged, as PDP Chairman Audu Ogbeh is 
rumored to be interested in the job. 
 
 
¶12. (SBU) Julius Ihonvbere is rumored as the new Minister of 
Petroleum Resources. The new portfolio would oversee Nigerian 
National Petroleum Corporation (NNPC) and manage the 
country's participation in OPEC. Ihonvbere is a political 
economist who worked from 1999 to 2002 at the Ford Foundation 
in New York. He returned to Nigeria June 2002 and was 
appointed head of Nigeria's Bitumen Implementation Commission. 
 
 
GON Bans Import of Baryte, Mineral Used for Oil Drilling 
--------------------------------------------- ------------ 
¶13. (U) On May 14, GON Minister for Solid Minerals Modupe 
Adelaja announced an import ban on baryte, a mineral form of 
barium sulphate. Baryte is used in oil well drilling to 
counter-act the force of oil and gas when released from the 
ground and prevent their explosion. The mineral is abundant 
throughout Nigeria, according to the Ministry for Solid 
Minerals, and is mined in small quantities. 
 
 
¶14. (SBU) Oil industry contacts tell Econoffs the ban has 
actually been in effect for a year. They say that for a fee 
they have been able to get exemptions from the ban so that 
they can import enough baryte to continue drilling. 
 
 
World Airways Lands in Lagos 
---------------------------- 
¶15. (U) World Airways, inaugural flight from Atlanta arrived 
in Lagos May 29, ending the Mission's five-month advocacy 
campaign on the airline's behalf to ensure the GON honored 
our Open Skies Agreement (Refs. A and B). At the arrival 
ceremony, Consul General Hinson-Jones highlighted the U.S. 
role in bolstering safety and security at Nigerian airports 
and lauded the importance of improved passenger and cargo 
links between the two countries. World Airways officials 
commended Mission advocacy efforts during the event. 
 
 
¶16. (SBU) Comment: World Airways' and its booking agent 
Ritetime Travel's inexperience in Nigeria complicated their 
efforts to obtain landing rights. In early January, World 
advertised service from the United States to Nigeria without 
consulting Minister of Aviation Kema Chikwe. Slighted by the 
presumptive announcement, Chikwe stalled the airline's 
approval. The logjam was broken only when Ambassador Jeter 
raised the matter with President Obasanjo. World Airways--now 
positioned to profit from the lucrative U.S.-Nigeria cargo 
and passenger routes, will fly weekly from New York, Atlanta, 
and Houston into Lagos. End Comment. (Note: Several press 
reports indicate that Kema Chikwe will not return to the 
Ministry of Aviation, probably true because she demonstrated 
very little political drawing power in her home state of Imo. 
End Note.) 
 
 
Parallel Market Exchange Rate Premium Widens 
-------------------------------------------- 
¶17. (U) The Central Bank reports that the naira held steady 
against the dollar in April, falling by 8 kobo to 127.77 
naira per dollar from the March average. Meanwhile, the naira 
depreciated by 1.75 naira to the dollar in the parallel 
market, falling to 138.75. That depreciation widened the 
parallel market premium from 7.6 to 8.5 percent. The naira 
held steady against the dollar in May, closing the month at 
127.82 in the official market and 139.50 in the parallel 
market. Meanwhile, the Central Bank reports that external 
reserves stood at $9.4 billion at the end of April, up from 
7.4 billion just six months ago. 
¶18. Comment: In keeping steady with the U.S. dollar, the 
naira has weakened against the euro, falling from about 137 
naira to the euro at the beginning of March to about 152 by 
the end of May. As a result, imported European goods are 
noticeably more expensive. It is unclear to what extent 
inflation, down to a 10.6 percent yearly rate in April, will 
reflect these price increases. Meanwhile, U.S. suppliers may 
exploit a price advantage over their European competitors if 
exchange rates remain steady. End Comment. 
Central Bank Buys U.S. Equipment 
-------------------------------- 
¶19. (U) In April 2003, Currency Systems International (CSI), 
a Dallas-based subsidiary of U.K.-based currency printing 
company De La Rue Systems, sold three high-speed banknote 
sorting machines worth $3.43 million to the Central Bank of 
Nigeria. CSI hopes for more sales to the Central Bank and 
plans to provide service and training contracts to the 
Central Bank in the near future. In making the sale, CSI 
broke a 13-year monopoly held by a German firm on sales of 
printing and sorting equipment to the CBN. 
 
 
¶20. (SBU) CSI and De La Rue's Nigerian representatives, 
Interprods Ltd. of Lagos, tell Econoff that the Central Bank 
is poised to acquire more printing and sorting equipment 
later this year. In addition to banknote printing and sorting 
equipment, the Central Bank would require new coin pressing 
and sorting equipment that Interprods says it may source from 
the United States. 
 
 
¶21. (SBU) Comment: Nigeria is a cash-based economy, and the 
500 naira note is its highest denomination. This note is 
worth approximately four dollars, making large-scale 
transactions very cumbersome (Ref. A). A 1,000 naira note 
would simplify things to a degree. The Central Bank had plans 
to introduce such a note, but recently scrapped the idea 
citing inopportune economic conditions. For now, economists' 
concerns that a 1,000 naira note could encourage inflation 
apparently have bested consumers' demands for convenience, 
but the issue will likely be revisited in the next few years. 
End Comment. 
JETER