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

281513Z Nov 05

UNCLAS SECTION 01 OF 02 LAGOS 001802 
 
SIPDIS 
 
DEPT PASS TO USTR 
 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD KIPR PGOV NI
SUBJECT: NIGERIA: ECONOMIC BRIEFS, OCTOBER/NOVEMBER 2005 
 
 
¶1. (U) Summary:  The GON's single digit inflation target now 
seems a mirage as inflation figures for August rose to 28.2% 
from 26.1% in July.  Experts expect September figures to be 
about 21%.  In the official markets, the naira was stable at 
about N130/$1 as of late October, while parallel market 
rates stood at N138/$1.  The GON made progress in 
privatization with the appointment of preferred bidders for 
Nicon Hilton Hotel and Nicon Insurance; initial payments are 
still due from both bidders.  Banks are making last-minute 
merger moves to beat the CBN's recapitalization directive. 
End summary. 
 
¶2. (U) This economic update includes: 
-- Macroeconomic Overview 
-- Banks Scramble to Beat Recapitalization Deadline 
-- NICON Privatization Completed 
-- Vodacom Pulls out of NITEL Bid 
 
---------------------- 
Macroeconomic Overview 
---------------------- 
 
¶3. (U) Inflation continued its upward trend according to 
Federal Office of Statistics (FOS) figures.  In August, year- 
on-year inflation rose to 28.2% from 26.1% in July, while 
the twelve-month average increased to 15.5% from 14.2%. 
Executives at Financial Derivatives Company (FDC) Limited, a 
Lagos-based economic think-tank, concurred with the double- 
digit figures, estimating the index at 22.3% for August. 
Inflation has been rising, and experts believe inflation 
figures will increase as December approaches. 
 
¶4. (U) The naira remained stable at approximately N130/$1 in 
official markets largely due to Central Bank of Nigeria 
(CBN) intervention in the foreign exchange market.  The CBN 
sold USD 380 million in foreign exchange in October at its 
Dutch Auctions, satisfying 86% of demand.  Meanwhile, 
parallel market rates stood at N138/$1.  Analysts believe 
the CBN may suspend its huge dollar injections as it begins 
the IMF-Nigeria debt buy-back program, expected to deplete 
foreign reserves by about USD 12 billion.  Prior to this, 
average bi-weekly CBN intervention had been about USD 120 
million. 
 
--------------------------------------------- --- 
Banks Scramble to Beat Recapitalization Deadline 
--------------------------------------------- --- 
 
¶5. (SBU) As the December bank recapitalization deadline 
draws near, banks, particularly those yet to merge or be 
acquired, are scrambling to meet the naira 25 billion (USD 
192 million) requirement.  An official of Gulf Bank, a 
marginal bank, confirmed that 11 marginal banks have 
obtained the CBN's pre-merger consent.  These banks include: 
African Express Bank, Assurance Bank, City Express Bank, 
Fortune Bank, Liberty Bank, Metropolitan Bank, Eagle Bank, 
Triumph Bank, Fountain Trust Bank, Societe General Bank, and 
Gulf Bank.  These banks intend to coalesce into a single 
entity known as Alliance Bank.  Gulf Bank had earlier been 
involved in two merger talks, first with First Consolidated 
Bank - a group of five banks and then with Union Bank, a 
first generation bank, both of which broke down. 
 
¶6. (U) According to the CBN, some 69 banks have merged to 
form about 20 banking groups, of which three (UBA, Access 
Bank, and Intercontinental Bank) have received final 
approval to merge and six others (AfriBank Group, IBTC- 
Chartered Group, Diamond Bank, FCMB Group, First Inland 
Bank, and Oceanic Bank) have approval-in-principle. 
 
 
----------------------------- 
NICON Privatization Completed 
----------------------------- 
 
¶7. (U) The GON's Bureau of Public Enterprises (BPE) in 
October completed the sale of NICON Hilton Hotel and Nicon 
Insurance.  The GON's 51% stake in the hotel was sold to 
Capital Leisure and Hospitality (CLH), a consortium of 
companies, including the recently incorporated Transnational 
Corporation of Nigeria, for USD 105 million.  70% of Nicon 
Insurance was sold to Assurance Acquisition Limited (AAL) 
for USD 47 million. 
 
------------------------------ 
Vodacom Pulls out of NITEL Bid 
------------------------------ 
 
¶8. (U) Meanwhile, South Africa's Vodacom has withdrawn its 
bid for the Nigerian Telecommunication Limited (Nitel), also 
up for privatization. Vodacom, which had tendered a joint 
bid with Telkom, a South African Company, claimed its 
withdrawal was based on the GON's decision to sell Nitel 
separately from its mobile arm, M-Tel. However, the BPE 
claims it had always indicated the mobile outfit would be 
sold independently. Industry analysts however believe 
Vodacom's decision may be connected with its ongoing bid to 
acquire V-Mobile. 
 
¶9. (U) This cable was cleared by Embassy Abuja. 
 
Browne