VZCZCXRO8683
PP RUEHMA RUEHPA
DE RUEHUJA #2725/01 2861337
ZNR UUUUU ZZH
P 131337Z OCT 06
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7491
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 5306
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 04 ABUJA 002725 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR AF/W (SILSKI) AND AF/EPS (POTASH) 
DEPARTMENT PASS TO USTR (HAMILTON) 
 
E.O. 12598: N/A 
TAGS: ETRD AGOA ECON NI
SUBJECT: AGOA ELIGIBILITY REVIEW - NIGERIA 
 
REF: STATE 163056 
 
¶1. (U) Country:  Nigeria 
Current AGOA Status:  Eligible 
 
¶2. (U) Country Background Summary:  Estimated population of 140 
million.  2005 GNI was $74.2 billion; 2005 GNI per capita was $560. 
(World Bank 2006 Data)  Nigeria completed civilian-run national and 
state elections in 2003 that were marred by irregularities and fraud 
and continued to struggle to consolidate democracy.  General 
elections are slated for 2007 marking a hand-over from civilian to 
civilian rule, but the electoral commission seems unprepared.  The 
government continues to make slow progress toward developing an open 
economy, minimizing government interference, and promoting free 
market principles. 
 
Comments on Eligibility Requirements Market-based Economy 
-------- -------------- ------------ ------------ ------- 
 
¶3. (SBU) Major Strengths Identified:  The government committed to 
transitioning from state directed economy to one driven by market 
forces.  The economy expanded by 6% due to an improved macroeconomic 
environment.  "Wholesale Dutch Auction" system of foreign exchange 
trading was introduced early 2006, and has led to a sharp reduction 
in the spread between the official and parallel market exchange 
rates.  Nigeria received debt relief from the Paris Club during the 
fourth quarter of 2005 resulting in a debt write-off of about $18 
billion.  The government is also nearly finished with plans to pay 
its London Club debt.  The government has a Policy Support 
Instrument (PSI) with the IMF, which is a new approach to IMF 
monitoring.  In September 2006, the IMF assessment team confirmed 
that Nigeria met all the benchmarks for the review period.  Power 
sector reforms are ongoing.  The unbundling of the National Electric 
Power Authority (NEPA) has been concluded.  A holding company, Power 
Holding Company (PHCN) has taken over the assets and liabilities of 
NEPA, while an electricity regulatory commission has been 
established.  PHCN is made up of 18 companies.  The Bureau of Public 
Enterprises (BPE) plans to privatize all the companies and enable 
private investment in generation and distribution.  Port concessions 
are moving forward and an international company was awarded the 
concession to manage the country's largest port--Apapa Port in 
Lagos.  The Nigerian Communications Commission (NCC) introduced the 
unified licensing regime in the first quarter of 2006 to further 
deregulation and spur competition.  Nigeria Telecommunications Ltd 
(NITEL) privatization was concluded in July 2006 though it seems 
unclear if the preferred bidder, Transcorp, has made the full 
payment.  Negotiations are yet to be concluded between BPE and 
Transcorp but a payment of $750 million has been made.  Nigeria is a 
WTO member.  Civil Service reform is progressing with the 
monetization of in-kind benefits implementation and downsizing of 
33,000 public servants is expected to be completed before the end of 
¶2006.  Nigeria launched National Economic Empowerment & Development 
Strategy (NEEDS), a medium-term economic reform program (2003-2007) 
focused on privatization, good governance, macroeconomic stability, 
anti-corruption, and public service reforms.  Savings from excess 
monies from crude oil sales above the $35 benchmark price have been 
put into a special reserve account, rather than used to fuel fiscal 
expansion.  The government budget process is taking its rightful 
position as an economic policy and management tool.  The budget 
deficit has been kept in check.  All three tiers of government are 
adhering to fiscal discipline with a consolidated surplus of 10% in 
¶2004.  New Chart of Accounts introduced in 2005.  Banking reforms 
are ongoing.  Central Bank of Nigeria's directive that banks 
recapitalize from the Naira 2 billion to Naira 25 billion by 
December 31, 2005 was successfully completed, leading to a reduction 
in the number of banks from 89 to 25 banking groups.  Pension and 
insurance reform also moving forward. 
 
¶4. (SBU) Major Issues/Problems Identified: 
Huge and inefficient public sector dominates and inhibits faster 
development of the formal sector.  Much of the nation's wealth is 
concentrated in the hands of tiny military, political, and 
commercial elites through corruption and non-transparent government 
contracting practices.  The banking system is poorly performing 
intermediation, therefore impeding small and medium investors. 
Regulatory and tax regimes are arbitrarily enforced.  Regulatory 
bodies are weak and ineffective.  Oil and gas receipts account for 
80% of government revenues and over 95% of exports.  Fuel subsidies 
are not budgeted and nontransparent; the Nigerian National Petroleum 
Corporation (NNPC) directly accesses national treasury; potential 
for corruption and abuse are enormous.  Economic data and statistics 
are of unreliable quality and availability.  Regulatory bodies are 
weak and ineffective.  Fuel prices continue to be regulated and 
subsidized.  Inadequate and unreliable infrastructure is a major 
barrier to private sector activity.  Nigeria faces growing pressure 
for looser fiscal and monetary policy.  The Intellectual Property 
Rights Commission (IPRC) was not established as announced.  The 1978 
Land Use Act mandates state ownership of land; private use of land 
 
ABUJA 00002725  002 OF 004 
 
 
is restricted to a 99-year lease, and subject to government 
confiscation without a Certificate of Occupancy or Governor's 
consent.  Conveyance of land requires high level government 
approval, promoting corruption and inhibiting property transactions. 
 
 
Political Reforms/Rule of Law/Anti-Corruption 
--------- ------------ -- ------------------- 
 
¶5. (SBU) Major Strengths Identified: 
Elections held in 2003 for some local governments, state governors 
and assemblies, and national legislators, and the President.  The 
elected civilian government is in its seventh year.  Thirty 
political parties participated in 2003 elections.  There was 
progress recognizing political pluralism, and establishing the right 
to fair trial and equal protection under law, rights guaranteed 
constitutionally.  Nigerian Supreme Court made landmark decisions in 
early 2002 affirming its role as arbiter of the national 
constitution.  Nigeria signed transparency and anti-corruption 
agreement with the United States and other G-8 members at the Sea 
Island Summit in 2004. It has established programs to combat 
corruption, many of which receive support from the United States and 
other donors. 
The Economic and Financial Crimes Commission (EFCC) has seized $5 
billion in assets from corruption cases since it was established 
three years ago, arresting several high level officials.  In 
December 2005, the governor of Bayelsa State in south-south Nigeria 
was impeached for money laundering and misappropriation of funds. 
He is currently facing trial.  The Inspector-General of Police and 
the Minister of Education were fired for corruption.  The Senate 
President was removed from his post for corruption, though he 
retained his Senate seat.  The EFCC is investigating ongoing 
corruption charges against state governors and their associates. 
The top levels at the Customs Administration were replaced on 
corruption charges. 
 
¶6. (SBU) Major Issues/Problems Identified: 
Communal violence continues, especially the latter in the oil-rich 
Niger Delta.  The elections of 2003 were married by serious 
irregularities, fraud, with violence in some areas.  The Independent 
National Electoral Commission (INEC), the body charged with the 
conduct of elections, is not independent, and argued in court 
throughout 2004-2005 that it need not be independent.  Public 
opinion is that the INEC is not prepared for the 2007 general 
elections.  Judges are subject to both bribery and intimidation, if 
not outright threats.  Corruption remains an overwhelming problem. 
To date there have been no convictions of any high-level official 
for corruption.  Use of militias and vigilante groups by politicians 
continues.  The government remains unable to guarantee citizens the 
right to a speedy and fair trial.  The government has failed to 
implement some key court decisions.  The judicial system is weak and 
in need of serious reforms.  Excessive violence, lethal force, and 
corruption at police and military roadblocks and checkpoints 
continues, despite the Acting Inspector-General of Police's 
announcement in January 2005 that police roadblocks would be 
eliminated.  Prison and detention conditions remain harsh and life 
threatening.  Some prisons held 200 to 300 percent more persons than 
their designed capacity.  The failure to curb oil bunkering fuels 
corruption, arms trafficking and political instability. 
 
 
Elimination of barriers to U.S. Trade and Investment 
----------- -- -------- -- ---- ----- --- ---------- 
 
¶7. (SBU) Major Strengths Identified: 
A TIFA with the U.S. provides a mechanism to address trade and 
investment issues.  Nigeria is a top destination of U.S. investment 
in Africa, due to investment in the petroleum sector.  U.S. exports 
to Nigeria rose by about 4% in 2005 over 2004.  In the first seven 
months of 2006 U.S. exports increased 35% over the same period in 
¶2005. 
 
¶8. (SBU) Major Problems/Issues Identified: 
Multiple bans in violation of WTO rules in the last three years have 
affected imports of many agricultural products.  The arbitrary bans 
encourage smuggling.  Import bans accompanied by sole source 
importation rights to favorite partners have impeded competition. 
Comprehensive trade reform by adoption of the ECOWAS Common External 
Tariff was implemented in the last quarter of 2005.  However, trade 
and investment policies are frequently changed, suspended, cancelled 
or implemented inconsistently.  Some U.S. firms with contracts with 
the government face consistent problems receiving timely payments. 
No progress has been made as the result of TIFA negotiations. 
Negotiators report that the President ultimately makes decisions on 
trade and investment issues.  The Nigerian government procurement 
process lacks transparency.  Nigeria's Cabotage Law is a barrier to 
trade and investment and has compelled U.S. firms to exit Nigeria. 
In the oil and gas sector Nigeria is imposing or threatening to 
 
ABUJA 00002725  003 OF 004 
 
 
impose requirements to invest in power production or refining, in an 
attempt to force investment in unprofitable sectors.  The 
availability of fuel import subsidies are limited to NNPC, forcing 
out potential competitors in the downstream fuel market.  Local 
content requirements impose additional costs in investments.  Across 
several sectors, the government employs predatory negotiating 
tactics, including threats to access to inputs, customs and other 
legal approval processes, and transferring contracts to entities 
that cannot uphold contract terms.  Foreign Exchange repatriation 
regulations are enforced arbitrarily.  Access to imported inputs 
under the Manufacturers-in-Bond Scheme is suspended, highly 
politicized and is available only by Presidential directive. 
 
Poverty Reduction 
----------------- 
 
¶9. (SBU) Major Strengths Identified:  National Planning Commission 
finalized NEEDS, Nigeria's homegrown Poverty Reduction Strategy. 
NEEDS is due for review in 2007.  The National Poverty Eradication 
Program (NAPEP) is being implemented at the local government level, 
and focusing on micro-enterprise development and other programs. 
the National Assembly appropriated over Naira 100bn for spending 
towards Millennium Development Goals in Budget 2006 
 
¶10. (SBU) Major Issues/Problems Identified:  The government poverty 
strategy does not clearly link goals and methods; serious concerns 
remain about fiscal transparency; human capacity for project 
implementation is weak.  The government is implementing the poverty 
program slowly. 
 
Workers' Rights/Child Labor/Human Rights 
---------------------------------------- 
 
¶11. (SBU) Major Strengths Identified:  Improvements in some areas of 
human rights, including the arrests of several traffickers of 
persons; yet serious problems remain, such as continued lack of 
accountability for past abuses.  The Constitution provides for 
freedom of religion, and the government generally respects that 
right, although some state governments place restrictions on freedom 
of religion.  The Nigerian Constitution protects the right of 
association and the right to organize and bargain collectively, but 
statutory restrictions remain in place.  In June 2005, a court 
struck down legislation that required a police permit for all public 
rallies and processions.  Nigerian law prohibits forced or bonded 
labor, forbids the employment of children younger than age 15 in 
commerce and industry, and restricts other child labor to home-based 
agricultural or domestic work for a maximum of eight hours a day. 
All known political prisoners and most known political detainees 
have been released.  Security forces still commit human rights 
violations, but these no longer appear to be systematic or 
officially sanctioned.  Workers, except members of armed forces, 
police, and employees designated essential by Government, may join 
trade unions and strike, but reasons for striking are limited.  In 
2002, President Obasanjo signed the instruments of ratification for 
International Labor Organization (ILO) convention 182, Worst Forms 
of Child Labor; Convention 138, Minimum age for Employment; and 
Convention 111, Equality of Occupation.  It ratified ILO convention 
87 on the Freedom of Association and Convention 98 on the Right to 
Organize and Collective Bargaining.  The government has also 
ratified ILO conventions on forced labor.  Worker rights and child 
labor laws have been enacted, but to date the Child Rights Act has 
only been ratified by six states.  New legislation was passed in 
2003 outlawing human trafficking, and the National Agency for the 
Prohibition of Trafficking in Persons (NAPTIP) was established. 
 
¶12. (SBU) Major Issues/Problems Identified: 
Most major social indicators remain weak; for example, under-5 child 
mortality is at an alarmingly high level of 20 percent.  Domestic 
violence and discrimination against women remains widespread. 
Outbreaks of violence and community unrest in the oil-producing 
Niger Delta caused occasional disruption in Nigeria's oil 
production.  Army troops killed nearly 200 unarmed civilians in 
October 2001 in Benue state, but to date there has been no 
accountability for the incident.  Police and security forces 
continue to use excessive and sometimes lethal force to beat 
protesters, suspects, detainees and convicts, and to use arbitrary 
arrest and detention.  Prolonged pretrial detention remains a 
problem.  There exist no laws that prohibit retribution against 
strikers.  The Trade Unions Act does not ensure workers right to 
form and join unions of their own choosing, deems all registered 
trade unions to be affiliated with the central labor organization, 
and violates the ILO convention on the Right of Association.  The 
Trade Unions (Amendment) Decree of 1996 makes check-off payment of 
dues conditional on a "no-strike" clause during the lifetime of the 
collective agreement.  The Trade Unions Amendment Act of March 2005 
criminalizes meetings between labor and civil society organizations 
and bans nation-wide strikes on any issue but service conditions. 
The Act ended the Nigerian Labor Congress' status as the sole, 
 
ABUJA 00002725  004 OF 004 
 
 
central labor organization, and the Trade Union Congress has yet to 
receive official federal government recognition.  While 
decentralization may seem better for the right to form and join 
unions, it has weakened the labor movement in Nigeria.  Labor rights 
have been limited by targeted layoffs and terminations of labor 
activists, by intimidation to press workers to leave unions, and by 
the increased use of casual labor, especially in the oil industry. 
Payment of salaries to government workers is often several months in 
arrears; workers who protest or strike over arrearages face 
dismissals, threats of layoffs, and pressure to agree to lowered 
minimum wages.  The government places limits on freedom of assembly 
and association, citing security concerns.  Trafficking in persons 
for purposes of prostitution and forced labor is a problem, 
allegedly with collusion of government officials.  Some persons 
including children are subjected to forced labor, and child labor is 
rising.  The relationship between the government and the National 
Labor Congress (NLC) remains severely strained since 2003 because of 
the President's determination to deregulate fuel prices, and the 
trade union's use of general strikes to protest price hikes. 
 
International Terrorism/U.S. National Security 
------------- -------------- -------- -------- 
 
¶13. (SBU) Major Strengths Identified:  President Obasanjo has taken 
personal action in building West African support for anti-terrorism 
coalition activities.  In June 2006, Nigeria was de-listed from the 
Financial Action Task Force list of Non-Cooperative Countries and 
Entities.  The Nigerian Financial Intelligence Unit, Economic and 
Financial Crimes Commission (EFCC), Securities and Exchange 
Commission, Central Bank and other regulators in the financial 
services industry are collaborating to identify and freeze terrorist 
assets in Nigeria. 
 
¶14.  (SBU) Major Issues/Problems Identified:  None. 
 
FUREY