VZCZCXRO4928
PP RUEHMA RUEHPA
DE RUEHUJA #1438/01 1871139
ZNR UUUUU ZZH
P 061139Z JUL 07
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 0154
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 7335
RUEHWR/AMEMBASSY WARSAW 0422
RUEHCD/AMCONSUL CIUDAD JUAREZ 0423
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 001438 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT PASS TO USTR (AGAMA) 
PASS TO OPIC (ANTONY IERONIMO AND DEBRA ERB) 
DEPT OF TREASURY FOR DPETERS 
 
E.O. 12598: N/A 
TAGS: EFIN ECON PGOV NI
SUBJECT: NIGERIA'S VISION--AFRICA'S FINANCIAL CENTER 
 
Ref: Abuja 887 
 
ABUJA 00001438  001.2 OF 002 
 
 
¶1. Summary. On June 18-20, the Central Bank of Nigeria (CBN) 
unveiled it vision for Nigeria's financial future, presenting a 
report titled "FSS 2020, Building Africa's Center of Choice".  The 
FSS 2020 vision refers to the potential for Nigeria to emerge as the 
top economy in Africa and the 20th largest in the world by 2020, and 
seeks to develop Lagos into a financial center and capital market 
comparable to Hong Kong, London and New York.  The vision includes 
developing the Lekki Financial Corridor east of Lagos as an 
international financial services center with its own infrastructure 
managed to international standards.  To support this vision, Nigeria 
will need to achieve impressive growth in GDP, foreign exchange 
reserves, banking, and insurance and pension reforms.  President 
Yar'Adua has identified five key areas his administration will 
pursue to support this vision, including security, rule of law, 
infrastructure, stable exchange rates, and transparency. Major 
changes need to be made to the Land Use Act to facilitate land 
ownership, provision of housing and mortgage financing are also 
promised.  The GON will need to address several challenges including 
maintaining political stability, improving institutional capacity, 
addressing trade policy, and providing infrastructure. End Summary. 
 
 
How it all began 
---------------- 
 
¶2. Financial System Strategy 2020 (FSS 2020) began in August 2006 
when Charles Chukwuma Soludo, Central Bank Governor, organized a 
technical committee to draft a long-term framework to make the 
Nigerian economy one of the largest in the world by 2020.  On June 
18-20, the CBN hosted a conference to present the plan's main aim of 
creating a financial system that will enable Nigeria to emerge as 
the largest economy in Africa and the 20th largest in the world.  A 
wide spectrum of people attended from domestic and international 
financial institutions, international developmental agencies, 
investment banks, and funds from both the domestic and international 
markets that discussed financial system reform, the economy, 
strengthening local markets, building an international financial 
services center, and supporting small and medium enterprises (SMEs). 
 Breakout sessions addressed the legal framework, regulation, 
macroeconomic and monetary policy, human capital development, 
ICT/payment systems, financial markets, credit mortgage and 
insurance. 
 
The Vision 
---------- 
 
¶3. Governor Saludo explained that FSS 2020 aimed to achieve Goldman 
Sach's prediction that Nigeria would be among the next eleven 
countries (dubbed the N-11) to surpass Italy in GDP by 2015 
(reftel).  A robust and vibrant financial sector would be needed to 
power Nigeria's new economy and to integrate Africa's financial 
systems.  Before 2004, the financial system was characterized by low 
aggregate levels of banking to the domestic economy, systemic 
bailouts of banks by the CBN, an oligopolistic structure where 10 
out of 89 banks accounted for over 50% of total banking assets. 
Nigeria had been primarily a cash based society, with a weak 
insurance industry, non-existent pension funds and a shallow stock 
market. Soludo had worked to recapitalize and consolidate banking, 
insurance and capital markets, to introduce micro-finance banks and 
convert community banks.  He had taken steps to establish the Africa 
Finance Corporation within the CBN and to reform pension funds to 
generate long term investment funds.  Further, Nigeria has seen its 
GDP increase to $142 billion and per capital income to $1,050 in 
¶2006. 
 
International Financial Services Center (IFSC) 
--------------------------------------------- - 
 
¶4. In the medium-to-long term Nigeria needs to strengthen the 
domestic financial markets and further integrate with external 
financial markets before becoming an international financial 
services center.  To strengthen domestic markets the country will 
need to develop capacity, develop non-oil sectors, integrate 
informal and formal financial sectors, and improve access to credit. 
 To integrate with external financial markets the GON will need to 
create links to the international financial markets, move toward 
currency convertibility while maintaining macroeconomic stability, 
maintain healthy foreign exchange reserves, and unified and 
liberalize trade and commercial laws among ECOWAS and African Union 
countries.  FSS 2020 will need a public- private partnership (PPP) 
approach with strong support in government institutions. 
 
ABUJA 00001438  002.2 OF 002 
 
 
 
¶5.  The GON hopes to develop the Lekki Peninsula east of Lagos as 
the Lekki Financial Corridor (LFC).  To attract international 
financial institutions the LFC will be set up as an independent 
corporation and municipality responsible for its own implementation, 
strategy, marketing and management with funding support from the 
government, private sector and international development agencies. 
The LFC will be run by a board of directors comprised of the heads 
of the major regulatory bodies in the country with a designated 
head/mayor.  The LFC is to establish a legal and regulatory 
framework based on internationally recognized standards and 
jurisprudence.  It will have liberal requirements on opening of 
capital accounts and currency convertibility, 100% foreign 
ownership, with an internationally competitive tax rate on income 
and profits. 
Implementation is slated for three phases.  Phase 1, from June 
2007-December 2012, will concentrate on the legal framework and 
beginning the physical development of the site.  Phase 2, January 
2013- December 2016 will focus on global branding, integration of 
African financial markets, development of the physical site for the 
LFC and review of strategic objectives.  Phase 3, January 2017 to 
December 2020 will concentrate on final preparations for LFC. 
 
President Yar"Adua's footprint 
------------------------------ 
 
¶6.  President Yar'Adua opened the conference and supported the 
vision of Nigeria as the financial hub of Africa.  As at the recent 
G8 summit, he said his top three priorities were, "the economy 
first, the economy second, and the economy third".  For Nigeria to 
prosper, it needed a sound financial network.  He identified five 
key areas that his administration would pursue: the security of 
lives and property, respect for the rule of law, infrastructure with 
an emphasis on power, a stable exchange rate regime, and consistency 
in transparency and policy. 
 
Can Nigeria compete? 
------------------------------------------ 
 
¶7. Creating a financial and capital market comparable to the premier 
financial centers of the world is astonishingly ambitious. Nigeria 
does have several factors to support this ambition. One in five or 
20% of all Africans are Nigerian. With the consolidation of the 
banking sector, eleven of the twelve companies in West Africa with a 
market capitalization of over $1 billion are Nigerian and seven are 
banks. Twenty-nine of the 50 largest companies in sub-Saharan Africa 
(excluding South Africa) are Nigerian and 14 of these are banks. 
Nigeria's GDP is over 60% of the total GDP of the 16 countries that 
make up the Economic Community of West African States (ECOWAS). 
Nigeria is rated BB- (by Fitch and Standard & Poors) with external 
reserves of over $40 billion. External debt is a low $3.3 billion. 
 
Challenges 
------------- 
 
¶8. On the other hand the challenges are enormous.  Nigeria will need 
to establish political stability through a succession of governments 
with real legitimacy. The LFC board must be both capable and 
empowered with support from relevant institutions and adequate 
funding. The lack of infrastructure is a major obstacle. Nigeria's 
financial sector still has a long way to go in becoming more 
integrated with domestic economy, let alone the African economy. 
Nigeria and the region will need much more open trade policies, as 
financial flows tend to follow trade.  Human resources will be 
another issue and Nigeria will need to upgrade the skills and 
experience for a broad range of employees in the finance and 
ancillary sectors. Another contentious issue is the need to reform 
the Land Use Act of 1978.  Changes in the Act are crucial for the 
full development of the banking sector.  The present structure of 
the act makes it virtually impossible to use and or transfer land 
and property as security because of its complexity.  The efficiency 
of land registration, surveys and valuation need improvement. 
 
CAMPBELL