VZCZCXRO1222
RR RUEHMA RUEHPA
DE RUEHOS #0186/01 1060744
ZNR UUUUU ZZH
R 160744Z APR 09
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 0700
INFO RUEHUJA/AMEMBASSY ABUJA 0304
RUEHOR/AMEMBASSY GABORONE 0080
RUEHGB/AMEMBASSY BAGHDAD 0014
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHINGTON DC

UNCLAS SECTION 01 OF 02 LAGOS 000186 
 
SENSITIVE 
SIPDIS 
 
FOR GABORONE PASS PDROUIN 
FOR BAGHDAD PASS DMCCULLOUGH 
STATE PASS OPIC FOR DERB, ZHAN, MSTUCKART, JEDWARDS 
STATE PASS TDA FOR LFITTS, PMARIN 
STATE PASS USAID FOR NFREEMAN, GBERTOLIN, GWEYNAND 
STATE PASS EXIM FOR JRICHTER, KJACKSON 
DOC FOR 3317/ITA/OA/KBURRESS 
DOC FOR 3310/USFC/OIO/ANESA/DHARRIS 
DOC FOR USPTO-PAUL SALMON 
TREASURY FOR DFIELDS, AIERONIMO, RHALL, DPETERS 
 
E.O. 12958: N/A 
TAGS: EFIN EFIN EAID NI
SUBJECT: NIGERIA: AMBASSADOR DISCUSSES ECONOMIC OUTLOOK WITH 
NIGERIA'S PRIVATE SECTOR 
 
Ref: A.) Lagos 154 
 
¶1. (U) Summary: In her meetings with Bank PHB and Coca-Cola on March 
23 and March 25, Ambassador engaged Bank PHB and Coca-Cola 
executives on their outlook on the economy. Bank PHB Managing 
Director expressed confidence in the Central Bank of Nigeria's (CBN) 
recent monetary policies, and in the competency of CBN Governor 
Charles Soludo to shepherd the banking and financial sector through 
this turbulent time.  In particular, he argued that a new framework, 
made of a better regulatory structure and improved industry 
standards and practices, has crystallized in the banking and 
financial sector, instilling a sense of confidence that Nigeria can 
and will weather the financial and economic crisis. Coca-Cola, 
however, expressed reservation about the CBN's deposit and lending 
interest rates cap, arguing that the cap would encourage 
under-the-table fees and activities by lending banks.  Coca-Cola 
also informed Ambassador about the added costs of doing business in 
Nigeria, namely the Government of Nigeria's (GON) partial trade 
liberalization system and its penchant for imposing arbitrary levies 
on companies. End summary. 
 
Bank PHB Optimistic on Soludo and Economic Outlook 
--------------------------------------------- ----- 
 
¶2. (SBU) Ambassador met with Francis Atuche, Managing Director of 
Bank PHB, on March 23 to understand the banking industry's 
perception of Central Bank of Nigeria (CBN) Governor Charles Soludo 
and his possible re-appointment in May 2009 and to discuss Nigeria's 
economic outlook. Atuche told Ambassador that the three hour 
consultation meeting on March 21 between Nigerian bank Managing 
Directors and Soludo was productive, resulting in an agreement 
effectively between the banking sector and the CBN on a 15 percent 
and 22 percent cap on deposit and lending interest rates for the 
industry (Ref A). Atuche credited Soludo for consulting with the 
private sector on crafting policy solutions to temper the effects of 
the global financial crisis and economic slow down on Nigeria.  He 
also expressed confidence in Soludo's competency and intention to 
support the Nigerian banking sector. (Comment: While Atuche did not 
explicitly endorse Soludo's re-appointment, he neither dismissed nor 
criticized the idea, which in itself could be construed as a vote of 
confidence coming from his bank. End comment) 
 
¶3. (SBU) Atuche believes that Nigeria will weather the financial 
crisis given the new regulatory and industry framework and Nigeria's 
relative insularity from the global financial system. According to 
Atuche, the CBN under Soludo's leadership has implemented sound 
monetary policies, which recently included the installation of an 
expanded discount window and the injection of foreign reserve funds 
into the system to boost liquidity. While acknowledging that the 
interest rate cap could lead to under-the-table banking activities 
and practices, he said the fixed two percent fee cap should prevent 
the problem from getting out of hand.  He also said that the banking 
sector, under CBN management, has raised industry standards and 
practices over the years. Altogether, better regulatory structure 
and improving industry performance have resulted in a fundamental 
change to the system.  Atuche did concede that the overall health of 
the banking and financial sector and economic outlook for Nigeria 
will depend largely on what transpires on the global stage, which in 
turn is linked to the U.S. market and economy.  However, he believes 
that Soludo will help shepherd the industry through the economic 
hardship. 
 
Interest Rates Cap Will Not Help 
-------------------------------- 
 
¶4. (SBU) In a meeting with the Ambassador on March 25, Coca-Cola and 
its Nigerian bottling subsidiaries' executives alerted Ambassador to 
the adverse effects that the interest rate cap could have on the 
manufacturing sector.  Coca-Cola executives contended that, even 
with the fixed two percent fee cap, banks would find ways to add 
extra fees under-the-table. As a result, they believe that the new 
interest rate regime would backfire. The Coca-Cola executives also 
told Ambassador that Coca-Cola's distributors, which are small to 
 
LAGOS 00000186  002 OF 002 
 
 
medium size, currently face on average a 30 percent interest rate 
for overdrafts while its corporate partners enjoy on average an 18 
percent interest rate for overdrafts.  The high 30 percent overdraft 
charge is detrimental for distributors, especially in the midst of 
the credit crunch and liquidity crisis. (Note: Coca-Cola has over 
215,000 distributors and employs about 6,200 employees in Nigeria. 
End note) 
 
Companies Suffer From Arbitrary 
Levies and Trade Restrictions 
------------------------------- 
 
¶5. (SBU) Coca-Cola executives told Ambassador that arbitrary levies 
and taxes imposed by the Government of Nigeria are posing huge 
problems for the manufacturing industry.  As examples, they talked 
about the corporate social responsibility bill that proposes a 3.5 
percent levy and an energy bill that also proposes a 3 percent levy 
on a company's before-tax-profit.  According to these executives, 
Coca-Cola is already paying a significant amount in taxes, and the 
imposition of arbitrary levies further eats into the company's 
revenue stream. In addition, Coca-Cola said the GON's system of 
partial trade liberalization is thwarting the growth of the domestic 
manufacturing base.  Coca-Cola cited the sugar monopoly as 
presenting a significant cost to the soft-drink business. In 
response to this concern, Ambassador assured Coca-Cola executives of 
the ongoing efforts by the U.S. Mission to push the GON for more 
movements on the Trade and Investment Framework Agreement (TIFA), 
toward establishing a Bilateral Investment Treaty (BIT), and to 
eliminate trade barriers, tariffs, and bans. 
 
¶6. (SBU) Comment: Even with the CBN's new monetary policies still 
under heated debate, Soludo's engagement with the private sector has 
instilled more confidence among some key banking and financial 
stakeholders.  Coca-Cola's story, however, presents a much different 
picture. Ambassador will continue to engage the GON as well as 
private sector to assess the CBN policy impacts on key industries 
and the impact of the global financial crisis. End comment. 
 
¶7. (U) This cable was cleared with Embassy Abuja. 
 
Blair