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P 031548Z JUN 09
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC PRIORITY 0798
INFO RUEHUJA/AMEMBASSY ABUJA 0399
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
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UNCLAS SECTION 01 OF 02 LAGOS 000243 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EE/TPP/ABT/ATP SPECK 
TREASURY FOR PETERS AND HALL 
DOC FOR 3317/ITA/OA/KBURRESS, 3130/USFC/OIO/ANESA/DHARRIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EAID ETRD NI
SUBJECT: Some US Companies in Nigeria Point to Poor Governance as 
Chief Obstacle 
 
¶1. (SBU) Summary.  Representatives of American business that are 
part of the American Business Council (ABC) in Nigeria on May 15 
outlined for visiting Nigeria Desk Officer the multitude of problems 
that US investors face in Nigeria as well as the opportunities 
presented by the Nigerian market.  Pfizer noted enforcement of 
intellectual property rights as a major problem it currently faces, 
while the high cost of doing business in Nigeria will keep it from 
manufacturing locally for the foreseeable future.  General Electric 
(GE) said corruption was its biggest fear.  (Note: GE on May 27 
signed its first country-to-company agreement with the GON.  End 
Note.)  Meanwhile Coca-Cola remarked on Nigeria's high cost of 
capital, poorly trained labor force, and plethora of regulatory 
agencies often working at cross purposes.  The executives 
universally identified the Nigerian government's economic 
mismanagement as their chief constraint.  Despite these roadblocks, 
executives indicated that Nigeria was simply too large of a market, 
with the potential for continued returns on investment, to ignore. 
End Summary. 
 
Pfizer: Flimsy Legal Environment Checks Presence 
--------------------------------------------- --- 
 
¶2. (SBU) In a series of meetings in Lagos on May 15, the Nigeria 
Desk officer and EconOff heard the variety of challenges that 
confront US non-oil industry manufacturing companies operating in 
Nigeria.  Pfizer's Country Manager for Nigeria, Enrico Liggeri, said 
Nigeria's high production costs prohibited the company from 
manufacturing in Nigeria and that the company's sole function in 
Nigeria is to market pharmaceuticals produced elsewhere.  Liggeri 
said Pfizer would not even consider locating manufacturing in 
Nigeria due to the lack of local infrastructure and high labor 
costs.  He recounted a recent World Bank study that found Nigeria's 
workforce to be the least productive in Africa, due to high costs 
and low skill and education levels. 
 
¶3. (SBU) Liggeri saw little progress on intellectual property rights 
(IPR) and requested USG assistance to help the Nigerian government 
improve its legal code and customs enforcement.  (Note: The Mission 
is providing technical assistance on IPR issues.  End Note.)  Draft 
legislation that carried stricter penalties for IPR violations was 
stalled in the legislature.  Meanwhile, Liggeri opined that 
pervasive corruption within the Nigerian Customs Service probably 
negated the impact of training for customs officials.  Liggeri did 
however note that efforts to sensitize customs officers to the 
health dangers posed by counterfeit drugs could encourage greater 
enforcement. 
 
¶4. (SBU) Liggeri provided an update on the lawsuit brought against 
Pfizer by the federal and Kano state governments for allegedly 
undertaking clinical trials without proper documentation and 
expressed confidence that the matter would be settled out of court 
soon.  While looking forward to putting the matter to rest, Liggeri 
said the lasting impact of the suit was to scare away all 
pharmaceutical firms from conducting potentially lifesaving clinical 
trials in Nigeria for the foreseeable future. 
 
GE: Concerns About Risks 
------------------------ 
 
¶5. (SBU) GE Country Executive Lolu Adubifa noted that pervasive 
corruption was the company's chief challenge in Nigeria.  He said 
GE's reputation and share value were the company's two greatest 
assets and that corporate management wanted to ensure these were 
protected and not jeopardized by participating in questionable 
business practices common in Nigeria.  Of chief concern, according 
to Adubifa, were the practices of GE's counterparties in Nigeria, 
the constant vetting of which consumed vast resources. 
 
¶6. (SBU) Interacting with the Nigerian government, the chief 
consumer of GE's electrical products, was a particular frustration 
for Adubifa.  He opined that the government lacked sufficient vision 
and programmatic skills to sufficiently address the power situation 
in Nigeria.  While Adubifa believed that the government's goal of 
producing 6,000 mega watts by the end of this year was achievable by 
implementing some quick fixes, he said power sector policy paralysis 
would almost certainly undermine further gains. 
 
Coca-Cola: Pressed On Virtually Every Front 
------------------------------------------- 
 
¶7. (SBU) Coca-Cola Managing Director Islay Rhind and his management 
 
LAGOS 00000243  002 OF 002 
 
 
team said the company and its associated bottlers in Nigeria faced a 
range of obstacles.  Of chief concern for the bottlers were access 
to affordable financing and skilled labor.  Even before the current 
global financial crunch, Nigeria's high cost of capital forced 
Coca-Cola bottlers to raise funds from shareholders, rather than 
seek bank financing.  Low education standards, according to the 
executives, had forced Coca-Cola and its bottlers to provide basic 
technical training to its roughly 7,500 workers.  Although retention 
of skilled labor was a perennial concern, the executives noted they 
had no choice but to invest in the training to overcome declining 
education standards. 
 
¶8. (SBU) The Coca-Cola executives said Nigeria's Byzantine 
regulatory system and antiquated intellectual property rights regime 
were persistent problems.  Coca-Cola operations in Nigeria have to 
comply with multiple regulators with similar functions but 
conflicting compliance requirements.  Moreover, the statutes were 
unclear and presented little avenue for recourse.  The executives 
noted that intellectual property-the firm's greatest asset-was not 
recognized by Nigerian authorities as being of value.  For instance, 
Nigeria's outdated legal code does not recognize a new bottle design 
as intellectual property even though it is crucial to Coca-Cola's 
brand value. 
 
¶9. (SBU) Despite challenges at all levels of operations, Rhind said 
Coca-Cola's presence in Nigeria was crucial to its global strategy 
and that there was huge potential for growth in this market of more 
than 140 million people.  Suggesting that the Nigerian market for 
bottled drinks was still largely untapped, the executives noted that 
annual per capita consumption ranged from 141 units in Lagos to 16 
units in the north, as compared to roughly 260 in South Africa. 
Speaking to the importance of this market, Rhind said Nigeria was 
one of only three locations in Africa where Coca-Cola manufactured 
soft drink concentrate. 
 
¶10. (SBU) Comment:  Despite representing different sectors, the 
executives from Pfizer, GE, and Coca-Cola painted a near-uniform 
picture of American companies seeking to expand ties to Nigeria but 
struggling with the country's poor business environment.  The 
laundry list of problems is long and familiar but ultimately can be 
traced back to government mismanagement or outright predation. 
These and other American firms, with the Mission's support, have 
begun to come together in the form of the American Business Council 
in the hope of creating a more effective lobby for more 
business-friendly regulation.  Pfizer's Liggeri characterized 
Nigeria as a challenging opportunity, but until the Nigerian 
government improves the country's business climate the challenges 
will remain and the opportunities will not fully materialize. 
However, they all indicated that the potential of Nigeria's market, 
in spite of the challenges, remains part of their business goals 
given the sheer size of the country and its population.  End 
comment. 
 
¶11. (U) This cable has been cleared by Embassy Abuja. 
 
Blair