VZCZCXRO7867
PP RUEHMA RUEHPA
DE RUEHUJA #1865/01 2851440
ZNR UUUUU ZZH
P 121440Z OCT 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7197
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 2076
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 06 ABUJA 001865 
 
SIPDIS 
 
DEPARTMENT FOR AF/EPS (MALLORY) 
DEPARTMENT PASS TO USTR (HAMILTON) 
DEPARTMENT PASS TO COMMERCE (BOYD) 
DEPARTMENT PASS TO TREASURY (IERONIMO) 
 
E.O. 12598: N/A 
TAGS: ETRD AGOA ECON NI
SUBJECT: NIGERIA - 2010 AGOA ELIGIBILITY REVIEW 
 
REF: STATE 97769 
 
¶1.  Country: NIGERIA 
Current AGOA Status: Eligible 
 
¶2.  Country Background Summary:  Estimated population of 151.3 
million.  2008 GDP was $212.1 billion; 2008 GNI per capita was 
$1,160 (World Bank 2009 data).  Nigeria continues to struggle to 
consolidate its fragile democracy following a civilian-to-civilian 
handover of power in its national and state elections in April 2007, 
which were seriously marred by irregularities and fraud.  The 
government is making slow progress in developing an open economy, 
minimizing government interference, and promoting free market 
principles.  On September 25, 2008 the Ministry of Finance announced 
a new tariff policy that reduced the number of banned import 
categories from 44 to 26 items and reduced tariffs on a wide range 
of products. 
 
Comments on Eligibility Requirements - Market-based Economy 
--------------------------------------------- ------- 
 
¶3.  Major Strengths Identified:  The government has committed to 
transitioning from a state-directed economy to one that is driven by 
market forces.  The economy has witnessed overall macroeconomic 
stability in recent years.  The foreign exchange rate remains fairly 
stable, although the domestic currency, the naira, depreciated 
during the last quarter of 2008 as a consequence of lower oil prices 
arising from the global economic crisis.  The "Wholesale Dutch 
Auction" system of foreign exchange trading was introduced in early 
2006, and led to a sharp reduction in the spread between the 
official and parallel market exchange rates.  The government has 
also restructured its domestic debt portfolio from 91-day Treasury 
Bills to Bonds with one to ten-years' duration. 
 
¶4.  The government maintains a cordial and productive relationship 
with the IMF.  Discussions are ongoing on a successor program to the 
Policy Support Instrument (PSI) which ended in August 2007.  In July 
2009, the IMF conducted an Article IV assessment of the Nigerian 
economy.  The IMF assessment team considered the overall economic 
outlook as positive.  However, it forecasts that economic growth 
will be slower than previous years because of revenue constraints 
resulting from lower oil prices, and lower credit to the private 
sector arising from banking reforms that have forced domestic banks 
to properly classify loans and withhold credit to the private 
sector.  The Nigerian Electricity Regulatory Commission (NERC) has 
issued 25 licenses to private companies involved in electricity 
generation and distribution.  A Multi-Year Tariff Order (MYTO) for 
the determination of charges and tariffs for electricity generation, 
transmission and retail tariffs is being implemented.  The MYTO, 
which is to be implemented from July 1, 2008 to June 30, 2013, will 
result in the upward adjustment of the electricity tariff to market 
rates to ensure that investors in the power sector recover their 
investments and turn a reasonable profit.  Some ports have been 
concessioned and an international company was awarded the concession 
to manage the country's largest port--Apapa Port in Lagos. 
 
¶5.  The Fiscal Responsibility Act to ensure transparency in the use 
of government revenue and a Public Procurement Act to ensure 
transparency and value for money in government procurement were 
passed in 2007.  The Fiscal Responsibility Act has also been passed 
in 11 states of the federation, while it is at various stages of 
enactment in the remaining 25 states.  Some states have also passed 
Qenactment in the remaining 25 states.  Some states have also passed 
the Public Procurement Act. 
 
¶6.  The 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, is undergoing review to 
incorporate President Yar'Adua's 'Seven Point Agenda', which focuses 
on energy, food security, land reforms, wealth creation, education, 
security, and transportation.  The expected new economic reform 
document christened "Vision 20-20-20" is due to be presented to the 
public before the end of October 2009.  Vision 20-20-20 will develop 
implementable programs aimed at making Nigeria emerge as one of the 
top twenty economies in the world by the year 2020.  Savings from 
crude oil sales above the budget benchmark price have been put into 
a special reserve account, called the Excess Crude Account (ECA), 
rather than being used to fuel fiscal expansion.  The government 
budget process is taking its rightful position as an economic policy 
and management tool and the President has promised an earlier 
submission of the draft budget for the coming year with the 
expectation that the National Assembly would pass the budget 
earlier.  The budget deficit has been kept in check.  However, 
current revenue constraints resulting from lower oil prices arising 
from the global economic crisis and insecurity in the Niger Delta 
may lead to higher budget deficits as the three tiers of government 
look for alternative sources to finance their respective budgets and 
 
ABUJA 00001865  002 OF 006 
 
 
resort to borrowing in the domestic money and capital markets. 
There are concerns about the degree of execution of the Capital 
Budget.  Failure to execute fully is a drag on infrastructure 
investments.  There are ongoing discussions about creating a 
Sovereign Wealth Fund, although the modalities and the form it will 
take have not been finalized. 
 
¶7.  Financial sector reforms are ongoing.  The Central Bank of 
Nigeria (CBN) recently concluded a special audit of the 24 domestic 
banks to ascertain whether they have classified their loans in line 
with mandated prudential guidelines and whether they are also 
well-capitalized.  The outcome of the special audit led to the 
replacement of the executive management of 8 banks, while 2 banks 
have been ordered to raise additional capital.  The CBN also 
provided 620 billion naira ($4.13 billion) in liquidity support and 
long-term loans to the 8 banks that were sanctioned to boost their 
liquidity.  The remaining 14 banks were given a clean bill of health 
but were still asked to make further provisions for loans granted to 
petroleum product importers and capital market operators.  Some 
domestic banks have received regulatory approval to raise additional 
capital.  Pension and insurance reforms are also moving forward. 
 
¶8.  A Trade and Investment Framework Agreement (TIFA) with the U.S. 
provides a mechanism to address trade and investment issues. 
Nigeria is a top destination for U.S. investment in Africa, 
primarily due to investment in the petroleum sector.  In 2008, U.S. 
exports to Nigeria increased 48 percent from 2007. 
 
¶9.  Major Issues/Problems Identified:  Militant and criminal 
activities in the oil-rich Niger Delta have led to the shut-in of 
oil production, thereby reducing fiscal revenues to the Government 
of Nigeria (GON) with its attendant negative impact on budget 
implementation.  An amnesty program that expired on October 4, 2009, 
led to a significant decline in militant violence and the partial 
restoration of shut-in production.  However, the longer-term impact 
of the government's Delta peace efforts is unclear.  Criminal 
activity in the Delta remains a serious concern.  Building on the 
gains of the amnesty program, it is hoped that the government will 
intensify efforts to promote economic development in the region. 
 
¶10.  Inadequate and unreliable infrastructure is a major barrier to 
private sector activity.  The GON has adopted a 
Public-Private-Partnership (PPP) strategy for infrastructure 
provision.  An Infrastructure Concession and Regulatory Commission 
has been established to regulate infrastructure PPP.  However, a 
national policy on PPP has not been approved. 
 
¶11.  The Petroleum Industry Bill (PIB) is an omnibus legislation 
that will replace the existing 16 oil sector laws with one legal 
framework with clear rules, procedures, and institutions.  The 
stated objective of the PIB is to bring about transparency, good 
governance, and reduce corruption.  The international oil companies 
agree to the reform efforts.  However, they have major concerns with 
specific elements of the bill that threaten profit and future 
investment.  The bill has completed two readings in the National 
Assembly and public comment was completed July 27-31, 2009.  A 
committee report is expected by October 23, 2009. 
 
¶12.  A court challenge was raised regarding whether the GON has the 
constitutional authority to set aside oil revenues that are above 
the budget benchmark price into the ECA.  The constitution requires 
Qthe budget benchmark price into the ECA.  The constitution requires 
that all oil revenue should be deposited into the Federation Account 
and then shared among the federal, state and local governments. 
Despite this, the ECA was established in 2003 by the GON without 
passage of an enabling law.  The government plans to introduce 
legislation that would legalize the ECA but a constitutional 
amendment may be required. 
 
¶13.  A large 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 a tiny group of political and 
commercial elites through corruption and non-transparent government 
contracting practices. 
 
¶14.  Regulatory and tax regimes are arbitrarily enforced, and 
regulatory bodies are weak and ineffective.  Oil and gas receipts 
account for 85 percent of government revenues and over 95 percent of 
foreign exchange earnings.  Fuel subsidies are not budgeted or 
transparent, and fuel prices continue to be regulated and 
subsidized.  Economic data and statistics are of unreliable quality 
and availability. 
 
¶15.  The establishment of the Nigerian Intellectual Property 
Commission (NIPCOM) that was announced in early 2007 is without 
passage of an enabling law.  The 1978 Land Use Act mandates state 
ownership of land; private use of land is restricted to a 99-year 
lease and subject to government confiscation without Certificate of 
 
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Occupancy or Governor's Consent.  Conveyance of land requires 
high-level government approval, promoting corruption and inhibiting 
property transactions. 
 
¶16.  The Ministry of Finance announced on September 25, 2008 that 
the number of banned import categories would decrease from 44 to 26 
items.  Nevertheless, the continued existence of any ban is in 
violation of WTO rules.  These import bans affect the import of many 
agricultural and manufactured products and encourage smuggling. 
Import bans accompanied by sole source importation rights for 
favored companies impede competition and are major impediments to 
the imports of a wide range of U.S. products.  The Ministry of 
Finance has also stated that there may be tariff reductions on a 
wide range of products in the future. Comprehensive trade reform 
brought about by adoption of the ECOWAS Common External Tariff (CET) 
was agreed to in the last quarter of 2005.  However, the government 
is presently reviewing its implementation of the CET.  In line with 
the review, on September 25, 2008 the Ministry of Finance proposed a 
fifth band duty rate of 35 percent.  This new proposed duty rate is 
a decrease from the GON's earlier proposal of 50 percent. 
 
¶17.  Some U.S. firms with contracts with government entities at the 
federal, state and local levels face problems receiving timely 
payments.  The GON's procurement process lacks transparency. 
Nigeria's Cabotage Law is a barrier to trade and investment and has 
compelled U.S. shipping firms to exit Nigeria. 
 
¶18.  The GON wants existing oil and gas operators to invest in power 
production or refining, in an attempt to bring about investment in 
these sectors.  Fuel subsidies distort the local market, 
discouraging investment in downstream oil and gas activities.  Draft 
legislation mandating high levels of local content in oil and 
gas-related activities is in the National Assembly and may impose 
additional costs on investments. 
 
¶19.  The GON sometimes employs predatory negotiating tactics, 
including threats to block access to inputs, customs and other legal 
approval processes, and threats to transfer contracts to entities 
that cannot uphold contract terms.  Foreign exchange repatriation 
regulations are enforced arbitrarily and hinder the transfer of 
funds.  The Manufacturers-in-Bond Scheme has been canceled, and the 
Export Expansion Grant is the only export incentive available for 
exporters. 
 
Political Reforms/Rule of Law/Anti-Corruption 
--------------------------------------------- 
 
¶20.  Major Strengths Identified:  Elections were held in April 2007 
for the President, national legislators, and state governors and 
assemblies.  The elections represented the first transition from one 
civilian elected government to another since Nigeria's independence 
in 1960, but were deeply flawed.  The Nigerian judiciary made 
several landmark decisions in 2007 and again in 2008, affirming its 
role as an independent arbitMwYDQQxhe gubernatorial 
elections were nullified, necessitating a re-run in those five 
states.  Three gubernatorial election cases remain open pending 
appeals at the appellate court. 
 
¶21.  Nigeria has established programs to combat corruption, many of 
which receive support from bilateral and multilateral donors.  The 
QEconomic and Financial Crimes Commission (EFCC) has arrested several 
high-level officials in connection with corruption cases since its 
establishment five years ago and is reported to have seized over $5 
billion in assets.  The governor of Bayelsa State was impeached in 
December 2005 for money laundering and misappropriation of funds and 
had been on trial.  He was released through a plea bargain that 
resulted in the forfeiture of several of his properties and bank 
accounts both locally and internationally.  The EFCC claims it is 
continuing to investigate ongoing corruption charges against several 
former state governors and their associates.  Approximately ten 
former state governors are currently facing corruption charges, and 
the cases against them are in varying stages of completion.  Three 
former ministers and a serving senator are currently facing trial. 
 
¶22.  In 2005, the former Inspector-General of Police and the 
Minister of Education were fired for corruption.  The former 
Inspector General was tried and subsequently jailed.  The former 
Senate President was removed from his leadership post for 
corruption, though he retained his Senate seat.  In 2007, the 
Speaker of the House of Representatives was removed from her 
position under allegations of corruption and misappropriation of 
House funds, although she retained her House seat.  In 2008, two 
former Ministers of Aviation and the standing Minister of Health 
were charged with corruption, as well as the Director of the Police 
 
ABUJA 00001865  004 OF 006 
 
 
Equipment Fund. 
 
¶23.  Major Issues/Problems Identified:  The elections of 2007 were 
marred by serious irregularities and fraud, with violence in some 
areas.  International and domestic observers pointed to widespread 
corruption throughout the electoral process, including ballot 
stuffing, intimidation and violence, deliberate miscounting, results 
tampering, and exclusion of opposition candidates.  More than 1,200 
petitions were filed with the electoral tribunals contesting the 
announced results. The Independent National Electoral Commission 
(INEC), the body charged with the conduct of elections, is not 
independent, and it was alleged to have conspired with the ruling 
Peoples Democratic Party (PDP) to manipulate the outcome of the 
elections.  Politicians continue to solicit support from, use, and 
manipulate militias and vigilante groups for their own interests. 
 
¶24.  Police and security forces continue to use excessive and 
sometimes lethal force to beat protesters, suspects, detainees, and 
prisoners, and to conduct arbitrary arrest and detention. 
Perpetrators of violence frequently enjoy impunity for their deeds. 
The judicial system remains inefficient, corrupt, and in need of 
serious reforms, despite some recent improvement.  Judges are 
subject to both extortion and intimidation, if not violence.  Some 
judges are corrupt.  Prolonged pretrial detention is an ongoing 
problem.  The government does not provide citizens the right to a 
speedy and fair trial.  Prison and detention conditions remain harsh 
and life-threatening.  Some prisons held 200 to 300 percent more 
persons than their designated capacity. 
 
¶25.  Corruption remains an overwhelming problem at all levels of 
government and throughout the security forces. Despite the arrest of 
several high-ranking Nigerian officials by the EFCC, allegations 
continue that agency investigations target individuals that are 
out-of-favor with the government, while those that are in-favor 
continue their activities with impunity.  The EFCC's inability to 
bring a number of corruption investigations to closure; the 
replacement of its internationally respected Chairman; and the 
transfer of many of its senior personnel have raised questions about 
the GON's commitment to fighting corruption. 
 
¶26.  An amnesty program for militants in the oil-rich Niger Delta 
ended on October 4.  Early reports indicated the amnesty program led 
to a significant decline in militant violence, although criminal 
activity remained a serious concern.  The longer-term impact of the 
government's Delta peace efforts is unclear. 
 
¶27.  Illegal oil bunkering has fueled corruption, arms trafficking, 
and political instability.  There are anecdotal reports that the 
efforts of the GON's military Joint Task Force (JTF) have reduced 
illegal bunkering in certain areas. 
 
Poverty Reduction 
----------------- 
 
¶28.  Major Strengths Identified:  The National Planning Commission 
is reviewing NEEDS-2, Nigeria's homegrown Poverty Reduction 
Strategy.  The National Poverty Eradication Program (NAPEP) is being 
implemented at the local government level, and is focusing on 
micro-enterprise development and other programs.  A Microfinance 
Policy was launched by the CBN in 2005, with a requirement that all 
community banks convert to microfinance banks by December 31, 2007. 
Since 2007, at least 600 microfinance banks have met the stipulated 
requirements and have been licensed by the CBN.  Some of the 
microfinance banks have been reported to be insolvent. 
Qmicrofinance banks have been reported to be insolvent. 
 
¶29.  Food and energy prices are increasing, putting pressure on poor 
families.  The government has developed a program to start 
addressing agriculture and rural-led economic growth. 
 
¶30.  Major Issues/Problems Identified:  Serious structural problems 
remain with unequal growth for the general public and high income 
disparities between rich and poor.  The government's poverty 
strategy does not clearly link goals and methods; serious concerns 
remain about fiscal transparency; and human capacity for project 
implementation is weak.  The GON is implementing the poverty 
reduction program slowly. 
 
¶31.  The country has been slow to meet its commitment to develop a 
compact to implement the Comprehensive African Agriculture 
Development Program (CAADP).  Federal and state-level commitment to 
health and education reforms remains weak and progress against the 
key Millennium Development Goals is poor. 
 
Workers' Rights/Child Labor/Human Rights 
---------------------------------------- 
 
¶32.  Major Strengths Identified:  The Nigerian constitution protects 
 
ABUJA 00001865  005 OF 006 
 
 
the right of association and the right to organize and bargain 
collectively, but statutory restrictions remain.  Most workers, 
except for members of the armed forces, police, employees designated 
essential by the government, and employees in export processing 
zones may join trade unions and strike, but the law limits the 
justifications for strikes. 
 
¶33.  In 2002, Nigeria signed the International Labor Organization 
(ILO) Convention 182 on the Worst Forms of Child Labor, Convention 
138 on Minimum Age for Employment, and Convention 111 on Equality of 
Occupation.  Worker rights and child labor laws have been enacted. 
The Child Rights Act was approved in 2003, but has been enacted by 
only 20 of the 36 states.  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. 
 
¶34.  The Ministry of Employment, Labor, and Productivity employs 
nearly 400 inspectors for all business sectors, but fewer than 50 
inspect factories.  The Ministry also sponsored awareness-raising 
and law-familiarization training programs for local law enforcement, 
customs, and other government officials.  In 2003, new legislation 
outlawing human trafficking was passed, and the National Agency for 
the Prohibition of Trafficking in Persons (NAPTIP) was established. 
 
¶35.  The country made progress in the area of human rights, 
including making several arrests for trafficking in persons. 
However, serious problems remain, such as the 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. 
 
¶36.  The GON's relationship with the two union federations (the 
Nigerian Labor Congress and the Trade Union Congress) has improved 
with the swearing in of President Yar'Adua's administration.  A 
national labor strike in June 2007 was peaceful, with security 
forces and labor members showing considerable restraint.  The 
Yar'Adua administration reversed several labor-opposed policies of 
the Obasanjo government as a result of the strike.  These include a 
partial reduction of the fuel price increase and a guarantee not to 
raise the price further for one year, a reversal of the VAT 
increase, a review of the Port Harcourt and Kaduna refinery sales, 
and an agreement to pay an owed civil servant salary increase. 
 
¶37.  Major Issues/Problems Identified:  The Trade Unions Act does 
not ensure the workers' right to form and join unions of their own 
choosing, deems all registered trade unions to be affiliated with a 
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 issues 
of national economic policy.  However, these sections of the law 
have not been enforced in practice. 
 
¶38.  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.  Several statutory restrictions on the right of 
Qin the oil industry.  Several statutory restrictions on the right of 
association and on trade unions restricted the right to form or 
belong to any trade union or association.  There are no laws to 
prohibit retribution against strikers, but strikers who believed 
they were victims of unfair retribution could submit their cases to 
an Industrial Arbitration Panel (IAP).  The decisions of these 
bodies infrequently carried the force of law. 
 
¶39.  The labor laws apply to legal foreign workers, but not all 
companies respected these laws in practice.  Payments of salaries to 
federal, state and local government workers are often several months 
in arrears and workers who protest or strike over arrearages face 
dismissals, threats of layoffs, and pressure to agree to lower 
minimum wages.  The GON places limits on freedom of assembly and 
association, citing security concerns. 
 
¶40.  Nigeria is a source, destination, and transit country for 
persons trafficked for forced labor and sexual exploitation.  Young 
boys were trafficked primarily to work as forced bondage laborers, 
street peddlers, and beggars, while girls were trafficked for 
domestic service and commercial sexual exploitation.  Child labor 
continues to be a problem.  The Child Rights Act has only been 
ratified by 20 states.  Domestic violence and discrimination against 
women remain widespread, underreported, and socially acceptable. 
Police rarely intervene in cases of domestic abuse.  Rape and sexual 
harassment are common.  Women and girls in all parts of the country 
are subjected to female genital mutilation (FGM), which the 
 
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government publicly opposes, but has taken no legal action to curb. 
Laws protecting the rights of the child are inadequate and seldom 
enforced.  Child abuse, abandonment, and exploitation for labor or 
sex remain serious problems. 
 
¶41.  The law prohibits homosexuality; homosexual practices are 
punishable by prison sentences of up to 14 years. Adults convicted 
of having engaged in homosexual intercourse are subject to execution 
by stoning in the 12 northern states that have adopted Shari'a law. 
However, this sentence has not yet been handed down in practice. 
Persons living with HIV/AIDS experienced widespread discrimination 
in seeking employment and health care services. 
 
 
International Terrorism/U.S. National Security 
--------------------------------------------- - 
 
¶42.  Major Strengths Identified:  In June 2007, the Nigerian 
Financial Intelligence Unit (NFIU) was admitted as a member of the 
Egmont Group of FIUs.  In June 2006, Nigeria was de-listed from the 
Financial Action Task Force list of Non-Cooperative Countries and 
Entities.  The NFIU, EFCC, CBN, Securities and Exchange Commission, 
and other regulators in the financial services industry are 
collaborating to identify and freeze terrorist assets in Nigeria. 
 
¶43.  Major Issues/Problems Identified:  Militant activities in the 
Niger Delta have led to a reduction in oil production, reducing 
revenues to the federal government and hampering effective 
implementation of the national budget.  Events in Nigeria can 
negatively affect world oil supplies and prices. 
 
¶44.  There are concerns about the president's health and the impact 
it has on the administration of government.  Some Nigerians opine 
that the current administration is too slow in implementing its 
programs. 
 
MCCULLOUGH