VZCZCXRO9646
PP RUEHMA RUEHPA
DE RUEHUJA #2210/01 3411659
ZNR UUUUU ZZH
P 071659Z DEC 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7684
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 2451
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 05 ABUJA 002210 
 
SIPDIS 
 
DEPARTMENT PASS TO USTR (AGAMA, JDOHERTY AND JWEISS) 
TREASURY FOR DPETERS, AIERONIMO, AND ABARCAN 
USDOC FOR 3317/ITA/OA/KBURRESS 
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS 
 
E.O. 12598: N/A 
TAGS: ECON ETRD EFIN NI
SUBJECT: NIGERIA - 2010 NATIONAL TRADE ESTIMATE REPORT ON FOREIGN 
TRADE BARRIERS AND REPORT ON SANITARY AND PHYTOSANITARY AND 
STANDARDS-RELATED FOREIGN TRADE BARRIERS 
 
REF: STATE 106353 
 
¶1. (U) Trade Summary: The U.S. goods trade deficit with Nigeria was 
$34 billion in 2008, an increase of $4 billion from $30 billion in 
¶2007.  U.S. goods exports in 2008 were $4.1 billion, up 47.7 percent 
from the previous year.  Corresponding U.S. imports from Nigeria 
were $38.1 billion, up 16.2 percent.  Nigeria is currently the 44th 
largest export market for U.S. goods. The stock of U.S. foreign 
direct investment (FDI) in Nigeria was $190 million in 2006 (latest 
data available). 
 
Import Policies - Tariffs 
------------------------- 
 
¶2. (U) The Government of Nigerian (GON) issued the 2008-2012 Common 
External Tariff (CET) Book that harmonizes its tariffs with its West 
African neighbors' under the Economic Community of West African 
States (ECOWAS) Common External Tariff (CET), in September 2008. 
Nigeria has been partially implementing the CET since 2005.  The 
tariff regime has five tariff bands and import duties were reduced 
on a number of items, such as rice, cigars, and manufactured 
tobacco.  The five CET tariff bands are: zero duty on capital goods, 
machinery, and essential drugs not produced locally; 5 percent on 
imported raw materials; 10 percent on intermediate goods; 20 percent 
on finished goods; and 35 percent on goods in certain sectors.  The 
fifth band proposed by the GON has been accepted by ECOWAS member 
countries as part of the CET, but each member country can include 
products it deems appropriate.  Adoption of the CET is part of 
ongoing economic reforms aimed at improving Nigeria's trade and 
investment environment and harmonization of economic policies in the 
sub-region.  There is some resistance within the GON and the private 
sector against deepening trade reforms. 
 
¶3. (U) Companies state that high tariffs, non-transparent valuation 
procedures, frequent policy changes and unclear interpretations by 
the Nigerian Customs Service (NCS) continue to make importing 
difficult and expensive, and often create bottlenecks for commercial 
activities.  Some importers complain that tariffs are excessively 
high and that the GON sometimes uses arbitrary reference prices for 
valuation purposes.  This problem is aggravated by Nigeria's 
dependence on imported raw materials and finished goods and affects 
most manufacturers.  Many importers reportedly resort to 
undervaluing and smuggling to avoid paying full tariffs. 
Transparent and proper implementation of the CET would be an 
important step toward resolving most of these problems. 
 
Non-Tariff Measures 
------------------- 
 
¶4. (U) The GON continues to ban certain imports, citing the need to 
protect local industries.  The new CET book reduces the number of 
items on the import prohibition list from 44 to 26.  Items removed 
from the list include corn, sorghum, millet, wheat flour, crude 
vegetable oil, biscuits, sugar confectioneries (including white 
chocolate), fresh and dried fruit, flowers (both fresh and plastic), 
toothpaste, envelopes, diaries, greeting cards, exercise books, 
bentonites, barites, calendars, cutlasses, axes, pick axes, spades, 
shovels, fully built mudguards, wheel barrows, and electric 
generating sound proof casings. 
 
¶5. (U) Items remaining on the import prohibition list include: 
Q5. (U) Items remaining on the import prohibition list include: 
bird's eggs, cocoa butter, powder and cakes, pork, beef, live birds, 
frozen poultry, refined vegetable oil and fats, cassava, bottled 
water, spaghetti, noodles, fruit juice in retail packs, 
non-alcoholic beverages (excluding energy drinks), certain textile 
products, and bagged cement.  Companies were awarded concessions to 
import bagged cement until December 2008 to bridge supply gaps.  A 
new cement policy was announced in October 2009.  The policy bans 
the importation of bagged cement, but provides some concessions to 
cement producers.  Such concessions include duty exemption on 
imported machinery and raw materials such as gypsum. 
 
Customs Administration 
---------------------- 
 
¶6. (U) Nigeria practices a destination inspection policy for 
imports.  Under this policy, all imports are inspected upon arrival 
into Nigeria, rather than at the ports of origin.  Nigeria's port 
practices continue to present major obstacles to trade.  The 
country's list of items prohibited for import, coupled with 
incorrect declaration of goods by importers, result in 95 percent of 
containers being physically examined.  This delays the clearing 
process and increases costs.  Nigeria's uneven application of import 
 
ABUJA 00002210  002 OF 005 
 
 
and labeling regulations make importing high-value perishable 
products difficult.  Disputes between Nigerian agencies over the 
interpretation of regulations often cause delays, and frequent 
changes in customs guidelines slow the movement of goods through 
Nigerian ports.  Importers report erratic application of customs 
regulations, lengthy clearance procedures, high berthing and 
unloading costs, and corruption.  These factors can contribute to 
product deterioration and may result in significant losses for 
importers of perishable goods. 
 
¶7. (U) Realizing that delays at the ports significantly increase the 
cost of doing business in Nigeria, the GON plans to implement a 
48-hour cargo clearance policy at the ports.  Roads coming in and 
out of the ports are decaying, and overuse results in 
around-the-clock traffic congestion.  There is no rail system 
transporting freight in and out of ports.  This congestion leads to 
ships queuing up to berth at cargo terminals and containers waiting 
to be transported out of the ports.  The port operator for Lagos 
ports, APM Terminals, made significant improvements in regards to 
off-loading ships in 2009.  Containers now come off of ships at a 
much faster rate but then have to wait for up to 45 days to be 
processed through customs.  This is true for all privately run 
ports.  The bottlenecks resulting from the lack of infrastructure in 
and around the ports affect the efficiency at which goods can be 
processed for import.  Over 15 agencies are represented at the 
ports. 
 
¶8. (U) In a bid to achieve the 48-hour cargo clearance target at the 
ports, the GON plans to withdraw all agencies, except the NCS, from 
the ports and improve the technical capacity of NCS to handle 
special cargos through continuous training of personnel.  There are 
also plans to automate all customs payments.  Private sector sources 
complain that corruption in the ports contributes to delays in 
clearing containers and that payment of illegitimate fees can speed 
up the process. 
 
Export Subsidies and Other Export Promotion Programs 
--------------------------------------------- ------- 
 
¶9. (U) The GON administers various export incentive programs such as 
tax concessions, export development funds, capital asset 
depreciation allowances, and foreign currency retention programs in 
addition to operating Free Trade Zones and Export Processing Zones. 
According to the 2008-2012 CET Book, most concessions, waivers or 
exemptions on imports have been stopped.  However, the Nigerian 
Export Promotion Council will continue to implement the Export 
Expansion Grant scheme to improve non-oil export performance. 
 
Standards, Testing, Labeling, and Certification 
--------------------------------------------- -- 
 
¶10. (U) Regulations for sanitary and phytosanitary standards, 
testing, and labeling are well defined in Nigeria.  The National 
Agency for Food and Drug Administration and Control (NAFDAC) is 
responsible for administering sanitary and phytosanitary (SPS) 
standards which are mostly the application of the Codex Alimentarius 
Commission, European Union, and U.S. Food and Drug Administration 
standards. 
 
¶11. (U) Nigeria requires that all food, drug, cosmetic, and 
pesticide imports be accompanied by certificates of analysis from 
Qpesticide imports be accompanied by certificates of analysis from 
manufacturers and appropriate national authorities, regardless of 
origin.  Specified animal products, plants, seeds, and soils also 
must be accompanied by proper inspection certificates.  Items 
entering Nigeria must be labeled exclusively in the metric system, 
as specified by law.  U.S. producers and exporters note that 
relabeling goods to meet this requirement is expensive and could 
limit U.S. exports to Nigeria.  NCS is charged with preventing the 
entry of products with dual or multiple markings, but such items are 
often found in Nigerian markets. 
 
 
¶12. (U) NAFDAC's responsibilities include protecting Nigerian 
consumers from fraudulent or unhealthy products.  The agency 
continues to pay special attention to eliminating the illicit 
importation of counterfeit and expired pharmaceuticals, particularly 
from East and South Asia.  NAFDAC's limited capacity for carrying 
out inspections and testing contributes to what critics have 
characterized as an occasionally heavy-handed or arbitrary approach 
to regulatory enforcement which sometimes leads to delays in 
clearance of legitimate food imports.  NAFDAC does not have a 
specific regulation on packaging but is in the process of developing 
one. 
 
ABUJA 00002210  003 OF 005 
 
 
 
¶13. (U) The Standards Organization of Nigeria (SON) administers 
product standards through the Standards Organization of Nigeria 
Conformity Assessment Program (SONCAP).  SONCAP requires exporters 
to Nigeria to obtain both a product certificate, which is issued 
after the submission of an acceptable test report to the local SON 
office in the exporter's country, and a shipment certificate on a 
shipment-by-shipment basis.  Products covered by SONCAP include 
toys; electrical and electronic products such as household 
appliances, communication products, and lighting products; used 
motor vehicles; vehicle spare parts; tires; automotive glass; 
chemical products such as motor oils, paints, and bitumen; tobacco; 
construction materials, mechanical devices and gas appliances such 
as taps and valves, ceramic and sanitary ware, pressure cookers, 
aluminum products, and cement; paper and stationery items; 
protective safety equipment such as firefighting equipment; and 
mosquito nets. 
 
¶14. (U) The government is generally supportive of biotechnology. 
Nigeria has no laws governing the application of biotechnology.  A 
draft biosafety legislation is being considered by the National 
Assembly.  The draft legislation portrays biotechnology products as 
safe for human and animal consumption but includes a mandatory 
labeling requirement. 
 
 
¶15. (U) U.S exporters do not complain that Nigeria's SPS regulations 
and standards are barriers to exporting U.S. goods to Nigeria. 
However, they complain about bureaucratic delays in product 
registration, as well as bottlenecks and inefficiencies at the ports 
and cite them as disincentives to exporting to Nigeria. 
 
Government Procurement 
---------------------- 
 
¶16. (U) The GON continues to take steps towards improving public 
procurement.   An amendment to the Public Procurement Act is being 
considered by the National Assembly.  The proposed amendment 
contains provisions for decentralizing government procurement and 
increasing the procurement authorization limits for ministries, 
department, and agencies, unlike the earlier legislation which 
created a central clearinghouse for issuing and monitoring all 
government procurement above 50 million naira ($333,333).  The 36 
state governments have also agreed to enact the Public Procurement 
Act in their respective states. 
 
 
¶17. (U) Foreign companies incorporated in Nigeria receive national 
treatment in government procurement, government tenders are 
published in local newspapers, and a "tenders" journal is sold at 
local newspaper outlets.  U.S. companies have won government 
contracts in several sectors.  Budget delays often result in both 
local and foreign companies experiencing delays in getting paid for 
contracts done for the GON. This has contributed to financial 
difficulties for the suppliers of some goods and services. 
 
¶18. (U) The National Petroleum Investment and Management Services 
(NAPIMS) agency's approval is required for all procurement in the 
energy sector with a value above $500,000.  Approval processes are 
slow and can significantly increase the time and resources required 
for a given project.  Nigeria is not a signatory to the WTO 
Agreement on Government Procurement. 
 
Intellectual Property Rights (IPR) Protection 
QIntellectual Property Rights (IPR) Protection 
--------------------------------------------- 
 
 
¶19. (U) Nigeria is a party to the World Intellectual Property 
Organization (WIPO) Convention, the Berne Convention for the 
Protection of Literary and Artistic Works, the Paris Convention for 
the Protection of Industrial Property, the Patent Cooperation 
Treaty, and the Patent Law Treaty.  Nigeria has also signed the WIPO 
Copyright Treaty and the WIPO Performances and Phonograms Treaty. 
Legislation intended to establish a legal framework for an IPR 
system consistent with WTO obligations has been pending in the 
National Assembly for several years. 
 
¶20. (U) GON's lack of institutional capacity to address IPR issues 
is a major constraint to police enforcement.  GON IP agencies suffer 
from low morale, inadequate training, and limited resources.  Piracy 
remains a problem despite Nigeria's active participation in the 
conventions cited above and growing interest among Nigerians in 
seeing their intellectual property protected.  Counterfeit 
 
ABUJA 00002210  004 OF 005 
 
 
automotive parts, pharmaceuticals, business and entertainment 
software, music and video recordings, and other consumer goods are 
sold openly, and piracy of books and optical disc products is a 
problem.  Industry reports contend that intellectual property 
infringers from other countries appear active in using Nigeria as a 
base for producing pirated goods.  Industry sources claim that 
Nigeria has the capacity to make an estimated 800 million CDs/DVDs a 
year. 
 
¶21. (U) Patent and trademark enforcement remains weak, and judicial 
procedures are slow and reportedly subject to corruption.  However, 
the GON is taking steps to improve enforcement.  Efforts to combat 
the sale of counterfeit pharmaceuticals, for example, have yielded 
some results.  The GON also included pirated materials in the list 
of prohibited imports in the 2008-2012 CET Book, which provides NCS 
the authority to seize pirated works if imported into the country. 
In addition, the GON has requested training to improve its 
enforcement efforts.  In 2008 and 2009, the United States responded 
by providing training assistance on IPR enforcement to GON officials 
in several sectors, with a focus on copyright piracy, border 
enforcement, counterfeiting, patents, and trademarks.  The United 
States intends to continue IPR training assistance to Nigeria in 
¶2010. 
 
¶22. (U) Nigeria's broadcast regulations do not permit rebroadcast or 
excerpting of foreign programs unless the station has an affiliate 
relationship with a foreign broadcaster.  This regulation is 
generally complied with, but some cable providers illegally transmit 
foreign programs.  The National Broadcasting Commission monitors the 
industry and is responsible for punishing infractions. 
 
¶23. (U) Widespread pirating of foreign and domestic videotapes 
discourages the entry of licensed distributors.  In 2004, the 
Nigerian Copyright Commission (NCC) launched an anti-piracy 
initiative named "Strategic Action against Piracy."  The Nigerian 
police force, working closely with the NCC, has raided enterprises 
producing and selling various pirated works such as software, books, 
and videos.  The NCC obtained two convictions on broadcast piracy 
and software piracy in 2009.  About 60 cases are currently being 
prosecuted against IPR violators in various courts in the country. 
However, inconsistent application of legal and law enforcement 
measures remain deterrents to IPR enforcement. 
 
Services Barriers 
----------------- 
 
¶24. (U) Foreign energy services suppliers are confronted with a 
number of barriers in Nigeria, particularly with respect to movement 
of personnel.  Nigeria imposes quotas on foreign personnel based on 
the issued capital of firms.  Such quotas are especially strict in 
the oil and gas sector and may apply to both production and services 
companies.  Oil and gas companies must hire Nigerian workers unless 
they can demonstrate that particular positions require expertise not 
found in the local workforce.  Positions in finance and human 
resources are almost exclusively reserved for Nigerians.  Certain 
geosciences and management positions may be filled by foreign 
workers with the approval of NAPIMS.  Each oil company must 
negotiate its foreign worker allotment with NAPIMS.  Delays in this 
Qnegotiate its foreign worker allotment with NAPIMS.  Delays in this 
process and in the approval of visas for foreign personnel present 
serious challenges to the energy industry in acquiring the necessary 
personnel for their operations. 
 
Investment Barriers 
------------------- 
 
¶25. (U) Investment in the petroleum sector is limited to existing 
joint- ventures or production-sharing agreements.  Foreign investors 
may invest in any Nigerian firm except those firms on an exemption 
list, which includes companies that manufacture firearms, 
ammunition, and military and paramilitary apparel.  Foreign 
investors must register with the Nigerian Investment Promotion 
Commission after incorporation. 
 
¶26. (U) Potential investors must contend with complex tax 
administration procedures, confusing land ownership laws, 
overlapping land ownership claims, arbitrary application of 
regulations, power shortages, poor roads, corruption, and crime. 
The sanctity of contracts is often violated and Nigeria's court 
system for settling commercial disputes is weak and can be biased. 
There were at least three prominent cases in 2009 where the judicial 
system or law enforcement agencies where manipulated by local 
companies in order to exert undue pressure on U.S. companies and 
individuals for commercial advantage. 
 
ABUJA 00002210  005 OF 005 
 
 
 
¶27. (U) International oil companies are under significant pressure 
to increase procurement from domestic firms.  The GON, through the 
Nigerian Content Division (NCD) of the Nigerian National Petroleum 
Corporation (NNPC), has set a target of 70 percent local content for 
oil-related projects by 2010.  The GON did not meet its 2008 target, 
and will likely not meet its 2009 target due to infrastructure 
challenges such as power shortages, and insecurity in the 
oil-producing Niger Delta.  Sufficiently trained personnel and 
physical infrastructure do not exist in many cases to meet the GON's 
local content targets.  Some domestic firms possess adequate 
technical expertise, but managerial and financial capabilities are 
often lacking.  New legislation to codify mandatory levels of 
Nigerian content in specific petroleum activities is pending in the 
National Assembly.  The proposed legislation would have a strong 
negative impact on the operations of international energy services 
companies already operating in Nigeria and could lead to higher 
costs for international oil companies. 
 
¶28. (U) The vast majority of natural gas flaring in Nigeria is done 
in older, on-shore, and near-off-shore oilfields.  International oil 
companies typically operate those fields in a joint-venture 
arrangement with the NNPC as the majority partner.  Funding for 
joint-venture operations, maintenance, and equipment upgrades comes 
from joint-venture partners in proportion to their equity ownership. 
 The GON has failed to fully fund its share of the joint-venture 
costs during the past several years, reducing the ability of the 
operating partners to install new anti-flare technology in these 
older oilfields. 
 
¶29. (U) The proposed Petroleum Industry Bill (PIB) would increase 
the government share of oil and gas revenues from mandated joint 
ventures and thereby affect the investment climate for the oil and 
gas sector.  Stakeholders in the sector, including international oil 
companies (IOCs) and oil and gas service providers, as well as 
Nigerian firms, have been advocating change in the fiscal and 
non-fiscal terms of the proposed bill to make it more attractive to 
private sector investment.  Other issues of concern include sanctity 
of contract, mediation, and dispute settlement.  Investment in the 
oil and gas sector, especially IOC investment, has slowed pending 
the passage of the final bill. 
 
Other Barriers 
-------------- 
 
 
¶30. (U) The GON has made efforts to eliminate financial crimes such 
as money laundering and advance fee fraud (also known as "419 
fraud," after the relevant section of the Nigerian Criminal Code). 
In June 2006, the Financial Action Task Force removed Nigeria's name 
from the list of non-cooperating countries and territories in the 
fight against money laundering and other financial crimes.  In May 
2007, Nigeria was admitted into the Egmont Group of Financial 
Intelligence Units. 
 
¶31. (U) Nigeria was ranked 130 out of 180 countries in Transparency 
International's 2009 Corruption Perception Index (CPI) dropping nine 
places from its 121 ranking in the 2008 CPI.  Nigeria's corruption 
levels remain high and its main anti-corruption institution, the 
Economic and Financial Crimes Commission has faltered recently in 
QEconomic and Financial Crimes Commission has faltered recently in 
its commitment on the issue.  The World Bank's Doing Business 2010 
report also ranked Nigeria 125 out of 183 countries surveyed for 
ease of doing business, a decline from its 120 position out of 183 
countries surveyed in Doing Business 2009.  Some U.S. suppliers 
believe they lose sales when they refuse to engage in illicit or 
corrupt behavior.  Other U.S. exporters say Nigerian businessmen and 
officials understand that U.S. firms must adhere to the U.S. Foreign 
Corrupt Practices Act, and they believe that the law's restrictions 
help minimize their own exposure to corruption. 
 
SANDERS