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Viewing cable 06ABUJA2803, NIGERIA: 2007 NATIONAL TRADE ESTIMATE

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Reference ID Created Released Classification Origin
06ABUJA2803 2006-10-26 14:36 2011-08-25 00:00 UNCLASSIFIED Embassy Abuja
VZCZCXRO0822
PP RUEHMA RUEHPA
DE RUEHUJA #2803/01 2991436
ZNR UUUUU ZZH
P 261436Z OCT 06
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 7584
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 5378
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHZK/ECOWAS COLLECTIVE
UNCLAS SECTION 01 OF 05 ABUJA 002803 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR AF/W (SILSKI) AND EB/TPP/BTA 
DEPARTMENT PLEASE PASS TO USTR (GBLUE) 
 
E.O. 12598: N/A 
TAGS: ETRD ECON EFIN NI
SUBJECT: NIGERIA: 2007 NATIONAL TRADE ESTIMATE 
 
1. (U) The following information is Nigeria's 2007 National Trade 
Estimate. 
 
Trade Summary 
------------- 
 
2. (U) The U.S. goods trade deficit with Nigeria was $22.6 billion 
in 2005, an increase of $7.9 billion from $14.7 billion in 2004. 
U.S. goods exports in 2005 were $1.6 billion, up 3.9 percent from 
the previous year. Corresponding U.S. imports from Nigeria were 
$24.2 billion, up 48.9 percent.  Nigeria is currently the 53rd 
largest export market for U.S. goods.  The stock of U.S. foreign 
direct investment (FDI) in Nigeria in 2004 was $955 million, down 
from $1.1 billion in 2003.  U.S. FDI in Nigeria is concentrated 
largely in the mining, and wholesale sectors. 
 
Import Policies 
--------------- 
 
3. (U) Nigeria's high tariffs and numerous import bans have been a 
concern to many U.S. businesses and were also raised in the context 
of Nigeria's May 2005 Trade Policy Review in the World Trade 
Organization. 
 
Tariffs 
------- 
 
4. (U) Tariffs provide the Nigerian government with its 
second-largest source of revenue after oil exports.  In its last 
major tariff revision, in October 2005, the government implemented 
the Economic Community of West African States (ECOWAS) Common 
External Tariff, reducing the number of tariff bands in Nigeria from 
twenty to five. The five tariff bands are: zero duty on capital 
goods, machinery, and essential drugs not produced locally; 5 
percent duty on imported raw materials; 10 percent duty on 
intermediate goods; 20 percent duty on finished goods; and 50 
percent duty on goods in the industries that the government seeks to 
protect.  The 50-percent tariff covers many items currently subject 
to import bans.  Items deemed to be necessities such as 
anti-retroviral drugs for the treatment of patients with HIV/AIDS 
are imported duty free.  This duty-free status will be reviewed 
after one year to assess its impact on the Nigerian economy and its 
stakeholders.  The reforms are an effort to harmonize the trade 
environment in the sub-region while at the same time improving 
Nigeria's own trade and investment environment. 
 
5. (U) Frequent policy changes and inconsistent duty collection make 
importing difficult and expensive, and occasionally create severe 
bottlenecks for commercial activities.  This problem is aggravated 
by Nigeria's dependence on imported raw materials and finished 
goods, which affects both foreign and domestic manufacturers.  Many 
importers resort to under-valuing and smuggling to avoid paying full 
tariffs. 
 
Non-Tariff Trade Barriers 
------------------------- 
 
6. (U) The United States continues to have serious concerns about 
the Nigerian government's use of non-tariff barriers to trade.  Bans 
on the importation of a variety of items - sorghum, millet, wheat 
flour, cassava, frozen meat and poultry products, biscuits, bottled 
water, fruit juice in retail packs, beer, mosquito repellent coils, 
most textile and apparel products, used clothing, and cars more than 
eight years old, maize, cocoa butter, disinfectants and germicides, 
diaries, greeting cards, calendars, and facial tissues - continued 
into 2006.  Items removed from the list in 2005 include certain 
textile products (such as nylon tire cord, conveyor belts, trimmings 
and linings, gloves for industrial use, elastic bands, mosquito 
nets, motifs), chocolates, white cement, linseed oils, castor oils, 
hydrogenated vegetable fats used as industrial raw materials, all 
raw materials for the manufacture of soap and detergents, safety 
shoes used in the oil industry, sports shoes, stadium chairs and 
fittings, accessories used in furniture making, and prefabricated 
buildings.  These items remained on the list of imports allowed in 
2006.  Overall, the government has reduced the number of items on 
its import prohibition list and has stated its intention to rescind 
all import bans by January 2007, but new import bans, such as an 
announced ban on cement imports by the end of 2007, are inconsistent 
with the government's stated intentions. 
 
Customs Barriers 
---------------- 
 
7. (U) Nigerian port practices continue to present major obstacles 
to trade.  Importers face long clearance procedures, high berthing 
and unloading costs, erratic application of customs regulations, and 
corruption.  Customs exemptions granted to U.S. firms as a 
 
ABUJA 00002803  002 OF 005 
 
 
concession for setting up operations in Nigeria have not always been 
honored.  In December 2005, the government released import 
guidelines for the implementation of a physical destination 
inspection regime that commenced in January 2006.  Under the 
destination inspection scheme, all imports are inspected on arrival 
into Nigeria.  These guidelines are implemented by the Destination 
Inspection Service Providers, which is a team comprised of the 
Customs Service and three firms that provide scanning services. 
 
Standards, Testing, Labeling, and Certification 
--------------------------------------------- -- 
 
8. (U) Rules concerning sanitary and phytosanitary standards, 
testing, and labeling are well defined, but bureaucratic hurdles 
slow the import-approval process.  Regardless of origin, all food, 
drug, cosmetic, and pesticide imports must be accompanied by 
certificates of analysis from manufacturers and appropriate national 
authorities, and specified animal products, plants, seeds, and soils 
must be accompanied by proper inspection certificates.  U.S. 
exporters may obtain these certificates from the U.S. Department of 
Agriculture and other relevant federal or state agencies.  By law, 
items entering Nigeria must be labeled exclusively in the metric 
system.  The Nigerian Customs Service is charged with preventing the 
entry of products with dual or multiple markings, but such items are 
often found in Nigerian markets. 
 
9. (U) High tariffs and uneven application of import and labeling 
regulations make importing high-value perishable products into 
Nigeria 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.  These factors can contribute to product 
deterioration and may translate into significant losses for 
perishable-goods importers. 
 
10. (U) The National Agency for Food and Drug Administration and 
Control (NAFDAC) is charged with protecting Nigerian consumers from 
fraudulent or unhealthful products.  The agency recently targeted 
the illicit importation of counterfeit and expired pharmaceuticals 
for special attention, particularly imports from East and South 
Asia.  NAFDAC's severely limited capacity for carrying out 
inspections and testing contributes to what some have characterized 
as an occasionally heavy-handed or arbitrary approach to regulatory 
enforcement, and the agency has occasionally challenged legitimate 
food imports.  U.S. products do not appear to be subject to 
extraordinary or discriminatory restrictions or regulations. 
 
Government Procurement 
---------------------- 
 
11. (U) The Obasanjo administration has made modest progress on its 
pledge to practice open and competitive bidding and contracting for 
government procurement.  Procurement and contracting guidelines are 
implemented by a "due-process" office in the Budget Monitoring and 
Price Intelligence Unit.  "Due process" certification aims at 
ensuring that the procurement process for public projects adheres to 
international standards for competitive bidding.  The unit acts as a 
clearing house for government contracts and procurement and monitors 
the implementation of projects to ensure compliance with contract 
terms and budgetary restrictions.  Procurement above 50 million 
naira (about $385,000) is subject to "due process" review. 
 
12. (U) Foreign companies incorporated in Nigeria receive national 
treatment, and government tenders are published in local newspapers 
and in tenders journal sold at local newspaper outlets.  U.S. 
companies have won government contracts in several sectors. 
Unfortunately, many companies that have won contracts have 
subsequently had difficulty getting them funded, usually as a result 
of delays in the national budget process, and some companies that 
won contracts for which funds were allocated have had trouble 
getting paid.  Nigeria is not a signatory to the WTO Agreement on 
Government Procurement. 
 
Export Promotion 
---------------- 
 
13. (U) In August 2006, the Government of Nigeria (GON) announced a 
new export initiative christened "Commerce 44".  The export 
initiative aims to develop and promote duty free export of eleven 
agricultural commodities; eleven manufactured products and services; 
and eleven solid mineral products with high export potentials, in 
eleven target markets.  The GON's aim is to focus on eleven 
countries/regions of the world while taking advantage of concessions 
offered by the subsisting bilateral and multilateral agreements, as 
well as Memorandum of Understanding (MOU), that will facilitate the 
export of Nigerian products and services into such markets. 
14. (U) The eleven agricultural products under the initiative 
 
ABUJA 00002803  003 OF 005 
 
 
include cocoa, cotton, cassava, ginger, sheanut, gum arabic, sesame 
seed, poultry, cashew nuts, floriculture, fruits, and vegetables. 
The eleven solid mineral products include kaolin, tin, 
tantalite-colombite, wolframite, zinc, iron ore, coal, lead ore, 
pyrite, zircon, and gem stones.  The eleven manufactured products 
and services include beverages, footwear, leather, shrimps, 
pharmaceuticals, rubber products, textiles and garments, iron and 
steel, films and music, and vegetable oil.  The eleven target 
markets include the EU, Japan, China, the United States, India, 
ECOWAS, Turkey, Southern African region, Central African region, 
South East Asia, and the Middle East. 
 
15. (U) An implementation committee comprising the Nigerian Export 
Promotion Council, Ministry of Finance, Ministry of Industries, 
Ministry of Commerce, Nigeria Customs Services, Central Bank of 
Nigeria, Special Adviser to the President on Manufacturing and the 
Private Sector, and the Nigerian Export-Import Bank administer 
export incentive programs that include tax concessions, export 
development funds, capital assets depreciation allowances, and 
foreign currency retention programs. Funding constraints limit the 
effectiveness of these programs.  In 2005, the GON rescinded all 
export subsidies, because it claims that the Common External Tariff 
(CET) it implemented in October 2005 automatically favors 
manufacturers through its lower tariffs on capital goods and raw 
materials.  Some of the incentives such as the Export Expansion 
Grant and the Manufacture-in-Bond Scheme have been modified and 
reintroduced in 2006. 
 
16. (U) The Nigerian Export Processing Zone Authority (NEPZA) is 
responsible for attracting investment in export-oriented industries. 
 Of the five zones established under NEPZA, only the Calabar and 
Bonny Island (Onne) export-processing zones are operational, with 
some difficulties reported.  The Calabar export-processing zone also 
functions as a free trade zone.  NEPZA rules dictate that at least 
75 percent of production in the zones be exported, but lower export 
levels are tolerated.  A third free zone, Tinapa Free Zone and 
Tourist Resort, is under construction and expected to commence 
operation during the first quarter of 2007.  Tinapa is owned by the 
Cross-River State Government. 
 
Intellectual Property Rights (IPR) Protection 
--------------------------------------------- 
 
17. (U) Nigeria is a member of the World Intellectual Property 
Organization (WIPO), a party to the Universal Copyright Convention 
(UCC), the Berne Convention, and the Paris Convention for the 
Protection of Industrial Property, and has signed the WIPO Copyright 
Treaty and the WIPO Performances and Phonograms Treaty.  Legislation 
pending in the National Assembly is intended to establish a legal 
framework for an IPR system compliant with WTO rules. 
 
18. (U) The government's lack of institutional capacity to address 
IPR issues is a major constraint to enforcement.  Relevant Nigerian 
institutions suffer from low morale, poor training, and limited 
resources.  Fraudulent alteration of IPR documentation is common. 
Despite Nigeria's active participation in the conventions cited 
above, its reasonably comprehensive IPR laws, and growing interest 
among Nigerians in seeing their intellectual property protected, 
piracy is rampant in Nigeria.  Counterfeit auto parts, 
pharmaceuticals, business and entertainment software, music and 
video recordings, and other consumer goods are sold openly 
throughout the country, and intellectual property infringers from 
other countries appear increasingly to be using Nigeria as a base 
for the production of pirated goods.  In 2004, U.S. industry 
reported a growth of optical disk manufacturing plants, some of 
which may be contributing to the production of pirated optical disk 
products.  Additionally, book piracy remains a problem. 
 
19. (U) Patent and trademark enforcement remains weak, and judicial 
procedures are slow and subject to corruption.  Nonetheless, recent 
government efforts to curtail IPR abuse have yielded results.  The 
Federal High Court of Enugu, Nigeria, issued an interim injunction 
on November 23, 2004 against several firms infringing a Honeywell 
International trademark for spark plugs.  The court warned all 
distributors, dealers, and retailers in Nigeria that the 
unauthorized use of Honeywell's "Autolite" trademark is illegal and 
constitutes an offense punishable by fine or imprisonment. 
 
20. (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 respected, but some cable providers illegally transmit 
foreign programs.  The National Broadcasting Commission monitors the 
industry and is responsible for punishing infractions. 
 
21. (U) Almost no foreign feature films have been legally 
distributed in the country in the last two decades.  Widespread 
 
ABUJA 00002803  004 OF 005 
 
 
pirating of foreign and domestic videotapes discourages the entry of 
licensed distributors.  In 2004, the Nigerian Copyright Commission 
launched an anti-piracy initiative named "Strategy Against Piracy" 
(STRAP).  The Nigerian police force, working closely with the 
Nigerian Copyright Commission, has raided enterprises producing and 
selling pirated software and videos, and a number of high-profile 
charges have been filed against IPR violators.  Unfortunately, most 
raids appear to target small rather than large and well-connected 
pirates, and very few cases involving copyright, patent, or 
trademark infringement have been successfully prosecuted. 
 
Services Barriers 
----------------- 
 
22. (U) Foreign participation in the services sector is generally 
not restricted.  Regulations provide for 100 percent foreign access 
in many service sectors, including banking, insurance, 
telecommunications, and securities.  Central Bank of Nigeria 
directives stipulates minimum levels of paid-up capital.  At least 
three foreign banks operate in Nigeria, and several Nigerian banks 
have foreign shareholders. 
 
23. (U) Professional societies in engineering, accounting, medicine, 
and law define minimum professional requirements.  Nigeria imposes 
quotas on expatriate employment based on the issued capital of 
firms.  Quotas are especially strict in the oil and gas sector and 
may apply to both production and service 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 geoscience and 
management positions may be filled by expatriates with the approval 
of the National Petroleum Investment and Management Services 
(NAPIMS) agency.  Each oil company must negotiate its expatriate 
worker allotment with NAPIMS.  Significant delays in the approval of 
this allotment, and in subsequent approval of visas for expatriate 
personnel, present serious management challenges to the energy 
industry's efforts to acquire the necessary personnel and maintain 
their legal immigration status in Nigeria.  NAPIM's approval is 
required for all procurement in the energy sector above $500,000. 
Approval processes are slow and can significantly escalate the time 
and cost required for a given project, as well as providing 
opportunities for corruption and favoritism. 
 
Investment Barriers 
------------------- 
 
24. (U) Under the Nigerian Investment Promotion Commission (NIPC) 
Decree of 1995, Nigeria allows 100-percent foreign ownership of 
firms outside the petroleum sector.  Investment in the petroleum 
sector is limited to existing joint ventures or production-sharing 
agreements.  Foreign investors may buy shares of any Nigerian firm 
except firms on a "negative list" (such as manufacturers of 
firearms, ammunition, and military and paramilitary apparel). 
Foreign investors must register with the NIPC after incorporation 
under the Companies and Allied Matters Decree of 1990.  The decree 
prohibits nationalization or expropriation of a foreign enterprise, 
except when necessary to protect the national interest. 
25. (U) Despite efforts to improve the country's investment climate, 
disincentives to investing in Nigeria continue to plague foreign 
entrepreneurs.  Potential investors must contend with poor 
infrastructure, complex tax administration procedures, confusing 
land ownership laws, arbitrary application of regulations, 
corruption, and extensive crime.  The sanctity of contracts is often 
violated, and Nigeria's court system for settling commercial 
disputes is weak and sometimes biased. 
 
26. (U) Foreign oil companies are under significant pressure to 
increase procurement from indigenous firms.  The GON through the 
Nigerian Content Division (NCD) of the Nigerian National Petroleum 
Corporation (NNPC) set a target of 45 percent local content for 
oil-related projects by 2006 and 70 percent by 2010.  Oil companies 
and NNPC appear to be working together cooperatively to meet these 
goals, but the extent of and mechanisms for enforcement of local 
content regulations remain unclear.  In many cases, sufficiently 
trained personnel and physical infrastructure do not currently exist 
to meet the government's local content targets.  The NCD of the NNPC 
is working toward identifying and certifying indigenous firms with 
specific skill sets through the Joint Qualification System (JQS). 
Although many indigenous firms possess adequate technical expertise, 
managerial and financial capabilities are often lacking. 
 
Other Barriers 
-------------- 
 
27. (U) The Nigerian government has increased its efforts to 
eliminate financial crimes such as money laundering and advance-fee 
 
ABUJA 00002803  005 OF 005 
 
 
fraud (or "419 fraud," named after the relevant section of the 
Nigerian Criminal Code).  With the encouragement and cooperation of 
U.S. law enforcement agencies, the Nigerian government is now 
prosecuting more "419" perpetrators.  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. 
 
28. (U) International monitoring groups routinely rank Nigeria among 
the most corrupt countries in the world.  While sales of U.S. goods 
and services to public- and private-sector enterprises are not 
restricted, 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 
exposure to corruption. 
 
CAMPBELL