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Viewing cable 07ABUJA2369, NIGERIA 2008 NATIONAL TRADE ESTIMATE

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Reference ID Created Released Classification Origin
07ABUJA2369 2007-11-13 12:47 2011-08-25 00:00 UNCLASSIFIED Embassy Abuja
VZCZCXRO4697
PP RUEHMA RUEHPA
DE RUEHUJA #2369/01 3171247
ZNR UUUUU ZZH
P 131247Z NOV 07
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 1415
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 8245
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHZK/ECOWAS COLLECTIVE
UNCLAS SECTION 01 OF 04 ABUJA 002369 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR AF/W (SILSKI) AND EB/TPP/BTA 
DEPARTMENT PLEASE PASS TO USTR (GBLUE, LAGAMA) 
 
E.O. 12598: N/A 
TAGS: ETRD ECON EFIN NI
SUBJECT: NIGERIA 2008 NATIONAL TRADE ESTIMATE 
 
1. The following information is Nigeria's 2008 National Trade 
Estimate. 
 
Trade Summary 
------------- 
 
2. The U.S. goods trade deficit with Nigeria was $25.7 billion in 
2006, an increase of $3.1 billion from $22.6 billion in 2005.  U.S. 
goods exports in 2006 were $2.2 billion, up 37.6 percent from the 
previous year. Corresponding U.S. imports from Nigeria were $27.9 
billion, up 15.2 percent.  Nigeria is currently the 50th largest 
export market for U.S. goods.  The stock of U.S. foreign direct 
investment (FDI) in Nigeria in 2005 was $874 million (latest data 
available), down from $2.0 billion in 2004.  U.S. FDI in Nigeria is 
concentrated largely in the mining, and wholesale trade sectors. 
 
Import Policies 
--------------- 
 
3. Nigeria uses a combination of tariff and non-tariff barriers, 
which continues to be a major source of concern to its trading 
partners.  It also practices a destination inspection policy for 
imports. 
 
Tariffs 
------- 
 
4. Tariffs provide the Nigerian government (GON) with its 
second-largest source of revenue after oil exports.  In October 
2005, the GON implemented the Economic Community of West African 
States (ECOWAS) Common External Tariff (CET) 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. 
 
5. Partial adoption of the CET is part of the ongoing economic 
reforms aimed at improving Nigeria's trade and investment 
environment and harmonization in the sub-region.  However, 
excessively high tariffs, non-transparent tariffs, frequent policy 
changes and unclear interpretations by the Nigerian Customs Service 
(NCS) make importing difficult and expensive, and occasionally 
create severe bottlenecks for commercial activities.  Some importers 
complain that the tariffs are excessively high, and that the GON 
uses arbitrary reference prices at times.  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.  Some of the products that attract 
very high tariffs include sparkling wine (100 percent); rice (110 
percent); and tomato puree (50 percent). 
 
Non-Tariff Trade Barriers 
------------------------- 
 
6. Despite partial adoption of the CET, the GON continues to ban 
certain imports citing the need to protect local industries.  Items 
on the import prohibition list include maize (corn); bird's eggs; 
cocoa butter, powder, and cakes; millet; pork; beef; live birds; 
frozen poultry; fresh and dried fruit; wheat flour; sorghum; 
vegetable oil and fats; cassava; bottled water; biscuits; spaghetti; 
noodles; fruit juice in retail packs; beer; non-alcoholic wine; 
alcoholic beverages; and bagged cement.  Items removed from the list 
of prohibited imports in 2005 and 2006 were certain textile products 
(textile fabrics, yarn, 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 
2007. 
 
Customs Barriers 
---------------- 
 
7.  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 
concession for setting up operations in Nigeria have not always been 
 
ABUJA 00002369  002 OF 004 
 
 
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 NCS and 
three firms that provide scanning services. 
 
Standards, Testing, Labeling, and Certification 
--------------------------------------------- -- 
 
8. 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 NCS is charged with preventing the entry of products with dual 
or multiple markings, but such items are often found in Nigerian 
markets. 
 
9. 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. The National Agency for Food and Drug Administration and Control 
(NAFDAC) is charged with protecting Nigerian consumers from 
fraudulent or unhealthy products.  The agency continues to target 
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. 
 
Government Procurement 
---------------------- 
 
11. The GON has made modest progress on its pledge to operate an 
open and competitive bidding process for government procurement. 
The Public Procurement Act was signed into law in June 2007 by 
President Yar'adua's administration.  The Act established the Bureau 
of Public Procurement (BPP) replacing the Budget Monitoring and 
Price Intelligence Unit a.k.a "due-process" office.  Public 
procurement reforms are aimed at ensuring that the procurement 
process for public projects adheres to international standards for 
competitive bidding.  The BPP acts as a clearing house for 
government contracts and monitors the implementation of projects to 
ensure compliance with contract terms and budgetary restrictions. 
Procurement above 50 million naira ($419,000) is subject to the "due 
process" review.  The 36 state governments have also agreed to pass 
the Public Procurement Act in their respective states. 
 
12. Foreign companies incorporated in Nigeria receive national 
treatment, and 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. 
Unfortunately, many companies that have won contracts have 
subsequently had difficulty receiving funding, usually as a result 
of delays in the national budget process.  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 Subsidies 
---------------- 
 
13. The GON through its agencies administer various export 
incentives such as tax concessions, export development funds, 
capital asset depreciation allowances, foreign currency retention 
programs, Free Trade Zones, and Export Processing Zones.  In 
September 2007, the GON announced a freeze on new tax and duty 
waivers, exemptions, and other incentives and ordered an 
investigation on their implementation.  Businesses that were granted 
incentives before the freeze will continue to enjoy the incentives 
granted until when the investigation is concluded and the GON acts 
on the recommendations.  The investigation is expected to be 
 
ABUJA 00002369  003 OF 004 
 
 
completed before the end of 2007. 
 
14. 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 permitted.  A third free zone, Tinapa Free Zone and 
Tourist Resort, recently commenced operation in 2007.  Tinapa is 
owned by the Cross-River State Government. 
 
Intellectual Property Rights (IPR) Protection 
--------------------------------------------- 
 
15. 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 that complies with WTO obligations. 
 
16. 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. Counterfeit automotive parts, pharmaceuticals, 
business and entertainment software, music and video recordings, and 
other consumer goods are sold openly 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 disc manufacturing 
plants, some of which may be contributing to the production of 
pirated optical disc products.  Additionally, book piracy remains a 
problem. 
 
17. Patent and trademark enforcement remains weak, and judicial 
procedures are slow and subject to corruption.  Nonetheless, 
government efforts to curtail IPR abuse have yielded limited 
results.  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. 
 
18. Almost no foreign feature films have been legally distributed in 
the country in the last two decades.  Widespread 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 
----------------- 
 
19. Foreign participation in the services sector is generally not 
restricted.  Regulations provide for 100 percent foreign ownership 
in many service sectors, including banking, insurance, 
telecommunications, and securities.  The Central Bank of Nigeria's 
directives stipulates minimum levels of paid-up capital.  At least 
three foreign banks operate in Nigeria and several Nigerian banks 
have foreign shareholders. 
 
20. Professional societies in engineering, accounting, medicine, and 
law define minimum professional requirements.  Nigeria imposes 
quotas on foreign employment based on the issued capital of firms. 
Quotas on foreign workers 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. 
 
21. Certain geoscience and management positions may be filled by 
foreign workers with the approval of the National Petroleum 
 
ABUJA 00002369  004 OF 004 
 
 
Investment and Management Services (NAPIMS) agency.  Each oil 
company must negotiate its foreign worker allotment with NAPIMS. 
Significant delays in the approval of this allotment and in 
subsequent approval of visas for foreign 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 provide opportunities for corruption and 
favoritism. 
 
Investment Barriers 
------------------- 
 
22. 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. 
 
23. 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. 
 
24. Foreign 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), set a target of 45 percent local content for 
oil-related projects by 2006 and 70 percent by 2010.  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 
domestic firms with specific skill sets through the Joint 
Qualification System (JQS).  Although some domestic firms possess 
adequate technical expertise, managerial and financial capabilities 
are often lacking.  Legislation to codify various levels of Nigerian 
content in specific petroleum activities failed to pass the National 
Assembly last term.  The bill's sponsors plan to reintroduce it this 
year. 
 
Other Barriers 
-------------- 
 
25. The GON has increased its efforts to eliminate financial crimes 
such as money laundering and advance-fee 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 
GON is now prosecuting more "419" perpetrators.  In May 2007, 
Nigeria was admitted into the Egmont Group of Financial Intelligence 
Units (FIUs).  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. 
 
26. 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. 
 
PIASCIK