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Viewing cable 08ABUJA2045, NIGERIA: INFRASTRUCTURE CONDITIONS HINDER EXPORT

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Reference ID Created Released Classification Origin
08ABUJA2045 2008-10-16 12:34 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Abuja
VZCZCXRO7072
PP RUEHMA RUEHPA
DE RUEHUJA #2045/01 2901234
ZNR UUUUU ZZH
P 161234Z OCT 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 4191
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 0076
RUEHZK/ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DOC WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
UNCLAS SECTION 01 OF 06 ABUJA 002045 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO USTR - AGAMA; USTDA - FITTS/MARIN; USITC -SCHLITT AND 
EXIM - JRICHTER 
DEPT OF ENERGY FOR HAYLOCK AND PERSON 
USAID AFR/SD FOR CURTIS 
TREASURY FOR PETERS AND HALL 
DOC FOR 3317/ITA/OA/KBURRESS, 3130/USFC/OIO/ANESA/DHARRIS 
USDA/FAS FOR C. MCKINNELL, R. VERDONK 
 
E.O. 12598: N/A 
TAGS: ETRD ENRG EAIR ELTN ECON PGOV EAID NI
SUBJECT: NIGERIA: INFRASTRUCTURE CONDITIONS HINDER EXPORT 
COMPETITIVENESS 
 
REF: A. ABUJA 1942 
 B. ABUJA 1794 
 C. STATE 85109 
 D. LAGOS 302 
 E. LAGOS 318 
 F. ABUJA 1563 
 G. LAGOS 240 
 H. ABUJA 1311 
 I. LAGOS 132 
 J. LAGOS 154 
 K. ABUJA 411 
 L. LAGOS 64 
 M. LAGOS 7 
 N. 07 LAGOS 768 
 O. 07 ABUJA 2059 
 
SENTITIVE BUT UNCLASSIFIED - NOT FOR DISTRIBUTION OUTSIDE USG 
 
1. (U) SUMMARY.  The overall state of Nigeria's infrastructure is 
poor.  Rapid population growth and lack of investment and 
maintenance have greatly deteriorated existing infrastructure.  In 
many areas of Nigeria, water supply, sewerage, sanitation, drainage, 
roads, electricity and waste disposal are virtually non-existent. 
Maintenance of the partially existing infrastructure has been 
infrequent.  The country's population is between 140-150 million 
people with 92 million hectares of land and 853 kilometers (km) of 
coastline, which supports eight major rivers and eight seaports with 
annual freight through-put of 49 million tons.  Roads carry a 
vehicle population of 5.5 million and road freight at 50 million 
tons per year.  The railroad system is 4,660 km of standard and 
narrow gauge track.  There are twenty-one airports, four with 
international flights, with passenger traffic at 5.4 million per 
year. The national electricity grid reaches only 40% of the 
population and much of that population has power only on a limited 
basis each day.  The Nigerian government (GON) is actively trying to 
improve the situation by drawing up strategic plans for 
transportation and electricity generation seeking public private 
participation (PPP) to fund improvements.  This cable is the second 
of two responses to reftel C regarding Nigeria's current physical 
infrastructure, capacity, state of repair and state of technology. 
END SUMMARY. 
. 
TRANSPORTATION SECTOR WOEFULLY INADEQUATE 
----------------------------------------- 
. 
2.  (U) In furtherance of the U.S. International Trade Commission's 
(USITC) preparation of three annual reports related to factors that 
affect trade patterns of selected industries in sub-Saharan African 
countries, Team Nigeria has put forward specific information to 
better understand the Nigerian landscape.  The transportation sector 
comprises road, rail, water and air sub-sectors, and GON has 
unveiled a plan for an inter-modal system that would effectively 
link the different modes of transport to promote the socio-economic 
development.  Federal and State plans include railway expansion and 
linkage with roads and airports.  One plan is for the Federal 
Capital Territory (includes Abuja) to be linked with the railway 
system along with ports such as Warri, Lily Pond, Onne, and Tin Can 
Island.  Likewise the airports may be linked with the railway to 
reduce congestion in intra-city transportation.  The major framework 
for implementing the transformation of the transport sector is 
through concessions and PPPs aimed at attracting private sector 
investments and participation. 
. 
ROADS - NOT PASSING THE GRADE 
----------------------------- 
. 
3. (SBU) In a January 24, 2008 meeting with the Ambassador and 
Africa Bureau Deputy Assistant Secretary Todd Moss, the Minister of 
Transportation Diezani K. Allison-Madueke, said the road network is 
unacceptable because of its serious negative economic impact and a 
major safety concern to passengers and vehicles.  The poor road 
conditions greatly increase vehicle operating costs, lead to higher 
fuel consumption, more frequent vehicle maintenance, depreciation of 
vehicle values, longer travel times and increased accident rates. 
She lamented that the Ministry therefore, bears the burden of high 
road maintenance costs. 
 
ABUJA 00002045  002 OF 006 
 
 
 
4. (U) The Nigeria Federal Roads Maintenance Agency (FERMA) reports 
that the GON completed 34,000 kilometers (km) of road infrastructure 
between 1970 and 1982. The national network is currently estimated 
at 194,200 km with an estimated 2008 asset value of $38 million out 
of which 34,102 km (17.6%) is federal roads with asset value of 
$18.8 million.  State roads account for 30,500 km (15.7%) and the 
local/rural roads cover 129,580 km (66.7%).  The federal road 
network carries 70% of freight and services 90% of the 
socio-economic activities in the country. Between 2003 and 2007 
FERMA assessed the condition of the federal roads network as 
follows: 
-- 50% of the road network was rated as collapsed and impassable; 
-- 35% was rated as in poor structural condition; 
-- 10% was rated in good condition; 
-- 5% was rated very good. 
The GON medium-term strategy plan targets improving the road network 
to 82.4% in very good condition, 5.89% in good condition and only 
12% in poor or bad condition by 2015.  This major improvement plan 
is estimated to cost $5 billion. 
. 
RAIL SYSTEM - DECAYING SINCE INDEPENDENCE 
----------------------------------------- 
. 
5. (U) The railway infrastructure was inherited from the colonial 
period and is virtually moribund with no history of upgrades or 
systematic maintenance programs.  In designing the Nigerian rail 
system, the colonial administration came up with north-south lines 
without linking east to west.  The aim then was to convey 
agricultural products from the north to the ports in the south.  In 
the post independence era, the railway system actively supported 
economic activities as a bridge between the north and south.  The 
system consisted of 3,500 km of narrow-gauge (1.067 meter) rail 
track.  The system's basic elements were two main lines running 
inland from the coast: 
-- In the west from Lagos to Kano, opened in 1912; 
-- In the east from Port Harcourt to a junction with the western 
line at Kaduna, opened in 1926. 
 
6. (U) Three major extensions were subsequently constructed: 
-- A branch line from Zaria to Kaura Namoda (an important 
agricultural area in the northwest) completed in 1929. 
-- A branch from Kano to Nguru (a cattle-raising region in the 
northeast) completed in 1930. 
-- A 645- kilometer branch from the eastern line to Maiduguri, 
completed in 1964. 
-- A short spur to the mining areas at Jos and three short branches 
from Lagos, Minna and Kaduna completed the system. 
Inadequate maintenance and funding have contributed to the severe 
deterioration of the entire system. 
 
7. (SBU) According to Nigerian Railway Corporation Managing Director 
Mazi Nwankwo, in a discussion with EconOff on September 15, 2008, 
there is a plan to refurbish the entire system, including keeping 
the narrow gauge system.  Another plan to convert the entire system 
to standard gauge (1.435-meter) by laying new track parallel to the 
old was shelved in the early 1980s and again in 2008 for lack of 
funding. Nwanko said the GON will purchase new locomotives, engines, 
and rail cars and there are active discussions with General Electric 
and others. 
 
8. (U) In addition, the Ministry of Transportation is actively 
proposing the following railway concessions: -- A western railway 
from Lagos to Nguru and Kaura Namoda via Zaria; 
-- An eastern railway from Port Harcourt to Maiduguri including the 
Kaduna to Kafanchan link; 
-- A central railway from Itakpe to Warri via Ajaokuta. 
In an August 8, 2008 presentation on infrastructure, Minister for 
Transportation Diezani Alison-Madueke said the estimated cost of 
these proposed public private partnerships is US$ 1.303 billion. 
. 
MARITIME TRANSPORT HAS POTENTIAL TO GROW 
---------------------------------------- 
. 
9. (U) Nigeria is rich with waterways and the use of these waterways 
would improve the movement of goods and people.  However, very 
 
ABUJA 00002045  003 OF 006 
 
 
little planning or funding has been dedicated to the maritime 
sector.  Nigeria has over 10,000 km of navigable waterways from the 
Nigeria/Niger and Nigeria/Cameroon borders to the Atlantic Ocean, 
comprising rivers, creeks, 26 lagoons and lakes.  In the 
intra-Coastal waters the Nigerian main river system is a 
Y-configuration suitable for North-South movement of people and 
goods.  Nigerian inland waterways transportation (IWT) development 
is in its infancy.  The inland waterways consist of 27 rivers, 36 
lagoons/creeks/canals and two lakes.  Two of the three largest 
rivers in West Africa flow through Nigeria, thus providing 
significant natural transportation advantages.  The IWT in Nigeria 
connects all major cities/commercial centers and major agricultural 
belts.  Most of the rivers are navigable only during the flood 
season of June through mid October.  The major rivers are the Niger 
and Benue and both require constant maintenance/dredging to make 
them passable.  Landing facilities on the rivers are mostly absent. 
The GON recently has made efforts to develop a master plan to guide 
and direct the development of the IWT industry, but no progress has 
been made. 
 
10. (U) Nigeria has a total of eight ports, which are delineated 
into 25 terminal and concessions to private operators, of which 
eighteen are located in Lagos and Rivers states and seven in Warri 
and Calabar.  The cargo through-put in tons in-bound is 31,937,804 
and out-bound is 17,235,530 for a total of 49,173,324 tons.  The 
Ministry of Transportation has developed a long list of investment 
opportunities for public private partnerships at the ports with 
mixed results. 
 
11. (U) The volume of exports via maritime transport is low. 
Unprocessed cashew, cocoa, shea nuts, sesame nuts, and cotton 
constitute the primary commodities shipped by sea.  Currently only 
20% of all shipping containers leave Nigeria filled with goods and 
commodities. The U.S. Trade and Development Agency (USTDA) is 
providing technical assistance to the Nigerian Ministry of Transport 
in the development of an integrated computerization plan for the 
operations and management of the Nigerian Ports Authority.  This 
project will help increase the productivity of the Nigerian Ports 
Authority, and build human capacity to analyze, design and manage 
information technology (IT) systems.  This technical assistance is 
expected to facilitate more efficient trade throughout the entire 
region. 
. 
AVIATION - IMPROVING BUT MORE NEEDS TO BE DONE 
--------------------------------------------- - 
. 
12. (SBU) The problems in the sector range from obsolete and 
malfunctioning air navigation equipment, inaccurate weather 
measuring instruments, and disrepair of fire tenders, runways, 
conveyor belts and other passenger processing equipment.  USTDA 
conducted a definitional mission in June 2008, looking at potential 
projects at airports and with the Nigeria Civil Aviation Authority 
(NCAA), which has not been completed.   Following several major air 
crashes in 2005 and 2006 the GON has provided increased funding for 
the sector.  However, several public investigations in the National 
Assembly have revealed that ministers and other high-level officials 
may have diverted funds to their own pockets.  Despite these issues, 
the aviation sector remains the fastest and safest means of 
transportation in Nigeria, due in large part to an on-going 
partnership with the U.S. Federal Aviation Administration (FAA), the 
World Bank, and others.  In January 2008 an FAA team began the first 
of many two-week visits, through 2010, to help Nigeria's aviation 
industry achieve Category One certification.  The team is 
concentrating on eight key areas: legislation, regulation, civil air 
authority structure and oversight functions, technical guidance, 
qualified technical personnel, licensing and certification, 
continued surveillance obligations, and resolution of safety issues. 
 The World Bank has provided $46.6 million in International 
Development Association (IDA) credits for Nigeria under the West and 
Central Africa air transport safety and security project.  The funds 
are providing an upgrade to the infrastructure and navigational aids 
at airports.  The upgrades will include an institutional study of 
each aviation agency, aircraft and aircrew recertification exercise, 
Port Harcourt and Abuja airports' operational perimeter fences and 
patrol routes construction and rehabilitation, and installation of 
wind shear detection systems for Lagos, Port Harcourt and Kano 
 
ABUJA 00002045  004 OF 006 
 
 
airports. 
 
13. (U) Four (Lagos, Abuja, Port Harcourt and Kano) of the 21 
airports in Nigeria operate international routes.  Domestic 
passenger traffic levels were six million in 2007, with another 
three million for international flights.  Annual numbers recorded 
for the first three quarters of 2008 indicate passenger traffic 
growing, especially internationally. 
 
14. (SBU) During 2007 and 2008 discussion with EconOff, the Ministry 
of Transportation Director Dr. Tunji Bolade and NCAA Director 
General Dr. Harold Demuren contended that the GON's new policy 
thrust is to follow up the National Civil Aviation Policy (NCAP) of 
2001, which set in motion deregulation and privatization, to further 
develop a privatized, autonomous, highly commercialized and 
competitive aviation industry. 
 
15. (U) The sector has shifted from a purely public driven sector to 
a liberalized sector with private sector participation in the 
airline business.  The country presently has 17 private domestic 
airlines with four private airlines operating international routes 
and 20 foreign airlines operating in the country. 
 
16. (SBU) According to Demuren, Nigeria has 100 aircraft that are 
less than 10 years old among which are mainly newer Boeing 737-700 
models.  The implementation of the Cape Town Convention by the GON 
has enabled several domestic airlines such as Arik Air, Chanchangi, 
Bellview, IRS and Virgin Nigeria to acquire new aircraft.  Another 
benefit of the Convention is the possibility of lower insurance 
premiums for Nigerian operators.  Similarly, Nigeria has signed an 
Open Skies Agreement on direct flights with the USG. (NOTE: In early 
2008, the Department of Transportation approved Virgin, Arik, and 
Bellview to wetlease flights to the U.S.; meaning that they are 
leasing airplanes including crews, maintenance and insurance. END 
NOTE).  The designated Nigerian carriers are Virgin Nigeria, Arik 
Air and Bellview while the American carriers are Delta and 
Continental Airlines. 
 
17.  (SBU) Also the aviation sector has embraced the PPP model such 
as the partnership at the new modern domestic airport terminal 
(MMA2) by a private company Bi-Courtney Aviation Services Limited 
through the Build, Operate and Transfer (BOT) arrangement which was 
inaugurated in 2007.  The GON has appropriated funds in the 2008 
budget for the provision of state-of-the-art equipment at several 
airports.  Concurrently, the Ministry of Transportation is 
reportedly modernizing two control towers at the Lagos and Abuja 
international airports, while plans are in the works to modernize 
the Port Harcourt and Kano airports. 
 
18. (U) Unreliable electricity supplies are a major problem for 
airports.  As a result, new generators have been installed by the 
Federal Airport Authority of Nigeria (FAAN) at the Kano (1,000 
kilovolt amp generator) and Abuja (dedicated dual line 33 Kilovolt 
power supply, from the National grid) international airports to deal 
with frequent power outages. 
 
19. (U) New Meteosat (MSG-2) Satellite Receivers have been 
reportedly installed at the four international airports across the 
country to improve weather forecasting.  The most recent 
commissioning was May 2, 2008 at the Abuja airport.  In addition, 
the Total Radar Coverage of Nigeria (TRACON) and communication 
equipment V-SAT are on-going projects of the Nigeria Airspace 
Management Agency (NAMA). The V-SAT is to provide ground to ground 
and ground to air communication from every part of Nigeria while the 
TRACON project is to provide total radar coverage for the Nigerian 
airspace 
 
20. (U) Building human capacity is another GON priority.  The 
Nigerian College of Aviation Technology (NCAT) in Zaria provides 
aviation training in Nigeria and is being restructured and 
repositioned to improve its mandate of providing manpower 
development for the sector. 
. 
ELECTRICITY PROBLEMS PERSIST 
---------------------------- 
. 
 
ABUJA 00002045  005 OF 006 
 
 
21. (SBU) At the Nigerian Infrastructure Summit on August 7, 2008 
President Yar'Adua emphasized that Nigeria's chronic lack of power 
is holding back its economic development.  (NOTE: Only 40% of 
Nigerians have access to the national electricity grid and those 
connected to the grid often go weeks without electricity or have it 
for only a few hours each day.  Businesses and residences must 
generate their own electricity via diesel generators, or use 
renewable power such as solar. END NOTE).  In a July 24, 2008 
meeting with Under Secretary for Economic Affairs Reuben Jeffery and 
Ambassador (reftel F), the Permanent Secretary for the Federal 
Ministry of Energy (Power) Dr. Abdullahi Aliyu commented that 
Nigeria's electricity supply is inadequate and characterized by 
frequent interruptions and countrywide load shedding.  As of June 3, 
2008 only 3,966 megawatts (MW) per day were potentially available 
from an installed capacity of up to 7,982 MW.  However, actual power 
generation had decreased and by June 22, 2008 was as low as 850 MW 
per day because of insufficient gas supply and low water levels at 
hydro plants. 
 
22. (SBU) Aliyu reported that the Ministry had a strategic plan 
(reftel H) through which it expects to expand distribution and 
transmission networks.  In addition, the plan calls for increasing 
power generation from existing and new plants by December 2009 to a 
peak of 7,982 MW and an average of 6,180 MW.  The medium phase would 
add new power generation for a peak of 14,737 MW and an average of 
11,540 MW by December 2011.  A major issue in providing added 
megawatt output through new and refurbished power plants is 
"perceived" insufficient natural gas supply (reftel A).  (NOTE: The 
GON is unwilling to purchase gas for domestic use at a price which 
is sufficient to compensate companies for their production costs. 
END NOTE). 
 
23. (SBU) According to Aliyu, total domestic gas supply is 700 
Million Standard Cubic feet per day (MMSCF/d) which would equal a 
total power generation capacity of 2,000 MW per day for gas-fired 
power plants.  According to the GON's gas supply plan, available 
natural gas will increase to 1,400 MMSCF/d by the end of 2008, to 
2,042 MMCF/d by the end of 2009, and then to 3,600 MMSCF/d by 
December 2011.  The increased gas supply will come from reduced 
flaring, existing/new reserves, production efficiencies, and 
expanded infrastructure. At the request of the Minster of State for 
Energy (Gas) Odusina, USAID (Reftel A) has commissioned assistance 
to the Government of Nigeria through the Ministry to review plans 
and policies in support of the World Bank partial loan guarantees, 
gas supply to power turbines, and gas flare reduction. 
 
24. (SBU) Aliyu said the most important requirement of the strategic 
plan is the creation of seven training centers, for in-country 
technical training.   He requested USG assistance in identifying 
qualified train-the-trainers instructors and to develop course 
curriculum. 
. 
POOR INFRASTRUCTURE CRIPPLES EXPORTS 
----------------------------------- 
. 
25. (U) Nigeria is one of the largest growers of cashews in the 
world; however, because of the power deficit and the state of other 
infrastructure, 90% of the cashews are shipped to India and Vietnam 
where it is processed and then exported to the United States.  The 
high costs of electricity, labor, and transportation leave the 
Nigerian processing and exporting cashew industry uncompetitive. 
Experts contend that the cost of shipping cashews to India or 
Vietnam for processing is actually lower than that of establishing 
and operating a processing factory locally. 
 
26. (U) According the Nigerian National Bureau of Statistics, 
Nigeria's manufacturing industry accounts for 4% of GDP.  The 
textile industry has been particularly hit hard by Nigeria's 
decaying infrastructure.  The industry claims high transportation 
costs, infrequent electricity supply, inconsistent government 
industrial policies, and multiple taxation, have created a high cost 
of doing business that hinders their ability to compete.  The GON 
has responded with several bail out plans and the latest is for $594 
million; however, none of the plans have been implemented.  During 
this time 35,000 textile workers have lost their jobs as a result of 
at least 12 textile mills closing (reftel O). 
 
ABUJA 00002045  006 OF 006 
 
 
. 
PORTS AND CUSTOMS ANOTHER BARRIER 
--------------------------------- 
. 
27. (SBU) Exporters contend that exporting from Nigeria via maritime 
carriers is costly given the lack of port infrastructure, absence of 
an inter-modal transport network across the country, security risks, 
and non-transparent custom procedures.  Roads coming in and out of 
the ports are decaying, and over-usage results in around-the-clock 
traffic congestion.  Despite the Nigerian Custom Service's (NCS) 
recent claimed adoption of a 48 hours custom clearance policy, 
congestion leads to ships queuing up to berth at cargo terminals and 
containers waiting to be transported out of the ports.  The 
chokepoints resulting from the lack of infrastructure at and around 
the ports affect the efficiency at which goods can be processed. 
The absence of an inter-modal transport network where the various 
modes of cargo transport (rail, road, and maritime) are linked 
together makes the transportation of goods from the hinterland to 
the ports capital and time intensive.  Cargo robberies and thefts 
are common.  Cargo trucks often never make deliveries or are seen 
overturned and abandoned by the side of the road. 
 
28. (SBU) Due to problems associated with transporting goods, 
freight forwarders do not operate inland container depots or offer 
cross-country transport services.  As a result, exporters are solely 
responsible for delivering goods from the production points to the 
ports and loading them into containers.  In addition, the poor state 
and lack of equipment and facilities contributes to port 
inefficiency, adding delays and costs, and increased incidences of 
damaged goods.  Custom clearance procedures and congestion at/around 
the ports are another major contributor to inefficiency. 
 
29. (SBU) Another hazard is providing NCS with proper documentation. 
 Exporters must provide on average five to six documents to NCS. 
Often the required documentation is not readily known or available 
to Nigerian exporters, therefore they then incur middlemen fees and, 
in most cases, arbitrary charges imposed by custom officials. 
 
30. (SBU) One positive improvement has been that port 
concessionaires have increased maintenance, and purchased new and 
improved equipment, which have benefited efficiency.  For instance, 
four new cranes were evident in the skyline at the APM terminal in 
recent months. 
. 
COMMENT 
------- 
. 
31. (SBU) The "resource curse" has played a major impact in 
Nigeria's infrastructure development.  In the first years after 
independence in 1960 through the 1970s oil boom, the GON spent 
sufficient funds on infrastructure.  In the last 30 years budget 
planning and execution have been poor.  The result is a decrepit 
infrastructure base that greatly hinders economic development. 
Since President Yar'Adua took office in May 2007, the GON and 
National Assembly have done much talking about what the problems are 
and have made pledges to marshal all the resources available to at 
least meet the challenge of increasing electricity supply.  Despite 
all the proclamations and reams of new plans, little has been 
accomplished. 
 
32. (SBU) The Ministries of Transportation and Energy continue to 
put forward strategic plans and the associated requests for 
additional funding.  The USG can play a positive role in response to 
the GON requests for technical support, contractors, products, and 
training. 
 
This cable was coordinated with Consulate Lagos. 
 
PIASCIK