(C) NIGERIA: PRIVATIZATION DIRECTOR TO QUIT JOB

S E C R E T SECTION 01 OF 02 ABUJA 001957

SIPDIS


NOFORN


E.O. 12958: DECL: 1.6X6
TAGS: EINV PGOV ECON PINR NI
SUBJECT: (C) NIGERIA: PRIVATIZATION DIRECTOR TO QUIT JOB
OVER GSM EQUIPMENT CONTRACT


REF: (A) ABUJA 1679 (B) LAGOS 1933


Classified by Ambassador Howard F. Jeter for Reasons 1.5 (B)
and (D).



1. (S) Summary. Ambassador Jeter hosted Nasir El-Rufai,
Director-General of the Bureau for Public Enterprises (BPE),
for lunch on August 1 to discuss the current status of the
NITEL GSM Equipment contract. EconOff attended as notetaker.
El-Rufai was very candid about his relationship with the
Vice President, the Vice President,s stake in awarding the
GSM contract to Ericsson, and his own intention to leave his
position as head of the GON privatization agency. El-Rufai
claimed that the Vice President had manipulated the contract
award in favor of Ericsson and that this case is just one
example of what is commonly practiced in the Executive
branch, e.g., cushioning or manipulating contracts for
personal and political gain. He stated that because the
President believes him capable of manipulating the tendering
process, as alleged by Ericsson, he has no other choice but
to resign his position at the BPE. End Summary.



2. (C) On August 1, Ambassador hosted a private lunch for
Nasir El-Rufai to candidly discuss the NITEL GSM Equipment
contract, valued at approximately USD 40 million. (See
reftels for background on this issue.) In the intimate
setting of the Ambassador,s residence, El-Rufai stated that
NITEL/Ministry of Communications was continuing to negotiate
the contract terms with Ericsson. According to El-Rufai, the
GON asked Ericsson to deliver the products and services at
Motorola's bid price, which was USD 10 million less than
Ericsson's bid of USD 49 million. El-Rufai did not believe
Ericsson could fulfill the contract provisions at that price,
commenting that conclusion would only be reached if the two
sides agreed to cut 25 percent of the contract, through, for
example, reducing the number of proposed base stations. But,
El-Rufai said, "that 25 percent would have to be paid for by
someone."



3. (C) When asked whether the President and Vice President
might reconsider the contract award, El-Rufai replied no,
despite the difficulties over negotiations, the Vice
President would "lose face" if Ericsson did not receive the
contract. However, El-Rufai did feel that a compromise could
be found that would allow the Vice President to save face and
allow Motorola to participate. He suggested that Ericsson
and Motorola split the contract: Ericsson could provide the
switching network and Motorola could provide the base
stations. He noted that this would allow each company to
provide the service in which it specializes. Because the
base stations represent a greater portion of the contract, he
recommended offering Ericsson some of the sub-contracting
work, such as the air conditioning towers and power
generation units, where neither company has specific
expertise. (Comment. El-Rufai's suggestions may not carry
much weight, as he is not currently participating in the
negotiations with Ericsson. End Comment.)



4. (C) El-Rufai expressed his deep displeasure with events
immediately preceding the contract award to Ericsson. In a
recent meeting with President Obasanjo, the two discussed
Ericsson's allegations that El-Rufai had manipulated the
tendering process to ensure Motorola's success. (Note.
El-Rufai had written a lengthy letter to President Obasanjo
on July 8 defending his role in the tendering process and
pointing to the questionable activities of the Vice
President's Aide-de-Camp, who acted on behalf of Ericsson.
At the time of El-Rufai's meeting with Obasanjo, however, the
President had not read this letter. End Note.)



5. (C) El-Rufai commented that he would have preferred to
wait until the President had read his letter before
discussing it with him. During the meeting, President
Obasanjo told El-Rufai that he had total confidence in the
BPE Director-General, but that he believed El-Rufai was
clever enough to have manipulated the tendering process from
the outset to ensure Motorola's success. The President then
said that El-Rufai had three problems: first, that there was
a popular perception that El-Rufai is "too clever"; second,
in fact, he is "too clever"; and third, his attitude towards
Ministers and the Vice President is not sufficiently
respectful or deferential.



6. (C) El-Rufai asked the President for permission to sue
Ericsson for defamation. Obasanjo reportedly refused this
request because of the negative political repercussions on
the Presidency. The President then asked El-Rufai what else
he could do for him. El-Rufai requested permission to leave
his position as Director-General of the BPE. El-Rufai argued
with the President that he could not oversee the country's
privatization program if Obasanjo believed that El-Rufai was
capable of manipulating the tendering process. However,
El-Rufai said, the President refused to allow him to quit.

7. (C) El-Rufai confided to the Ambassador that despite the
President's refusal, he still intended to leave the BPE after
a 2-3 month period. He said that he would not leave too soon
after the GSM Equipment tendering in order to avoid
speculation over the causes for his departure. El-Rufai
added that over the next few months he would expose his
deputy, Tijjani Abdullahi, and the Legal Department Head, to
his contacts at the Presidency in hopes that the President
would choose one of them as his successor. However, he
admitted that neither of them had political connections or a
close relationship with the Presidency. El-Rufai asked for
the support of the donor community in advocating for the new
BPE Director-General to come from within the agency's ranks.



8. (C) Ambassador Jeter expressed sincere regret that
El-Rufai had decided to leave public service. The Ambassador
believed that the privatization program would severely suffer
and so would Nigeria. While El-Rufai seemed to appreciate
these sentiments, he did not soften his position on leaving
the job.



9. (C) El-Rufai also showed a great deal of resentment toward
Ericsson and promised to "get them" at a later time. He said
that "time is on my side" and that he was sure that sometime
in the future Ericsson would need his help and he would be
able to refuse them.



10. (S) The Ambassador asked about the quality of El-Rufai's
personal relationship with the Vice President, noting that in
public their relationship had always appeared close.
El-Rufai replied that, yes, he had believed their
relationship was good. He commented that the Vice President
had never asked him to do anything unsavory or to "bring him
deals." He said, however that a friend heard from former
Senate President Chuba Okadigabo, who is close with the Vice
President and helps him to "raise money" for the campaign war
chest, that the Vice President was unhappy with El-Rufai's
performance because El-Rufai had never brought him a single
"deal" (read kickbacks).



11. (S) El-Rufai explained that the Vice President worked
through the Ministers, particularly the Minister of Works and
Housing, to manipulate public contracts for both building the
campaign war chest for the 2003 Presidential elections and,
he assumed, for personal gain. El-Rufai said that the
President was not a wealthy man and would not likely receive
campaign support from his supporters during the last
election. (Comment. The PDP party itself is barely solvent
and would not be able to offer the President much financial
support. End Comment.) Therefore, El-Rufai said, the
President was tacitly complicit in the Vice President's "fund
raising" activities, but never involved himself directly so
as to "stay clean." El-Rufai commented that the Vice
President came from a "dirty" background in the Customs
Service and had continued these practices in the Villa.
El-Rufai implied that the NITEL GSM Equipment contract was an
example of such activities.



12. (S) Comment. Many in the international community respect
Nasir El-Rufai for his integrity and forthrightness.
El-Rufai's departure from public service would be a
devastating blow to the GON's image of transparency and good
economic governance. Embassy officers have heard many times
from many sources that the Vice President is directly
involved in corrupt activities. El-Rufai's testimony
provides more anecdotal evidence supporting these sources.
With El-Rufai gone, the Vice President will be more able to
manipulate the country's privatization process for personal
and political gain. End Comment.
Jeter