NIGERIA: NEED TO SUPPORT IMPORTANT FY-02 ESF PROPOSALS

UNCLAS SECTION 01 OF 03 ABUJA 001635

SIPDIS


AF/FO FOR DAS PERRY


E.O. 12598:N/A
TAGS: EAID PREL ECON SENV NI
SUBJECT: NIGERIA: NEED TO SUPPORT IMPORTANT FY-02 ESF PROPOSALS

REF: 01 ABUJA 3162



1. This cable provides additional justification for
two of the FY-02 ESF proposals submitted reftel. The
following justifications are in order of Mission
priority. Complete project descriptions will be faxed
to AF/W.





A. PRIVATE/PUBLIC PARTNERSHIP TO DEVELOP AGRIBUSINESS
IN THE NORTH


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Project Overview and USG Interests
--------------



2. We need creative projects that directly address key
American interests and concerns in Nigeria. This
project fits that description by advancing important
goals of Economic Growth, Democratization and
Combating Terrorism, three of the Mission's key
performance goals under the latest MPP. Northern
Nigeria needs greater USG penetration, diplomatically
as well as by our economic assistance. Nigeria is home
to Africa's largest Muslim population, and most
Nigerian Muslims live in the North. The project will
be an important symbol that the USG regards Nigeria's
Muslims as its friends and partners. Our diplomatic
efforts to engage Nigeria's Muslim community will fall
on deaf ears if not accompanied by demonstrations of
targeted assistance that have a visible impact. Again,
this project fits the bill nicely.



3. Kano is a key state economically and politically
and Jigawa is a recently created state, formerly part
of Kano. Kano's capital, which bears the same name as
the State, is the North's largest city. Unfortunately,
both the city and state have experienced significant
unemployment and economic dislocations in recent years
due to declining agricultural production and the
impact of global economic competition on local
industries, particularly textiles and leatherwork. Due
to the high levels of unemployment and poverty, Kano
has experienced severe disruptions in the recent past.
Because of economic want, the local population is
restive and Kano is a potential home for Islamic
radicalism and divisive political regionalism.
Organizations from Saudi Arabia, Sudan, Iraq, Iran,
Pakistan and Libya have established themselves in Kano
and elsewhere in the North. Not only do these groups
provide Islamic education, many also promote anti-
American sentiment. This project will help counter
their presence.



4. By putting people to work and energizing the
agricultural sector, the project will be a catalyst in
the local economy. Not only is agriculture the
dominant economic sector in the North, every new job
created helps support 5-10 other people. Thus, job
creation under this project will have a ripple effect,
spurring growth beyond the activities directly related
to the project. Additionally, the more people are
gainfully employed, the less likely they are prone to
social unrest and extremism of any form. The project
promotes the order and stability necessary for
sustaining democracy. This is exceedingly important as
Nigeria moves to state and national elections in 2003.
Key project objectives are to:


--Create a private/public partnership to develop a
strong agro-business base and leverage $6 million in
private sector investment;


--Focus on existing crops with a strong agro-
industrial potential and development of a sustainable
local seed industry;


--Counter the deforestation that degrades water
quality and encourages erosion;


--Introduce several high-value industrial tree crops
with strong global market demand; and


-- Create a minimum of 5,000 jobs in agribusiness,
particularly among rural youth, with a program for
continued job creation for the coming decade.



5. Agro-industry in Northern Nigeria is in its
infancy and not currently managed well. Bolstering
agro-industry in the region, this initiative will
focus on cotton for domestic use as well as tomatoes
and other horticultural products for domestic use and
export to the European Union and Middle East using the
cargo facilities at Kano's International Airport.
Locally grown cotton can be processed for the domestic
textile industry, providing a basis for taking
advantage of AGOA in the future. Cotton by-products
can be used for animal feed and oil for various
industrial end-uses. High value tree crops with
strong global markets include the (1) Karite tree's
shay nuts used by the cosmetics and soap industries;
(2) Tee Tree (melaleuca spp.) oil marketed as a
natural antiseptic and antifungal agent; (3) Gum
Arabic derived from the Acacia Tree, used as an
emulsifier; and (4) Neem Tree Oil, used by the
furniture/wood industry. Making tree crops more
valuable should reduce cutting for firewood, a
principal cause of deforestation in the Guinea
Savannah and Sahel.



6. Project Partners: Implementing this project,
USAID's primary partners will be Schaffer and
Associates (SAIL),Dangote Industries, Ltd. (DIL),
AfricaGlobal (AFG),and Michigan State University
(MSU). These partners will work with reputable local
firms, State Governments, NGOs, CBOs (for out
growers),and the Federal Government, to develop new
private sector investment opportunities in agro-
business and to create jobs. SAIL and MSU will have
primary responsibility for all trials and training.
SAIL and DIL, working with the local states, will
focus on developing cotton, tomatoes and other
horticultural products as agro-industrial crops. They
will also explore the creation of a local private seed
industry. Depending on how these develop, SAIL and DIL
will assess exploitation of high value tree crops.
SAIL/AFG will have primary responsibility for
structuring new investment in agribusiness, working
with DIL and other potential investors. MSU will work
with AFG to develop a youth training/employment
component for each crop. USAID will have overall
responsibility for project implementation through a
Cooperative Agreement with MSU through the
Partnerships for Food Industry Development or similar
mechanism.



7. Project Outputs: Within 2 years, the project will
have: (1) created at least ten new agribusiness
investment opportunities; (2) trained/mentored at
1,000 youth for agro-business related jobs; (3)
leveraged $6 million in new agribusiness investment;
and (4) created 5,000 new jobs.





B. CREATING A RESPONSIVE ENVIRONMENTAL INDUSTRY
(THE NIGER DELTA - SOUTH)


--------------
Project Overview and USG Interests
--------------



8. This project advances the Mission Goals of Economic
Growth and Democracy. The Niger Delta is economically
important to the United States. Nigeria furnishes
approximately 8 percent of U.S. oil imports and the
nearly all Nigeria's production comes from the Delta.
The region also is blessed with major natural gas
reserves and large-scale gas extraction is imminent.
As with oil, American companies will likely be major
players, and Nigeria can become an important source of
natural gas for the United States.



9. However, despite the wealth generated by the
extractive industries, the Delta remains an
economically depressed, environmentally challenged and
politically troubled region. There is significant
discontent among residents that both their government
and the oil companies have paid inadequate attention
to their basic needs. Residents believe the local
ecological system has been tossed off-balance by the
extractive activities yet they have not been
compensated for this adverse by-product of the oil
industry, notwithstanding considerable resources from
the oil companies for mitigation of environmental
impact and investments in social infrastructure. For
example, water contamination and improper waste
management have contributed to a diminution of
traditional means of livelihood (agriculture and
fishing) but there also has been very little modern
development (schools, roads, health clinics
industries) in the region.



10. Because of this adverse combination, the Delta has
seen more than its share of social unrest.
Frequently, this discontent is focused against the oil
companies. Protests and facility takeovers have
disrupted operations and put personnel in harm's way.
There is a history of kidnappings of oil company
personnel. These types of disturbances can
potentially disrupt an important source of oil for the
U.S. Because oil revenues constitute the vast
majority of Nigeria's national income, any major
unrest and sustained disruption of production could
hinder economic stability and growth in Nigeria.
Additionally, the competition for scarce local
resources by the Delta's inhabitants has led to
persistent inter-ethnic clashes. These clashes
undermine political stability and democratization.
Last, although the U.S. oil companies in the Delta are
private sector operations, they represent the United
States to local residents. The extent we work with the
local populace, government and the oil companies to
address environmental and developmental concerns, the
better will be our relationship and the greater our
influence here. Key project objectives are to:


--Build a quality local private sector environmental
services industry to more adequately address major
environmental needs in the Delta;


--Develop a center of excellence at Port Harcourt
University's Institute of Environmental Studies to
provide entrepreneurial and skills training to
strengthen and expanded the private sector
environmental services industry;


--Create a youth employment and training program for
the local private sector environmental services
industry;


--Urge private sector energy companies such as Shell,
ExxonMobil, Chevron and others to contract with local
private sector environmental firms assisted through
this project;


--Create a minimum of 1,000 jobs in the local
environmental services industry within two years, with
a program for continued job creation each year for the
coming decade; and


--Assist selected communities in the Delta to manage
more efficiently the resources received from the GON
and oil companies.



11. This project will help fill a serious gap -- the
existing private/public sector capacity for
environmental services in the Delta is inadequate. As
a result, the environmental needs of the region cannot
be sufficiently addressed by in-country resources.
Environmental issues in the Delta typically include
poor potable water quality/capacity, untreated or
under-treated wastewater, lack of appropriate solid
and medical waste management, contamination from oil
and the related energy industry and natural resource
depletion. These issues have a direct linkage to
regional health and economic problems. The lack of
adequate environmental services further compounds
other development gaps such as poor roads and
inadequate health services.



12. Implementing Consortium: Millennium Science
Engineering is a premier U.S. environmental services
group with relevant global experience, including
Africa. In addition to training local firms, they will
help improve Port Harcourt University's Institute of
Environmental Studies. AfricaGlobal has worked a
number of years in the Delta, including with state
governments, Port Harcourt University and oil
companies. AfricaGlobal will ensure participation by
all local stakeholders and help manage aspects of the
project, including youth employment. Fresh and Green,
a locally registered environmental services firm, will
assist with training local firms, and with youth
training and employment. Port Harcourt University will
provide the venue and facilities for all local
training.



13. Project Outputs: Within 2 years, the project will
have: (a) created a center of excellence at the
University of Port Harcourt; (b) trained/mentored at
least 20 local environmental services firms and more
than 100 youths; (c) assisted at least ten firms to
win contracts with oil companies and the public sector
to deliver environmental services; (d) created 1,000
new jobs; and (e) improved financial management in 6
to 10 LGAs in the Delta.
ANDREWS