NIGERIA: AN AGOA POWERHOUSE AFTER ALL?

UNCLAS ABUJA 001810

SIPDIS


E.O. 12958: N/A
TAGS: EINV ETRD ECON NI AGOA
SUBJECT: NIGERIA: AN AGOA POWERHOUSE AFTER ALL?



1. Summary. In contrast to the widespread view that
Nigeria is ill prepared to benefit from the Africa
Growth and Opportunity Act (AGOA),a survey by textile
and apparel consultants Jack S. Smith and Heidi
Scheller suggests the Nigerian textile and apparel
industry could become a primary AGOA beneficiary. End
Summary.


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Nigerian Textile and Apparel Industry Findings
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2. On June 7, Smith and Scheller briefed POL/C,
EconOff, and Tom Hutcheson of USAID about their survey
of the Nigerian textile and apparel industry. The
level of sophistication of the industry surprised the
consultants. They concluded Nigerian textiles had
tremendous export potential and could play an
important role in filling the entire continental quota
under AGOA. At the same time, they noted the apparel
industry is underdeveloped, almost non-existent. That
situation, however, might be quickly turned around
through direct investment, which could be generated if
the textile section took off.



3. From 2005 on, cloth for apparel entering the
U.S. under AGOA must either be produced in the U.S. or
in an eligible sub-Saharan country. Thus apparel-
producing nations such as Mauritius and Lesotho that
are using Asian textiles will have to find another
source. Nigeria could easily put itself in position
to capitalize. Even before 2005, Nigerian textile
manufacturers could profit under AGOA if they would
seek to establish business relations with apparel
producers in the AGOA-active countries. They believe
that Nigeria cotton production would need to be
quickly increased to meet the greater demand. The
consultants also stated that Nigeria has ample labor
at competitive rates and its ports have competitive
container rates that would facilitate export.
However, the consultants identified problems such as
uncertain regulatory/political environment, high
interest rates, poor exchange rates, low labor
productivity, no incentive-based payroll tradition
(being paid by the piece) in the textile or garment
industry, and Nigeria's lack of experience in global
marketing. They also emphasized that both the textile
and apparel industries are extremely time sensitive.
Orders must be filled in a timely manner. To do this,
Nigeria must streamline export procedures,
particularly port clearance operations.



4. Mr. Smith and Dr. Scheller concluded that, based
on their experience in Central America and other parts
of the world, Nigeria's problems could be overcome and
the country could easily become one of the biggest
beneficiaries of AGOA.



5. Comment: This gives a fresh perspective to
Nigerian textiles, an industry hard hit by second-hand
clothing and the smuggling of Asian cloth into the
market. Before Nigeria can obtain the benefits
envisioned, the GON must complete its textile visa
process. A critical part of that process is
legislation creating new and adequate penalties for
trans-shipment. Despite reports that this bill will
be passed any day, there has been no movement in the
National Assembly. We confirmed this during a
subsequent call on House Finance Committee Chair
Mohammed Sanusi Daggash, who, nevertheless, promises
the legislation will be ready by the end of June.
Despite its bureaucratic difficulties in passing the
AGOA visa system, Nigeria still holds great export
potential in textiles. Because of the difficulty for
other African countries to replicate the capital-
intensive sophisticated textile production sites in
Lagos, Kaduna and Kano, Nigeria will almost certainly
benefit from the 2005 changes in AGOA. However, to
reap the full benefits of AGOA would require the
development of the apparel sector. The necessary
direct investment to energize that sector will not
come in until there is a working textile visa system,
and an improvement in export infrastructure,
especially ports. This will require continued
engagement with the GON to reform export policy, and
improved performance by Customs, the Nigerian
Investment Promotion Council, the Nigerian Export
Promotion Council, the Ministry of Transport and the
Ministry of Commerce. End comment.
ANDREWS