This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS ABUJA 001810
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.
- Nigerian Textile and Apparel Industry Findings
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