NIGERIA: FOOD FOR PROGRESS PROPOSAL

UNCLAS SECTION 01 OF 02 ABUJA 002505

SIPDIS

USDA FAS FOR FAA/AME/PAUL HOFFMAN

STATE FOR AF/W - DAN EPSTEIN

TOFAS 013

E.O. 12958, N/A
TAGS: EAGR NI
SUBJECT: NIGERIA: FOOD FOR PROGRESS PROPOSAL



1. The American Embassy in Nigeria is proposing a
Government-to-Government "Food For Progress" activity for
FY 2003. This program will involve 25,000 mt of soybean
and/or soybean meal (SBM) at $200 per mt. Africare will be
the consultant to the Nigerian Government, managing the
sale of the commodities and the activities to be carried
out with the funding. The American Soybean Association
strongly endorses a carefully constructed proposal and will
provide technical support to the importers. The proposal
also has the support of FAS Lagos, Amembassy Abuja, the
local trade and the Nigerian Government, including
President Obasanjo. There are no Bellmon or UMR issues.
The funds will be used to support a joint program of the
Government of Nigeria and Africare, called `Wise' - The
Women's Initiative for Sex Education and Economic
Empowerment. The goal of the `Wise' program is to
economically empower and provide HIV/AIDS awareness to low
income and vulnerable young women living in the Federal
Capital Territory of Nigeria. It is anticipated
that the plan of operations will be submitted in September.



2. There are several factors resulting in increased
demand for soybean products in Nigeria that open the
possibility for the import of U.S. soybean and feed-stuffs,
including :


-- a large population growing at approximately 3 percent
annually;


-- an annual growth in the Nigerian poultry industry of 20%
over the past three years;


-- high tariff on imported chicken, in an effort to
protect local producers;


-- the existing feed industry is operating below its
installed processing capacities;


-- knowledge and understanding of the feed and poultry
industry trying to rebuild after more than two decades of
decline;


-- interest and investment in soybean processing capacity,
creating a new market.



3. A few companies in Nigeria import feed-stuffs,
primarily wheat and some soybean meal. Available
statistics, however, are not reliable. Industry sources
estimate Nigeria's consumption requirement at more than
200,000 mt of soybean annually, and the market is growing.
Nigeria became a significant importer of soybean meal in
1999 following the revitalization of the poultry sector
after nearly two decades of decline. Prior to this, the
local feed industry was able to secure adequate supplies of
soybean meal from the oilseed processing sector. Based
upon FAS Lagos surveys of the feed industry, total soybean
meal imports in calendar 1999 are estimated at 12,000 tons.
Soybean meal imports increased to 21,000 tons and 30,000
tons in 2000 and 2001 respectively. The bulk of the SBM
appears to be crushed from local beans. One importer is
investing in a line of extruders with a total capacity
of 100 mt per day. He is interested in importing U.S.
soybeans to make feed for his poultry operations and to
trade full fat or partially defatted soybean meal on the
open market.





4. Positive factors that suggest using monetization
in Nigeria include:


A) a growing market, though somewhat constrained by
Forex financing difficulties and low volumes, which
increase product, shipping and transaction costs.
Monetized SBM could increase the overall consumption and
therefore be additive.


B) The market is already fairly large. At 200,000 mt
consumption per annum, a program of slightly more than 10%
should not be considered disruptive. The Nigerian
Government's request indicates that local authorities have
no concerns about market disruptions.


C) Soybean imports would be a new import and offer
considerable value to the local industry by encouraging
local value-added, increased throughput (which increases
demand and benefits to local soybean farmers).


D) Imports of beans also increase capacity utilization
in the existing crushing mills and reduce Nigeria's
dependence on vegetable oil imports. This program would be
additive and not disruptive to the established trade.
There are significant positive economic effects of
financing value-adding activities in the agricultural
sector without a foreign exchange outlay.



5. A well managed monetization program that gives
opportunity to multiple buyers (either through
multiple product mix, regional sales, or some similar
arrangements) would be beneficial for the buyer, the
pvo/seller and for U.S. exports. We support this soybean
initiative.



6. Ambassador Jeter is well aware of this proposal and
fully endorses it. President Obasanjo wrote to the
Ambassador on August 20 and requested that the proposed
project be implemented as soon as possible.



7. This cable was drafted by FAS Lagos.


Jeter