NIGERIA: AGOA ELIGIBILITY REVIEW

UNCLAS SECTION 01 OF 03 ABUJA 002803

SIPDIS


DEPARTMENT FOR AF/EPS - WENDELL ALBRIGHT, PASS TO USTR
- C. HAMILTON, COMMERCE/ITA - G. GELDMAN, TREASURY -

E. BARBER


E.O. 12958: N/A
TAGS: ECON ETRD PGOV NI AGOA
SUBJECT: NIGERIA: AGOA ELIGIBILITY REVIEW


REF: (A) STATE 171150; (B) 01 ABUJA 02856;
(C) 00 STATE 110733; (D) 00 STATE 127971;
(E) 00 STATE 126813



1. In response to Ref A, the following is an update of
the information provided previously in Nigeria's AGOA
eligibility (Ref B.)


PROGRESS TOWARD A MARKET ECONOMY
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Item 4.1.1A: The GON continues to make incremental
progress toward establishing a market-based economy
that protects private property rights, incorporates an
open rules-based trading system and generally reduces
government interference in the economy. Despite the
failure of winning bidders to obtain the financing
necessary to pay the purchase price for the
telecommunications monopoly NITEL and the
disintegration of the joint partnership that won the
bid on the ship repair facility Nigerdock, the GON
remains committed to the privatization process.
Efforts to privatize two large, modern hotels in
Abuja, as well as newsprint, sugar and tractor
manufacturing companies are proceeding apace. After
the GON successfully auctioned three GSM licenses in
2001, a second national telecommunications carrier was
designated in August 2002.


In July, the Central Bank of Nigeria (CBN) re-
introduced a modified Dutch Auction System (DAS) for
foreign exchange which tied officially traded Naira to
a market mechanism, greatly reducing the discount
between the parallel market and officially traded
Naira. Prior to the DAS, the spread between the two
rates had risen to 17-20 percent, thus diverting a
significant amount of banking activities from
investment into non-productive arbitrage activities.


For the current fiscal year 2002, the Executive agreed
to the CBN request to cap deficit spending at 12.5
percent of the total expected revenue for the year.
This established a hard-line of debt, beyond which the
government cannot spend. The result has been periodic
halts to all government payments for capital projects
and delays on recurrent expenditures until the CBN
receives revenues so as to remain within the 12.5
percent deficit band.


The Presidency established in 2001 an office to review
all capital projects of more than USD $10,000. This
new "due diligence" requirement has reduced some of
the most blatant forms of corruption in new capital
projects, but it is time consuming , not widely
understood by many contractors or civil servants and
still can be circumvented.


Government policies helped lower year-to-year
inflation rates (from 19.5 to 16.5 percent) and
reduced growth of the money supply to within CBN
targets, both improvements over last year's
performance. They also demonstrated commitment to a
significant degree of economic reform and fiscal
discipline by the Obasanjo Administration at
considerable political cost during the build up to the
2003 elections.


POLITICAL PLURALISM AND THE RULE OF LAW
--------------


Item 4.1.1 B: The elected civilian government is now
in its fourth year. The GON has repeated its
commitment to the rule of law, human rights and
democracy and has established a commission to
investigate abuses by security forces related to
ethnic violence between the Tivs and Jukun ethnic
groups in 2001.


Despite the Executive-Legislature impasse over budget
and spending processes, and the threatened impeachment
proceedings against the President, all key political
figures and the vast majority of Nigerians
steadfastly support the democratic process.


Three new political parties have been registered, and
a voter registration program was conducted in
September 2002, albeit with widespread complaints that
large numbers of Nigerians were unable to register due
to a lack of materials and other irregularities with
the process. National, including Presidential and
state elections, are planned for 2003. Local
elections will take place in late 2002 or early 2003.
A USG-supported police modernization project was
launched in July 2002 with ICITAP personnel on the
ground in several cities providing training and
technical assistance.


The Supreme Court made landmark decisions in early
2002 that affirmed its role as the final arbiter of
the national constitution in the ongoing process of
the development of Nigerian democratic federalism.
While the Supreme Court and Appellate Courts have
distinguished themselves, the overall the judicial
system lacks the resources and administrative
capability to function effectively. This results in
long delays in resolving civil and criminal cases.


In several instances in the year, local Shari'a courts
have imposed stoning sentences against women for
adultery, which is a crime under the new Shari'a code
in many States in Nigeria. Several of the cases have
been dismissed. In the highly publicized case of
Safiya Husseini, the stoning sentence was overturned
by a State Appellate Court in March. Another well-
publicized stoning case is in the appellate process.
The Federal Government has stated its opposition to
these sentences; under the Nigerian constitution, it
must allow these matters to be resolved by the
judicial system.


Ethnic and religious tension continued in 2002, though
at a lower level than 2001. Communal clashes resulted
in dozens of deaths and injuries, and displaced
hundreds of people. The GON has established and
supports commissions and other groups working to end
communal violence.


NONDISCRIMINATION IN TRADE
--------------


Item 4.1.1C: Nigeria generally does not discriminate
against U.S. goods or services and allows for the free
movement of foreign exchange into and out of the
country. The GON continues to move toward policies
eliminating barriers to US trade and investment,
although tariffs were amended and revised upwards in

2002. The GON is moving toward lower tariffs on
manufacturing inputs and reduced the duty on wheat to
5%, but prohibitive tariffs were implemented in 2002
on other imports, notably detergents, rice, poultry
and printed fabrics and other items were banned
outright. The GON continues to work toward
restructuring the intellectual property rights regime,
with legislation pending to create a quasi-independent
IPR commission and to bring Nigeria into full
compliance with the WTO TRIPS agreement. Nigeria is
party to numerous conventions and agreements regarding
patent, trademark and copyright protection, and the
country' s laws generally favor protection of
intellectual property owners and provide criminal
penalties for violation of their rights. Even though
significant progress has been made in strengthening
IPR laws and regulations, enforcement of IPR laws is
weak due to scarce resources and a lack of expertise
by the courts and enforcement officials. Limited
progress has been made in regard to licensed materials
such as software and optical media.


POVERTY REDUCTION
--------------


Item 4.1.1D: Poverty alleviation progresses at a slow
pace. GDP growth was at 3.9% for 2001, while the
country's population grew at 3.1%. After a slow
start, the GON is now engaged with the World Bank and
donor community in preparing a Poverty Reduction
Strategy Paper with a view towards coordinating its
own anti-poverty efforts with those of the
international community. Other parts of the GON
Poverty Alleviation program include an on-again, off-
again program of paying small stipends to a limited
number of the unemployed and Universal Basic
Education, which is building two schools in each of
Nigeria's 774 local government areas. The Niger Delta
Development Commission (NDDC),a publicly funded
entity, was created to better promote development in
the eight states of the oil-producing region, one of
the poorest in the country. As of September 2002, the
NDDC had received N32 billion ($254 million US) over
the 20 months ending September 2002.
CORRUPTION
--------------


Item 4.1.1E: Corruption remains a perceived and real
problem throughout Nigerian institutions, and the GON
maintains efforts to combat corruption, with uneven
results. An anti-corruption commission is in place,
and the GON continues to audit public enterprises.
Since 2001, all federally funded capital projects over
USD $ 10,000 must pass a due diligence test before
funding and implementation.


U.S. NATIONAL SECURITY
--------------


ITEM 4.1.F.2: The GON does not engage in activities
that undermine US national security or foreign policy
interests. Nigeria has been one of our staunchest
anti-terrorism allies in Africa.


CHILD LABOR
--------------


ITEM 5: In 2002 President Obasanjo signed the
instruments of ratification for ILO Convention 182,
Worst form of Child Labor, Convention138, Minimum Age
for Employment, and Convention 111, Equality of
Occupation. Existing legislation prohibits children
under 15 years to work in most sectors and outlaws
forced or compulsory labor, but enforcement remains
weak. Draft legislation was under review in the
National Assembly that would make trafficking in
persons (including children) a crime; however, no
action was taken on it by year's end. There were few
statistics available to determine the success of
ongoing antitrafficking campaigns.


JETER