NIGERIA: CHIEF ECONOMIC ADVISOR SAYS COMMUNAL

C O N F I D E N T I A L ABUJA 000306

SIPDIS


E.O. 12958: DECL: 01/31/2012
TAGS: ECON PGOV NI
SUBJECT: NIGERIA: CHIEF ECONOMIC ADVISOR SAYS COMMUNAL
VIOLENCE SHOULD NOT DETER FOREIGN INVESTORS


Classified by Ambassador Howard F. Jeter; reasons 1.5 (b) and
(d).



1. (C) Summary. The Ambassador and EmbOffs met January 24
with Chief Economic Advisor Magnus Kpakol who claimed that
Nigeria's best hopes for future reform lay with the
reelection of President Obasanjo. Kpakol argued that recent
communal conflicts throughout the country should not deter
foreign investors from doing business in Nigeria. End
Summary.



2. (C) On January 24, Ambassador Jeter met Chief Economic
Advisor to the President Magnus Kpakol to discuss the
structure of the new bilateral Economic Committee (septel).
Kpakol also discussed prospects for the Presidential election
and the impact of communal conflicts on foreign investment in
Nigeria. PolEcon Counselor and EconOff also attended.



3. (C) The Ambassador told Kpakol that recent outbreaks of
communal violence have created the perception of instability,
sending the signal overseas that Nigeria might be in a stage
of "unraveling." As the 2003 elections near, people fear
the outbreaks will occur more frequently and could taint the
election process. The Ambassador added that it was critical
for Nigerians to see that economic growth, although
important, was not the only dividend from democracy. The
social and political benefits arising from freedoms of
speech, press and association should be recognized as
'democracy dividends', as well, he said.



4. (C) Kpakol added that democracy dividends should also be
divided between internal and external dividends. Internal
dividends would include economic reforms, political freedoms,
improved access to services, and increased incomes while
external dividends include stronger foreign direct
investment, debt relief and other assistance. Kpakol
believed economic reforms were advancing as much as possible
given the political constraints of Nigeria's young democracy,
pointing to the privatization of NITEL, fuel price
deregulation and exchange rate liberalization. However, the
federal government could not try to do too much, too fast, he
said. If so the economic bite would be harsh and would sour
the public on the expected fruits of democracy.



5. (C) Kpakol felt that if Nigeria were able to survive
through this difficult time (the elections) with the current
Administration, then in his next term, President Obasanjo
would be less restrained by electoral considerations and able
to pursue significant economic reforms. He worried that
another Administration next term would "do things
differently" and be less likely to walk the path of reform.
Kpakol could not identify any other Presidential candidates,
apart from Obasanjo, with reformist-minded ambitions.
Moreover, he argued that while the GON was doing its part to
realize the internal democracy dividends, the donor community
was languid in helping Nigeria realize the external
dividends.



6. (C) Kpakol argued that the perception that Nigeria was
unraveling was unjustified and inaccurate. He pointed out
that recent communal conflicts were not acts of random
violence, but stemmed from historical rivalries between
identifiable groups. Kpakol argued that foreign investors
were not targeted and, therefore, should not be deterred from
doing business in Nigeria. Kpakol claimed that people
intimately familiar with Nigeria's socio-political
environment (implying the Ambassador and Embassy officers)
and who understand the difference between random violence and
communal violence, should spread the word that Nigeria was
not coming apart. (Comment: On this point, Kpakol's argument
became casuistry. Too eager to prove his point, he
uncharacteristically abandoned logic by implying that random
violence, unless talking about pure anomie, was more a threat
to internal stability than an increasing frequency of
communal violence that affects thousands of people with each
occurrence. End comment)



7. (C) The Ambassador agreed that the communal violence was
not random or targeted at foreigners. However, he stressed
that the violence and the government's sometimes brusque
manner to suppress it were raising concerns in Washington and
other Western capitals. Moreover, some influential U.S.
lawmakers were justifiably concerned about the military's
role in the Tiv-Junkun conflict in Benue. Should another
incident occur, we would have to take a very close look at
our bilateral military-to-military relationship. Kpakol
understood this perspective and pointed out that the federal
government would thoroughly investigate the Benue tragedy.
Jeter