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2002-11-27 13:42:00
Embassy Abuja
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						C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 003202 



E.O. 12958: DECL: 11/25/2012


Classified by DCM Timothy D. Andrews, reasons 1.5 b and

1. This periodic economic report includes:
--U.S./U.K. Team Bids on Management Contract for Nigerian PTT
--Nigeria Buys U.S.-Made Buses
--World Bank to Work Closer with States
--Environmental Success Story: Getting the Red Out in the

U.S./U.K. Team Bids on Management Contract for NITEL



2. New Jersey-based Africa Consortium is one of four
finalists for the three-year management contract for Nigerian
Telecommunications Limited (NITEL). The Consortium's bid
features Lucent, as well as the consulting branch of British
Telecom (BT), as principal vendors for the project. Chris
Vaios, Africa Consortium's Managing Director, told Econoff
that the three-year management contract could result in sales
of as much as $2 billion for the two companies. Lucent and BT
representatives, however, were careful to stress that their
companies have no equity stake in the consortium

3. Vaios contends that his group is the most technically
competent of the bidders. He is confident that it will win
the competition unless political factors influence the
contract award.

4. (C) Comment: Africa Consortium has its work cut out. As is
the wont of most businessmen, Vaios may have exaggerated the
group's technical edge over its competitors, some of whom are
also backed by European PTTs. More important, Africa
Consortium has no agent in Nigeria. The group's visit was
handled by a recently appointed State of New Jersey commerce
official who was unable to arrange a meeting with the Vice
President, even though Atiku was in town and normally would
have met this caliber of delegation. Business names are
important in Nigeria, and reticence to bill Lucent and BT as
part of the consortium may also hurt. Nevertheless, the
Bureau of Public Enterprise has a good track record on
transparency and the group should remain in the running.
However, as Vaios seems to understand, it would not be
unheard of for politics to intrude at some point. End Comment.

Nigeria Buys U.S.-Made Buses


5. Sofitel Capital Corporation USA, Inc., a capital
investment company in Maryland, and Innochris Nigeria, Ltd.,
one of the largest transportation companies in Nigeria,
signed a $12.9 million loan agreement to purchase 35
U.S.-made buses. U.S. EX-IM Bank is expected to guarantee the
loan and Motor Coach Industries (MCI), the largest luxury bus
manufacturer in America, will supply the buses. This will
mark the very first time U.S.-manufactured buses will share
the roadways with the Mercedes Benz and Volvo buses that have

dominated this sector of the Nigerian transportation sector.
Sofitel is currently negotiating two similar deals with other
Nigerian transportation companies for the purchase of 60
U.S.-made buses for a total value near $25 million, as well
as a loan for a company to provide airline services in

World Bank to Work Closer with States


6. (C) World Bank Representative Mark Tomlinson recently told
Econoffs that the Bank is providing technical assistance to
the GON to improve Nigeria's capacity to absorb the nearly
$757 million in bank loans approved for the country.
Tomlinson explained that only $25 million of the approved
loan portfolio has been spent so far because of the lack of
institutional capacity at all levels of government to
implement projects under the Bank's strict fiduciary and
performance standards. Absent this institutional weakness, he
estimated that $75 million would have been spent by now.

7. (C) Comment: Tomlinson points the finger at the GON for
the slow implementation of bank loans. We believe that
Tomlinson was not so much concerned with the GON's ability to
spend as its ability to account for what is spent. GON
officials see their relationship with the bank differently.
They complain bitterly that the bank has not worked
diligently to honor its commitments to Nigeria. Instead, the
bank has engaged in an incessant game of "moving the goal
posts" that continually has placed new requirements on
Nigeria to tap into bank funds. True, Tomlinson may not
always be at his diplomatic best when dealing with the
relationship between the bank and the GON. However, given
legitimate concerns about malfeasance and corruption, the GON
should not have been totally surprised that the bank
presented stringent conditions for the release of funds. End

8. (C) Tomlinson has complained that the GON is unreceptive
to the Bank's attempts to build institutional capacity at the
federal level. The Nigerians have been insisting instead that
the Bank engage in more hands-off project financing. Because
of this difference in philosophy with the federal government,
Tomlinson has begun to focus more of the Bank's efforts at
the state level, where institutional responsibility for many
aspects of poverty alleviation rests. Tomlinson also told
Econoffs that before Bank spending can pick up again, Nigeria
must improve its macroeconomic fundamentals, adding that a
fresh agreement with the IMF would be a curative step.

9. (C) Comment: The Bank has also been frustrated by GON
slowness in moving the Poverty Reduction Strategy Paper
(PRSP) process forward. The GON likewise was further
disappointed by the Bank's decision to lower the level of its
lending program in Nigeria. A low point probably came in
September when Minister of Agriculture Bello publicly
criticized the Bank in front of Tomlinson and the press for
rejecting a $200 million loan for agriculture.

10. (C) It is highly unlikely the Bank will find working with
the States any easier. Conventional democratic theory assumes
that state and local government will be more responsive to
local needs. However, what is in the textbooks differs from
actual practice in many if not most Nigerian states. The
spendthrift behavior of many states makes the federal
government look fiscally responsible. Few if any states have
developed the minimal due diligence and fiduciary standards
found at the federal level. End Comment.

Environmental Success Story: Getting the Red Out in the Delta



11. (SBU) Ken Clary, Managing Director of the Washington
State-based Environmental Distribution Network (EDN), cites
his organization as a model for others who wish to get
environmental contracts from the Niger Delta Development
Corporation (NDDC). EDN has signed a $1.7 million contract
for a water treatment program for eight villages and
anticipates additional projects.

12. (SBU) Clary claimed he was able to avoid many of the
political pitfalls that have befallen others who wanted to
work with the NDDC and its widely discredited predecessor
OMPADEC (Oil Mineral Producing Areas Development Commission).
Working with a Nigerian associate, Clary insisted the NDDC
fund all of his expenses up front. Clary says a major selling
point of his water treatment system was its ability to remove
iron from the ground water. "People got excited when they saw
that they could wash white clothes without the red tinge and
that sprinklers stopped staining the bottoms of white walls."

13. (SBU) Clary sees oil service companies as even better
potential clients than the NDDC. "Many of the companies
operating in the Delta are in an environmental time warp.
They don't know about recent advances in the technologies
which are not only cleaner but more cost effective as well."
He says that despite tens of millions of dollars spent on
environmental projects in the Delta, very little visible
progress has been made.

14. (SBU) Clary believes there has been a change of attitude
about the environment in the Delta, and there is now a grass
roots demand for real progress. People are demanding NDDC and
others restore water quality; Delta inhabitants are not just
settling for leveraging more money out of the government and
oil companies. Clary believes his company and other smaller
U.S. firms have almost unlimited opportunities if they hold
their ground and get the Nigerians to play the game on U.S.
standard business practice terms. Comment: Post applauds
Clary's enthusiasm for doing business in Nigeria, but our
experience here suggests that he may face more ruts and bumps
in the road ahead than he anticipates. End Comment.