NIGERIA: THE TENTH ECONOMIC SUMMIT: NEW PLANS,

UNCLAS SECTION 01 OF 02 LAGOS 001966

SIPDIS


E.O. 12958: N/A
TAGS: ECON EFIN NI
SUBJECT: NIGERIA: THE TENTH ECONOMIC SUMMIT: NEW PLANS,
NEW HOPES, OLD DOUBTS



1. (U) Summary. The Nigerian Economic Summit Group's
tenth annual summit ended on September 12 on a
cautiously optimistic note. Delegates from business,
academia and the public sector recognized the need for
far-reaching economic reforms and seemed optimistic
that they might be implemented under the leadership of
President Obasanjo's new economic team, but their
optimism was tempered by doubts about the efficacy of
previous summits and subsequent attempts at reform.
End summary.



2. (U) The president's new chief economic advisor
(appointed last June),Dr. Charles Soludo, emerged as
one of the summit's leading advocates of reform; to a
large extent, the summit bore his stamp. Soludo said
bluntly that Nigeria's economy would remain stagnant
unless the GON undertakes drastic changes. Without
reform, he said, achieving the GON's target of 5-7
percent GDP growth will be virtually impossible,
particularly as Nigeria has never sustained even 5
percent growth for more than three consecutive years.
Soludo argued that the current situation - one of low
productivity, low investment, low GDP growth and
widespread poverty - is unsustainable and expressed
dismay at the GON's poor policy coordination, lack of
fiscal and monetary discipline, and failure to root out
corruption and rent seeking behavior. Soludo painted a
harsh but accurate picture of the Nigerian economy;
others echoed it and used it to push for reform.



3. (U) With the new Minister of Finance, Soludo figures
prominently in President Obasanjo's new economic team.
The group is widely perceived as competent and
knowledgeable, and many believe this to be one of the
GON's best chances for implementing reform. Soludo
himself believes that with executive buy-in, new
cooperation among federal and state governments
(facilitated by the governing party's control of 28 of
Nigeria's 36 states),a receptive and responsive
legislature, and strong stakeholder support, the time
is ripe for change. Toward that end, Soludo emphasized
the importance of a concise and coherent reform agenda
focused on a handful of priorities: establishing sound
fiscal and monetary policies, facilitating private
sector growth and investment, and improving the
delivery of basic public services.



4. (U) Soludo urged the GON to minimize ever-growing
budget deficits by establishing overall expenditure
limits and setting aside excess oil earnings to
stabilize revenues (both reforms would require
appropriate enabling legislation). He also called for
careful monitoring of the GON's debt profile and
greater fiscal policy coordination among federal and
state governments - particularly since many states are
technically bankrupt or on the verge of bankruptcy -
and urged governments at all levels to tie their
budgets to agreed-upon spending priorities. Soludo
went on to stress the need for stable exchange rates
and controlled growth in the money supply, thus echoing
the Central Bank's stated goals of stable monetary
policy and single-digit inflation.



5. (U) Along with other GON officials, Soludo called
for a series of reforms to facilitate private sector
growth and investment, suggesting first and foremost
that the GON move forward with the privatization of
major public enterprises and continue efforts to
liberalize the downstream petroleum sector. He also
emphasized the importance of stronger anti-corruption
laws, sound competition policy, and well-defined and
transparent regulatory regimes, pointing out that the
latter is crucial to any attempt to attract private
sector investment.



6. (U) Summit delegates widely acknowledged the GON's
failure to effectively deliver public services.
Nigeria's poor infrastructure and lack of readily
available healthcare and education are among the
country's biggest obstacles to growth, and along with
other speakers, Soludo emphasized the need for improved
power supplies, expanded transportation and
telecommunications networks, and more (and better)
schools and healthcare facilities. The World Bank's
country director, Dr. Mark Tomlinson, pointed out,
however, that improving the delivery of public services
would require massive investment - investment that the
GON simply cannot afford. Financing Nigeria's much-
needed 6,000-megawatt increase in power generating
capacity will alone require $6 billion, and many
billions of dollars more are needed to finance
improvements in roads, railways, ports,
telecommunications networks, schools and healthcare
facilities.



7. (U) Given the GON's limited resources, Soludo and
other summit participants called on the private sector
to play a greater role in financing investment and
emphasized the need for more numerous public-private
partnerships. They recognized, however, that even
private sector investment would be insufficient. Both
Soludo and Tomlinson said bluntly that consumers would
have to shoulder more of the burden of providing public
services, particularly since they now pay for only 30
to 40 percent of all power generated and enjoy
surprisingly low charges for water delivery (Nigerians
pay only $0.04 per cubic meter of water, as compared to
$1.52 in Burkina Faso, $1.10 in Mauritania and $0.75 in
Mali). Even the price of fuel is heavily subsidized.
Unfortunately, transferring financial responsibility to
consumers may be easier said than done, particularly
when previous price increases have been met by strong
resistance.



8. (U) Comment. Although Nigeria's economic landscape
is littered with failed reform initiatives, summit
delegates seemed remarkably optimistic that under the
government's new economic team, things might be
different; perhaps the tenth time is the charm. Many
believe that the GON's reform agenda now enjoys
unprecedented support both within and outside the
government. Soludo himself is acutely aware of
Nigeria's history of failed reform attempts, but he
stressed in a recent newspaper interview that the
chances for successful reform are greater now than in
the past. Rather than being an ivory tower exercise,
he said, the current agenda is grounded in political
reality and enjoys the support of the "highest levels."
Post certainly hopes so; if even a handful of its
recommendations are implemented, Nigeria may be looking
at a brighter economic future. But as a veteran
participant in these summits told us a few days after
this one ended, "been there, done that, bought the T-
shirt." End comment.


HINSON-JONES