NIGERIA ECONOMIC UPDATE, JUNE 1

UNCLAS LAGOS 001153

SIPDIS

DEPT PASS TO USTR

E.O. 12958: N/A
TAGS: EAIR ECPS ETRD ECON NI
SUBJECT: NIGERIA ECONOMIC UPDATE, JUNE 1


1. (U) This update includes:

-- New International Routes for Local Airlines
-- NITEL Introduces New Tariffs Effective June 1
-- Recharge Cards Import Ban Effective January 2005

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New International Routes Approved for Local Airlines
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2. (U) Six local airlines were recently approved by the
GON to operate new international routes. Four of the
airlines - Aviation Development Company (ADC),Afrijet,
Bellview and Kabo may operate intercontinental flights
from Lagos to Brussels, Madrid, Bombay and Rome
respectively. Aero Contractors and Chanchangi Airlines
may run flights to various West African cities
including Accra, Douala, Malabo and Sao Tome.


3. (U) The Aviation Ministry directed that the airlines
assigned intercontinental routes must increase their
capital base to N1 billion ($7.2 million),while those
on West African routes must increase theirs to N500
million ($3.6 million) by April 2005.


4. (U) Managing Director of Afrijet, Dr. Harold
Demuren, said his company, which is recruiting
crewmembers and procuring equipment, intends to build a
multi million-naira hangar in Lagos. These upgrades, he
said, will prepare Afrijet for competition with Iberia,
as the Spanish airline begins a thrice-weekly flight
from Lagos in June.

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NITEL Introduces New Tariffs, Effective June 1
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5. (U) The state-owned Nigerian Telecommunications
Limited, NITEL, introduced new tariffs for local and
trunk calls effective June 1. Tariffs on local calls
increased 51 percent from N4.30k/min to N6.50k/min,
while trunk calls were reduced 49 percent, from N43/min
to N22/min.


6. (U) Ig Nwangwu, Public Relations manager of NITEL
Lagos, said tariffs on calls to GSM networks were
reduced 13 percent from N30/min to N26/min. But NITEL
subscribers' monthly access charge was increased 40
percent from N500 ($3.60) to N700 ($5.10).


7. (U) Comment: The new tariff regime is NITEL's
response to the keen competition in the sector. Other
private telecom operators, who have their tariffs
pegged to the NITEL rate, may also adjust their charges
appropriately. The effect of the reduction in GSM call
rates is significant given the prevalence of mobile
telephony and the GON's call for lower tariffs. End
comment.

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Recharge Cards Importation Ban, Effective January 2005
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8. (U) Minister of Communications Cornelius Adebayo
recently announced a GON ban on imported recharge cards
by telecom companies. The ban, which did not come as a
surprise to most telecom operators, is effective from
January 1, 2005.


9. (U) Most of the major players in the sector,
including MTN, Vodacom and the state-owned NITEL now
import recharge cards. Others like Cellcom and Mtel
print locally. Joke Giwa of MTN said the company would
meet the deadline by implementing recommendations of
the feasibility study it commissioned in September
2003, on local production of recharge cards. In the
interim, the company has introduced a Virtual Top Up
(VTU) method of recharging, which allows subscribers to
buy airtime without using cards. Nwangwu of NITEL
stated that the company, which is introducing prepaid
landlines, will comply with the directive.


10. (U) As the telecom companies jostle to meet the
deadline, Masterstrokes and Cards Technology, the two
major local producers of recharge cards are positioning
for more transactions. The ban is designed to encourage
foreign firms to establish manufacturing plants in
Nigeria to take advantage of the huge market.

Hinson-Jones