ANALYSIS OF APPLICATION FOR OPIC FINANCE: JACKDAN

UNCLAS LAGOS 001359 SIPDIS NOFORN SENSITIVE E.O. 12958: N/A TAGS: EINV EFIN NI SUBJECT: ANALYSIS OF APPLICATION FOR OPIC FINANCE: JACKDAN INTERNATIONAL INC. REF: STATE 148325 ¶1. Per action request in reftel, Post submits observations on the planned OPIC loan of USD 2.4 million to support the development of Jackdan Breweries Nigeria Limited, a microbrewery and water treatment and bottling project in Uyo, Akwa Ibom State. ¶2. There is a significant consumer base for beverages of all types in Nigeria; however, the two main producers, Nigerian Breweries and Guinness Nigeria, have tight control on the production side of this equation. Their market strength and lack of interest in encouraging competition would make it hard on potential newcomers. South African Breweries is the only foreign firm to have penetrated the Nigerian market on any appreciable scale. The most successful recent launch of an alcoholic beverage was the introduction of Gordon Spark, a fruity gin drink, by Guinness. The launch was successful in large part because of the participation by Guinness. Support from one of the Nigerian major producers is a large factor to success in this market. ¶3. The Foreign Commercial Service (FCS) reports no knowledge of Jackdan Breweries or its owner, Mr. Daniel Jack. The governor of Akwa Ibom State, Victor Attah, is a well known figure. He is U.S. trained and seeks U.S. investments for state projects. These projects, however, tend to be large, and sustained funding has been a problem. For instance, work with General Electric (GE) on a power plant began in 2001, but the plant is not operational. Construction has also begun on a hangar for an airport; however, an international airport already exists within 383 kilometers at nearby Port Harcourt. . ¶4. Akwa Ibom may not be the best of locations for a brewery. Most of the demand for beers lies west of Akwa Ibom, and the road networks connecting East and West are poor. Both Nigerian Breweries and Guinness have facilities in Aba, Abia State which is 351 kilometers from Akwa Ibom's capital. These facilities cover much of the demand in the eastern regions, and transportation networks from Aba are much more friendly to national distribution than UYO. A startup would do better either in Aba or further west near Lagos. Post would advise that a detailed feasibility study be conducted on this project before proceeding. ¶5. Political risks to companies operating in Nigeria include agitation by local communities who may be politically disaffected or motivated by monetary gain. Risks include physical attacks on company personnel or infrastructure. However, we are not aware of the beverage industry being the target of such community opposition in the past. The U.S. Department of State maintains a travel advisory for Nigeria, noting, "Violent crime committed by ordinary criminals, as well as by persons in police and military uniforms, can occur throughout the country." ¶6. This cable has been cleared by Embassy Abuja. BROWNE