MEGA CORPORATION COULD HELP AND HURT NIGERIA AT

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 000474

SIPDIS

DEPARTMENT PLEASE PASS TO EXIM, OPIC

E.O. 12958: DECL: 03/23/2015
TAGS: ECON EINV EFIN PGOV NI
SUBJECT: MEGA CORPORATION COULD HELP AND HURT NIGERIA AT
THE SAME TIME

Classified By: BRIAN BROWNE FOR REASONS 1.4 (B) AND (D)


1. (C) Summary. On March 1, a cadre of Nigeria ,s
business elite presented plans to the Government of
Nigeria (GON) to establish the Transnational
Corporation of Nigeria (TCN). Deemed a mega-
corporation, TCN's initial capital would consist of
naira 4.2 billion (USD 31.5 million) including naira
100 million each (more than USD 750,000) in
contributions from 42 private investors, many of whom
have connections at the highest level of government.
TCN is further testimony of active government
involvement in business and of a close beneficial
nexus between the GON and the pro-Obasanjo business
elite, contradicting GON ,s claims that Nigeria is a
free market economy with an even playing field. End
summary.


2. (U) On March 1, a cadre of Nigeria ,s business
elite presented plans to the Government of Nigeria
(GON) to establish the Transnational Corporation of
Nigeria (TCN). Deemed a mega-corporation, TCN's
initial capital would consist of naira 4.2 billion
(USD31.5 million) including naira 100 million each
(more than USD750,000) in contributions from 42
private investors, notably Aliko Dangote, CEO,
Dangote Group; Dr. Ndi Okereke-Onyiuke (Onyiuke),
Director General, Nigerian Stock Exchange (NSE); Jim
Ovia, CEO, Zenith Bank; Jacobs Moyo Ajekigbe, CEO,
First Bank; and Femi Otedola, CEO, Zenon Petroleum
and Gas. The TCN expects to raise its initial
capital to naira 14 billion (over USD100 million)
after an April or May 2005 listing on the NSE, and
contemplates an eventual capital base of USD500
million.


3. (U) This projected USD500 million capital base
would give TCN a larger financial capacity than any
other Nigerian private company. It would help its
Nigerian business moguls and the GON to collectively
meet investment goals that were previously out of
their reach even to them as wealthy individuals. TCN
investors could then take on large projects such as
refineries, gas pipelines, and vertically-integrated
agricultural processing with an eye to exports. For
the GON, TCN's success would be a point of
nationalistic pride. It also might attract foreign
direct investors who now reason that if Nigerians
are not investing in their own country, why should
they?


4. (U) In the light of the GON's economic aspirations,
the TCN has the potential to help increase revenue,
trade, and employment. Furthermore, the mega
corporation could become a prime customer of the
large banks that will result from the Central Bank's
directive that banks in Nigeria must have a minimum
capital base of naira 25 billion (over USD185
million) by December 31, 2005.


5. (C) There is an apparent downside, however. TCN
signifies a stronger partnership between GON and
Nigeria ,s business elite contrary to the free market
model Nigeria claims it supports. The modus operandi
of the corporation has yet to be seen though the
cozy relationship between many of its investors and
the GON will lead to questions about insider trading,
corruption, and transparency. Most of TCN ,s
investors move in the highest political circles,
including that of President Obasanjo. (Aliko
Dangote reportedly was the highest contributor to
Obasanjo's 2003 presidential campaign.) Already,
TCN seems to have been given an unfair advantage:
its director and &team leader 8, Onyiuke, wielding her
power as NSE director general, is trying to get TCN
listed on the NSE as early as April 2005. Usually,
NSE and Nigerian Securities Exchange Commission (SEC)
regulations require companies be operational for
three years before being listed. Media reports also
indicate that TCN expects GON &concessions 8 to buy a
GON oil refinery and other public enterprises in
line with TCN's objectives. The TCN has plans and
expects favorable treatment in its efforts to build
a new refinery and petrochemical plant, to operate
an independent power plant, and to gain tax breaks
through pioneer status for investing in agriculture.
(Comment. The speed at which the TCN will be listed
on the NSE should indicate whether regulatory
institutions in Nigeria like SEC have the wherewithal
to maintain a fair playing field for firms listed on
the exchange. End comment.)

6. (SBU) The announcement publicizing the TCN was
contemporaneous to a statement by the Manufacturer ,s
Association of Nigeria (MAN) indicating that 90
percent of Nigeria ,s manufacturing firms are
distressed. MAN's Director General Jide Mike said he
welcomes the TNC because it will contribute to
economic growth and generally be a point of pride
for Nigerians, but will not compete directly with
Nigeria's actual manufacturers.


7. (SBU) Mansur Ahmed, the Executive Director of
the Nigerian Economic Summit Group, is less sanguine.
He speculates that TCN's consolidation may worsen
Nigeria's unequal distribution of wealth, as TNC ,s
wealthy investors become even wealthier and crowd
out smaller investors and firms in the sectors which
TCN wants to invest.


8. (SBU) Comment: If it takes off, the TCN is apt
to become the bellwether of Nigerian firms. It's
potential for dominance reflect the strong
interplay between economics and politics on a field
that is less than level. End comment.
BROWNE