PRESIDENT OBASANJO'S FORUM ON ECONOMIC STAKEHOLDERS

UNCLAS SECTION 01 OF 03 ABUJA 000887 SIPDIS SIPDIS DEPARTMENT PASS TO USTR FOR LAGAMA TREASURY FOR LUKAS KOHLER/DAN PETERS USDOC FOR 3317/ITA/OA/KBURRESS USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS DOE FOR CAROLYN GAY E.O. 12958: N/A TAGS: ECON EFIN ETRD ENRG PINR NI SUBJECT: PRESIDENT OBASANJO'S FORUM ON ECONOMIC STAKEHOLDERS ABUJA 00000887 001.2 OF 003 ¶1. Summary. In April, President Obasanjo hosted a "Presidential Forum with Stakeholders of the Economy". Presentations were made by key ministries and government agencies giving a glowing tribute to Obasanjo's leadership. The general theme was that there had been progress, but many challenges remained, especially if Nigeria were to become one of the top 20 economies in the world by 2020. Nigeria needs to sustain an economic growth rate of 12.4% over the next 15 years with massive investments in basic infrastructure, health and education to achieve the Millennium Development Goals (MDGs). Key legislation on Fiscal Responsibility, Nigerian Extractive Industries Transparency Initiative (NEITI),and Tax Reform are unlikely to be passed in the current National Assembly. The declared President-elect, Alhaji Umaru Musa Yar'Adua has promised that reforms will continue. End Summary. ¶2. President Obasanjo hosted a "Presidential Forum with Stakeholders of the Economy" in April. The forum took a congratulatory tone to progress made during his tenure as president from 1999-2007. Key ministries and government agencies made presentations including the Ministries of National Planning, Finance, Agriculture and Water Resources, Energy, Commerce and Industry, Foreign Affairs, the Central Bank and the Nigerian National Petroleum Corporation (NNPC). Comments and discussion followed, with President Obasanjo fielding questions from participants. Central Bank of Nigeria (CBN) -------------- ¶3. Charles Soludo, Governor of the CBN, gave a presentation. His initial topic, "The Nigerian Economy Then and Now" was changed at the last minute to "Financial System Strategy 2020 (FSS 2020)". FSS 2020 is a strategic plan led by the CBN to integrate reforms to ensure that Nigeria becomes Africa's financial hub and one of the 20th largest economies in the world by 2020. Soludo based his assessment on Goldman Sachs's research on the economies of Brazil, Russia, India and China (BRIC) and their potential to surpass the G6 nations on key economic indicators by 2050. After the BRICs, Goldman Sachs's named the "next 11" or, the "N11" countries, which have the potential to be BRIC-like, Nigeria among them. Goldman Sachs's predicted that in terms of GDP, Nigeria could overtake Italy by 2015. To overtake Italy and be on target with the 20th largest economies of the world, Soludo stressed that Nigeria must maintain an average economic growth rate of 12.4% over the next 15 years. This would include the continued economic reforms, improved power, transportation and telecom infrastructure and a more industrial, and agricultural economy less dependent on oil revenues. The GON also needed to increase its commitment to education and security. Ministry of Finance -------------- ¶4. Minister Nenadi E. Usman gave MOF's presentation. She highlighted statistics that indicated Nigeria was on sound footing for the future. GDP has been robust since 2003 at roughly 6%. Inflation last year was in the single digits (headline at 8.5% and year on year at 3.9% from CBN). The Naira was stable with the official and parallel rates converging. Foreign reserves climbed steadily since 2003 reaching over $43 billion in 2006. Nigeria's has had two positive reviews by the IMF of its Policy Support Instrument (PSI). The PSI played a critical role in Nigerian debt relief from the Paris and London Clubs. A third review was completed in February 2007, which is expected to show positive results. Nigeria has received sovereign credit ratings from both FitchRatings and Standard and Poors (S&P) last year. Fitch reaffirmed their BB- rating last month with S&P's new 2007 rating expected very soon. Nenadi said the next steps should be at the federal level to consolidate the reforms in public financial management, in budgeting, debt and due process. She said there was an urgent need to extend the reforms to state and local governments, and to focus on developing growth strategies in the non-oil sectors. Ministry of Commerce and Industry -------------- ¶5. Minister Aliyu Modibbo Umar made the presentation on "Commerce 44, Foundation for a Non-Oil Sector Economy". Commerce 44 is an initiative to develop, promote and export eleven agricultural commodities, eleven manufactured products, and eleven solid minerals, focusing on eleven counties/regions of the world taking advantage of concessions in bilateral and multilateral agreements. ABUJA 00000887 002.2 OF 003 Commerce 44 targets a 10% growth rate per year in non-oil exports. Umar said operational, enforcement and policy issues needed to be addressed. Policy approaches that emphasized large-scale enterprises that bypassed the poor and now a concerted effort was needed to develop small and medium enterprises that offered better opportunities for employment creation and growth. On the operational side, they needed to address port delays and the long period for claims processing especially in the Export Expansion Grant Scheme (EEGS). This fund provides cash inducement for exporters that have exported a minimum of 50,000 naira of semi-manufactured products. On the policy, multiple levies, VAT, and limited export financing were obstacles. Umar touched on the Free Trade Zones and their impact in providing foreign direct investment (FDI),developing industries, employment, revenue generation and uplifting adjacent communities. Umar cited the $6.7 billion OKLNG project and the Tinapa Free Trade Zone as examples. The GON envisions Tinapa as a manufacturing, distribution and tourism hub for Africa comparable to Dubai. Ministry of Agriculture (MOA) -------------- ¶6. Minister of Agriculture and Water Resources, Otunda B. F. Dada gave the presentation. The MOA wants to make agriculture the "engine" to drive the economy and support rapid economic growth, poverty alleviation, job creation and a stable economy. Presently the sector contributes 41% of GDP and 88% of non-oil foreign exchange; employs nearly 70% of the active labor force and supplies raw materials to the industrial sector. Growth rates have steadily increased from 2.9% in 1998 to 8% in 2006. Challenges to increasing productivity include the need to develop an almost non-existent water irrigation systems, and the high cost of agro-inputs, most of which are imported. Good quality fertilizers are needed to be supplied in time and in sufficient quantities. Underdeveloped markets have inadequate infrastructure that completes distribution and transport of produce and inputs. Another area of concern is water availability. Nigeria has abundant land, good soil and water resources that have not been exploited with an over dependence on rain fed agriculture. Nigerian National Petroleum Corporation (NNPC) -------------- - ¶7. NNPC Group Managing Director Funso Kupolokun gave the presentation based on President Obasanjo's agenda from 1999 for the oil sector. This agenda envisaged by 2010 Nigeria would have crude oil reserves of 40 billion barrels and a production capacity of 4 million barrels per day (mbpd) with a concerted effort to integrate the oil and gas sectors. Growth in oil reserves as of 2006 had reached 35 billion barrels, a 59% increase from 1999, and by the end of this year installed capacity would reach 3 mbpd. Local refineries had generally operated at 70% of capacity, supplemented by imports that still could not meet demand. Since February of 2006 two refineries were completely shut down due to sabotage of pipelines by armed militants. Nigeria has enormous gas reserves; exports of liquefied natural gas (LNG) are expected to grow from 22 metric tones per annum (mtpa) to 50mtpa by 2010 and add an estimated $10 billion a year in earnings. Domestically, LNG will be used for private consumption, manufacturing (cement, steel, and aluminum) and for power generation. Kupolokun noted that regional cooperation projects with Equatorial Guinea, the West African Gas Pipeline (WAGP) and the Trans Sahara Pipeline projects were ongoing. President Obasanjo's Participation -------------- ¶19. In a departure from the past, the President was an active participant and moderated the event. He introduced each minister, and made comments after each presentation. Afterward, he took the podium to field questions and gave a lengthy exhortation on where Nigeria was before he took office. He indicated the future looked bright, but stressed that a few setbacks would negate the progress of the past eight years. He made the surprise announcement that Mr. Nuhu Ribadu was reappointed as the Executive Chairman of the Economic and Financial Crimes Commission for another four years and promoted to Assistant Inspector General (AIG) of the Nigerian Police Force. (Note: In previous discussions with Embassy officers, Ribadu indicated that he would not seek another term. There were rumors that he would be appointed the Inspector General (IG) of Police and consolidate the EFCC and NFIU under his command. End Note) ABUJA 00000887 003.2 OF 003 Comment -------------- ¶20. Although GON officials painted a rosy picture, amid the abundance of reserves and increasing revenues there still are shortfalls in the local economy. There are frequent queues at the gas pumps and not enough refined products to satisfy domestic demand. Nigeria needs massive investments in basic infrastructure --power, roads, telecoms--and increased funding and focus in health and education to achieve the Millennium Development Goals (MDGs). It is bad news that key legislation such as Fiscal Responsibility, NEITI, and Tax Reform are unlikely to be passed by the National Assembly before the new administration takes office on May 29. Following a change of administration, a new government is unlikely to focus on these issues soon. All of the bills will have to be re-introduced and begin the process from scratch. So far, the President-elect has promised that the reforms will continue. CAMPBELL