NIGERIA: AMBASSADOR'S MEETING WITH SECURITY AND EXCHANGE

UNCLAS SECTION 01 OF 02 ABUJA 001147 SENSITIVE SIPDIS DEPARTMENT FOR EB/IFD/OIA DEPARTMENT PASS TO USTR (AGAMA) TREASURY FOR RHALL AND DPETERS E.O. 12958 TAGS: EFIN ECON ETRD PGOV KCRIM EAID NI SUBJECT: NIGERIA: AMBASSADOR'S MEETING WITH SECURITY AND EXCHANGE CHAIRMAN ADVANCES TRANSPARENCY EFFORTS SENSITIVE BUT UNCLASSIFIED -- HANDLE ACCORDINGLY. ¶1. (SBU) Summary: The Ambassador met with the Nigerian Security and Exchange Commission (SEC) Chairman Mallam Musa Al-Faki on June 4 to discuss efforts the SEC is doing on transparency in capital markets with stock brokerage houses, banks, and in the area of money laundering. Chairman Al-Faki stated that his most critical challenges are the need to put in place the necessary regulatory framework to deepen transparency in the Nigeria market place, the legislative changes on the Land Use Act, to ensure a better mortgage environment and improve the capacity of his staff. The Chairman expressed a desire to work closer with the United States SEC on a range of issues, as well as other elements of the U.S. Mission, particularly the FBI. The Ambassador underscored USG focus on transparency in all sectors and our efforts to fight corruption. She highlighted the presence of the FBI and LegAtt in Lagos and noted that there were synergies where his office and LegAtt could work together. End Summary. ¶2. (U) The Ambassador met with SEC Chairman Mallam Musa Al-Faki on June 4 to discuss a range of issues on transparency in Nigerian capital markets. Chairman Al-Faki has been the SEC chairman since ¶2004. He is also the Chairman of the Africa, Middle East Regional Committee (AMERC) of the International Organization of Security Commissions (IOSCO) and has been re-elected recently to that position. Chairman Al-Faki described the four main SEC activities: -- The supervision and oversight of the Nigerian Stock Exchange (NSE); -- Promoting awareness and effective regulation of NSE activities; -- Building a strong, transparent structure in which the NSE activities can flourish; and, -- Ensuring transparency in Nigerian markets ¶3. (SBU) The Ambassador noted the USG focus on the importance on increased transparency in all areas of business, particularly the market sector, and noted the importance of the right regulatory and legislative frameworks in order for Nigeria to truly move forward. The SEC and his director echoed the same request we have heard from many that Nigerian policy and businesses seek more U.S. trade and investment. The Ambassador said she was aware of these sentiments and highlighted key things, such as a bilateral investment treaty and trade and investment framework needed to be in place to really encourage U.S. investment and growth in Nigeria. Improving Regulations, Laws and Cooperation -------------- ¶4. (SBU) Chairman Al-Faki said that effective regulations are needed to enhance confidence in the Nigerian market and financial sectors, and that international exposure, particularly Nigerian membership in IOSCO, has improved regulatory practices in Nigeria, leading to higher standards and more accountability and transparency. To deepen this momentum, he continued, the Land-Use Act and tax laws must be updated and corporate reporting standards should be raised to international levels. The Ambassador replied that the USG through USAID and the Overseas Private Investment Corporation (OPIC) have been working closely with the GON on reforming the Land Use Act. ¶5. (SBU) Regarding law enforcement cooperation, SEC Director of Enforcement and Investigation Udora said that his office recently contacted FBI headquarters in Washington and reported a possible case of money laundering and abuse of the GON financial system, providing both the name and location of the suspect. He lamented that the FBI had not responded to the Nigerian SEC overture. The Ambassador was surprised by this and said she would have Mission's LegAtt office contact him soonest (since the meeting, LegAtt has followed up on this and other partnership opportunities seem to be on track). Capacity Building Assistance -------------- ¶6. (SBU) Chairman Al-Faki contended that cooperation with the U.S. SEC is critical for his agency to build capacity. He characterized the Nigerian SEC structure as largely based on the U.S. model and said that there were several key areas of interest for cooperation based on SEC future planning. The SEC plans to work with the NSE to make all of its transactions electronic by 2009, and further develop the corporate bond market. The Chairman remarked that investors in Nigeria prefer to invest in equities but a balanced capital structure is needed, and development of the corporate bond market is one of the SEC's biggest challenges. ABUJA 00001147 002 OF 002 ¶7. (SBU) Comment: The SEC plays an important regulatory role in improving and maintaining the transparent financial sector in Nigeria's market. The Ambassador invited the SEC to participate in the upcoming export credit USTDA workshops and send representatives under the U.S.-Nigeria framework for partnership to working groups on investigation and fraud prevention. Following the meeting EconOff and Acting USAID Mission Director met with a representative from the U.S. based firm, Financial Markets International, Inc., to discuss capacity building programs. The FMI rep noted that the company has worked with USAID in other countries on their SEC capacity building programs and was interested in Nigeria. Econoff passed FMI contact information to the Managing Director of the Nigerian Capital Market Institute, an affiliate of the SEC in charge of training programs. End Comment. SANDERS