NIGERIA: OPPORTUNITIES FOR US AG PRODUCT EXPORTS

UNCLAS SECTION 01 OF 03 ABUJA 002302

SIPDIS

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TREASURY FOR PETERS AND HALL
DOC FOR 3317/ITA/OA/BURRESS AND 3130/USFC/OIO/ ANESA/HARRIS
USDA/FAS FOR MCKINNELL, VERDONK

E.O. 12958: N/A
TAGS: EAGR ECON ETRD EAID EFIN PGOV NI
SUBJECT: NIGERIA: OPPORTUNITIES FOR US AG PRODUCT EXPORTS

REF: A. ABUJA 2169

B. ABUJA 2126

C. ABUJA 1925


1. Summary: Following the September 25, 2008 release of the
2008-2012 Nigerian government tariff book, a number of major import
bans were eliminated and some tariffs were significantly reduced
(reftel C). A review of the tariff book demonstrates that in
several products there may be significant opportunities for U.S.
products. Exports bans have been removed on corn, crude vegetable
oil, sorghum, biscuits, sugar confectionaries, flour and fresh/dried
fruits, while tariffs have been reduced on products such as rice.
Due to Nigeria's decrepit infrastructure imported U.S. products may
have an advantage over domestically produced products. This cable
is one of two cables that will describe in detail trade policy
changes and the areas where U.S. companies may take advantage.

CORN BAN LIFTED
--------------


2. (U) Corn imports were banned since 2005, but this ban has now
been removed. The corn importation tariff rate is 5%. This removal
opens an opportunity for exports of U.S. corn, primarily for use by
the Nigerian poultry industry. Potential U.S. corn buyers include
major commercial feed millers, who have their own port facilities
and can handle larger vessels, as well as large scale poultry
farmers who typically operate their own feed mills.

3 (U) U.S. import prospects are strong despite Nigerian production
of both white and yellow corn. Local domestic corn production
remains constrained by limited fertilizer availability, as well as a
lack of high-quality seeds (reftel A). As a result, yields are very
low, averaging about 1.7 metric tons (mt) per hectare, compared to
nearly 10 mt per hectare in the United States. In addition, nearly
all of the corn is still planted and harvested by hand because there
is almost no mechanized production. This has led to very high
production costs, thereby increasing domestic corn prices far above
international prices. Concomitantly, a lack of storage facilities
in the key corn growing areas results in high post harvest losses
and negatively impacts grain quality (reftel B).


4. (SBU) Poultry operators have expressed a strong desire to import
U.S. corn and the Poultry Association of Nigeria (PAN) lobbied the
government to eliminate the import ban. The location of the poultry
industry makes it beneficial to import corn, as about 80% of poultry
production is located in the southwestern part of Nigeria, close to
the major seaport of Lagos but a substantial distance from the corn
growing areas of Nigeria.


5. (U) Although the domestic poultry industry is developed in
Nigeria and expanding very rapidly, poultry production is still
unable to keep pace with demand (Note: Poultry imports into Nigeria
remain banned. End Note). This demand is driven by changing
demographics, urbanization, economic development and the rapid
expansion in fast food restaurants in Nigeria, such as Chicken
Republic, Tastee Fried Chicken, Drumstix, etc.

RICE TARIFF REDUCED
--------------


6. (U) The rice duty was reduced from 109% to 5% for seed, paddy and
brown rice, while the duty on semi and wholly milled rice was
reduced to 30%. Nigeria is the second largest rice importer in the
world, and large rice imports are expected to continue, despite
efforts by the GON to achieve self-sufficiency in rice production.
Rice is produced in the country largely by resource-poor,
subsistence, and small-scale farmers and the bulk of this locally
produced rice is consumed by the farmers and does not enter the
market chain. Domestic production remains far below demand. At
present, rice is either imported bulk and bagged upon arrival or
pre-bagged in 25 and 50 kilogram bags. Thailand and India are the
leading suppliers to the market accounting for approximately 60% and
30% respectively in 2007. The lower duty for paddy and brown rice
is a GON incentive to increase domestic milling capacity. Most of
the major rice importers in Nigeria have built local milling
facilities and are eager to shift from imports of wholly milled rice
to paddy and brown rice, largely because of this duty advantage.
This opens up a market for U.S. supplies.

CRUDE VEGETABLE OIL BAN REMOVED
--------------


7. (U) Beginning in 2001, the GON implemented an import ban on bulk

ABUJA 00002302 002 OF 003


vegetable oil to support local producers. Branded and
consumer-ready vegetable oil was also banned in 2005. The GON has
removed the import ban on crude vegetable oil and the import duty is
now 35%. Refined vegetable oil import remains banned. Palm oil,
and to a lesser extent soybean and peanut oil, is produced in
Nigeria; however, domestic vegetable oil production has not kept
pace with rising demand. Nigerians are becoming more familiar with
the higher quality and health benefits of soybean oil and one major
domestic oilseed crusher/oil refiner has indicated that he has
shifted production significantly away from peanut oil and to soybean
oil due to the much higher demand for this product. Rising demand
and insufficient local production has caused local prices to rise to
nearly double international price levels. Removing the ban on crude
vegetable oil has opened market opportunities for U.S. exports of
crude vegetable oil, primarily for refining into edible oil.

SORGHUM BAN REMOVED
--------------


8. (U) The ban on sorghum import was removed, and the tariff is now
5%. Nigeria is the world's largest producer of sorghum, and it is
the primary food crop in virtually all parts of northern Nigeria.
Sorghum is used extensively in brewing, and industrial demand for
sorghum by beer manufacturers is rising steadily. It is estimated
that 150,000 tons of sorghum is used each year for brewing.
Although Nigeria is a large sorghum producer, high domestic sorghum
prices could provide opportunities for U.S. sorghum exporters to
sell to the brewing industry. These major breweries are located
near the Lagos port, and more that 500 miles from key growing areas.
Due to Nigeria's poor infrastructure imported sorghum has a
transportation advantage compared to domestic sorghum.

WHEAT FLOUR BAN REMOVED
--------------


9. (U) The ban on flour import was removed, and the tariff is now
35%. Nigeria has a large and well developed milling industry, and
is one of the world's largest importers of U.S. wheat. Due to the
milling industry's excess capacity it is unlikely that U.S.
exporters will export large quantities of flour. However, there
could be opportunities for U.S. exports of specialty flours in small
volumes. The major mills typically only produce two types of flour
and higher-end restaurants and hotels, have demand for specialty
flours for creating different products.

BISCUITS BAN REMOVED
--------------


10. (SBU) The 2003 instituted ban on biscuits was removed, and the
tariff is now 25%. Biscuit consumption in Nigeria, which includes
cookies, crackers and biscuits, has grown by 15% per year since

2003. According to industry sources, Nigeria's per capita biscuit
consumption is 600,000 mt per annum; however, production has
declined due to very high production costs due to infrastructure
problems and mounting energy costs. All manufactures report that
they must use generators most of the time due to epileptic
electricity supply. This combination makes many domestic products
non-competitive compared to imported products.


11. (U) Moreover, most local processors continue to manufacture
primarily inexpensive, low-quality products for the low-income mass
market and school-age children. As a result, few domestic products
meet the quality and tastes of Nigeria's growing middle-income
consumers and significant opportunities exist for U.S. exports of
high-quality biscuits, cookies and crackers for this market segment.


SUGAR CONFECTIONERIES BAN REMOVED
--------------


12. (U) The 2003 instituted ban on sugar confectioneries was
removed, and the tariff is now 35%. Nigeria's confectionery sector
comprises hard candy (50%),bubble gum (30%) and toffees/other
products (20%). Similar to biscuits, Nigeria's domestic production
of confectionery products has grown but infrastructure and high
energy costs limit production. In addition, input costs are high as
all of the sugar used is imported, primarily from Brazil. Domestic
confectioneries products are mostly low quality, low-price products
targeted at mass markets. Due to the low quality available in
Nigeria and the confectionary market's rapid growth in demand (20%
per year),there are opportunities for U.S. exports of these
products.


ABUJA 00002302 003 OF 003


FRESH AND DRIED FRUIT BAN REMOVED
--------------


13. (SBU) The ban on fresh and dried fruit was removed, and the
tariff is now 20%. Nigerian farmers produce millions of tons of
seasonal fresh fruits and vegetables; however, the farmers suffer
from very high post-harvest losses due to inadequate storage and
processing facilities, and high transportation costs. There is
strong local demand for fruits not grown widely in Nigeria,
especially apples and grapes, which during the ban had been smuggled
into the country in very large quantities. This ban removal should
provide access to U.S. fresh and dried fruits exports.

COMMENT
--------------


14. (U) The Nigerian government's 2008-2012 tariff book presents
several opportunities for U.S. exporters to become more heavily
involved in trade with Nigeria and increase U.S. exports. The
government's new policies should allow potential U.S. exporters to
focus on corn, crude vegetable oil, sorghum, biscuits, sugar
confectionaries, flour, fresh/dried fruits, and rice.


15. (U) This message was coordinated with ConGen Lagos.

SANDERS