NIGERIA: SOUTHEAST, SOUTHSOUTH INFASTRUCTURE PROJECTS MAKE

UNCLAS SECTION 01 OF 03 LAGOS 000489 SENSITIVE SIPDIS STATE PASS OPIC FOR DERB, ZHAN, MSTUCKART, JEDWARDS STATE PASS TDA FOR LFITTS, PMARIN STATE PASS USAID FOR NFREEMAN, GBERTOLIN, GWEYNAND, SLAWAETZ STATE PASS EXIM FOR JRICHTER, KJACKSON, KJANIK DOC FOR 3317/ITA/OA/KBURRESS DOC FOR 3310/USFC/OIO/ANESA/DHARRIS DOC FOR USPTO-PAUL SALMON TREASURY FOR DFIELDS, AIERONIMO, RHALL, DPETERS TRANSPORTATION FOR KSAMPLE E.O. 12958: N/A TAGS: EINV EFIN ECON EAID PGOV NI SUBJECT: NIGERIA: SOUTHEAST, SOUTHSOUTH INFASTRUCTURE PROJECTS MAKE PROGRESS Ref: A) Lagos 399 B) Lagos 303 C) Lagos 265 ¶1. (SBU) Summary: Abia State's Geometric independent power project (IPP),projected to be operational April 2009, has started construction on only one substation to date. Akwa Ibom's (AI) IPP, scheduled for testing in December 2009, will generate 165 megawatts (MWs) of power, 65 of those for distribution within the state. AI's international airport will be operational in December 2009; the project coordinator predicts cargo and domestic traffic, now using the Calabar airport, will make AI's airport profitable. Tinapa business resort, in Cross River, has received Federal Government's permission to open, and the associated resort hotel will open in December 2008. The five-star Le Meridien in Akwa Ibom and Tinapa in Cross Rivers will link by water taxi. Both Abia and Akwa Ibom are working to raise internally generated revenue to offset the drop in oil price. EconOff noted significant progress on most projects since her most recent trip two months ago. End Summary ¶2. (SBU) A visit to Enugu, Anambra, Abia, Akwa Ibom, and Cross River States November 16-20 showed that progress was being made on ambitious infrastructure projects in the Southeast and South-south. Geometric's April 2009 Commissioning Unlikely -------------- ¶3. (SBU) I.M. Ukut, Geometric's Technical Adviser, believes the power plant will be operational April 2009. (Note: Geometric is an independent power project (IPP) which will service industries in Aba, the industrial heart of Abia State, and not connect to the national grid. End Note) Of the four power substations Geometric is to build, construction has only begun on the one substation on the plant site. Three GE turbines are already on site. Ikut said Geometric had acquired more land for the expansion phase, estimated to begin in 2011, which will bring Geometric's total power generation up to 300 megawatts (MWs) and supply power to Abia's northern region and possibly to Port Harcourt in Rivers State. Ndukwe Adindu, Commissioner for Finance, Abia State, said Geometric will provide the much needed power for Aba's manufacturing industries and some public facilities. (Comment: Given the construction progress observed on the ground, it is unlikely that Geometric will be operational by April 2009. End Comment) Akwa Ibom's Road, Airport, IPP Goals Ambitious -------------- - ¶4. (SBU) Bassey Akpan, Commissioner for Finance, Akwa Ibom (AI), said the Akwa Ibom State Government (AISG) is constructing and rehabilitating 600 kilometer (km) of road. (Ref A) AISG plans to construct 20 km of road in every local government area, and promises to have each road connect at least three communities. AISG, like the Abia State Government, is also taking on the rehabilitation of federal roads. (Note: EconOff observed that, in the two month period since her visit to AI, road expansion and construction activities had increased significantly. End Note) ¶5. (U) According to Akpan, the 165 MW Ibom Power Project is at 95 percent completion and will conduct a test run in December 2008. The AISG and the Power Holding Company of Nigeria (PHCN) had agreed to the state "retaining" 65 MWs of the 165 MWs the plant will generate for the national grid. (Note: Akpan told Pol-Econ Chief in a subsequent conversation that a clause in the license given by the Federal Government (FG) provides for distribution of 65 MWs within the state. Akpan noted, however, that even that allocation cannot guarantee a steady supply of power to the state. Akpan said that the Nigerian Gas Company's (NGC) gas line from Port Harcourt experiences frequent disruption, resulting NGC says, from an insufficient supply of gas. End Note) ¶6. (SBU) The USD 300 million Ibom International Airport will be commissioned in March 2009, Akpan projected. (Note: U.S. Dyncorp was LAGOS 00000489 002 OF 003 the original contractor for this project. End Note (Ref C)) However, Marco Fenini, Project Coordinator, Akwa Ibom International Airport Company (AIIA),said the airport will be operational in September 2009 barring any delays. The airport hangar will be able to accommodate two Boeing 747s, and the runways will span 3.2 km. A road linking the airport directly to Uyo, the state's capital, is under construction. Fenini believes that the AISG will be able to recover its investment through the airport's international air cargo operation. He also said that because 80 percent of air traffic at the Calabar Airport, the nearest airport to AI, comes from AI, passenger traffic will also buoy the new airport's businesses. The AISG had signed four Memoranda of Understanding (MOUs) with the local communities to assure that airport employees are hired locally. Currently, there is a 20 to 1 ratio of local to expatriate staff. Tinapa Opens for Businesses -------------- ¶7. (U) Francis Ekom, Assistant General Manager, Tinapa Business Resort Ltd., said the resort had finally obtained approval from the FG in early November, and that some shops have already opened for business. (Ref B) The two-star, 243-room hotel and remaining shops will open in December 2008, and the casino and theater will open in January 2009. Retail giants, including Walmart and South Africa-based Flamingo and Shoprite, are slated to come to Tinapa. (Note: Post has not been able to confirm Walmart's participation. End Note) The resort currently employs 6,000 local employees during the construction phase of the project, and has the potential of hiring up to 12,000 employees once it becomes fully operational. The state initially had planned to go to the capital market to raise additional funds through an initial public offering (IPO),but had shelved this plan given the current global financial crisis. Akwa Ibom-Cross Rivers Collaborate on Tourism -------------- ¶8. (SBU) Akwa Ibom and Cross Rivers state governments are looking to link the five-star Le Meridien Hotel and Golf Resort (Uyo, Akwa Ibom State) with Tinapa (Calabar, Cross Rivers State) through a water ferry system. Akwa Ibom Governor Godswill Akpabio has visited Tinapa twice for this purpose, Ekom said. A successful linkage between Uyo and Calabar, a popular tourist destination, will boost the tourism industry and scale up the commercial and socio-economic dividends, Ekom posited. Oil Price Dive Spurs IGR -------------- ¶9. (SBU) In light of falling oil prices, states are exploring ways to raise their internally generated revenue (IGR) as a way to fund development projects. According to Commissioner Adindu of Abia State, eighty percent of the state's revenue comes from the FG through derivation and allocation, and only 20 percent is internally generated. Expecting a decline in the revenue stream from the FG for 2009, Abia State Government (ASG) plans to raise its IGR to 50 percent of all revenue through taxation. ASG is devising new taxation enforcement schemes for businesses and the informal sector, including mandating business registration and working through trade and labor unions. Adindu believes the IGR will rise and make up fully 40 percent of Abia's revenue by May 2009. Commissioner Akpan of AISG also noted the need to find alternative revenue sources through taxation and by developing the agriculture sector. (Note: He told Pol-Econ Chief that the state has little borrowing, but that a total of 256 people-oriented projects, including free education at all levels, will require substantial revenue. End Note) ¶10. (SBU) Comment: Large-scale infrastructure projects are dotting Nigeria's southeast and south-south regions. While state government officials may be overly optimistic about projected completion dates, EconOff noted significant progress on most fronts, including roads, power projects, airports and tourism facilities since her trip only two months ago. End comment. LAGOS 00000489 003 OF 003 ¶11. (U) This cable has been cleared by Embassy Abuja. Blair