NIGERIA: MARCH 2009 TRADE POLICY UPDATE

UNCLAS SECTION 01 OF 02 ABUJA 000533 SENSITVE SIPDIS DEPT PASS TO USTR-AGAMA DEPT PASS TO USAID/AFR/SD DATWOOD, ELOKEN & USAID/EGAT TQUILTER BAGHDAD FOR DUNDAS MCCULLOUGH TREASURY FOR PETERS, IERONIMO, AND HALL DOC FOR 3317/ITA/OA/KBURRESS AND 3130/USFC/OIO/ANESA/DHARRIS USDA/FAS FOR CMCKINNELL & LSIMMERING E.O. 12958: N/A TAGS: ETRD ECON EINV PREL PGOV NI SUBJECT: NIGERIA: MARCH 2009 TRADE POLICY UPDATE REF: A. ABUJA 263 ¶B. ABUJA 231 ¶C. ABUJA 88 ¶D. ABUJA 79 ¶E. 08 ABUJA 2486 ¶F. 08 ABUJA 2446 ¶G. 08 ABUJA 2360 ¶H. 08 ABUJA 2340 ¶I. 08 ABUJA 2327 ¶J. 08 ABUJA 2302 ¶K. 08 ABUJA 2223 ¶L. 08 ABUJA 2197 ¶M. 08 ABUJA 1977 ¶N. 08 ABUJA 1925 SENSITIVE BUT UNCLASSIFIED - NOT FOR DISTRO OUTSIDE USG ¶1. (SBU) Summary. Since the unveiling of the 2008 - 2012 Tariff Book there have not been major improvements in Nigeria's trade policy (reftel M). Nigerian government (GON) officials tell us they are working with the Economic Community of West African States (ECOWAS) to harmonize tariffs with its West African neighbors under the Common External Tariff (CET). In a response to the global economic crisis and to ease challenges faced by local manufacturers, the GON announced the removal of excise duties on several products in February 2009, which it had put in place in the 2008 - 2012 Tariff Book. The reversal was to reduce the costs of production, and enhance the competitiveness of local producers. The Minister of Commerce and Industry Chief Achike Udenwa has made several public statements regarding improving local manufacturing capacity and enhancing the performance of non-oil exports. However, trade policy remains the main responsibility of the Minister of Finance because the GON views trade as a source of revenue by imposing tariffs and not a tool for development. Ambassador met with both the new Ministers of Commerce and Industry as well as Finance in February 2009 to push harder for better trade reforms (reftels A & B). End Summary. ¶2. (U) Current Nigerian trade policy is encapsulated in the 2008 - 2012 Tariff Book, which is Nigeria's second attempt at harmonizing its tariff regime with the ECOWAS CET (reftel N). The tariff book came into effect in October 2008, and reduced the number of banned imports from 44 to 26 items and placed all imports within five tariff bands of zero duty (for necessities such as medicine, books, and fertilizer); 5% duty (for basic raw materials); 10% duty (for intermediate goods); 20% duty (for finished goods); and 35% duty (for luxury items and finished goods in infant industries the GON wants to protect). . Change in Trade Policy? -------------- . ¶3. (U) The Tariff Book introduced excise duties on various products such as perfumes, cosmetics, non-alcoholic beverages, fruit juice, soap and detergent, beer, wines, spaghetti, noodles, alcoholic beverages, spirits, cigarettes, tobacco, telephone recharge card and vouchers, corrugated paper, toilet paper, and cleansing tissues. (Note: An excise duty is a tax charged on goods produced within a country. The tax is levied on the producer of the goods. End Note). ¶4. (SBU) In February 2009 the GON removed the same excise duties on products due to domestic producer complaints. In a February 9 meeting between the Deputy Chief of Mission and representatives from Proctor and Gamble, the reps complained that the excise duties were needlessly hurting domestic manufacturers and could potentially curtail continued investment in local production. The GON reported that the turnabout in policy and removal was aimed at enhancing the competitiveness of locally produced goods vis-`-vis imported goods. . Minister of Commerce and Industry Speaks -------------- . ¶5. (SBU) Since his appointment as minister in December 2008, Chief Achike Udenwa has stated at different fora that he will focus on reviving the industrial sector and improving Nigeria's non-oil ABUJA 00000533 002 OF 002 export performance. He said he will specifically focus on reviving the textile sector through a proposed 70 billion naira ($454 million) intervention fund to be provided by the GON, and will work on improving the quality of Nigeria's non-oil exports, because of the potential for revenue from other sectors and because of the need to diversify the economy. . Comment -------------- . ¶6. (SBU) If Nigeria expects major gains in domestic production and investment it must address problems in infrastructure - energy and transportation structures and poor electricity supply. For 2008 there were some positive reforms with the drop in import bans from 44 to 26 and continued commitment to the ECOWAS CET. However, more needs to be done. The Minister has said most of the right things, but the key will be implementation. The abrupt reversal in excise duties demonstrates that key Ministries - Finance and Commerce and Industry are not quite in sync on the path forward. Trade policy for Nigeria rests with the Minister of Finance, who views trade as a source of revenue by imposing tariffs and not a tool for development. At the 2009 Trade and Investment Framework Agreement Council Meeting in Washington on March 30, the GON may provide a cohesive and comprehensive road map on additional trade reforms, but we are not hopeful this will happen. End Comment ¶7. (U) This cable was coordinated with ConGen Lagos. SANDERS