Nigeria Department of State Background

U.S. Department of State Background Note

Nigeria

PEOPLE

The most populous country in Africa, Nigeria accounts for over half of West Africa's population. Although less than 25% of Nigerians are urban dwellers, at least 24 cities have populations of more than 100,000. The variety of customs, languages, and traditions among Nigeria's 250 ethnic groups gives the country a rich diversity. The dominant ethnic group in the northern two-thirds of the country is the Hausa-Fulani, most of whom are Muslim. Other major ethnic groups of the north are the Nupe, Tiv, and Kanuri. The Yoruba people are predominant in the southwest.

About half of the Yorubas are Christian and half Muslim. The predominantly Catholic Igbo are the largest ethnic group in the southeast, with the Efik, Ibibio, and Ijaw (the country's fourth-largest ethnic group) comprising a substantial segment of the population in that area. Persons of different language backgrounds most commonly communicate in English, although knowledge of two or more Nigerian languages is widespread. Hausa, Yoruba, Igbo, Fulani, and Ijaw are the most widely used Nigerian languages.

HISTORY

In the northern cities of Kano and Katsina, recorded history dates back to about 1000 AD. In the centuries that followed, these Hausa kingdoms and the Bornu empire near Lake Chad prospered as important terminals of north-south trade between North African Berbers and forest people who exchanged slaves, ivory, and kola nuts for salt, glass beads, coral, cloth, weapons, brass rods, and cowrie shells used as currency.

In the southwest, the Yoruba kingdom of Oyo was founded about 1400, and at its height from the 17th to 19th centuries attained a high level of political organization and extended as far as modern Togo. In the south central part of present-day Nigeria, as early as the 15th and 16th centuries, the kingdom of Benin had developed an efficient army; an elaborate ceremonial court; and artisans whose works in ivory, wood, bronze, and brass are prized throughout the world today. In the 17th through 19th centuries, European traders established coastal ports for the increasing traffic in slaves destined for the Americas. Commodity trade, especially in palm oil and timber, replaced slave trade in the 19th century, particularly under anti-slavery actions by the British Navy. In the early 19th century the Fulani leader, Usman dan Fodio, promulgated Islam and that brought most areas in the north under the loose control of an empire centered in Sokoto.

A British Sphere of Influence
Following the Napoleonic wars, the British expanded trade with the Nigerian interior. In 1885, British claims to a sphere of influence in that area received international recognition and, in the following year, the Royal Niger Company was chartered. In 1900, the company's territory came under the control of the British Government, which moved to consolidate its hold over the area of modern Nigeria. In 1914, the area was formally united as the "Colony and Protectorate of Nigeria."

Administratively, Nigeria remained divided into the northern and southern provinces and Lagos colony. Western education and the development of a modern economy proceeded more rapidly in the south than in the north, with consequences felt in Nigeria's political life ever since. Following World War II, in response to the growth of Nigerian nationalism and demands for independence, successive constitutions legislated by the British Government moved Nigeria toward self-government on a representative, increasingly federal, basis.

Independence
Nigeria was granted full independence in October 1960, as a federation of three regions (northern, western, and eastern) under a constitution that provided for a parliamentary form of government. Under the constitution, each of the three regions retained a substantial measure of self-government. The federal government was given exclusive powers in defense and security, foreign relations, and commercial and fiscal policies. In October 1963, Nigeria altered its relationship with the United Kingdom by proclaiming itself a federal republic and promulgating a new constitution. A fourth region (the midwest) was established that year. From the outset, Nigeria's ethnic, regional, and religious tensions were magnified by the significant disparities in economic and educational development between the south and the north.

On January 15, 1966, a small group of army officers, mostly southeastern Igbos, overthrew the government and assassinated the federal prime minister and the premiers of the northern and western regions. The federal military government that assumed power was unable to quiet ethnic tensions or produce a constitution acceptable to all sections of the country. Its efforts to abolish the federal structure greatly raised tensions and led to another coup in July. The coup-related massacre of thousands of Igbo in the north prompted hundreds of thousands of them to return to the southeast, where increasingly strong Igbo secessionist sentiment emerged.

In a move that gave greater autonomy to minority ethnic groups, the military divided the four regions into 12 states. The Igbo rejected attempts at constitutional revisions and insisted on full autonomy for the east. Finally, in May 1967, Lt. Col. Emeka Ojukwu, the military governor of the eastern region, who emerged as the leader of increasing Igbo secessionist sentiment, declared the independence of the eastern region as the "Republic of Biafra." The ensuing civil war was bitter and bloody, ending in the defeat of Biafra in 1970.

Following the civil war, reconciliation was rapid and effective, and the country turned to the task of economic development. Foreign exchange earnings and government revenues increased spectacularly with the oil price rises of 1973-74. On July 29, 1975, Gen. Murtala Muhammed and a group of fellow officers staged a bloodless coup, accusing Gen. Yakubu Gowon's military government of delaying the promised return to civilian rule and becoming corrupt and ineffective. General Muhammed replaced thousands of civil servants and announced a timetable for the resumption of civilian rule by October 1, 1979. Muhammed also announced the government's intention to create new states and to construct a new federal capital in the center of the country.

General Muhammed was assassinated on February 13, 1976, in an abortive coup. His chief of staff, Lt. Gen. Olusegun Obasanjo, became head of state. Obasanjo adhered meticulously to the schedule for return to civilian rule, moving to modernize and streamline the armed forces and seeking to use oil revenues to diversify and develop the country's economy. Seven new states were created in 1976, bringing the total to 19. The process of creating additional states continued until, in 1996, there were 36.

The Second Republic
A constituent assembly was elected in 1977 to draft a new constitution, which was published on September 21, 1978, when the ban on political activity, in effect since the advent of military rule, was lifted. Political parties were formed, and candidates were nominated for president and vice president, the two houses of the National Assembly, governorships, and state houses of assembly. In 1979, five political parties competed in a series of elections in which a northerner, Alhaji Shehu Shagari of the National Party of Nigeria (NPN), was elected president. All five parties won representation in the National Assembly.

In August 1983, Shagari and the NPN were returned to power in a landslide victory, with a majority of seats in the National Assembly and control of 12 state governments. But the elections were marred by violence, and allegations of widespread vote rigging and electoral malfeasance led to legal battles over the results.

On December 31, 1983, the military overthrew the Second Republic. Maj. Gen. Muhammadu Buhari emerged as the leader of the Supreme Military Council (SMC), the country's new ruling body. He charged the civilian government with economic mismanagement, widespread corruption, election fraud, and a general lack of concern for the problems of Nigerians. He also pledged to restore prosperity to Nigeria and to return the government to civilian rule but was stymied in his attempt to deal with Nigeria's severe economic problems. The Buhari government was peacefully overthrown by the SMC's third-ranking member, Army Chief of Staff Maj. Gen. Ibrahim Babangida, in August 1985.

Babangida moved to restore freedom of the press and to release political detainees being held without charge. As part of a 15-month economic emergency, he announced stringent pay cuts for the military, police, and civil servants and enacted similar cuts for the private sector. Imports of rice, maize, and wheat were banned. Babangida led a national debate on proposed economic reform and recovery measures, which convinced him of intense opposition to an economic recovery package dependent on an International Monetary Fund (IMF) loan.

The Abortive Third Republic
President Babangida promised to return the country to civilian rule by 1990; this date was later extended until January 1993. In early 1989, a constituent assembly completed work on a constitution for the Third Republic. In the spring of 1989, political activity was again permitted. In October 1989 the government established two "grassroots" parties: the National Republican Convention (NRC), which was to be "a little to the right," and the Social Democratic (SDP), "a little to the left." Other parties were not allowed to register by the Babangida government.

In April 1990, mid-level officers attempted to overthrow the Babangida government. The coup failed, and 69 accused coup plotters were later executed after secret trials before military tribunals. The transition resumed after the failed coup. In December 1990 the first stage of partisan elections was held at the local government level. While turnout was low, there was no violence, and both parties demonstrated strength in all regions of the country, with the SDP winning control of a majority of local government councils.

In December 1991, gubernatorial and state legislative elections were held throughout the country. Babangida decreed in December 1991 that previously banned politicians would be allowed to contest in primaries scheduled for August 1992. These were canceled due to fraud, and subsequent primaries scheduled for September also were canceled. All announced candidates were disqualified from again standing for president once a new election format was selected. The presidential election was finally held on June 12, 1993, with the inauguration of the new president scheduled to take place August 27, 1993, the eighth anniversary of President Babangida's coming to power.

In historic June 12, 1993 presidential elections that most observers deemed to be Nigeria's fairest, early returns indicated that wealthy Yoruba businessman M.K.O. Abiola had won a decisive victory. However, on June 23, Babangida, using several pending lawsuits as a pretense, annulled the election, throwing Nigeria into turmoil. More than 100 persons were killed in riots before Babangida agreed to hand power to an "interim government" on August 27. Babangida then attempted to renege on his decision. Without popular and military support, he was forced to hand over to Ernest Shonekan, a prominent nonpartisan businessman. Shonekan was to rule until new elections, slated for February 1994. Although he had led Babangida's Transitional Council since early 1993, Shonekan was unable to reverse Nigeria's ever-growing economic problems or to defuse lingering political tension.

With the country sliding into chaos, Defense Minister Sani Abacha quickly assumed power and forced Shonekan's "resignation" on November 17, 1993. Abacha dissolved all democratic political institutions and replaced elected governors with military officers. Abacha promised to return the government to civilian rule but refused to announce a timetable until his October 1, 1995 Independence Day address. Following the annulment of the June 12 election, the United States and other nations imposed various sanctions on Nigeria, including restrictions on travel by government officials and their families and suspension of arms sales and military assistance. Additional sanctions were imposed as a result of Nigeria's failure to gain full certification for its counter-narcotics efforts.

Although Abacha's takeover was initially welcomed by many Nigerians, disenchantment grew rapidly. A number of opposition figures united to form a new organization, the National Democratic Coalition (NADECO), which campaigned for an immediate return to civilian rule. Most Nigerians boycotted the elections held from May 23-28, 1994, for delegates to the government-sponsored Constitutional Conference. On June 11, 1994, using the groundwork laid by NADECO, Abiola declared himself president and went into hiding. He reemerged and was promptly arrested on June 23. With Abiola in prison and tempers rising, Abacha convened the Constitutional Conference June 27, but it almost immediately went into recess and did not reconvene until July 11, 1994.

On July 4, a petroleum workers union called a strike demanding that Abacha release Abiola and hand over power to him. Other unions then joined the strike, which brought economic life in around Lagos area and in much of the southwest to a standstill. After calling off a threatened general strike in July, the Nigeria Labor Congress (NLC) reconsidered a general strike in August, after the government imposed "conditions" on Abiola's release. On August 17, 1994, the government dismissed the leadership of the NLC. Although striking unions returned to work, the government arrested opponents, closed media houses, and moved strongly to curb dissent.

The government alleged in early 1995 that some 40 military officers and civilians were engaged in a coup plot, including former head of state Obasanjo and his deputy, retired Gen. Shehu Musa Yar'Adua. After a secret tribunal, most of the accused were convicted, and several death sentences were handed down. The tribunal also charged, convicted, and sentenced prominent human rights activists, journalists, and others--including relatives of the coup suspects--for their alleged "anti-regime" activities. In October, the government announced that the Provisional Ruling Council (PRC--see below: Abubakar's Transition to Civilian Rule) and Abacha had approved final sentences for those convicted of participation in the coup plot.

In an October 1, 1995 address to the nation, Gen. Sani Abacha announced the timetable for a 3-year transition to civilian rule. Only five of the political parties which applied for registration were approved by the regime. In local elections held in December 1997, turnout was under 10%. By the April 1998 state assembly and gubernatorial elections, all five of the approved parties had nominated Abacha as their presidential candidate in controversial party conventions. Public reaction to this development in the transition program was apathy and a near-complete boycott of the elections. On December 21, 1997, the government announced the arrest of the country's second highest-ranking military officer, Chief of General Staff Lt. Gen. Oladipo Diya, 10 other officers, and eight civilians on charges of coup plotting.

Abacha, widely expected to succeed himself as a civilian president on October 1, 1998, remained head of state until his death on June 8 of that year. He was replaced by General Abdulsalami Abubakar. The PRC, under Abubakar, commuted the sentences of those accused in the alleged 1997 coup in July 1998. In March 1999, Diya and 54 others accused or convicted of participation in coups in 1990, 1995, and 1997 were released. Following the death of former head of state Abacha in June, Nigeria released almost all known civilian political detainees, including the Ogoni 19.

During the Abacha regime, the government continued to enforce its arbitrary authority through the federal security system--the military, the state security service, and the courts. Under Abacha, all branches of the security forces committed serious human rights abuses. After Abubakar's assumption of power and consolidation of support within the PRC, human rights abuses decreased.

Abubakar's Transition to Civilian Rule
During both the Abacha and Abubakar eras, Nigeria's main decision-making organ was the exclusively military Provisional Ruling Council (PRC) which governed by decree. The PRC oversaw the 32-member federal executive council composed of civilians and military officers. Pending the promulgation of the constitution written by the constitutional conference in 1995, the government observed some provisions of the 1979 and 1989 constitutions. Neither Abacha nor Abubakar lifted the decree suspending the 1979 constitution, and the 1989 constitution was not implemented. The judiciary's authority and independence was significantly impaired during the Abacha era by the military regime's arrogation of judicial power and prohibition of court review of its action. The court system continued to be hampered by corruption and lack of resources after Abacha's death. In an attempt to alleviate such problems, Abubakar's government implemented a civil service pay raise and other reforms.

In August 1998, the Abubakar government appointed the Independent National Electoral Commission (INEC) to conduct elections for local government councils, state legislatures and governors, the National Assembly, and president. INEC held a series of four successive elections between December 1998 and February 1999. Former military head of state Olusegun Obasanjo, freed from prison by Abubakar, ran as a civilian candidate and won the presidential election. Irregularities marred the vote, and the defeated candidate, Chief Olu Falae, challenged the electoral results and Obasanjo's victory in court.

The PRC promulgated a new constitution, based largely on the suspended 1979 constitution, before the May 29, 1999 inauguration of the new civilian president. The constitution included provisions for a bicameral legislature, the National Assembly, consisting of a 360-member House of Representatives and a 109-member Senate. The executive branch and the office of president retained strong federal powers. The legislature and judiciary, having suffered years of neglect, are finally rebuilding as institutions and beginning to exercise their constitutional roles in the balance of power.

The Obasanjo Administration
The emergence of a democratic Nigeria in May 1999 ended 16 years of consecutive military rule. Olusegun Obasanjo became the steward of a country suffering economic stagnation and the deterioration of most of its democratic institutions. Obasanjo, a former general, was admired for his stand against the Abacha dictatorship, his record of returning the federal government to civilian rule in 1979, and his claim to represent all Nigerians regardless of religion.

The new President took over a country that faced many problems, including a dysfunctional bureaucracy, collapsed infrastructure, and a military that wanted a reward for returning quietly to the barracks. The President moved quickly and retired hundreds of military officers who held political positions, established a blue-ribbon panel to investigate human rights violations, ordered the release of scores of persons held without charge, and rescinded a number of questionable licenses and contracts let by the previous military regimes. The government also moved to recover millions of dollars in funds secreted in overseas accounts.

Most civil society leaders and most Nigerians saw a marked improvement in human rights and democratic practice under Obasanjo. The press enjoyed greater freedom than under previous governments. As Nigeria works out representational democracy, there have been conflicts between the executive and legislative branches over major appropriations and other proposed legislation. A sign of federalism has been the growing visibility of state governors and the inherent friction between Abuja and the various state capitols over resource allocation.

In the eight years since the end of military rule, Nigeria has witnessed recurrent incidents of ethno-religious, community, and resource-related conflicts. Many of these arose from distorted use of oil revenue wealth, as well as from flaws in the 1999 constitution. In May 1999, violence erupted in Kaduna State over the succession of an Emir, resulting in more than 100 deaths. In November 1999, the army destroyed the town of Odi in Bayelsa State and killed scores of civilians in retaliation for the murder of 12 policemen by a local gang. In Kaduna in February-May 2000 over 1,000 people died in rioting over the introduction of criminal Shar'ia in the state. Hundreds of ethnic Hausa were killed in reprisal attacks in southeastern Nigeria. In September 2001, over 2,000 people were killed in inter-religious rioting in Jos. In October 2001, hundreds were killed and thousands displaced in communal violence that spread across the Middle-Belt states of Benue, Taraba, and Nasarawa. On October 1, 2001, President Obasanjo announced the formation of a National Security Commission to address the issue of communal violence. In 2003, he was re-elected in contentious and highly flawed national elections and state gubernatorial elections, which were litigated over two years. Since 2006, violence, destruction of oil infrastructure, and kidnappings of primarily expatriates in the oil-rich Niger River Delta has intensified as militants demanded a greater share of federal revenue for states in the region, as well as benefits from community development. For many reasons, Nigeria's security services have been unable to respond to the security threat, which is both political and criminal.

In May 2006, the National Assembly soundly defeated an attempt to amend the constitution by supporters of a third presidential term for President Obasanjo. This measure was packaged in a bundle of what were otherwise non-controversial amendments. Nigeria's citizens addressed this issue in a constitutional, democratic, and relatively peaceful process.

Civilian Transition
Nigeria held state legislative and gubernatorial elections on April 14 as well as presidential and national legislative elections on April 21, 2007, in which more than 35 political parties participated. Nigeria missed an opportunity to strengthen an element of its democracy through a sound electoral process. Analysis of the process by most international observers did not conform to what Nigeria's National Electoral Commission (INEC) reported. U.S. and international observers reported overall a seriously flawed process with credible reports of malfeasance and vote rigging in some constituencies. The scope of violence that occurred also was regrettable. There were considerable degrees of difference in the conduct of elections among states, but serious differences were also observed within states during the two polling dates. The main opposition parties, All Nigeria People's Party (ANPP) and the Action Congress (AC), as well as numerous smaller political parties and the ruling People's Democratic Party (PDP) have filed petitions to challenge the results of gubernatorial elections in 34 of Nigeria's 36 states. Challenges to the presidential election have been filed by the ANPP, AC, and others in the Federal Court of Appeals, but the opposition is not unified, and mass protests have not materialized. INEC's principal problems included politicization and lack of independence, lack of transparency in its operations and decision-making, and persistent failure to make adequate logistical arrangements for both voter registration and polling. With INEC's certification of the ruling party's presidential ticket as the winner with over 70% of the vote, Nigeria experienced its first transition of power between civilian administrations when President Obasanjo stepped down on May 29, 2007. Newly-elected President Umaru Yar'adua, a moderate and a respected governor from the northern state of Katsina, pledged publicly to make electoral reform, peace and security in the Niger Delta, and continued electoral reform his top priorities.

Principal Government Officials
President--Umaru Yar'adua
Vice President--Goodluck Jonathan

Nigeria maintains an embassy in the United States at 3519 International Place, NW, Washington, DC 20008, (phone. 202-986-8400, fax-202-362-6552) and a consulate general in New York at 575 Lexington Ave., New York, NY 10022, (phone. 212-715-7200).

ECONOMY

Nigeria is the largest U.S. trading partner in sub-Saharan Africa, based mainly on the high level of petroleum imports from Nigeria. Total two-way trade was valued at $30.8 billion in 2006, a 19% increase over 2005. Leading U.S exports to Nigeria were machinery, wheat, and motor vehicles. Leading U.S. imports from Nigeria were oil and rubber products. Nigerian exports to the United State under the African Growth and Opportunity Act (AGOA), including its Generalized System of Preferences (GSP) provisions, were valued at $25.8 billion during 2006, a 15% increase over 2005, due to an increase in oil exports. Non-oil AGOA trade (leather products, species, cassava, yams, beans, and wood products) totaled $1.4 million in 2006, almost double the amount in 2005. The United States was the largest foreign investor in Nigeria.

In June 2006, the United States met with Nigeria under the existing Trade and Investment Framework Agreement (TIFA) to cooperate on investment issues and to develop a strategy for Nigeria to diversify its export base, especially in manufactured goods. Under the TIFA, the United States and Nigeria pledged to work together on critical issues such as World Trade Organization (WTO) Doha Development, intellectual property rights, and trade capacity building.

The U.S. goods trade deficit with Nigeria was $25.7 billion in 2006, an increase of $3 billion from $22.6 billion in 2005. U.S. goods exports to Nigeria in 2006 were $2.2 billion, up 38% from the previous year. U.S. imports from Nigeria were $27.9 billion in 2006, up from 15% from 2005. Nigeria is currently the 50th-largest export market for U.S. goods.

The stock of U.S. foreign direct investment (FDI) in Nigeria in 2005 was $874 million, down from $2.0 billion in 2004. U.S. FDI in Nigeria is concentrated largely in the mining and wholesale trade sectors.

Dominated by Oil
The oil boom of the 1970s led Nigeria to neglect its strong agricultural and light manufacturing bases in favor of an unhealthy dependence on crude oil. In 2002 oil and gas exports accounted for more than 98% of export earnings and about 83% of federal government revenue. New oil wealth, the concurrent decline of other economic sectors, and a lurch toward a statist economic model fueled massive migration to the cities and led to increasingly widespread poverty, especially in rural areas. A collapse of basic infrastructure and social services since the early 1980s accompanied this trend. By 2002 Nigeria's per capita income had plunged to about one-quarter of its mid-1970s high, below the level at independence. Along with the endemic malaise of Nigeria's non-oil sectors, the economy continues to witness massive growth of "informal sector" economic activities, estimated by some to be as high as 75% of the total economy.

Nigeria's proven oil reserves are estimated to be 36 billion barrels; natural gas reserves are well over 100 trillion cubic feet. Nigeria is a member of the Organization of Petroleum Exporting Countries (OPEC), and in 2006 its crude oil production averaged around two million barrels per day. Poor corporate relations with indigenous communities, vandalism of oil infrastructure, severe ecological damage, and personal security problems throughout the Niger Delta oil-producing region continue to plague Nigeria's oil sector. Efforts are underway to reverse these troubles. In the absence of coherent government programs, the major multinational oil companies have launched their own community development programs. The Niger Delta Development Commission (NDDC) was created to help catalyze economic and social development in the region, but it is widely perceived to be ineffective and opaque. The United States remains Nigeria's largest customer for crude oil, accounting for 40% of the country's total oil exports. Nigeria provides about 11% of overall U.S. oil imports and ranks as the fifth-largest source for U.S. imported oil.

The United States is Nigeria's largest trading partner after the United Kingdom. Although the trade balance overwhelmingly favors Nigeria, thanks to oil exports, a large portion of U.S. exports to Nigeria is believed to enter the country outside of the Nigerian Government's official statistics, due to importers seeking to avoid Nigeria's excessive tariffs. To counter smuggling and under-invoicing by importers, in May 2001 the Nigerian Government instituted a 100% inspection regime for all imports, and enforcement has been sustained. On the whole, Nigerian high tariffs and non-tariff barriers are gradually being reduced, but much progress remains to be made. The government also has been encouraging the expansion of foreign investment, although the country's investment climate remains daunting to all but the most determined. The stock of U.S. investment is nearly $7 billion, mostly in the energy sector. Exxon-Mobil and Chevron are the two largest U.S. corporate players in offshore oil and gas production. Significant exports of liquefied natural gas started in late 1999 and are slated to expand as Nigeria seeks to eliminate gas flaring by 2008.

Agriculture has suffered from years of mismanagement, inconsistent and poorly conceived government policies, and the lack of basic infrastructure. Still, the sector accounts for over 41% of GDP and two-thirds of employment. Agriculture provides a big chunk of non-oil growth, which in 2006 reached 9%. Nigeria is no longer a major exporter of cocoa, groundnuts (peanuts), rubber, or palm oil. Cocoa production, mostly from obsolete varieties and overage trees, is stagnant at around 180,000 tons annually; 25 years ago it was 300,000 tons. An even more dramatic decline in groundnut and palm oil production also has taken place. Once the biggest poultry producer in Africa, corporate poultry output has been slashed from 40 million birds annually to about 18 million. Import constraints limit the availability of many agricultural and food processing inputs for poultry and other sectors. Fisheries are poorly managed. Most critical for the country's future, Nigeria's land tenure system does not encourage long-term investment in technology or modern production methods and does not inspire the availability of rural credit.

Oil dependency, and the allure it generated of great wealth through government contracts, spawned other economic distortions. The country's high propensity to import means roughly 80% of government expenditures is recycled into foreign exchange. Cheap consumer imports, resulting from a chronically overvalued Naira, coupled with excessively high domestic production costs due in part to erratic electricity and fuel supply, have pushed down industrial capacity utilization to less than 30%. Many more Nigerian factories would have closed except for relatively low labor costs (10%-15%). Domestic manufacturers, especially pharmaceuticals and textiles, have lost their ability to compete in traditional regional markets; however, there are signs that some manufacturers have begun to address their competitiveness.

Arguably the government's biggest macroeconomic achievement has been the sharp reduction in its external debt, which declined from 36% of GDP in 2004 to less than 4% of GDP in 2007. In October 2005, the International Monetary Fund (IMF) approved its first ever Policy Support Instrument for Nigeria. On December 17, the United States and seven other Paris Club nations signed debt reduction agreements with Nigeria for $18 billion in debt reduction, with the proviso that Nigeria pay back its remaining $12 billion in debt by March 2006. The United States was one of the smaller creditors, and received about $356 million from Nigeria in return for over $600 million of debt reduction. Merrill Lynch has won the right to take on $509 million of Nigeria's promissory debt (accrued since 1984) to the "London Club" of private creditors. This arrangement saves Nigeria about $34 million over a simple prepayment of the notes. Nigeria owes some bilateral loans and multilateral institutions over $101 million in oil warrant instrumental debts, which soon might be redeemed via a cash tender offer. Consequently, Nigeria faces intense pressure to accept multibillion dollar loans for railroads, power plants, roads, and other infrastructure.

In the light of highly expansionary public sector fiscal policies during 2001, the government has sought ways to head off higher inflation, leading to the implementation of stronger monetary policies by the Central Bank of Nigeria (CBN) and underspending of budgeted amounts. As a result of the CBN's efforts, the official exchange rate for the Naira has stabilized at about 127 Naira to the dollar. The combination of CBN's efforts to prop up the value of the Naira and excess liquidity resulting from government spending led the currency to be discounted by around 20% on the parallel (nonofficial) market. A key achievement of the Policy Support Instrument has been closure of the gap between the official and parallel market exchange rates. The Inter-Bank Foreign Exchange Market (IFEM) is closely tied to the official rate. Under IFEM, banks, oil companies, and the CBN can buy or sell their foreign exchange at government influenced rates. Much of the informal economy, however, can only access foreign exchange through the parallel market. Companies can hold domiciliary accounts in private banks, and account holders have unfettered use of the funds.

Expanded government spending also has led to upward pressure on consumer prices. Inflation, which had fallen to 0% in April 2000, reached 14% by the end of 2003. Inflation was estimated at 8% in early 2007. High world oil prices have resulted in the government now holding $45 billion in foreign exchange reserves. State and local governmental bodies demand access to this "windfall" revenue, creating a tug-of-war between the federal government--which seeks to control spending--and state governments desirous of augmented budgets, preventing the government from making provision for periods of lower oil prices.

One of Nigeria's greatest success stories has been the completion in early 2006 of a major overhaul of its banking system, although some have criticized the pace of consolidation and aggressive CBN supervision. Reforms have reduced the number of banks from 89 to 25, increased a bank's minimal capital requirement to $190 million, and required banks to hold 40% of their deposits in liquid assets. Retail, corporate, and Internet banking are seen as intensively competitive, and the home loan market is considered moderately competitive. Less than 10% of lending is believed to be made to individuals. About 65% of the economically active population is serviced by the informal financial sector, e.g., microfinance institutions, moneylenders, friends, relatives, and credit unions. Since 1999, the Nigerian Stock Exchange has enjoyed strong performance, although equity as a means to foster corporate growth remains underutilized by Nigeria's private sector. Rural communities remain largely unbanked, the real estate sector and small businesses receive a low level of lending, and the credit card market remains at an early stage of development.

Nigeria's publicly owned transportation infrastructure is a major constraint to economic development. Principal ports are at Lagos (Apapa and Tin Can Island), Port Harcourt, and Calabar. Docking fees for freighters are among the highest in the world. Of the 80,500 kilometers (50,000 mi.) of roads, more than 15,000 kilometers (10,000 mi.) are officially paved, but many remain in poor shape. Extensive road repairs and new construction activities are gradually being implemented as state governments, in particular, spend their portions of enhanced government revenue allocations. The government implementation of 100% destination inspection of all goods entering Nigeria has resulted in long delays in clearing goods for importers and created new sources of corruption, since the ports lack adequate facilities to carry out the inspection. Four of Nigeria's airports--Lagos, Kano, Port Harcourt and Abuja--currently receive international flights. There are several domestic private Nigerian carriers, and air service among Nigeria's cities is generally dependable. The maintenance culture of Nigeria's domestic airlines is not up to international standards.

Gradual Reform
Nigeria made progress toward establishing a market-based economy in 2006. It privatized Nigeria Telecommunications and its mobile subsidiary as well as the only government-owned petrochemical company. The government also sold its interest in eight oil service companies. Nigeria continued implementation of the Economic Community of West African States (ECOWAS) Common External Tariff. Nigeria's implementation of non-tariff barriers has been arbitrary and uneven and continues to violate WTO prohibitions against trade bans. However, the government removed some textile items from its list of prohibited imports in 2006. Enforcement of criminal penalties against intellectual property rights (IPR) violations is weak, and firms that are successfully countering IPR piracy have generally done so through civil court cases. The government has recently created an intellectual property commission.

A co-member of the International Advisory Group of the Extractive Industries Transparency Initiative (EITI) initiated by the G8, Nigeria's federal government is playing an important role in having volunteered to pilot the new disclosure and validation methodologies. It has completed a comprehensive audit of oil sector payments and government revenues from 1999-2004. However, it is perceived that government contracting remains rife with corruption and kickbacks, and that many state and local officials continue to steal public monies outright.

Nigeria's economic team has enjoyed an excellent reputation in the international community. The team produced an encouraging body of work, notably budgets described as "prudent and responsible" by the IMF and a detailed economic reform blueprint, the National Economic Empowerment and Development Strategy (NEEDS). Other positive developments have included: (1) government efforts to deregulate fuel prices; (2) Nigeria's participation in the EITI and commitment to the G8 Anticorruption/Transparency Initiative; (3) creation of an effective Economic and Financial Crimes Commission (EFCC), which has earned 150 convictions and recovered over $5 billion in mishandled funds; and (4) development of several governmental offices to better monitor official revenues and expenditures.

Nigeria is not on track to meet its Millennium Development Goals because of a lack of policy coordination between the federal, state, and local governments, a lack of funding commitments at the state and local levels; and a lack of available staff to implement and monitor projects on health, poverty, and education.

Investment
Although Nigeria must grapple with its decaying infrastructure and a poor regulatory environment, the country possesses many positive attributes for carefully targeted investment and will expand as both a regional and international market player. Profitable niche markets outside the energy sector, such as specialized telecommunication providers, have developed under the government's reform program. There is a growing Nigerian consensus that foreign investment is essential to realizing Nigeria's vast potential. Companies interested in long-term investment and joint ventures, especially those that use locally available raw materials, will find opportunities in the large national market. However, to improve prospects for success, potential investors must educate themselves extensively on local conditions and business practices, establish a local presence, and choose their partners carefully. The Nigerian Government is keenly aware that sustaining democratic principles, enhancing security for life and property, and rebuilding and maintaining infrastructure are necessary for the country to attract foreign investment.

DEFENSE

Since independence, Nigerian foreign policy has been characterized by a focus on Africa and by attachment to several fundamental principles: African unity and independence; peaceful settlement of disputes; nonalignment and nonintentional interference in the internal affairs of other nations; and regional economic cooperation and development. In pursuing the goal of regional economic cooperation and development, Nigeria helped create the Economic Community of West African States (ECOWAS), which seeks to harmonize trade and investment practices for its 15 West African member countries and ultimately to achieve a full customs union. Over the past decade, Nigeria has played a pivotal role in the support of peace in Africa. It provided the bulk of troops for the UN peacekeeping mission in Sierra Leone (UNAMSIL), the UN Mission in Liberia (UNMIL), and the African Union Mission in Sudan (AMIS), and is anticipated to do so also in Somalia.

Nigeria has enjoyed generally good relations with its immediate neighbors. A longstanding border dispute with Cameroon over the potentially oil-rich Bakassi Peninsula was addressed by International Court of Justice (ICJ) in The Hague in 2002. The ICJ awarded most of the disputed Bakassi Peninsula and maritime rights to Cameroon, and the UN established a Mixed Commission on implementing the ICJ ruling. On June 12, 2006 Nigerian President Obasanjo and Cameroonian President Biya signed an agreement in New York on implementing the ICJ decision. Nigeria promptly withdrew its troops within 60 days.

Nigeria is a member of the following international organizations: UN and many of its special and related agencies; World Trade Organization (WTO); International Monetary Fund (IMF); World Bank/IBRD; African Development Bank (AfDB); INTERPOL; Organization of Petroleum Exporting Countries (OPEC); Economic Community of West African States (ECOWAS); African Union (AU); Maritime Organization of West and Central Africa (MOWCA) and several other West African bodies; Commonwealth; Nonaligned Movement (NAM); and Organization of the Islamic Conference (OIC), among others.

U.S.-NIGERIAN RELATIONS

"Investing in People" is the top U.S. foreign assistance priority in Nigeria. The U.S. ability to help Nigeria combat public health shortcomings contributes directly to good governance, societal stability, economic growth, and confidence in U.S. concern for the well-being of the Nigerian people. The challenges are considerable. Nigeria has the world's second-lowest rate of immunization coverage, is the global center of transmission of wild polio virus, and has the world's second-highest maternal mortality rate. Malaria causes the preventable deaths of 300,000 children and 7,000 women each year, and Nigeria has the fourth-highest tuberculosis (TB) burden in the world, with 100,000 deaths each year. Nigeria's low contraceptive prevalence rate of 8.9% and high fertility rate of 5.7 children per woman drives an annual population growth rate of 3.2%, which imposes an unsustainable burden on health care delivery services that are already taxed to the limit. U.S. Government maternal and child health efforts will focus on immunization, polio eradication, birth preparedness, and maternity services.

U.S. efforts to eradicate malaria will focus on the sale of insecticide-treated nets and treatments kits, and provide therapies and intermittent preventive treatment of pregnant women. To reduce death and disability as a result of TB, especially in the vulnerable co-infected HIV/AIDS population, U.S. assistance will strengthen the Nigerian health system, and referral systems between diagnosis and treatment programs for TB and AIDS. Furthermore, the U.S. Government focuses resources on expanding access to quality family planning services and reproductive health care and strives to increase the contraceptive prevalence rate to 14%.

One-third (10 million) of Nigerian children are enrolled in primary school. Only 45% of primary-school aged children have functional numeric skills, and only 28% are literate. The United States hopes to bolster basic education, including at Islamiyya schools, which provide both religious instruction and a secular curriculum, through teacher training and community involvement, and ensure equitable access to quality basic education.

Governing Justly and Democratically: The United States is helping Nigeria make exceptional efforts to develop inclusive, transparent, and effective institutions of democratic governance. U.S. assistance helps rebuild basic mechanisms of democratic governance to make elected officials accountable to constituents through free and fair elections, strong government institutions, and well-organized, informed citizens who demand performance. The U.S. advances rule of law in Nigeria by strengthening the capacity and transparency of law enforcement agencies and judiciary. The United States supports democratic local government and decentralization and improves fiscal administration by maximizing revenue collection in credible audits. It strengthens civil society by promoting existing watchdog groups that have lobbied successfully for more transparency, accountability, and pluralism in Nigeria's fiscal, electoral, conflict management, political, and human rights affairs.

Peace and Security: The United States has supported the peacekeeping and simulation centers at the Armed Forces Staff College--the only one in Africa and a major regional asset--and has continued to provide equipment and training for Nigerian peacekeeping forces while promoting effective civilian oversight of the military and its adherence to human rights norms. The U.S. is building the capacity of the Economic Community of West African States (ECOWAS) to prevent and respond to regional instability and promote the integration of ECOWAS security mechanisms into a broad Africa framework. It is also funding military-sponsored schools, clinics and basic community services to demonstrate U.S. commitment to help build the nation's infrastructure. Beyond fostering maritime cooperation with security services in the Niger Delta, the United States supports the European Union's leading role in helping Nigeria fight corruption, organized criminal elements, document fraud, drug traffickers, and terrorists. The U.S. will focus on training, developmental and technical aid, and law enforcement cooperation in border control and against arms smuggling and oil theft. Expanded community policing programs will improve Nigeria's human rights record and restore public faith and cooperation with the security services. The U.S. will continue to offer legal reform, training, and technical help to Nigeria's counter-terrorism finance regime.

Economic Growth: The United States is working with the Central Bank of Nigeria, Finance Ministry, National Planning Commission, and others to improve the environment for investment in agriculture through policy reform at the national and state level. Micro-investment is hindered by lack of access to market-driven financial services and lack in policy that provides for liberalization of credit institutions and encourages savings plans with transparency in both the private and public sectors. Federal and state policy strengthening are essential as business decisions and banking regulation take place at both levels. U.S. programs help develop a policy climate in which micro, small and medium enterprises have access to credit, encourage investment, stimulate job growth, and build capacity in both the public and private sectors. Trade initiatives include capacity building in customs regulation and operations, policy reform to encourage internal and external trade, taking advantage of AGOA incentives for bilateral trade, and development of the private sector capacity to meet international trade and export standards.

Ongoing presidential initiatives with Nigeria include the African Growth and Competitiveness Initiative, fighting avian flu, the Initiative to End Hunger in Africa, and the Trans-Sahel Counter-Terrorism Program. Nigeria's eligibility for other regional activities include the Famine Early Warning System, Anti-Corruption Initiative; trafficking in persons; and the Ambassador's Girls Scholarship Fund. Nigeria is a premier participant in the President's Emergency Plan for AIDS Relief (PEPFAR), for which $270 million was committed in FY 2007.

Principal U.S. Officials
Ambassador-designate--Robin Renee Sanders
Deputy Chief of Mission--Lisa Piascik
Political Affairs--Terry Pflaumer
Economic Affairs--Robert Tansey
Commercial Affairs--Larry Farris (Lagos)
Agricultural Affairs--Ali Abdi (Lagos)
Consul General--Vicky Hutchinson, Acting (Lagos)
Defense Attaché--Col. Peter Aubrey
Public Affairs--Atim George

U.S. Embassy website: http://abuja.usembassy.gov/

TRAVEL AND BUSINESS INFORMATION
The U.S. Department of State's Consular Information Program advises Americans traveling and residing abroad through Consular Information Sheets, Public Announcements, and Travel Warnings. Consular Information Sheets exist for all countries and include information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Public Announcements are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.

For the latest security information, Americans living and traveling abroad should regularly monitor the Department's Bureau of Consular Affairs Internet web site at http://www.travel.state.gov, where the current Worldwide Caution, Public Announcements, and Travel Warnings can be found. Consular Affairs Publications, which contain information on obtaining passports and planning a safe trip abroad, are also available at http://www.travel.state.gov. For additional information on international travel, see http://www.usa.gov/Citizen/Topics/Travel/International.shtml.

The Department of State encourages all U.S citizens traveling or residing abroad to register via the State Department's travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions.

Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada.

The National Passport Information Center (NPIC) is the U.S. Department of State's single, centralized public contact center for U.S. passport information. Telephone: 1-877-4USA-PPT (1-877-487-2778). Customer service representatives and operators for TDD/TTY are available Monday-Friday, 7:00 a.m. to 12:00 midnight, Eastern Time, excluding federal holidays.

Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. A booklet entitled "Health Information for International Travel" (HHS publication number CDC-95-8280) is available from the U.S. Government Printing Office, Washington, DC 20402, tel. (202) 512-1800.

Further Electronic Information
Department of State Web Site. Available on the Internet at http://www.state.gov, the Department of State web site provides timely, global access to official U.S. foreign policy information, including Background Notes and daily press briefings along with the directory of key officers of Foreign Service posts and more. The Overseas Security Advisory Council (OSAC) provides security information and regional news that impact U.S. companies working abroad through its website http://www.osac.gov

Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more.

STAT-USA/Internet, a service of the U.S. Department of Commerce, provides authoritative economic, business, and international trade information from the Federal government. The site includes current and historical trade-related releases, international market research, trade opportunities, and country analysis and provides access to the National Trade Data Bank.

Revised: Oct. 2007