WORLD TRADE WT/TPR/M/147

14 June 2005
ORGANIZATION
(05-2491)

Trade Policy Review Body

11 and 13 May 2005

TRADE POLICY REVIEW

NIGERIA

Minutes of Meeting

Chairperson: H.E. Mr. Don Stephenson (Canada)

Page

I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3

II. OPENING STATEMENT BY THE REPRESENTATIVE OF NIGERIA 4
III. STATEMENT BY THE DISCUSSANT 6
IV. STATEMENTS BY MEMBERS 9
V. REPLIES BY THE REPRESENTATIVE OF NIGERIA AND ADDITIONAL
COMMENTS 15
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 17

Note: Advance written questions by WTO Members and the replies provided by Nigeria are
reproduced in document WT/TPR/M/147/Add.1 and will be available online at
http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.
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I. INTRODUCTORY REMARKS BY THE CHAIRPERSON

1. The third Trade Policy Review of Nigeria was held on 11 and 13 May 2005. The Chairperson
(H.E. Mr. Don Stephenson) welcomed the delegation of Nigeria, headed by Mrs. Ogunleye, and the
discussant Dr. Alexander Gross (Germany). As usual, the discussant would speak in his personal
capacity and, in accordance with established procedures, had made available in advance a broad
outline of the themes he intended to raise (document WT/TPR/D/123).

2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures of the meeting. The Report by Nigeria was contained in document WT/TPR/G/147
and that of the Secretariat in document WT/TPR/S/147. Copies of advance written questions,
submitted by: Switzerland; Japan; Canada; the Separate Customs Territory of Taiwan, Penghu,
Kinmen, and Matsu; the European Communities; Hong Kong, China; Brazil; the United States;
and the Republic of Korea had been transmitted to the delegation of Nigeria. These questions and the
replies provided by the delegation of Nigeria are reproduced in WT/TPR/M/147/Add.1.

3. The Chairperson stated that the documentation prepared for this Review highlighted the steps
taken by Nigeria to reform its economy. Nigeria's macroeconomic and structural reforms had
contributed to an annual average economic growth rate of 4.8% since 1999, up from 3.5% during the
previous period; its fiscal deficit had been reduced from 5.6% of GDP in 2001 to 1.2% in 2003.
However, difficulties in managing the surge in foreign assets (as a result of favourable international
oil prices), together with increases in border protection, through tariff and non-tariff measures, had
maintained inflation high. This had made Nigeria's trade regime generally more protectionist,
compared with the period before its last TPR in 1998.

4. Continued structural and trade reforms, and improvement of multilateral commitments on

goods and services would help Nigeria to further exploit its enormous comparative advantages,
further diversify its economy away from oil, and ensure compliance with its multilateral
commitments.
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF NIGERIA

5. The representative of Nigeria thanked the Secretariat, the Chairperson, and the discussant.
This was the third Review of Nigeria since the introduction of the Trade Policy Review Mechanism in
1989, aimed at contributing to improved adherence to the disciplines and commitments of the
multilateral trading system, and smoothing its functioning by achieving transparency in, and
understanding of, the trade policies and practices of the Members. Nigeria shared these objectives,
which were consistent with its commitment to the principles of the multilateral trading system and the
adoption of economic and trade reforms to progressively liberalize its economy. The TPRM also
provided important feedback and appraisal to articulate and chart the future course of its trade policies
and practices, taking into account the collective experience of Members as well as the prevailing
opportunities and challenges.

6. Since 1998, Nigeria's economic development and performance had remained mixed. Nigeria
had been under military dictatorship from 1983 to 1999. The current challenge was how to positively
address the problems and distortions, in all spheres of national life, caused by the military misrule. In
this regard, to establish a stable, transparent, and sustainable economic environment, the Government
had embarked on structural reforms since 1999, including, inter alia: (i) structural reforms to promote
a more diversified, rule-based market economy with more private sector participation, and to reduce
State involvement to that of a facilitator; (ii) social sector policies aimed at poverty reduction and
human resource development; (iii) political reforms aimed at making Nigeria more stable, as well as
resolving political and constitutional issues to achieve national unity, peace, and progress; and (iv)
promoting transparency and accountability, fiscal discipline, and fighting corruption.

7. To demonstrate its serious commitment to these reforms and ensure their coordinated
implementation, the Government had adopted the National Economic Empowerment and
Development Strategy (NEEDS) for the 2003-07 period. The NEEDS was aimed at reforming the
way the State worked; making the private sector the engine of economic growth; implementing a
social charter taking into account education, health, employment, poverty reduction, and security; and
value reorientation. The core economic reforms under the NEEDS included: achieving
macroeconomic stability, including significant debt reduction to create an environment conducive for
growth and development; fighting corruption and improving transparency and accountability,
particularly in the oil subsector and government procurement, by strengthening institutions dealing
with corruption; improving governance and institutions; undertaking public expenditure and civil
service reforms to, inter alia, improve fiscal discipline, speed-up customs clearance, and re-
professionalize the public service; and accelerate privatization and liberalization reforms. The
Government had established anti-corruption institutions and bodies (e.g. the Independent Anti-
Corruption Practices Commission, the Budget Monitoring and Price Intelligence Unit, and the
Economic and Financial Crimes Commission) to pursue these objectives. The National Political
Reforms Conference would soon submit a report on fundamental constitutional issues regarding
nationhood.

8. A privatization and deregulation programme was also being implemented. All existing state
monopolies in energy, communication, transport, solid minerals, services, and tourism had been
abolished; and various state-owned enterprises had been privatized or were at different stages of
privatization. In agriculture, the Government had established irrigation schemes, and adopted
programmes to revive the sector, especially in the production of crops (e.g. cassava, rice, fisheries,
livestock, vegetable oils, and tree crops) to achieve food self-sufficiency, and to reduce rural poverty.
The capital base of commercial banks had also been increased to ensure that agriculture would
contribute more meaningfully to the economic development. While the Government's commitment to
the ongoing reforms remained firm and unwavering, Nigeria would also appreciate assistance and
support from its partners to assure their success and sustainability, through increased inflows of FDI
and debt cancellation.
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9. The representative referred to concerns expressed by Nigeria's trading partners on some of its
trade policy measures to address development challenges, in particular import prohibitions. Nigeria
was working bilaterally with its partners to fully resolve these issues, which were essentially
temporary. Their eventual elimination had commenced: a new finalized tariff structure would be
published shortly; and Nigeria had adopted the UEMOA tariff structure within the framework of the
ECOWAS common external tariff (CET). Nigeria was committed to the objectives and priorities of
the ECOWAS and the New Partnership for Africa's Development (NEPAD) programme.

10. The representative reiterated Nigeria's request for the continued support and understanding of
Members, as these measures had been necessitated by the significant decay in institutions and the rule
of law arising from military rule. The Government's efforts would actualize the 2007 transition
deadline, even though the process had been beset with special difficulties regarding legislative rule-
making due to Nigeria's young democracy. However, the Government expected that the transition
period would allow enough time to enact all the necessary legislation with a view to providing a
transparent, rule-based mechanism to enforce appropriate trade remedies and border measures,
including IPRs.

11. The representative reaffirmed Nigeria's commitment to the WTO principles and objectives,
and assured Members that Nigeria would continue to play a positive and constructive role in the
WTO, including in the ongoing negotiations in which it expected a pro-development result that would
significantly improve the living standards of all. She assured Nigeria's trading partners that their
concerns on some of Nigeria's trade policies (especially the import bans) were being addressed.
Nigeria's ongoing structural reforms in the economic, political, and social fields were real, and would
be sustained to make the economic environment more conducive to business and improve the living
standards of Nigerians. Nigeria counted on the support of the international community to make its
current reforms successful.
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III. STATEMENT BY THE DISCUSSANT

12. The discussant complimented the Secretariat for its report, and Nigeria for its efforts to
implement economic and social reforms, based on the NEEDS. Decisive actions had already
produced positive results: (i) the Government had stabilized the economy and considerably reduced
inflation over the last year; (ii) urgently needed reforms in the civil service, banking sector, and
customs administration had been launched, but would need to be continued; and (iii) the fight against
economic crime and corruption was moving forward, and had already produced encouraging results.
When discussing the more difficult aspects of Nigeria's development, it was important to keep this
good news in mind. The discussant pointed out that the TPR should clearly encourage and support
the Government to continue on this reform path for higher sustainable growth, based on structural
change and poverty reduction.

13. The discussant highlighted two characteristics. Firstly, Nigeria was an extremely rich
country, but had suffered from serious poverty and grave development problems. It was the world's
fifth largest oil exporter, and had large natural gas reserves that it had just begun to exploit. It was
richly endowed with various important minerals and fertile land, and water resources that could be
used for profitable farming and tourism. It had the largest population in Africa, which was an
important source for growth and development. Despite its huge potential, about 70% of its population
lived on less than US$1 a day, income per capita was very low, and its UNDP ranking was
worrisome. The inability to convert natural wealth into prosperity pointed to the paramount need for
internal reforms. Closing the gap between huge potential and actual performance was Nigeria's key
challenge.

14. Secondly, Nigeria was extremely oil-dependent. Oil accounted for over 90% of its exports
and 80% of its revenue, and received the major share of FDI, but it employed only 5% of the
workforce. This showed that living standards and development already relied mainly on increases of
productivity and employment in the non-oil subsector, and they would do so even more when the
income stream from oil resources diminished. This implied that: (i) economic policy had to focus
strongly on fostering development and competitiveness in agriculture, services, and manufacturing;
and (ii) current richness in oil had to be used as efficiently and prudently as possible to lay the
foundation for an overall positive development process. To attain these structural challenges, trade
policy should not be discussed in isolation or with regard to single measures, but had to be part of an
overall reform and development strategy aimed at getting fundamentals right, and setting the signals
for efficiency, productivity, and social balance.

(i) Macroeconomics

15. One prerequisite for sustainable growth and development was macroeconomic stability. In
the past, GDP growth had been driven by world oil prices: high oil prices meant high export income,
high revenues, and, frequently, higher fiscal spending. This connection had been supported by a
monetary policy that had provided the necessary financial leeway for fiscal spending, and had tried to
prevent the rise in the exchange rate. This oil-driven circle of fiscal and monetary policy had resulted
in a destabilizing boost-and-bust cycle for the economy and double-digit inflation rates, which
reduced real income (especially for the poor) and worked against poverty reduction. Breaking this
cycle was essential to regain a reliable foundation for economic activity and poverty reduction.

16. It was commendable that the Government had brought inflation rate down in 2004, but there
was still the question of sustainability. For example, it was extremely difficult to gear monetary
policy toward exchange rate and price stability at the same time. Therefore, more exchange rate
flexibility and greater political independence for the Central Bank might be desirable to allow reliable
control of the monetary base and more stable prices, conducive to investment and poverty reduction.
This approach might conflict with the decision to establish a West African monetary zone with a
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common central bank and a single currency. This far-reaching monetary integration amongst
ECOWAS anglophone members was due to be completed in June 2005. Considering Nigeria's oil-
driven exchange rate and its recent success in fighting inflation, the discussant asked whether the right
time for this far-reaching monetary integration had already come, and how Nigeria viewed its
advantages and risks.

17. The introduction of a new and prudent fiscal rule in 2004 was commendable. For the first
time, in 2004, the Budget had not been based on actual oil revenues but on a lower, conservative
assessment of the oil price, which was sustainable in the medium run. The rule set aside windfall
profits in times of rising prices and used the savings in bad times. However, the question remained
whether the 2004 savings success could be maintained in the future, in particular whether Nigerian
states, to which a large part of the oil income had to be transferred, would agree to work continuously
on this more solid basis.

18. Norway, another WTO Member, was facing a similar oil challenge. It had had set aside fiscal
income from oil in a State Petroleum Fund to build up a reserve for future expenditures, and to
guarantee intergenerational fairness. As controlled use of oil wealth on a long-term sustainable basis
would be important for transparency, stability, and poverty reduction, the discussant was wondering
whether the Norwegian example could be of any use to Nigeria. An additional benefit might also be
that, if oil income accrued in U.S. dollars, a petroleum fund would isolate the exchange rate from oil-
induced influences, and thus make it easier to opt for more exchange rate flexibility.

19. Another important structural issue in Nigeria's fiscal policy was the role of State. The share
of public consumption in GDP had increased from 10% in 1997 to almost 30% in 2003, whereas the
share of private consumption had declined from 70% to around 40%. These resources had not been
used for investment (the share of public investment in GDP had declined), but for consumption (e.g.
civil service wages, support to public enterprises, and subsidies). In terms of structural reforms and
poverty reduction, political priorities should be rebalanced between the private and the public sector,
and between investment and consumption spending within the public sector.

(ii) Structural reforms

20. Structural reform challenges were at two levels. Firstly, it was essential to further improve
the framework conditions to strengthen the basic foundation for increased economic activity and
confidence. Enforcing the rule of law, ensuring public security, more transparency and accountability
of the public sector, and decisive action against corruption were key to further progress. This seemed
one of the centrepieces of the Government's current reform agenda, including independent audit of the
oil subsector, and the establishment of the Economic Crimes Commission and the Corrupt Practices
Commission. Further active engagement in these areas would be central to reviving the economy.
The discussant asked Nigeria to elaborate on the success achieved so far. Secondly, it would be
crucial to encourage structural change within the private sector to mobilize Nigeria's advantages.
Competition as a driving force for efficiency, prices that reflected market conditions, and incentives to
increase investment and productivity across all sectors, were important to lift income levels, and
reduce poverty on a sustainable basis. Since it was difficult to address all these issues at the same
time, careful sequencing of the reform steps was justified and necessary to avoid overburdening the
adjustment capacity, and to include everyone on this path of change.

21. Improving infrastructure (road, railway, water supply, and port facilities) was a priority.
Frequently mentioned deficiencies were a major cost factor and bottleneck for increased activity. The
electricity subsector was criticized for its frequent power cuts, supply constraints, and unreliability.
The Government had been trying to improve the situation by introducing a clear regulatory
framework and partly privatizing the subsector. The discussant asked whether improvements had
already been achieved.
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22. Privatization could be part of a more efficient structural change. There were 1,500 state-
owned enterprises in Nigeria, accounting for about 50% of GDP. Their performance and management
were frequently criticized as extremely poor, and they were major contributors to fiscal deficits and
non-performing debts. The results of privatization had been very limited, and the discussant
wondered how this record could be improved, and what significance the Government attached to its
privatization agenda.

23. The agriculture sector took centre stage in structural change and poverty reduction. It
employed 70% of the workforce, and likewise around 70% of the population lived in poverty. Much
of the Government's effort to reduce poverty had focused on agriculture. The result had been: (i) a
high and increasing degree of protection: applied tariff rates had increased from around 25% in 1998
to above 40% in 2003, with peaks far above 100% for some products; and import and export
prohibitions for some essential food products had been enacted to support self-sufficiency, and restrict
domestic competition; and (ii) despite the Government's efforts and success in reviving production,
the agriculture sector was still underperforming: productivity was low and declining; investment and
machinery were very limited; credit was difficult to obtain; and despite deregulation, there was still
the high price-low supply problem regarding state-produced fertilizers. As a consequence, Nigeria
had become a net food importer.

24. Taking into account that around 80% of the poor families' spending went on food, high prices,
due to protection, combined with limited domestic food production was extremely risky with regard to
poverty. In this context, the further drastic reduction of food imports from about 15% to 5% set by
the NEEDS could seriously aggravate the situation. The discussant asked whether this situation could
be turned around, i.e. by relaxing some of the import restrictions to reduce poverty and, at the same
time, pushing forward structural reforms to increase productivity in agriculture. Since agriculture had
so far received only 1% of the Government's capital investment and 2% of the public spending, there
was room for further action.

(iii) Trade policy

25. The Government had opted for a rather restrictive import substitution approach. High import
tariffs were applied to agricultural and non-agricultural products; the average applied MFN tariff was
about 25% with a binding coverage of only 9% of tariff lines. Additional customs fees, bound at
80%, discouraged imports. Moreover, since 1998, the ten-fold increase in products covered by import
bans indicated that the domestic economy remained sheltered from competition. The export industry
was compensated for the high costs of imports through various schemes. Numerous tariff exceptions
were granted to attract FDI in the manufacturing sector.

26. Overall, trade policy had created a complicated system of protection and promotion that
encouraged rent seeking, fraud, and smuggling; it had distorted prices, and led to higher costs for
domestic business and consumers. Through the NEEDS, which aimed at improving economic
efficiency through structural change, making institutions more reliable, and enhancing competition, a
different kind of trade policy was expected, aimed more at promoting exports and openness.

27. The Government's plans to adopt the ECOWAS CET with far lower tariff rates (ranging from
zero to 20%) were encouraging. This, more liberal, trade regime would apply to most products by
June 2005, and was due to be completed in 2007. The discussant requested up-to-date information on
this change in Nigeria's customs regime.

28. Further liberalization between the ECOWAS countries could stimulate regional integration,
competition, and sensible division of labour. So far, only 6% of Nigeria's exports and a mere 2% of its
imports had arisen from trade with its African neighbours. The discussant asked for Nigeria's views
on the potential for increased regional trade and integration.
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IV. STATEMENTS BY MEMBERS

29. The representative of the European Communities noted the developments in Nigeria since
1998. The EC welcomed the NEEDS, as well as the reforms aimed at enhancing the non-oil subsector
and implementing a social charter. Nigeria's policies were aimed at reducing corruption, bringing its
legislation into conformity with the TRIPS Agreement, and reforming the financial,
telecommunications, and transport subsectors. Since many of these reforms related to issues
discussed in the DDA negotiations, the EC expected that the importance given to addressing these at
the national level would translate into participation at the multilateral level. By signing the Fifth
Protocol to the GATS, Nigeria had opened its services market; further WTO bindings would enhance
its development.

30. Nigeria participated in the African Union and in the NEPAD, and played an important role in
the multilateral negotiations and in the ECOWAS. The EC was convinced that regional integration
helped to consolidate regional trade, and foster economic development. To this end, trade needed to
be liberalized in all sectors and for all products, otherwise unbalanced liberalization would hamper
development, and limit the benefits. Nigeria had also taken steps to address the relationship between
trade and sustainable development; social and environmental dimensions were the pillars of
sustainable development. The EC welcomed the inclusion of a social charter in Nigeria's
development policy. Given the positive role of core labour standards for economic growth and
development, the EC encouraged Nigeria to further explore the social dimension development.

31. The representative expressed concerns about Nigeria's trade policy. In recent years, third
countries had faced increased tariffs, and extensive use of other charges, which had significantly
increased the level of protection granted by tariffs. Nigeria had also enlarged the list of products
subject to arbitrary bans. These measures had been introduced at the expense of local and regional
trade, and the aims of the NEEDS plan; they had had an impact on exporters, as well as local
consumers and producers.

32. The EC encouraged Nigeria to continue its reforms, and to open its trade regime to external
competition with a view to supporting growth and reducing poverty, through competitive consumer
prices and enhancement of the private sector. The representative asked how Nigeria appraised the
effects of its policies on its own development, as well as on the development of the countries in the
region.

33. The representative of Japan recalled Japan's initiatives to promote trade and investment in
Africa, such as the Tokyo International Conference on the African Development Process, the Africa-
Asia Business Forum, and the TICAD Exchange Network. Japan and Nigeria had intensified their
bilateral relationship.

34. Japan appreciated Nigeria's role in promoting the NEPAD, as well as the Government's
reforms (e.g. the fight against corruption, poverty reduction, and restructuring the economy through
liberalization, privatization, and the deregulation of services). Japan hoped that Nigeria would
continue its reforms, and recover security in the Niger Delta area, which were critical to its economic
development. Nigeria depended highly on oil exports. The current high oil prices were supporting its
economic growth. However, dependence on a single export product made Nigeria's economy
vulnerable to world market fluctuations. Diversification was needed, and Japan welcomed Nigeria's
endeavours to foster non-oil sectors. Japan hoped that Nigeria could improve its tariffs bindings since
only 19.2% of its tariff lines were bound (in particular only 7% of its non-agricultural lines were
bound), the average bound tariff rate was quite high, and the average applied MFN rate had increased
4% from 1998 to 2003.
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35. Nigeria participated actively in the WTO, as well as in regional and bilateral trade
agreements. However, it had room for further WTO commitments (for example, it was not a
signatory to the WTO plurilateral agreements nor had it yet tabled an initial offer in the services
negotiations). This year was the "Year of Africa". In April, Japan announced that it would hold
TICAD IV in 2008 and double its ODA to Africa in the three years to come. Japan considered that,
due to Nigeria's major presence in Africa, its development would set a model for other African
countries. Japan sincerely hoped that Nigeria would be successful in the domestic reforms and further
commitments in the multilateral trading system.

36. The representative of Canada congratulated Nigeria for its reforms and efforts to create an
attractive business environment by fighting corruption and increasing transparency. Canada
applauded Nigeria's political leadership in the African Union, ECOWAS, and NEPAD. Since 1998,
Nigeria had reformed its economic policy. The NEEDS was an important step towards full
integration in the global economy. Deregulation and privatization would encourage Nigerian
enterprises to be competitive.

37. Although Nigeria had undertaken commitments under the GATS, deeper commitments were
necessary to benefit fully from the Government's proposed deregulation. Canada urged Nigeria to
engage more in the GATS negotiations as the presented opportunities to diversify into new markets
and to operate on a level playing field, with rules that improved transparency and predictability of the
regulatory framework. Canada commended Nigeria's efforts, since 1998, to introduce and implement
reforms in its ports administration and customs regime. It encouraged Nigeria to continue to play an
active role in the ongoing negotiations on trade facilitation, and urged it to maintain its schedule to
fully adopt the ECOWAS CET. Although recognizing the need to take extraordinary measures in
crisis situations, Canada was concerned about the growing list of products prohibited for import, but
expected this to be only temporary. Canada encouraged Nigeria to continue its regional integration.
The representative reiterated that working with leading developing countries, like Nigeria, could
ensure that trade liberalization would benefit citizens of all countries.

38. The representative of the Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu
("Chinese Taipei") said that, although bilateral trade had been growing in recent years – Nigeria was
Chinese Taipei's second largest African trading partner – there was room for greater potential.
Chinese Taipei noted Nigeria's progress to implement its WTO commitments. The representative
referred to Chinese Taipei's questions, which were aimed at better understanding Nigeria's trade
policies, and finding opportunities to further develop their bilateral trade. Chinese Taipei wished
Nigeria success with its programme of structural reform.

39. The representative of Switzerland welcomed Nigeria's progress towards macroeconomic

stability and growth, based on sound stabilization policies supported by rising international oil prices.
The favourable developments in the oil and gas subsectors and the resulting increase in public
revenues would help the NEEDS to be implemented rapidly. This implied increased financing of
infrastructure facilities, a precondition for the development and growth of non-oil sectors, and the
implementation of structural reforms to improve the efficiency of Nigeria's economy and products,
thereby allowing their diversification and the enhancement of the overall growth prospects.

40. Nigeria was Switzerland's third most important African trading partner. Bilateral trade was
mainly based on oil imports from Nigeria. The representative recalled that Nigeria could not remain a
one-product export economy. Nigeria was not among the top destinations of Swiss FDI due to its
difficult business and investment climate. Switzerland strongly encouraged the Government to step
up its efforts to implement reforms in the rule of law and governance, while maintaining a liberal
trade and investment regime.
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41. Nigeria participated actively in, and was contributing to finding a balanced outcome for the
WTO negotiations. Switzerland commended Nigeria's regional integration through the ECOWAS.
The adoption of the ECOWAS CET would simplify and rationalize its tariff structure, and eliminate
import prohibitions, thereby improving market access, and stimulating regional integration and
economic development. However, since 1998, Nigeria's trade regime had become more protectionist;
the average applied MFN tariff had increased as had the number of products subject to import bans.
These restrictions, alongside increased tariff protection, had distorted prices, and led to inefficient
resource allocation. They undermined the Government's efforts to reduce poverty, increased
smuggling, and created losses in customs revenue. Switzerland welcomed Nigeria's efforts to bring
its intellectual property legislation into conformity with the international rules and practices, and with
the TRIPS Agreement. It also welcomed the preparation of legislation on competition, and was
satisfied that Nigeria had signed the Fifth Protocol to the GATS.

42. The representative of Hong Kong, China said that bilateral trade relations with Nigeria were
harmonious. Hong Kong, China appreciated Nigeria's commitment to the multilateral trading system
and the DDA. The DDA would provide potential development gains, i.e. improved market access and
multilateral trade rules; special and differential treatment, and technical assistance were part of this
process.

43. Nigeria was scheduled to fully adopt the ECOWAS CET, which would liberalize its trade
regime. He encouraged Nigeria to participate actively in the NAMA negotiations, and to accelerate
its trade liberalization by bringing down its high tariff rates; increasing the predictability of its tariff
regime; expanding the coverage of its tariff bindings in the non-agriculture sectors; and simplifying
its tariff structure. He also urged Nigeria to eliminate the variety of internal taxes and duties on
imports that added to the MFN tariff. He was concerned about import prohibitions, quantitative
restrictions, and licensing: since 1998, there had been an increase in the products subject to import
bans to protect domestic industries. He asked whether Nigeria planned to phase out these prohibitions
to align its trade regime with the ECOWAS.

44. Hong Kong, China encouraged Nigeria to fulfil its notification obligations on anti-dumping
and countervailing duties, as no notifications had been received since 1998. Nigeria had undertaken
liberalization reforms in certain services subsectors, which would contribute to its further economic
development. To increase the predictability of its trade regime, Nigeria should improve its services
commitments, participate more actively in the ongoing services negotiations, and table its offer as
soon as possible. Hong Kong, China encouraged Nigeria to make commitment in road transportation
services – largely provided by the private sector but open to foreigners – to provide legal certainty to
foreign services suppliers.

45. The representative of Brazil referred to Nigeria's structural reforms since 1998, which,
alongside progress in macroeconomic reforms, had improved Nigeria's economic performance. In
this regard, Brazil commended Nigeria for its average annual GDP growth of 4.8%, the decline in the
public deficit, and the surpluses in external trade. Brazil welcomed the NEEDS, and hoped that
Nigeria would succeed in implementing its reform policies. Nigeria's economic prospects largely
depended on the oil subsector. However, agriculture remained critical if Nigeria was to succeed in
reducing poverty. Brazil hoped that a successful conclusion to the DDA would help developing
countries to diversify their economy. Nigeria – a G-20 member – had been fighting trade distortions
due to high levels of export subsidies and domestic support in developed countries. Nigeria planned
to implement the ECOWAS CET, which would simplify and rationalize its tariff structure, eliminate
import prohibitions, and improve market access. Brazil hoped that the ongoing economic reforms
would help Nigeria to create an environment conducive to investment inflows.

46. The representative of the United States commended Nigeria's commitment to economic
reform under the NEEDS. She referred to the deepened bilateral trade policy dialogue since 2004.
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She highlighted two important aspects of Nigeria's trade policy. First, the Government was taking
steps to improve transparency and reduce corruption; the United States commended Nigeria's anti-
corruption measures, and invited the delegation to provide more details on their accomplishments.
Second, Nigeria was bringing its intellectual property legislation into conformity with the TRIPS
Agreement, and the United States urged Nigeria to build on its efforts, since a strong intellectual
property regime improved the investment climate.

47. Nigeria was taking positive steps to liberalize trade and reform its internal market. However,
some aspects of its trade regime might not be fully consistent with WTO provisions. For example,
import procedures had become more protectionist since 1998, as this had raised prices, distorted
resource allocation, and detracted from growth and development. The United States requested an
update on Nigeria's plans in this area, including on customs valuation, preshipment inspection, and
harmonization with the ECOWAS CET. In addition, there was a plethora of incentives, some of
which could be negotiated on a case-by-case basis, and some of which had never been notified to the
WTO. In this regard, the United States reminded Nigeria that subsidies requiring the use of domestic
goods in lieu of imports had been prohibited since 2003. The United States looked forward to
receiving Nigeria's initial services offer.

48. The representative of the Republic of Korea welcomed Nigeria's efforts to implement
macroeconomic and structural reforms. Continued reforms would help to translate Nigeria's huge
economic potential into reality. Despite progress, Nigeria's trade regime had become more
protectionist since 1998, and deprived Nigeria and its trading partners of the benefits from further
expansion of trade. He encouraged Nigeria to make further efforts to create the environment for
market-oriented and private-sector-led economic development.

49. The representative of Turkey said that Nigeria was among Turkey's important trading
partners, and referred to work to further strengthen their bilateral trade and economic relations.
Turkey commended Nigeria's active participation in the WTO, and supported its recent reforms. To
consolidate its GDP growth rate and overcome its economic impediments, Nigeria might further
liberalize its trade policy regime by increasing its predictability and establishing the ECOWAS CET.
Turkey hoped that the NEEDS would lead to a high level of economic growth, stability,
competitiveness, and the diversification of exports and GDP composition.

50. The representative of Benin said that Nigeria and Benin had bilateral and sub-regional
economic and trade relations. A viable economic and trade environment in Nigeria and its role in
ECOWAS was in Benin's interest. Benin congratulated Nigeria for its efforts that had led to major
economic and institutional achievements (e.g. high GDP growth, and a decrease in the budget deficit).
The representative underlined the importance of the reforms under the NEEDS for improving the
legislative and regulatory framework, as well as the investment environment. Benin urged Nigeria's
bilateral and multilateral partners to continue and strengthen their support for Nigeria.

51. The representative of Rwanda commended Nigeria for its macroeconomic reforms, and the
establishment of the NEEDS, the Budget Monitoring and Price Intelligence Unit, the Independent
Anti-Corruption Practices Commission, and the Economic and Financial Crime Commission.
Rwanda welcomed reforms in deregulation, privatization, transparency, accountability, ports, and
customs. Nigeria was also making progress in agriculture and services. With continued efforts in
these reforms and fuller participation in the multilateral trading system, boosted by technical and
financial assistance, Nigeria should overcome its economic difficulties, achieve sustainable growth,
and address debt and poverty. The representative referred to the introduction of import prohibitions to
safeguard public health and safety. Nigeria needed assistance to set up a transparent mechanism for
testing and certification.
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52. The representative of Pakistan noted Nigeria's economic reforms since 1998. The oil,
tourism, and transport subsectors as well as the manufacturing sector had been deregulated and
privatized. However, Pakistan was concerned that, despite the trend towards trade liberalization,
Nigeria's MFN rates on agricultural and non-agricultural products had increased since 1998. Pakistan
commended Nigeria's contribution in the DDA negotiations, and looked forward to expanded bilateral
trade.

53. The representative of Morocco welcomed Nigeria's macroeconomic and structural reforms
since 1998, which had led to high GDP growth, and the deregulation, privatization or consolidation of
certain sectors. Nigeria's trade policy was aimed at strengthening the competitiveness of its domestic
industries, promoting export diversification, and setting up an attractive environment for FDI. The
Government's commitment to pursue the ongoing reforms would help Nigeria to overcome the
difficulties and constraints to bringing its legislation into conformity with the WTO. Moreover, the
new tariff structure would be establish in June 2005 and all prohibitions would be eliminated by 2007.
The representative referred to their bilateral trade and economic cooperation, and to Nigeria's
participation in the ongoing WTO negotiations.

54. The representative of India noted Nigeria's annual average GDP growth since 1998, and
commended it for firmly pursuing its structural reforms. However, growth was driven by the oil
subsector, and susceptibility of fiscal and monetary policies to developments in the international oil
market, and the resulting macroeconomic fragility, had constrained Nigeria's efforts towards
achieving broad-based growth. Nigeria participated actively in the WTO, and as G-20 members,
India and Nigeria cooperated closely; they also collaborated in the ongoing WTO negotiations.
Nigeria was India's largest African trading partner. India had provided Nigeria with training and
technical support.

55. The representative of Kenya complimented Nigeria for its macroeconomic and structural
reforms since 1998. However, its annual growth performance had been constrained by its dependence
on the oil subsector and the resulting vulnerability to price fluctuations, compounded by supply
bottlenecks in non-oil subsectors, debt burden, high poverty levels, and unstable macroeconomic
environment. This undermined Nigeria's efforts toward a long-term sustainable growth. Kenya
appreciated the Government's commitment to the NEEDS. Successful implementation of reforms
under the NEEDS required resources, and the international community should therefore support
Nigeria.

56. The export contribution to GDP showed the important role international trade played in
Nigeria's development prospects. Kenya encouraged Nigeria to diversify its economy and flows of
exports, and reduce its dependence on oil. Agriculture provided a high potential for growth and
poverty reduction. Kenya encouraged Nigeria to continue its efforts to revamp its agricultural
production, and address market distortions through the WTO ongoing agricultural negotiations. Many
laws and regulations had not been enacted or modified to ensure their conformity with the WTO;
Nigeria's commitments were largely unfulfilled. Technical assistance and capacity building were
needed to help it to implement its commitments, and to integrate into the world economy. Nigeria
participated actively in the WTO, as well as in the NEPAD.

57. The representative of Malaysia noted Nigeria's real GDP growth rates. While recognizing
Nigeria's oil dependence, Malaysia encouraged the Government to continue its economic reforms,
including economic diversification. Some results had already been achieved. The recent
improvements in oil prices should enable Nigeria to further increase its expenditure on infrastructure.
A stronger economy would mean more scope for Nigeria to progressively liberalize its non-
agriculture and agriculture sectors. Nigeria had reduced its high tariffs on raw materials and
intermediate goods, which could expand the share of the manufacturing sector in the GDP. Reforms
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in services would improve significantly the economic environment. Nigeria participated actively in
the WTO. Malaysia was one of Nigeria's trading and investment partners.

58. The representative of Egypt noted Nigeria's efforts to improve and enhance the effectiveness
of its economy and its attempts to comply with its WTO obligations and commitments. Egypt
commended Nigeria for its participation in the DDA negotiations.

59. The representative of Senegal said that Senegal and Nigeria cooperated in the ECOWAS,
NEPAD, and the African Union. Since 1999, Nigeria had restructured its economy: the
macroeconomic and structural reforms had reduced the budget deficit, and achieved a high annual real
GDP growth rate. The representative referred to the goals of the NEEDS; the important progress in
services, due to privatization; the institutions set up to fight corruption and to increase transparency in
order to create an attractive environment for national and foreign private investment; and reforms in
customs and the port system. Nigeria was committed to the WTO principles and objectives, and was
a major player at the regional and sub-regional levels. Kenya urged Members to continue to support
Nigeria's efforts.
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V. REPLIES BY THE REPRESENTATIVE OF NIGERIA AND ADDITIONAL

COMMENTS

60. The representative of Nigeria said that Nigeria had taken note of the concerns and points
raised during its third Review. This Review had allowed Nigeria's partners to appreciate and evaluate
its trade policies and practices, especially its major developments since 1998, as well as the structural
reforms embarked upon since 1999. This Review had also allowed Nigeria to take stock of its trade
policies and practices, including the need to realign or bring them into conformity with its WTO
obligations and commitments. Nigeria welcomed and appreciated the concerns raised and the support
given by the Members.

61. The representative assured Nigeria's trading partners that the issues raised, especially the
temporary import restrictions, would be addressed soon as a demonstration of Nigeria's commitment
to the principles of the multilateral trading system. He also assured them that the Government was
committed to the ongoing structural reforms in the trade, economic, social, and political fields in order
to increase confidence, create a better business environment, and improve the living standards of
Nigerians. Nigeria solicited the Members' support and cooperation to make these reforms successful.

62. While preparing its written answers to the questions, Nigeria had realized that the task ahead
was enormous, and, therefore, would appreciate significant assistance in trade-related capacity
building, particularly with respect to the implementation of the Trade Policy Action Plan. Nigeria
was convinced that progressive liberalization of its trade regime would bring significant dividends to
Nigeria and its trading partners. The representative acknowledged the extensive support and
assistance received from the United Kingdom's DFI, the WTO, UNTAD, WIPO, and UCID, among
others, and said that some of the ongoing reforms would not have been possible without their
contributions.

63. The discussant said that the 6.1% growth in 2004 – a very good basis for structural reforms
and further development – had been higher than expected. Growth in the non-oil subsector had been
even higher than in the oil subsector. He referred to a proposed budget increase, which would
jeopardize price stability. He reiterated that the NEEDS was an excellent guideline for the future, and
encouraged Nigeria to implement it quickly, before the 2007 elections, since it was difficult to
implement far reaching structural reforms before elections. The discussant asked about Nigeria's
plans for 2005, and how far Nigeria intended to pursue its structural reforms.

64. The representative of Switzerland thanked Nigeria for its attempts to respond to the Swiss
questions. However, Switzerland reserved the right to come back to Nigeria in order to gain a better
understanding of the answers.

65. The representative of the United States recognized Nigeria's economic and political efforts,
and encouraged it to build on its achievements. He thanked Nigeria for its answers, and also reserved
the right to follow them up. With regard to other duties and charges, and privatization, the
United States sought information on Nigeria's plans to streamline or rationalize these charges either
on its own or in cooperation with ECOWAS, and on further privatization.

66. The representative of the European Communities thanked Nigeria for its answers, and also
reserved the right to come back to them. The representative referred to the temporary import bans,
and hoped that they would effectively be addressed soon. The EC encouraged Nigeria to go further
with its reforms.

67. The representative of Nigeria said that Nigeria was a young democracy. Currently, the
Government, within its macroeconomic policy, exercised budgetary constraint while the Parliament
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wanted extensive expenditures to accommodate projects. Referring to the 40% budget increase, the
representative said that the Government would ensure that the final budget could be implemented
without leading to distortions. The Government was strongly committed to continuing its structural
reforms in, and far beyond, 2005. It would address specifically the issue of tariff rates (i.e. reducing
the gap between bound and unbound tariffs), and charges; most of these were being abolished to
reduce the cost of doing business in Nigeria. The privatization programme was under way, but the
response from foreign investors had not been encouraging. Companies to be privatized had been
advertised, and Nigeria urged Members to indicate interest.
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VI. CONCLUDING REMARKS BY THE CHAIRPERSON

68. We have conducted this third Trade Policy Review of Nigeria in a frank and constructive
manner. We have benefited from the contribution of the Nigerian delegation, led by Mrs. Ogunleye,
Permanent Secretary of Federal Ministry of Commerce, the very insightful comments by our
discussant, Dr. Alexander Gross, and the detailed questions and thoughts of several Members.

69. Members appreciated Nigeria's active participation in the multilateral trading system,
including the ongoing negotiations. They stressed its important role in regional integration in Africa,
mainly through its membership of the Economic Community of West African States (ECOWAS).
Members also commended Nigeria on its efforts towards full democracy and on steps taken to reduce
corruption, but stressed the need for further improvement of its business environment.

70. Nigeria's macroeconomic and structural reform efforts, including through the National
Economic Empowerment and Development Strategy (NEEDS), were acknowledged, and the
contribution of developments in the international oil market to its recent economic performance was
emphasized. Nonetheless, trade barriers and increased foreign assets from oil exports have
maintained inflation at a high level, while trade protection and the exchange rate regime have fuelled
informal trade.

71. Members expressed concerns about the increase in the level of protection of Nigeria's
economy since its last TPR in 1998: MFN tariffs have been raised on many products, the number of
import bans has been increased tenfold, and, in addition, various other duties and charges apply to
imports. These measures, together with various duty and tax concession schemes – sometimes subject
to local-content requirements – make Nigeria's trade regime complex, while the binding of import
duties at ceiling rates further challenges its predictability. State ownership remains high and
preshipment inspection is required on imports. Members urged Nigeria to liberalize its trade regime
and to implement the WTO Customs Valuation Agreement. The implementation of the liberalization
programme adopted by ECOWAS should help.

72. Members welcomed Nigeria's reform efforts in the services and energy sectors, and sought
clarification on the pursuit of the reforms. Members also asked questions on other issues, notably:
trade policy formulation and implementation; quantitative restrictions and the licensing system;
contingency trade remedies; standards and other technical requirements; public procurement;
intellectual property rights; and specific measures related to agriculture.

73. Members appreciated the responses provided by the Nigerian delegation, and looked forward
to further written replies.

74. In conclusion, it is my understanding that Members have encouraged Nigeria to pursue its
macroeconomic reforms, with an emphasis on trade liberalization through simplification and
reduction of import duties, elimination of import bans, and adoption of trade facilitation measures and
WTO-consistent rules and regulations. Such reforms, together with the dismantling of supply-side
constraints and improvements in Nigeria's multilateral commitments in goods and services, should
promote both a better allocation of resources in line with Nigeria's enormous comparative advantages,
and the diversification of the economy away from petroleum products. These should contribute to
mainstreaming trade into Nigeria's development strategy and to the effectiveness of its poverty
reduction strategy. Nigeria's trading partners could help by providing market access opportunities.

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