Monday, August 29, 2011

Rethinking Nigeria’s Privatisation Programme

On July 5, 2011, I was a discussant at a policy dialogue organised by the African Centre for Leadership, Strategy & Development (Centre LSD) in Abuja. The dialogue was on the management of public enterprises in Nigeria. In attendance were government officials including an official of Bureau of Public Enterprises, development partners, academics, civil society organizations and the private sector. The interaction showed that government privatisation programme has not been as successful as its proponents will make us believe. It is not pro-poor and has no social safety nets. There are also viable alternatives to privatisation which ought to be considered by government. Many other notable people have commented on the privatisation scheme while practical steps have been taken to further assess the programme.

On August 4, 2011 while inaugurating a new board of the National Council on Privatisation (NCP), President Goodluck Jonathan observed thus: “We believe the private sector will handle things better that than the public sector. But the whole story about privatisation has not been as successful as Nigerians expected it to be.” In the view of Vice President Namadi Sambo “the process of privatisation has been going on for about ten years but has not been successful due to obvious non-performance. 80 per cent of such companies are actually not working.” However, the Director General of BPE thinks otherwise, according to Ms. Bolanle Onagoruwa, “On the contrary, if we consider all the privatized enterprises from inception of the programme in 1999 to date, the evidence indicate that more than 70 per cent of privatized enterprises are performing relatively well and less than 30 per cent are non-performing.”

On July 19, 2011 Senator Ahmad Lawan (ANPP, Yobe North) sponsored a motion with 25 other distinguished Senators calling for the probe of the government’s privatisation programme. Presenting the motion, he noted that the Federal Government embarked on the privatisation and commercialisation of federal public enterprises through the enactment of the Privatisation and Commercialisation Act No 25 of 1988, Bureau of Public Enterprises Act No 78 of 1993 and Public Enterprises Act of 1999. He said the primary and fundamental purpose of privatisation by the Federal Government was to divest and free the subsidies that were paid into the operations of the enterprises, so as to fund better the provision of critical and crucial infrastructure. The Senate adopted the motion, passed resolution No. S/Res/004/01/11 and set up an ad-hoc committee to look into the privatisation project. Senator Lawan was appointed the chair while other members of the committee are Senators Babafemi Ojudu (ACN, Ekiti), Alli Ndume (PDP, Borno), Philip Aduda (PDP, FCT), Ifeanyi Okowa (PDP, Delta), Hope Nzodima (PDP, Imo) and Mohammed Magoro (PDP, Kebbi). The committee was given four weeks to submit its report.

The committee’s terms of reference was to investigate the process through which the BPE privatised the companies and establish the agreements and conditions upon which the privatisation was consummated; determine how much was realised from the sale of the companies and where the proceeds were paid into while also determining how many jobs were lost and gained after the privatisation of companies. Others include, identify the factors militating against the expected improved and good performance of the privatised companies; determining the best way forward for the privatisation exercise and the desirable development and growth of the sold companies.

At the weeklong Senate ad-hoc committee on privatisation public hearing held from August 8 – 13, 2011, it was revelation galore. Indeed, the suspicions of the general public and the Senators were largely confirmed. All the directors-general (DGs) of the BPE since its inception, including its pioneer DG, Mallam Nasir el-Rufai, Dr Julius Bala, Mrs. Irene Chigbue, Dr Chris Anyawu and Ms. Bola Onagoruwa, were on hand to shed light on the transactions held under their watch. It was established that 122 federal government enterprises, spanning hotel and tourism, mining and manufacturing, banks and insurance, publishing and telecommunication sectors, etcetera, have either been sold or concessioned by the BPE from 1999 to date. It also emerged that while trillions of Naira was expended in establishing these enterprises, only total revenue of N146.2 billion (net proceeds and dividends) was realised during the period.

It also surfaced that due process and rule of law was side-stepped in the sales of some of the privatised corporations. A classical case in point was that of BUA Group versus Global Infrastructure Holden Limited over the sale of Delta Steel Company, Aladja. While BUA was selected by BPE as the preferred bidder, the presidency picked GIHL which did not submit any technical bid as the winner. BPE was also sidelined in the concession of the Ajaokuta Steel Company, as it was done by the Ministry of Power and Steel in 2006 by presidential fiat. GIHL was later to embark on asset stripping. There was also a proven case of corruption as Mr. Charles Osuji, a former Deputy Director of BPE openly admitted receiving bribe from Chief Mike Adenuga over the sale of National Oil to the business mogul. Funny enough, Mr. Osuji had the audacity to request the Senate committee for reinstatement to BPE in spite of his admittance of malfeasance.

It also emerged that some of the companies privatised may actually have had the contracts for their construction padded. Such was the case with the Aluminium Smelter Company of Nigeria (ALSCON) which was contracted with the sum of $3.2 billion, operated for 18 months and sold to Russel, a Russian company with Nigerian Board members for a paltry $130 million. According to the current director general of the BPE, an evaluation of the company indicated that the cost of the project was over-inflated as “a similar company in Mozambique, built within the same period, was constructed with $800 million.”

The Senate public hearing also revealed that the Bureau of Public Enterprises (BPE) illegally sold Federal Government’s 5 percent equity shares in Eleme Petro-Chemical Company Limited (EPCL) Port Harcourt to the Indian conglomerate, Indorama for N4.375 billion naira. This is contrary to the Privatisation Act of 1999 which states that not more than 75 per cent equity shares of the company shall be privatised while 2.5 per cent should be kept for staff, 7.5 per cent for host community and 5 per cent for the Federal government and the remaining 10 per cent for the general public. Curiously, Ndorama was one of the success stories of privatisation as the company is said to be operating at 100 per cent capacity utilization in less than two years of its acquisition and had paid out N12.9 billion as dividends to the Federal Government and the host community. It was commendable of the Senate committee to order BPE to return the money for the 5 per cent FG equity to Indorama.

The one week slated for the public hearing was grossly inadequate as the probe panel only heard issues relating to fewer than twenty of the privatised companies. It is unfathomable that none of the former members of the National Council on Privatisation was summoned to come and shed light on the torrents of allegations made on the privatisation exercise, yet NCP is the political and policy arm of the privatisation exercise whose approval must be sought by BPE before the sale of any public enterprise can be concluded. I do hope Senate committee will be able to pay visit to many of the privatised company for on-the-spot assessment. There is no gainsaying the imperative of reform of Nigeria’s privatisation process. The same factors that collapsed the public enterprises before their sale are also afflicting the privatisation exercise. These include: political interference, lack of good corporate governance, corruption, nepotism, and incompetent manpower. Under the Nigerian privatisation programme, the nation has lost assets, revenue, jobs and values.

One of the recommendations of the Centre LSD policy dialogue on privatisation is that the Nigerian government should start a programme of reconstruction and development of public enterprises in Nigeria with focus on redesign, restructuring, turnaround strategies, setting up of mechanism for improving efficiency and effectiveness and corporate governance. Need I say more?