On July 17, 2007 the Director-General of the Bureau of Public Enterprises (BPE), Mrs. Irene Chigbue, was still insisting that due process was observed in the concluded sale of both the Port Harcourt Refinery Company and Kaduna Refining and Petrochemical Company. Her comments, made during a courtesy call by a delegation from the United States Department of Energy, came at a time when she must have known that that particular transaction had been terminated. She had after all represented her department at the meeting in the Presidency where the decision was taken, and was also under suspicion regarding the untimely leakage of the deliberations to Blue Star Oil Services Limited, a consortium owned by billionaire businessmen Aliko Dangote and Femi Otedola.
In a face-saving gesture the consortium released a letter dated 17 July, claiming it was withdrawing from the USD721 million deal due to the vilification of the consortium by organised labour and some vested interests in the state-run Nigerian National Petroleum Corporation (NNPC). This may prove to a very costly gesture because while the Presidency was inclined to refund all monies obtained for the refineries where the government itself reverses the transaction, the situation is less clear where the bid winners themselves indicate their intention to withdraw.
Mrs. Chigbue may maintain that the privatisation of the nation’s refineries was in fact “the result of a complex five-year transaction process conducted subject to international best practice and following the adoption of a multiple-bidder competitive tender process” but the overwhelming opinion of Nigerians was that the process was lacking in clarity and transparency and seemed designed to reward ‘friends’ of the outgoing President in the twilight of his influence.
This flawed transaction is just one of many examples of the haphazard implementation of the governments privatisation policy. The sale of Apo Legislative Quarters under the guise of the monetisation program, the ‘concessioning’ of the National Theatre, Lagos International Trade Fair Complex and the Tafawa Balewa Square are also issues of great concern to the public. There is the suspicion in all these cases that the public interest has not been served due to the lack of consultation and transparency of the policy implementation.
Privatisation in the ordinary sense is the policy implemented by the state whereby State-owned companies are transferred or sold out to private individuals or private corporate entities. Until the 1980s international policy tended to favour state planning and state ownership to lever investment and capital accumulation as part of economic development. By the 1990s, however, sentiment had changed in donor agencies and a number of governments in the face of developments in economic theory and mounting evidence of ‘state failure’ (World Bank, 1995). This was reflected in the collapse of the USSR and the ‘socialist’ eastern block and its subsequent restructuring along more capitalist lines.
The theory is that inefficient State-owned industries suffer because agents within government have a tendency to pursue their own interests, or the interests of special groups at the expense of the public. Such agents lacked motivation and incentive to perform adequately. Private capital with its profit driven motive would act more decisively to ensure the health and growth of an enterprise. For a newly privatised entity this might entail a period of streamlining of the cost structure of the business, with a predictable impact on the labour force, but in the medium to long term, there is a freeing up of government funds for other purposes, and as the business prospers, more labour may be required and tax revenues to the government increase as well.
So much for theory. It is acknowledged that over the years billions of dollars have been spent on public enterprises like NEPA, NITEL, Health and educational institutions, recreational facilities like the Stadia, National Theatre, among others. President Olusegun Obasanjo announced the new privatisation programme in July 1999 shortly after becoming the country’s first elected head of state in 15 years. He was scathing in his criticism of the unwieldy public sector, where some of the more than 1,000 state-owned enterprises were losing millions of dollars annually. “State enterprises,” he said, “suffer from fundamental problems of defective capital structure, excessive bureaucratic control or intervention, inappropriate technology, gross incompetence and mismanagement, blatant corruption and crippling complacency.”
The Nigerian public knows and has suffered greatly from the widespread incompetence of the management of these institutions but it is also very much aware that the Management Boards of these enterprises are appointed by the government, and the inadequate funding was also determined by the same government. And of course, the bulk of officials-cum-policy makers of the past also occupy the present government. In other words, the criticism is a self-indictment on the ruling elite and other government personnel, past and present.
The failure of the privatisation policy and its monetisation branch rests squarely on the shoulders of the Obasanjo regime. The main policy makers of government have had various comments to make about the process that show there was incoherence and bad faith at the highest levels, from the beginning. The most damning evidence was provided by former Vice President, Atiku Abubakar, who chaired the National Council on Privatization between 1999 and 2005. He was quoted thus:
“The well-conceived and well-intentioned privatization programme, which was designed to, transparently, transfer state-owned assets to private hands to ensure better service delivery, has gradually been personalized and our prized economic assets and choice enterprises have been cornered and auctioned off to a tiny cabal of private sector interests closely associated, or in full partnership with those in the corridors of power, with little or no pretence at due process or transparency … (They) used the privatisation programme to auction our crowned jewels to themselves at rock-bottom prices” (The News, March 5, 2007). Even Senator Ahmadu Ali, chairman of the ruling Peoples Democratic Party felt free to weigh in on July 4, “This is an age when they sell off everything including the family silver. I don’t encourage all these things. I don’t see why my Federal Government Colleges should be sold. I don’t see why certain things that are of national security should be sold”.
The perception that the privatisation process has been taken advantage of primarily by residents within the corridors of power and their loyalist is amply demonstrated in the sale of the “government-owned non-essential houses” where choice presidential guest houses ended up in the hands of serving public officials.
1. Mallam Nasir el-Rufai, former Minister in the Presidency and Chairman of the Federal Capital Territory Administration (FCTA) who in that capacity was also the chief auctioneer in the sale of federal government houses in the Federal Capital Territory (FCT), bought the presidential guest house at No. 16 (now No.12), Mambilla Street, Off Aso Drive, Maitama, Abuja;
2. Dr. Andy Uba, former Special Assistant to the President on Domestic Matters, dethroned as governor of Anambra state by a Supreme Court judgement which reinstated Peter Obi, bought the property at No. 19 Ibrahim Taiwo Street, Aso Rock, Abuja;
3. Mrs. Remi Oyo, Senior Special Assistant to the former President on Media bought the property on Yakubu Gowon Crescent, inside the Presidential Villa;
4. Dr. Mohammed Hassan Lawal, former Minister of Labour and Productivity bought the property on Suleiman Barau Street, Asokoro, Abuja;
5. Mr. Akin Osuntokun, former Managing Director of the News Agency of Nigeria (NAN) and, later Honorary Political Adviser to the former president, bought the presidential guest house at No. 2 Mousa Traore Crescent, Abuja;
6. The sale of the official residence of the Inspector General of Police (IGP) to Mr. Sunday Ehindero, the immediate past IGP.
Another major concern is the fate of Apo Legislative Quarters, Abuja. It was reported that new lawmakers became stranded in Abuja because the housing units originally built for the MPs had been sold to former legislators. Over N25bn has been realised from the sale of the Legislative Quarters but the nation now faces an immediate bill of N3bn as Legislators accommodation allowances for the next one year, raising questions about the long term benefit of disposing of this particular asset. The propriety of Mallam el-Rufai participating in a process he is meant to supervise, and the sale of guest houses within the Aso Villa security zone is not apparent to the public and that all these ‘transfers’ took place in the closing phase of the former government raises many questions.
The residents of Transit Village Adetokunbo Ademola Street, Victoria Island, Lagos have also raised their voices over the manner in which their estate of about 110 units, ended up in the hands of the Bank of Industry, a government parastatal with Senator Ahmadu Ali, chairman of the ruling Peoples Democratic Party, and a political appointee as its chairman. The Estate’s residents are senior public servants of the Federal Government and assumed they were among those who government by its circular reference No SGF 191549/C1/11/37 of 27 June, 2005, promised to give the first option to buy their official quarters and would only sell to the highest bidder if they declined to exercise that option.
Co-ordinating Chairman of the Transit Village Resident’s Association, Mr Chioma Abara, has raised questions about how the estate came to be described as “fallow” (as in, unoccupied, without human presence) in a government advertisement of October 21, 2006. The Implementation Committee which in April 2006 undertook the physical verification of Federal Government properties in Victoria Island had, as part as its task verified 1004 Estate but somehow overlooked Transit Village next door. Residents notified the committee in writing of this oversight, and met a wall of silence. When occupants of Federal Government Houses in Lagos were asked to collect forms to bid for their residences, they were collectively rebuffed and told they were not included in the arrangement. Now they find their homes effectively belong to the Bank of Industry, whose remit can only by ridiculous contortion, be said to include property development.
Such is the fate of the powerless in Nigeria. A laudable policy is put forward and on the face of it the benefits are obvious, but the intentions of those in charge of implementation can only be characterised as deceitful, and the process, lacking in credibility, accountability and transparency. Specifically, the government and the BPE in particular stand accused of the following:
- A failure to explain the purpose and the benefits of the privatisation policy to the population. An increase in social and political tension caused by the
widespread perception that the policy and its application is intrinsically unfair actually deters overall investment in the economy. Unions are right to be concerned about job losses and Nigerians should be concerned about foreign ownership of major sectors of the economy. The government has distinctly failed
to persuade most sectors from academia, the unions, women’s societies, voluntary organisations etc. that it is acting in the common interest and its actions indeed provide much evidence to the contrary.
- A failure to clarify the backgrounds of potential investors with regard to personal and corporate character, financial credibility and industry experience, as well as their detailed intentions regarding the enterprises offered for sale. This would prevent situations like the failed IILL bid for NITEL where funds to cover the purchase of NITEL could not even be raised, or the situation with the National Theatre concession, where the bid winners Infrastructica start shopping for $500m after they have won the concession. This sum represents the total investment the company has outlined for the refurbishment of the National Theatre and the redevelopment of the site into a cultural district. The signs are clear that Infrastructica will invest none of its funds beyond those already expended in winning the concession. The Committee for Relevant Art (CORA), has effectively challenged the BPE on its own lack of definition of ‘concessioning’ and that the fact that there was no consultation with strategic groups within the culture sector and the fact that Infrastructica has no history in this area and its plans remain unclear. Then the case of the Lagos Trade Fair Complex whose N40 billion concession was won by Aulic Nigeria Ltd, a company with a paid up share capital of N185,000! When one considers that Nigeria Airways under Mrs. Kema Chikwe, was almost sold to a U.K. based shell company with a share capital of just a thousand pounds, perhaps this is not so surprising.
- A failure to monitor and encourage the expansion of privatised sectors to ensure there is competition and an increase in the supply of goods and services to the market. There is a high bar to entry into many industries the government is divesting from such as hotels, vehicle assembly plants, the electricity and telecommunications sectors, oil refining, cement and fertilizer production. It is clear that the price of hotel accommodation, transportation, cement, fertilizer etc. have all risen giving the public grounds for criticism. Only in the communications sector can there be said to have been a significant increase in services but still fully 60% of the population remains without this basic utility. It is indeed unfortunate that many public monopolies seem destined to end up in private hands as private monopolies.
- A failure to act ethically and consistently in the pursuit of public policy. Only perhaps in Nigeria can the Director-General of the Nigeria Stock Exchange (NSE), Dr. Ndi Onyiuke-Okereke – a public official no less – head an organisation called Corporate Nigeria whose sole purpose was to raise funds (N2 billion approx.) for the Obasanjo/Atiku campaign organisation of 2003, even going as far as to solicit funds using NSE stationery. While still occupying the same office, she emerged as the chairperson of Transcorp (Transnational Corporation), a company in which President Obasanjo held betwen 200-600 millon shares, and ended up purchasing NITEL, the Abuja Hilton Hotel and two oil blocks from the same government they both serve. Transcorp (now Plc.) was also floated on the NSE under her careful watch. Board meetings are reported to have been held at Aso Rock. There is no life to Transcorp Plc outside the properties it has acquired from the Federal Government and when it missed the deadline for payment of the first $500 million of its $750 million winning bid for a 75% equity stake in NITEL on July 13, 2006 this is what the BPE had to say: “Transcorp failed to meet the deadline. We will communicate this to the National Council on Privatisation, which will decide either to revoke the deal or grant them an extension.” With the National Council on Privatisation and the BPE effectively under Presidential control, there could only be one possible outcome.
Privatisation can indeed bring great benefits to the economy and the population but only when it is complemented by policies that promote competition and where there is effective state regulation in a broader process of structural reform. The government for its part has failed to appreciate this and has neglected to provide the basic infrastructure that would encourage private enterprise.
Rail and road networks are failing and after eight years, the Obasanjo regime has left us with even less electricity being generated. The education sector is in constant crisis and is incapable of producing the basic manpower this country needs now and in the foreseeable future. The GSM companies have protested that the government has not provided the enabling environment it promised when the first set of licenses were auctioned. Now they are wholesale importers of generators and consumers of diesel. Lafarge WAPCO in its half year report disclosed that it lost 200,000mt of cement production (valued at N400 million) due to the poor supply of electricity and gas to its plants.
Every Nigerian has to make his own private arrangements for water, stand-by electric power, transport and every basic necessity while the government spends freely on projects that have no impact on ordinary lives. It is no wonder that they are sceptical of the rhetoric coming not just from Aso Rock, but from all the state houses across the federation. President Yar’adua has a golden opportunity to prove he is a new beginning. So far, his words have been thankfully few but so indeed have his actions. He must remember that the French President Nikolas Sarkozy, was elected at about the same and has already taken positive and striking steps to resolve the Libyan-Bulgarian Nurses imbroglio, EADS-Airbus troubles and is now working on a better relationship with the American establishment. The French Presidency makes ours look sluggish and indecisive at a time when the country despairs for a new direction. President Yar’adua needs to act firmly to correct the serious anomalies of the immediate past, and the reversal of the refineries transaction while a positive sign is not enough. The sale of Apo Legislative Quarters needs to be revisited and the management of the entire privatisation and monetisation process overhauled to bring it in line with standard international practice. Then his government has to focus on providing credible solutions for the electricity, transport and education sectors or else Nigeria will forever be condemned to exist as a paid-up member of the “third-world”.
The privatisation of public enterprises is not a panacea for our many problems. It has its critics and will certainly cause some pain in the short term, but the telecommunications industry shows all too eloquently that given a choice, the Nigerian public would rather do business with private enterprises who are more focussed on their needs. The best that government can do is provide the basic infrastructure and regulatory framework for Nigerians to operate in. There is a huge resource of skill and entrepreneurial ability that is being choked by the gross inefficiency of government. At every turn Nigerians are frustrated by the inadequate provision of basic necessities and now tend to see the government as the monkey on their backs, forever demanding and giving very little satisfaction in return. After eight years under Obasanjo, there is little evidence of any real structural change, and it is frightening to imagine that the next eight years might be a reprise. Of course, President Yar’adua has time on his side, time enough to lay the foundation of a more sound economic regime. Time enough indeed to prove the sceptics wrong.