By Emma Ujah, Abuja Bureau Chief
The on-going privatisation programme of the federal government has come under criticisms in recent times, particularly, since the decision of the Senate to probe the process that led to the sale of public stakes in some of the enterprises that have failed to meet the objectives of privatisation.

Lawan, Mark set the tone The Chairman of the Committee investigating the programme, Senator Ahmed Lawan, set the tone of a failed privatization exercise.  His words at the opening of the sitting “privatization and Commercialization was to enhance development, however, in Nigeria, it has not been successful.

80 per cent of privatized agencies are not performing; there is loss of jobs to the economy which will jeopardize the quest to make Nigeria one of the greatest economies by 202020”. Senate President David Mark agreed with him when he expressed worries over the privatization exercise saying it has left Nigerians worse off.

His words, “it has been indeed, of great concern to the Senate that most of the privatised companies are under performing. That is our own perception and that is the perception of so many Nigerians. “The chairman has noted that the privatised companies have not been working well. It is not a matter of one or two privatised companies that are doing well, the issue is whether the whole privatisation exercise has achieved its intended objectives.

“If one or two companies are performing well and about hundred other companies are not performing well it means that the exercise has been a failure. Nigerians expected that the exercise would provide employment opportunities, add to government economic activities and that government would be able to benefit from the functional activities of these companies.

The question is whether these objectives have been achieved or not. It has also been widely reported that many privatised enterprises are not performing, thereby leading to loss of jobs, financial deprivation to many Nigerian families. I believe that some of the companies have not even taken off.

“May be there was no proper understanding between government and investors or those who purchased these companies.  The issue is that if we don’t examine ourselves very well, we would be building our economy on a weak foundation”. The public hearing was indicative that of particular interests to the legislators are the Aluminium Smelter Company of Nigeria,

ALSCON, located in Ikot-Abasi, Akwa Ibom State; Daily times of Nigeria; Ajaokuta Steel Complex; Delta Steel Company Limited; NICON Insurance; National Fertiliser Company of Nigeria, NAFCON; Eleme Petrochemicals; ports concession arrangements; and Petroleum products marketing companies, especially National Oil and Chemical Company, NOLCHEM which was bought by billionaire Mike Adenuga and turned to Conoil.

The probe rests on three main pegs: whether or not due process was followed in each case; how much the enterprises were sold compared to the cost of establishing each of them; and whether they are performing optimally in terms of out puts and generating for Nigerians.

Some witnesses at the hearing alleged underhand dealings, while others claimed that they were schemed out of the processes which were deemed non-transparent. Others claimed that some of the enterprises were sold at give-away prices to interests with connections to political leaders and traditional rulers.

Invite Adenuga A former Deputy Director in the BPE Mr. Charles Osuji stood out in his accusation of Mallam. Ahmed el-Rufai who was to have been bribed by Mr. Mike Adenuga Jnr in order to win the NOLCHEM bid.  To the surprise of the public at the hearing, Mr. Osuji told the committee that he personally collected the “gift” for El-Rufai.

He claimed it was N25 million and $100, 000.  El-Rufai denied the allegations as he told the committee later that he ordered Osuji to return the money.  In addition, he said Mr. Osuji’s sack from the BPE was in connection with his role in the bribe scandal.

But rather than questioned Osuji, the Sen. Lawan committee did not appear to be interested in Osuji’s involvement in the bribe mess.  Why would Osuji collect bribe from a bidder ostensibly for a favour in the process, confessed at the hearing and the committee behaves as if it doesn’t matter.

The public would want to know what happened to the money if el-Rufai asked him, Osuji, to return it to Adenuga.  Did he returned the money or not.  One would have thought that Sen. Lawan and his members of the committee would invite Mr. Adenuga to tell the public what exactly transpired between him, Osuji and el-Rufai but that hasn’t happened.  The committee should invite Adenuga to clear the air, if it is on a sincere mission to probe the privatization programme in public interest.

ALSCON mess Some stakeholders also claimed that ALSCON which was valued at N480 billion was sold to a Russian Company, Rusal for only N37.5 billion.  Rusal’s case was made more complex, given the controversy that bedeviled the transaction from the day its financial bid opened.

The other bidder, BFIG headed by a Nigerian- America, Dr. Reuben Jaja had won the bid with $410 million. Rusal presented a $5 million conditional bid in which it promised to increase the bid to $200 million in 20 years.  Based on the conditional bid, it was disqualified at the financial bid opening at Trasncorp Hilton on June 14, 2004.

However, powerful interests in the Aso Rock Villa, at that time put pressure on government officials to scuttle to process and eventually sold the company to Rusal, said to be backed by a powerful traditional ruler from South West.

The Delta Steel Company was another firm that was said to have been sold at a give-away price to Global Infrastructures, owned by Indians. The committee was told that Delta Steel Company, valued by BPE at N225 billion was sold to Global Infrastructure Nigeria Limited for N4.5 billion.

But in her defense current Director-General of the BPE, Ms. Bola Onagoruwa, told the committee that the drop in the value of both ALSCON and DSC were due to the inflation of the contract sums when the plants were built. She further told the committee that while it took Mozambique N120 billion to build an aluminum smelting plant akin to ALSCON, Nigeria spent over N400 billion on the same project.

On the sale of ALSCON, she said, “The Company was sold for N37.5 billion to Rusal Nigeria limited while N19.5 billion was discounted for the dredging of Imo River to enable Nigeria Gas Company, NGC supply gas to ALSCON. The reason is because the prices Nigeria pays for construction of plants were a lot higher than the world standard. A similar plant built in Mozambique was built for $800 million.”

The D-G refuted claims that over 80 per cent of the privatised firms are not performing.  In her own estimation, close to 70 per cent of the 120 enterprises so far privatised are performing satisfactorily. Her words, “the privatization exercise has not failed as people are made to believe. It is just about 33.6 per cent of the companies privatized so far that are not doing well. 66.7 per cent of the companies are flourishing.”

“BPE through its Post Privatisation Monitoring (PPM) department conducts periodically, performance assessment/compliance monitoring of the privatised enterprises to ensure that the core investors or concessionaires implement the Developmental or Post Acquisition Plans as they covenanted in the Share Purchase Agreement (SPA).

Complimentary to PPM efforts, international agencies such as DFID, World Bank had in the past commissioned independent consultants—-NCEMA (2003), IBTCI (2008), and Adam Smith Institute funded under the DFID Grant (2005-2006), etc to carry out performance/impact assessment of privatisation” the agency’s image maker, Mr. Chukwuma Nwoko also said in a document circulated among media organisations.

According to him, overall, a significant number of the privatised enterprises are doing satisfactorily in terms of increased production and improved financial performance. A number of the enterprises that were virtually dead or moribund have been rehabilitated, particularly, Jebba Paper Mill, Savannah Sugar Company and Eleme Petrochemicals, among others.

He said that such achievements were recorded against the backdrop of increasing difficult operating environment in Nigeria with the virtual collapse of infrastructure and the attendant manifold increase in the cost of production.  He said, “let’s look at Eleme Petrochemical in some details. The company was drawing from the Treasury to remain afloat.  Between 1999 and 2004, it had total liabilities of N210, 130,797, 000.

In fact, it got subvention of N22, 445, 057,000 in 2004.  With the privatisation of Eleme Petrochemical in 2006 which has nursed it back to health, the Federal Government got as dividend for its 15 per cent equity, N3,206,250,000 in 2008; N3,546,797,000 in 2009; and N1,691,250,000 for 2010 half-year.

In fact, the compliance status of EPCL is highly satisfactory. Eleme exceeded the projected production target for the first year of production (85,200Mt) as contained in the Post Acquisition Plan.

“The performance of the concessioned sea port terminals is very satisfactory despite the inability of the Government to adequately fulfil its own obligations under the concession agreement.  Most have by far surpassed the covenants and projections contained in the concession agreement in terms of infrastructural development, procurement of equipment and traffic volumes.

The ambience of the port terminals and safety of cargo have significantly improved.  Most of the indicators of increased efficiency – lower ship dwell and turnaround time, faster clearing of goods, improved cargo turn around, etc – have significantly improved compared to the pre-concession levels. This is attested to by all impartial analysts of the Nigerian port system.

This is not to say that, one of the key objectives of the ports reform, reduced cost to users, has been completely achieved. This is largely due to several factors, most of which are not the making of the terminal operators and sometimes beyond their control.  “However, the Ports Reform was somehow hamstrung mid-way.

The envisaged passage of the necessary bills (Ports & Harbour Bill and National Transport Commission Bill) has not happen. Thus, NPA has not been restructured for greater autonomy and efficiency in tandem with the objectives of the reform.  Lack of passage of the NTC Bill and establishment of a single economic regulator has created a vacuum”.

Mr. Nwoko admitted that there are a few enterprises whose performance is less than satisfactory mostly in the Iron and Steel Sector and particularly those that were privatised through guided liquidation—Jos Steel Rolling Mill and Oshogbo Steel Rolling Mill. Oshogbo Machine Tools, though privatised through core investor sale was yet to commence production.

Sen Lawan had also queried BPE’s failure to pay in all the over N200 billion proceeds of the privatisation programme into the federal government account with the Central bank of Nigeria.  According to him, the lodgment of the proceeds in commercial banks instead of the Central Bank of Nigeria as provided by the act setting up BPE was illegal.

The Chairman must have failed to realise, as the BPE boss pointed out that it is out of the proceeds of each enterprise that funds have to be taken to settle labour and other liabilities.

There have been doubts about the honesty of purpose of the privatisation probe among members of the public.

The legislature have undertaken probe of several sectors without a conclusive benefits to the public and there are fears that the current exercise on the BPE may only end up in targeting individuals and halting the entire programme.

Plot against PHCN privatisation

Some interests in certain parts of the country are said to have resolved to halt the privatisation of the Power Holding Company of Nigeria, PHCN.  As learnt, it was the same group that masterminded the reversed sale of the refineries by late President Umaru Yar’Adua.

Those who have been benefiting from the inefficiency of the old NEPA want to continue to maintain the status quo, no matter the cost to the economy.  They are said to have decided to block current moves by the Minister of Power, Prof. Bath Nnaji and the Economic Management Team to push through with the power privatisation.

Rather than sell the generation and distribution companies, the main problems in the sector, some interests close to the Aso Rock seat of power, were said to be working towards distorting the exercise. At worst, they plan to introduce the Brazilian model where the industry would largely be controlled by government, with huge annual budgetary outlays that can be diverted to other uses through patronage.

As the committee inspects the enterprises, they should also return to invite former government officials and the contractors who allegedly inflated the contracts for the establishment of those enterprises.  The truth to be revealed would be very instrumental in making well-informed recommendations.

NASS should pass necessary Bills

The senators should also ask themselves how their failure to pass vital reform Bills have contributed in frustrating core investors in the sectors.  For instance, several ports reform Bills, Power Sector Bills, Transport Sector Bills (especially for roads) and Petroleum Industry Bill PIB are waiting for passage in the National Assembly.

There is certainly room for improvement in the privatisation programme, especially as regards transparency of transaction process.  BPE officials must not create room for doubts about their integrity.  The Osuji case is a bad example of how not to superintend over the sale of public assets and indeed Mr. Osuji deserves appropriate punishment to serve as deterrent for his ills.

There should be no special interests that would create distortions in the processes of each sale.  Winners and losers of bids must be satisfied that indeed, BPE and CNP actually followed their own rules to the letter.  Besides, a more thorough due diligence should be conducted on all bidders to ensure they have the financial muzzle and technical know how to implement their Post Acquisition Plans, PAPs, to the letter.  That is the only way to ensure value added in the programme.

Until the privatisation of many of the enterprises, their workers were drawing salaries for no work done.  Huge sums of money therefore had to be taken out of their sales proceeds to settle staff liabilities.  In the case of NITEL which remains a problem to the programme after four unsuccessful attempts, the federal government had to provide funds through the Ministry of Finance to pay arrears of staff salaries and other allowances.

Each time one remembers the rot that brought the NAFCON to its needs, one sees the reason for privatising every government business, if that would guarantee a more productive economy in Nigeria.