 Privatization |
Seeking to transform Nigeria's economy the new democratic government led by President Olusegun Obasanjo sees privatisation as a pillar of its economic policy and a veritable path to the country's international competitiveness.
For three decades, Nigerian governments insisted on controlling the "commanding heights" of the economy. So, electricity, telecommunication, railways, petrochemicals and refineries, steel and other heavy industries remained the exclusive turf of the public sector.
Nigeria's current privatisation programme is overseen by the National Council on Privatisation (NCP) which is headed by the vice president, Alhaji Atiku Abubakar.
The 12 member council which has representatives of the private sector and economic agencies of government decides on policies and directions for the programme. The Bureau of Public Enterprises, BPE, the implementation agency is headed by Mr. Nasir El-Rufai. Nigeria's privatisation history according to Mr. Bernard Verr, a former head of the BPE, first began in 1986 affecting 86 enterprises with a final sale value of less than US$ 400 million. The present government's commitment to this second privatisation programme which commenced on December 13, 1999, is in line with its vision of having a country where things work, a buoyant economy and a proper balance between private and public sector activity.
The current exercise envisages full privatisation of 25 enterprises, partial privatisation of 36 enterprises (including public utilities and companies in the petroleum and petrochemical sectors) as well as the commercialisation of 33 enterprises. The first stage which should be completed by December 2000 involves government's divestment of the balance of its equity holding ranging from 10 to 40 per cent in telecommunications, aviation, power distribution and generation, banks, cement plants and petroleum marketing companies already listed on the Lagos stock exchange. The second stage, scheduled for January 2001 to December 2001, will witness the first set of cross border initial public offer (IPO) in fertilizer, sugar, paper, steel, media, insurance companies, hotels and vehicle assembly plants in which the government has equity stake of between 35% and 100%.
The final stage will be the partial privatisation of enterprises in which the government currently has 100% equity including public utilities, refineries.
In-built success factor of the Nigerian privatisation program includes commitment from the top and political will. This is guaranteed by the unflinching support of President Obasanjo who inaugurated the NCP and bestowed full responsibility on the vice president as the chairman. The privatisation exercise aims essentially to create competition in the economy especially with regard to the utilities. All anti-competition laws in power, telecommunications and related sectors have been abrogated. Regulatory institutions are being strengthened with expanded scope where they exist and new ones being set up from the scratch where they don't.
The support of multilateral agencies as well as independent experienced consultants is being sought. The NCP is taking due care to avoid conflicts of interest among the advisers it is engaging while it is doing its utmost to promote an atmosphere of transparency that will attract quality investors as well as appease domestic political resentment. Transparency is the Government's key word for the success of the privatisation program. Restructuring the Nigerian economy is more a question of transparency than time. The Federal Government urges potential investors to be patient, as it tries to be very meticulous and create the most favorable framework for sustainable foreign investments.
The institutional framework for implementing the privatisation programme which is placed at the highest level in government and the organised private sector ensures effective synchrony between policy conception, articulation, implementation, feedback and control.
The privatisation and commercialisation Act 1999 defines the scope and the technical processes and procedures for implementing the privatisation programme. Nigeria's privatisation process involves a full complement of quality private advisers - lawyers, bankers, technical people - at the onset. Government is not involved in the technical aspects of structuring transactions although it will provide quality control. The NCP is putting its best foot forward by starting with viable companies already quoted on the stock exchange. | Foreign participation is integral to Nigeria's current privatisation exercise. Involving international privatisation advisers helps the transparency process in addition to securing the requisite knowledge and skills required for the complex work of privatising utilities. Bringing the considerable expertise and experience of world-renowned financial and technical advisers to bear on the programme will boost the confidence of international investors as well as provide an optimum investment climate.
Another critical element is the involvement of core investors with the capabilities to add value to an enterprise and making it operate positively in the face of international competition. Core strategic investors should be able to turn around the fortunes of an unhealthy enterprise. They should possess the technical know-how in relation to the activities of the enterprises they wish to invest in.
The residual effect of all these is that the economy will have enhanced ability to create jobs. Furthermore, privatisation will improve efficiency at the enterprise level. It will impact positively on the budgetary and financial standing of the government.
By fostering broader capital ownership, privatisation will improve income distribution. Privatisation will reduce the size and scope of the public sector's share in economic activity. This will reduce the cuthroat competition for the spoils of office thereby engendering political stability.
Mr. Nasir El-Rufai in November 1999 replaced Mr. Verr as member/secretary of the National council on privatisation and director general of the bureau of public enterprises. Though he has cut the image of being a more ardent believer in the internationalisation of the privatisation programme he insists there is no fundamental change in approach.
Mr. El-Rufai who has been involved in the privatisation exercise from past administrations says the current one is quite ambitious.
A private sector professional who has advised past heads of state, El-Rufai says he is passionate about the privatisation program he helped design and which he is now saddled with implementing. He says privatisation is the key to Nigeria's political stability as well as economic progress.
El-Rufai says he is bringing a complete private sector approach to the implementation of the programm, that he was brought in to hasten the implementation as both the President and Vice President expect to see it move faster. Besides, his previous dealings with the World Bank and the IMF give these multilaterals confidence that Nigeria is really serious about the privatisation exercise.
Pragmatism is the driving spirit behind Nigeria's privatisation, not ideology and certainly not pressure from multilateral institutions. El-Rufai puts the motivation in perspective: "We are doing this because we have worked out on our own that it does not make sense to spend 2-3 billion dollars every year to support public enterprises that employ about 200,000 people. It is unfair to spend 3 billion dollars to support such a small percentage of the work force and they don't function. No public enterprise in Nigeria functions well, not a single one. We feel that we can no longer sustain this unjust and inequitable situation".
The Director General says 60% of the core strategic partners who have shown interest are foreign. "Most of the investor applications we have had are Europeans. There are a few Americans particularly in the financial services sector. But in oil marketing, in cement, they are mostly European. A few Asians but very few". He is taking steps to increase international awareness of the privatisation opportunities in Nigeria.
Foreign investors are particularly sought for telecommunication and power as well as downstream oil and gas. Then there is the solid mineral sector where the Nigerian Mining Corporation and its subsidiaries are for sale. "Their potentials are largely untapped", says El-Rufai.
A senior resident representative of the IMF Mr. Christopher Brown observes that privatising state-owned enterprises will give Nigeria a private sector-led and technology driven economy which it needs to remain relevant in the global economy. The IMF and World Bank believe that elimination of structural obstacles through the privatisation programme will be crucial in reviving economic growth and job creation in Nigeria. A member of the World Bank Group, Multilateral Investment Guarantee Agency (MIGA) ,involved in the promotion of foreign direct investment in developing countries, has indicated willingness to offer industrial guarantee and technical assistance to Nigeria in her current effort to attract foreign investment. Since its establishment in 1988, MIGA has guaranteed 420 projects including 62 in Africa. The organisation has also undertaken to help market Nigeria's privatisation programme globally through the agency's free on-line information service called privatisation link. Privatisation, many Nigerians have come to accept, is liable to cure much of the ills of the economy if it is associated with deregulation, decentralization, decontrol and economic democratization. |
