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BPE And Privatisation That Is Not Beneficial To Nigerians

Published on April 22, 2014 by   ·   No Comments

John Tosin Ajiboye

DG BPE Benjamin Dikko

Privatisation has been defined by economic scholars and jurists œ…to encompass a wide range of options for involvement of private capital and management in the running and operations of public enterprises…” It may involve the total transfer of public ownership and asset structures to private companies.

Or conversion of public enterprises to private entities or incorporation of new private entities in place of public enterprises or public-private participation in the running of public enterprises, which can be by management transfers, leases, operational concessions, development leases, build and transfers (BOT) etc.

Like every other issue in life, privatisation has its own advantages and disadvantages. Part of several advantages of it include; reducing government bureaucracy, redistributing wealth, reducing state monopolies and ensuring level playing fields, reducing bad management, increasing competitiveness, increasing the quality of goods and services, reducing corruption and control by government, increasing staff quality and supervision, freeing up government funds for more pressing problems, creating employment, re-invigorating the local economy, expanding local businesses, attracting direct foreign investments, enhancing trade control regulations, etc.

On the other hand, some privatisation problems include private firms concentrate on profit making to the detriment of essential public service, private firms render more expensive services, private firms fail to invest in infrastructure, reduction of public workforce and experience, private companies are interested in short term benefits, privatization replaces state monopolies with private monopolies, it reduces public accountability, it is subject to abuse by the regulators and private enterprises, private firms encounter problems of new government regulations, private companies replace state corruption with private corruption etc.

The major privatisation exercise that was implemented against public interest recently in Nigeria is electricity and ever since that exercise, electricity supply has worsened, while consumers pay higher even as the lights have gone off under excuses that questions the competence of the new electricity companies.

Therefore, the recent announcement by the Director General of the BPE, Benjamin Dikko, that plans have been concluded to privatise refineries as well as commercialise the Nigerian Television Authority, the Federal Radio Corporation, the News Agency of Nigeria, Nigeria Films Corporation, Skypower Catering and Hotels Services and the Commodities and Exchange Commission, the partial privatisation of Bank of Agriculture and the Bank of Industries, and the commercialization of National Parks came as a surprise to many Nigerians and the questions they are asking is; why all these important public properties will be sold very fast without due consultation with the stakeholders?

According to NLC, œthe haste with which government seemed determined to sell off public properties to members of the ruling class and their cronies under the guise of making them more efficient is alarming.
œThere is the need for caution because these properties belong to the Nigerian people as a collective wealth and the people have never been consulted and their interests considered before the sales.”

NLC said it was scandalous that the same government which has always promised to use the gains from petroleum price increases it has received over the years to reactivate existing refineries and build additional ones can turn around to announce the privatization of refineries.
œThis is clearly unacceptable, and the public have strongly opposed this attempt several times in the past, even on the floor of the National Assembly,” it warned.

œWhat we need in Nigeria is not a blind adoption of neo-liberal policies that mortgage the interests and future of our people. Our national economy depends largely on the oil industry and if we allow the industry to be handed over to private individuals, it would then mean the entire economy would become private property run by private individuals, mostly cronies of those in government, against our collective interests,” NLC added.

Privatization in Nigeria was formally introduced by the Privatization and Commercialization Act of 1988, which later set up the Technical Committee on Privatization and Commercialization (TCPC) chaired by Dr. Hamza Zayyad with a mandate to privatise 111 public enterprises and commercialize 34 others.

In 1993, having privatized 88 out of the 111 enterprises listed in the decree, the TCPC concluded its assignment and submitted a final report. Based on the recommendation of the TCPC, the Federal Military Government promulgated the Bureau for Public Enterprises Act of 1993, which repealed the 1988 Act and set up the Bureau for Public Enterprises (BPE) to implement the privatization programme in Nigeria.

In 1999, the Federal Government enacted the Public Enterprise (Privatization and Commercialization) Act, which created the National Council on Privatization chaired by the Vice President, Alhaji Atiku Abubakar.

A large number of privatization controversies in Nigeria includes the entangled privatization exercises of NITEL, Pentascope, PHCN, the power sector reforms, the oil sector reforms particularly NNPC and Nigerian LNG, the ports reforms, the inability of 18 successor companies to Power Holding Company of Nigeria (PHCN) to function, the sale of national steel companies namely Ajaokuta Steel and Delta Steel to Global Infrastructure, Daily Times, African Petroleum, ALSCON, NAFCON, Eleme Petrochemicals, the constant labour disputes, the draconian sale of Federal Government properties in Lagos and Abuja considered by patriotic civil servants to be the greatest economic heist of the 21st century in Africa, the revocation of 18 private refineries licences, the proposed and ill advised privatization of Unity Schools, the sale of the Trade Fair Complex, the controversial auction sale of African Petroleum, the sale of Stallion House etc.

By a recent admission of the BPE in a national newspapers, only 10% out of 400 privatized firms in Nigeria are properly functioning as at today. The specifics of this discontentment can be attributed to several technical complications inherent in the gamut of the exercise.

From all indications, there was no evidence that previous privatisation exercises have succeeded. Corruption has remained the omnipresent obstacle that has eroded the very essence of the exercise, that is provide efficient public service to the Nigerian public through the private sector at subsidised and competitive rates.

The fundamental component of corruption is that the very basics of privatization laws and rules are often partially relegated or entirely discarded for expediency or self interest in the conduct of the exercise. In addition, genuine privatization consultants are ostracized from the exercise for professional spin doctors and wheeler dealers.

Companies with small asset turnover are concessionaire to handle larger public agencies, bigger than their capacities. Financial records of privatized firms are often not audited or at best incoherent. Due diligence is conducted at the data room of the BPE instead of a full physical and financial audit of the government firm creating room for manipulations and distortions. Landed Assets of substantive or principal Government corporations are manipulated and converted as those of subsidiaries.

Asset acquisition agreements or share purchase agreements are often lopsided or inchoate leading to unnecessary court litigations.
The case of Ajaokuta Steel Rolling Mill is a shocking instance. According to newspaper reports, this industrial complex built with over $1.5 billion by the Federal Government of Nigeria, but was sold to an Indian company for $30 million. Delta Steel Company, Aladja was also sold for less than 20% of their actual market value.

Oshogbo, Jos and Katsina steel rolling mills are not functional today after they were sold at scrape prices to organizations that do not have the capacity to manage and turn them around. There have been massive assets stripping in these steel rolling mills to pay for their reserved prices. After the disposal of stripped assets, these companies repatriate their œprofits” back to India.

Another funny case is that of Daily Times of Nigeria. Until now, Daily Times was the largest Nigerian newspaper corporation in the seventies and early eighties. Owning landed properties worth billions of naira all over Nigeria, it was sold by the BPE to Folio Communications at an undervalued price. The matter was finally resolved by a Federal High Court of Nigeria ruling in January 2010 voiding the sale of 140 million shares of Daily Times of Nigeria (DTN) to Folio Communications by the BPE.

The core investor of DTN (Folio Communications) according to the court, never paid a single kobo for Daily Times. Instead, it used the shares of Daily Times and its expansive assets network to secure a loan of N750 million from Afribank.

A loan DTN or Folio has not even repaid after selling off several Daily Times properties and assets. The Federal High Court ruled while voiding the sale of Daily Times to Folio Communications by the BPE that the action of the core investor is oppressive and a breach of fiduciary relationship.

We have also read how NITEL suffered a N100 billion deficit after the Pentascope management contract. We also read how over $40 million was paid by BPE to a management firm, Denham Management Limited to conduct the Privatization Shares Purchase Loan scheme, an exercise in limbo since it commenced in 2003.

Lastly, if privatisation will be successful in Nigeria it must be carried out with sincerity of purpose, i.e. almost every group should benefit as a result of divestiture. Workers will be among shareholders. Consumers will be better off because of better services. New graduates and the unemployed will get jobs because of expansion.

Government will be relieved of the burden of subsidies. Investors will gain investment opportunities. Ultimately, the public (both foreigners and nationals) will be free to pursue any private economic interest.

On the contrary, we have read how billions and billions of naira disappear from government accounts all in the name of privatisation and there is no record of any previous Director General or top official of the BPE or Government official ever being probed, investigated or prosecuted by the EFCC or ICPC for corruption or economic sabotage despite all the privatization scandals we have witnessed in the last eleven years.

Therefore the EFCC and the ICPC must investigate and prosecute all those involved in the privatisation scandals in the last decade. In the same vein, total enforcement of stricter corporate regulations and ethics that will allow transparency and accountability and enhance the quality of the Nigerian privatisation exercise must be carried out by BPE instead of all this fraudulent privatisation exercise that we have witnessed in the past which have robbed Nigerians of their collective wealth.

Until all these issues are addressed government does not have any moral right to sell any of the public properties hastily and on that point I am joining the Nigeria Labour Congress and other well meaning Nigerians to call on the Benjamin Dikki lead Bureau of Public Enterprises to halt the proposed sale of more public enterprises, and the National Assembly to probe all previous sales and retrieve public properties that may have been sold to private interests fraudulently.

•Ajiboye, a public affairs analyst writes in from Lagos, Nigeria via johntosin21@yahoo.com. +2348138966292

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Posted by on April 22, 2014, 8:50 pm. Filed under Opinions.
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