Nigeria: Ghosts of privatisations past rear head in asset sale fight
The government’s attempt to boost finance with a sell-off of assets meets resistance.
Nigeria’s attempt to raise as much as N252 billion ($6.9 billion) from sales of undisclosed government assets has pitched the Bureau of Public Enterprise (BPE) in a fierce battle with the National Assembly, who accuse the bureau of opacity in its operations.
Finance Minister Zainab Ahmed said earlier in February that the West African nation would look into selling some of its assets and taking more debt from domestic and international markets in effort to boost finances in order to fund Nigeria’s record N10.59 trillion ($35bn) budget for 2020.
- The new plan comes months after international oil companies, including Exxon Mobil, Shell, and Chevron said they were selling several of their Nigerian oil fields in moves to diversify their investments.
- It is also a year after the federal government said it was selling its stake in oil ventures to boost finances.
The government announced plans last September that it was going to raise N1.07 trillion ($2.9bn) from the sale of property and businesses by 2022 to shore up dwindling revenues.
According to Ikemesit Effiong, Head of Research at SBM Intelligence, the move comes as no surprise.
- “The administration’s hand has been forced by the double whammy of the revenue crunch it has experienced as a result of the general depression in oil prices and the heavy debt it has taken on as a result of this revenue shortfall,” he said. “As long as this fiscal situation persists, the government will have no choice but to pursue this course.”
The Nigerian National Assembly on 12 February, said it was “worried that the BPE has not lived up to expectation by the slow pace with which it handles the privatization process and the delay is resulting into loss of investments which would have helped to improve the economic profile of the country” and said that the bureau is known to be “evasive about the process whenever inquiries are made to it”.
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According to the National Assembly, 20 public enterprises in the energy and manufacturing sectors, including
- Kaduna Refining and Petrochemical Company Limited,
- Port Harcourt Refining Company Limited,
- Nigeria Sugar Company Limited, and
- Nigerian Machine Newsprint Manufacturing Company Limited
- have been listed for privatization since 2007, but information was scanty on the state of play on those assets.
“The extent to which the BPE has completed the privatization process with respect to those public enterprises has not been ascertained as the Bureau is evasive about the process whenever inquiries are made to it,” said parliament. It, therefore, resolved to mandate the Committee on Privatization and Commercialization to liaise with the Bureau of Public Enterprises towards speeding up the privatization process and report back within six weeks for further legislative action.
The spokesperson for the BPE was not immediately available for comment at the time of filing this report.
Privatisation in Nigeria
Privatisation in Nigeria has a chequered history.
- “While the liberalisation regime has worked wonders in telecoms, it has been managed terribly in the power sector, where the distribution companies have lost N713 billion ($1.95bn) in 2017 alone. The amount owed to the National Bulk Electricity Trader, the government-owned manager and administrator of the country’s electricity pool and the Transmission Company of Nigeria by the distribution companies is now N1.1 trillion ($3bn),” says Effiong.
- “This conversation around power is important because the country’s ten National Independent Power Projects plants are the prime assets being targeted by the government to broaden its revenue base.”
While privatization has worked mostly in the telecommunications sector, according to the World Bank, history shows that privatization in Nigeria “reflects some of the problems which have beset many other development processes: lack of political commitment, poor design, insufficient resources, weak management, and corruption”.
Nigeria began to privatise its assets in the 1980s during the Buhari/Idiagbon regime to address the structural problems confronting the country’s economy.
- Some 1,029 public enterprises were privatised between 1988 and 1993, before the eventual establishment of the Bureau of Public Enterprises (BPE) in 1999, the year Nigeria returned to democracy.
Since the inception of BPE, Nigeria made a total of N552.2 billion ($1.51bn) between 1999 and 2007 and privatised 147 public enterprises in the same period, according to the bureau’s data cited in the Entrepreneurial Journal of Management Sciences (EJMS).
Two years ago, the Director General of the privatisation agency, Alex Okoh, said 52 out 142 (37%) of privatised public enterprises from 2004 were non-performing.
He attributed non-performance to the business environment in Nigeria that had forced privatised public enterprises to either shut down or relocate to neighbouring countries, signifying a failure by the government to provide a safe and enabling business environment in the country of 193 million people.
- “If the government remains the primary manager of the privatisation process, what will happen is that there will be an immediate revenue spike as the asset divestments are executed but without the attendant structural reforms, especially in the power sector, the current state of low productivity, high debt, stunted competition and low growth will continue to endure”, Effiong said.
Bottom line: Don’t expect the mooted privatisations to close any time soon.