Echoes of Senate probe of BPE
Written by Ayodele Adesanmi Thursday, 18 August 2011
Senator David Mark, Senator Ahmad Lawan, Bola Onagoruwa and Mallam Nasir el-Rufai
Ordinarily, privatisation and commercialisation of public enterprises is a policy meant to relief government of liabilities and waste. It was also aimed at ensuring efficiency in the running of enterprises. Those who hold this view believe that privatisation would enlarge the scope for private sector to operate.
The proponents of the privatisation also insists that it was an economic strategy aimed at reducing the role of government in economic activities believing that public enterprise have consumed a large proportion of national resources without people benefitting from the large investment. In Nigeria, it was reported that in 1998 alone, over N268 billion was spent on public enterprise in subsides and waivers, the amount that would have assisted tremendously if invested in education, health, and other social sectors.
To many Nigerians, the experience so far has been uninspiring as many of the companies sold or privatised have remained moribund. To many observers, privatisation and commercialisation of public enterprises in Nigeria mean more like enriching the few at the expense of the majority. They also see it as amounting to selling off of the common wealth of the nation to a privileged few.
The government, therefore, set up the Bureau of Public Enterprise (BPE) to privatise and commercialise, as the case may be, public enterprises with the objective of reducing or eliminate the drain on public treasury. It also seek to reducing corruption, modernise technology, strengthen domestic capital markets, promote efficiency and better management, reduce debt burden and fiscal deficit, resolve massive pension funding problems, broaden the base of ownership of business. Others include generating funds for the treasury, promoting governance, attracting foreign involvement and attract back flight capital. Whether the BPE has met and realised these objectives is a matter that is open for debate.
In the face of the widespread failure of many of the privatised companies, many are quick to say that the exercise had failed. One of such Nigerians is Senator Ahmad Lawan, former Chairman, Senate Committee on Public Accounts who moved a motion on the floor of the Senate to draw attention to the activities of BPE in the last 12 years. Lawan, alongside 25 other senators, had moved the motion in July, seeking a probe of the activities of the BPE as regards privatised companies. The senators contended that the Federal Government embarked on the privatisation and commercialisation of federal public enterprises through the enactment of the Privatisation and Commercialisation Act No 25,1988, the Bureau of Public Enterprises Act No 78, 1993 and the Public Enterprises Act, 1999.
Lawan, who moved the motion, recognised that the primary and fundamental purpose of privatisation by the Federal Government is to divest and free the subsidies that were paid into the operations of the enterprises, in order to better fund the provision of critical and crucial infrastructure. He said that the senators were surprised that the chairman of the National Council of Privatisation (NCP), Vice-President Namadi Sambo, told the nation that 80 per cent of government companies that have been privatised have failed to operate properly due to lapses in the privatisation process. He observed that, due to the collapse of the privatised companies, there are massive loss of jobs and colossal loss of financial returns to the national economy, giving the example of the steel sector that used to employ up to 20,000 workers, but now with less than 4,000 workers.
At the end of the day, the entire Senate supported the motion and an ad hoc committee was subsequently set up to investigate the activities of the BPE from 1999 to date. The committee, which has two weeks within which to submit its reports, has Senator Lawan as the chairman with Senators Babafemi Ojudu, Alli Ndume, Philip Aduda, Infeanyi Okowa, Hope Nzodima and Mohammed Magoro as members. According to its terms of reference as spelt out by Senate President David Mark, the committee is to investigate the process through which the BPE privatised the companies and establish the agreements and conditions upon which the privatisation was consummated. The committee would also determine how much was realised from the sale of the companies and where the proceeds were paid into; determine how many jobs were lost and gained after the privatisation exercise and identify factors that are militating against the expected improved and good performance of the privatised companies.
The Senate President, during its inauguration, said; “the purpose is to find out why the privatisation has not gone the way government intended it to go. Let me say, straight away, that it is not to witch hunt anybody, nobody is a target. Government may have made some mistakes in the process. The idea is to find out where the mistakes are, rectify them and see whether we can put them back. We represent the people and we hear the grumblings and the pains of the people, which is, indeed, the feelings of Nigerians. That is what we are expressing here today and that is why we set up this committee to look at what has happened with all the privatised companies.”
Stating that no position has been taken yet, Mark said “Senate has not taken any decision until the committee completes its findings. The finale position would be the outcome that would emerge at the end of the exercise. There is no doubt that you will be under tremendous pressure because you are dealing with powerful people and organisations. You will be exposed to temptations and if you do not give in, there would be blackmail but you should be courageous in your findings”.
The Ahmad Lawan-led committee immediately set for work and called for memorandum. It also set aside six days for public hearings on the steel rolling mills, the automobile assembly plants, ALSCON and EMCON; the cement, gas and oil and marketing companies and the Eleme Petro-Chemical Company Limited. Also on the list of schedule for public hearings are hotel and insurance and sugar companies, former government-owned media, mining companies, the Tafawa Balewa Square (TBS), the LITC and paper mill companies, as well as the sea ports, aviation industry and fertilizer companies. The sitting lasted from Monday to Saturday.
Incumbent BPE Director-General, Ms. Bolanle Onagoruwa, was the first to face the panel. She agreed that there is clear evidence that public enterprises in Nigeria have failed woefully to live up to expectations, noting that ”most rational Nigerians, including this distinguished committee, have recognised that privatisation is desirable and inevitable – state capitalism has failed, is outdated and unsustainable.”
She revealed that the BPE had privatised 122 enterprises from 1999 to date and that the percentage of performing privatised enterprises, vis-a vis the non-performing ones is 66:34, despite the difficult operating environment. She insisted that policy inconsistence, failure of government to perform its own obligations and infrastructure deficits are some of the critical challenges facing the privatised enterprises.
Onagoruwa, while failing to give the gross total amount got as proceed from the privatisation exercise, said; “from the 122 enterprises that have been privatised so far, N146 billion has been realised from the sales. 33.6 per cent of them are doing poorly while 66.3 per cent are doing well. The privatisation and labour expenses are deducted before the balance is remitted for effectiveness. It is the net sum that is remitted and that is in line with the guideline approved by the National Council on Privatisation (NCP). What we are trying to do is to nurture the companies to growth. It is not that the investors have not made efforts, but there are constraints. We try to look at policy issues to see where we can help them. If we are discipline on the policy issue, we will make progress.”
However, Senator Lawan cited Section 19 (1) of the Privatisation and Commercialisation Act to fault the BPE DG’s claim, declaring that the lodgments of the sales proceeds in commercials banks are illegal. He also pointed out that Section 80 (2) and (3) of the 1999 Constitution allows the BPE to only carry out expenses based on the appropriation of the National Assembly. Querying why the BPE should operate any other account outside the law which provided for only an account with the Central Bank of Nigeria (CBN), Lawan directed the BPE DG to furnish the committee with details and list of all the banks where the sales proceeds have been lodged, including the interests yielded from 2000.
Asking which part of the 1999 Constitution or the Act empowers the BPE “to open these accounts in commercial banks?”, he said; “Just calm down, if you don’t have the figure for the gross sales now, you can give us later. But that information is essential. Nigerians need to know the total amount before any deduction was made. Provide all the accounts, the proceeds amounts and all the interests yielded so far.”
The committee was told, on its first day of sitting, that the Aluminum Smelter Company of Nigeria (ALSCON) was sold at the sum of $250 million and that $120 million is yet to be paid. The Deputy Managing Director of ALSCON, a Russian, Vitally Kuznetov, was ordered by the committee to immediately arrange for the payment of the balance of $120 million as it has no justification to continue to hold on to the money. The committee also discovered several irregularities in the sales and commercialisation of many public companies. It faulted the realisation of N146billion from the sales of 122 companies, noting that the fund amounted to nothing after deducting expenditure incurred in the exercise.
The committee also summoned Musa Sada, the Minister of Mines and Steel Development, to explain how Ajaokuta Steel Rolling Mill was sold. This was sequel to the denial by Ms Onagoruwa of any knowledge of the sale of the company.
On the second day of its hearing, the committee discovered that BAU Group of Companies originally bided and emerged the preferred bidder for the Delta Steel Company, Aladja, Delta State. It immediately advised the BPE to return the ownership to the company.
The DG, during the sale of the steel company, Dr Julius Bala, said the winner of the bid was BUA Group, but the then Federal Government preferred Global Infrastructures. He said, “There was a bid and BUA Group emerged winner and when they were submitted to the National Council on Privatization (NCP), they directed that the DSC must not be sold for anything less than $25million.
Bala, who admitted that he signed the Share Purchase Agreement (SPA) for the purchase, denied ever signing the letter which gave BUA Group the approval to pay for purchase of DSC. “Before the DG signs any agreement, there has to be approval from the chairman of the NCP. So there was approval given to me to sign by the NCP. I signed the agreement as the DG against the background of the political situation and despite the fact that it was made known to me that I was leaving. I was made to sign the agreement but I was not blackmailed.”, he said.
It was also discovered that Indorama has 75 per cent shares in the Eleme Petrochemical Company Limited, the Nigerian National Petroleum Corporation (NNPC) has 10 per cent, the host communities have 7.5 per cent, workers in the company have 2.5 percent, while the Federal Government has five per cent.
The committee, however, directed the BPE to suspend further transactions on the sale of the Federal Government shares in the company. Equally the BPE was asked to return the sum of four billion naira, being the five per cent of the total amount paid by Indorama to buy the petrochemical company because it was illegal since it is by law reserved for the Federal Government. Indorama, which bought the company at the sum of N3.2 billion in 2006, was asked to further pay for the reserved five per cent.
Meanwhile the adhoc committee, on Wednesday, asked the BPE to make available records containing total earnings of all privatised companies since 1999, as well as all the bank accounts and interests accruing to the government. The committee was also told of the demand by the Bachana community in Adamawa State which is demanding the cancellation of the privatisation of the Savannah Sugar Company, Numan, to Dangote Group. The community had submitted a petition through the former president of the Nigeria Labour Congress (NLC), Comrade Pascal Bafyau, to that effect.
The community said that Dangote Group had defiled the terms of agreement leading to the privatisation and that it has refused to expand the sugar company, even when the community had volunteered lands.
Former Minister of the Federal Capital Territory (FCT), Mallam Nasir el-Rufai, on Thursday, told the committee that political interference was the cog in wheel of the successful privatisation exercise in the country. el-Rufai, who was the DG of the BPE between November 1999 to June 2003, disclosed that the mess in the BPE started with the appointment of his successor from outside the bureau against his recommendation.
He said that he had wanted the appointment to come from within the Bureau because of the huge amount of money spent on training of the officers and their knowledge about the privatisation process and the technical nature of the process.
“But the government employed someone that was literarily fired from the BPE. We have never investigated anybody for corruption, but the only person that we had course to have investigated ended up being the DG of BPE. I knew everyone that work with me, their capability and competence. The public hearing will not be completed without speaking about the staff of the BPE. I worked with them and knew each of them by the first name; they were only 180 staff. I am very proud of the BPE because my years there are my very best. But unfortunately one of the people we investigated ended up being the DG,” he said.
According to him, the government was losing N265 billion to support inefficient and corrupt enterprises before privatisation, adding that the objective of the privatisation in Nigeria was not to create job, but to make those companies functional. He added that 23 companies were privatised, out of which 22 were concluded before his exit, adding that he paid into the government treasury the sum of N57 billion within the period, noting that Nigerians should be grateful to the BPE for saving them the pains of running inept public enterprises.
The Stakeholders Forum on the Concession of Lagos International Trade Fair Complex also accused the Federal Government of conniving with AULIC Nigeria Limited to acquire the entire trade fair at a reduced cost of N10 billion. The forum was reported to have invested about N70 billion in the Trade Fair complex. Stakeholders who presented petition to the Senate Committee said, despite the court decision ordering AULIC Nigeria Limited not to tamper with the area occupied by the traders, Nick Eze, who is the owner of AULIC, was adamant and has continued to collect rent on the complex in contravention of the agreement.
The battle for the ownership of the Daily Times of Nigeria (DTN) also took the centre-stage with the preferred bidder, Folio Communication Limited, insisting that it fully paid the sum of N1.2 billion for the company in 2004 and received the approval of the BPE to sell some of the assets of the company. The Managing Director of the company, Mr Seminu Makanjuola and Chairman of Folio Communication, Mr Fidelis Anosike, both tendered documents to buttress the position of the company. But representative of DSV, business partner to Folio, Senator Ikechukwu Obiora, told the committee that Anosike should not have emerged core investor on the ground that he initially did not put any money down but used part of DTN assets to obtain loan to pay for the company.
However, in his presentations, Anosike told the committee that he won the bid for the company and was duly given the company by the BPE which also approved his moves to secure credit from a commercial bank to pay for the company.
The final day of the committee was equally revealing as it was disclosed that the privatisation exercise was disrupted by the feud between President Olusegun Obasanjo and his deputy, Alhaji Atiku Abubakar. The former DG of BPE, Irene Chigbue and the present DG agreed that Obasanjo and Atiku Abubakar had in 2005 engaged in bitter crisis of confidence which disrupted the success of the privatization exercise.
It was made known that, at a particular point during the rift, the former vice-president, was also the Chairman of the National Council on Privatisation, was by-passed by the BPE on issue critical to the exercise and was directly dealing with Obasanjo.
However, a Lagos-based lawyer and human rights activists, Mr Femi Falana, informed the committee that Nigerians have been short-changed, based on the revelations, saying that privatisation was “just to invite the foreigners to come and steal.” Falana asked the committee to summoned Obasanjo for violating the due process, noting that BPE should be prosecuted for ‘selling’ Nigeria illegally.
At the end of the hearing, the chairman of the committee, Senator Lawan, said that despite the closing of the hearing, the committee would still be receiving presentation. He said the committee would use the next two weeks to sit down and analyse all the submissions, after which it would travel to go and inspect, first-hand, all the companies to assess and see the state of development. He assured that after concluding, the committee would submit its report to the Senate at the plenary and that no government would set aside the outcome of the committee, but “we will ensure that all the recommendations would be implemented.”
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