TODAY, questions are being asked as to why the collective patrimony of the world’s most populous black nation would be ceded to a few individuals in the name of privatisation, or better still, concessioning. In most cases, these lucky Nigerians are empowered to hold the national heritage for between 25 to 50 years. Worse still, there are little or near-invisible safety nets to suck in any form of abuse in the long run.
For this reason, the courts are busied with litigations as contentions trail some of these decisions that were, hitherto, unquestionable.
The list is endless. From the Aviation and maritime sectors to road infrastructure, the dotted lines of concessioning show clearly. In some sectors, aviation, roads and maritime for example, the ensuing rift just refuses to go away.
Only recently, the Federal Government was forced to rescind the 2009 concessioning of the Lagos-Ibadan Expressway to Bi-Courtney and re-awarded the contract to Julius Berger and the RCC Nigeria.
The 105-kilometre road, which was first constructed in 1974 — and now remains an object of heated public debate — was approved for concessioning by the Federal Executive Council (FEC) on April 15, 2009. The original plan was that the beneficiary, having been mandated to pay N89.53 billion, would hold the forte for a period of 25 years under a Design, Build, Operate and Transfer (DBOT) scheme. That was not to be, as the government of the day saw the public outcry over “poor performance” as an alibi to correct the “mistakes of the past.”
That is just a snippet of today’s issues with road sector concessioning or privatisation, if you like. Even though the Lekki Concessioning Company’s Lekki-Epe Expressway remains one clear success story of this experiment, the troubles arising from what many Lagosians see as a rip-off, the resultant tolling stare every one in the face.
In what appeared a “self-reversal,” former President Olusegun Obasanjo, in whose regime the privatisation project flourished, directed the demolition of several toll gates on major highways after they were handed over to certain Nigerians of great economic worth.
In the aviation sector, the Federal Airports Authority of Nigeria (FAAN), the Bi-Courtney and the AIC Nigeria Limited feuds speak volumes of the trouble with the nation’s kind of privatisation/concessioning.
The AIC and FAAN, it was said, executed a deed of lease on February 17, 1998, which gave a parcel of land covering 11.654 hectares at the Murtala Mohammed International Airport, Ikeja. The concessionaire was to build a hotel, which it is expected to run profitably for a minimum of 50 years. The leasehold gave similar rights to AIC in Abuja, Port Harcourt and Kano Airports, even though the structures would be developed in phases. That agreement has now come under serious public scrutiny, with reports ‘alleging’ that the FAAN has been mandated to take back the land.
Again, the Ministry of Aviation is currently carrying out major repair and reconstruction works at the tollgate leading to the local and international wings of the Murtala Muhammed Airport, Lagos. That arm of aviation business (it should be said) was concessioned to a private sector operator, now having a field day raking in millions of Naira on daily basis. That process of handing the toll gate to concessionaire was less than transparent.
The petroleum sector, the downstream in particular, also witnessed what promised to be a successful privatisation of the “perennially challenged refineries,” again conducted by the Obasanjo regime; but that was to be short-lived, as late President Umaru Musa Yar’Adua did not waste time in returning them to the waiting weak hands of public-sector managers.
Named Nigeria’s first Prime Minister, the Tafawa Balewa Square (TBS), embodied the essence of Nigerian sovereignty. Late Tafawa Balewa did mount a rostrum at the main bowl of the square to announce the country’s independence to a gathering of hopeful Nigerians whose memories were directly tied to the trappings of the square itself.
The memories of the historic birth of a new country lingered for many decades; but they were to be cut short by a concession saga that might as well continue to haunt, those old enough to have appreciated the significance of TBS.
The concession bid process was greeted with criticisms that were more rooted in emotions than in the substance of the decision; and this contention was understandable.
People find it difficult to take a stand on things that touch their hearts, and TBS was one of such things. Many Nigerians preferred a collapsed TBS owned by government to a modernised one handed over to ‘unknown investors.’
Amid condemnation, government, in its usual character, went ahead to sign a 30-year concession deal with BHS International Limited. Of course, the memorial arcade built on the spot the Nigeria’s green-white-green flag was hoisted (following the lowering of the Union Jack) was not spared in the N9.5 billion-concession deal.
The understanding was that BHS, a company promoted by late Chief Fred Archibong, would transform the national monument into a world-class shopping centre, operate it for 30 years and hand it over to the Federal Government. But the promised El Dorado remains a mirage, while litigations threaten the very foundation of the deal.
First, the concessionaire had to convince ‘stubborn’ tenants that the agreement it signed with the government gave it sufficient grounds to manage the former public asset profitably. The occupants were not ready to pay “market rate” for the spaces allocated to them. They were bitter that BHS wanted more money when it did not invest any kobo to improve the property. That triggered series of litigation.
The Lagos State Government also dragged the Federal Government to court over its ownership – a situation BHS said was responsible for its inability to turn around the square. With development stalled, the leaseholder simply settles for rent collecting while the national heritages rots away.
The TBS case exemplifies the sorrowful story of the country’s concessioning programme. Where a concessioned national heritage is not bogged down by legal contentions, the renter simply turns it (in its raw form) into a cash cow in contravention of the terms.
In few cases where there are visible efforts to develop the asset, users are meant to pay cut-throat charges for services, which, in most cases, throw up debate on multiple taxation.
These have been the tales of concessioning, a programme conceived in 2005 as an inescapable route to the country’s blissful future when the Infrastructure Concession Regulatory Commission Act was passed.
Indeed, not many Nigerians believe the programme has achieved significant success. Liborous Oshoma, a lawyer, said the programme has not achieved its goals because it has been twisted to favour selected individuals. He attributed most problems militating against the efficiency of concessioned facilities to lack of merit at the onset.
Oshoma said: “Concessioning is originally meant to increase efficiency in public service. And that is not a bad idea on its face value. The problem lies in the kind of politics we play with it.
“At the seaports, services are more efficient. When you imported car those days, you would be scared it would be vandalised; many of their components would have gone before it was delivered to you. But now, the challenge has been addressed because the concessionaires are held responsible for such damages. There is improvement in security at the ports also.”
Oshoma observed that the government also makes more money at little or no cost as a result of concessioning. He, however, noted that the manner the leased assets are managed and the process of filing returns to the government are riddled by underhand dealings.
“Those involved have a way of structuring the processes to benefit themselves and their cronies. Some of the concessionaires may not even have the know-how to manage the assets. But because they are connected to those at the top, they emerge winners. It is like the common story where oil blocks are given to those who don’t even know what drilling is.”
The concessioning of Lagos wharfs has, indeed, translated into improved service delivery at Tin-Can Island and Apapa. Oshoma attested to the improvement but noted that the recorded gain in terms of faster clearing is nothing to compare with what obtains in other parts of the world, which Nigeria should use to benchmark the performance of the concessionaires.
“When you compare the quality of service to what was in place before the ports were concessioned, you will, sure, notice an improvement. But does the improvement match best global practices? No, it doesn’t. I think what others have achieved is a more reasonable benchmark for measuring the success of the concessionaires,” the lawyer noted.
Oshoma also traced the origin of the decay in public assets to a sort of conspiracy theory. His allusion is that those who managed the assets before the concessioning ran them down to reinforce the general belief that government is, “not a good business manager.” The tactics, he said, was to convince relevant stakeholders that concessioning, which they would stage-manage to benefit themselves, was the way to go.
“And you ask whether it was not the same set of people that managed the institutions that are still in charge now. The only thing that has changed is the nomenclature. The man is no longer running it as public but private enterprise,” he noted.
The legal expert said concessioning runs against section two of the Constitution, which spells out the fundamental objectives of government, supposing the responsibilities are justiciable, as long demanded by the civil society.
He continued: “You cannot sue government when it fails to provide basic amenities such as water as in the case of fundamental human rights. They are not justifiable; and they are supposed to be basic rights. When government fails to provide those things, you cannot take it to court.”
He observed that the government, over the years, has used the loophole created by the Constitution to abdicate its basic responsibilities (through the Public Private Partnership (PPP), which is driven by concessioning) to individuals who in turn use the services that are supposed to be free to exploit the masses.
Those who object to the Nigeria’s version of concessioning on the ground that it is a paddy-paddy arrangement may not be wrong after all. Just last week, Director General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, raised the alarm that government’s decision to replace Cotecna Destination Inspection Limited (CDIL) as service provider at the Lagos Ports Complex (LPC), Apapa, is already taken its toll on the efficiency of cargo clearing process. LPC is the biggest and busiest port handling company in the country and, hence the calls to engage the best hands for its management.
The Federal Government recently rejected industry stakeholders’ position, including that of the Nigeria Customs Service (NCS), in a decision that led to Cotecna losing its destination inspection job at LPC to an indigenous Global Scan Systems Limited.
The Federal Ministry of Finance, by the decision, extended the contract, which expired June 2013, by another six months but swapped the lots given to the three concessionaires across the country. Cotecna, a Switzerland family-owned firm, by the new arrangement, lost the prime and sensitive Apapa Ports to Global Scan.
Global Scan was incorporated in 2001 “with the main objective of facilitating Federal Government’s reforms on importation and operations at the nation’s seaports, airports and border posts,” according to information on its corporate website.
The company, with an initial paid up share capital of N20 million, is promoted by a consortium of four Nigerian limited liability companies. It was, in September 2005, awarded the contract together with Cotecna and SGS Scanning Nigeria Limited to provide destination inspection services for Nigeria. Global Scan was awarded lot III, which covers the Murtala Mohammed Airport, Seme Border, Warri and Calabar seaports. The service was hinged on Build-Own-Operate-and-Transfer (BOOT) basis.
Cotecna, on the other hand, boasts of a robust experience in commercial inspection dating back to 1974 when it was founded by Elie Georges Massey. By 1980s, it initiated relationship with the United Nations and has, over the years, worked with UN agencies such as the World Health Organisation (WHO), to inspect purchases of medical equipment.
Its first contact with Nigeria was made in 1984 when it was selected by the Nigerian government amongst a number of other service providers to carry out a “comprehensive import supervision scheme.” Cotecna, subsequently, adapted the programme specifically for NCS, triggering what would be known as pre-shipment inspection (PSI), a new practice it spread to many other countries.
Cotecna consolidated its PSI position throughout the 1990s, signing many PSI contracts and establishing its status as one of the world’s premier trade facilitation and inspection organisations, making a major contribution in helping to curb foreign exchange control evasion.
In 1994, SGS bought a controlling interest in Cotecna, though the Masseys bought back the company four years later. A year after the buy-back, the company developed its PSI programme into DI that incorporated risk management and the use of new technology such as container scanners. And it is the same DI for which decided who between Cotecna and its Nigeria competitor (Global Scan) takes the lead contract.
Less than two months before Apapa DI was handed over to Global Scan, forwarders, importers and dockworkers lamented over what they described as insufficient scanning machines at Seme Border, saying the development could lead to loss of revenue to the government. Mr. Ignatius Ezeukwu said government would continue to lose revenue as a result of the dismal performance constantly experienced by clearing agents and importers caused by constant break down of equipment.
In the run-up to the end of the seven-year concession in 2012, NCS and Global Scan engaged in war of words, obviously to outwit each other. Global Scan has always claimed that Customs Officers, which the companies handling DI were to groom, are untrainable and, as such, cannot handle scanners. Towards the end of the first six-month extension, the company alarmed that the country risked cancer outbreak if the operations were handed over to Customs. Observers saw the statement as tactical step to blackmail the government into another extension. And the companies involved in the contract got the extension.
Customs, indeed, described the accusation as a desperate attempt by the “incapable concessionaire” who could not deliver on its mandate to get undeserved extension.
In a particular press statement, Public Relations Officer of the NCS, Wale Adeniyi, said Global Scan did not start construction of fixed scanner at a Seme Border site until about two years ago. The project, he lamented, was yet to be completed, even as nearly all the mobile scanners supplied at other sites had serious operations and maintenance issues.
The management of NCS further opened up on the scorecard of the concessionaire, saying the service provider failed to meet the contract obligations months after expiration of the original tenure.
NCS said several audit and assessment reports by Accenture, the World Bank and oversight committees of the National Assembly indicted Global scan of handling the responsibility shoddily.
Till date, nobody knows the full extent of NCS and Global Scan collaboration. Whereas the terms of contract say the concessionaires in DI should train Customs sufficiently within seven years such that the service could take over the operation that is relatively novel, it is not clear whether the companies, including Global Scan, failed in that aspect or if the Customs officers were truly “untrainable”. The only thing that is unambiguous is that the government has not only extended the contract as “indirectly canvassed” by Global Scan but has also given the company at the centre of the intrigues the most juicy portion of the contract – LPC.
Just about a month when that was done, Yusuf says the decision has created serious capacity gaps in the cargo clearing process at the Lagos Ports.
“Reports reaching LCCI indicate the worsening of congestion at the LPC resulting from delays in the scanning of containers and other related activities. This development has profound implications for the private sector and the economy in the following ways: high demurrage charges, high cost of borrowed funds, disruption of production schedules of manufacturers as raw materials are stuck at the port and inability of suppliers to meet contractual timelines. Other implications listed are aggravation of corruption at the port as importers struggle to clear their cargo through the bottlenecks and exacerbation of inflation as clearing experience delay.”
Recently, the National Council on Privatisation (NCP) raised a committee to investigate the allegations on sharp practices levelled against private port terminal operators.
Minister of National Planning Commission, Shamsudden Usman, who doubles as chairman of Policy and Monitoring Committee of NCP, said during a tour on the Lagos ports that the team are already going round the country to verify the allegations.
Shamsuddeen particularly pointed out that some of the concessionaires’ operations were not at par with the national expectation.
Similar intrigues, poor satisfactions or cutthroat charges trail virtually all the major concessionings at the airports. Recently, AIC Limited lost close to 12 hectares of land at the Murtala Mohammed Airport (MMA), Lagos, it secured through a concessioning deal in 1998 to build a hotel to service the port of entry. Barely two years after the deal was signed, a letter from the Federal Airports Authority of Nigeria (FAAN) stopped the construction. Arbitration and litigation lingered for several years before the matter was recently decided in favour of FAAN.
On another scale, the running battle between Bi-Courtney Aviation Services and FAAN tips to yet extreme example of how PPP are not expected to be managed. If a press release by the airport landlord is not reversing charges imposed by the service provider, it is instructing the company to recoil operations to reflect what it signed as terms of agreement.
Bi-Courtney has even been accused of conniving with corrupt ministry officials or top politicians to extend both space and period covered by the original agreement. The Ministry of Aviation had to wade through litany of litigations to remodel the General Aviation Terminal (GAT).
Travelers had long lamented the decay of the terminal describing it as a terrible reputation for the country. When ‘help’ eventually came, the concessionaire fought hard to stop work on the ground that the agreement bans the government from tampering with the facility for the period it occupied it.
In 2011, it took the direct intervention of the Minister of Aviation for Bi-Courtney to halt the collection of the new N2, 500 it imposed on each ticket under the guise of Passenger Service Charge (PSC). It jacked the charge from N1,000 to N2,500 at the MMA2, arguing that it got approval from relevant authorities since 2006 to increase the levy to N3000.
Is government’s partnership with private sector in the massive infrastructure development needed to meet Nigeria’s goal of being one of the best 20 economies in the world by 2020 are fast becoming a pipe dream. With the failure of the PPP option so far undertaken by the government, investors may be wary of making commitment in over 20 projects lined up for private entities to help finance. The projects include a light rail system and the Kuje water works both in Abuja, Sagamu-Benin-Asaba Highway, Abuja-Kaduna-Kano Road, Lagos- Kaduna-Kaura Namoda-Nguru Rail Line, Port Harcourt-Kafancha-Maiduguri Rail Line and the Kiri-Kiri Lighter Terminals 1 and 2. There are also projects in the health and housing sectors marked down for private sector funding.
Yet, Steve Ozili, who was among the team that did the valuation of non-core areas of the Nigerian Ports Authority (NPA) in preparation for concessioning, said the programme could not be described as a failure. He said any fair assessment must string together what it cost government to maintain the assets, the quality of services the public utilities were giving, the present status of the assets, the legal issues and goodwill passed to the concessionaries.
Ozili, a valuer, said: “We cannot just jump into what the expectations were without looking into what the Federal Government was spending yearly on those companies. One also needs to have complete knowledge about the state of the assets before the concessioning. Where they fully ultilised? What was the state of their indebtedness? Then one can cross-match the information with where they are now.”
He observed that concessioning was genuinely conceived as option for developing the country’s infrastructure “except that the implementers might have compromised national interest. The concessionaires might have veer off the path charted by the initiator of the scheme. The challenge we have is that threw is no proper monitoring. That leaves a big room for the concessionaires to go beyond what is contained in the Memoranda of Understanding (MoU).”
He noted that concessioning, a concept rooted in landlord-tenant relationship, has little to do with valuation figures since the assets would eventually return to the government.
He said what is most important is whether the leaseholder keeps to the terms of agreement. But decrying the manner government has handled the programme, Ozili said the process ought to have been closely monitored by relevant agencies.
General Atawodi Samuel Usman (rtd), a public facility manager, said the programme is defeated by poor commitment to national interest, a malady, he said, has permeated every aspect of the national life. He noticed that even where foreign companies are involved, the challenge is in getting the Nigerians who work with them to understand the focus of the country and key into it.
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