The choice of President Umaru Yar’Adua as successor to Olusegun Obasanjo in 2007 was predicated in part upon the need to sustain the latter’s massive, somewhat flawed, economic reforms that had gone on for about eight years. On the surface, the choice was to ensure that the reforms- including the privatisation of state-owned enterprises- would not be reversed by someone with a different agenda for Nigeria.
The reforms spanned the entire economy, and were aimed at achieving efficiency in resource use, thus enabling the economy to perform better than it had done hitherto. They included, among others, the liberalisation of the downstream of the oil industry; the liberalisation of the telecoms industry, and reforms in the financial sector, leading to consolidation in the banking and insurance sub-sectors.
But, beneath the concerns about the retention of the reforms, people also suspected that the choice of Yar’Adua was meant to put in office someone who would cover Obasanjo’s open flanks, especially those arising from some of the controversial decisions his government took. Among such decisions were those bordering on the privatisation exercise, under which several assets of the state were sold in deals that raised many unanswered questions.
Is Yar’Adua doing these, and how well has succeeded, some eight months in office as Nigeria’s president?
A string of actions so far taken by the government suggests a silent recourse to reversal of some of the actions of the Obasanjo-led administration, and questions are being raised by observers as to why he’s doing that. Some however, support the president’s actions.
“Reversals are welcome because they are inevitable,” says Owei Lakemfa, spokesman for the Nigeria Labour Congress, which groups members of the country’s blue-collar workers.
“People (officials of the former government) took public assets and sold them to themselves,” the labour spokesman alleged.
In February 2008, the government reversed he sale of the Nigerian Telecommunications Limited, or Nitel, to the Transnational Corporations (Transcorp). However, the government later reversed itself, explaining that it only reduced Transcorp’s equity holding in Nitel.
Minister of Communications and Information, John Odey, had initially said Transcorp had lost its 51% equity stake in the troubled national carrier. The announcement drew the ire of many Nigerians, who blamed the government for inconsistency. The furor rattled the presidency, prompting it to embark on a damage control mission.
Odey again had to do the job. According to him, government had only reduced Transcorp’s holdings in Nitel to 10%, choosing to cede the remaining 41% to a core investor yet to be chosen. Government itself was to retain 49% interest in Nitel, Odey had explained.
However, more details emerged later, indicating that both parties had agreed that Transcorp would cede 27% out of its 51% to a yet-to-be appointed core investor, while the government would also cede 24% out of its 49% to the new investor.
Government’s action, many analysts have said, smacked of interference in the reform process that the government once presented as its pet project to salvage the sagging economy.
“They went about it the wrong way,” said Pat Utomi, a professor of political economy at the Pan-African University, Lagos, and a presidential candidate in Nigeria’s 2007 general elections.
Transcorp paid $750 million to acquire its stake in Nitel, the moribund carrier whose inefficiency and mismanagement delayed Nigeria’s entry into the communication era by several years. Many people, observers, including the NLC, believe that amount was below the real value of Nitel.
“People are getting weary of the whole idea of reversing things that Obasanjo did. Meanwhile, this government is supposed to be a continuation of the former government,” Utomi noted.
Azubuike Ishiekwene, Controller of Publications at Punch Nigeria Limited, publishers of The Punch, one of Nigeria’s leading dailies, shares Utomi’s worries.
“The reversals have been a source of concern for both the public at large and the investors,” he said in an interview.
Reversal of privatisations has become a thorny issue in several countries, but it usually takes place when there is a clean break between a government and its predecessor, as was the case in Ukraine in 2005. That year, the new government of President Victor Yushchenko and Prime Minister Yulia Tymoshenko, went through the reversals of the privatisation of Krivorizhstal, Ukraine’s major steel plant.
In 2004, Krivorizhstal had been sold by the previous government to the son-in –law of the former president, Leonid Kuchma, and another fellow, Rinat Akhmetov, at the price of $800m. But in that same year, the plant had sales of about $1.9bn.
The government succeeded in the sale of the steel plant, but the experience was so difficult that it backed down from its planned massive reversal of the previous government’s actions.
Transcorp was floated originally by a group of topnotch Nigerian entrepreneurs, with the active support of Obasanjo, the former president. Among them were Aliko Dangote, whose business empire named after him, spans virtually the entire Nigerian economy; Prof Ndi Okereke-Onyiuke, the director-general of the Nigerian Stock Exchange, Jim Ovia, managing director of Zenith Bank Plc, and Femi Otedola, an oil magnate.
The promoters, with the active support of former president Obasanjo, sought to position Transcorp as a counterweight to the activities of multinational companies that have dominated the key sectors of the Nigerian economy. Consequently, the corporation received government’s nod to participate actively in Nigeria’s privatization programme with the then government.
Besides winning the bid for Nitel, Transcorp also garnered a number of plum assets from government’s privatization and licensing exercises. These include the former NICON-Nuga Hotel in Nigeria’s Federal Capital Territory, Abuja, as well as three oil blocks it won in May 2006 for a total sum of $135.5 million.
However, the corporation’s bid to win the Port Harcourt Refinery failed. Although Bluestar, a consortium involving Transcorp and Aliko Dangote, Nigeria’s business mogul recently named by Forbes magazine as the richest black man, initially won the bid, the government later cancelled that award, citing failure by the process to comply with “due process.”
That decision, says Ishiekwene, left many questions unanswered. “It’s not sufficient for the government to claim that due process was not followed. The public should know the extent of deviation from due process,” he said.
Due process is not the cure-all, magic wand that the government is presenting it to be, Ishiekwene stressed.
But Lakemfa says most of the assets that were privatized were sold “without due process.
“A lot of them were sold to cronies of government officials,” he said. He cited the Port Harcourt Refinery as one of the national assets that the former government had put up for sale to its cronies “at ridiculous prices.”
Dr. Abdullahi Sule-Kano, national president of the Academic Staff Union of Universities (ASUU), agrees, stressing that corruption feeds on the leaders’ greed. “So long as the driving force is profit making and individual interest, there will be corruption,” he said.
Transcorp experienced severe financial constraints that impaired its performance, especially the resuscitation of the moribund Nitel, long after the sale. Part of the cause was the withdrawal from its board by all members who were also chief executive officers of banks, in compliance with a directive of the Central Bank of Nigeria, banning them from holding such positions.
Utomi said that “the problem with Nitel was how to get the right people to manage it.”
With Transcorp having brought in investors – big and small- through listing on the local stock market, Utomi said that for the government to “just wake up and change the agreement is to give the wrong signal to the whole world about how we do things here.”
The announcement of the removal of Nitel from Transcorp led to a stampede by shareholders to dump Transcorp’s stock on the market, leading to a drastic fall in its price. The downward spiral continued until the management of the Nigerian Stock Exchange placed the stock on technical suspension, which permits transactions on a stock but without price movement. The technical suspension has since been lifted, and the price rebounded.
Utomi said the hiccups on the privatization programme arose because the process was badly damaged by the way those who designed and implemented it personalized it. In doing that, he said, they made it “look like something that was likely to be threatened by this kind of reversal.”
“If they had an objective process and people believed in it, it would have been difficult for this kind of reversal; people would have bought into it,” he argued.
Therefore, says Sule-Kano, the reversals are inevitable, since they are needed to right the wrongs in policies that gave rise to the sale or privatization of the assets in question.
“Some of the reversals have to do with fundamental flaws in the laws of the state, and the interests of the individuals to implement them,” he said. It was such individual interests, Lakemfa pointed out earlier, which influenced the sale of many of the assets to cronies of government officials.
But, Sule-Kano said, the success of the reversals “will depend on the government’s ability to be fair and just, so there can be some semblance of reversals for justice.”
The Nitel controversial reversals came after a similar one involving NICON Insurance Plc, where the government reversed the sale of the company to Jimoh Ibrahim, a lawyer and businessman. Against a court order against the reversal, the government held onto NICON, even going ahead to appoint an interim management for the firm.
Again, as in the Nitel case, the government has capitulated. President Yar’Adua has ordered that NICON be returned to Jimoh, and the case between the two parties settled out of court, according to reports.
The letter addressed to the Ministers of Finance and that of Justice, and signed by Mohammed Abdullahi, an army general and Chief of Staff to Yar’Adua, said the president, said the Nigerian leader demanded “a quick implementation of this directive.”
While Nigerians expect more of the reversals – and perhaps counter-reversals- the antidote to that, says NLC’s Lakemfa, is for the privatization process to be “open, with the value of the assets known.”