4-Year Status Report on

Programme Implementation (1999-2003)

To The National Council On Privatisation (NCP/33/05/2003) May 2003

OUTLINE OF REPORT 1.Table of Contents 2.Chapter One: Introduction Statement of the Director General Rationale for Privatisation & Commercialisation 1.Chapter Two: Institutional Framework For Implementation of Programme Legal Framework/ Enabling Legislation NCP Membership-functions and powers Standing, Steering and Ad-hoc Committees (Terms of References & Membership) BPE/Secretariat- Organisational Structure and stafng 4. Chapter Three: Programme Implementation 1. Chart of Public Enterprises slated for privatisation & commercialisation 2. Status of Implementation since 1999 i.e. Phases I, II & III including Concessioning 3. Sector Reforms; Policy, Legal and Regulatory Framework (Ports, Power, Telecom, Oil & Gas, Transport) 4. Cross-Cutting Issues: Pensions Reform, Cross Debt, Competition and Anti-Trust, and Environment. 5. Consensus Building, Publicity & Enlightenment 6. Focus Groups with Labour Unions Chapter Four: Procurement Issues 7. Process Implementation-Adviser Selection, Core Investor Selection and IPO Process 8. Multilateral & Bilateral Credit and Donor Support 9. Training, Workshops & Seminars Chapter Five: Issues Related to Privatisation 10. Privatisation Strategy 11. Subsidies Reform 12. Use of Privatisation Proceeds 13. Share Purchase Loan Scheme 14. Labour & Severance Issues Chapter Six: Financial Matters 15. Audited Accounts 1998-2001 16. Privatisation Proceeds 1999-2003 17. BPE Budget Proposals vs. Appropriation 2000-2003 Appendices: i.Commercialisation ii. Framework iii.BPE current Staff List iv.Staff Training Programmes 2000-2003
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5.

6.

7.

8.

1. 2. 3. 4. 5.

Seminars and Workshops Local Training Overseas Training Study Tours In-House Training

CHAPTER I 1.0 1.1 INTRODUCTION STATEMENT OF THE DIRECTOR GENERAL

It gives me great pleasure to present to the National Council on Privatisation the four-year Report and Audited Accounts of the Bureau of Public Enterprises. In the last four years, we have had some successes and many challenges in the implementation of the structural reform, privatisation and commercialisation programme. The modest achievements recorded in the Privatisation of enterprises slated for Privatisation in phases One and Two, as well as the remarkable progress made in the area of restructuring and reform of sectors that were non-competitive and lacking the required legal and regulatory framework to induce private sector participation based on clear, fair, transparent and level playing eld for all participants, are self evident. Since the re-launching of the programme in 1999, when this administration assumed ofce, we have carried out a total of 33 privatisation transactions in the rst and second phases of the programme, out of which 24 were successfully and nancially closed. The new owners have since taken over these enterprises. Six transactions were not concluded for various reasons as enumerated in chapter 4 of this report. The rest will be concluded shortly after the necessary approvals are obtained. The enterprises successfully privatised were divested mostly through core investor sales or a combination of core investor sales and public offers. A few were disposed of through sale of assets and one was liquidated. Our sector reform activities, especially for power, telecoms and ports, have progressed very well. Our focus henceforth, will be to accelerate the concessioning of the seaports, privatisation of the new business units unbundled from NEPA, the sale of majority interest in our petroleum reneries and privatisation of NITEL beginning with the public offer. In addition, we will divest Governments interest in the remaining enterprises slated for privatisation under Phase 2. We have collected gross proceeds to the tune of about N57 billion from the sale of these public enterprises. We also expect additional N10 billion from (NAFCON: $75m, MV Abuja: $3.45 and Iwopin Pulp and Paper: $3.1m) very soon when negotiations with the preferred bidders are concluded and sales agreements signed. In the course of implementation of the programme, we faced considerable challenges. By Gods grace, and with the support of the authorities, especially the vice president and chairman of NCP, members of the NCP and other well-meaning Nigerians, most of these challenges were overcome. In 2000, we focused much attention on our agship, which was Nigeria Airways. The withdrawal of International Finance Corporation (IFC) as privatisation adviser due to continued frustration from the Airline and the Ministry was a setback. In 2001, the 51% core investor sale of NITEL was our agship transaction. The process went very well and was adjudged open, transparent and conducted in a timely fashion, although it did not reach full
5

nancial closure. In spite of the unfortunate inability of the preferred bidder to raise the balance of purchase consideration for the acquisition of 51% of the Federal Governments interest in NITEL, the Federal Government received more than US $130 million by way of the non-refundable deposit from the transaction. We also sent the clear signal nationally and internationally by the decision to stick resolutely to international best practices in the conduct of the transaction. This has proven to be of major benet in the conduct of subsequent transactions. We have however concluded preparatory work for the Initial public offer of NITEL shares, which will be the largest such offer in the Nigerian capital market. The issue of core investor sale will be revisited when global market conditions permit. Similarly, the 51% core investor sale of Nicon Hilton Hotel did not reach nancial closure due to the inability of the preferred bidder to meet the payment deadline. We have also faced challenges from some of the workers unions. While most of the workers had genuine concerns about job security, job losses and payment of entitlements such as gratuities and pensions, many of the union leaders were simply ideologues who refused to make any efforts to appreciate what the programme is trying to accomplish. Building on dialogue unions and reaching down to the workers directly proved effective, as the workers were ready to support the programme once their basic concerns have been addressed. On a number of occasions we had disagreements with the House of Representatives. However, the greatest challenge to the programme was the Air Wing saga, the facts of which are well known to all of us and represents the largest single damage to the credibility of the programme and Nigeria as a nation. We continued to encounter resistance from some managements of public enterprises slated for privatisation. We were however, in all occasions, able to surmount this obstacle through our determination and the political will of the Vice President and the President. We are condent that with the benet of our past experience and the continued support of their Excellencies the President and Vice President, and the crucial support of members of the NCP and the Nigerian public, who stand to be the greatest beneciaries of the success of this programme, the implementation of the privatisation programme will proceed in accordance with our work plans. Finally, I wish to use this opportunity to, on behalf of myself, members of my management committee and the entire staff of BPE, profoundly thank members of the NCP, especially the vice president, for the tremendous support and encouragement given to us while undertaking this very important national assignment. You were always there for us and your unwavering support at all times was a source of tremendous strength and encouragement that kept us going. Thank you. Nasir A. el-Rufai, OFR Director General

CHAPTER II 2.1 RATIONALE FOR PRIVATISATION AND COMMERCIALISATION

2.1.1 PRIVATISATION From an obscure and little known concept in the late 1970s, Privatisation has become a worldwide phenomenon in both developed and developing countries. This was as result of several developments that forced a rethink of earlier held views on the role of state in fostering economic development. In the 1980s, the role of stateowned enterprises (SOEs) underwent close scrutiny in many countries, especially developing countries. Many governments concluded that SOEs were not the ideal hybrids they had been made out to be: only rarely did they combine the strengths of the public and private sectors as originally expected, and occasionally they combined the worst of both. SOEs commonly failed to maximize the greater good, or did so at very high cost. Fine-tuning and marginal reforms had, in most cases, done little over the years to improve their performance. By the late 1970s, the SOE sector had absorbed a large share of governments budgets in the form of direct allocations, subsidies and capital investments. As governments ran into severe scal problems in the 1980s and loans became increasingly difcult to mobilise at home and abroad, they were forced to consider relatively radical methods for turning the SOE sector around. Thus, a programme of SOE reform emerged in developing countries that in terms of scale and scope had no parallel in the post-war period. The search for solutions resulted in several reform measures. The two classes of reform commonly employed were Privatisation and strengthening the methods by which governments controlled SOEs. The term Privatisation can be dened simply as the transfer of ownership of public enterprises to private hands. In reality, Privatisation takes many different forms and the term is sometimes used, broadly, to describe any policy changes that enlarge the scope for private enterprise to compete with state-owned enterprises (SOEs), or even ones that might cause SOEs to behave more like private rms1. Essentially therefore, Privatisation is an economic strategy aimed at reducing the role of government in economic activities and in favour of widening the scope for the private sector to operate. Thus, in many African countries, particularly since the late 1980s, and against the background of shifting ideologies, donor pressure and dismal performance of PEs, with the resultant public dissatisfaction, privatisation of PEs, has been stepped up signicantly as a major instrument of economic reform. Though, an economic measure, privatisation has social and political implications that must be considered if the desired results are to be fully realized. Privatisation gained considerable momentum in the developing world in the 1980s, such that, by the end of December 1987, some 571 SOEs had been privatised in 57 developing countries. These countries are spread in all the regions of the world, in
1Ramamurti,

R and R. Vernon et. al (1991), Privatisation and Control of State-Owned Enterprises, Economic Development Institute of the World Bank). 8

Africa, Asia, Latin America, Middle East and the Caribbean. The countries in the forefront of these privatisation transactions include: Cote dIvoire, Guinea, Niger, and Togo in Sub-Saharan Africa; Singapore in Asia; Brazil, Chile, and Jamaica in Latin America and the Caribbean.2 Nor is Privatisation restricted to developing countries alone. It is being implemented even in the developed market economies in Europe and Canada and in the former communist countries in Eastern Europe. For example; in the UK, at the end of the 1970s the nationalized industries accounted for nearly 10 per cent of GDP and employed nearly 10 per cent of all workers. And Government-owned monopolies dominated transport (buses, rail and aviation), communications (postal services and telecoms) and the energy sector. The picture has changed drastically by the end of the 1980s where telecoms, gas, electricity, aviation, steel production, water supply and many more have all become largely- or wholly-private sector activities. However, different goals motivated privatisation in different countries. Country studies reveal that these goals included improving a governments cash ow, enhancing the efciency of the SOE sector, promoting popular capitalism, curbing the power of labour unions in the public sector, redistributing incomes and rents within society, and satisfying foreign donors preference for in the role of government in the economy. Lessons learned from the rst phase of our privatisation programme (1989-1993) and elsewhere have revealed that privatisation of PEs alone may not result in optimal levels of efciency gain for the consumers. Efciency gain is one of the most important objectives and justication for Privatisation. Under the appropriate conditions and circumstances, privatisation, is capable of promoting efciency and growth. But for it to yield the desired and satisfactory outcome, certain prerequisites or conditions are imperative, among which are: commitment and support at the highest political levels, appropriate policy environment, including a liberalized and competitive environment that induce the private sector to operate as well as adequate legal/regulatory framework to ensure that no private monopoly is created to replace a public one. Similarly, the privatisation programme must address the issues of equity and interests of the poor, fears of foreign domination, transparency and accountability, labour issue, capacity for programme implementation, broad ownership of privatised national assets, handling of proceeds generated, privatisation policy instruments, etc.3 The case for privatisation in Nigeria is not very different from the experience worldwide. Public Enterprises failed to live up to expectations. They consumed a large proportion of national resources without discharging the responsibilities thrust upon them. A reection on the level of coverage of the National Electricity Power Authority (NEPA) and its inefciency in providing electricity balanced against governments monumental investments in NEPA speaks for itself. It is estimated that
2 3

Ramanadham, V.V. et. al (1993), Privatisation: A Global Perspective, Routledge, London

Obadan, M.I. (2000) Privatisation of Public Enterprises in Nigeria: Issues and Conditions for Success in the Second Round, NCEMA Monograph Series, No.1 9

SOEs consume about N200 billion of national resources annually, by way of grants subsidies, import duty waivers, tax exemptions, and the like. Data obtained from various government departments and estimates reveal that in 1998, Nigerian PEs enjoyed about N265 billion in transfers, subsidies and waivers, which could have been better invested in our education, health and other social sectors. Table 1 below shows the breakdown of these actual and shadow transfers: TABLE 1 - TRANSFERS TO PARASTATALS AND AGENCIES (1998) Transfer/Waiver/Subsidy Subsidised Foreign Exchange(1) Import Duty Exemptions Tax Exemptions/Arrears Unremitted Revenues Loans/Guarantees Grants/Subventions, etc TOTAL Amount (N bn) 156.5 12.5 15.0 29.5 16.5 35.0 N265.0 Percent of Total 59% 5% 6% 11% 6% 13% 100%

Foreign Exchange allocation at N22 instead of the market rate of N86 prevailing in 1998. Source: Federal Ministry of Finance, Various Government Records Economic liberalisation and privatisation is therefore justied by gross failure of PEs to provide the goods and services and operate efciently and protably. Moreover, it is more prudent to direct our scarce resources to attacking poverty through investment in health, education and rural development social programme s that will benet millions of Nigerians, not just a few thousand urban elite that are employed by, or capture the subsidies granted to the public enterprises. Policymakers realise that no creditor will forgive our debt and no donor will offer aid, so that Nigeria will have resources to prop up the Nigerian Telecommunications Plc (NITEL), NEPA or Ajaokuta Steel. That is the stark reality that Nigeria faces. There is virtually no public enterprise in Nigeria today that functions well. While they were created to alleviate the shortcomings of the private sector and spearhead the development of Nigeria, many of them have stied entrepreneurial development and fostered economic stagnation. NITEL, NEPA and the Nigerian National petroleum Corporation (NNPC) are the best examples of these. Public enterprises have served as platforms for patronage and the promotion of political objectives as they suffer from operational interference by civil servants and political appointees.
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Public enterprises have also contributed to income redistribution in favour of the rich over the poor, who generally lack the connections to obtain the jobs, contracts or the goods and services they are supposed to provide. The annual burden of over N200 billion that PEs imposes on the economy has become untenable, unbearable and unsustainable. PEs consumed nearly half of all the revenue made from the sale of crude oil since 1973. Estimates of the Vision 2010 Committee indicate that Federal Government investments in PEs stood at over US $100 billion in 1996. The return on these investments averaged less than 0.5% per annum. According to a TCPC Survey, public enterprises account for between 30 and 40 per cent of xed capital investments and nearly 50% of formal sector employment. Public Commissions and Study Groups have undertaken various studies on the performance of PEs in Nigeria. Adebo (1969), Udoji (1973), Onosode (1981) and AlHakim (1984) chaired these commissions. The ndings of the studies were consistent in nding that PEs were infested with problems such as: Abuse of monopoly powers, Defective capital structures resulting in heavy dependence on the treasury for funding, Bureaucratic bottlenecks, Mismanagement, Corruption, and Nepotism

Nigerias privatization program started 1989 following the inauguration of the 11member Technical Committee on Privatisation and commercialization (TCPC) on August 27, 1988 in accordance with the provisions of Decree No. 25 on Privatisation and Commercialisation. The decree gave legal backing to and formally initiated Nigerias Privatisation and Commercialisation Program. Before then, between 1986 and 1987, FGN liquidated seven agricultural commodity boards, the Nigerian National Supply Company (NNSC) and divested various units of Nigerian Livestock Production Company. From 1988 to 1993, the TCPC had privatized 55 rms. Offer for sale was the predominant mode of privatization. Out of the 55 privatised companies, 35 were through public offer, 1 through MBO, 8 through sales of assets by public tender, 7 by private placement and 4 through deferred public offer. The predominance of public offer was to ensure wider share ownership and the desire to extend the frontiers and depth of the Nigerian capital market. In all, the TCPC sold about 1.5 million shares, resulting in the creation of over 800,000 new shareholders. Market capitalisation of the NSE increased from N8bn to over N30bn by September 1992. It generated gross revenue of about N3.7bn from the 55 PEs privatized. The original investment in these enterprises according to MOFI records was N652 million, indicating a capital gain of N31 bn or nearly 600 per cent. The government also relinquished about 280 directorship positions in these companies, reducing the scope for wasteful political patronage.
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The program was truncated in 1993. There were no privatizations between 1993 and 1999. The then government promulgated Decree No. 78 of 1993, establishing the Bureau of Public Enterprises (BPE), which replaced the TCPC, and opted for a new scheme of contract management and /or leasing of PEs to private concerns in 1995. On coming to power in 1998, the Gen Abdulsalam Abubakar, reafrmed Nigerias commitment to the privatization program and launched the current (second round) privatization program, though the actual implementation was left to the incoming civilian administration. The legal framework of this second round was put in place with the promulgation of the Public Enterprises (Privatisation and Commercialisation) Decree No. 28 of 1999. The decree provides for a reorganized institutional framework that includes the establishment of the National Council on Privatisation (NCP) and the Bureau of Public Enterprises (BPE). The scope of the Privatisation Programme , which commenced in 1999, includes the partial or total divestment of the shares owned by the Federal Government, its parastatals and other agencies in PEs active or dominant in at least 13 key sectors. The cumulative value of investment to be transferred from the public sector is in excess of $100 billion. Unfortunately, it is extremely unlikely that the Government will ever recoup these investments. A mere sample of some sectors and estimated values of FGN investment is summarised in Table 2 below: Table 2 FGN investments in selected PEs Sector Infrastructure/Utilities Upstream Petroleum Downstream Petroleum Steel/Aluminium/Mining Machine Tools/Minting Fertilizer Paper Sugar Vehicle Assembly Media Insurance Oil Marketing Cement Enterprises 3 1 6 9 2 2 3 4 6 3 2 3 5 FGN Investment US $28 bn N/A US $17 bn US $14 bn US $650 mn US $850 mn US $1.4 bn US $1.8 bn US $1.7 bn N/A N/A N/A N/A
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Transportation/Aviation Commercial/Merchant Banks Agro-Allied TOTAL

3 5 5 62

US $1.9 bn N/A N/A About US $70 bn

N/A Not available Source: Federal Ministry of Finance, Other Government Records The cumulative value of FGN investment by way of equity, loans and other transfers to these 62 enterprises is estimated at nearly US $70 billion nearly a third of Nigerias total oil revenue since 1973. As at December 2000, the total liabilities of 39 of these PEs were in excess of N1.1 trillion, with accumulated losses of N92.3 billion. The experience in the last thirty years has been one in which the PEs have:

Created economic inefciency; Incurred huge nancial losses; Absorbed disproportionate share of credit especially in the form of Paris and London club loans, as well as domestic loans and advances; and Contributed to consistent scal decits.

Over time, political and personal considerations have proved to be signicant inuences on numerous PEs policy matters (including investment, tendering, siting, pricing, choice of machinery, employment levels, and management appointments). All have been unsustainable, and achieved at signicant cost to the Treasury.
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The objectives and benets of privatisation in Nigeria are many and include the following: Reduce corruption; Modernise technology Strengthen domestic capital markets; Dismantle monopolies and open markets; Promote efciency and better management; Reduce debt burden and scal decits; Resolve massive pension funding problems; Broaden base of ownership Generate funds for the Treasury Promote corporate governance Attract foreign investment Attract back ight capital

A TCPC survey in 1991 reveals that by 1990, there were over 1500 commercial and non-commercial public sector enterprises in Nigeria. 600 of these were owned by FG and the rest by states and local governments. Estimates of the contribution of the public enterprise sector to GDP ranges from 35-50%. Public enterprises also provided employment for approximately 500,000 people, about a third of public sector employment and almost 22% of total employment in the formal sector of the economy. The magnitude, scope and persistence of failure of Nigerias public enterprises have been extraordinary. They require continuous massive subsidies but deliver only intermittent and sub-standard services and yielding non-or very low rates of return relative to the large amount of resources invested in them. Between 1975 and 1995, the FGN spent about $100 billion to establish public enterprises. These PEs also consumed an average of $3bn annually in subsidies from 1992-99. From 1980 to 1987 alone, it was estimated that the total investment in the public sector exceeded $35 billion, comprising $12.5 billion in equity, $10.2 billion in government loans, and another $11.5 billion in unspecied and largely unrecorded subventions to various enterprises. These investments provided meagre returns, yielding $1.5 billion in dividends and loan repayments. Furthermore, about 40% of non-salary recurrent expenditure and 30% of capital expenditure was expended annually on PEs. The case for privatisation in Nigeria therefore is not very different from those in other countries. But in Nigeria, the very poor performance of the public enterprises and the high level of corruption, even by developing country-standards, made it even more imperative. 2.1.2 COMMERCIALISATION Commercialisation on the other hand does not involve government divesting its shareholding. It involves reforming the public enterprise to operate under purely market conditions. The hallmark is the execution of performance agreement with the Managers providing appropriate incentives for accomplishing the target or goal and possible sanctions for failure to deliver.
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Commercialisation, under the Public Enterprise (Privatisation and Commercialisation) Act, is limited to a handful of companies currently engaged in ecology and social-related activities, such as the River Basins (Irrigation scheme and rural development), National Parks (Tourism and ecology), NTA, FRCN, VON, NAN, National Hospital Abuja, etc. Commercialisation invariably is a rst step in preparing PE for privatisation, and not a permanent solution. The National Council on Privatisation recently approved a new framework for commercialisation, which provides the broad principles to guide the operation of commercialised enterprises. The approved Commercialisation Framework is attached as an appendix to this report.

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CHAPTER III
3.0 1. INSTITUTIONAL FRAMEWORK FOR IMPLEMENTATION OF PROGRAM Legal Framework (Enabling Legislation) The Public Enterprises (Privatisation and Commercialisation) Act 1999 provides the enabling legislation for the implementation of the Privatisation and Commercialisation programme. In order to ensure effective coordination and proper implementation of the programme, the enabling act also provides for the establishment of the following institutions/bodies: 2. NCP (Terms of Reference) The NCP is the apex body charged with the overall responsibility of formulating and approving policies on Privatisation and Commercialisation. The major functions and powers of the NCP include to: determine the political, economic and social objectives of Privatisation and Commercialisation of Public Enterprises. approve policies on Privatisation and Commercialisation. approve guidelines and criteria for valuation of public enterprises for Privatisation and choice of strategic investors. approve public enterprises to be privatised or commercialised. approve the legal and regulatory framework for the public enterprises to be privatised. determine the mode of sale of shares of a listed public enterprise and advise the Federal Government accordingly. approve the prices of shares or assets of the public enterprise to be offered for sale. approve the appointment of Privatisation advisers and consultants and their remuneration. appoint as and when necessary Committees comprising persons from both the public and private sectors with requisite technical competence to advise on the Privatisation or Commercialisation of specic public sector enterprises. approve the budget of the Council.
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approve the budget of the Bureau. receive and consider for approval audited accounts of the Bureau. receive and review periodic reports from the Bureau on programme implementation and give appropriate directions.

Membership of the NCP The NCP has two classes of members statutory and co-opted members. The thirteen statutory members have voting rights and are listed in the enabling legislation. The co-opted members are Ministers overseeing relevant enterprises pipelined for Privatisation, and have no voting rights. The statutory members of the NCP are: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. 3.3 The Vice President, as Chairman; The Minister of Finance, as Vice Chairman; The Attorney-General of the Federation and Minister of Justice; The Minister of Industries; The Minister of National Planning; The Secretary to the Government of the Federation; The Governor of the Central Bank of Nigeria; The Special Adviser to the Head of State on Economic Affairs; Mr. Akin Kekere-Ekun, Managing Director, Habib Bank Nigeria Ltd; Dr. Ejike Ignatius Onyia, Chairman, MGF Petroleum Nig. Ltd.; Alhaji Shehu Umaru Ndanusa, President, NACCIMA; Comrade Adams Oshiomhole, President, Nigerian Labour Congress; and The Director-General of the Bureau of Public Enterprises

Standing Committees In order to ensure adequate coverage of its Terms of Reference and easier execution of its mandate, the NCP has formed ve Standing Committees, each having its specic Terms of Reference derived from those of the NCP. These Committees and their specic Terms of Reference are:
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Technical Committee: (Chairman: Mr. Akin Kekere-Ekun, Managing Director of Habib Nigeria Bank Ltd.) Functions of the Technical Committee include to: provide the necessary technical inputs to the NCP to enable it make decisions on Privatisation transactions. review information memoranda of public enterprises to determine their state of readiness for Privatisation or Commercialisation. determine and recommend to council actions required to bring enterprises to the point of sale or otherwise. These actions may include re-capitalization, liquidation and sale of assets. determine criteria for qualication of core investors review proposals for shortlist core investors and supervise public opening of core investors bids. review shortlist of rms qualied for appointment as consultants submit periodic reports on its activities to the Chairman of Council. Policy and Monitoring Committee: (Chairman: Obong Ufot Ekaette, Secretary to the Government of the Federation) Functions of the Policy and Monitoring Committee are: identify, initiate and review all policy issues dealing with the Privatisation and Commercialisation of public enterprises. monitor policy implementation and issue guidelines where necessary to the Bureau and the Sector Steering Committees. review all policies initiated by the various Sector Steering Committees, the Secretariat and the public enterprises, harmonize and coordinate such policies and advise Council accordingly.

Finance Committee: (Chairman: Mallam Adamu Ciroma, Honourable Minister of Finance) Functions of the Finance Committee include: review the nancial management systems of the Bureau to ensure their adequacy for the purpose of achieving sound nancial practices throughout the duration of the programme .

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review, approve and monitor the budgets of the Council and Bureau on an annual basis. determine the approval limits of the Bureau. determine and approve banking and investment policies of the Bureau. approve assets acquisition and disposal by the Bureau. review and approve any bi-lateral or Multi-lateral grants or credits to the Privatisation programme.

Publicity and Mobilisation Committee: (Chairman: Professor Jerry Gana, Honourable Minister of Information and National Orientation)

Major functions of the Publicity and Mobilisation Committee include to: review the programme, identify the various stakeholders, liaise with various Committees of Council and the Bureau and assess the needs for publicity and communications. review strategies for implementing the programme and any surveys and studies on the effectiveness of current publicity and mobilization efforts. In collaboration with coordinating consultants devise new strategies to increase awareness and support for the programme for the areas identied. set targets for increasing public awareness and perception and mould public opinion to ensure wider support and participation in the programme.

Transaction Marketing Committee: (Chairman: President, Nigerian Association of Chambers of Commerce, Mines, Industry and Agriculture) Main functions of the Transaction Marketing Committee include: review key issues and dynamics of the programme and review the design and timing of each transaction. review and discuss the situation analysis of each enterprise as prepared by the communications and marketing consultants. In conjunction with the communications and marketing consultants to assist in marketing the transaction through activities complimentary to the overall marketing plan.

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3.4

Steering Committees The Privatisation programme involves certain sectors of the economy, which would require some reform and restructuring prior to or along side the divestiture transaction. Consequently, eleven (11) Sector Steering Committees were formed by the NCP to carry out this task. The Committees, which are chaired by the relevant Ministers or senior private sector managers, are: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. Electric Power Sector Steering Committee Oil and Gas Sector Steering Committee Telecommunications Sector Steering Committee Agriculture and Water Resources Sector Steering Committee Hospitality/Tourism Sector Steering Committee Industry/Manufacturing Sector Steering Committee Insurance Sector Steering Committee Transport Sector Steering Committee Solid Minerals Sector Steering Committee Aviation Sector Steering Committee Basic Metals Steering Committee

In order to ensure successful implementation of the Nations Privatisation Programme, the National Council on Privatisation (NCP) besides the specic Sector Steering Committees, inaugurated other specialized committees that cut across so many issues that impact upon the implementation of the programme and to suggest a lasting solution to some persistent problems such as pension issues. The committees include: 1. 2. 3. Steering Committee on Pension Reforms in Public Enterprises in Nigeria Steering Committee on Cross Debt Determination and Resolution Competition and Anti-Trust Reform Steering Committee

Steering Committee on Pension Reform: The Committee was charged with examining the problems associated with the present Pay-As-You-Go (PAYG) system of pensions in Public Enterprises and proffering solutions. Terms of Reference Review existing studies, reports and other background materials on pension schemes, particularly in public enterprises of the public sector of the Nigerian economy; Review existing regimes, studies, reports and background materials on the implementation of pension systems in the countries that share common economic characteristics with Nigeria; Determine the actual amount of un-funded pension liabilities in all Public Enterprises, particularly those slated for privatisation and commercialisation as at December 2000; Advise the Federal Government as to the best way forward for handling the matter in a manner that would not jeopardize the expectations of the gains of the privatisation programme;
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Examine the practicability of introducing an alternative pension scheme that is market-driven for the public enterprises, given the current structure of the Nigerian Economy; Propose some multifaceted investment instruments that will facilitate the implementation of a fully private insurance scheme if adopted by the Nigerian government; Arrange and hold intensive formal and informal interaction with the organized private and public sectors, pension consultants and managers and the general public to further articulate a position on the subject matter to enrich the work of the committee; Determine the cost implication and prepare a blueprint and timelines for the implementation of the transition from the current pay-as-you-go system to a fully funded private approach being envisaged for Nigerias public enterprises; Prepare draft legislation on the new pension system to be debated upon by all relevant stakeholders before presentation to the National Assembly for eventual enactment into law for implementation; Recommend in the light of its ndings, the most efcient ways and means of ensuring optimal realization of the potential benets of the new system to the Nigerian economy; and Recommend such other actions that may be taken by the government and other interest groups, as may be considered desirable at this stage (short term) having regard to the current privatisation of public enterprises.

Membership of the Committee Mr. Fola Adeola MD/CEO, GTB Ltd Chairman Dr Timi Austen-Peters, Legal Practitioner Member Mr. Steve Oronsaye, Perm-Sec. Presidents Ofce Dr. M.O. Ojo, Perm-Sec. Econ Affairs SGFs Ofce Dr. Aboki Zhawa, Perm-Sec.Ofce of HSF Dr. Magnus Kpakol, Chief Economic Adviser Dr. Shamsudeen Usman, Dep. Gov CBN Mr. J.K. Naiyeju, Accountant General of Federation Dr. Haruna Sanusi, Perm. Sec Budget FMOF Mr. Akin Arikawe DG Debt Mngt. Ofce Mallam Suleyman Ndanusa DG SEC Ms. P Soares MD NICON Prof. Anya O Anya DG NESG Mr. Adams Oshiomole President NLC Mr. Mark Tomlinson, Country Director World Bank Mr. Tom Hutcheson, Representative of USAID Mr. Theo Thomas Econ Adviser Africa-DFID Dr. Mohammed Abba-Aji MD NSITF Chief Ziggy Azike Legal Practitioner Dr. Musa Ibrahim Exec. Director NDIC Miss Lauretta Aniagolu Haj. Halima Aliyu Nig. Union of Pensioners Mr. O.A Oshinowo DG Nig Employers Consultative Assoc . Prof. Mike Kwanashie Director Ins. Dev. Research Zaria
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Dr. Musa Omar UNIMAID Mr. Lamis S Dikko Banker Mr. Emmanuel H Njokanma Pension Consultant Mr. Bashir M Bugaje Dep. Commissioner NAICOM Dr. Pat Utomi Director Lagos Business School Mr. Wole Oshin Insurance Practitioner Prince A Aderemi, Banker Dr. O.B Oyetunji, Actuary Mr. Chuka Eseka Investment Analyst Mr. Godwin Obaseki, Stockbroker Mr. S.O.Z Ejiorfoh, NLC Mr. Ivor Takor, NLC Mr. Joseph Akinlaja, NLC Mallam Nasir Ahmad el-Rufai DG BPE Coordinator Mrs. Aisha Dahir-Umar Dep. Director BPE Secretary

Steering Committee on Cross Debt Determination and Resolution: the Committee was charged with the responsibility of determining and resolving cross debts of Public Enterprises which are candidates for privatisation. MEMBERSHIP OF THE COMMITTEE 1. Late Dr. Hamza R. Zayyad 2. Mrs. T. A Iremiren, Perm. Sec. FMF 3. Dr. O. Soleye 4. Prof. I. Ayagi, Chairman NEIC 5. Mr. A. Arikawe, DG, DMO 6. Mr. J. K Naiyeju, AGF 7. Mr. J Oluseye Duggan, ED (F&A) NTA 8. Mr. Akin Oyewole, ED (F&A) NPA 9. Mal. M.S. Baba, ED (F&A) NITEL 10. Mr. F. A Ayinde, Rep, ED (F&A) FRCN 11. Mr. O. C. Harry, GED (F&A) NNPC 12. Chief (Mrs) Rita Chris Garuba 13. Mal. M.K Ahmed, Director NDIC 14. Mr. E. Danone, Danone & Co. 15. Mal S. Sharubutu, ED (F&A) NICON 16. Mr. Obong M. E. Akpan, Rep. ED NEPA 17. ED, F&A, NAL 18. Dr. O. M. Ojo, PS SGF Ofce 19. Mal. M. R. Rasheed, Dep. Gov, CBN 20. Dr. Sanusi Haruna, PS, Budget FMF 21. Dr. A. S. Mohammed, ABU, Zaria 22. Mal. I. M. Inuwa, ED (Ops) NACRDB 23. Mr. Nduka Obaigbena, Thisday 24. Mr. S. Oronsaye, PS C-in-C Presidency 25. Mallam Nasir Ahmad el-Rufai, DG BPE 26. Mr. D. A. Morakinyo, DD BPE Chairman Vice Chairman Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Member Coordinator Secretary

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TERMS OF REFERENCE 1. 2. 3. 4. 5. Determine the exact amount of indebtedness of selected PEs as of 31st December 2000 and assess the resultant impact on the operations of these enterprises. Check the various reconciliation statements produced by each of the affected enterprises, identify the differences and dene procedures for dealing with the variations. Advise on the most effective ways of settling various existing indebtedness by all affected enterprises under the ongoing privatisation and commercialisation programme. Recommend precautionary measures to be put in place and appropriate steps to ensure prompt settlement of nancial obligations amongst PEs and between them and the government. Ascertain the authenticity or otherwise of claims of indebtedness by each of the affected enterprises and develop a cross debt matrix among the affected enterprises and between them and government as of 31st December 2000. Crosscheck balances for government indebtedness and compare government loan balances with records at the Federal Ministry of Finance Incorporated (MOFI).

6.

Competition and Anti-Trust Reform Steering Committee: this Committee was charged with the responsibility of drafting a competition policy for Nigeria and a draft Competition Bill. Terms of Reference Review the existing studies, reports and background materials on monopoly, competition and anti-trust regimes in Nigeria, including position papers, probe and panel reports and Government White Papers, where applicable; Identify all legislation, industry practices and customs that inhibit competition or in any way confer monopoly/restrictive powers on any rm- whether public or private, in all sectors of the economy; Actively interact with the Organized Private Sector, Consumer Interest Group, the general public, to further articulate areas of concern that inhibit economic efciency; Recommend areas of legislative and administrative intervention, and exible mechanisms for monitoring the consequences of legislation and regulation in the overall interest of the economy; Prepare draft legislation designed to eliminate monopolies, remove restrictive conduct, and foster competition in all sectors of the economy; and Prepare a blueprint and timeline for the implementation of the competition legislation and the establishment of correspondent independent regulatory agencies. Membership of the Committee Mr. Bunmi Oni MON MD Cadbury Nig. Plc Mr. Akin Kekere Ekun OFR MD Habib Bank Chairman
23

Alh. Aliko Dangote Chairman/CEO Dangote Group of Coys. Mr. Hakeem Bello-Osagie Chairman UBA Plc Mr. Adams Oshiomole, Preident NLC Mrs. Maryam Uwais, Legal Practitioner Prof. Olu Ajakaiye, DG NISER Prof. I.A Ayua SAN DG Nig.Inst.of Advanced Legal Studies Dr Ayotunde Soleye, Medical Practitioner Dr. F.L Osunsade, EPCC Mrs. Irene Chigbue, Director BPE Prof. Pat Utomi, Director Lagos Business School Ms. Funmi Ade-Ajayi, GM Citibank Mallam M.M Ibrahim, Oil & Gas Consultant Mrs. M.F Mmakwe Rep. Ofce of SGF Mrs. Oby Ezekwesili SA to President Dr. Auwalu Anwar SA to Hon. Speaker Mr. Asue Ighodalo, Legal Practitioner Mr. T.A Ogunfemi, Rep. Min. of Commerce Mr. Bola Odugbesan, Rep. Min. of Justice Prof. C Solodu, E.D African Inst. Of Applied Economics Mal Abdulrazaq Oniyangi DD BPE 3.5 BPE/Secretariat- organizational structure, stafng etc

Secretary

BPE as the Secretariat of the NCP is charged with the overall responsibility of implementing the policies and decisions of the Council. The functions of the Bureau as provided for in the Act include: implementing the Councils policy on Privatisation and Commercialisation preparing public enterprises approved by the Council for Privatisation and Commercialisation advising Council on further public enterprises that may be privatised or commercialised advising Council on capital restructuring needs of the public enterprises to be privatised ensuring the update of accounts of all commercialised enterprises for nancial discipline making recommendations to the Council on the appointment of Consultants, advisers, investment bankers, issuing houses stockbrokers, Solicitors, trustees, accountants and other professionals required for the purpose of either Privatisation or Commercialisation ensuring the success of the Privatisation and Commercialisation exercise through effective post transactional performance monitoring and evaluation providing secretarial support to the Council, and carrying out such other duties and responsibilities as may be assigned to it from time to time by the Council and its respective committees.

ORGANISATIONAL STRUCTURE

24

In May 1999, a democratically elected government was sworn in to govern Nigeria. The new government inherited a broad-based public enterprise reform and privatization program enacted as Decree No. 28 of 1999 by the previous military government. In July 1999, President Olusegun Obasanjo inaugurated the National Council on Privatization (NCP) under the chairmanship of Vice President Atiku Abubakar. The incumbent Director General (DG) of the Bureau of Public Enterprises (BPE), Mr. Bernard Verr was a member and secretary of the NCP. Within the BPE, the then Director General proceeded to undertake a reorganization of the structure inherited from the Zayyad-led board. The organizational structure in place from September 1999 is reproduced in Annex I. It is essentially a functional structure and designed to accommodate the twenty-two Deputy Directors inherited from TCPC/BPE under the chairmanship of Mallam Hamza Zayyad. In November 1999, Mallam Nasir Ahmad el-Rufai was appointed DG to replace Mr. Bernard Verr. The new DG inherited the stafng situation and structure above, as well as the plan for the implementation of the rst phase of the privatization program. The situation inherited from TCPC/BPE at this point in time was characterized by: Top-heavy structure with too many Deputy Directors and little or no middle management. Some Deputy Directors had only a secretary and no professional support staff. Staff that had limited transaction skills and experience, further exacerbated by ve years of idleness. Employees were hired haphazardly without relation to predetermined needs. Shared values of indolence and indiscipline where clearly undeserving staff are promoted, fraud and corruption treated lightly and immorality ignored. Absence of organizational procedures and systems to guide managerial decision-making and actions. The leadership style was laissez faire, with the organization still trying to recover from the vacuum created by the absence of Zayyads strong, centralized leadership. The overall strategy of the organization appeared awed, as it treated the implementation of the reform and divestiture program as a series of Initial Public Offerings (IPO) e.g. there was no core investor selection strategy, or how to deal with moth-balled companies like Calabar Cement Co. Ltd., included in the rst phase of the program.

With the approval of Vice President, a team of management consultants (New Paradigm Consultants/Ituah Ighodalo & Co) was hired to undertake an organizational review of BPE and make recommendations on its re-engineering. The Consultants submitted their report in June 2000, and a sub-committee of the Management Committee reviewed the report and made recommendations to the Director General. In August 2000, the BPE implemented the rst re-engineering plan approved by the
25

Vice President and Chairman of NCP. The organization also moved to new ofces along Ibrahim Babangida Way, Maitama. The building (now named Hamza Zayyad House) was formally commissioned by President Olusegun Obasanjo in October 2000. The organizational structure in place from August 2000 has been slightly modied from time to time to address certain identied lapses. In addition to organizational restructuring, the BPE also undertook extensive restafng, shedding off nearly 40% of its November 1999 work force and hiring nearly 100 full-time and a select number of consulting (Core Team) staff. The Consultants are mostly Nigerians and nominally designated Deputy Directors and are paid US Dollars salaries by USAID through the USAID contractor International Business & Technical Consultants, Inc. (IBTCI). Annexes I and II depicts the organisational structure existing as at September 1999 prior to the rst restructuring and re-engineering of the BPE and as at August 2000 after the initial restructuring. ANNEX I

BPE ORGANIZATION STRUCTURE SEPTEMBER 1999

Director General B.B.A. Verr Deputy Director Legal Mrs I. Chigbue Deputy Director Special Duties Ms H. Lazzari Director Corporate Services M. A. Ahmadu MIS Corporate Affairs Research & Publications Director Privatization M. S. Liadi Advisory Services Corporate Finance Capital Markets Deputy Director Special Assistant I. S. Njiddah Ag.Deputy Director Audit E. O. Azodo Director Commercialization U. Okpa-Obaji Monitoring & Evaluation Reform & Restructuring Ag. Director Finance & Admin. Mrs M. Abiodun-Wright General Administration Finance & Accounts Human Resources

26

ANNEX II

BPE ORGANIZATION STRUCTURE AUGUST 2000

Director General Special Assistant DD(Audit) DD(PA) DD (IT) DD(HR) AD(ACTU)

Director Operations

Director Legal Services

Director Planning & Monitoring

Director Council Affairs

Director Finance & Admin.

Priority Sector Teams Litigation & Arbitration Monitoring & Evaluation Restructuring & Divestiture Agreements & Documentation Planning & Research Commercialization & Concessioning Research & Opinion Procurement MIS*

Documentation & Publications Finance & Accounts Stakeholder Relations Budget & Control Govt. Relations Admin & Support Services Council Secretariat

27

* MIS was subsequently moved to the DGs Ofce

28

In July 2002, the operational structure of BPE was again transformed. This process of restructuring was considered necessary to ensure speedier and more efcient service delivery of privatisation transactions. The reorganization process has transformed BPE into a more focused, more motivated and more procient organization, with a management team that is more accountable and performance-oriented and staff that are driven to succeed. To achieve this, BPE has moved from a functional structure, with a single Operations Department and ve service departments, to a divisional structure with six sectorfocussed operations departments and a single central unit providing general support to the departments. This has effectively resulted in the creation of six self-contained, semi-autonomous units with clear sectoral transactions mandates. Organisational Structure Pre-July 2002.

Director General's Office

Operations

Planning Monitoring

Council Affairs

Finance & Administration

Legal Services

New Organisational Structure

D irector G eneral D Irector G eral's O en ffice

Industry &M anufacturing

Infrastructure &N orks etw

N atural R esources

O &G il as

Services

T ransport &A viatio n

Beginning from April 1, 2003, this structure was slightly amended with the merger of Transport and Aviation department into Infrastructure and Network department and the creation of a new department of Organisational Support Services.

STAFFING 1999-2003 Appendix II show the staffs that have been employed in the BPE since 1999. The Human Resources Unit is mandated with the task of managing the people working in the Bureau, by providing them with essential services so that they can collectively and individually contribute to the attainment of the goals of the organization. This function was carried out diligently in 2001 as witnessed by the following activities.
29

STAFF RECRUITMENT In accordance with the approval by Management Committee, 39 staff were recruited in order to invigorate the organization. The statistical breakdown is portrayed in table 1 annexed to this report. STAFF REDEPLOYMENT Based on the decision of Management to improve the operational performance of Departments, 29 members of staff were redeployed as outlined in table 2 annexed to this report. STAFF TRAINING In order to develop a capable and highly skilled work force management had given priority attention to staff training and development in 2001. A considerable and large number of staff cutting across all categories in the Bureau beneted from numerous training programmes locally and internationally. In this regard, 5 members of staff are on study fellowship in Ahmadu Bello University, Zaria and University of Abuja as indicated in table 3 annexed to this report. On the other hand a total of 40 staff attended overseas courses, while 48 staff attended local courses as presented in tables four and ve respectively. STAFF PENSION SCHEME A non-contributory pension scheme was established in December. First Trustees have been appointed as Pension Managers for the Fund. Furthermore, management has approved January 2002 as the take off date for the 5% Voluntary Additional Contribution. 99% of staff have accepted to participate in the scheme. STAFF WELFARE SCHEME In line with the welfare policy of the Bureau, 9 staff were given nancial support to assist them in their wedding, while a total of 10 staff were supported in the burial of their parents. SEMINAR ON HIV/AIDS In line with the approval of management we have concluded arrangements for the successful hosting of a seminar on HIV/AIDS organized by health care organization of Africa. The event is to take place as follows; Venue: Hilton Hotel Abuja. Lagos-Osun Hall. Date: 12th January 2002 Time: 9 am. STAFF RESIGNATIONS
30

In 2001 only three individuals resigned from the Bureau for family reasons. This low staff exit is an encouraging sign because it indicates that there is general contentment amongst the work force of the Bureau. DISCIPLINARY MATTERS In 2001 there were few disciplinary cases. Adebayo Ajagunna, an Enterprise Ofcer I in Planning and Monitoring Department was suspended for insubordination for one month without pay. The appointment of seven others was terminated for services no longer required, while ve individuals were warned for unsatisfactory performance. STAFF COMMENDATION AND PROMOTION In accordance with the policy of the Bureau to recognize and acknowledge outstanding performance, 22 staff were given written commendation for exceptional performance. In addition, 4 staff were promoted last year as indicated in table 6.

ANNUAL INCREMENT Annual increment will be done in January of every year for deserving staff. Therefore, staff due for increment in the year 2001, will be given this in January. Special Increment based on exceptional performance goes on throughout the year.

STAFF SELECTION PROCESS The Management of the Bureau determines the staff selection process, which is currently as follows. COLLATION OF APPLICATIONS The human resources Unit receives applications from applicants and collates into a databank. APTITUDE TEST Upon the directive of management Committee the human resource unit schedules a date for an aptitude test for short-listed candidates from its databank. DATABANK A databank for successful candidates is created for possible reference by the departments whenever vacancies occur in them. INTERVIEWS Where the departments declare vacancies, the HR Unit schedules interviews for the candidates. Candidates who perform well at the interview are subsequently recommended to Management for appointment
31

PLACEMENT Candidates whose appointments were approved by Management are placed on appropriate salary grade levels based on their qualications and years of relevant experience. The implementation of the Secretariats employment policy has been guided by the principle of Federal Character as required by law. All constituent states in the federation have indigenes employed in the Secretariat. On gender issues, the Secretariat has been able to employ 45% of its workforce as women, a fact that has been acknowledged and commended by even our international friends and donors.

32

CHAPTER IV

4.0 Program Implementation 4.1 List of scheduled enterprises for privatisation & commercialisation
Scheduled Enterprises

Infrastructure &N orks etw T A ijjani bdullahi (D irector)

T ransport &A n viatio IbrahimN jiddah (D irector)

N atural R esources M odupe Abiodun-W right (D irector)

Industry &M anufacturing Irene C higbue (D irector)

Services ArchibongU dofia (D irector)

O &G il as B olanle O nagoruw a (D irector)

M &S minerals ining olid Pow er C m om unications O ther A viation R ay ailw s O ther NC C NC M NC U NC IM Agro-A llied O P C (3) il alm o.s B M asic etals AL C N SO Ajaokuta D elta R olling M (3) ills O ther RD B As N D B Authority iger elta asin

F ertilizer FF SC N CN AF O V ehicleAssem (6) bly N igeria M achine T ools P (3) aper S (4) ugar N W Ind. R ood C hemical C S o., enegal O nigboloC ement P remier B reweries C entral P ackages C ompany

F inance B anks Afribank Assurance B ank B of Industry ank N B AC F ederal M ortgage F inance F ederal M ortgage B ank Insurance C panies om NO IC N N igeria R e N iger N IT SF O ther

U pstream N PC N ND PC M idstream PM PC D ownstream P ortharcourt R efinery (I) P ortharcourt R efinery (II) W R arri efinery K adunaR efinery E P leme etrochem icals C arlson/ B uda L erm td H (N L yson ig.) td OS il ervices C ompanies (1 1 ) G as

NP EA E CN MO Seaports

NE IT L NO IP ST

Abuja W B ater oard Abuja E nvironmental P rotectionB oard

N AL N subsidiaries AL F AAN N C AH o

NC R

NL U N igerdock N A IW

NA P C oncessioned P orts

NP C SM Abuja S Echange tock x M edia D T aily imes NN N NA T FC RN NC F N AN C ulture &T ourism H (4) otels International C onferenceC entre N ational Arts T heatre LF ITC TS B N ational P (2) arks S (3) tadia O ther N ational H ospital F ederal M edical C entre S tallion P roperties N D D iger elta evelopm Authority ent F ederal H ousing Authority

NC G O ther W African R est efinery

2.

STATUS OF PROGRAM IMPLEMENTATION SINCE 1999

4.2.1 OVERVIEW OF THE PRIVATISATION TRANSACTIONS The government approved the implementation of the relaunched privatisation programme in three phases. It was envisaged that there would be full or partial divestment of the government interest in 98 public enterprises spread in 14 key
33

sectors of the economy in which government owns minority or controlling interest. The cumulative book value of these transactions has been estimated at between $10 and $50. The three-phased implementation involves: Phase 1. Full divestiture of the governments shares in oil marketing companies, banks and cement companies. This encompasses 14 companies, most of which are already quoted on the Nigerian Stock Exchange. The revenue target was to raise N20bn. Phase 2. Full divestiture of the governments ownership in hotels, vehicle assembly plants, insurance companies and other enterprises operating in competitive markets; and Phase 3. Partial divestiture of the government holding in major public enterprises operating in non-competitive sectors, such as electric power, telecommunications, oil and gas and similar ventures.

It was envisaged that starting with those enterprises already corporatised and whose shares are already traded on the oor of the Nigerian Stock Exchange with their values established by the market will be much easier and result in speedy conclusion and would engender more condence in the program. Unfortunately, the implementation of the rst phase, which was to have ended in December 1999, was considerably delayed due to various problems encountered including poor subscription rates for the public offers undertaken and disappointment by issuing houses. Another cause of delay was our stringent requirements for conformity with the conditions for allotment approved by the NCP to ensure widespread and equitable distribution of the shares among all the geo-political zones of the country. Allotment was done on the basis of equality of all Federal Constituencies in the country. There were also restrictions with respect to allotment of not more than 1% per applicant where the offer is oversubscribed. Delays were experienced in processing and sending back excess and return monies to unsuccessful applicants. However, despite the delays, the rst phase has been completed including return monies and accrued interest paid to unsuccessful applicants. The remaining unsubscribed shares were rst offered to the respective state governments to purchase and warehouse for their citizens and those not taken up by the state government were sold to institutional investors on competitive basis on the oor of the Nigerian Stock Exchange. The enterprises privatised during the rst phase, which were divested through public offer or a combination of public offer and core investor sale include: NAL Merchant Bank Plc, IMB Plc, FSB International Bank Plc, Unipetrol Plc, African Petroleum Plc, NOLCHEM Plc, WAPCO Plc, AshakaCem Plc, CCNN Plc and Nigercem Plc. The case of BCC is yet to be resolved for the core investor to takeover. Affected parties are trying to resolve the issue out of court. The remaining shares reserved for the staff of BCC, which the staff failed to take up have been sold to institutional
34

investors. Similarly, the privatisation of Assurance Bank, initially scheduled in phase one but spilled-over to phase 2, has been successfully concluded. The core investor took over the bank on November 18, 2002. Afribank is another spillover enterprise from phase 1 whose privatisation is far advanced but is yet to be concluded due to legal and regulatory hurdles. While Calabar Cement Company (Calcemco), in which the Federal Government has a minority interest, was recently liquidated. The second phase covers public enterprises engaged in sectors where the prices of their respective output/services are largely market-determined. It was originally planned that a total number of forty-two (42) public enterprises would be involved under this phase. Due to several delays, including unforeseen legal and technical issues uncovered in the due diligence process and those occasioned by the decision to seek the assistance of the World Bank and other donors, the second phase has not proceeded quite as planned. However, the Secretariat has now re-engineered the roadmap for the effective implementation of this phase of the programme with a view to completing this phase by end of 2003. So far, some 20 privatisation transactions were undertaken with 16 successfully concluded: Festac 77, Nigerdock, Electric Meter Company of Nigeria, Savannah Sugar Company Limited, Niger Insurance Plc, National Trucks Manufacturers, Nigeria Reinsurance Corp., Capital Hotels Plc (owners of Sheraton Hotel and Towers), Ikoyi Hotel, MV Abuja (the only Vessel of the Nigerian Unity Line), National Fertiliser Company (NAFCON), Kano Central Hotel, Iwopin Pulp & Paper Mill, and Ikoyi Hotel Properties located in Lagos (Caterers Court and No. 8 & 10 Lees Road, Ikoyi). However, the 51% core investor sale of NITEL and Nicon Hilton Hotel did not reach nancial closure due to the inability of the preferred bidders to come up with the balance of purchase consideration at the expiry of the deadline. Sale of Sotel Hotel was stepped down having disqualied all the two prospective investors for their failure to submit their bid bonds as required. Similarly, the sale of 51% of Durbar Hotel to a core investor was not approved due to the very low price offered by the core investor, which was below the reserved price, while the sale of NSPMC to a suitable core investor group, which had reached advanced stages was aborted following FGNs decision to change the strategy to carry out public offer instead. Recently, the public offer of Daily Times of Nigeria was aborted due to very poor subscription. We now present brief summary of some of the key privatisation transactions enterprise by enterprise. 4.2.2 SUMMARY OF ENTERPRISE PRIVATISATION TRANSACTIONS FROM MAY 1999 TO APRIL 2003 PHASE I Nal Merchant Bank Plc A total of 419,432,200 ordinary shares were offered in NAL, at N2.75 per share, by way of a public offer for sale. The public offer for sale opened on June 12th 2000
35

and was ofcially to close on July 10th 2000 but, due to weak subscription results and the need to enable wider participation, the close was extended to August 7th 2000. At the close of the public offer, 208,363,811 shares were allotted representing a subscription rate of 49.7%. The un-allotted shares were initially offered to various state governments for purchase on behalf of their indigenes and then to various NCP-registered institutional investors. Subsequently, the shares on offer in NAL were fully subscribed with a subscription rate of 100%.

NAL Allocation Allotted %

ABIA ADAMAWA AKWA IBOM ANAMBRA BAUCHI BAYELSA BENUE BORNO CROSS RIVER DELTA EBONYI EDO EKITI ENUGU FCT GOMBE IMO

9,210,271 9,210,271 11,512,838 12,664,122 13,815,406 5,756,419 12,664,122 11,512,838 9,210,271 11,512,838 6,907,703 10,361,555 6,907,703 9,210,271 2,302,568 6,907,703 11,512,838

2,301,050 2,195,000 7,584,140 8,377,400 5,245,400 5,756,419 4,032,550 7,674,600 675,250 5,603,800 267,650 3,678,250 2,793,450 1,247,750 2,067,500 6,907,703 4,724,150

24.98% 23.83% 65.88% 66.15% 37.97% 100.00% 31.84% 66.66% 7.33% 48.67% 3.87% 35.50% 40.44% 13.55% 89.79% 100.00% 41.03%

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JIGAWA KADUNA KANO KATSINA KEBBI KOGI KWARA LAGOS NASSARAWA NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA YOBE ZAMFARA

12,664,122 18,420,541 27,630,812 17,269,258 9,210,271 10,361,555 6,907,703 27,630,812 5,756,419 11,512,838 10,361,555 10,361,555 10,361,555 16,117,974 9,210,271 14,966,690 12,664,122 6,907,703 6,907,703 8,058,987

2,221,700 12,510,650 12,234,650 17,269,258 7,447,900 5,216,850 2,142,550 10,330,250 4,303,400 6,445,900 9,266,150 2,349,675 5,925,600 6,387,000 9,040,559 752,500 3,011,800 2,204,700 5,141,650 8,058,987

17.54% 67.92% 44.28% 100.00% 80.87% 50.35% 31.02% 37.39% 74.76% 55.99% 89.43% 22.68% 57.19% 39.63% 98.16% 5.03% 23.78% 31.92% 74.43% 100.00%

IMB Plc 19,195,686 ordinary shares were offered in IMB, at 75k each, by way of a joint public offer for sale with the shares of NAL Merchant Bank Plc. Like NAL, the offer opened on June 12th 2000 and was extended to close on August 7th 2000. At the close of the public offer, 15,016,929 shares were allotted representing a subscription rate of 78.2%.

37

IMB Allocation Allotted %

ABIA ADAMAWA AKWA IBOM ANAMBRA BAUCHI BAYELSA BENUE BORNO

426,571 426,571 533,213 586,535 639,856 266,607 586,535 533,213

426,571 334,165 533,213 586,535 245,565 266,607 450,855 252,755 426,571 533,213 319,335 479,892 319,928 426,571 30,195 319,928 533,213 122,885 565,895 501,390 278,850

100.00% 78.34% 100.00% 100.00% 38.38% 100.00% 76.87% 47.40% 100.00% 100.00% 99.81% 100.00% 100.00% 100.00% 28.31% 100.00% 100.00% 20.95% 66.33% 39.18% 34.86%
38

C R O S S 426,571 RIVER DELTA EBONYI EDO EKITI ENUGU FCT GOMBE IMO JIGAWA KADUNA KANO KATSINA 533,213 319,928 479,892 319,928 426,571 106,643 319,928 533,213 586,535 853,142 1,279,712 799,820

KEBBI KOGI KWARA LAGOS

426,571 479,892 319,928 1,279,712

259,050 479,892 319,928 1,279,712 266,607 425,180 479,892 479,892 479,892 746,499 426,571 522,140 45,890 319,928 158,475 373,249

60.73% 100.00% 100.00% 100.00% 100.00% 79.74% 100.00% 100.00% 100.00% 100.00% 100.00% 75.33% 7.82% 100.00% 49.53% 100.00%

NASSARAWA 266,607 NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA YOBE ZAMFARA 533,213 479,892 479,892 479,892 746,499 426,571 693,178 586,535 319,928 319,928 373,249

Unipetrol Plc 62,500,000 ordinary shares were offered in Unipetrol PLC, a petroleum marketing company, by way of a combined sale of 46,875,000 shares at N34.00 each to a core investor and offer for sale to the general public at N29.00 per share. The core investor sale was concluded with Ocean and Oil, an indigenous petroleum-marketing rm, emerging as the successful core investor in Unipetrol having paid N1.59 billion for the Federal Governments equity stake. The public offer of 15,625,000 ordinary shares opened on June 12th 2000 and closed ofcially on July 10th 2000. Due to the un-availability of application forms in certain parts of the country, the offer closing date was initially extended to August 7th 2000 and then nally to October 31st 2000.

39

As at the close of the public offer, 15,027,623 ordinary shares were allotted, representing a subscription rate of 96.2%. Of this, 1.5 million ordinary shares were allotted to the staff of Unipetrol. The remaining shares were offered initially to State Governments and then to Institutional Investors and as a result of the successful take-up, the offer of shares in Unipetrol was fully subscribed with a subscription rate of 100%. UNIPETROL Allocation Allotted %

ABIA ADAMAWA AKWA IBOM ANAMBRA BAUCHI BAYELSA BENUE BORNO

312,500 312,500 390,625 429,688 468,750 195,313 429,688 390,625

312,500 312,500 390,625 429,688 468,750 195,312 429,688 390,625 312,500 390,625 230,575 351,562 234,375 312,500 78,125 234,375 390,625 227,150 625,000

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 98.38% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 52.86% 100.00%
40

C R O S S 312,500 RIVER DELTA EBONYI EDO EKITI ENUGU FCT GOMBE IMO JIGAWA KADUNA 390,625 234,375 351,563 234,375 312,500 78,125 234,375 390,625 429,688 625,000

KANO KATSINA KEBBI KOGI KWARA LAGOS NASSARAWA NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA YOBE

937,500 585,938 312,500 351,563 234,375 937,500 195,313 390,625 351,563 351,563 351,563 546,875 312,500 507,813 429,688 234,375 234,375

893,400 541,875 199,175 351,562 234,375 937,500 195,312 378,000 351,562 351,562 351,562 546,875 312,500 486,125 274,450 234,375 234,375

95.30% 92.48% 63.74% 100.00% 100.00% 100.00% 100.00% 96.77% 100.00% 100.00% 100.00% 100.00% 100.00% 95.73% 63.87% 100.00% 100.00%

ZAMFARA

273,438

273,438

100.00%

FSB International Bank Plc 380,602,195 ordinary shares were offered in FSB by way of a public offer for sale at N4.20 per share. The public offer was opened on December 20th 1999 and was closed on February 11th 2000, following a two-week extension due to the initial weak response. A supplementary public offer for sale of 380,602,195 ordinary shares, initially reserved for a core investor, opened on October 30th 2000 and was closed on November 27th 2000. At the close of the supplementary offer, the combined allotment for both offers was 299,647,707 shares representing a subscription rate of 78.7%. As in the
41

other offers, the shares remaining un-allotted were offered rst to State Governments, for purchase on behalf of their indigenes, and then to NCPregistered Institutional Investors.

FSB Allocation Allotted %

ABIA ADAMAWA AKWA IBOM ANAMBRA BAUCHI BAYELSA BENUE BORNO

8,457,827 8,457,827 10,572,283 11,629,512 12,686,740 5,286,142 11,629,512 10,572,283

8,457,827 7,808,900 7,315,700 6,944,400 6,132,200 5,286,142 7,236,500 10,572,283 597,900 9,977,200 3,186,300 5,022,100 6,343,370 8,457,827 1,997,800 3,791,400 10,572,283 11,629,512

100.00% 92.33% 69.20% 59.71% 48.34% 100.00% 62.23% 100.00% 7.07% 94.37% 50.23% 52.78% 100.00% 100.00% 94.48% 59.77% 100.00% 100.00%
42

C R O S S 8,457,827 RIVER DELTA EBONYI EDO EKITI ENUGU FCT GOMBE IMO JIGAWA 10,572,283 6,343,370 9,515,055 6,343,370 8,457,827 2,114,457 6,343,370 10,572,283 11,629,512

KADUNA KANO KATSINA KEBBI KOGI KWARA LAGOS

16,915,653 25,373,480 15,858,425 8,457,827 9,515,055 6,343,370 25,373,480

15,974,450 15,946,064 8,156,000 7,294,856 9,515,055 5,799,192 25,373,480 1,342,400 10,496,700 9,515,055 3,022,038 5,201,200 14,500,800 8,457,827 13,522,600 11,629,512 1,765,292 6,333,142 4,472,400

94.44% 62.85% 51.43% 86.25% 100.00% 91.42% 100.00% 25.39% 99.29% 100.00% 31.76% 54.66% 97.97% 100.00% 98.39% 100.00% 27.83% 99.84% 60.43%

NASSARAW 5,286,142 A NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA YOBE ZAMFARA 10,572,283 9,515,055 9,515,055 9,515,055 14,801,196 8,457,827 13,743,968 11,629,512 6,343,370 6,343,370 7,400,598

Ashakacem Plc 206,968,317 ordinary shares were offered in ASHAKACEM PLC, a cement manufacturing company, by way of a combined sale of 146,250,000 shares at N10.25 each to a core investor and offer for sale of 60,718,317 ordinary shares to the general public at N8.25 per share. The core investor sale was concluded with Blue Circle PLC, a UK-based international cement manufacturer, emerging as the successful core investor in Ashaka having paid N1.49 billion for the Federal Governments stake.
43

The public offer of 60,718,317 ordinary shares opened on March 27th 2000 and were due to close ofcially on April 24th 2000. In order to make up for the weak subscription results, the offer close was initially extended to May 9th 2000 and then nally to October 13th 2000. As of the close of the public offer, 44,744,566 ordinary shares were allotted, representing a subscription rate of 73.7%. Of this, 3.8 million ordinary shares were allotted to the staff of Ashaka. The remaining shares were offered initially to State Governments and then to Institutional Investors and, as a result of the successful take-up, the offer of shares in AshakaCem PLC was fully subscribed with a subscription rate of 100%. ASHAKA Allocation Allotted %

ABIA ADAMAWA AKWA IBOM ANAMBRA BAUCHI BAYELSA BENUE BORNO

1,264,307 1,264,307 1,580,384 1,738,422 1,896,461 790,192 1,738,422 1,580,384

993,650 1,264,307 1,091,200 598,150 1,714,871 790,192 138,650 1,580,384 1,016,400 1,580,384 29,000 1,376,895 190,350 165,200 78,300 948,230 412,005

78.59% 100.00% 69.05% 34.41% 90.42% 100.00% 7.98% 100.00% 80.39% 100.00% 3.06% 96.80% 20.07% 13.07% 24.77% 100.00% 26.07%
44

C R O S S 1,264,307 RIVER DELTA EBONYI EDO EKITI ENUGU FCT GOMBE IMO 1,580,384 948,230 1,422,345 948,230 1,264,307 316,077 948,230 1,580,384

JIGAWA KADUNA KANO KATSINA KEBBI KOGI KWARA LAGOS

1,738,422 2,528,614 3,792,921 2,370,576 1,264,307 1,422,345 948,230 3,792,921

1,267,851 2,365,913 3,792,921 2,370,576 781,700 987,700 914,224 2,919,406 790,192 1,117,950 525,650 959,800 1,422,345 1,997,160 1,169,950 92,100 640,500 948,230 948,230 939,500

72.93% 93.57% 100.00% 100.00% 61.83% 69.44% 96.41% 76.97% 100.00% 70.74% 36.96% 67.48% 100.00% 90.27% 92.54% 4.48% 36.84% 100.00% 100.00% 84.93%

NASSARAWA 790,192 NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA YOBE ZAMFARA 1,580,384 1,422,345 1,422,345 1,422,345 2,212,537 1,264,307 2,054,499 1,738,422 948,230 948,230 1,106,269

West African Portland Cement Plc 94,814,813 ordinary shares were offered in WAPCO, a cement manufacturing company, by way of a combined sale of 55,340,000 shares at N32.50 each to a core investor and offer for sale of 39,474,813 ordinary shares to the general public at N27.50 per share. The core investor sale was concluded in with Blue Circle PLC, a UK-based international cement manufacturer, emerging as the successful core investor in WAPCO having paid N1.8 billion for the Federal Governments stake.
45

The public offer of 39,474,813 ordinary shares opened on December 20th 1999 and were due to close ofcially on January 28th 2000. Due to litigation and in order to make up for the weak subscription results, the offer close was initially extended to July 12th 2000 and then nally to September 12th 2000. As of the close of the public offer, 29,719,685 ordinary shares were allotted, representing a subscription rate of 75.3%. The remaining shares were offered initially to State Governments and then to Institutional Investors and, as a result of the successful take-up, the offer of shares in WAPCO was fully subscribed with a subscription rate of 100%. WAPCO Allocation Alloted %

ABIA ADAMAWA AKWA IBOM ANAMBRA BAUCHI BAYELSA BENUE BORNO

868,960 868,960 1,086,200 1,194,820 1,303,440 543,100 1,194,820 1,086,200

217,360 868,960 144,666 1,204,770 52,418 566,900 245,350 104,150 67,800 1,086,350 651,720 425,149 1,197,840 131,650 120,750 1,124,756 449,521

25.01% 100.00% 13.32% 100.83% 4.02% 104.38% 20.53% 9.59% 7.80% 100.01% 100.00% 43.49% 183.80% 15.15% 55.58% 172.58% 41.38%
46

C R O S S 868,960 RIVER DELTA EBONYI EDO EKITI ENUGU FCT GOMBE IMO 1,086,200 651,720 977,580 651,720 868,960 217,240 651,720 1,086,200

JIGAWA KADUNA KANO KATSINA KEBBI KOGI KWARA LAGOS

1,194,820 1,737,920 2,606,880 1,629,300 868,960 977,580 651,720 2,606,880

1,194,820 589,690 2,606,880 1,629,410 868,960 763,353 990,416 2,620,113 80,494 172,600 1,655,593 99,117 1,292,338 1,699,117 1,170,980 1,367,560 21,350 651,720 651,720 825,666

100.00% 33.93% 100.00% 100.01% 100.00% 78.09% 151.97% 100.51% 14.82% 15.89% 169.36% 10.14% 132.20% 111.73% 134.76% 96.85% 1.79% 100.00% 100.00% 108.59%

NASSARAWA 543,100 NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA YOBE ZAMFARA 1,086,200 977,580 977,580 977,580 1,520,680 868,960 1,412,060 1,194,820 651,720 651,720 760,340

Cement Company Of Northern Nigeria Plc 177,289,351 ordinary shares were offered in CCNN, a Sokoto-based cement manufacturing company, by way of a combined sale of 154,915,741 shares at N4.02 each to a core investor and an offer for sale of 22,373,610 ordinary shares to the general public at N2.50 per share. The core investor sale was concluded with Scancem AS, a Norway-based international cement manufacturer, emerging as the successful core investor in CCNN having paid N622.8 million for the Federal Governments stake.
47

The public offer of 22,373,610 ordinary shares opened on September 8th 2000 and was closed ofcially on September 29th 2000. At the close of the public offer, 17,976,538 ordinary shares were allotted, representing a subscription rate of 80.3%. The remaining shares were offered initially to State Governments and then to Institutional Investors and as a result of the successful take-up, the offer of shares in CCNN PLC was fully subscribed with a subscription rate of 100%. CCNN Allocation Allotted %

ABIA ADAMAWA AKWA IBOM ANAMBRA BAUCHI BAYELSA BENUE BORNO

497,191 497,191 621,489 683,638 745,787 310,745 683,638 621,489

240,773 479,042 231,092 683,638 370,438 96,396 336,919 568,538 136,423 551,342 192,692 559,340 230,146 271,119 69,646 372,893 621,489 322,369 994,383

48.43% 96.35% 37.18% 100.00% 49.67% 31.02% 49.28% 91.48% 27.44% 88.71% 51.67% 100.00% 61.72% 54.53% 56.03% 100.00% 100.00% 47.15% 100.00%
48

C R O S S 497,191 RIVER DELTA EBONYI EDO EKITI ENUGU FCT GOMBE IMO JIGAWA KADUNA 621,489 372,894 559,340 372,894 497,191 124,298 372,894 621,489 683,638 994,383

KANO KATSINA KEBBI KOGI KWARA LAGOS

1,491,574 932,234 497,191 559,340 372,894 1,491,574

1,491,574 932,234 497,191 473,311 372,893 1,349,571 199,346 516,819 559,340 341,446 558,442 803,503 497,191 436,976 683,638 126,450 372,893 435042

100.00% 100.00% 100.00% 84.62% 100.00% 90.48% 64.15% 83.16% 100.00% 61.04% 99.84% 92.35% 100.00% 54.09% 100.00% 33.91% 100.00% 100.00%

NASSARAWA 310,745 NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA YOBE ZAMFARA 621,489 559,340 559,340 559,340 870,085 497,191 807,936 683,638 372,894 372,894 435,042

African Petroleum Plc 86,400,000 ordinary shares were offered in AFRICAN PETROLEUM PLC, a petroleum marketing company, by way of a combined sale of 68,800,000 shares at N35.63 each to a core investor and offer for sale of 17,600,000 ordinary shares to the general public at N28.50 per share. The core investor sale was concluded in with Sadiq Petroleum, an indigenous oil and gas player, emerging as the successful core investor in AP having paid N2.3 billion for the Federal Governments stake. The public offer of 17,600,000 ordinary shares opened on April 17th 2000 and was due to close ofcially on May 19th 2000. In order to make up for the weak subscription results, the offer close was ofcially extended to June 2nd 2000. Citing weak subscription results and poor logistics due to the fuel-crisis of that
49

period, the issuing houses kept the offer opened un-ofcially until August 18th 2000. The Bureau observed, following further investigations and analysis of the subscription lists, that many of the applications received after the ofcially closing appeared to be fraudulent and thus sought and obtained NCP approval to nullify, in accordance with SEC regulations, all applications received after the ofcial cut-off date. At the close of the public offer, 9,552,290 ordinary shares were allotted, representing a subscription rate of 54.3%. The remaining shares were offered initially to State Governments and then to Institutional Investors and, as a result of the successful take-up, the offer of shares in AP was fully subscribed with a subscription rate of 100%. Meanwhile, N895 million has been received from IMB representing the unpaid return monies on the AP Public Offer Transaction. The new registrar, First Registrars, has created the schedule of warrants to be dispatched. Approval has been received to remit the amount of N895 million to First Registrars this was paid 4th April 2002. AP

Allocation

Allotted

ABIA ADAMAWA AKWA IBOM ANAMBRA BAUCHI BAYELSA BENUE BORNO

480,000 480,000 600,000 660,000 720,000 300,000 660,000 600,000

339,800 277,100 157,300 660,000 345,400 300,000 119,350 250,900 145,000 430,750 54,500 382,750

70.79% 57.73% 26.22% 100.00% 47.97% 100.00% 18.08% 41.82% 30.21% 71.79% 15.14% 70.88%
50

C R O S S 480,000 RIVER DELTA EBONYI EDO 600,000 360,000 540,000

EKITI ENUGU FCT GOMBE IMO JIGAWA KADUNA KANO KATSINA KEBBI KOGI KWARA LAGOS

360,000 480,000 120,000 360,000 600,000 660,000 960,000 1,440,000 900,000 480,000 540,000 360,000 1,440,000

256,500 223,200 5,000 302,500 563,330 99,500 285,750 200,150 297,600 68,500 261,300 360,000 324,500 111,900 127,500 533,000 342,800 540,000 514,050 172,950 78,700 80,800 188,300 64,000 87,610

71.25% 46.50% 4.17% 84.03% 93.89% 15.08% 29.77% 13.90% 33.07% 14.27% 48.39% 100.00% 22.53% 37.30% 21.25% 98.70% 63.48% 100.00% 61.20% 36.03% 10.09% 12.24% 52.31% 17.78% 20.86%

NASSARAWA 300,000 NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA YOBE ZAMFARA 600,000 540,000 540,000 540,000 840,000 480,000 780,000 660,000 360,000 360,000 420,000

51

National Oil And Chemical Marketing Co. Plc (now renamed CONOIL) 274,400,000 ordinary shares were offered in NOLCHEM, a petroleum marketing company, by way of a combined sale of 205,800,000 shares at N36.02 each to a core investor and an offer for sale of 68,600,000 ordinary shares to the general public at N25.00 per share. The core investor sale was concluded with Conpetro Ltd, an indigenous oil and gas company, emerging as the successful core investor in NOLCHEM having paid N7.4 billion for the Federal Governments stake. The public offer of 68,600,000 ordinary shares opened on September 4th 2000 and was due to close ofcially on September 29th 2000. In order to make up for the weak subscription results, the offer close was ofcially extended to November 27th 2000. At the close of the public offer, 39,196,550 ordinary shares were allotted, representing a subscription rate of 57.1%. Of this amount, 6.9 million shares or 10% of the shares on offer to the public were allotted to the staff of Nolchem. The remaining shares were offered initially to State Governments and then to Institutional Investors.

NOLCHEM Allocation Allotted %

ABIA ADAMAWA AKWA IBOM ANAMBRA BAUCHI BAYELSA BENUE BORNO

1,372,000 1,372,000 1,715,000 1,886,500 2,058,000 857,500 1,886,500 1,715,000

1,127,400 491,050 1,505,150 1,886,500 465,050 857,500 512,500 374,600 291,450

82.17% 35.79% 87.76% 100.00% 22.60% 100.00% 27.17% 21.84% 21.24%

52

C R O S S 1,372,000 RIVER

DELTA EBONYI EDO EKITI ENUGU FCT GOMBE IMO JIGAWA KADUNA KANO KATSINA KEBBI KOGI KWARA LAGOS

1,715,000 1,029,000 1,543,500 1,029,000 1,372,000 343,000 1,029,000 1,715,000 1,886,500 2,744,000 4,116,000 2,572,500 1,372,000 1,543,500 1,029,000 4,116,000

1,441,650 172,800 1,279,700 908,200 610,600 171,700 963,750 1,715,000 328,150 1,296,600 1,005,350 722,650 99,650 897,550 1,015,400 2,342,700 150,900 386,400 1,543,500 1,191,000 1,543,500 1,963,550 1,004,550 364,400 146,900 353,450

84.06% 16.79% 82.91% 88.26% 44.50% 50.06% 93.66% 100.00% 17.39% 47.25% 24.43% 28.09% 7.26% 58.15% 98.68% 56.92% 17.60% 22.53% 100.00% 77.16% 100.00% 81.78% 73.22% 16.34% 7.79% 34.35%
53

NASSARAWA 857,500 NIGER OGUN ONDO OSUN OYO PLATEAU RIVERS SOKOTO TARABA 1,715,000 1,543,500 1,543,500 1,543,500 2,401,000 1,372,000 2,229,500 1,886,500 1,029,000

YOBE ZAMFARA

1,029,000 1,200,500

946,650 259,100

92.00% 21.58%

Benue Cement Company Plc Dangote Industries Ltd. emerged the successful core investor for BCC having paid N918.3 million for 173,267,194 shares. NCP had earlier approved the sale of the remaining shares of the company (approximately 10%) to BCC Staff. Following the failure of the staff to take up the offer the shares were offered to Institutional Investors and as a result of the successful take-up, the offer of shares in BCC has been fully subscribed with a subscription rate of 100%. The core investor, Dangote Industries Ltd., however could not take over the enterprise following protest from the Benue State Government and the local communities. The case went to court but the parties involved are negotiating to settle out-of court. Nigercem Plc The decision of the NCP that the owner states should sign an MOU ceding 51% of the Company to the FGN failing which the FGN will sell its 10% holding on the oor of the Exchange has been communicated to the states concerned. The shares were then offered initially to Institutional Investors and as a result of the successful take-up, the offer of shares in NIGERCEM Plc was fully subscribed with a subscription rate of 100%. PHASE 2 Assurance Bank Assurance Bank was a spill-over enterprise from phase 1. It has gone through two rounds of privatisation. The nearly-concluded core investor sale of 90% of Assurance Bank was aborted by the NCP and the regulatory authorities due to a lack of condence in the suitability of the core investor groups that emerged during the rst bidding process in July 2001. The NCP decided that ABN should be re-advertised for sale to a core investor. Following the re-advertisement of the core investor sale of Assurance Bank in September 2001, eight prospective core investor groups submitted their expressions of interest at the end of the deadline on October 12, 2001. The eight prospective bidders were pre-qualied by the NCP to proceed to the due diligence stage provided that they replaced their N500 million Bank Guarantees with cash deposit. However, as at end of the deadline of December 14th 2001, only three out of the eight prospective bidders effected the replacement. Dantata Investment and Securities Limited NSITF/Profund Securities Group Parmex/General Securities Limited Consortium
54

The opening of Financial Bids submitted by the three prospective core Investors in Assurance Bank was held on Wednesday, February 13th 2002. The bidding was conducted in Two Rounds as follows: FIRST ROUND Dantata Investment and Securities Ltd. N252, 000,000 NSITF/Profund Securities Limited N594, 000,000 Parmex/General Securities Limited. N550, 000,000 SECOND ROUND N504, 000,000 N783, 000,000 N853, 000,000

Thus Parmex/Gensec, which had the highest bid for 90% stake in the Bank, was declared the Preferred Bidder while NSITF/Profund, was declared the Reserved Bidder. The consortium of Parmex/GenSec Limited paid the balance of N353.2 million to the Secretariat on 8th March 2002. This N353.2m together with the N500m already deposited with BPE at the Expression Of Interest stage made up the purchase consideration of N853.2m. Following the deposit of N1.2 billion minimum new capital for the recapitalization of Assurance Bank with CBN, the t and proper test on the preferred bidder was concluded and approval given by CBN for the consortium to take over the Bank. The new core investor took over the Bank on November 18, 2003. Tourist Company of Nigeria (owners of Federal Palace Hotel) The Federal Palace Hotel was privatised in 1992. The company was sold lock, stock and barrel to the Tourist Company of Nigeria (TCN) at the price of $50.0 million. The Share Sale Agreement signed with the then TCPC provided that TCN would divest 40% of the shares of the company to the Nigerian public after a period of 5 years through Offer for Sale. The TCN offer for subscription of 650 million ordinary shares of 50k each at N4.00 per share opened on January 14, 2002. The offer closed on February 25, 2002. The TCN offer for subscription of 650 million ordinary shares of 50k each at N4.00 per share opened on January 14, 2002. The offer closed on February 25, 2002. It was felt that the low subscription gures were due to a combination of the relatively high price of the offer (N4.00 per share) and ineffective marketing campaign. Subscription level was 1.98%.
55

The issuing houses and TCN gave the following reasons for the low subscription levels. They are of the view that the allotment by Federal Constituencies restricts the number of shares to be allotted to one person. As a result of this, individuals that want to buy in bulk are discouraged. The public is wary of participating in phase II due to the way they felt that phase one was handled by the BPE, i.e. some people have still not received their return monies. Given that the general public was apparently not keen on the offer has been sought to offer the shares for sale to state investment companies and/ or institutional investors. Nigerdock Nigeria Limited The Initial advertisements for a 40% sale of Nigerdock to a core investor were placed in July, 2000. Due to policy change, it was re-advertised for 51% sale in May, 2001. The EOIs were harvested and evaluated. Bid documents were issued to the two pre-qualied bidders on 14 Aug. 2001. Technical and Financial Bids were submitted 15 Oct. 2001. The rm of GEC/JRM emerged winners after a second round of bidding with the highest purchase consideration of N3.4billion. Announcement of the winner was made on November 2001 after a meeting of the NCP. Signing of Share Sale/Purchase Agreement took place on December 20, 2001. All arrangements for the public offering of the remaining FGN shares in Nigerdock have been completed and the offer will be opened before the end of May 2003. Festac 77 Hotel FESTAC 77 was privatised through Asset Sale. UACN Properties paid the sum of N1, 010,000,0000 to Government. Also a Payment of N19.8million interest penalty was paid by UACN properties on the 1st February 2002, which was followed by the signing of the sales and purchase agreement and handing over on 25th February 2002. NITEL Consistent with the new National Policy Telecommunications Policy which states that consistent with the philosophy that the private sector will lead the future development of the Nigerian telecommunications sector to the greatest extent possible, controlling ownership interest in NITEL and M-TEL shall be transferred from Government to private investors. The privatised companies are to be restructured by the new owners to implement modern operational and management practices. Both companies will be issued new licenses by NCC, designating their role and responsibilities in the liberalized market. In conformity with this, Mr. President directed that NCP ensure that NITEL and MTEL be privatised by the end of 2001, making the NITEL/M-TEL privatisation the agship transaction for the year.
56

The Selection Process In accordance with the timetable for the privatisation of NITEL, the Bureau received bid proposals for a 51% equity stake from three potential core investors. These core investor groups were: Investors International (London) Limited (with TDC, a subsidiary of Portugal Telecom, as operator) Newtel Limited consortium (with Detecon, a subsidiary of Deutsche Telecom, as operator) Telnet Nigeria Limited consortium (with Korea Telecom as operator)

All three proposals, which were submitted by the three bidders before the expiration of the deadline given by BPE, were submitted in two envelopes (for Technical and Financial proposals) under the bid process and evaluation criteria approved by the National Council on Privatisation. BPE opened the Technical Proposals in the presence of representatives of the three consortia and the technical evaluation was completed on 12th November 2001. The sealed nancial proposals of the consortia were then opened in a live televised event on 13 th November 2001, witnessed by all stakeholders and representatives of the international diplomatic community and Transparency International. After the opening of initial nancial bids, bidders were given a chance to submit revised offers. These offers were as follows: Investors International (London) Limited Newtel Limited consortium US$1.317 billion US$1.072 billion

Telnet Nigeria Limited consortium

US$1.310 billion

The preferred bidder was declared to be Investors International (London) Limited (IILL) and the reserve bidder was declared to be the Telnet Nigeria Limited consortium (Telnet). IILL paid 10% of its bid price on 12th December 2001 but failed to pay the remaining 90% as required by the deadline of 12th February 2002. Following the laid down procedure, IILL was deemed to have lost its deposit and the Reserve Bidder was invited for negotiations. Negotiations with Telnet were inconclusive and the consortium nally declined to take up the offer. Accordingly, the stipulated sale process was suspended. Following the ofcial suspension, NCP proceeded to consider alternative options ranging from investigating the possibilities of NITEL entering into a management contract to a full re-tender of governments interest in the enterprise. In the interim, IILL had requested that they be given an extension of time to arrange the necessary nancing. An extension of six weeks was granted. However, they still failed to raise the funds and NCP is still in the process of considering available options.
57

Following the advertisements in both national and international publications requesting for expressions of interests (EOIs) by Management contractors in the Nigerian Telecommunications Limited (NITEL), the Bureau of Public Enterprises (BPE) harvested a total 14 (fourteen) applications at the close of entry on 28 June 2002. After evaluations of the technical and nancial proposals submitted by the prospective managers, the rm of Pentascope (Netherlands) emerged the preferred contractors. After series of meetings and negotiations, the management contract agreement was eventually signed between FGN/NITEL/Manager in March 2003. It will be recalled that a two-pronged approach to the privatisation of NITEL has been adopted. The rst step is to bring in a credible and well-qualied telecoms operating company to manage the operations of NITEL. Once this process has been completed, we intend to take approximately 20% of NITEL to the capital markets by way of an Initial Public Offer (IPO). Both activities have already started in earnest. The planned initial public offer, which was accelerated, met with some delays largely due lack of up to date accounts of NITEL, will be opened in May/June 2003. The NITEL public offer being the single largest Capital Market transaction in Nigerias history is receiving all the attention that it deserves. Whilst the Management Contract transaction process was going on, the BPE was simultaneously making all the necessary preparations for the IPO. Implementation of an effective grass-roots and stakeholder mobilization campaign that will cover the 36 states and Federal Capital Territory of Nigeria has commenced. This campaign will be done on an on-going basis. The campaign will be multi-faceted and will cover TV shows, billboard, posters as well as interactive events such as targeted road-shows etc. BPE has also put in place incentives that will ensure the participation of millions of Nigerians in this very important transaction. The Share Purchase Loan Scheme is expected to be in place before the commencement of the NITEL IPO. In addition, we shall also be targeting institutional investors who will be allowed to purchase equity in the event of under-subscription. Nigerians in the diaspora are also being factored into the divestiture of NITEL shares and would also be able to benet from the IPO when it is listed in the London and New York Stock Exchanges. BPE has taken several steps and will introduce new procedures that will eliminate the occurrence of some of the problems experienced in Phase I exercise such as delayed allotments and return monies. As you can imagine, an offering of this size and magnitude will have severe logistical implications. Nicon Hilton Hotel The opening of nancial bids for prospective core investors for the hotel took place on August 14, 2002. African Properties emerged as the Preferred Bidder for 51% stake in NIRMSCO Properties Ltd (owners of NICON Hilton Hotel) offering a sum of $61,710,000 this was approved by NCP at its 30th meeting. The BPE and African Properties signed the Share Sale/Purchase Agreement on August 30th 2002. African Properties was expected to pay by September 27, 2002. Unfortunately, the preferred bidder could not meet the payment deadline
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alluding to concerns with respect to court injunctions on the privatisation of the enterprise. Negotiations with the second highest bidder, IBTC Consortium, to raise their offer to the level of the reserved price were not successful. Search for new prospective core investors is on-going. Electricity Meter Company of Nigeria The FGN owned 70.45% of EMCON. Advertisements for EOIs from prospective core investors for a 51% stake in the company were placed on June 10, 2002 and expired on July 10, 2002. The remaining 19.45% would be offered to the public through IPO. At the expiry of the deadline for submission of EOIs only two EOIs were received. The data room due diligence took place from 18/8/2002 to 10/10/2002. Only one nancial bid from Dantata Investments and Securities Limited was opened on 9th December 2002. The rst offer was for $2,615,159 for the 51%. During the second round, the bidder raised the offer to N0.40 billion to emerge the preferred bidder. The necessary approvals have been received and the core investor has taken over already. Savannah Sugar Co. Ltd. After the advertisement for a 51% sale of the company, only two bids were received from prospective core investors: Dangote Industries Limited and BHI Holdings. However, at the nancial bid opening, BHI Holdings was disqualied for failure to submit its bid bond as required. Thus Dangote Industries was the sole bidder with an offer of $6,292,406.33. During subsequent negotiations, the price was raised to N1.35 billion for 90% of Savannah Sugar. The purchase consideration was paid on 13/02/03 and the core investor took over the company on 6/03/03. National Trucks Manufacturers Following the advertisement for a 51% sale of NTM to a core investor, six expressions of interests were received from prospective bidders. Eventually only two rms reached the nancial bidding stage: Art Engineering and Dantata Investments & Securities Limited. After the second round of bidding, Art Engineering emerged the preferred bidder with an offer of $6,398,479.00 million compared to Dantatas offer of 4,545,515.00 million. Art Engineering has since taken over the company having paid the purchase consideration. Nigeria Re-Insurance Corporation Following the advertisement for expressions of interest from prospective core investors in acquiring 51% shares in Nigeria Re and the completion of the scheme of arrangement in October 2002, the data room due diligence took place from 21/10/2002 to 16/11/02. Only two bidders reached the nancial bidding stage held on 12/12/2002: Industrial & General Insurance and Reinsurance Acquisition Group Limited. Reinsurance Acquisition Group emerged the preferred bidder with an offer of N1,006,999,999.00. Payment of the purchase consideration was effected on 31/12/2002.

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Capital Hotels Plc (owners of Sheraton Hotel and Towers, Abuja) There were two bidders for the Hotel: Hans Gremlin Nigeria Limited and Vigeo Hotels Limited. The prospective bidders due diligence took place from 11/06/02-20/07/02. The bidders submitted their Techincal and Financial Bids on scheduled on 29/07/02. The nancial bid opening took place on 14/08/02. In the rst round the bids were as follows: Hans Gremlin Nigeria Limited-$25,000,000.00 Vigeo Hotels Limited-$12,500,000.00 In the second round the bidders revised the offers as follows: Hans Gremlin Nigeria Limited-$32,500,000.00 Vigeo Hotels Limited-$17,552,000.00 Thus, Hans Gremlin Nigeria Limited emerged the preferred bidder. Payment and handover were effected on 30/10/02 and 03/12/02, respectively. Nigeria Hotels Limited The core assets of the company were separated, creating Ikoyi Hotel Limited; Central Hotel Kano; Caterers Court and and some landed properties. This was done to make the assets more attractive to investors and to maximise proceeds. Ikoyi Hotel Five prospective core investors bidded for 100% of the Hotel. At the nancial bid opening held on 23rd October 2002, the nal offers after the second round were as follows: SPDC Company $8,118,118.00 Prudential Trust Company $13,500,000.00 BETA Consortium $13,877,000.00 IBTC Company $7,800,000.00 Reliance Estate Limited $11,700,110.00 BETA Consortium was the preferred bidder and Prudential the reserve bidder. Payment was made on 08/01/2003 and handover took place on 10/01/2003. Caterers Court There were six bidders for the asset sale of caterers court. Reliance Estate Limited emerged the preferred bidder with an offer of N656, 700,000.00 during the competitive nancial bidding. Payment took place on 06/01/03. Recently, the nancial bid opening for the asset sale of Central Hotel, Kano and the remaining properties of Nigeria Hotels Limited at No. 8 &10 Lees Road, Ikoyi, Lagos, and the Audit section of the Hotel, took place. Dangote Investment Company emerged the preferred bidder for Central Hotel and Audit Section with an offer of N160 million and N100 million, respectively. Chyzob Enterprises Limited emerged the preferred bidder for No. 8 and 10 Lees Road with an offer of N131million and N70 million, respectively.
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Daily Times of Nigeria Plc The remaining FGN shares in DTN were divested through public offer. The offer opened 04/11/02 and closed 13/12/02 as scheduled. However, offer was poorly subscribed with a subscription rate of just about 1.5% which was below the minimum required for SECs approval. It was felt that one of the main reasons for the poor public response was lack of condence in the company due to the absence of a reliable and competent core investor. The option of privatising the company through core investor sale is being worked out. MV Abuja (Nigeria Unity Line) MV Abuja is the main asset and the only remaining vessel of the Nigeria Unity Line. Eleven tenders were received for the sale of the asset from prospective foreign buyers. Following competitive bidding held on April 3, 2003, the rm of Howe Robinson Shipbrokers (UK)/Simatech emerged the preferred bidder with a nal bid offer of $3,450,000.00. National Fertiliser Company of Nigeria (NAFCON) NAFCON was established in 1981 at Onne in Rivers State and commenced production in 1987. Noting that to a large extent the company has failed to reach its set objectives, hence the imperative of privatisation. NAFCON process of privatisation started in 2002 with the appointment of privatisation advisers who conducted diagnostic analyses of the company and submitted to the BPE. Based on their reports, the option adopted for the privatisation of NAFCON was by core investor sale for 100% divestiture. Seven prospective core investors were pre-qualied by the NCP and conducted their due diligence on the enterprise. Eventually only two out of the seven submitted their technical and nancial proposals. They were Sino Africa Petrochemicals Company Limited and HRGC Investment Company Limited. These two prospective core investors scaled through the technical evaluation stage and were recommended to NCP for their nancial proposal to be opened. The NAFCON divestiture will be 100% to the prospective core investor with deferred public offer of 40% in Five years. Upon NCPs approval, the opening of nancial bids was conducted on Thursday March 13, 2003. However, one of the bidders, HRGC Investment Company Ltd was disqualied for failure to submit its bid bond as crequired. Thus, Sino Africas Petrochemicals Company Ltd became the sole bidder for NAFCON. In the rst round of the bidding, Sino Africa Petrochemicals offered $100,000.00 for 100% of NAFCON including taking over NAFCONs #15billion liability to be repaid after the company has been rehabilitated and is fully operational. Otherwise, it offered to pay $46.1 million without liabilities. In the second round of the bidding, Sino Africa Petrochemicals reviewed their bid and dropped all the conditions and made a nal offer of $66 million without liabilities.
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On further negotiation, Sino Africa raised their bid to $75 million. They are expected to pay the purchase consideration before the end of May 2003. Iwopin Pulp and Paper Mill Advertisement inviting expressions of interest (EOIs) from prospective core investors for 100% acquisition of FGN holding in Iwopin was placed on 23rd September 2002. Four EOIs were received. Only two rms paid the mandatory $15,000 fees for access to the data room. These were: Beulah Technical Services Co. Ltd and Hippogriff Nigeria Ltd. The two companies undertook due diligence from 30th January to 20th March 2003. They submitted their technical and nancial bids on 21st March 2003. The nancial bid opening took place on April 3, 2003 at which only Beulah was allowed to bid having disqualied Hippogriff for failure to submit a valid bid bond of $750,000.00 as stipulated. Once the relevant authorities approve the transaction, the core investor will be expected to pay before the end of May, 2003. After two rounds of bidding, Beulah Technical Services Ltd. emerged the preferred bidder with a nal bid of N3,100,000,000.00 for 100% equity stake in IPPC at a price of N4.40 per share. Remaining Phase Two Enterprises Other second Phase enterprises to be privatised, most of which are now at advanced stages of divestiture, are as follows: i) ii) iii) iv) Financial Services: Nicon Insurance Corporation Abuja Stock Exchange Bank of Industry Nigerian Agricultural and Co-operative Bank Culture and Tourism: Durbar Hotel Ahmadu Bello Stadium, Kaduna Liberty Stadium, Ibadan Nnamdi Azikiwe Stadium, Enugu National Arts Theatre International Trade Fair Complex Tafawa Balewa Square Media Companies: New Nigerian Newspapers Ltd (Public Offer) Transport and Aviation: Nigeria Airways Limited and subsidiaries Nigerian Aviation Handling Company Federal Airports Authority of Nigeria
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v) vi) vii) viii) ix) x) xi) -

Nigerdock Nigeria Plc (Public Offer) National Inland Waterways Authority Nigeria Unity Line Vehicle Assembly Plants: Annamco Leyland VWON PAN Steyr Nigeria limited Paper Mills: NNMC, Oku Iboku NPM, Jebba Sugar Companies: Nigeria Sugar Co. Bacita Laagi Sugar Co Sunti Sugar Co. Agro-Allied: Ihechiowa Oil Palm Co. Ltd. Ore Irele Oil Palm Co. Ltd Ayip Eku Oil Palm Co. Ltd Nigerian Romanian Wood Industries Steel and Aluminium: Ajaokuta Steel Co. Ltd. Delta Steel Co. Ltd Jos Steel Rolling Mill Co. Ltd. Katsina Steel Rolling Mill Co. Ltd Oshogbo Steel Rolling Mill Ltd. Aluminium Smelter Co. Ltd. Mining and Solid Minerals: Nigerian Coal Corporation and subsidiaries Nigerian Mining Corporation and Subsidiaries Nigerian Uranium Company Limited Nigerian Iron-Ore Mining Company Limited Others: Nigerian Security Printing and Minting Co. West African Renery Sierra Leone NIPOST Central Packaging company, Ilupeju Opobo Boat Yard Abuja Environmental Protection Board Chemical Company of Senegal Premier Breweries Plc
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PHASE 3 Phase Three of the programme comprises the privatisation of major enterprises in the monopoly sectors of the economy, which require major pre-divestiture sector reform, including NEPA and the NNPC subsidiaries. The privatisation of NITEL, formally scheduled in Phase Three, was accelerated to take maximum advantage of the liberalisation of the telecom sector and to avoid depreciation of its realisable value due to competition as a result of the entry of private GSM providers into the sector. Below is a list of enterprises by sectors where reform process is currently going on:

Oil & Gas o o o o o o o o o o o o o o o o o o Nigerian National Petroleum Corporation Port Harcourt Renery & Petrochemicals Ltd. Warri Renery and Petrochemical Limited Kaduna Renery and Petrochemicals Limited Eleme Petrochemicals Limited Nigeria Petroleum Development Company Nigeria Gas Company Limited Pipelines Products Marketing Company Limited Dresser Nigeria Limited Solus Scholl Nigeria Limited A.C.M. Nigeria Limited Baker Nigeria Limited Sedco Forex Nigeria Limited Schlumberger Wire Line Co Dowell Schlumberger Nigeria Limited Key Drill Nigeria Limited Baroid Nigeria Limited D.C.P. Limited

Power and Steel o o o o o o o Jos Steel Rolling Mill Ltd. Oshogbo Steel Rolling Mill Ltd. Katsina Steel Rolling Mill Ltd. Ajaokuta Steel Company Limited. Aluminium Smelter Company Limited National Iron Ore Mining Company Limited National Electric Power Authority

Solid Mineral
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o Nigerian Mining Corporation o Nigerian Coal Corporation o Nigerian Uranium Corporation Co. Ltd. Transport o o o o Nigerian Ports Authority Nigerian Railway Corporation Nigerdock Limited NAHCO.

4.3

SECTOR REFORMS: POLICY, LEGAL & REGULATORY FRAMEWORK The implementation of Phase three of the Privatisation programme requires sector reform and restructuring, prior to or side-by-side with the divestiture transaction. In the monopoly sectors like electric power and telecommunications, sector reforms are undertaken in a logical sequence as follows: i) ii) iii) iv) Policy Formulation or Review Legal/Regulatory Framework Design Restructuring and Liberalization Privatisation Transaction

Some of the Sector Steering Committees earlier inaugurated have reached advanced stages of their assignments. The sectors to be covered include Ports, Power, Transport, Telecom, Oil& Gas) Power Sector Reforms In order to attract private sector investment and sustain the development of the power sector to ensure uninterrupted and efcient power supply in the country, the NCP dened the objectives for power sector reform as follows: To promote competition to facilitate more rapid provision of service throughout the country; To create a new legal and regulatory environment for the sector that establishes a level playing eld, encourage private investment and expertise, and meet social goals; To restructure and privatise the National Electric Power Authority (NEPA); and To encourage the successors to NEPA to undertake an ambitious investment programme.

In order to carry out the twin processes of restructuring and privatisation of the power sector, the NCP Electric Power Sector Reform Implementation Committee (EPIC) was inaugurated in February 2000. The following steps were also taken:
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EPIC with the advice of reputable power sector consultants (NERA) put together a Power Policy, which was approved by the Federal Executive Council on 28th March, 2001 (see below) Legal Regulatory Consultants were appointed in April 2001 Draft Electric Power Sector Reform Bill was approved by FEC and submitted to National Assembly for enactment in September 2001. Appointment of Restructuring Blueprint Advisers in November 2001. Appointment of Due Diligence Advisers in August 2002

Power Policy The Policy envisages a 3 stage legal and regulatory reform of the power sector as follows: Transition Stage - characterized by private power generation through Independent Power Producers (IPPs) and Emergency Power Producers (EPPs); corporate restructuring, unbundling and privatisation of NEPA through sale or license of all thermal plants to private operators or concessionaires and transfer of management, ownership and control of selected distribution companies (Discoys). Medium Term (after the unbundling and privatisation of NEPA is completed) Characteristics that are contemplated will include competition among generating companies; energy trading between generation and distribution companies primarily on the basis of bilateral contracts through contact exchanges and sales; payment of full price by generators for natural gas and other fuels; and, sale of energy by companies generating power in excess of their needs to distribution companies Long run Competition Structure - It is envisaged that during this phase, the various power generation, transmission and distribution companies will be operating optimally. Additionally, there would be economic pricing of electricity to cover the full costs of supply, including expectation of a reasonable, riskadjusted rate of return on capital; opportunity for large industrial consumers to choose their suppliers; a well developed wholesale market with formal membership rules, procedures, etc.; and, full retail sales competition. Legal and Regulatory Reform The Electric Power Implementation Committee (EPIC), with the aid of its consultants, has made considerable headway in dening the legal and regulatory architecture for power sector reform. Key features of his architecture are as follows: The market design structure and regulatory framework are interrelated aspects of the power sector reform programme that are documented in the Electric Power Sector Reform Bill recently passed by the National Assembly and presently awaiting the assent of the president. The enactment of the Bill is paramount to the establishment of a transparent power sector in Nigeria, whilst the market rules are the key to operation of the market.
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The Power Bill has the following objectives: to provide for the formation of companies to take over the functions, assets, liabilities and staff of the National Electric Power Authority, to develop competitive electricity markets, to establish the National Electricity Regulatory Commission; to provide for the licensing and regulation of the generation, transmission, distribution and supply of electricity; to enforce such matters as performance standards, consumer rights and obligations; to provide for the determination of tariffs; and to provide for matters connected with or incidental to the foregoing. The creation of a new Electricity Supply Industry (ESI) requires predictable and efcient rules, sometimes called the rules of the game for any company operating (connected) to the grid or operating in the Market. The Market Rules and Grid Code are in quite an advanced stage. Notwithstanding this, the Market Rules and Grid Code require further review to adapt them to Nigerias electricity system realities to reect issues of compliance and enforcement. Detailed procedures, for instance, thermal variable cost nomination, hydro operation and dispatch are required to complete the rules and codes. Once the Market Rules and Grid Code are completed and drafted, the approval by NERC is required to formalize it as the regulatory framework for the Power sector, to complement the new Bill. Corporate Restructuring of NEPA. PriceWaterhouseCoopers (PWC) and other consultants commenced work in November 2001 on preparing a blueprint for the restructuring and unbundling of NEPA. Essentially, NEPA will be unbundled along functional lines namely, generation, distribution and transmission. A special purpose entity will also be established to assume NEPA legacy liabilities and some of the current energy-purchasing obligation. On August 26th, 2002, the NCP approved the implementation blueprint for the restructuring. This restructuring will involve the creation of six Generation Companies (Gencos), in line with NEPA existing generating installations with the exception that Kainji and Jebba will be one Genco since they both drew from River Niger, an independent transmission company, that is also responsible for System and Market Operation; and eleven (11) Distribution/Marketing Companies (Discoys) matching existing zones (with the exception of Lagos, which will be split into two due to size of the load). The objective is that each one of these companies will be (or become) a commercially viable independent company. It is envisaged that this restructuring programme will conclude in late-2002 and be followed soon after by a shadow-trading period and before the divestiture of Government interest in 2003 and 2004 in the Discoys followed by the Gencos. As the restructuring blueprint has been approved by NCP, activities in the early part of 2003 are focusing on implementation of the blueprint and the actual creation of the new business units as envisaged. The BPE is working
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hand in hand with both the Ministry of Power and Steel and NEPA along side the newly inaugurated NEPA Board to ensure effective implementation of the reform programme. Rural Electrication Policy and Strategy Consultants Part of the medium-term objectives of reform program for power sector prepared is rural electrication aimed at expanding access to electricity by the rural communities in a cost effective manner. This entails the drafting of a comprehensive Rural Electric Policy and establishing a Rural Energy Fund to implement this policy. BPE working in close collabouration with the Federal Ministry of Power & Steel is now in process of retaining advisers to undertake this work. NEPA Due Diligence As a precondition to the physical unbundling of NEPA, it is considered that a Due Diligence Audit of NEPA would be benecial. The objective of the due diligence audit is to assist and advise the Federal Government in determining the precise operational status of NEPA and place a value on existing assets ahead of its restructuring and eventual privatisation. KPMG Professional services (KPS) have been retained to undertake assignment in August 2002. This assignment is in its nal stages. this

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Telecom Sector Reforms Telecommunications Policy The Telecommunications Sector Reform Implementation Committee developed and produced a new National Telecoms Policy that provides for a dynamic private sector driven industry It was this Policy that created the enabling environment for the telecom revolution that is transforming Nigeria today. Prior to the approval of the Telecoms Policy by the NCP and then Federal Executive Council in September 2000, Nigeria had the third lowest tele-density in the whole world. NITEL had an installed capacity of about 750,000 lines, while only about 400,000 lines were actually in use. There were correspondingly, about 50,000 analogue phone users and an even lower number of subscribers for the Private Telecom Operators. Before the GSM operators entered the telecom market, the waiting period in Nigeria for a phone line was several weeks if not months, and the connection fee was amongst the most expensive in the world. Just over a year after the auctioning of Digital Mobile Licenses to three operators, close to a million people have been connected. Legal and Regulatory Framework A consortium comprising Booz Allen & Hamilton/Clifford Chance/ Afriprojects/Udo Udoma & Belo-Osagie was appointed as advisers to review the legal/regulatory framework of the sector and prepare a draft Telecommunications Bill for presentation to the National Assembly. The Terms of Reference for the Consultants were to: Review the existing laws and regulations in the telecommunications sector

Prepare an overview report on the legal and regulatory framework in the sector with comments on: i. Nigeria Telecommunications policy ii. The Nigerian Communications Commission Decree 1992 iii. Public Enterprises (Privatisation and Commercialisation) Act 1999 iv. Other relevant Acts, legislation and regulations with direct relevance to the telecommunications sector v. Regulatory instruments such as orders, operating licenses, tariff lings and interconnection agreements. vi. Existing procedures for policy making, rule making, licensing, appeals, consumer affairs, etc. Prepare a new legal framework for the Nigeria Telecommunicati s n o Sector Prepare a new law for the Telecommunications sector which addresses the rights and responsibilities of the Ministry, Nigeria Communications Commission and licensed operators; Provide support to the regulatory agency in drafting and nalizing the new licenses for NITEL, M-TEL and other licensed wireless operators.
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Prepare appropriate subsidiary legislation and amendments to the existing legal and regulatory framework and other regulatory instruments regarding: i. Numbering plan ii. Spectrum management; and iii.Internet services

The consortium deployed cross-country experience in over 30 nations and, using the Telecoms Policy as the foundation, developed the Bill. The consortium held various consultations with NCC, NITEL, the Ministry of Communications and other stakeholders in the industry. By late 2000, the consultants submitted the rst draft of the Bill to the Steering Committee and this draft was accepted and approved for public discussion by the President-inCouncil on 27th December 2000.The approved draft was published in various national newspapers and copies were distributed far and wide for public debate. Following inputs from federal agencies, State Governments, the National Assembly, the Judiciary, trade unions and other interest groups, the Bill was revised and re-revised, culminating in the production of a fth draft which was debated and nalized at a National workshop held on 3rd and 4th April 2001. Following the workshop, the approval of the Bill was obtained from NCP and the recently, the clearance of the Federal Executive Council before onward passage to the National Assembly. The Bill was forwarded to the National Assembly in the third quarter of 2001 and is still awaiting nal passage. Management Contract As a result of the inconclusiveness of the Core Investor Sale transaction for NITEL, and in order to ensure that NITEL keeps pace with the rapid transformations in the telecoms market, the FGN decided that the management of the company should be placed in private sector hands through a competitively tendered management contract. The appointment of a reputable telecom rm to come and manage NITEL, will help bolster the condence of the Nigerian public in the telecom utility, thus increasing the publics interest in its shares. The rationale was that under a new competent management that is focused and given specic mandates to deliver, NITEL would be able to embark on a new expansion programme, enabling it to generate new prots. The potential manager would be a reputable telecommunication company that will assume the management and operational control of NITEL for a period of two to three years. The potential manager is expected to compete effectively with the telecommunication markets introducing sales and marketing expertise, increase range of products, transfer technologies and skills and strengthen management. In May 2002, advertisements were placed in foreign and local newspapers calling for the submission of expressions of interest (EOIs) from reputable world-class telecommunication rms interested in operating NITEL under a
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management contract for the next two to three years. In order to afford additional time for reputable companies to apply, the Transaction Advisers, PriceWaterhouseCoopers (PWC) advised that the deadline for the submission of EOIs be extended by 2 weeks. It was thus extended to June 28, 2002. The extension was advertised in the Financial Times. Following the advertisements, 14 EOIs were received by the June 14, 2002 deadline. After evaluation, the following bidders were short-listed based on the earlier published evaluation criteria and were subsequently invited to submit their bids for the NITEL Management Contract. The short-listed bidders included: 1. 2. 3. 4. 5. 6. 7. 8. 9. Africa Access and Lucent Technologies BT Teleconsult Keppel T&T Netcom ZTE Consortium Pentascope International SaskTel International TCIL Bhawan and BNSL Technologia das Communicacoes Telenor Management Partner AS and Swedtel AB

Following the pre-qualication of the short listed prospective operators, Condentiality Agreements were sent to the prospective operators in preparation for the data room due diligence. The Condentiality Agreement was to ensure that prospective operators do not disclose any privileged information to a third party. Seven (7) companies out of nine signed the Condentiality Agreement while 2, BT Teleconsult and Keppel T & T withdrew form the process. The due diligence process was to enable the prospective operators assess NITELs facilities, network and resources before submitting their technical and nancial bids. The prospective bidders were issued transaction Information Memorandum on September 4, 2002 and electronic copies of data room documents to enable them conduct due diligence on NITEL. Securities features were installed in the CD-ROMs to prevent the documents from being circulated to the unauthorised parties printed or saved on the bidders computer system. The due diligence commenced on 16th September 2002 and ended on 14th October 2002. The pre-qualied managers requested for an extension of time for submission of their bids. An extension was subsequently granted until November 14. There were 5 consortia that took part in the process. These were; - Africa Access / Lucent / BT - Pentascope - TCIL / BNSL - SaskTel / IBM
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- China Netcom The pre-qualied rms concluded due diligence on 4th November 2002, and technical and nancial proposals were submitted on 15th November. As part of the due diligence process, all the rms were in Nigeria for meetings and site visits at NITEL. The technical proposals were evaluated immediately and have since been concluded. The process of appointing the Management Contractor was concluded with Pentascope International B.V Private Ltd. signing the Contract on March 18th 2003 and has since taken over the Management of NITEL on 21st April 2003.

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NITEL IPO This connotes the Public Offer of a portion of the Federal Governments Shares in NITEL to Nigerians. The Secretariat was of the view that the sale of NITEL shares to the public should be done in multiple tranches due to the limited absorptive capacity of the domestic capital markets and the sheer volume and thus value of the NITEL Offer. It was also envisaged that sometime in the future there would be a tranche of NITEL shares for cross-border listing on one of the international stock exchanges. In order to facilitate the Public Offer of these shares, the Council had approved the appointment of a team of otation advisors for the transaction The IPO transaction was not a fall back measure following the collapse of the core investor transaction but had always constituted an integral part of the privatisation strategy for NITEL. Given the collapse of the core investor sale, Council felt it could achieve the same objective of fostering NITEL from the bureaucratic and inefcient management that had left it a shadow of its full potential by entering into a Management Contract agreement with a credible and well-experienced international telecom operator The secretariat had anticipated opening the Public Offer by October 1st 2002 in order to realize the projected proceeds of N20 Billion, for remittance to the Treasury, before the end of 2002. However, several un-anticipated legal and accounting issues in the course of the preparation of the statutory documents have resulted in delays to this timetable. These issues had been further aggravated by the absence of a NITEL board to pass the necessary resolutions including those authorizing the IPO. A Board was inaugurated on the 5th of November 2002 and has now passed all necessary resolutions. NITELs accounts proved to be a contentious issue due to the repeated inability of NITEL and its auditors to prepare the companys accounts within the stipulated period of time. The board approved the accounts for the company on the 2nd of December 2002. All qualications except that on Pension Liabilities had been removed. The legal and accounting issues have delayed the preparation of the offer documents and regulatory lings. With these untimely delays it is envisaged that the offer would open towards the end of May 2003. Oil And Gas Sector Reforms OBJECTIVES The FGN has assigned very high priority to petroleum sector renewal and reform. Specic objectives include:

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Revitalization of the sector and an end to public sector losses through redesign of and adequate stafng and resourcing of policy and oversight agencies and restructuring and disposition of public sector assets to the private sector. Continued expansion of upstream activities, emphasizing private sector participation and additions to oil and gas reserves. Resolution of NNPCs JV funding difculties, including a re-examination of NNPCs level of equity participation in the JVs. Enhanced upstream oversight capacity, particularly with respect to cost containment and the monitoring of revenue ows. Improved transfer of upstream managerial and technical know-how to the Nigerian community and increased Nigerian capacity and content in the sector both directly, and as suppliers of goods and services. Urgent amelioration of adverse social and environmental impacts of upstream operations. A sustainable clean physical environment, social equity, and an end to violence in the oil producing areas. Increased emphasis on the recognition of the interests of host communities in oil producing areas, and articulation of a framework for the sustainable development of said areas. Downstream self-sufciency, ending product imports and restoring export capacity. An end to subsidies to the rening sector and signicant efciency gains through privatisation and expanded private sector participation in both existing and new rening capacity. Consolidation of product price liberalization initiatives. Enhanced competition in both rening and retailing. Effective regulation of transport and storage infrastructure in both the oil and natural gas industries, including reasonable tariffs and rules of access protecting against anti-competitive abuse and promoting competition. Enhanced security in the operation of oil products infrastructure. Greater attention to environmental and Health Safety & Environment priorities in the downstream sector.

An early end to gas aring and expanded private sector investment in the gas sector for both exports, regional and domestic markets.

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REFORM INITIATIVES To set the pace for reform of the petroleum sector, the FGN, through the Vice President, in April 2000, established the Oil and Gas Sector Implementation Committee (OGIC) with 6 sub-committees. They have each submitted reports, which have been harmonized and will provide framework for new policy: The Structure of the Industry Legal and Regulatory Matters Upstream Operations Downstream Issues Non-Core Investments Gas and Petrochemicals

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SECTOR REFORM The sector reform will be implemented in the following sequence: Transition to full deregulation REFORM AGENDA Market liberalization Policy review and formulation Review of legal and regulatory framework Privatisation PRIVATISATION Pre-conditions for Privatisation Preconditions include the deregulation of petroleum products market by the removal of all barriers to internal trade, exports or imports of rened products through: Freeing of crude oil prices, so that reneries will pay the equivalent of world prices for crude. International market parity pricing and appropriate downstream tariffs Establishment of an Independent Regulatory Commission for the Sector A regulated open access pipeline and storage depot system A legal and regulatory framework that will assure private investors of competition on a level playing eld.

The Federal Government of Nigerias interest in the downstream sub-sector is made up of the following fully owned subsidiaries of NNPC, which are all slated for privatisation: Four reneries, located in Port Harcourt (2 reneries, old and new), Warri and Kaduna. Petroleum and Pipelines Marketing Company Limited (PPMC) made up of over 5000 kilometers of products pipelines, 17 depots and 3 renerybased product tank farms, two jetties and one export terminal Nigerian Gas Company Eleme Petrochemicals Company Limited. In the upstream sector, the eleven (11) oil service companies, in which the FGN holding is not more than 36% will be privatised. BPE has been invited to visit Petronas, Malaysia from the 27th to the 29th of January 2003. The visit is in compliance with the objective of the FGN to gain an understanding of the structure and workings of the Malaysian oil & gas industry to benchmark Nigerian oil service companies against their Malaysian counterparts. This would help put in place a framework that will encourage them to operate with efciency, protability to their shareholders, accountability to regulatory agencies, transparency in their operations, and enhancement of local capacity in the oil and gas sector. Other assets scheduled for privatisation include HYSON (Nigeria) Limited, in afliation with Calson Bermuda Limited.
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The Federal Government has also scheduled its investments in West Africa Renery Company (WARCO), Sierra Leone, for privatisation. Objectives Of The Privatisation Strategy For The Downstream Oil And Gas Sector The objectives of the Privatisation strategy for the downstream oil and gas sector are as follows: To create a competitive industry framework through sector reform and privatisation, thus mobilizing private investment. Competition will improve customer service levels and prevent price abuses To improve the regulatory framework and liberalise prices and imports To diversify supply sources and improve transparency To create adequate margins for all stakeholders and attract investments into the sector To eliminate petroleum products scarcity and set the stage for coordinated export to the West African sub-region. The above initiatives will create the necessary environment for privatisation and provide the background for the objectives of the sub sectors of the downstream sector, which are given below: Objectives Of The Privatisation Strategy For The Reneries The reneries will be privatised partially with strategic interest going to a core investor with expertise in running a world-class renery. Each core investor will submit an investment plan as well as a Social Plan. The sale would most probably be sequenced as the investor pool for renery privatisation offers are unlikely to be able to absorb 3 renery offers in one year Objectives Of The Privatisation Strategy For Products Pipelines And Marketing Company (Ppmc) The strategic plan proposes that PPMC pipeline network system, marine and truck bulk transport assets and infrastructure be unbundled and privatised through the sale of several large share blocks, with the largest shareholder becoming the operator (Logistics Company). The logistics company will transport products by pipeline, marine vessels and trucks between depots nationwide on behalf of Oil Marketing Companies, on open access, nondiscriminatory basis, but will not be allowed to own or sell products in its own right. The plan also proposes that PPMC depots be privatised as Regional Storage Depot Companies (RSDCs), which will offer product reception, storage and distribution services to all licensed oil marketing companies on nondiscriminatory basis. The RSDCs will not be allowed to own or sell products in their own right and products handled will remain the property of oil marketing companies. Also a Regulatory Commission will be established to deal with
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access and related issues and to set pipeline and depot tariffs, according to agreed formulae. The Oil Marketers will be allowed to purchase products either from the international market or from the privatised domestic reneries at international market (import parity) prices. They will be able to instruct the logistics company and the regional storage depot companies at which terminal or depot, product is to be supplied and when. The Logistics Company and depot companies will have the right to reject cargo, which do not meet quality standards. Privatisation Strategy For Eleme Petrochemical Co. Limited (Epcl) The TOR and advert for EOIs in respect of Privatisation Advisory Services were drafted and submitted to the World Bank in December 2002. The Bank responded with a No Objection for the TOR and advert but objected to a fast track method of privatisation, as major restructuring will be required for the successful privatisation of the enterprise. The adverts will be placed in domestic and international dailies and publications.

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COMMERCIALISATION OF NNPC NNPC itself is slated for full commercialisation. In view of the fact that the downstream assets are scheduled for privatisation, the commercialisation of NNPC will focus primarily on upstream operations, and other assets of NNPC. The commercialisation exercise will commence after the privatisation of the NNPCs downstream assets. Upstream Federal Government of Nigeria upstream assets include: Exploration and production operations, which are dominated by NNPC joint ventures (JVs) and more recent production sharing contracts (PSCs) with major foreign oil companies such as Shell, ChevronTexaco, ExxonMobil and TotalFinaElf. Six JVs account for close to 95% of Nigerias current production. NNPC holds an average 58% equity interest in these JVs, but leaves the management of operations in each to the participating international oil company. NNPC does not hold an equity interest in the newer PSCs and the entire nancing burden falls on NNPCs partners. The Nigerian Petroleum Development Company, (NPDC), NNPCs wholly owned exploration and production subsidiary, which holds and operates a number of licences, although its operations are small relative to overall upstream activity.

Other Assets include: NAPIMS, the investment services arm of NNPC, established for the purpose of monitoring and controlling the nancial ows associated with the sale of NNPCs share of the joint venture production, as well as NNPCs share of joint venture operating costs and capital expenditure. Integrated Data Services Ltd (IDSL), an NNPC subsidiary incorporated in 1998 to offer geophysical, geochemical, seismic and other related services in the upstream sector of the oil industry. Nigeria Engineering & Technical Co. Ltd (NETCO), a subsidiary of NNPC, established in1989 to provide an effective and reliable engineering base for the NNPC group, and the entire oil and gas industry Information Systems Department, described as the information nervous system of NNPC. National Strategic Seismic Data Storage (NSSDS), a seismic data bank. Petroleum Research Centre (PRC), and the Research and Development Division (RDD) of the NNPC.
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Duke Oil, a market monitoring company. Housing Estate Management

APPOINTMENT OF ADVISERS The Bureau of Public Enterprises, has appointed the following advisers: Downstream Strategic Adviser Tom Houston & Associates was appointed in August 2002. The Adviser commenced work on the 26th of August 2002, and has since submitted his nal report with recommendations, which articulates strategy for sector reform of the downstream. His TOR included Review options for privatisation and recommend privatisation strategy Provide recommendations with regard to regulatory requirements of sector: Regulatory agency Appropriate tariff structures and access rules for use of downstream infrastructure Appropriate pricing system for crude oil delivered to domestic reneries and for products market Protection against anti-competitive abuses etc The services of Tom Houston & Associates have been extended to include the preparation of terms of reference for legal/regulatory advisers, provide support for selection, evaluation and negotiation for consultant Start Date, Jan 2003.

Policy Adviser The rm of Nexant Ltd was engaged with effect from October 2002 to provide policy advisory services with respect to the Oil and Gas Sector. Their inception report was submitted in November 2002, the rst draft of the Policy is due in January 2003. The terms of reference for its 20-week assignment include the following: Critically review and comment on existing and proposed sector policies, including the various reports and recommendations of the OGIC Subcommittees. Comment on the wisdom or otherwise of adopting these policy recommendations for inclusion in a National Energy Policy.

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Review the existing laws governing the Petroleum sector vis a vis the proposed sector policy and recommend appropriate amendments or necessary additions that will subsequently have to be made to the laws by consultants to be appointed separately for that purpose. Based on the above, and the sector objectives listed in the Terms of Reference, prepare a draft national policy and action plan for the petroleum sector, paying particular attention to the goals and requirements of a liberalized, competitive, private sector-led sector. In this context, highlight appropriate future post-privatisation structures and roles for the Government, regulatory agencies and NNPC. Make recommendations on any additional work or consultancies, which may be required. Throughout the assignment, consult as necessary with key stakeholders from Government, the legislature, national enterprises, the private sector and civil society. Participate in, and prepare presentational materials for planned Stakeholder Workshop. Coordinate closely with any ongoing parallel or complementary initiatives, e.g., planned downstream strategy advisory, power sector reform, and downstream natural gas strategy. Other Advisers that will be appointed include: Legal/Regulatory Framework Adviser Start Date, 2nd Quarter 2003

A consortium will be selected as legal/regulatory advisers for the downstream oil & gas sector. Their Tors will include: Review of existing legal/regulatory framework Designing regulatory framework for the downstream, including transitional initiatives (IMPP model & tariff and open-access study). Drafting a new petroleum (downstream) sector reform bill. Developing an implementation plan for startup and Year 1&2 of operation for new regulatory agency. Long Term Policy And Strategic Adviser- Start Date, 1st Quarter 2002

The services of a Long Term Strategic Adviser will be procured to provide continuous support throughout the privatisation programme. Implementation Advisers For The Establishment Of The Regulatory Commission For The Sector Are Due To Be Appointed In 2003. Long Term Communications And Marketing Adviser- Start Date, 1st Quarter 2002

The adviser will be appointed without any prejudice to the overall BPE Long Term Communications and Marketing Adviser.
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Social Plan Consultant

The adviser will be selected subject to the effectiveness of the social plan of EPCL. Privatisation Advisers

The services of privatisation advisers for the following enterprises will be procured: ELEME PETROCHEMICALS COMPANY AND OIL SERVICING COMPANY- Start Date, 2nd Quarter 2003 PORT HARCOURT REFINERY I AND II AND PRODUCT AND PIPELINES MARKETING COMPANY- Start Date, September/ October 2003 PRIVATISATION ADVISORS FOR WEST AFRICAN REFINERY COMPANY LIMITED, SIERRA LEONE

SGS Inspection Nigeria Limited was appointed as technical advisers on 13th November 2002, to carry out a preliminary technical assessment. They submitted their interim report on the 21st of November 2003. Also, First Interstate Bank and Messrs Renner-Thomas and Co. were appointed in December 2002 as Financial/Lead Adviser and Legal Advisers respectively and will commence work on the 20th of January 2003. STAKEHOLDER ISSUES

An all parties meeting consisting of the Oil and Gas Labour unions (NUPENG and PENGASSAN), Hon Minister of Labour, NNPC and BPE was held with the NCP Chairman sequel to the two-day warning strike by NUPENG and PENGASSAN to protest the privatisation of NNPC downstream sector. Subsequently, a standing technical committee on the privatisation of NNPC downstream assets comprising of the Ministry of Labour, Nupengassan, NNPC and BPE with the Hon Minister of Labour as Chairman, was established to resolve perceived differences; so far the committee has held one meeting. TRANSPORT Ports Reform And Privatisation BPE and the Transport Sector Reform Implementation Committee (TSRC) have proposed a programme for the reform and privatisation of the Ports sector that comprises the following steps: Formulation and implementation of a new Transport Policy for Nigeria;
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The review of the existing Nigeria Ports Authority (NPA) Act 1999 and the establishment of an appropriate legal and regulatory framework; The creation of a regulator for the sector; Restructuring NPA, including the corporatisation of port services and terminals; and The issuance of concessions for port services and operations to private sector operators.

The primary objectives of the port reform programme are: To create a new legal and regulatory environment for the sector that establishes a fair and open business environment for all operators, Provide a framework for improved services provision, Restructure NPA and facilitate the creation of a sector regulator, Encourage competition wherever possible in the sector, Facilitate infrastructure development; and Provide the framework for private sector led growth through expanded domestic and foreign investment.

In accordance with the above, BPE has appointed advisers to assist in managing and executing the Federal Governments ports sector reform policy and the concession of some or all of NPAs operations. STAGE OF PROGRESS (PRIVATISATION ADVISERS) Terms of reference (TOR) and Advertisement for Expression of Interests (EOIs) for the privatisation advisory services on the ports were prepared and nalized in February 2002 World Bank No Objection was obtained in March 2002 Advert for EOIs from prospective advisers was placed on 2nd April, 2002 in the international and local print media, and the World Bank Development Business 21 EOIs were received from the prospective advisers as at the submission date (May 2, 2002). 18 EOIs were evaluated and 3 disqualied for non-compliance with the requirements in the advertisement. The evaluation report was approved by the Management/Technical Committee and sent to the World Bank for No Objection in June 2002. The World Bank No Objection on the EOIs evaluation report and the draft Request for Proposals (RFP) were obtained on 24th July and August 2002 respectively. RFPs were issued on 12 August to the following Short listed Firms: o o o o Africa Merchant Bank Consortium PWC London Standard Bank London Ports Advisory Consortium
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o o

Capital Bancorp Consortium, and CPCS Transcom Consortium

Proposals from the short listed consortia were received on 25th September 2002, while the evaluation of the proposals commenced on 30th September 2002.

During the last quarter of 2002, the report of the evaluation of the technical proposals was sent to the World Bank Country Mission for No Objection in order to proceed to the next stage - the opening of Financial Proposals of the following pre-qualied rms, which obtained minimum qualifying scores of 75%: PriceWaterhouseCoopers CPCS Transcom Consortium Standard Bank Consortium.

The Evaluation Report has been referred to the World Bank Headquarters in Washington D.C for No Objection in accordance with the Banks guidelines. A procurement plan for the 2003 has been prepared and reviewed with the World Bank. Approval of the procurement plan is expected this month. MARKETING COMMUNICATION For appropriate publicity of the restructuring and reform of the ports sector, Rosabel Advertising Limited was engaged as short term Marketing/ Communications Adviser through a competitive bidding. Rosabel has commenced the assignment; the inception report (situation analysis) is expected by the end of February 2003. CONSULTATIONS WITH LABOUR UNIONS IN THE PORTS SECTOR BPE has emphasized the need to engage constructively the Labour Unions. The Labour Unions involved in the privatisation of the ports are: Maritime Workers Union of Nigeria (MWUN) NPA Senior Staff Association (NPASSA)

The building of consensus and partnership with the ports workers started by the inclusion and subsequent participation of the representatives of the Labour unions as active members of Transport Sector Reform Implementation Committee (TSRC), which was established in September 2000, with the Honourable Minister of Transport as Chairman. The TSRC at its rst meeting of October 12th 2000 created ve sub-committees, which include the subcommittee on Nigerian Ports Authority (NPA). As regards continual dialogue with Labour unions, focus group discussions were held between the unions and BPE at Port Harcourt, Delta and Lagos.
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These crucial meetings have immensely assisted in facilitating open and frank discussions with the unions leaders. In August 2002, one-on-one meetings were held with all the relevant stakeholders in the Nigerian ports sector. During the period, interactive sessions were held with Joint Dock Labour Industrial Council (JODLIC) and other dockworkers representatives. Between March and August 2002, three zonal workshops were held in Port Harcourt, Calabar and Asaba while a National workshop was held in Lagos to enhance wide spread consultations with Labour unions, littoral communities and other stakeholders in the ports sector. Representatives of the workers attended, presented papers and participated in group discussions during the workshops. 4. CROSS-CUTTING ISSUES In addition to the specic sector reform issues being address towards ensuring successful implementation of the nations privatisation programme, the NCP had explored other cross-cutting issues that impact upon the implementation of the programme. These issues include: 1. Pension reform; Cross Debt Determination and Resolution; Competition and Anti-Trust and Environmental Issues;

PENSION REFORM ISSUES: The pay-as-you-go system of funding civil service pension schemes has led to difculty in the ability of Government to meet its liabilities. Beyond the inherent challenges posed by the pay-as-you-go system of pensions, Government may to some degree have been the architect of the current pension problems. For instance, inadequate and late release of funds, increase in salaries for workers and increases in the rate of pension payments for pensioners were implemented without a full assessment of the short and long term nancial implications of these increases. Government has also undertaken large-scale retrenchment of staff from time to time on full pension well before the end of their normal working life, as well as the discharge on full terminal benets of people guilty of misfeasance who should have been discharged without benets. These difculties have been brought to a head as a result of the privatisation of public enterprises where hard decisions as to how to meet the pension liabilities of existing beneciaries over the long term must be made before the privatisation of the particular enterprise.

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On the other hand, the private sector pension schemes are not mandatory, and even where they exist, the lack of clear regulatory provisions and inadequate returns in some cases has led to complaints by beneciaries. These problems led to the decision by the NCP through its secretariat, BPE to undertake an ambitious pension reforms in public enterprises in Nigeria. A Steering Committee on Pension Reforms in Public Enterprises in Nigeria was inaugurated by his Excellency, the Vice President, Atiku Abubakar on 17th September 2001 (see Chapter 3 for Membership and Terms of Reference of the Committee). PENSION REFORMS OBJECTIVES The main objectives of the reforms are to provide a descent income for the retirees and to ensure adequate funding and administrative resources such that retirement benets will be paid in full and on time. Main Objectives a. Adequacy of income for retirees b. Find short and long term funding solutions to past difculties/outstanding liabilities Ancillary Objectives a. Prudent and transparent management of pension scheme assets. b. Enhance privatisation process by resolution of outstanding pension liabilities. c. Better administration for more effective delivery of pension benets. d. Development of domestic capital markets. STATUS The Steering Committee has concluded its assignment and had submitted its report and recommendations on Draft Bill and Policy. RECOMMENDATIONS BY THE COMMITTEE The Committee recommended the need for a new, single act to govern the establishment, investment and administration of pension schemes in Nigeria in order to avoid the present fragmented statutory framework where the relevant provisions governing the pensions industry are dispersed in various pieces of legislation. One all embracing Act will make for ease of understanding and compliance. Both pension industry operators and the general public have advocated this suggested reform. In order to ensure a smooth take off of the contributory pension scheme, there is need to put in place a sustainable source of funding that would adequately offset the estimated N1.03 Trillion pension liability of the Federal, State and Local Governments. A combination of funds sources
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o o o o o o

was proposed by the Committee to be utilized to offset these pension liabilities. A number of options were considered by the Committee, which were narrowed to the following: Direct budgetary allocations Sovereign bonds Privatisation proceeds Sale of non-core assets of entities to be privatised, in the case of parastatals Sale of rent of idle Government assets Assignment of shares.

Implementation issues; the following steps have to be instituted as a matter of urgency: o The need to generate political consensus on the proposed reform amongst all stakeholders. o Early approval of the reform programme should be achieved as a result of a broad-based consensus as is mentioned above. o Once the reform programme is approved, relevant legislation should be enacted to facilitate the process of transiting from the PAYG to the contributory pension system. o On the basis of the statutory provisions of the new pensions act, the necessary institutional framework for the implementation of the reforms should be established. In particular, the National Pension Commission (NPC) and its Board should be appointed as early as possible, and the necessary resources for them to carry out their functions should be made available. o There should be a massive public enlightenment programme for the sensitization of all stakeholders. This should be undertaken by way of seminars, conferences, workshops, articled in the print media, radio jingles, television shows, etc.

2.

CROSS DEBT DETERMINATION AND RESOLUTION His Excellency, the Vice President and Chairman, National Council on Privatisation, Atiku Abubakar inaugurated a Steering Committee for Cross Debt Determination and Resolution to determine and resolve the cross debts of the public enterprises which are candidates for privatisation under the privatisation and commercialisation programme of the Federal Government of Nigeria. In order to expedite the Committees work, NCP engaged the services of ve consultants to assist the various subcommittees of the CCDDR to determine and resolve these debt issues under the leadership of Andersen Consulting. The consultants were mandated, but not limited, to: a. Determine the exact amount of indebtedness of selected Public Enterprises (PEs) as of 31st December 2000 and assess the resultant impact on the operations of these enterprises.

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b. Check the various reconciliation statements produced by each of the affected enterprises identify the differences and dene procedures for dealing with the variations. c. Advise on the most effective ways of settling various existing indebtedness by all affected enterprises under the ongoing privatisation and commercialisation programme. d. Recommend precautionary measures to be put in place and appropriate steps to ensure prompt settlement of nancial obligations amongst PEs and between them and the government. e. Ascertain the authenticity or otherwise of claims of indebtedness by each of the affected enterprises and develop a cross debt matrix among the affected enterprises and between them and government as of 31st December 2000. f. Crosscheck balances for government indebtedness and compare government loan balances with records at the Federal Ministry of Finance Incorporated (MOFI).

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CROSS DEBT DETERMINATION AND RESOLUTION- OBJECTIVES The core objective of the CCDDR is to determine the quantum, nature and structure of indebtedness among public enterprises on the one hand and between them and government on the other. The committee was also expected to consider and recommend debt resolution options and advise government on strategies for the effective operation of affected enterprises preparatory to their privatisation. STATUS It is pertinent to mention that the Committee had nalized its report and found as follows: Aggregate Debt Portfolio: Receivables: Aggregate receivables of the PEs reviewed totaled N341 billion, N188 billion (55%) of which is due from private sector organizations, N27 billion (8%) from the Federal Government and its agencies, N123 billion (36%) represents cross or inter-PE balances outstanding, while State governments owe about N2 billion. Sixty-three percent of total inter-PE receivables represent inter-group balances within the NNPC group. There is a concentration of receivables within the top ten enterprises (11% of all PEs reviewed) as they account for approximately 75% of aggregate receivables4. N Million Other PEs 1,700 MOFI 3 DMO Fed. Govt & Agencies State Govts 193 1,900 169 123 1 4,799 10,495 10,999 742 582 2,386 27,617 0.7% 8.1% 1,212 11 3 , 2 8 6,872 8 37 3 1 2 3 4 5 6 123,109 0.001 % 0.0% Total % of Total 36%

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P r i v a t e Sector 15,232 Organizatio ns TOTAL 21,927

46,566 99,112 2 3 , 7 3 3,786 7 188,433

55.2 %

60,173

223,56 3 1 , 4 7 4,406 8 4

341,548

100.0 0%

Payables: Aggregate payables amounted to approximately N1.3 trillion. Of this amount, N994 billion (77%) is due to the Federal Government and its agencies in direct local loans (via MOFI) or guaranteed foreign loans (via DMO). Fifty-nine percent of total PE payables are in the form of long-term debt whilst the balance of N524 billion is shortterm denominated. Similar to the case of receivables, there is a concentration of payables from the top ten enterprises, which account for over 85% of aggregate payables. Efforts should be focused on these enterprises in order to achieve maximum results.

N Million Other PEs MOFI DMO 34,502 87,435 1 736 14,490 296,55 0 8,116 211 4,808 2 3 107,40 0 4,713 157,27 6 64,266 77 141,75 3 4 3,460 10,98 2 66,00 4 4,836 183 13,62 1 5 817 155,55 3 20,643 4,004 45 10,501 61,065 6 Total % of Total

113,913 8.8% 220,240 17.2% 688,973 54% 84,100 538 6.6% 0%

Fed. Govt 2,878 & Agencies S t a t e 22 Govts P r i v a t e 5,131 Sector Organizati ons TOTAL 129,96 8

175,814 13.7%

324,91 1

475,48 5

99,08 6

191,56 3

61,065 1,283,5 78

100%

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PROBLEMS OF CAPITAL ADEQUACY AND IMPACT OF DEBTS ON EFFICIENT RUNNING OF PUBLIC ENTERPRISES Excessive Debt/Equity Ratios: Most PEs are excessively leveraged as a result of poor capitalization and huge debt nancing. They have been largely dependent on the Federal Government through foreign and local loans for funding and sustenance. The average debt/equity ratio is 10.6x. Essentially, this means that for every Naira in equity in the public enterprise, there is N10.6 of a debt claim to it. Huge debt overhang and poor capitalization have resulted in capital inadequacy thereby paralyzing the operations of many enterprises.

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N Million Equity 69,225 28,254 3,811 Deposit for Shares 6,239 Total Capital 75,464 29,260 Total Debt 131,46 324,91 475,484 99,086 191,562 61,065 9 1 * D e b t / E q u i t y 1.9 Ratio 11.5 100.8 9.9 (124.1) 10.6 1,006 908 4,719* 10,037 1,544 116,305 1,283,577 8,065 1,972 (7,256) 8,800 18,925 1 2 3 4 5 6 102,099 Total

Net Inter-PE balances and Unresolved Disputes Under normal circumstances, aggregate inter-PE payables should equal aggregate inter PE receivables. However, aggregate inter-PE receivables (N123 billion) exceeded reported aggregate inter-PE payables (N114 billion) by approximately N9 billion due to disputes and unresolved reconciliation issues. In the debt resolution meeting conducted by the Committee between 26th and 27th February 2002, inter-PE disputes involving NNPC, NPA and NICON debs totaling N6 billion were resolved, while a dispute of N4.6 billion between NGC and NEPA still requires resolution with intervention from the Presidency. Accordingly, the maximum possible collective set-off (either directly or by assignment) amongst the various public enterprises reviewed based on the reconciliation status of all claims outstanding is approximately N114 billion. Treatment of Grants: It is estimated that the excessive debt overhang will continue to have a negative impact on the ability of the various PEs to exist as going concerns. Further exacerbating this problem is the reliance, by PEs, on government subventions as it has lead to an indifference to generating massive operating losses. Most PEs rely on these grants to stay operational. Total grants to all PEs, as of 31st December 2000, was approximately N521 billion. If all PEs were to capitalize federal grants on their balance sheets, the average debt/equity ratio would substantially be improved from 10.6x to 2.0x. It is unclear why PEs do not capitalize these grants. A possible explanation could be the lack of focus on nancial performance and as a result PE managers have ignored key nancial indicators. Poor Working Capital Management: Many PEs are facing multiple issues that lead to their eventual demise. Their debt service requirements continue to increase dramatically due to foreign exchange exposure and they cannot support this ballooning effect as they operate below breakeven capacity levels. As a result, most
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PEs cannot meet the demands of their current liabilities. This systemic default not only affects the PEs but the various small-scale businesses that serve as their suppliers. This phenomenon has caused a vicious cycle in our economy. RECOMMENDATIONS Public Enterprise Debt Clearing House (PEDCH) The opinion put forth in the nal project report is for the FGN to consider setting up a Public Enterprise Debt Clearing House (PEDCH). This agency will be charged with the responsibility of eliminating the current debt overhang, arbitrating disputes between the PEs and monitoring settlements of future liabilities. This agency will also ensure that both parties to a debt obligation are aware of the terms of the liability. The net aggregate payable (measure of net indebtedness) amount of all PEs is N45 billion. Because a large portion of PE net payables is to other PEs, the role of the PEDCH is a focal one in alleviating this problem. PEDCH can clear outstanding indebtedness by offsetting all payables between specic PEs with receivables. This should signicantly reduce the debt overhang borne by these enterprises and help to resolve disputes by introducing an unbiased third party. Capital Restructuring and Recapitalisation The report suggests that one of the survival strategies for PEs should be to provide relief for losses incurred by viable enterprises with decit shareholders fund. The Federal Government can accomplish this in one of several ways with or without fresh capital injection. This should be preceded by a careful assessment of the operating and absorptive capacity as well as capital requirements of all affected PEs. New enterprises to be created from liberalized industries like Power and Mining could be relieved of their excruciating debt obligation through the creation of Special Purpose Entities/ Special Payment Vehicles which would take over current outstanding debt obligations and retire such debts over a long period through special taxes levied on industry players and/or customers. Debt-Equity Conversion of Local Loans and Balance Sheet Restructuring Many PEs are not in the nancial position to repay their huge debts either now or in the near future. Traditionally, MOFI accrues interest on long outstanding and unserviced loans but this will continue to be an exercise in futility if something is not done. It is recommended that some of the MOFI loans of approximately N220 billion be converted to equity prior to privatizing these enterprises. There will also be a need to write-off some loans where the net assets of the relevant enterprises are below their total debt value. This would not only substantially reduce the unconventionally high debt/equity ratio of the affected enterprises but also effectively restructure their capital base and enhance privatisation proceeds. Asset Verication and Valuation Many enterprises have debt exposures that cannot be justied or supported by their net asset base mostly due to uneconomic use of funds from loans. Accordingly, the starting point for any capital restructuring effort would be the
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economic valuation of their assets to establish the requisite asset support for any recapitalisation effort. Foreign Debt Forgiveness and Rescheduling The depreciation of the Naira over the years has compounded the huge exposure of PEs to foreign currency denominated loans. It is bad enough that many PEs operate at sub-optimal levels and have difculty collecting payments for services rendered, but the additional burden of an exponential increase in debt service requirements is unbearable. The report suggests that a solution to this problem would be to seek forgiveness for and/or negotiate rescheduling of DMO FGN guaranteed foreign loans totaling about N628 billion, based on affected PEs inability to pay. While it is realized that debt relief negotiation is currently going on at a national level, any relief obtained should be reected in the books of the PEs concerned. Rapid Turnaround Strategy For some of the strategic enterprises to be successfully transferred at a good value to reputable core investors, the Committee recommends that some turnaround efforts are necessary. It is recommended in the report that BPE institute a rapid strategic overhauling process for effectively reviving these PEs after a study to ascertain their viability is conducted. The enterprises focus, orientation and objectives would need to be redrawn, business like targets adopted, technical management expertise sought and relationships with technical partners would need to be reviewed and redened in the light of current realities. The Secretariat suggests an alternative to this recommendation because it proposes that BPE perform the functions of traditional business managers and restructure the enterprises. We believe there is a valid need for preprivatisation monitoring to place controls over the degree to which PE managers can make operational, nancial, legal and technical decisions. However, we do not support the recommendation that BPE takeover management of any enterprise. Legal, Regulatory and Market Reforms Current legislations should be reviewed and improved upon to remove all monopolistic tendencies and bring about competitiveness in the management and operations of the various PEs. There is an urgent need to conduct extensive sector reforms in order to create the appropriate mechanism to drive growth, dynamism and competitiveness. Enhancement of Management Information Systems Most of the PEs reviewed have poor accounting records. Most of the enterprises have no credit and payment policies and where such exists, it is only in the archives and never used. To smoothen the process of their divestiture, it would be necessary to repair their accounting/book-keeping records and set-up transparent processes and policies to record their transactions and manage working capital.
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Regular Reconciliation of Local and Foreign Loans The assignment revealed a number of gaps in the control and management of loans between MOFI and DMO on one hand and the various PEs on the other. It is recommended that all loan disbursement to PEs be processed and executed through appropriate channels. Records of loan transactions including basis of interest computation should be agreed to and kept by all parties to the loan. DMO and MOFI should conduct periodic interest re-computations of local and foreign loans and periodic statement of loan account should be circulated to all PEs for validation. The Committee recommend that MOFI also conduct periodic surveillance on loan utilization and management by affected enterprises with a view to ensuring loans are utilized for the approved purposes. Payment of Taxes and Other Deductions Many PEs collect WHT, VAT and other direct deductions from their customers and employees but never remit these deductions to the appropriate Revenue Authorities. The report recommends that all outstanding government revenue yet to be remitted should be deducted directly from the statutory allocations or subventions of concerned PEs.

3.

COMPETITION AND ANTI-TRUST REFORM Nigeria is currently immersed in orchestrating reforms which would enable her compete globally. The current deregulation and privatisation policy of government will result in the transfer of state-owned monopolies to private ownership. The entire philosophy rests on the basis that the private sector thrives on competition and therefore greater efciency in the allocation of resources. Following this, it is imperative that public interest is protected by disallowing restrictive practices detrimental to the interests of the consumer. This is the rst attempt in the history of the country to lay down a comprehensive framework that will provide a regulatory guidance for commercial activity in public interest. The goal of the economic policy of the current administration that the economic growth of the nation be powered private instrument while government concentrates on providing the conducive environment and set out clear rules of play for those engaged in commercial activities. To this effect, we need to prepare a policy which is designed to promote competition, enhance competitiveness, remove restrictive conduct to the ultimate benet of consumers and applicable to all sectors of the economy.

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The restructuring of the economy of the country is imperative in order to enable Nigeria benet from the advantage of the opportunities the world offers. Therefore in playing in the global arena, it is important that the internal systems run on the appropriate wavelength to guarantee integrity and provide strategy net for those who will necessarily be adversely affected in the transition. One of the most important instruments against the negative impact of the drive in the global market place is the competition and anti-trust mechanism. Inline with the above, His Excellency, the Vice President and Chairman, NCP on the 18th June 2001 inaugurated the Competition and Anti-trust Reform Steering Committee. OBJECTIVES OF THE COMPETITION POLICY AND LEGISLATION Prevention of the concentration of economic and political power in the hands of a few large organizations. Promotion of maximization of consumer welfare using market principles and efciency criteria. Preservation of management control of business and protection against the effects of labour dislocation. Nurturing small businesses, and creation of an economy characterized by many sellers competing with each other. Ensuring access to many more people previously denied an equal opportunity to participate in the economy. Prevention of restrictive practices and abuse of dominance, as well as ownership concentration.

Any competition policy is best seen as supporting both the macro-economic strategy (national economic management) and the micro-economic restructuring (promoting more efcient rms and industries). This support requires a consistency across the various elds associated with competition policy, particularly trade and industrial policies, state asset restructuring, and approaches to empowering emerging entrepreneurs. It also demands political courage and consistency in driving the reform process. STATUS The Committee called for memoranda from various stakeholders in all the sectors of the economy and the different zones of the country. The committee in collaboration with the Senate and House of Representatives Committees on Privatisation organized and held ve (5) stakeholders workshops in ve geo-political zones, namely, South-West, North-West, SouthSouth, South-East and North-East of the country. The aim of the workshop was to sensitize the stakeholders on the need for a competition policy and legislation and discuss issues arising from their memoranda. A two-day Retreat was held at the Conuence Beach Hotel, Lokoja to review the activities of the steering committee and discuss the draft competition bill prepared by the consultant. Apart from the members of the steering committee,
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expert stakeholders, representatives of the National Assembly and consumer groups participated at the Retreat. A one-day Nation Workshop was held at which the draft competition bill was presented to the general public for their contributions and comments. At the conclusion of the National Workshop, the steering committee met to harmonize the various contributions and agreed on the Final Draft Competition Bill. Draft Competition Policy, Economist Incorporated was incorporated was appointed as policy adviser by the BPE to assist the steering committee to formalize the draft competition policy for the country. Draft Competition Bill, the law rm of ECU Associates, P.C. based in Washington DC, USA was appointed as consultant by the BPE to assist the steering committee to draft appropriate legislation on competition and anti-trust.

FEDERAL COMPETITION COMMISSION A key element in implementing a competition policy in Nigeria should be the creation of a Federal competition Commission. The Commission should be competent, autonomous and professionally run authority, with effective public participation. It needs to have competent leadership and staff and sufcient resources to investigate possible violations of the competition law, hold hearings and enforce the provisions of the law through its own proceedings or through the courts. The commission should be the chief institutional advocate for competition within the Nigerian government and be involved in competition advocacy in the areas of trade policies and import regulations; foreign direct investment; securities law and privatisation. RECOMMENDATIONS The following recommendations were made by the steering committee: a. The Federal Competition Bill will replace the Hon. Chidi Durus Bill on Competition that is before the National assembly. b. The Federal Competition Commission (FCC) should be established within six months of the commencement of the Bill. c. The NCP will facilitate the take-off of the Commission including the provision of the take-off grant. d. The BPE should prepare a blueprint for the establishment of the commission bearing in mind international best practices as contained in the Report of the sub-committee on International Beast Practices and structure of the commission as contained in the draft bill. 4. ENVIRONMENTAL ISSUES It is pertinent to mention here that the World Bank-nanced Privatisation Support Project supports transparent and effective implementation of Nigerias privatisation program, in addition, the Bank creates an enabling environment for private sector participation and competition in infrastructure services, notably telecommunications and electric power. The privatisation support project is classied into Environmental Assessment Category B. An environmental report prepared by independent consultants identied activities necessary to ensure environmental and social sustainability of this operation and of national
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privatisation program in general, including the creation of a position of an environmental adviser at the BPE. MAIN ENVIRONMENTAL ISSUES The main environmental issues with respect to the project relate to the need to adequately identify and mitigate past environmental hazard and risk factors in the plants and operations of the Public Enterprises (PEs) concerned. The PE divestiture program includes major PEs in sectors where signicant environmental issues can be expected to arise. These will at least need review and analysis, and where warranted, mitigation and clean up. It is important to note, therefore, that the BPE will adopt standards and guidelines for preparation of environmental audits and assessments and implementation of actions required. Since the project focuses principally upon providing technical support for implementation of the FGN's overall privatisation program, and not investment in PEs, the environmental audit and assessment and mitigation work is best done during project implementation as part of the process leading up to privatisation and divestiture. The principal actions in preparation for the IDA credit have been to: (1) undertake a pre-audit survey of the main PEs in the telecoms, power, air transport and Lagos Water sectors to be privatised to identify the extent and principal types of environmental clean-up and mitigation activity that will need to be carried out before PE divestiture; and (2) prepare, for adoption by FGN and BPE, standards and guidelines for preparation of environmental assessments and implementation of mitigation work prior to divestiture, which would cover remaining PEs. ENVIRONMENTAL LEGAL ISSUES The Nigerian environmental law is derived from: 1) The Constitution, 2) Acts, Decrees and Statutes passed by the Legislature, including those enacted by the military governments (an indicative List of Legislation is attached for information purposes only,) 3) cases decided by courts, 4) international treaties (an indicative List of International Treaties is attached for information purposes only,) and 5) received English law, i.e. English Statutory and common law as it existed in England on January 1, 1900. The existing Nigerian environmental and related legislation is usually divided into two distinct groups: a) the pre-1988 laws and b) the laws enacted after 1988. What these laws share in common is that each of them in various provisions regulates and prohibits certain activities or conduct, which may be detrimental to the quality of the environment and health and safety of the workers and general population as well as all that many of them impose various administrative, civil and criminal sanctions and penalties for violation and noncompliance with the pertinent provisions of the respective laws. It has been observed that many pieces of existing legislation are outdated and inconsistent, while in other cases legal requirements overlap and/or there are numerous gaps in stipulations, and signicant legal-institutional linkages should be established in order for the law to be implemented and to become an effective tool for an improved environmental management in national economic transformation and privatisation.
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The Nigerias National Agenda 21 proclaimed national and sectoral goals and policies in achieving sustainable development. It has established pollution prevention and polluters pays principles. Current Nigerian environmentrelated laws stipulate corporations, owners and operators as well as directors, ofcers and managers (administrative, civil and criminal) liability for environmental pollution and damage, and mandate their responsibility for environmental mitigation, clean-up, rehabilitation, etc. Existing legislation established environmental impact assessment and audits as mandatory instruments to support design, planning and decision-making, evaluate environmental performance and develop necessary environmental management plans. Various environmental regulations and standards, applicable to different sectors of economy, have been in place since 1991. Though Nigerian privatisation legislation and regulations are completely silent on environmental aspects, some provisions, particularly those stipulating legal, technical, accounting and valuation due diligence as well as disclosure regarding various activities and assets of public enterprises may be interpreted as inclusive of environmental, health, safety and social dimensions. ENVIRONMENTAL ISSUES- STATUS Consequent upon the above developments ( main environmental issues and environmental legal issues), the NCP, through its secretariat, BPE decided to appoint Full Environmental Adviser and Environmental Legal Adviser. Presently, the Bureau is at the nal stage of appointing the consultants; Full Environmental Adviser (at RFP stage), Environmental Legal Adviser (at negotiation stage).

CONSENSUS BUILDING, PUBLICITY & ENLIGHTENMENT The Communication and Marketing Unit of the Bureau of Public Enterprises has greatly expanded its mandate since the restructuring that took place in mid-2002. Following the overall restructuring, the Unit itself was reorganized and is now composed of three divisions, namely Campaign Monitoring and Events Management, External and Government Relations, and Media and Publications, each of which has a specic purview based on the needs of the BPE, its stakeholders and various publics. With that, ongoing activities currently being implemented by the C&M Unit can be broken down as follows: Revision of the Communication Master Plan Benchmark Qualitative and Quantitative Survey
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Selection of a Long-Term Communication and Marketing Manager Interim Awareness Strategy Campaign Monitoring External and Government Relations

Details on each of these broad areas of activity are provided in the narrative below. REVISION OF THE COMMUNICATION MASTER PLAN In August 1999, Council approved the adoption of a Marketing Communications Master plan for the Privatisation Program. Against the background of a number of key issues, which were identied as likely to impact upon the implementation of the Privatisation Programme , the Master Plan established the following: Broad Goals Communication Objectives Key Communication action programmes Implementation arrangements.

This Master Plan was developed before the commencement of the actual awareness activities. After one year of implementation and the deployment of additional human resources in the management of the communication activities, it was felt that there was a need to review the master plan. This review was designed to draw from the experiences of the rst year of programme implementation and to properly dene the roles of the various functionaries involved in the management of the Communication activities. As a result of this review, a Revised Masterplan was prepared and subsequently approved by Council. The last phase of the Master Plan concluded in March 2002 and since then the Communication and Marketing Unit of the BPE has been engaged in formulating a fundamentally new strategy aimed at enhancing public awareness and consensus building efforts. The new communication program, which will be funded under the IDA credit and is now in the early stages of procurement, is being developed to achieve the following broad objectives: Generate and sustain, at all levels of society, greater awareness and support for the FGNs privatisation program, with emphasis on the Power, Oil, Port and Railways sectors; Design and put in place mechanisms to foster transparency and increase public trust in the privatisation process;
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Attract potential investors, domestic and international, to participate in specic business opportunities available through the privatisation program; Build capacity, in form of a fully trained team, to further develop and implement the communications program of BPE beyond the Consultants assignment; and Achieve measurable success in shaping public attitudes in favour of privatisation and minimizing opposition to the exercise.

It is expected that the next phase of the communication program will launch in the middle of June 2003. BENCHMARK QUALITATIVE AND QUANTITATIVE SURVEY The overriding objectives of the research project are to: Test public attitudes, awareness, support and concerns vis--vis the FGNs privatisation exercise; Determine benchmarks against which to evaluate the progress of subsequent communication, consensus building and awareness activities; Identify sources through which the Nigerian public most regularly receives information on privatisation and determine its attitudes towards these sources; Provide the NCP and BPE with recommendations on how to incorporate the outcomes of the research in the next phase of the FGNs public communication programme; Suggest possible messages that correspond to the views and opinions collected as part of the research project; Track progress of the communication programme and conduct a further benchmark study (upon request by the FGN).

The survey is intended to update data obtained through a previous survey conducted in 2000, while providing baselines conducive to tracking subsequent implementation of the awareness program. At the time of writing, both the qualitative (focus group discussions, in-depth interviews) have been completed and an interim report submitted. It is expected that the research contractor, Adam Smith Institute, will present its nal report, including ndings and recommendations for future communication work, in early February 2003. SELECTION OF A LONG-TERM COMMUNICATION AND MARKETING MANAGER In an effort to ensure proper management of the enlarged communication and marketing function, the BPE has requested for, and received, IDA permission to retain the services of a long-term public relations professional. At the time of writing, a short-list of candidates had been forwarded to and approved by the World Bank Country Ofce in Nigeria. At present, the Request for Proposal,
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which will be issued to short-listed candidates, is with the World Bank awaiting its No Objection. INTERIM AWARENESS CAMPAIGN This portion of the awareness campaign is intended to bridge the gap between conclusion of the last segment of the Master Plan and launch of the next phase of the communication program, which is anticipated in mid-June 2003. Key components of the Interim Strategy are a greater focus on grassroots mobilization, improved and intensied use of radio as a means of communication, well-timed appearances on strategic television programs, and systematized newspaper advertising. Additionally, the interim is being used to strengthen Unit capacity and prepare it for the greater responsibility it will shoulder once the next phase of the communication program is launched. CAMPAIGN MONITORING As part of the Unit reorganization, signicant attention was given to the need to properly and efciently manage the various awareness campaigns and activities commissioned from time to time by the BPE. To date, the C&M Unit has monitored implementation of the Daily Times of Nigeria IPO marketing strategy and is developing systems to ne-tune and supervise marketing efforts for the Nigerdock IPO. EXTERNAL AND GOVERNMENT RELATIONS A signicant and very important component of a successful public awareness and consensus building program is the ability to properly communicate with various stakeholders and publics. Such interaction is meant to enlighten audiences and, hopefully, engage them while generating support and understanding for the privatisation program. As part of this function the C&M Unit has identied a range of population groups with which it has either initiated or entrenched a relationship. Among these are: State governors; Traditional and religious leaders; Local governments; High school students; Students of tertiary institutions; and, Labour unions.

Additionally, the Unit has successfully arranged a bi-lateral visit from a Senior Economist with the Gambian Divestiture Agency, and is currently organizing a summit of the African Privatisation Network, of which the BPEs Director General is Chairman.

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103

Focus Groups with Labour Unions

Focus Group and its Purposes A Focus Group is a forum of knowledgeable persons to discuss specic issues and concerns under semi-structured format and seek feedback and suggestions on the subject areas. The general objectives of the labor focus group represented by the union leadership were to: 1. Explore and examine the areas of real concerns of the rank and le of the workers, arising from the on-going privatization program; 2. Gather suggestions and views from the participants and incorporate them into the privatization process, including the evaluation of core/strategic investors; and 3. Incorporate relevant ideas and suggestions into the design of severance benet package and social safety net for the workers to be likely retrenched as a result of privatization. The key areas dealt with, included: * Severance pay and pension benets * Retraining and redeployment opportunities * Workforce development issues, including skill acquisitions * Conditions of service * Employee share ownership scheme * Post-privatization concerns and issues The conduct of the Focus Group Sessions: Deliberate efforts were made to ensure condentiality and to encourage an atmosphere of frank and sincere discussions with everyones participation. In this case, no attributions were to be made to anyone who asked questions, gave information or sought clarications. Moreover, worker representative was elected as the chair of each session and certain ground rules were adopted to guide the deliberations. Findings 1. General Common to all Enterprises Workers fears for job cuts There was recurrence of expression of fears for job security by workers. The transitional provision on staff rationalization for a six-month period following the privatization could not adequately convince workers from losing their jobs before or at the expiry date of the grace period. Sale agreement In some cases, the sale agreement would not address the employment and unemployment conditions; benet provisions; infusion of new capital and technology as well as modern business principles; investment plans, product/ service diversication and expansion of business operations in the near and longterm. These issues attracted the attention of most workers.
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Unpaid salaries and benets Some of the enterprises to be privatized such as the Daily Times of Nigeria, Festac 77 Hotel, etc., have large liabilities, arising from unpaid staff salaries and benets, including salary and pension benets to those who left or retired from the enterprise during the past several years. Inadequate labor representation in the Privatization Process Some of the labor leaders complained of inadequate representation on the National Council on Privatization and the lack of representation on the sector steering committees. The argument was that, as crucial stakeholders in the program, workers would want to ensure that the best core investor with vision, commitment, technical and managerial expertise, and adequate resources were given opportunity to buy. 2. Asset Stripping Cases of asset stripping and vandalism were reported at some enterprises. Specic Allegations Pertinent to some enterprises The Benue Cement Company (BCC) The Company was privatised below market value. (Enterprise was sold for N950 million, along with two kilns). Unpaid Salaries The core investors of BCC have not paid salaries of workers and have refused to meet with them. Private monopoly by BCC The same BCC core investors also bought Salt Company of Nigeria (SALCON). As a dominant importer of salt, it has shut down SALCON to enhance private monopoly of the salt business. Asset Stripping There were serious allegations of asset stripping at the Daily Times and the New Nigerian. Recommendations Business Plan as part of the Sale Agreement - To avoid possible abuse of sale terms regarding workers job security, it should be required that core investors include in the business plans, immediate and near-term (one to three years) strategic investment, covering replacement and/or expansion, and any major changes in the workforce, including plans for skill development. This business plan must be an addendum to the sale agreement. Workforce development plan to protect the interests of workers - While the core investors must have some degree of exibility to make managerial changes for the sake of efciency and productivity, there may be need to place some safeguards to protect the workers interests. This may include a total business plan with specic provisions for workforce development, including training, internal promotions, workforce expansion, and the strategies to deal with redundancy. It is on this basis that the BPE would be able to monitor the effects of post-privatisation on workers and also to hold the core investor liable to breach of any conditions of the sale agreement.

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Post-Privatisation Monitoring Unit A unit headed by a Deputy Director be established within the Planning and Monitoring Branch of the BPE with tasks including, but not limited to: a. Evaluating the progress of the enterprises in following business plans; b. Keeping track of industrial relations and disputes as well as providing education and training on best practices of industrial harmony; c. Collecting and analysing statistics on the employment changes, salaries, labour turnover, changes in investment and technology, and other nancial data as well as conducting customer satisfaction surveys. Substantial violation of sale contract/agreement Under the termination clause of the share/purchase agreement, if certain conditions such as the Security and Exchange Commission approval or purchasers satisfaction with respect to nancial and other affairs of the enterprise are not completed with in six weeks, either party may rescind the agreement, giving a months notice. The purchase price in this case will be refunded with interest. For instance, for lack of compliance with the main elements in the business plan or if the non-compliance is detrimental to the interests of shareholders or workers, BPE must have the option to take back the privatized enterprise. In this case, the core investors share price may be refunded with penalty, ranging from 10 to 25 percent (without interest) and without considering any capital investment that may have been injected by the core investor. Even though it is not the intention of the BPE to regain the privatized enterprise, the above provision will act as a deterrent against the abuse of the intended purpose of privatization. Enterprises with excessive liabilities Regarding those enterprises with large liabilities arising from salary and benet arrears to the current and past workers, it would be a good idea for the BPE to require the consultants appointed to each enterprise to dialogue with union leaders at the enterprise level, while assessing liabilities. This may provide additional source of information to consultants in assessing liabilities rather than depending primarily on management records and documents. The collective agreements, which are in force, must provide the basis for estimating the liability of workers benets and salary arrears. Increased worker representation in privatization exercises Since workers are the key stakeholders and also soon to be share holders, it might be necessary to consider the possibility of allowing them representation, at least on some of the sector steering committees. Asset stripping The cases of asset stripping of enterprises to be privatized should be thoroughly investigated by the BPE and whoever is found guilty should be punished in accordance with the law of the land. In the mean time, BPE should send a
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letter, cautioning the managing directors concerned to be personally responsible for all the assets of enterprises in their care, until privatization exercise is completed. Problem of salary arrears For those companies with acute problem of cash-ow and the backlog of salary and benet arrears, we would recommend that the government should help to pay arrears of workers salaries, for this in itself will reduce the size of liability and eventually add value to the sale price of the enterprise to be privatized. Danger of collusion and monopoly behavior There may be a likely chance of creating monopolies through through collusion, market power or even the diversion of product between companies to the detriment of the shareholders, workers and the public. We recommend the prohibition of core investor from conducting business dealings with his exclusively owned companies. If the core investors have an ongoing business relationship prior to its privatization, then they should cease from doing business, soon after taking over the privatized enterprise.

Other Suggestions received at the Focus Group Sessions NPA workers recommended that the Ports be fully commercialized instead of being privatisation Nigerian airways add value before privatizing want to meet with DG in Lagos BAASA Fund for use Northern Nigeria Cement Co (NNCC) not following the business plans and not paying salaries of workers NAFCON (National Fertilizer Co of Nigeria) Alleged that the community (NGOs) is mobilizing the support of youth and using them to gang up against privatization. According to NITEL Junior Staff Union, many would like to go back to rural area for farming if housing, electricity, roads, schools, water, and infrastructure are made available. Backlog of arrears to be paid before privatization, to ease implementation process. Pension funds used by management for operations rather than vesting. Pilots want turn - around for Nigerian Airways before privatization and add value BPE is ignorant of aviation and it should have an aviation desk. Use of severance pay to purchase shares self employment There is a potential for hijacking of stocks allowed for public BPE to put some safeguards (NUJ) Tightening checks and balances when credit for self-employment is provided. Severance payment must be paid promptly, whether it is by core investor or by the government. NPA was critical of legal framework legal framework must be in place before privatisation. Core investors are required to follow the current agreements. When the workers have 10 percent share of the public offer, at least on seat on the board may be reserved to worker representative.

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Workers and management at the enterprise would like to receive a periodic status report on their enterprise between the time periods of the enterprise being advertised for advisors and the completion of the privation. How do we handle the long-term contract such as labor contract or vendor (supplier contract) which expires after the end of the transitional period? Can the core investor rescind the contract unilaterally?

S/N 1. 2. 3. 4. 5. 6. 7.

NAME OF UNION Staff of Daily Times of Nigeria

DATE OF MEETING 14th December 2000

VENUE DTN Conference Room BPE Conference Room BPE Conference Room Ikeja Airport Hotel

Hotel and Personal Services SSA 25th January 2001 Nigeria Union of Journalists Food, Beverages and Tobacco SSA PENGASSAN National Union of Electrical Employees National Union of Printing, Publishing and Paper Products Employees NPA SSA National Association of Aircraft Pilots and Engineers Maritime Workers Union 25th January 2001 2nd February 2001 5th February 2001 6th February 2001 7th February 2001

Ikeja Airport Hotel Ikeja Airport Hotel

8. 9. 10. 11.

8th February 2001 9th February 2001 9th February 2001

Ikeja Airport Hotel Ikeja Airport Hotel Ikeja Airport Hotel Ikeja Airport Hotel

Senior Staff Association of Banks, 13th February 2001 Insurance and Financial Institutions Employees National Union of Air Transport Employees Postal and Telecommunications Employees 14th February 2001 14th February 2001

12. 13

Ikeja Airport Hotel Ikeja Airport Hotel

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14.

Staff of National Oil

15th February 2001

National Oil Head Ofce, Marina, Lagos Sango, Otta

15.

National Union of Chemical, Footwear, Rubber and NonMetallic Products Employees Iron and Steel Engineering Workers Union Iron and Steel SSA

16th February 2001

16. 17.

April 2003 April 2003

IPM Lagos Sheraton Hotel Lgos

CHAPTER V 5. 5.1 PROCUREMENT ISSUES Donor Support

5.1.1 Securing the World Bank Credit facility for BPE: The World Bank Group was invited by the Federal Government in September 1999 to provide advisory transactional and nancial assistance to the successful implementation of the Privatisation and commercialisation programme. After the meeting, the group agreed to provide a Credit assistance to the Nigerian Government to enable it develop and implement its home grown Privatisation programme. The Credit is in the region of US$114 million over a period of about 5 years with interest of 0.75% per annum and a grace period of 10 years and repayment period of 35 years. Some of the areas of technical support include: Carrying out of the Privatisation Programme through the preparation and execution of divestiture transactions for about one hundred Public Enterprises. Carrying out of studies to prepare evaluations, design compensation and severance policies, analyse business environments, and establish coherent policies to ensure effective implementation of the Privatisation Program. Strengthening NCPs capacity to carry out the Privatisation programme through provision of technical advisory services, training and study tours for NCP, BPE and other involved in the programme. Carrying out of a review of the options for the establishment of a legal and institutional framework for competition policy.

2.

Multilateral and Bilateral Loans and Credit: As a result of the World Bank Credit, other Governments became interested in the programme and engaged the Federal Government in Discussions on assistance in areas crucial to the success of the programme. Some of these governments are:
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1. 2. 3.

4.

German Government This government has made an offer of assistance to the bureau but the offer has not been utilized as of now. Canadian Government - This government has made an offer of assistance to the bureau but the offer has not been utilized as of now. USAID USA - In October 2001, USAID approved a technical assistance grant of $8.2 million to BPE. This grant was an extension of the earlier grant of $1million approved in July 2000, through which consultants were provided to the Bureau. DFID UK - The British Government agreed to provide a grant of approximately US$10 million to BPE to cover such areas as: Institutional support for BPE staff; Technical assistance in the implementation of the transport, power and oil and gas sector reform programmes; Technical assistance in the establishment of the Nigerian Electricity Regulatory Commission; and Assistance in National Council on Privatisations consensus building activities Spanish Government - The Spanish Government through its Embassy in Nigeria are providing limited nancial assistance to the successful implementation of the Privatisation programme through the sponsoring of investment feasibility studies to be conducted by Spanish consultants

1.

1. Recruitment of in-House Advisers to Build Capacity: The Credit received from the World Bank and other donor governments was used to build capacity in the Bureau by engaging the services of advisers that were specialized in areas that needed expertise support. The advisers hired were of two types, namely: 1. IBTCI foreign Advisers: These advisers were to work on institutional and Selected Policy Support by strengthening the capacity of BPE to manage the Privatisation programme through the provision of technical assistance by short and long term expatriate advisers. Nigerian Core Team Advisers: These advisers were hired to help in reversing the Nigerian brain drain by engaging the services of a group of young and dedicated Nigerian professionals, trained in the best Universities locally and abroad, and with extensive international private sector experience in such areas as investment banking, law and economics to bolster the efforts of BPE to implement transactions.

2.

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5.3

Bidding Procedure for the selection of Advisers and Use of World Bank Guidelines for Selection and Employment of Consultants by World Bank Group Borrowers: 1. Adviser Selection Process: To provide assistance in the preparation and conduct of divestiture transactions, BPE routinely engages rms and individuals as advisers to help in various activities which include: policy advice; institutional and public enterprise reforms; sale preparation, transaction and implementation; management/engineering services; procurement services; and social and environmental studies. The Bureaus objective in this regard is to ensure that selected advisers provide professional, objective, impartial advice at all times and hold the interests of the Federal Government of Nigeria vital. Further, the NCP is keen to ensure that fraud and corruption is eliminated in the process, requiring that the BPE as well as the consultants involved in the implementation of the privatisation programme should observe the highest standard of ethics during the selection and execution of all contracts. In July 2000, the NCP approved new guidelines for the selection and employment of Consultants by BPE for the implementation of the Privatisation programme. In most cases, the process to be applied is the Quality and Cost Based Selection (QCBS) scheme, which follows closely the methodology applied by the World Bank and recognised as international best practice. QCBS is a competitive process, which takes into account the quality of proposal submitted by the shortlisted rms and the cost of services to be provided, in the selection of the successful consultant. A typical QCBS process consists of the following steps: Preparation of Terms of Reference (TOR); Preparation of the cost estimates and the budget; Advertisement inviting Expressions of Interest (EOI); Preparation of the shortlist of consultants; Preparation and issuance of Request for Proposal (RFP), which includes a Letter of Invitation (ITC), Information to Consultants (ITC), and the proposed Contract. Receipt of proposals; Evaluation of technical proposals; Evaluation of nancial proposals; Negotiations/award of the contract to the selected rm. The process typically applied by the bureau is shown below:

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Diagram of the Selection Process for Advisers:

Advertisement for Expressions of Interest (EOIs) published in local and international

Expressions of Interest submitted to BPE

EOIs evaluated by BPE Evaluation Team

Applicants pre-qualied and shortlisted

Shortlist submitted to NCP Technical Committee for consideration and approval

Requests for Technical and Financial Proposals (RFPs) issued to approved shortlist of applicants

Proposals submitted by shortlisted applicants

Technical Proposals evaluated by BPE Evaluation Team

Public opening of Financial Proposals

NCP Technical Committee and BPE conduct negotiations with shortlisted applicants

Approval and ratication of selected adviser by NCP Technical Committee and full NCP meeting

Adviser appointed

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113

Finalise TOR Finalise cost <USD 200, 000

The Steps of the Selection Process

<USD

<USD100, 000

QCBS

SBCQ

QBS

SFB

SSS

LCS

Call for EOI Prepare Banks

Call for EOI Prepare Banks Dene eva. Criteria and Prepare

Ban Dene eva. Criteria and

Dene evaluation criteria and

Prepare RFP Banks `

Prepare RFP Banks Send RFP Send RFP

Prepare RFP

Ban Send RFP

Send RFP

Prepare and submit Tech.

Prepare and submit tech. Evaluate tech.

Banks Banks

Prepare and submit tech.

Prepare and submit tech. Evaluate tech.

Evaluate Tech. proposals

Public opening of n. Proposals if tech.

Public opening of n. Proposals: calculate evaluated price;reject

QBS SFB

Public opening of n. Proposals if score of

Banks Negotiate with Banks Contract Award Start the assignment

Banks

Negotiate with highest-ranking

Submit nancial Banks Banks

Negotiate with lowest eva.

Ban

QCBS- Quality and Cost Based Selection QBS- Quality Based Selection SFB- Selection under Fixed Budget SSS- Single Source Selection LCS- Least Cost Selection SBCQ- Selection Based on Consultants

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2. Core Investor Selection Process Since its commencement in 1999 the second privatisation programme has been executed with all sense of transparency, accountability and professionalism consistent with the stance of the present administration. This posture has engendered credibility with which the implementation of the programme has been pursued so far. The Privatisation transaction involves two major processes: The actual transfer of substantial equity stake plus Management control of the public enterprise to a strategic investor; and an initial public offer of another block of shares on Nigerian and International capital markets. The selection of Core investors is done in an open international competitive bidding process designed to ensure that only the most qualied bidder is chosen. The selection process starts with the invitation (through advertisement in the local and international journals and magazines) of interested core investors to submit Expressions of Interest (EOIs). This is sequentially followed by other stages in the process including Evaluation of EOIs received, issuance of bidding documents and information memoranda to qualied bidders, due diligence for all bidders, return of bids, public opening of bids, negotiation with bidders, review of nal submissions of the bidders recommendations, nal approval, announcement of winning bid and payment by the winner. A owchart depicting the detailed core investor selection process is shown below.

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Diagram of the Selection Process for Core Investor

Advertise invitations to all prospective core investors to submit expressions of interest (EOIs)

Receive EOIs at the deadline time and date

Evaluate EOI

Qualied

Inform applicant of nonqualication

Issue Bidding Documents, Guidelines on Post-Acquisition Plans (PAPs) and Bidding Process, Information Memorandum to qualied Bidders

Bidders submit Initial Post Review of Initial PAPs

Return Initial PAPs (with comments) to Bidders

Allow at least 4 weeks due diligence period for all bidders Verication of Bidders Credentials Bidders submit Final PAPs

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(Continuation of the Core Investor Selection process)

Evaluate Final PAPs

NCP Approval of Final PAPs

Bidders with NCP-Approved PAPs invited to Auction

Auction

NCP Approval

NCP announces Winner

Technical Committee reviews Final PAPs and Prices offered by each Bidder and submits its Recommendations to the NCP

Communication by BPE to Winner

Winner Pays

Commence Transitional Procedures

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3. Initial Public Offer Process 1. Appointment of professionals 2. All Parties Meeting 3. Commence drafting of offer documents 4. Due Diligence 5. Share Valuation 6. File documents with SEC and NSE 7. Obtain necessary approvals from SEC and NSE 8. Pre marketing of offer 9. Completion Board Meeting 10. Printing and Distribution of offer documents 11. Marketing of offer/ Road Shows 12. Application list opens and closes 13. Collection of returns 14. Prepare basis of allotment 15. Obtain SEC approval of allotment 16. Allotment announcement 17. Issue proceeds to vendor 18. Dispatch return monies and share certicates 19. Execute declaration of compliance and general undertaking 20. Listing of shares 21. Transaction review 22. Ensure on -going compliance with regulatory past listing requirements.

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1. Evaluations BPEs Central Procurement Unit developed international acceptable Requests For Proposals (RFPs) and circulated World Bank standard evaluation criteria format and reporting system to all departments of the Bureau to help bolster condence in the system. Evaluations of proposals are undertaken by a 5-man team and are carried out in accordance with the criteria set in the RFPs or deduced from the Advertisement in the case of EOI evaluations. The World Bank format for evaluations and evaluation reporting was adopted by the Bureau through the help of central procurement and ever since has been in use as a standard. 2. Procurement Training and Workshops: Several training programmes were arranged to build up capacity in the area of procurement within the Bureau. Departmental Procurement Ofcers were assigned in all departments to facilitate the ow of procurement activities. Local in-House training and World Bank training were organized for designated procurement ofcers in all departments. International training was organized for departmental procurement ofcers and other members of the bureau in distinguished institutions around the world. 3. Preparation of Global Procurement Strategic Plan This plan is a comprehensive plan, which includes all training programmes, study tours, consultants hired and to be hired for the year within the bureau and all procurement activities sponsored by the Bank. It was prepared by the central procurement unit with inputs from other key units and departments and forwarded to the Bank for consideration.

CHAPTER VI 5. OTHER ISSUES

119

The Third Management Retreat of the BPE took place in January 2003. The forum afforded opportunity for frank and objective review of the performance of the entire programme by senior staff of the Secretariat. Among the issues discussed were the need for thorough review of our privatisation strategy, to allow for more exibility and the accommodation of new ideas; the need for reform of subsidies; forms of assistance and incentives for investors and more targeted use of privatisation proceeds. At the end of the Retreat, study groups were set up to articulate position papers on these issues. 1. Privatisation Strategy The main thrust of the Committee assignment was to look at the privatisation process and develop a framework that should assist Enterprise Ofcers in developing appropriate strategies for specic enterprises. 2. Subsidies Reform The Subsidies Reform Committee was tasked with the review of the current subsidies regime in the country and determine which sectors require subsidies and other sectors where subsidies can be removed. 3. Use of Privatisation Proceeds The Committee was mandated to identify ways that privatisation proceeds could be better utilised targeting specic socio-economic projects. 4. Core Investor Payment, Fund Raising and Investment Promotion This Committee was to examine the issue of fund raising by Core Investors and the complexities besetting fund raising, look into ways of attracting quality investors to participate in the privatisation process and assisting the core investors in raising the required funds, look into the ways of effectively attracting and promoting investment in Nigeria and make appropriate recommendations. The reports of these ad-hoc committees have been submitted to BPE Management. Management is considering these reports and a separate write up will be presented to Council in due course. 5. Share Purchase Loan Scheme The Privatisation Share Purchase Loan Scheme (PSPLS) was initiated by the National Council on Privatisation (NCP) to enable low-income earning Nigerian citizens to purchase shares in public enterprises, being privatised under the Federal Government's on-going Privatisation exercise, by offering credit, under extremely favourable terms and conditions, to be used for the purchase of shares.
120

From our experience during Phase I of the Privatisation program (1999-2001), it was clear that many Nigerians had enjoyed the benets of purchasing shares offered for sale by way of public offer. Subscription of shares during the Phase I exercise was largely successful with many public offers recording extremely high rates of over-subscription. However, there were a large number of Nigerian citizens who, due to the difcult economic realities of our time, were unable to put aside the few thousand Naira required to purchase a small shareholding in the enterprises that we had offered for sale in the course of the privatisation program. We are acutely aware that the success of any privatisation program, being largely political in nature, would be determined essentially by the extent to which the masses have been able to participate and benet directly from the program - the ability to purchase shares in the program by the general public is therefore an extremely important and noble objective. Given the need to encourage wider participation and support for the program as well as to encourage the savings and investment culture in Nigeria, the BPE has spent the past few months preparing the implementation of the PSPLS in order that it serves the eligible beneciaries in a transparent and efcient manner. Following extensive research, the Bureau of Public Enterprises, in achieving the Federal Government's aim of ensuring that the Privatization programme is not only well received but experienced and enjoyed by the masses, is implementing this innovative project that will touch the furthest reaches of the country, most especially people in the 'low-income bracket'. The PSPLS is designed to make available to as many Nigerians as possible the opportunity, which they may never have had, to be a part owner of some of the key business entities of the state. At this initial stage of the PSPLS, the shares in public enterprises being sold under the Privatization programme will be made available through this scheme to two million (2,000,000) Nigerian citizens. 6. Labour and Severance Issues As the privatisation programme continues to unfold, ushering positive changes in our economic landscape, there is the need to anchor the all round success of the implementation process on the efcient handling of the human resource elements. The legal framework and the implementation strategies of the NCP, have placed important premium on the quality of reward and social safety net to be provided to former employees of state-owned enterprises. The envisaged downsizing of workers for instance, must be accompanied by properly negotiated compensation measures. The Council is intensely aware of the redundancy problems in most of the state-owned enterprises and the fact that, in the short-run, retrenchment of excess labour is inevitable when the ownership is transferred to core or strategic investors. This is because, efciency in production and management demands optimum level of factor utilization including labour. The main issue therefore, is how well we address the concerns of labour redundancy rather than continuing with
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bloated workforce to the detriment of the economy and the workers themselves. In this wise, the development of social safety net in the forms of retraining, reorientation, self-employment opportunities, and other job creation activities coupled with the implementation of a negotiated equitable and fair severance payment will greatly offset the anxiety of workers. Also, privatised enterprises are required by the Transitional Provisions, to maintain the level of staff compliment that existed at the time of privatisation for at least six months, in order to offer some of the workers ample opportunity to explore reemployment or self-employment options. Conversely, severance payments are usually paid to redundant workers or workers who are involuntarily laid off. In the absence of universal unemployment insurance programme in Nigeria, it is desirable for privatised enterprises to provide for severance payment if they plan to retrench the workforce at the expiration of the six months Transitional Period. The main Labour Issues in the privatisation programme are: Redundancy issues Salary arrears/ Terminal benets/ including pension. Employee share ownership plan Social safety nets Data Collection: Employment data by broad occupational category, years of service, average wages and benets were collected at each enterprise level. A series of focus groups of union representatives both at the national and local levels were held to discuss labour issues and concerns as they relate to privatisation and also to seek their feedback and suggestions for the design of a standard severance package and social safety net. Published demographic and labour market statistics were collected from the Federal Ofce of Statistics, Nigeria Employers Consultative Association (NECA), and Manufacturing Association of Nigeria (MAN) to assess Nigerias population growth, employment and unemployment conditions, wages and salaries, and relative growth trends of industry sectors to gauge the employment potential for the workers likely to be retrenched. Also gathered were the labour market experiences of sample-retrenched workers to assess their income loss and standard of living. Estimation of Redundancy Redundancy Rates: As in the case of state-owned enterprises in other countries, overstafng is also common in Nigeria. In order to estimate the level of overstafng, three sources of information were used: feedback from general managers and human resource professional at the sample enterprises; empirical results of retrenchment in African and other developing countries; and the judgment of labour experts. The general pattern of response from the general managers with respect to redundancy reected the low-end of the redundancy rates. Thus, a base122

level, a mid-level and the an upper-level rates of 20%, 25%, and 30% respectively were determined for most sectors. In the case of Nigerian Airways and Nigerian Railways, 40%, 50%, and 60% redundancy rates were used. Use of Stafng pattern: It was prudent and useful to estimate the redundancy by broad occupational category for two reasons: a privatised enterprise is expected to run as an efcient business organization with correct stafng within each occupational category to maximize the staff utilization and worker productivity; and, the design of social safety net calls for setting up of retraining and redeployment programs for retrenched workers based on the likely redundancy at the occupation/skill level. The retrenchment rates are likely to differ among occupational categories and sectors. In the absence of industry (sector) occupational stafng matrix (mix of occupations by sector) for Nigeria or other developing country, the stafng pattern established for the United States is applied to the current employment pattern at each enterprise level. The stafng pattern is, although, signicantly inuenced by technology and relative prices of labour. A privatised enterprise is expected to a follow the best practice in stafng and the suggested redundancy rates in the logrun. However, realizing the time lag needed for a privatised enterprise in Nigeria to attain the optimum level of efciency in its business operation, an upward adjustment is made to U.S. stafng pattern while determining the expected employment level and the redundancy rates. Thus, the application of the stafng pattern of an industrialized country to Nigeria will provide us some guide in estimating redundancies by occupational category and thus developing retraining and redeployment programs for workers to be likely retrenched. Redundancy by Occupational Category: In order to derive the redundancy at the broad occupational category, we follow a few simple steps: rst, we calculate the percent distribution of stafng based on the data collected at each enterprise. This is the current stafng pattern at the enterprise. Second, apply the U.S. stafng pattern to the employment distribution by occupational category calculated in step 1. Third, reduce the employment derived in step 2 by the redundancy rates suggested above. The differences between employment in step 1 and step 3 provide redundancy rates by occupational category. There are seven broad occupational categories such as Managerial and administrative; professional and technical; sales and related; clerical and administrative support; service occupations; agriculture, forestry, shing and related; construction, operation, maintenance and material handling. Within each category there are scores of detailed occupations. To simply the calculation, only the broad seven occupational categories are used. To further simply and aggregate the categories, seven occupational categories are further reduced to three groups: managerial, senior, and junior staff, which is consistent with the stafng pattern generally, followed
123

in Nigeria. It is also assumed that if there is a shortage of positions in one of the seven occupational categories, surplus staff in closely related occupations could be lled with some additional training. Examples of labour issues treated by the secretariat. JEBBA PAPER MILLS All outstanding salary arrears and terminal benets have been paid to workers. Total sum of N213.757million was paid to the 2,100 former workers For the continued provision of services, 120 staff were retained. Salary arrears and nal entitlements payment was based on the 1996 salary levels Letters of disengagement have since been served on the 1,942 workers to facilitate privatisation. FESTAC 77 HOTEL Total sum of =N=110million has been paid to 199 workers as salary arrears and gratuity. A break down showed that =N=21million was paid as salary arrears while =N=89million was paid as terminal benets. Final entitlement payment was based on 1996 January base salary and paid at a discounted rate of 40%. DAILY TIMES Payment of salary arrears is on going. About 70% payment is completed. Final payment of the 30% will be completed this week. A total sum of =N=253.168 million was approved to pay 2,111 workers. Current staff strength is 432 while 1679 workers have been retrenched. NNMC Oku Iboku The sum of =N=313.7 million budgetary allocation has been secured by the ministry of industry to settle staff liabilities. A total of 1519 were veried out of which 764 were lay-off in May 1996. 189 staff are currently engaged in services. The sum of =N=203.69 million,=N=50 million, and =N=60million have set aside for salary arrears, pension scheme and maintenance of current staff respectively. Name enterprise o f Amount expended Number of workers 2,100

J e b b a P a p e r =N=213.757million Mills

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Festac 77 Hotel Daily Times Nnmc Oku Iboku

=N=110million =N=253.168 million =N=313.7 million

199 2,111 1519

In furtherance of the overall objective of the Council to have a sound and workable strategy in addressing labour issues, a labour policy framework to guide privatisation implementation in a consistent manner, across all sectors of the economy, was approved and adopted. The underlining principle of this approach is that, labour issues should be tackled explicitly through mechanisms that promote efciency and increase the potential gains from privatisation. Also, inherent in this basic assumption, is that, regardless of how much care is devoted to labour issues in privatisation, there will always be some unforeseen events. For instance, the Council took due cognizance of the fact, that in certain enterprises, a large number of workers may volunteer to leave under the terms stipulated by the labour policy, while in others most workers may prefer to stay. Some of those who chose to leave may fare relatively well after separation, while others may face a very hard time. As regards the enterprises, some may become lean enough to attract expressions of interest, and others will not. Moreover, after privatisation some of them may thrive, offering good employment and earnings opportunities to their employees, while some may just fail. Admittedly, these are normal cycles in market economies. Nonetheless, the problem of labour redundancy in public enterprises as illustrated by the preliminary estimate conducted based on data collected from about 27 enterprises, is clearly indicative of the necessity to downsize the labour force. However, the main thrust of any retrenchment exercise is the issue of compensation paid to the affected workers. In the case of Nigeria, workers compensation in both public and private sectors is laid down through the instrument of collective bargaining whose specic terms are dovetailed in Conditions of Service (signed agreements). Looking into the adequacy or otherwise of these compensation packages is important because of their bearings on the losses workers suffer in welfare. From experience, workers who consider the package as inadequate are unlikely to accept it. If this rejection is on a mass scale, it might constitute a formidable obstacle to achieving efciency targets. It has been further observed that even when retrenchment is involuntary, it is likely to be politically more agreeable if the severance payments are adequate, or at least reasonable viz- a- viz, the problem of welfare loss. There is variation in terms of these agreements but on the whole they are similar in structure in that most of them specify payments that increase with years of service. A typical collective bargaining agreement is one that species payment of 3 weeks of (ending) pay for each year of service for those with 1 to 5 years of service, 5 weeks of pay for those with 6 to 10 years of service, and 6 weeks pay for those with more than 10 years of service. These
125

compensation packages are in addition to settlement of outstanding pension and gratuity entitlements, which are also set out clearly in these agreements. The existence of collective bargaining agreements as benchmarks for measuring workers compensation in Nigeria, should not blind us from the pervasive abuse of this process by the parties involved. Thus, due to misapprehensions arising from the impending privatisation of PEs, there exist a convergence of interest between workers and management on the need to optimize end-of-service benets. This collusion is given tangible expression through unrealistic and unaffordable generous offers that are hurriedly negotiated and nalized to pave way for draining the resources that government seek to conserve and apply in re-invigorating the economy. In other cases, the absence of collective agreements in certain enterprises has left them with a deplorable and poor compensation package that falls far below the sector average, in terms of its adequacy and justiability. Also, in judging the adequacy or otherwise of any severance package, workers and their representatives, are likely to refer to agreements of other enterprises. The commitment of government to the principles of fairness and affordability compels us to ask the pertinent question: Are these payments adequate with respect to addressing the workers welfare losses? What changes, if any, would make the packages fairer to workers, but also nancially feasible for the government? SEVERANCE PACKAGE: It was in an effort to provide urgent solution to the above dilemma, that the Bureau deemed it appropriate to solicit the assistance of the World Bank for the services of a short-term Consultant, who was specically commissioned to examine different collective bargaining agreements and estimate the percentage of workers who are likely to accept the package voluntarily, and the extent to which the severance payments cover workers welfare losses. Relying on data on General Household Surveys collected from the Federal Ofce of Statistics as the most readily available source, the Consultant examined the labour market conditions and estimated the earnings of workers. Although, the data gathered were somewhat dated, the main concerns were that they seemed to underestimate earnings. It was further observed that the extent of under-reporting of earnings by workers is somewhere around 54%. Taking this inbuilt shortcoming into account, the Consultant reasonably proceeded to work on the assumption that workers would under-report earnings while employers tend to exaggerate their wage payments. The under-reporting of earnings is critical to the estimation of income loss and the design of a severance package. The ndings of the Consultant conrmed that under-reporting of earnings in the public and private
126

sectors leads to under-estimation of earnings loss (over the remainder of working years) because both the loss in public sector earnings and the gain in alternative earnings (upon retrenchment) are under-estimated. For this reason the Consultant opted against inating the earnings data. Instead, he focused on presenting all results- on income loss, severance payments, and shortfall in loss coverage- in terms of multiples of current monthly earnings. Accordingly, in order to derive current values of workers income losses and the severance payments offered by different packages, the results presented should be multiplied by current monthly earnings- from public sector enterprises. The important point to note is that lost public sector earnings are observable and even though we normally assume a discount rate and a prole for future earnings, the losses are tangible and real. The summary of ndings in this connection is that in addition to the tangible loss in earnings, retrenched public sector workers might also suffer intangible losses. These are losses that are not easily observable in monetary terms but derive from the nature of public sector employment. For instance, public sector workers typically enjoy a greater degree of job security, lower level of effort, scope for moonlighting (earning private sector income while on the public sector job), and higher level of prestige and power. Loss of public sector jobs implies losing these benets and hence the sustained interest shown by workers in the monetary value of these benets. By determining what public sector workers could earn in the private sector, the report has reected on the difference between these earnings and the (current) size and value of intangible benets in the public sector. The reasoning underlying this approach is that workers who can earn more in the private sector, but choose to stay on in the public sector, must do so because they enjoy certain intangible benets and that these are roughly equal to the difference between private and public sector earnings. Appropriate adjustment of these differentials in earnings between the sectors was effected in a systematic manner, thereby determining even the value of potential losses due to unemployment and drop out from the labour force. The baseline calculation of intangibles, with the available survey data and assuming that measurement error inuences 10% of observations, are 99% of current public sector earnings for all workers. In other words this means that intangible benets are estimated to be 99% of current public sector earnings, so that adjusting for these benets, in effect, means doubling of public sector earnings for each worker. Once the adjustment for intangibles is made, the resulting stream of earnings has to be discounted to get its present value. SCENARIO OF OPTIONS The Consultant made use of simulation model to calculate earnings loss and assess the adequacy of alternative severance packages. This became necessary because while a worker who is laid off clearly loses his/her earnings in the public sector (tangible and intangible) there is the possibility of generating new earnings in an alternative occupation. There
127

could be job opening in the private wage sector or the startup of microenterprise, or contribution of labour time to an existing household enterprise; the assumption is that for most part workers are not likely to be re-employed in other public sector enterprises or the government. Earnings from this alternative employment reduce the earnings loss suffered by retrenched workers and need to be taken into account. Even though, alternative earnings are not known to the worker at the time of layoff it is reasonable to assume that those who are employed have some idea of their earnings possibilities in the private sector, and that this is based on what workers with similar characteristics earn in the private sector. Due to high rate of unemployment in Nigeria, the alternative to public sector employment is remote and tortuous. Older workers, particularly those close to the ofcial retirement age and with fewer technical skills might have difculty obtaining employment in the private sector. Similarly, a signicant percentage of female workers might choose not to seek employment and thus drop out of the labour force. If there are no alternative earnings, a situation that would be relevant for those who drop out of the labour force, median earnings loss is 86% higher than the baseline value and makes up almost 18 years of current earnings. This is one extreme in the spectrum and while it might be relevant for some classes of workers (women, and older workers), based on current labour market information this does not seem reasonable for the majority of workers. It is self-evident that employment in the informal sector is larger with the attendant prospect of under-statement of their earnings in household surveys. Be that as it may, this indicates that using current labour market data to project post-layoff patterns might not be that unreasonable. The Consultant also examined the scenario of small group of workers who managed to generate some earnings in the private sector (after layoff) but these are either a fraction of their public sector earnings, or begin after a prolonged period of unemployment. These are realistic possibilities. However, the pattern of income loss and collective bargaining agreements-type severance payments has important lessons for the design of a default severance package. The rst is that CBA-type severance payments will (almost) always be hopelessly inadequate for those with relatively few years of service in the public enterprise. The extent of the shortfall will, depend on the payments offered to those with fewer years, but it is difcult to even imagine these being high enough to make up for the high loss these workers suffer. It is counter-productive to attempt to fully compensate younger workers, as they are those with relatively few years of service. The focus, therefore, should be on designing a severance package that pays an amount sufcient enough to act as a buffer while the transition is made to the private sector, either as a wage employee or in self-employed capacity. The other side of the story deals with workers who have several years of service and are likely to be over-compensated. Understandably, the reemployment prospects of these categories of workers are worse than
128

those of younger workers. Nevertheless, the justication for overcompensation remains weak because; Current labour market data do not show signicantly higher levels of unemployment in this age group, These workers are likely to have better money-management skills, which are critical for success in the informal sector, and Resources for severance payments are necessarily limited.

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CHAPTER VII
5. FINANCIAL MATTERS

2. Audited Accounts 1998-2001 (Attached As Appendix D)

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2.

Privatisation Proceeds

PRIVATISATION PROCEEDS PHASE ONE

131

Core Investor Proceeds

Public Offer Proceeds

Post-Offer Proceeds (States) (a)

Post-Offer Sale on NSE Proceeds (IIs) Floor

Total Proceeds

NAL NIL N 573,000,480.25 N 255,775,729.00 N594,295,165. 00 IMB NIL N 11,262,696.75 N 1,116,635.25 N2,205,379.80 UNIPETR OL N 1,593,750,000.00 N 435,801,067.00 N 10,157,105.00 N 12,785,215.00 NIL N 2,052,493,387.00 FSB NIL N 1,258,520,369.4 0 N 132,441,208.20 N256,445,978. 87 N39,447,024. 00 ASHAKA N 1,572,187,500.00 N 369,142,669.50 N 72,028,910.25 N 94,170,688.00 NIL N 2,107,529,767.75 CCNN N 622,761,278.82 N 44,941,345.00 N 3,165,857.50 N10,531,507.0 7 NOLCHE M N 7,412,916,000.00 N 979,913,750.00 N 305,455,000.00 N117,337,775. 00 N200,626,884 .53 AP N 2,308,824,000.00 N 272,240,265.00 N 195,777,900.00 N102,011,379. 58 WAPCO N 1,798,550,000.00 N 31,660,035.00 N808,307,115.0 0 N213,185,819. 16 N167,184,623 .06 BCC N 918,316,128.20 NIL NIL N32,960,867.0 0 NIL N951,276,995.00 N3,018,887,592.22 NIL N2,878,853,544.58 N9,016,249,409.53 NIL N681,399,988.39 N1,686,854,580.47 N778,369.60 N15,363,081.40 NIL N1,423,071,374.25

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TOTAL

N 16,227,304,907.0 2

N 3,944,822,642.9 0

N 1,007,578,380.20

N1,435,929,77 N408,036,901 4.48 .19

N23,831,979,720.59

GROSS PROCEEDS (PHASE TWO)

S / NO ENTERP RISE BIDDI N G DATE Janua r y 2002 Janua r y 2002 Febru a r y 2002 Febru a r y 2002 Octob e r 2002 GROS S PROC EED N3.50 Billion N1.01 Billion N15.4 0 Billion N0.85 Billion CORE INVESTOR

Niger Limited

dock

Global Energy/McDermott

F E S TA C 7 7 Hotel N I T E L . (Unconcluded Non-Refundable deposit) Assurance Bank Nigeria Ltd Nicon Hilton Hotel unconcluded (Bid Bond proceeds) Capital Hotels Plc (Abuja Sheraton) N i g e r i a Reinsurance Corporation Niger Insurance Plc Savannah Sugar C o m p a n y Limited National Trucks Manufacturing, Kano Nigeria Hotels Limited

UAC Properties Plc conversion to shopping mall and hotels in progress IILL (failed to conclude)

Parmex/Gensec Consortium

N0.32 Billion

African Properties

Octob e r 2002 Dece mber 2002 Dece mber 2003 Dece mber 2002 Dece mber 2002 April 2003

N4.5 Billion N1.01 Billion N 0.62 Billion N1.35 Billion N0.80 Billion N2.82 Billion

Hans Gremlin Nigeria Limited

Management Buy-out

Management Alliance Company Limited Dangote Industries Limited.

10

Art Engineering Limited

11

Various

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12

Electricity Metre Company, Zaria TOTAL

Dece mber 2002

N0.40 Billion N 32.58 Billion

Dantata Industries

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2.

BPE Budget Proposals Vs Appropriation 2000-2003

The BPE has been going through a period of serious budget crisis since the year 2001 when we got into the budget. This stems from the fact that the amount appropriated falls far below our proposal making it impossible to walk within budget approvals. Since 2001, when we rst went into the Federal Government Budget, the percentage of funds approved vis- a- vis our budget proposal has been on the decline, the 2003 budget has not been appropriated but the draft recommendation sent to us by the Budget ofce in the federal Ministry of Finance does not portray better times for the BPE in the area of budgetary allocations, as provided below: S/N Year 1 2 3 2001 2002 2003 Budget Proposal Budget Approved % o f p r o p o s e d (N) (N) budget approved 1.87b 1.6b 2.01b 520m 406m 310m 28% 25% 15%

In view of the above, there is the need to call the attention of management to the implication of the above, most especially in the areas of personnel cost and staff training. The BPE personnel expenditure is over N300m per annum, this is exclusive of the pension fund that we have not been funding regularly, with a backlog of about N40m. The breakdown of the amount recommended for the BPE for 2003 is: S/N 1 2 SUB-HEAD Personnel Cost Overhead Cost TOTAL Proposed Amount Naira 898,397,359.00 1,111,878,650.00 2,010,276,009.00 Recommended Amount Naira 166,056,000.00 144,000,000.00 310,056,000.00

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7.4

IDA ACCOUNTS Special Account The Initial deposit of US$700,000.00 (Seven hundred thousand Dollars only) was paid into the Special Account at the First Interstate Bank Plc on August 23, 2002, A replenishment application has been forwarded to the bank. Counterpart Fund Account This account that is sited in the United Bank for Africa Plc (UBA) was opened in May, 2001 with the sum of N443,235,000.00 being the Naira equivalent of $3.9million stipulated in the DCA. Project Operations Account This account is also sited at the First Interstate Bank Plc. It is used to effect payments in naira, by converting the dollar equivalent from the special account. TOTAL CREDIT AMOUNT The total Credit Amount is $114.29million TOTAL AMOUNT DISBURSEED The sum of $5.2million has so far been drawn from the credit. These include the PPF amount of $2million,initial deposit of $700,000.00 into the special account and the retroactive claims.

136