By Omoh Gabriel, Business Editor.
When the idea of privatisation was muted in the 80s its purpose was to free government from running enterprises that the private sector can handle better. Its purpose was to further free resources and unleash the power of the private sector as the engine of growth of the economy. It was a global concept and every nation queued up to embrace the concept. The federal bought into the concept and set up the then Technical Committee on Privatisation and Commercialisation. The body had the responsibility of preparing enterprises in which government has interest for privatisation. The TCPC later metamorphosised into the albatross called Bureau of Public Enterprises (BPE).
So far most of the enterprises privatised seem not to meet the very objective for which the exercise was set up national objective. The BPE was suppose to ensure that those who emerged as bidders after pre qualification had the necessary prerequisite to run the enterprises they have acquired to further the over interest of Nigeria. The criteria set by government itself include among others, Technical competence of the institution, financial and managerial capability. There is overwhelming evidence that the privatisation process have been subverted by personal interest instead of national interest. The process of pre qualifying and the entire privatisation has been described by foreign investors as the most expensive and one that is not transparent. The massive bad debt concealment in African Petroleum, The sale of Niger Dock almost immediately it was handed over to Global Energy, the inability of CIIL to pay for NITEL,etc are a few example of the after affect of ill conceived and under managed privatisation.
In recent times the BPE had pre qualified and it finally emerged as the winner of the NAFCON exercise but were unable to pay and that has to be put on hold meaning that either enough work was not done or the political process was allowed to intervene in the free market process the government claims to be pursuing. Secondly it would appear that a lot of people are being used as fronts for principal actors in the National Council on Privatisation. Companies without the financial well withal and the much needed managerial competence that would allow for the continued survival of these companies being privatised.
Painfully, the government has not mustered up the courage to have a thorough review of the exercise. What is obvious in the Obasanjo current privatisation, is the urgent need for cash injection into the economy which is a short term thing. It is in the political interest of the federal government and the PDP to find money to build schools, roads and other social services so it can afford to sell to the highest bidder. The question is of what use is the highest bidder who does not have the well withal to ensure the continued existance of an hitherto national asset. The over all survival of these companies, the employment that they will generate in the future if the business continues to thrive, the tax the government gets, and other streams of benefit should be the long run consideration of any government interested in the welfare of the people and the growth of the economy.
For instance the sale of Daily Times recently to Folio Communication Limited may not necessarily be that the promoters of Folio communication have interest in the business of publishing. Nigerians are well aware that Daily Times has a lot of assets. These assets could be tripped and sold to make quick gains. After all the section of the privatisation act prohibiting the sale of a privatised enterprise in the first five years have been jettisoned.
The Aluminum Smelter Company of Nigeria is the most current and one that is likely to go the way of CIIL. It is by all indication another NITEL in the waiting. Within the farmwork of the federal government‚Äôs privatisation plans, the Bureau of Public Enterprises (BPE) is seeking to sell the majority stake in the Aluminum Smelter Company of Nigeria. An efficient management team with extensive experience in the sector, a good environmental record and strong financial resources is required to refurbish the smelter and restart operations. It is believed that the winning b bidder would need to spend an additional $180 million in order to secure the production of Alscon‚Äôs optimal metal volume.
When the company was advertised for interested parties to send in their expression of interest only one global aluminum company came bidding. The company Rusel is a Russia company. Non from Europe or the United States of America. This should give Nigerians concern given that most aluminum companies are looking for opportunities to invest in emerging markets. According to Marcos Courage , the vagaries of Nigeria‚Äôs privatisation process and the high financial premium requested for the smelter have been sighted by analysts as reason for the lack of interest from Alcoa, BHP Billiton and Alcan. He said ‚Äúthere can be no doubt that the unpredictability of Nigeria‚Äôs privatisation process has deterred many foreign investors. Last week the World Bank published a report indicating their frustration at the slow progress of privatisation in Nigeria.‚Äù
Indications are that since the suspension of production in the company in the 1990s, Alscon has been consuming an estimated N60 million every month to finance the plant maintenance, pay staff salaries, provide security and meet overheads without producing any aluminum. In total, Alscon is said to have devoured in excess of $2.5 billion of Nigerian tax payers‚Äô money since inception.
Two companies were pre-qualified for Alscon and during the bid process BFI emerged the highest bidder having double its bid when they were asked to review their bids while Rusel the second preferred bidder reduced its bid. It is pertinent for Nigerians to have a proper perspective of the two companies. Most especially as the president has refused to give assent to the BFI. It learnt that the president has asked the BPE to ensure that Rusel is back into the process of Alscon sale. Is there something the president know that the rest of us do not know?
Rusel‚Äôs bid according to Marcos Courage, was informed by its due diligence which put the value of the complex at $140 million. Mr. Courage disclosed that Standard Chartered Bank had valued the plant for $140 million. He said no company would want to pay beyond the actual value of a plant. Courage said that Rusel was founded in 2000 by merging several independent smelters, today Rusel is one of the largest aluminum producers, controlling 10 per cent of the global market. The company he said aims to increase its output and efficiency by modernizing existing plants, constructing and acquiring new ones.
With plants all over Russia and abroad, including the worldÃìs two largest aluminum smelters, located in Bratsk and Krasnoyarsk, the company has embarked on a program of modernization. This program is led by the RUSAL Engineering and Technological Centre
Rusal acquired the Friguia refinery in the Republic of Guinea in 2002. Since then, Rusal has embarked on a major modernization program ‚Äî modernizing the mines and the refinery in Guinea. The aim is to raise output from the alumina refinery and improve the quality of products.
Rusal intends also to modernize a local heat power station, which supplies both the alumina refinery and Friguia town with energy. The company is also planning to acquire and install new turbines and add another boiler, which will significantly increase the production capacity of the plant and improve its reliability.
Rusal will be introducing mining with cutter-loaders at its operations in Guinea, replacing traditional drilling and mining with explosives. This new method of mining is much less damaging for the environment. The company has also recently approved an extensive program to reduce dust-blowing during alumina loading at the Conakry sea port.
On the other hand, the other bid for Alscon came from BFI Group, an alleged Nigerian-owned US-based consortium which bid $410 million for the smelter. Once RusalÃìs bid was disqualified for its conditional bid, the BFI Group consortium was pronounced ‚ÄòPreferred Bidder.Ãì
From available record while BFI Group claims to be global in reach, in practice the company apparently is just a vehicle for one Dr Reuben Mietamuno Jaja, who lives in West Covina, California to acquire the company. There are no records of company incorporation for ‚ÄòBFI GroupÃì in the US, nor any evidence that Daewoo is involved in the bid. There are also no records that Daewoo has ever invested in the production of aluminum as available records both in the web and at the Nigeria corporate Affairs Commission has shown. It is doubtful if the BPE actually undertook a due diligence on the company. Sad enough it was the same thing that happened in NITEL when a group of Nigeria investors teamed up with the hope of acquiring the company but could not finance the project and hurriedly set up CIIL. Till today the BPE and First Bank PLC are still leaking their wounds from that botched exercise.
However, another company, ‚ÄòBFI Group Divino CorporationÃì was incorporated in California on February 23rd 2004, by one Dr Jaja.
The Secretary of State of California does not have on file a ‚ÄòStatement by Domestic Stock Corporation FilingÃì (which lists officers among other things). ‚ÄòBFI Group Divino CorporationÃì has twice been notified of this but has not yet filed a statement with the Secretary of State of California. This should have been done within 90 days of the companyÃìs incorporation.
The said Dr Jaja and his company ‚ÄòBancorp Financial Investigations GroupÃì were alleged to have been sued for alleged fraud in the Orange County Superior Court on August 15, 2000 in connection with their failure to obtain regulatory approval to operate a wire transfer business. The case was allegedly settled out of court. However, according to the attorney of record for the plaintiff in this case, the said Dr. Jaja defaulted on his obligation to pay and was sued again for alleged fraud by the same party. This suit was filed on May 12, 2004 in the Orange County, California Superior Court: Richard Nauven v. Reuben Jaja. Bancoro Financial Investigations Grow, No. 04CC05740, ‚ÄúComplaint for Fraud, Conversion, Money Had and Received, Breach of Contract, and Accounting.‚Äù
It is worthy of note that Solgas was the only company which bid for the Ajeokuta Steel plant. Apparently the said Dr Jaja was mandated by Solgas to raise the money to finance this transaction. Dr Jaja is said to be still seeking these monies.
It is unclear what financial resources ‚ÄòBFI Group Divino Corporation has at its disposal, but from all indication Dr Jaja has insufficient personal wealth to pay $410 million. It is speculated
also that he is incapable of raising these sums of money from the international capital markets. Since the CBN started to mop up liquidity in the Nigerian market earlier this year, forcing a ‚Äòliquidity squeezeÃì, it is also unlikely that sufficient capital is available in the Nigerian market to finance this deal.
Where does BFI hope to secure $410 million? The people of Nigeria have a right to know.
The privatization of Alscon is too important to risk another embarrassment like NITEL, which severely damaged the credibility of NigeriaÃìs privatization program and scarred First Bank which lost $l0million in the deal. Nigeria simply cannot afford a failure on this grand scale.Alscon has the potential to provide well-paid jobs for 1,800 Nigerians. A fully operational smelter will stimulate the development of local infrastructure, including harbor facilities, maintenance services, social and medical institutions. It is estimated that the project would indirectly provide about 20,000 jobs in lkot Abasi.
What is the objective of NigeriaÃìs privatization program? What are the national interests being pursued?
For too long the stateÃìs assets (funded by Nigerian taxpayers) have been used as a cash cow by successive governments. The Federal Government is committed to ending this abuse and to attracting experts from the private sector to manage and develop Nigerian utilities for the benefit of the Nigerian economy. The private sector has proven itself to be more efficient than the public sector at managing many industries and utilities – creating wealth, employment and security for the people of Nigeria.
The sum of money which the FGN can raise from the sale of a public asset or state utility is only a portion of the real and long term return which Nigeria receives from successful divestitures. For example, a fully operational plant at Ikot Abasi will not only provide direct employment for thousands of Nigerians, but will also provide the government with taxation revenues for expenditure on basic public services for as many years as the plant is operational.
NigeriaÃìs donors and development partners have invested time, money and resources into BPE and the FGNÃìs program of divestiture. The sale of Alscon has international implications. USAID has invested money and provided training to build up the capacity and competency of BPE. The World Bank has too. Last week the World Bank registered its dissatisfaction with NigeriaÃìs privatization process. International investors are keenly observing the BPEÃìs short-term program of divestiture. They will take no confidence from another flawed privatization. A failure would further and significantly damage NigeriaÃìs ability to attract private capital, foreign and local.