Playing The Joke Of Privatization – By Prof Nick Ezeh

— Privatization has its fans and its foes. It deserves both. But the fans and the foes need to be clear about what they are cheering or jeering. Regardless of which side you belong, the case for privatization in Nigeria has largely centered on achieving two goals, which are – (a) to tap private-sector expertise and money to rescue fledgling public enterprises; and – (b) to reduce or eliminate public sector involvement in the administration of commercial enterprises.

Experience has shown that while the first goal – private sector expertise and money – sounds great to all; the second goal – extricating government from being a ‘businessman’ – has met with an avalanche of institutional resistance totally unexpected at the outset. This institutional resistance comes almost entirely from the MDAs that used to (mis)manage these public enterprises. The interventions of the Bureau of Public Enterprises (BPE) and the National Council on Privatization (NCP) is yet another whole story.

So, while it is self-evident that Nigeria has ripped quantum benefits from private expertise and cash infused in her privatization regime, what remains hidden from the public is the gridlock arrayed against some of the core investors by the very public servants that are supposed to see that privatization works. On this score, you can discern who is cheering and who is jeering.

Notwithstanding the current and long-dominant debate in privatization circles focusing on the new-efficiencies or lack thereof brought by private industry and money, Nigerians need to also be aware of the latent undercurrents that have been frustrating some of the privatized enterprises.

To be clear, what Nigerians know is that these formerly government-owned enterprises are now in the hands of private managers who are expected to do better. What Nigerians don’t know is that some of these private managers have suffered in degrees sufficient to make the whole idea of our privatization an expensive national and international joke.

These problems are more prevalent in the scenario of the ‘Concessions’ as opposed to the outright ”Share Sales’. In true Concessions, the crux of what the core investor (the Concessionaire) gets is the management of the long-leased enterprise or property. Conversely, in a clean Share Sale, the core investor gets the booty, represented by his controlling or absolute percentage share of the enterprise. So, in practice, the Share Sale investor is free to roam and manage his business without any let or hindrance, except for the occasional and normal regulatory interventions; but the Concessionaire is left to deal with the antics of a ‘ministerial management board’ terrified of being taken off its ‘cash cow’.

So, it happens that in the realm of Concessions, the story is entirely different and it’s not pretty. It’s confounding and it’s fast spiraling to becoming an international embarrassment and a potent threat to Nigeria’s desires to attract foreign investments. I will not go as far mentioning names here, but I will ask Nigerians to advert their minds to what is really happening with some of the Concessions. If anybody should care to look far, what you will see will shock you. What you will see is a scenario where the civil servants formerly in-charge of these failed enterprises or properties will not allow the Concessionaire the free-will to operate.

This is how it happens: The pertinent federal ministry signs a Concession Agreement, leasing or relinquishing the management of a certain government commercial property (and its appurtenants) to a Concessionaire. The Bureau of Public Enterprises (BPE) confirms the agreement on behalf of the National Council on Privatisation (NCP). That’s how the law says it should be; and that’s supposed to give the Concessionaire the free-hand to take over the property and manage it profitably and then pay government the agreed concession fee.

But, in practice, it hardly happens, at least going by the circumstances of a certain concession I am personally aware of. What happens instead is that not only will the Concessionaire be denied access to the major and profitable portions of the demised premises, the pertinent ministry refuses to yield the very management that is at the core of the concession and profit-making. The ministry officials – in claiming rights it does not possess as a mere ‘management board – engages in serial harassment of the Concessionaire, continues to collect rents and fees on the property; and otherwise complicates the entire ability of the Concessionaire to perform.

As if above shenanigans are not enough, the ministry officials go as far as suborning other third parties to interfere with the Concessionaire’s rights to peaceable occupation and management of the little left after its illegal excisions. They cap it all by processing to collect fees and rents which they hardly care to remit to government covers. This later one even became the subject of criminal investigations and prosecutions of the erring ministry officials. But they’re hardly deterred. While all these dirty jokes of a concession are prevalent, the ministry turns around and launches a ‘war of attrition’ on the Concessionaire by claiming that the Concessionaire is not paying concession fees.

Pray, how can any Concessionaire pay fees on a concession that he is hardly allowed to operate freely? How can the ministry concession one hundred present of a property for a stated fee, then refuses to yield over seventy percent of the property but at the same time expects to be paid rent on one hundred percent of the property? Madness. A joke of a concession.

Nonetheless, even as the Concessionaire is still ready to perform on the little portion left in the kitty, the ministry still refuses to execute a supplemental agreement to that effect. Then you wonder! Is it not through a supplemental agreement that the Concessionaire will know the new fee payable and thereby becomes liable to pay it? Yet, what the public will probably hear is that the Concessionaire is ‘not performing’, and that he is ‘not paying the concession fee’.

And then this: Instead of stepping in to faithfully carry out its legal mandates, the NCP rather intervenes to unilaterally terminate the concession without regard to the provisions of the concession agreement, due process and international best practices. The NCP quickly forgets that there are damning consequences for taking such illegal actions; there are consequences for breach of contract; and there are other consequences too numerous to mention here.

Suffice it to say that while the NCP feels it has some ‘police powers’ to act unilaterally and arbitrarily, it must now be ready to deal with the many consequences of its action. And to be sure, the NCP should be aware that – in accordance with the terms of the concession agreement – the consequences of its action will be tested outside its comfort zone because the concession agreement provides clearly that all disputes shall be settled by international arbitration, sitting outside Nigeria. In those climes, privatization is serious business, not some joke.

Prof Ezeh, a political economist wrote from Abuja.