BPE: why Fed Govt is holding on to 40% stake in DisCos

Friday, 10 August 2018 05:19

BPE: why Fed Govt is holding on to 40% stake in DisCos

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THE Bureau of Public Enterprises (BPE) is set to revive non-performing privatised enterprises in its determination to create more jobs and widen the Federal Government tax sources.

It (BPE) is optimistic that the full implementation of its Post Acquisition Plan (PAP) for the enterprises will be beneficial to communities, where such concerns are domiciled

A stakeholders’/investors’ forum was recently organised in Abuja by the BPE to revitalise the bricks and mining, steel, automobile industry, services and agriculture sectors.

At the opening of the forum, Vice President Yemi Osinbajo, who doubles as the Chairman of the National Council on Privatisation (NCP) Chairman, said the Federal Government has refurbished 140 public enterprises the Bureau’s 30 years of reform journey.

He listed the affected enterprises across the various sectors of the economy as including: banking and insurance, oil and gas, power, hospitality, pensions and telecommunications.

The reforms, according to the BPE chair, were in the form of full or partial privatisation, full or partial commercialisation and concession.

Osinbajo said: “The vast majority of these enterprises can be regarded as being productive and profitable. However, naturally, there is a small percentage of these enterprises which have not been able, for one reason or the other, to achieve success. The purpose of this forum is to address this.”

BPE Director-General Alex Okoh explained that since the beginning of the privatisation programme in the 1980s, the Bureau has successfully privatised 142 enterprises by December, last year.

Out of the 142, according to him, 94 enterprises have been successfully monitored. They cover critical sectors of the economy from the transportation to vehicle assembly plants, oil palm, cement, hospitality, fertiliser, bricks and clay, mines and steel, national facilities, oil and gas, ports, power and communication.

Sixty-three per cent of the privatised enterprises are performing. Thirty-seven are not performing as expected that,” the BPE boss noted.

He said that the BPE meeting with core investors in the six bricks and clay companies, mining firm, three automobile firms, two oil palm industries and two paper manufacturers between May and June was to achieve the objective.

Besides, Okoh, who expressed satisfaction with the process, said the numerous engagements with the investors were to secure their full buy-in and support for the forum.

He said: “I am happy to announce that all the 12 core investors we have selected for this pilot scheme have cooperated with the Bureau in the organisation of the forum, and they submitted their inputs and recommendations of what needs to be done to revive the enterprises and attract potential investors. This would form part of the discussion that we will be holding today.”

It was to further consolidate on the gains the Federal Government insisted on collaboration with stakeholders to activate moribund companies for full capacity utilisation and for the benefit of the citizenry.

Okoh, therefore, told the stakeholders that the essence of the forum was to create a platform for the public and private sector operators to engage meaningfully and attract potential investors that would inject a new lease of life into the key sub-sectors of the economy.

The BPE director-general also explained that the forum was to open the enterprises for potential investors to inject fresh ideas, capital and expertise into rejuvenating them.

The urgent need for the enterprises’ revival according to the vice president, culminated in a directive to the National Council on Privatisation (NCP) to the BPE to, amongst other things, highlight the significant potential of these enterprises, interact with potential investors, engage the key stakeholders (including the relevant MDAs) and facilitate the resolution of all identified impediments that have prevented these companies from performing optimally.

Osinbajo said: “Today’s forum represents a continuation of the Federal Government’s desire and commitment to put in place an enabling business environment and to create investment opportunities for the private sector.

“Please recall that we signed three Executive Orders last year to actualise this desire and to address the following critical areas namely:

The promotion of transparency and efficiency in the business environment designed to facilitate the ease of doing business in the country;
Support for local content in public procurement by the Federal Government;
Timely submission of annual budgetary estimates by all statutory and non-statutory agencies, including companies owned by the Federal Government.
“The impact of these Executive Orders is already being felt and resulted in Nigeria rising 24 places in the World Bank’s Ease of Doing Business rankings for 2017.

“It is my anticipation that by bringing together policymakers, local and foreign investors, we will be able to engage in meaningful dialogue and develop a road map for reviving these enterprises and other non-performing enterprises.”

Okoh listed the objectives of the privatisation programme expected to be achieved at the forum as:

To build a strong and competitive economy.
To re-focus the role of government in the economy.
To attract foreign investment and technology; to create higher skilled/paying jobs.
To bring the benefits of privatisation to the common man.
After the privatisation of the Power Holding Company of Nigeria (PHCN) Plc assets in 2013, the Federal Government retained 40 per cent equity in the DisCos. Despite having the BPE to represent government’s interest in the companies, their performance remained below average.

Confronted with questions about the companies at the sideline of the forum, Okoh explained why government has not divested its stake in the firms despite the dire need of funds for revival.

His words: “Power is a strategic utility and the government at this time is not comfortable to totally divesting the interest in such essential and core utility. We had proposed that over time as we see the performance of the new private sector investors holding 60 per cent in the Discos and their commitment to providing this key public utility, then the government can systematically divest its interest.

“But, we have to be in a position that we are comfortable with how this key utility is being run, if not, there is the possibility that the government will be held hostage by the private sector people as far as that is concerned because a responsible government cannot wake up and not explain reasons for a blackout.”

Okoh said that the government was weighing several options including, looking into whether the balance sheets have been compromised.

The BPE chief suggested that analysing the situation to know “if the Discos balance sheets are compromised because they are not able to raise sufficient capital to improve the distribution network and provision of meters, then we have to look at the possibility of how to admit other investors who may have the capacity financially and other technical expertise to improve the distribution infrastructure.”

He noted that the interest of the citizenry lay in improved power supply at a reasonable cost and not in the power play between the government and the DisCos.

Despite the ailing condition of the assets and investors’ reluctance to inject more funds to rejuvenate them, the BPE boss said the government has not plan yet resell or re-privatise them.

He, however, suggested ways out of whatever challenges being faced by the investors.

Okoh said: “We cannot resell. It is not re-privatisation, it is already owned by the core investors, but if they make that strategic decision to admit additional investors, that will be fine.

“And, if they admit that liquidity is the challenge and the way they want to solve it is through equity and not debt, then they can admit investors, but if it is a debt solution, then we can approach the banks – the BoI (Bank of Industry) and others.”

He described privatisation as a way of raising money to make up for government shortages, instead of resorting to borrowing which should be a second option to resolving any financial gap that a corporate organisation or individual faces.

According to him, the same principle should apply to a country when it is in a shortfall in its liquidity to fund developmental activities. Okoh insisted that the natural fallback situation should be the assets that have not been yielding any benefit to the country as a whole and privatise these companies to raise the liquidity to fund the existing gap.

He said: “Borrowing or debts should be a sending options not your primary option because there is a cost to even borrowing which also comes back in terms of budgetary provisions that you have to service the debt.

“The principle of realising the value of assets that you have accumulated in the period of boom should drive a government policy in terms of bridging its cash fall in times of gloom.”

The success of the stakeholders’ forum will be determined with the implementation of the resolutions and recommendations made participants.

TheNation