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NICON Privatisation: Interview with Jimoh Ibrahim

By on September 14, 2011

Group Managing Director of NICON Group, Dr Jimoh Ibrahim (OFR), in this interview with a group of select editors in Abuja, speaks on the Senate inquiry into the privatisation of public corporations .

In what state was the NICON Group when the BPE handed it over to you six years ago?

THE company was insolvent then. The liability BPE handed  over to us was over N25bn. The shareholders fund was just about N74 m. You can see the wide gap. At that time, I was very young and fresh from Harvard and felt I could do some magic at NICON and turn the place around. It was an opportunity to put to practice the management theory from Harvard. What I did with the NICON deal was simply to purchase Nigeria’s liability. It was not an asset because the company was insolvent. By the time we took over the management of the company, NICON lacked even the shareholders fund required by law to operate as an insurance company. Six years after, we give all the glory to God. By the last approved accounts by the regulator, shareholders fund is now about N14bn outside of its liabilities. The account has been approved. So, with this result, you will realise that a lot has been done in terms of returning NICON to where it should be, that is to be a legacy of our company. It is no longer a company owned by the nation because some people still make the mistake of saying that it is their father’s asset. It is not anybody’s father’s asset. It is my asset, the asset of our group – Global Fleet. We paid for it. We paid $48m to the Federal Government. As long as we are not asking government questions about what it did with the money we paid, nobody should be disturbing us.

Is NICON now a profitable company?
It is marginally on the profit side. We are expecting it to be profitable in the next five years. This is because we have been making huge provisions for the liabilities inherited. Imagine giving a cover to Power Holding Company of Nigeria (PHCN) at N4bn and not a single kobo paid as premium. When it was sold, the premium from PHCN was recorded in the balance sheet as asset. So, how do you take care of this? It means that the shareholders fund has to be increased in order to tackle problems like this. As long as PHCN is not paying, then of course, you can not take the premium as an asset. So, you have to make provision for it. This kind of problem made the Global Fleet Group to inject over N17bn into NICON in 2008. Then, we had issues with the Federal Government over NICON. It was settled out of court as consent judgement. The injection of fresh funds was expected to be done by all the shareholders but the federal government did not come up with one Kobo. That diluted the shares of the company and reduced what the FG owns.

What  is NICON’s share structure now?
I don’t know the exact figure, but I know that Global Fleet is quite heavy in terms of the number of shares we own. It is now more than the 70 per cent we initially bought. I think our control should be over 80 per cent now.

What about the clients, are they still mainly government agencies?
Things have changed greatly. Most of the clients we have now are mainly from the private sector. We also have the general public. It is expensive and risky doing business with government departments. Collecting premiums from them is usually difficult. You also need to do a lot of public relations to get your premiums from them. No businessman would be interested in this kind of a thing. Today’s NICON is very strict and organised. No premium, no cover. This is why we now enjoy more patronage from members of the public. We are now building a realistic balance sheet and not the bogus one in which the government said NICON is capable of making N17bn from premium. These premiums are usually not paid. When they are added as part of a company’s asset, they become bogus.

What’s NICON’s income from premium as of today?
It should be around N5bn. This is okay for a company that we are just bringing back to life after years of decay. The income from premium has moved from the initial N2bn to N3bn and now N5bn. We are moving and making progress. In the next five years, we are looking at about N20bn income from premium. But you see, we also have to look at the quality of risks we underwrite. We don’t just take any risk. What we discovered is that some risks would have occurred, after which the owner would quickly rush to the bank to pay the premium. You know they can go to any bank and get our account number to make payments. They often think we would not investigate. This is a big problem in the insurance industry.

What about Nigerian-Re? Was it also in a very bad state when you took over?
Let me first correct the misconception about how I purchased Nigeria-Re. I did not buy Nigeria-Re from the BPE. It is so sad that some people said I bought Nigeria-Re for N1bn from government and used it to get loans running into several billions. That’s so sad. We did not buy Nigeria-Re from the BPE. We bought it from the people who bought it from BPE. After running it for five years, they could not make progress and also owed Union Bank. So, Union Bank put it up for sale and we bought from the bank. Union Bank did not give us any loan to buy it.

Is Nigeria-Re now 100 per cent owned by Global Fleet?
No, not at all. When N7.5bn was injected into the company sometime ago, our group put in N4.5 billion. The Federal Government that still partly owns it did not come up with any money. We own about 70 per cent of the company. The Federal Government now owns about 13 per cent because of its failure to take up the fresh shares when it was ordered by court that N7.5bn be injected into Nigeria-Re. They consented to the judgement but did not come up with any money. When we took over Nigeria-Re two years ago, the company was unable to meet the capital requirement for operations as a re-insurance company. Unfortunately for us, when we bought it, the regulators increased the capital requirement for re-insurance to N10bn. Nobody would have touched it, if this had been obvious. I suspected that the former owners had a good knowledge of this and did not disclose it, we had paid for it before this new capital requirement was introduced. So, we had to tackle the challenge with all our might and we succeeded. Today, the shareholders’ fund of Nigeria-Re is over N10bn based on the last approved account. The company is doing incredibly well. We are hoping to start paying dividends from next year.

One of the allegations against you at the last public hearing on privatised companies was that of asset stripping at NICON. What’s your take on this?
I don’t think they know what they are talking about. We have injected N17bn into a company and somebody out there is talking about asset stripping. By this injection of funds, is the investor adding to the asset or reducing it? That aside, which asset are they talking about? I know some of the critics kept referring to one KPMG report. The KPMG report is illegal. This is because when government intervened in NICON in 2008, the board and management of the company were suspended. Minority shareholders went in, in flagrant violation of the laws of the land and appointed KPMG to audit the company. How can minority shareholders audit the company without the owner? Management was also not around. When the auditor finished its job, the surprising thing I saw in the report was that NICON was indebted to me to the tune of N2.3bn. I just laughed. I will love to have that money in my pocket today. What the auditor also said was that NICON invested in certain companies that are directly or indirectly owned by me. What is the crime in that? If NICON for instance takes 10 per cent of Air Nigeria, is that a crime? Would that not be good for NICON? Should NICON go and be investing in buildings across the nation that will not bring any returns? NICON has so many buildings all over the states that are unoccupied. Some of the buildings were offered to states governments for free and they refused to use them. So, which assets are they talking about?

Again, under the shares purchase agreement that we signed with the Federal Government, the new owner has a right to use all assets to borrow from banks after six months of operations without BPE’s approval. This was clearly stated in the share purchase agreement under section 8, sub-section 6. It says after six months, the new owners can take loans using its asset. It is now over six years. The new owner can do anything he wishes to do with the firms. It is my own company. In fact, the purchase agreement’s life span is five years. So, after five years, one can even sell one’s shareholding and transfer the ownership to another person without the knowledge or approval of anybody, the BPE inclusive. We have been operating in conformity with the agreement we signed with the BPE. I don’t know where the asset stripping thing is coming from. The companies are my own, according to the laws of the land. I can do anything I like with them. We don’t have any debenture. I don’t think anybody can come up with anything to the contrary. NICON and Nigerian-Re are not indebted to any bank and we don’t have any of our assets used for any loan.

Somebody at the public hearing also accused you of illegally taking all the cash in the London account of NICON. What is your take on this?
I don’t know where the cash is in the London account of NICON. I hope they will come and help me locate the cash so that I can quickly go and take it. I have not taken any money from the London account of NICON. It’s all lies. Let’s assume that there were indeed cash in the London account of NICON. That cash will be part of the assets of the company. If you are selling an insurance company, the seller has to leave the policy holders’ money as well as the pensioners’ money. That’s the kind of money we met at NICON. For example, three months after we took over NICON, Sosoliso Airline’s plane crashed. Three months after, AOS airline’s plane also crashed and we paid N151m as claims. How would we have paid claims, if policy holders’ money had been taken away? You see, people ought to be appreciating us for turning NICON and Nigeria-Re around. They are now world class companies. You can check our approved accounts with the regulators. Because of the high failure rates in Nigeria, people are not even aware when things are being turned around by some patriotic Nigerians.

Some stakeholders alleged that you have, over the years, sacked thousands of people at NICON and Nigerian-Re because the companies are not doing well?
Under the purchase agreement, after six months, we can sack workers. The staff strength of NICON when I took over was around 1,200. Right now, it is about 1,300. So, you can see that it has increased. We are not compelled to keep inherited staff. The key staff at NICON now are not those I inherited. Most of those we inherited walked out after collecting millions of naira from the BPE. The BPE caused a big problem in all the companies they privatised and this has been responsible for some of the failures recorded. At NICON, many workers resigned after we took over because of the huge money paid to them as gratuity/pension by the BPE. BPE had a pact with the workers that once government firms are sold, they will be paid their pensions and gratuity. So, the moment they sold, BPE paid everybody. Many of them simply resigned after collecting their millions. My secretary then at NICON simply called and told me she was leaving after collecting about N26m from the BPE. Some at the management level, collected up to N85m. The truth is that pensions and gratuity are supposed to be paid after retirement. Many of them with several more years left to serve were paid pensions and gratuity and they simply resigned. We could not control the others who stayed behind because the money BPE paid them got into their heads. So, if you tell a staff with N85m in his account to come for a management meeting by 8a.m the next day, he would not show up. We did not sack workers at NICON, BPE, by that policy, technically sacked the workers. I had to start recruiting and transferring people from our group into NICON so that we could make progress. We did very well because it is an insurance company. Now, assuming it is a steel company requiring highly skilled manpower, how would they have been immediately replaced? This is the problem BPE’s action has caused in many highly technical privatised companies like automobile, cement and steel. The skilled staff simply left after collecting millions of naira from BPE. I think this is the reason why the highly technical companies like the steel mills are going down after privatisation. Their highly skilled staff resigned after BPE’s big pay.

In the case of Nigeria-Re, the staff strength was alleged to have gone down to 200 from about 2,000. Were they sacked?
Re-insurance is a technical business. In re-insurance, we deal only with insurance companies and not the general public. So, the customers available to re-insurance firms are the existing insurance companies. So, re-insurance companies don’t need huge staff to operate. There is no any re-insurance company in the whole world that runs with 2,000 work force as was the case with Nigeria-Re before privatisation. If there is any one like that in the world, let the critics mention it. We have fully computerised our operations at Nigeria-Re to meet global challenges. That is how it is done in developed countries. What we discovered at Nigeria-Re was that government used political considerations to load the staff strength and we had to quickly correct it. You can’t operate with huge staff in re-insurance companies. There are only two re-insurance companies in Nigeria. Go and ask the second one – Continental-Re – about the number of staff it operates with. With the situation of things now, we don’t need more than 100 staff to run a re-insurance company. It means we still need to reduce further our staff strength at Nigeria-Re. Again, the laws have changed. Insurance companies in Nigeria can now do their re-insurance anywhere in the world, unlike before when Nigeria-Re enjoyed a monopoly. That amendment is enough to kill a re-insurance company. Nigeria-Re would have gone under after this but for our re-engineering strategy. The BPE gave us an indemnity that that monopoly would remain. Now that the lawmakers have removed the monopoly clause, can the BPE pay the damages incurred by Nigeria-Re? The company is over 47 years and we don’t want it to go under.

Some stakeholders have suggested that the sale of NICON should be revoked. Would you be happy to take back your money and return NICON if such an offer comes?
Which NICON? That is not possible. I can tell you that when that kind of move comes, they will meet me in court. They have tried it once, when they sacked the management and board of the company in 2008. What happened at the end of the day? We got it back. It is not possible to retrieve NICON because what we have invested is unquantifiable. Are they going to pay the principal and interest on the $44m payment I made six years ago? What about the N17bn I have injected into the company? What about all the efforts I have put into it all these years? Where will they get the money and what will they do with the company. It is not possible. Anybody recommending that is just wasting his time. When they tried it with the firm that bought Ajaokuta, the firm went to court abroad and won. I was not in any way worried by the public hearing. I have gone through all these before. The public hearing itself is questionable. They invited the seller but did not invite the buyers. Obviously, they have violated the doctrine of fair play. They only wrote to the managing director of NICON and not to the managing director of the company that acquired NICON.

Some critics at the public hearing claimed the law setting up NICON had not been repealed and that technically, NICON still belongs to the government of Nigeria. What is your response?
That’s not true. It was repealed and published in government Gazette No 6 of 2006, which says that the percentage to be offered to the core investor is 70 per cent. It was signed by Atiku Abubakar who was the chairman of the privatization council at that time. I am an experienced lawyer. There is no way I will go and buy what I know was not being genuinely sold. Critics should be looking at what we are doing at NICON and Nigeria-Re and use them to turn  other companies around.

What is your message to those saying that NICON and Nigeria-Re are not doing well?
If the companies are not doing well, how come NICON was given the National Productivity Award by President Goodluck Jonathan last year? Productivity award was established by an act of parliament. It is the highest award that can be given to an enterprise. It was not given to Jimoh Ibrahim. What I have is OFR. I think the masquerade dancing at the back of NICON should come out so that we can see him. NICON is about 15 per cent of our group asset structure. We are ready to fight anybody trying to distract us.

Do you see yourself giving up NICON in the future if the pressure continues as was seen during the public hearing?
That is not possible. We were initially thinking of selling it after some few more years of running it. But that is no longer on the card. I am a Nigerian and I am entitled to my rights. The money I used to buy NICON was not borrowed in this country. It was an inflow from Israel. Go and ask BPE. I heard one man at the public hearing saying that we borrowed money from Nigerian banks and used it to buy Nigerian assets. That’s not true. The money came from an Israeli bank. That’s an inflow of almost $50m. If anybody is thinking that we can be intimidated into selling NICON, that person is just wasting his time.

For the senators probing, I wish them the best of luck as long as they are not probing my family affairs. But some of the statements I heard some of them making were bad. I had some making conclusive remarks even before probing. I heard them saying that 80 per cent of the companies privatized were not doing well. Whereas, the BPE told them that over 70 per cent of the companies are performing. It was supposed to be investigative, but some of them took a position before it took off. Their conclusive remarks were embarrassing. We were probed by the last Senate. This Senate has also probed us. All these should stop. They should look at the agreements reached with the buyers before making statements. We should concentrate our efforts on things that will bring about development instead of probing and probing. There was a time we paid about N400m as tax for NICON alone and some people are still saying the company is not performing.

There was also the allegation that NICON was not sold to Global Fleet Group but that you hijacked it?
Assurance Acquisition Limited that purchased NICON was a special purpose vehicle. The shareholders of AAL were also clearly defined under the shares purchase agreement. The purchaser is the special purpose vehicle, created by the following entity – Global Fleet Oil and Gas (30 per cent); Great Nigeria Insurance (20 per cent); Energy Destination (25 per cent); Broad Field (10 per cent); Oceanic Bank (five per cent); N-Glory (five per cent) and Niger Insurance (five per cent). Companies that are fully owned by me control over 85 per cent of the special vehicle. The agreement binding us, on the payment for the purchase of NICON was that whoever fails to pay, his shares would be taken over by those who paid. About three of us paid; all owned by Global Fleet and we took over the company according to the agreement. The payment to BPE was time-bound. First, 10 per cent must be paid after winning and the rest within 90 days. If we fail, we will forfeit the 10 per cent to BPE. There was no way we could wait for them. In the SPA, I, Jimoh Ibrahim signed as the chairman of AAL. The Federal Government subsequently handed over NICON to me.

3 Comments

  1. Omotayo GBOGI

    September 14, 2011 at 7:45 am

    After reading this interview , I have come to conclusion that there are hosts of evil men who have covenanted with devil to supplant the destiny of this great  Nation called  Nigeria. There is this adage in Yoruba literally translated thus ” that if rats cannot or will not be able to eat the beans he will squander and mess it up . The Senate probe is one of such vehicles the enemies of this nation  is using to thwart the advancement of this nation . Recall that it was this same  senate probe on power sector  that put  the whole of the integrated power project initiated by Obasanjo regime in a reverse gear and for more than five years the Man left government subsequent government of the day have not brought forward any  alternative policy rather using phony probe to cover up their lack of understanding of what governance is all about . Luckily they found a ready and willing tools in the hand of jobless , ill prepared and to more extent educated illiterate who are busy stealing our money in the name of law making.
    Barrister Jimoh Ibrahim , I wish to thank God  for your life and for planting men  like you in this nation  
    The people that ought to be probed for all the huge  constituent allowance they are collecting are the probing what they know little or nothing about . Some are them just want to be seeing and heard on television to deceive their community in believing that they are represented well

  2. Canegbu

    September 16, 2011 at 7:21 pm

    What ever happens, the prayers of the elites and that of the real children of God will definitely surpass the evil plans of the enemies of this nation.

  3. Ewumsholding

    October 18, 2011 at 3:50 pm

    Mr Jimoh Ibrahim, you have done well. Whoever does not like what you have done by rescuing  NICON and Re-assurance are enemies of progress.