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We’re reforming to attract private sector investments – Dikki

By on July 21, 2013

Benjamin Dikki is the Director General of the Bureau of Public Enterprises, the agency saddled with the privatisation of government owned companies. The Bureau has been involved in various issues of recent, ranging from the botched NITEL sale, the power reforms, to the conversion of National Theatre into a hotel, among others. Dikki recently spoke with journalists and he explained the issues at stake and what the Bureau intends to do to ensure that the tax payer is not the loser at the end of the day. Senior Correspondent, EFE EBELO, was there. Excerpts:

You recently talked about review of some bills, what are those bills?The railway bill, the inland waterways bill, the road sector reform bill, the national transport commission bill, ports and harbors bill.

These bills have already been reviewed by the National Council for Privatisation and for further transmission to the Federal Executive Council.

After the Council okayed the bills, we referred them to the ministry of finance in order to harmonise the financial provisions in all the bills to bring them in conformity with the fiscal nature of the economy so that they are not out of sync. We also referred them to the Attorney General who did a final review  and has now made them ready and we are at the stage of producing copies for presentation to the Federal Executive Council. So in the not too distant future these bills will be before the National Assembly for consideration and enactment.

The basic thing these bills seek to do especially those in the transport sector is to remove the monopoly powers on these bills.

As you will know let me take for example the railway bill, no organisation can set up a railway track or agency except the Nigerian Railway Corporation and that has restricted state governments and the private sector from investment in this sector. So, all these bills intend to create regulatory agencies that will regulate the sectors so there will be a road regulatory agency, a rail regulatory agency inland motorways regulatory agency and ports and harbor regulatory agencies.

They will also create authorities that will be vested with the assets of the various transport modes. There will be a road authority, which will vest the road asset in that authority and grant it power to grant concessions.

What is the importance of these bills?

Now, these reform bills are very critical in reforming transport sector and bringing in private capital into the transport sector.

Economists tell us that presently because of the inefficiency of the road transport sector, we have in transport system in Nigeria, transport alone contributes 30 – 40 per cent of the costs of our products and we believe if the sectors are made conducive for private sectors investment, we will see a lot more funds coming into this sector than did in the telecommunication sector.

For example, you know that the euro tunnel was built by government  but  by the private capital.

So what we want to do is to create that kind of atmosphere that will bring in this infrastructure funding to the Nigerian economy

Specifically what do we expect from the transport sector review?

Now under the transport sector, immediately the bills are enacted, there will be a lot of concessions to be done on roads, railways, inland waterways and those will provide a lot of activities in this sector and a lot of opportunities for those who are seeking investment avenues. We are also commencing on the working of privatisation on Sky Power Catering which is a subsidiary of Nigerian Airways. We also concluded the auctioning of port removal access out of the concessions granted to the concessionaire. We are also concerned that the maritime services which is towage and all this related services that are supposed to contribute to improving the efficiency of the ports reform is lagging behind.

There are times when ships clog the channels because the towage machines are broken down and ships stay in the sea for 24 and sometimes up to 48hrs and they create a back log of traffic on the high sea increasing demurrage and other associated costs to Nigerians. So,we are working on how we can improve the efficiency in the maritime services.

We have commenced discussion with the NPA and Ministry of Transport so that we can come up with appropriate strategy that will improve the efficiency of this sector. The conclusion could either be privatisation; commercialisation or whatever form we feel will be most appropriate. We will cross the bridge when we get there.  We are also collaborating to finalise the concession of the Kirikiri Light Terminal.

 Can you give an update on the power reform?

So far, we are concluding the privatisation of the ten power companies; 15 successful companies of PHCN, the five GENCOs (Generating companies) and five DISCOs (Distribution companies) by mid September and we expect to get full payments of all the balance of the 75 per cent and then we commence the process of handover.

The labour issues also are reaching conclusions with the distributed benefits statement to all members of the PHCN staff. They have returned 85-86 per cent of the pay slips we received, they were clean no complaints, maybe just about 10-15 per cent that we have issues with and are working on correcting them. We did this so that when we pay there will be no basis of complaining, because each staff would have reviewed the benefits statement and make sure that everything is on track.

You are also aware that we have also just come back from the road show. So, by the 19th we will be harvesting the interest of expression by the NIPP transactions that we have just started. We will evaluate them and then move to the technical stage.  So, those are the activities on the electric power privatisation we are hoping that by the 2nd quarter of next year the NIPP will also have been taken up and the electric power sector industry in Nigeria will now move to the private sector.

But we also want to sensitise the Nigerian public to be aware that once the private sector takes over they are going to collect every penny for every power they give. The unbundling of the sector has created some measure of control in managing the revenue streams in the value chain. The generators are separate from the transmission and separate from the distribution.

If I generate mega watts of power and I put it on the national grid I get paid. The distribution company then takes that 1 Mega watt if he does not collect money, he’s losing business because they would have already disbursed, so the public needs to be aware that it is no longer government that owns these enterprises and they are going to ensure that they get full collection for whatever services they provide.

What of Afam and Kaduna?

You will recall that Afam and Kaduna did not have bidders that met the requirements, so a new process has to be started and we have done the technical evaluation and we are just waiting for NCP to give us approval to do the financial bill opening for Kaduna and Afam.

We believe that now that the private sector is coming to take over the power sector, they will bring in good maintenance culture that will ensure that installed capacity is maximally untilised. Even the capacity we have now, by the time the private sector takes over they will crank it up to more than 5,000 megawatts and I believe that by the first quarter of next year, power supply will stabilise.

The telecom sector has moved over $40billion into the Nigerian economy. If the Federal Government was to raise that kind of money from its own resources, it may take them another 50 years. But because enabling environment was created, huge amount of capital moved into the economy through that sector, the same way huge amount of capital will move into the power sector. We also believe if we get the PIB correct, some huge amount of private capital will move into that sector, same with other sectors.

 What exactly is the situation now with NITEL?

Now, this is an area I know we have had some differences of opinion with the National Assembly. With the distinguished senate committees on privatisation, the issue of divided liquidation of NITEL. Now the whole essence of the guided liquidation is not to decimate NITEL bit by bit but the fact remains that NITEL has over $3billion dollars of liabilities hanging on it and the only way government can protect itself from being foreclosed on assuming the proceeds of sale do not cover all liabilities is for us to go through the liquidation process under CAMA that protects the shareholders and members of the company to only what is realised from the proceeds of sale. Any unsettled liabilities, no shareholder or company can pursue the company beyond the amount of resources available from the liquidation process. 

What is the status of the National Arts Theatre?

The next transaction is the National Arts Theatre. When the National Arts Theatre was started, the preferred bidder did not pay. So, actions have commenced to allow the reserved bidder to revise the post-acquisition plan and submit a fresh technical proposal. When that technical proposal is submitted, it shall be evaluated by BPE and the ministry and they will come to an amicable conclusion.

But is it going to be turned into a hotel?

It is true that there was an advertisement that it was going to go under some concessional arrangement. Subsequent to that, the Vice President called the ministry and the BPE and a committee has been set up now by the Federal Executive Council to review the whole transaction and recommend a way forward. So, we are awaiting the outcome on that.

Are you doing anything in the agriculture sector?

Yes, under the national facilities and agric resourses department, we are looking at three or four transactions. Firstly, we are looking at the rural river basin development authorities; these are agencies that have been created but have dams and water supply all the year round and vast expanse of land which have been secured. But unfortunately, these facilities have been grossly underutilised, so we are beginning to look at it and say what is it that is stopping the private sector from taking advantage of the facilities.

Take for example Hadeija and the Rima River Basin where you can grow wheat maybe 2 or 3 times a year. What has stopped a flour milling company to come and establish a farming company there, create an agric scheme that provide seedling and improved fertilisers to the farmers who will now grow those crops and the company taken up as a fixed stock for their raw materials. Now, we are reviewing the whole sector in order to determine what policy initiatives and what laws need to be passed to encourage the private sector to take concessions of this river basin development. .

We are working on the core investor’s sale of the Abuja Commodities and Stock Exchange; we are collaborating with the Ministry of Agriculture for them to lease the warehouses and silos they have all round the country to the trading platform of the Abuja Commodities and Stock Exchange. This will enable the facilitation of the Warehouse Receipt Trading system.

The Warehouse Receipt Trading system and the commodity exchange will remove 2 elementary bottlenecks to the fast development of agriculture revolution in this country; first is the stability and predictability of prices, and second is the definition of who is the buyer.

We intend that in the next  four to five weeks we shall commence the advertisement for the privitisation of the Abuja Commodities Exchange that will unleash a revolution on agriculture investment in this country.

Any reforms in the oil and gas sector?

Under oil and gas sector we have two oil services companies that are still outstanding for disposition and then the Stallion Properties Development Company assets. Now, once the PIB is passed there is a whole threshhold of potential transactions, privatisation of the refineries, concession of the NGC and the PPMC. Discussion will start, of course, on how to structure those transactions but we believe the correct PIB needs to be passed that clearly separates the power of policy formulation from operations and regulations. Currently, the power are diffused in various institutions; NNPC, ministries, DPR and so on and in fact even the draft bill that was presented to the national assembly also did not comply with international best practices of separation of powers.

Policies must be domiciled with the ministries, regulation should be domiciled with the one regulatory institution with clear powers and functions and then the operators will now operate under the regulatory purview of the regulator and the policy formulation framework of the ministry.

Now, if the appropriate PIB is passed we believe there will be a revolution in that sector.

 What is the problem with the PIB?

There are internationally accepted principles for reforms and if reforms are to take effect, you must separate policy formulation from regulation and operation. Now if you don’t delineate those roles early, whatever bills you pass will run into problems. We have tested with telecoms bills and it has worked. If you look at the PIB bill that came to the National Assembly, you have regulatory powers domiciled with the ministry, regulator and other agencies. That is confusion because it is more or less not changing the status quo and that is what we have now. That is why up till today no single refinery has been set up in spite of the profitable nature of refineries. What we are interested in is opening up that sector to private sector investment. The only thing that can open it up is, if you create a clear separation of roles. It has worked for power; it has worked for telecomm why should we not reinvent the wheel?

There are other sectors of reform that we need to check in the short term and in the near future. Take for instance the education sector, it is only our high institutions; our universities that are regulated. Our secondary schools and primary schools are not regulated. So, you go to some states and you find children learning under trees. There is no standard and no regulator to enforce standards and say look this school cannot waste children’s time for seven years and cannot put knowledge into their heads.

What other policies are you seeking to review?

We have also commenced a review of all the sectorial policies and laws. We found out that, take for example, the automobile sector we want to establish a local automobile industry, all the ones we had closed down. Why? Because its cheaper to import a completely assembled car than to build one locally because the tariff structures do not discourage the importation of wholly built.



[Daily Independent]