Investing Under The Nigerian Privatisation Programme

1
Investing Under The Nigerian Privatisation
Programme

• US-NIGERIA TRADE AND INVESTMENT FORUM CHICAGO
  USA
• July 2008

Mrs Irene N. Chigbue, Director General, Bureau
of Public Enterprises (BPE)
2
Agenda

• Background
• Investing In Nigeria
• Investing Through Privatisation
• Privatisation Process
• Results
• Concluding Remarks

3
Background

• Nigeria
• Largest population in Africa (over 140 million)
• Second largest economy in Africa GDP (2007) of
  about 294.8billion)
• Most entrepreneurial economy in Africa.
• One-fifth of African and global Black population
• Committed to democracy and development
• Pillar of stability in Sub-Saharan Africa
• Reforming to act as the engine of growth in
  Africa
• Veritable Destination for venture capital in
  Africa

4
Nigeria Real Achievements

• Significant Improvement of Economic Prospects
• Increase in GDP growth (6.2 2004, 6.8 2005,
  6.6 2006, 6.1 2007)
• Flitch, Standard Poors credit rating of bb-
• Significant increases in foreign exchange
  reserves (over 50billion 2007)
• Reduction in government consumption
• Stable exchange and interest rates
• Very active capital market (Market Capitalization
  about 5bn most profitable Stock Market in the
  world with annual ROI of 105)
• Consolidation in the banking system very
  successful

5
Investing in Nigeria

• Broadly there are 2 modes for Investing in
  Nigeria
• Greenfield's
• Privatisation
• Greenfield Investments require
• Licenses approvals
• Land Acquisition
• Rolling out of Outfit
• Recruitments
• Etc
• Privatisation
• All requirements provided in the deal
• Locked in Value in the Enterprise

6
Privatisation Process

• Use World Class experienced advisers
  competitively selected
• Application of a well developed and documented
  procedure for transactions and for sale
• Adhere to legal and due process as in Nigerian
  laws and the Privatisation Act.
• Advertise the opportunity in local and foreign
  papers and magazines
• Competitive bidding process
• Evaluation on basis of technical /managerial
  capabilities and finally on basis of highest
  financial offers
• Sale process conducted in the public place under
  coverage of live television and radio
• Process observed by internal Compliance Unit and
  Anti-Corruption Unit
• Transparency International now invited to observe
  the bid process

7
Core Investor Sale (Bidding Process)
8
Bidding Process 2
9
RESULTS 1999-2007

• After the suspension 1994-1999, programme
  accelerated
• 40 PEs privatised 1999 to 2004
• Accelerated privatisation initiative was launched
  in April 2005 to privatise 23 PEs
• 46 PEs privatised in 2005
• About US2.5billion realised
• Ports and Power sector reforms pursued
  aggressively
• 38 PEs privatised in 2006 in telecoms, solid
  minerals, manufacturing services
• About US1.16billion realised (2006)
• 37 PEs privatised in 2007
• About US1.5billion realised (2007)

10
Results Transactions
159 transactions concluded 1999 2007
Whereas the years 2000 to 2004 were used to
reposition the program after the lull years of
1994 to 1999, 2005 and 2007 can be dubbed the
watershed years in terms of transactions and
reforms.
11
Transactions History
12
Reforms Score Card 2006

• monumental legislative and institutional
  reforms were successfully executed to pave the
  way for effective regulation and privatisation in
  2006 UK Department for International
  Development, April 2006
• ongoing privatisation should improve the
  efficient provision of commercial services,
  support private sector growth, and help focus the
  government on its core mandate International
  Monetary Fund, August 2006

13
Results Reforms

• BPE produced sector-specific policies and reform
  Bills, and one generic reform bill, including
• Power Sector Reform Act
• Telecommunications Act
• Solid Minerals Act
• Petroleum Industry Bill
• Ports and Harbour Authorities Bill
• National Transport Commission Bill
• Federal Roads authority Bill
• Roads Fund Bill
• Nigeria Railway Commission Bill
• National Inland Water Way Bill
• Gas Bill
• Federal Competition Commission Bill
• Postal Sector Reform Bill
• Industrial Policy

14
International Investors?
We have results to show
15
Success Story (2000-2007) International
Participation

• In addition to local Nigerian consultants,
  international participation in privatisation
  consultancy services indicates
• Adoption of International best practice
• Process credibility
• Upgrade of domestic capacity
• A partial List of Internationally renowned
  advisers to the programme include
• Booz Allen H (USA) Telecom Regulation
• Pricewatehousecoopers NEPA corporate
  restructuring blueprint
• Adam smith International (UK) Attitudinal
  Research
• CPCS (Canada) Ports Concessions
• BNP Paribas (France) Nitel (Telecom)
  Refineries
• Arthur Andersen overseas Power reforms
• CSFB (UK)/USA - Refineries
• Standard Bank of South Africa Petrochemical
  plant privatisation
• Mecados Energiticos of Spain Electricity
  Regulatory Commission
• Netpost of Netherlands - NIPOST
• Chano Oil of China
• KPMG

16
Success Story Snap Shot of International
Participation

• In addition to Nigerian Investors, international
  participation by Investors shows
• Programme endorsement
• Platform for FDI
• Technology transfer and entrepreneurial
  development
• Platform for economic diplomacy
• A partial list of renowned international
  investors include
• Scancem (Norway) Cement
• Holcim (Spain) Cement
• Lafarge (France) - Cement
• AP Moller - Ports
• ENL Consortium Ports
• Flour Mills (Greece) - Ports
• Global Energy Company/MC Dermott - Ports
• Indorama of Indonesia Petrochemicals
• Rusal (Russia) Aluminum Smelting
• MTN of South Africa
• Celtel of Netherlands

17
Privatisation Transactions

• Typically each transaction involves-
• Transfer of major equity stake to core/strategic
  investor
• Public offer of remainder
• Concession of major infrastructure

18
How can you participate?

• Opportunities exist in the privatisation
  programme for-
• Investors
• Advisers
• Consensus builders
• Process is competitive and transparent

19
What Next 2008 Beyond (see attached details)
20
Highlights 2008 Programme

• Ensure reform bills (including Anti-trust bill)
  are enacted
• Ensure the institutionalisation of reforms by
  establishing the sector regulatory institutions
  comprising-
• Federal Competition Commission, National
  Transport Commission, Oil and Gas Regulatory
  Commission, Infrastructure concession Commission
• Conclude Transport Sector reform i.e Rail, Ports,
  Roads, inland Water Ways, etc
• Privatise balance of shares after core investor
  sale in NICON, Transcorp Hilton, etc
• Implement the Reform and Commercialisation of the
  River Basin Development Authorities and
• Implement outstanding Initial Public Offers such
  as SAHCOL, Nitel, Nig. Re,
• Conclude solid minerals privatisation such as
  Coal, Bitumen, non-core assets, etc
• Implement power sector privatisation

21
Concluding Remarks

• Nigeria Beckons for investment
• Foreigners can own 100 of investment
• Guarantee against expropriation of investments
• Repatriation of profits guaranteed by law
• Generous tax incentives
• One of the highest ROI in the world
• Huge local market (population of N140million)
• Access to the West African sub-regional market
• Cheap but skilled labour

22
Concluding Remarks

• Nigeria is largely un-ploughed ...
• Seek-out credible Nigerians (and there are many
  of us)
• Use Embassies/High Commissions, National
  Investment Agencies Banks as entry contacts
• Avoid get rich quick schemes

23
Thank you for listening
Check our website www.bpeng.org for other
details and updates
Mrs Irene N. Chigbue, Director General, Bureau
of Public Enterprises, Nigeria
24
River Basin Authorities of Nigeria (RBDAs)
S/N Enterprise Strategy
1 Anambra-Imo RBDA Commercialization
2 Ogun-Osun RBDA Commercialization
3 Hadejia-Jamaare RBDA Commercialization
4 Sokoto-Rima RBDA Commercialization
5 Upper Niger RBDA Commercialization
6 Lower Niger RBDA Commercialization
25
River Basin Authorities of Nigeria (RBDAs)
SN Enterprise/Strategy Strategy
7 Cross River BDA Commercialization
8 Chad RBDA Commercialization
9 Benin-Owena RBDA Commercialization
10 Upper Benue RBDA Commercialization
11 Lower Benue RBDA Commercialization
12 Niger Delta RBDA Commercialization
26
Capital Market Financial Institutions
S/N Enterprise Strategy
13 Nicon Insurance IPO
14 Nig-Reinsurance IPO
15 Capital hotel IPO
16 Transcorp Hilton IPO
17 NSPMC IPO
27
National Facilities Services
S/N Enterprise/Strategy Strategy
18 NIROWI Liquidation
19 Save Sugar Company Core Investor
20 Iwopin Paper Pulp Company Core Investor
21 National Hospital Commercialization
22 Chemical Company of Senegal Commercialization
28
National Parks
S/N Enterprise Strategy
23 Gashaka Gumi National Park Partial Commercialization
24 Chad Basin National Park Partial Commercialization
25 Kainji lake National park Partial Commercialization
26 Cross River National Park Partial Commercialization
27 Old Oyo National Park Partial Commercialization
29
National Parks
S/N Enterprise Strategy
28 Kamuku National Park Partial Commercialization
29 Okomu National Park Partial Commercialization
30 National Park Services Partial Commercialization
30
National Stadia
S/N Enterprise Strategy
31 National stadium Abuja Commercialization
32 Surulere National Stadium Lagos Commercialization
33 Liberty Stadium Ibadan Commercialization
34 Nnamdi Azikwe Stadium Enuge Commercialization
35 Ahmadu Bello Stadium Kaduna Commercialization
36 Abubakar Tafawa Balewa Stadium Bauch Commercialization
31
Transport Department
SN Enterprise/Strategy Strategy
37 SAHCOL Core Investor
38 National Inland Waterways (Non Core Assets) Asset Sale
32
Steel and Solid Minerals Cont
S/N Enterprise/Strategy Strategy
39 Associated Companies of NMC (12) Divestment
40 Nimco Terrazzo Company Divestment
41 NMC Bricks (3) and Quarry Companies (3) Divestment
42 Non-Core aseet of NMC (Scraps, Motor Vehicles) Divestment
43 Non Core assets of NCC and NMC Houses Asset sale
33
Information and Communication Dept.
S/N Enterprise Strategy
44 NITEL Core Investor sale
45 Federal Radio Corporation of Nigeria Commercialization
46 Nigeria Television Authority Commercialization
34
Information and Communication Dept.
S/N Enterprise Strategy
47 Nigeria Film Corporation Commercialization
48 News Agency of Nigeria Commercialization
35
Oil Gas Transactions
S/N Enterprise Strategy
50 PPMC Core Investor sale
51 Nigeria Gas Company Core Investor sale
52 LPGs (7) Asset sale