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N301bn missing privatisation proceeds: BPE reacts as SERAP demands probe of funds

* Too late to revisit probe- BPE

The Bureau of Public Enterprises (BPE), has reacted to the petition written to President Muhammadu Buhari and Vice President Yemi Osinbajo demanding a thorough investigation into the disappearance of the N301billion proceeds from the privatisation exercise from 1999 to 2011.

The BPE, in a statement on Wednesday by the Head, Public Communications, Chukwuma Nwokoh, described the demand and petition as “Curious,” as it amounted to dredging “up a six-year report and attempting to give it the air of infallibility.”

While many groups, financial experts and stakeholders who knew the mind-boggling corruption that continues to be swept under the carpet by the BPE acquiesced to SERAP’s demand, BPE said, it was a wasted exercise since many years have gone by over the issue.

This latest controversy over bids to unearth what has been described as cesspool of corruption in one of the core agencies of the government stemmed from Senate’s report after painstaking investigation by its Ad-hoc Committee on Investigation of the Privatisation and Commercialisation Activities of the BPE from 1999 to 2011.

While it was noted that members of the committee wept after knowing the level of corruption, as well as the brazen and indiscriminate acquisition of government properties, BPE says it’s too late to revisit it.

The BPE condemned SERAP over the petition saying, “We again reject the conclusions of the report which may have been aimed at tainting the activities of the reform agency,” referring to the Senate Ad-hoc Committee report.

But members of the public said the current administration has no excuse than to revisit the privatisation exercise, otherwise it would further raise concern about official conspiracy and negligence.

Specifically, the Senate Ad-hoc committee, among others found that a total sum of N301 billion was realised as proceeds of privatisation from 1999 to 2011.

SERAP noted that, “N900m of that was used as loan to Nigeria Re-insurance Plc for recapitalization, in violation of section 19(2) of the Public Enterprises (Privatisation and Commercialization) Act 1999.

It further pointed to the Senate report as discovering that, core investor converted the premises of Volkswagen Nigeria Limited into bonded warehouses for storage of contraband mainly rice, vegetable oils, fertilizer, but was not reported by the BPE.

“Former Director-General of BPE, Mrs. Irene Nkechi Chigbue sought and received direct approvals of former President Olusegun Obasanjo for many privatisation transactions, in violation of Section 11 of the Public Enterprise Act and the Bureau Procedure Manual,” the petition pointed out.

Further, SERAP alleged that, “Aluminium Smelter Compny of Nigeria (ALSCON)—BFIG Corporation of the USA was declared preferred bidder and winner with a bid of $410m after going through the bidding process but was denied its legal right to negotiate terms, sign Share Purchase Agreement and pay 10% initial payment.”

However, “BPE approved a Willing Seller Willing Buyer to Rusal/Dayson for $250m and cancelled BFIG Corporation $410m offer.
“Aluminium Smelter Company of Nigeria was grossly undervalued, having being built for $3.2bn and was privatized by BPE for $130m excluding $120m Imo River Channel Dredging cost from the purchase consideration.”

Also, “Michelle Nigeria Limited emerged as the preferred bidder of the Apapa Port Complex Terminal “C” but it was given to ENL Consortium Limited which already had one, in breach of Ground Rule 7, which states: ‘No single bidder/concessionaire would be allowed to have more than one concession in Apapa Port Complex.’
“ BPE reversed the process instead and gave Terminal ‘C’ to ENL Consortium Ltd without cancelling the Michelle Nigeria Limited offer, in breach of the core investor selection process.

“Former Director General of BPE Ms Bolanle Onagoruwa abused the approval process in the sale of 5% Federal Government’s residual shares in EPCL to Indorama Group, in contravention of the First Schedule of the Public Enterprises (Privatisation and Commercialisation) Act 1999. Indorama Group has already acquired the maximum 75% shares reserved for core investor in EPCL as provided in the First Schedule Section 1(1) no. 6 of the Act.

“The share purchase agreement created an escrow account into which all the monies shall be paid. However, the escrow account was not opened. The enterprise was handed over to the purchaser without payment of the purchase consideration. Former president Olusegun Obasanjo approved the addendum, in violation of the Privatisation Act and the share purchase agreement.

SERAP further revealed that, “All former Directors-General used privatisation proceeds to pay transaction expenses, consultancy fees and staff terminal benefits without appropriation by the National Assembly, in violation of Section 19(2) of the Public Enterprises Act. Former Director-General of BPE Mrs Irene Chigbue used privatisation proceeds to execute capital projects (Office extension) in 2007 in violation of this provision.

“The process of privatisation of public enterprises was totally set aside in the concession to Global Infrastructure Holdings Limited and Global Infrastructure Nigeria Limited by the then Federal Ministry of Power and Steel Development in breach of Section 11(c) of thee Public Enterprises Act. BPE later converted the Concession Agreement to a core investor agreement, in breach of the transaction process.”

It said, the N1.9bn Privatisation Proceeds loaned for recapitalisation of Nigeria Re-insurance Plc and Nicon Insurance Plc was not used for that purpose and the BPE is yet to recover the money. Contract for dredging Imo River Channel was overvalued at $120m by BPE. This would cost less than $100 today (2011). 43 enterprises of 122 privatised companies are not performing.

“The core investor of Transcorp Hilton Hotel agreed among others to within 3 years construct a shopping mall within the Hotel grounds; and construct short/long stay serviced apartments on the available land within the hotel premises. However, to date the core investor has failed to deliver in breach of clause 8.4 of the share purchase agreement and BPE also failed to apply sanctions as provided in clause 10.
“The core investor of Abuja International Hotels Limited (Nicon Luxury Hotel) agreed to invest at least additional N2bn to complete the furnishing of the hotel and provision of ancillary services to a 5-year deluxe status within 9 months.”
However, “the core investor has failed to comply, in violation of clause 7.3 of the share purchase agreement and BPE has failed to apply sanctions as provided in clause 9.
“Also, the core investor of Sheraton Hotel and Towers, Abuja has failed to comply with the share purchase agreement, in violation of clause 8.6 and the BPE has failed to apply sanctions as provided in clause 9,” it lamented.

It noted that the core investor in Nigerian Cement Company Plc (Nigercem) has woefully failed to fulfil its technical and financial obligations several years after privatisation. The core investor in Delta Steel Company agreed to invest $100.65m within 15 months, but no evidence of such investment. The Delta Steel Township 1 Housing Estate is comprised of 4,500 housing units; 1,109 unauthorised plots were illegally sold/allocated by the BPE.

The petition, which has unsettled BPE further read, “Poor privatisation monitoring, skewed share purchase agreements in favour of investors in many instances and abuse of process in utilizing privatisation proceeds further marred the privatisation programme. Some of the share purchase agreements were skewed in favour of private investors against public interests. In the Nicon Insurance Plc share purchase agreement, the BPE deliberately removed the protective clause on sales of assets without BPE’s written consent within the first 5 years.”

“Bid bonds are usually refunded to bidders after closure of bidding. In the case of crystallized bid bonds transaction expenses are deducted before refunds. BPE abused this process in the sense that National Council on Privatization (NCP) approvals for funds are kept for years without payment.

“Terminal benefits of workers of companies slated for privatisation are usually computed by management or by an appointed BPE Actuarial Consultant before payment. The processes are often abused by BPE. In NITEL, workers were forced to accept less than 5 years pension buy-out where it was agreed earlier for 5 years. BPE owed workers in Delta Steel Company (N5.2bn); and ALSCON (N2.7bn). In Federal Super phosphate Fertilizer Company the Actuarist computed and recommended full payment of N457m, but BPE paid only N383m leaving a difference of N73m.

“Workers of National Steel Raw Materials Exploration Agency, Kaduna, are owed gratuities of N150m by NICON Insurance Plc. Workers often benefit from allotments of shares in companies undergoing privatisation on request.

“The reserve shares are however, not granted on free carriage in compliance with provisions of the First Schedule Section 1(1) in line with Nigeria Individuals Participation as Percentage Post Privatisation.

Out of the 122 privatised public enterprises only 14 enterprises had shares reserved for workers. 11,000 jobs were lost in Nitel/M-Tel; 2000 jobs were lost in Daily Times; and 1000 jobs were lost in ALSCON,” SERAP said.

Mathew Dadiya, Abuja

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