Download NIDO Americas Convention

Bureau of Public Enterprises
NIDO Americas Convention
Nigerian Professionals in the Diaspora’s involvement in
National Economic Development
Lai Yahaya
Director General’s Office
14th December, 2002
Washington DC
Agenda
• Current Economic Situation
• Imperative of Privatisation and Market
Liberalisation
• Role Nigerians in the Diaspora can play
Current Economic Situation
• Opportunities abound, but
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Poverty is pervasive – 70% incidence
Physical infrastructure in disrepair
Attention to social sector deteriorated
Social capital has been depleted
Real sector growth has been elusive
External and domestic debt burdens remain
Current Economic Situation
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Real GDP growth – about 3% (we need 10%)
GDP per capita <$300 (was $1,200 in 1980)
Foreign Debt - $30bn (2.5 x exports and rising)
Domestic debt – N1.4tn and rising
Blind signatory to WTO – open borders, dead industries,
exported jobs, dilapidated infrastructure
• Mono-product economy – fiscal crisis of 2002 and beyond
– will continue unless we import less and export more
Current Economic Situation
• Budget Implementation
• Revenues hardly pay salaries of public service:
• Overheads cannot be fully funded even at 50% levels
• Pensions will be first to suffer – N1.1 tn needed for FGN
• Pet projects which are non-regenerative continue to be proposed –
Ministers are still in dreamland
• 40,000+ ghost workers cannot be flushed out
• Reserves are going down and quietly
• USD 10bn at Dec 2001 has become USD 6bn+ Aug 2002
• Reserves depleted @ USD 500m monthly for consumption only
• Further draw-down to fund NEPA etc., will accelerate depletion
• Very difficult fiscal situation awaits next administration.
How did this happen?
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World oil market trends and quota content changes
Lack of policy initiatives and loss of policy focus
No teamwork
Inconsistency of economic policies
Weak judiciary and protection of rights
Weak attention to social services
Non-conducive style of leadership and little teamwork
Political parties and other political institutions are weak
Government dependency continues:
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Inefficient public enterprises – 40% of economy
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Corrupt, parasitic and rent-seeking elite that prefers status quo
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Non-functioning institutions at all levels – family, community,
LG, state, nation
Public Enterprises in Nigeria
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590 public enterprises (160 in economic activities)
Over 5,000 board appointments – enormous patronage power
Control funds of over N1 trillion – more than Federal Budget
Transfers of US $3bn (1998), $0.8bn (1999), and about $1.4bn
(2000) – about $4bn in 2001.
Accounted for budget deficit of 5% of GDP (1998) and growing
Over 55% of non-performing debts (London and Paris Clubs)
are PE debts (Hilton $300m, Sheraton $250m, Paper $1bn, etc.)
Almost all government owned industries and businesses operate
at sub-optimal levels of capacity and among the most inefficient
in the world. (NEPA, NPA, NITEL, Paper Mills, Steel, Sugar)
No government business in Nigeria makes true profit today – and
none has ever ever made real profit unless managed by Technical
Partners (the NITEL, Nigerdock and NAFCON stories)
Challenges Ahead
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Accordingly, we need to:
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drastically reduce the size and dominance of government
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through privatisation of public enterprises, de-monopolisation
and deregulation of economic sectors
What role for Nigerians in the diaspora?
• Critical role to play in the privatisation
programme as:• Advisers
• Investors
• Consensus builders
Appointment of Advisers
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Routinely engage transactions advisers (financial lead, accounting, legal, asset
valuation, technical, marketing)
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Five main considerations:
• need for high quality services to ensure the successful conclusion of the eventual
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divestiture;
need for economy and efficiency in the selection process;
importance of transparency and accountability in the selection process;
BPE interest in encouraging the development and use of Nigerian consultants and
domestic capacity building; and
opportunity for value-added through the training or transfer of knowledge to BPE
staff and/or Nigerian consultants
Typically use Quality and Cost Based Selection method
Adviser Selection Process
Advertisement for Expressions of Interest
published in local and international press
Applicants evaluated, pre-qualified and short listed
Requests for Technical and Financial Proposals (RFPs)
issued to approved shortlist of applicants
Technical Proposals evaluated and applicants
shortlisted
Public opening of Financial Proposals
Contract and appointment
Investors
• Typically each transaction involves:• Transfer of major equity stake to core/strategic
investor
• Public offer of remainder
Core Investor Sale
(Issues)
• Core investors needed with right technical,
managerial and financial mix
• Difficulties in getting foreign investors due
to (often misguided) perceptions of political
& commercial risk
• Role of Nigerian investors is therefore
critical
Core Investor Sale
(Bidding Process)
Solicitation, receipt and
evaluation of Expressions of
Interest
Qualified ?
Inform applicant of nonqualification
Issue Bidding Documents, Bidding Process
Guidelines & Information Memorandum to
qualified Bidders
Allow at least 4 weeks due
diligence period for all bidders
Verification of Bidders’
Credentials
Core Investor Sale
(Bidding Process)
Bidders submit Technical and Financial Proposals (& bid bond)
Evaluation of technical proposals and shortlisting
Qualified bidders invited to public financial bid opening
Financial bid opening (optional multiple rounds)
Preferred bidder payment within specified period
Financial Close
Commence Transitional Procedures and Transfer of Management Control
Reserve bidder
Public Offer
(Process)
SELECTION OF ADVISERS
OFFER
PREPARATION
SELECTION OF PRINTERS,
COURIERS & REGISTRARS
DUE DILIGENCE & FINANCIAL ANALYSIS
PRODUCE
OFFER DOCUMENTS
FILINGS
OFFER
OPENS
OFFER
CLOSES
TRANSACTION
MARKETING
ADVERTISING
DISTRIBUTE OFFER
DOCUMENTS
Public Offer
(Process)
RECEIVING AGENTS
ISSUING HOUSES
JIH COLLATE DATA
ALLOTMENT PROCESS
BPE RECEIVES
PROCEEDS
SEC APPROVAL
ISSUE SHARE CERTIFICATES
NSE COMPLIANCE
TRADING COMMENCES
REGISTRAR
Public Offer
(Participation)
• BPE trying to devise modes of participation for
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Nigerians in the diaspora
Estimated 15 million Nigerians in diaspora
Remit in excess of of US$1.4 billion annually
Design of technology solution to allow for
purchase of shares in primary market issuances
Create virtual marketplace via the internet
Need to review international securities laws
governing trading of securities over the internet
Consensus Building
• External
• Marketing of the programme
• Revising misperceptions of political risk
• Lobbying foreign governments and donor agencies
• Internal
• Convincing Nigerians of the benefits of privatisation
• Encouraging government to remain focussed
Check our website:
www.bpeng.org
for details and updates
Thank You