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The Role of BPE In Liberalising The Nigerian Economy

For many, privatisation and commercialisation is simply a massive fire sale of government assets by the National Council on Privatisation (NCP) and its implementation arm, the Bureau of Public Enterprises (BPE).

But on the scale of one to ten though, privatisation and commercialisation combined could only be ascribed about five points out of ten, while sector reforms alone would take the remaining five points and that’s a whopping 50 percent.  But of course all that the public talk about is “how our collective assets are being disposed” by the BPE in particular

The point is often made that when you privatize, you sell only one enterprise, but when you reform you open up an entire sector thereby creating many more enterprises in the sector through the creation of enabling environment for private sector participation.

In 1999, Nigerian began a process of accelerated reform of the key sectors of the economy to align with its changing status from a military government to an emerging democracy. Political democracy without attendant economic democratization cannot lead to growth of any society.

The National Council on Privatisation (NCP) established under the provisions of the Public Enterprises (Privatisation and Commercialisation) Act of 1999, through its secretariat, the Bureau of Public Enterprises (BPE), was charged with driving the Federal Government’s programme of privatising public enterprises, carrying out sector reforms and liberalization of key economic sectors especially the infrastructure sector.

This was in realization of the fact that infrastructure services are critical inputs in the provisions of goods and services and significantly affect the productivity, cost and competitiveness of any economy.  Consequently, policy decisions regarding their provision and sector development have ramifications throughout the economy.

Traditionally, the reform and liberalization of any economy involves several major steps, some of which include:

  1. formulating new policy;
  2. establishing a new legal and regulatory framework;
  3. Structural changes to the sector and the institutional operatives; and

It is important to point out that a major obstacle that confronted the NCP when it commenced implementation of its mandate was the near absence of well-articulated policies in the key sectors of the economy. Consequently in 2000, the NCP established  the following steering committees: Oil and Gas Sector  Implementation Committee (OGIC); Telecommunications Sector Reform Implementation Committee; Transport Sector Implementation Committee; Aviation Sector Reform Implementation Committee; Electric Power Sector Implementation Committee; Agriculture and Water Resources Implementation Committee. Others are Hospitality/Tourism Implementation Committee; Industry/Manufacturing Sector Implementation Committee; Insurance Sector Reform Implementation Committee; Basic Metals Sector Implementation Committee and Solid Minerals Sector Implementation Committee.

The broad mandate of the committees included:

  • Formulation of sector policies to promote competition, efficiency and transparency in the sectors;
  • Formulation of proposals for the attraction of private financing and investment in the sectors;
  • Overseeing the activities of the various government agencies, parastatals, and operators in the sectors;
  • Formulation of proposals for the restructuring and liberalization of the sectors;
  • Protection of the rights and interests of service providers and consumers; and
  • Recommend the legal and regulatory framework for the sectors

 

The work of the committees and the implementation of the privatisation program by the Bureau further revealed that there were several cross-cutting issues in all the sectors that needed to be addressed. Major amongst them were collapse of the pension system in the country which was compounded by the inadequate legislation on pension.   It also became glaring that to properly manage fiscal reforms, the absence of a proper mechanism for managing cross debts was a major hindrance.  In addition, a liberalized economy would require legislation on competition. In Nigeria, no such legislation existed which meant that there existed a clear and present potential for unfair trade practices with full liberalization of the economy. Accordingly, the NCP also set up the following committees:

  1. Steering Committee on Pension Reform;
  2. Steering Committee on Resolution and Determination of Cross Debts; and
  3. Steering Committee on Competition and Anti-trust Reform.

 

All the committees set up by the Council worked in accordance with their mandate and produced reports for Government. The Bureau of Public Enterprises also collaborated with all stakeholders – the ministries, members of the National Assembly, labour and organized private sector in carrying out the reform.

Some of the steering committees submitted sector policies and draft bills to NCP.  Some of the sector policies have since been approved by the Federal Executive Council and in operation while a significant number of the bills have been passed into law by the National Assembly.

Some of the bills already passed into law are the Electric Power Sector Reform Act; the Telecommunications or NCC Act; Pension Reform Act; the Debt Management Office (Cross Debts) Act; and the Solid Minerals Act.

Telecommunications Sector

The Telecommunications sector reform was the culmination of an extensive study which resulted in the current telecommunications policy and law. The law provided a new legal and regulatory framework for the sector leading to the strengthening of the Nigerian Communications Commission (NCC), the liberalisation of the sector, the emergence of private sector (GSM) operators. In sum, the reform in this sector which was spearheaded by BPE has paved the way for the telecommunications revolution in the country.

Power Sector

The power sector is critical to the growth and development of the economy in many respects. Its management has however posed the most daunting challenge over the years. Under public sector management, the National Electric Power Authority (NEPA) was an inefficient monopoly where service delivery was grossly incompetent. The reforms in the sector were aimed at breaking the monopoly by deregulating the sector and opening it up to private sector participation in a competitive market environment. To achieve this NCP/BPE produced and government approved a new Power Sector Policy in 2001, followed by an investor friendly Power Sector Reform Act 2005. The Act brought about fundamental changes including:

  1. i) The unbundling of NEPA into six generating companies, eleven distribution companies and one transmission company;
  2. ii) The corporatisation of the successor companies and the assets and liabilities of the former electricity authority;

iii)      The establishment of an electricity regulatory body – Nigerian Electricity Regulatory Commission (NERC); and

  1. iv) The development of a competitive electricity market rules and pricing system.

Ultimately, the privatisation of all the successor companies save for Transmission Company of Nigeria was achieved in 2013; leading to the hand over to their core investors on November 1, 2013.

Oil and Gas Sector

The Oil and Gas sector is obviously the most dominant in Nigeria and is the mainstay of the economy. Its management has also presented the greatest challenge in terms of accountability, transparency and indigenous know-how. The need for reforms in the sector is clearly apparent. To this end, Government, through the NCP/BPE, produced a new National Oil and Gas Policy as well as the Petroleum and Gas Industry Bills. The policy and Bills were reviewed by another panel which produced a single Bill for the industry – the Petroleum Industry Bill (PIB). The PIB which BPE midwifed in 2008 was reviewed by succeeding administrations. However, the aim of the bill, if it is passed in the form recommended by the NCP/BPE, is to provide a new legal and regulatory framework for the industry, deregulate the industry and bring it up along international standards and practices. Deregulation of the oil and gas sector will result in market based pricing, eliminate distortions in the sector, and open the downstream market to private sector operations and investments.

Since 1999, NCP has devoted a chunk of its time and energy to the reform aspect of its assignment.  In continuation of this mandate, at its second meeting for 2013 which held at the Presidential Villa, Abuja, the privatisation council approved seven more sector reform bills for transmission to the National Assembly via the Federal Executive Council (FEC).

The seven reform bills are:

  • Competition and Consumer Protection Bill, popularly known as Anti-Trust Bill;
  • Postal Reform Bill;
  • National Transport Commission Bill;
  • Ports and Harbour Bill;
  • National Inland Waterways Bill;
  • Roads Sector Bill; and
  • Railway Bill.

COMPETITION AND CONSUMER PROTECTION BILL

In approving the Competition and Consumer Protection Bill, NCP noted that Federal Government’s policy shift from public sector provision of infrastructure and services to the private sector has necessitated the need to ensure that there was no abuse of dominant positions in the market.

Council further pointed out that the new anti-trust regime would prohibit anti-competitive practices; activities, it said that substantially lessen competition; control mergers and acquisitions and hence, protect consumers.

NCP further remarked that the bill when passed into law will prevent the emergence of private monopolies in place of old public monopolies which, if not checked, would portend dire consequences for the socio-economic development of the nation.

Other objectives of the bill include:

  • Promotion of competition in the economy;
  • Ensure fair trading practices, efficiency, equal opportunities for all players in the economy; and
  • Protect consumers and end users of products and services from exploitation, unfair trade practices, price collusion, etc.

To achieve these objectives, the bill seeks to among others:

  • Promote the welfare and interests of consumers and provide them with competitive prices and product choices;
  • Expand the space for domestic and foreign competition in a globalized market in Nigeria;
  • Regulate monopolies, mergers/acquisitions and all forms of business combinations; and
  • Prohibit restrictive business practices which prevent, restrict or distort competition or constitute the abuse of a dominant position of market power in the economy.

The bill, when passed, will also create the Federal Competition and Consumer Protection Commission and a Competition Tribunal.  In effect, the Commission will act as the policeman for competition matters in the Nigerian business environment.

The Competition Tribunal will have the powers to adjudicate on conduct prohibited under the Competition Act and also have the powers to hear appeals from or review any decision the exercise of the powers of a sector specific regulatory authority in relation to competition and consumer protection matters; and hear appeals from or review any decision of the Commission that may be referred to it.

The functions of the Commission will include, among others:

  • Formulating measures to increase market transparency;
  • Periodically initiate policy review of commercial activities in Nigeria to ascertain anti-competitive and restrictive practices which may adversely affect the economic interest of consumers;
  • Provide consumers with competitive prices and product choices;
  • Carry out, on its own initiative or at the request of any person, such investigation or inquiries in relation to the conduct of business in Nigeria to enable it determine whether any individual or corporation is engaging in business practices in contravention of the Act and initiate actions to redress such violations; and
  • Eliminate anti-competitive agreements, misleading, unfair, deceptive or unconscionable marketing, trading and business practices.

Council believes the passage of the bill will eliminate and contain cartels and monopolies that strangulate economic development in the country and further provide framework to promote and ginger competition in the market.

 

 

POSTAL REFORM BILL

NCP also approved the Postal Reform Bill which aims to promote the implementation of the National Postal Policy and a regulatory framework for the postal industry.  The bill when passed will ensure the promotion and the provision of modern universal, efficient and easily accessible postal services and encourage private investment in the sub-sector.  The bill will promote fair competition in the postal industry and protect the right and interest of service providers and consumers.

Council noted that the bill will ensure that the needs of the poor, disabled and elderly persons are taken into consideration, adding that the bill also establishes the National Postal Commission which will serve as regulator for all postal sector operators and activities.  The Commission when established will ensure a level playing field for all entrants into the sector and stimulate private investments in the sector.

TRANSPORTATION SECTOR

Under the Bill, the National Transport Commission will be set up as a multi-sector regulator.  The powers of the Commission are derived essentially from the sub-sector bills, namely, the Ports and Harbour Authorities Bill, the Nigerian Railways Commission Bill, the Nigerian Inland Waterways Bill and the Roads Sector Reform Bill

The Ports and Harbour Bill and the National Transport Commission Bill will complete the ports operating regime by further empowering and equipping the new ports operators to meet the challenge of making Nigeria the hub of ports operations in the whole of West and Central African sub-region. They will also ensure that the sector will be properly and efficiently regulated for the benefit of all stakeholders.

 

NATIONAL TRANSPORT COMMISSION BILL

 This bill seeks to establish the National Transport Commission (NTC). The Commission is designed to be a multi-modal/sector regulator covering the transportation sub-sector of roads, rail and marine.

The bill, when passed, is expected to introduce synergy and inter-modalism in the development of the transport sector that in the past operated in a haphazard and uncoordinated manner and create an enabling environment for private sector participation in the provision of services in the transport sector.

The bill will promote the implementation of the national transport policy and provide for an economic regulatory framework for the transport sector or regulated transport industry.

The bill will also seek to provide efficient operation and regulation of the transport sector through the removal of multiple and duplicate regulatory functions by the Federal Government and its agencies and protect the rights and interests of service operators and users within the sector.

PORTS AND HARBOUR AUTHORITIES BILL

The objectives of the Ports and Harbour Authorities Bill include the provision of an appropriate institutional framework for the ownership, management, operation, development and control of ports and harbours to ensure the integrity, efficiency and safety of the ports based on the principles of accountability, competition, fairness and transparency; and to encourage private investment in port infrastructure, promote private sector participation in the provision of port services and facilities and promote and safeguard Nigeria’s competitiveness and trade objectives.

Thus instead of the Nigerian Ports Authority, acting as a landlord, regulator and provider of ports service, the role of the Ports and Harbour Authorities will be confined to ownership/regulation while the private sector provides ports services.

NIGERIAN RAILWAY CORPORATION BILL

The aims of the Nigerian Railway Corporation Bill are the establishment of the Nigerian Railway Authority to acquire the assets of the Corporation; the procurement of private sector participation for the provision of Railway services and Railway infrastructure; and providing for the regulation of the railway sector by an independent regulator to promote the efficient and sustainable development and operation of the railway sector.

NIGERIAN INLAND WATER WAYS BILL

The aims of the Nigerian Inland Water Ways Bill are to establish the Inland Waterways Authority of Nigeria which shall be responsible for the improvement and development of the inland waterways for navigation and day-to-day technical and safety regulations; and to increase and promote private sector investment and involvement in the management and operation of the assets of the National Inland Waterways Authority.

ROADS BILL

The aims of the Roads Bill include the establishment of the Nigerian Roads Board which shall be responsible for the management of the Road Fund; the establishment of the Federal Roads Authority; the promotion of sustainable development and operation of the road sector; and facilitation of the development of competitive markets and the promotion of the enabling environment for the private sector participation in the financing, maintenance and improvement of roads in Nigeria.

Challenge of Regulation

One of the challenges to be faced in the post-privatisation era is the regulation of the sectors.  Hitherto, this was done by either ministries or statutory bodies that performed both regulatory and operational functions.  An example is the Nigerian Ports Authority that was not only the landlord but performed regulatory and operational functions.  Another challenge is whether the ministries will restrict their new roles to policy oversight.

In fact, when an economy is liberalized, proper regulatory machinery must be put in place.  In all the sectoral bills being drafted by the Bureau of Public Enterprises (BPE), there is provision for regulators.  This is to ensure that the rights of all parties, especially the consumers, are protected.  For instance, the Nigerian Communications Commission (NCC) has been overseeing the telecommunications sector while the Nigerian Electricity Regulatory Commission (NERC) is in charge of the power sector.

Some public enterprises were often organized to achieve political objectives; not to solve market failures.  Many have been tools of special interest groups and corrupt officials.  There is a danger that such rent-seeking coalitions, aiming to avoid financial losses from privatisation and competition, will subvert the regulatory process.

Indeed, credible and stable regulation is required to achieve the benefits of privatizing and liberalizing infrastructure. A regulator should be coherent, independent, accountable, transparent, predictable and have capacity to carry out its mandate.

In the drafting of the legislation, the BPE has ensured that all these challenges are provided for.  For instance, the Bureau has clearly spelt out the qualifications of members of the Commissions to be established, the method of their appointment and removal from office.

From the foregoing, it is obvious that the reform and liberalization of the economy has been properly sequenced – from formulation of appropriate sector policy and provision for the establishment of a legal and regulatory framework.   This is in keeping with international best practice.