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Investing Under The Nigerian Privatisation Programme

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). Agenda. Background Investing In Nigeria Investing Through Privatisation

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Investing Under The Nigerian Privatisation Programme

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  1. Investing UnderThe 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 & Poor’s 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) Solicitation, receipt and evaluation of Expressions of Interest Qualified ? Inform applicant of non-qualification 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

  8. Bidding Process – 2 Bidders submit Technical and Financial Proposals (& bid bond) Evaluation of technical proposals and short listing Qualified bidders invited to public financial bid opening Financial bid opening (optional multiple rounds) Preferred bidder payment within specified period Reserve bidder Financial Close Commence Transitional Procedures and Transfer of Management Control

  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 US$2.5billion realised • Ports and Power sector reforms pursued aggressively • 38 PEs privatised in 2006 in telecoms, solid minerals, manufacturing & services • About US$1.16billion realised (2006) • 37 PEs privatised in 2007 • About US$1.5billion 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)

  25. River Basin Authorities of Nigeria (RBDAs)

  26. Capital Market & Financial Institutions

  27. National Facilities & Services

  28. National Parks

  29. National Parks

  30. National Stadia

  31. Transport Department

  32. Steel and Solid Minerals Cont

  33. Information and Communication Dept.

  34. Information and Communication Dept.

  35. Oil & Gas Transactions

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