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 Privatisation Process Results Concluding Remarks 2 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 SubSaharan Africa - Reforming to act as the engine of growth in Africa - Veritable Destination for venture capital in Africa 3 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 4 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
5 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 AntiCorruption Unit Transparency International now invited to observe the bid process 6 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 7 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 8 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) 9 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. No. of transactions Summary of No. of transactions 50 40 30
No. of transactions 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 Years
10 Transactions History Summary of of transactions Number of Transactions 50 40 30 No. of transactions 20 10 0 2000 2001 2002 2003 2004 2005 2006 May 2007 Year 11
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 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 13 International Investors? We have results to show 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 15 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 16 Privatisation Transactions Typically each transaction involves: Transfer of major equity stake to core/strategic investor Public offer of remainder Concession of major infrastructure 17
How can you participate? Opportunities exist in the privatisation programme for:- Investors Advisers Consensus builders Process is competitive and transparent 18 What Next 2008 & Beyond (see attached details) 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 20 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 21
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 22 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 River Basin Authorities of Nigeria (RBDAs) S/N
Enterprise Strategy 1 Anambra-Imo RBDA Commercialization 2 Ogun-Osun RBDA 3 Hadejia-Jamaare RBDA 4 Sokoto-Rima RBDA
5 Upper Niger RBDA 6 Lower Niger RBDA 24 River Basin Authorities of Nigeria (RBDAs) SN Enterprise/Strategy
Strategy 7 Cross River BDA Commercialization 8 Chad RBDA 9 Benin-Owena RBDA 10 Upper Benue RBDA
11 Lower Benue RBDA 12 Niger Delta RBDA 25 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 26 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
27 National Parks S/N Enterprise 23 Gashaka Gumi National Park 24 Chad Basin National Park 25 Kainji lake National park
26 Cross River National Park 27 Old Oyo National Park Strategy Partial Commercialization 28 National Parks S/N Enterprise
28 Kamuku National Park 29 Okomu National Park 30 Strategy Partial Commercialization National Park Services 29 National Stadia
S/N Enterprise 31 National stadium Abuja 32 Surulere Strategy Commercialization National Stadium Lagos 33 Liberty Stadium Ibadan 34
Nnamdi Azikwe Stadium Enuge 35 Ahmadu Bello Stadium Kaduna 36 Abubakar Tafawa Balewa Stadium Bauch 30 Transport Department SN Enterprise/Strategy Strategy
37 SAHCOL Core Investor 38 National Inland Waterways (Non Core Assets) Asset Sale 31 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 32 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 33 Information and Communication Dept. S/N Enterprise Strategy 47
Nigeria Film Corporation Commercialization 48 News Agency of Nigeria Commercialization 34 Oil & Gas Transactions S/N Enterprise Strategy 50
PPMC Core Investor sale 51 Nigeria Gas Company Core Investor sale 52 LPGs (7) Asset sale 35
