The Federal Government and the 36 state governors have finally agreed to sell five power plants under the National Integrated Power Projects and use the proceeds to fund the 2023 budget.
Parties in the deal reached the agreement last week after over two years of disputes and legal tussle as regards the sale of the NIPP plants being managed by the Niger Delta Power Holding Company.
The NDPHC, owned by the federal, state, and local government councils, is a power generation and distribution company that oversees the implementation of the NIPPs.
The Director-General, Bureau of Public Enterprises, Alex Okoh, disclosed this in an interview with select journalists in Abuja on Tuesday.
The BPE boss had announced this in Abuja at the Investor Pre-bid Conference for the privatisation of the five plants and gave the names of 16 pre-qualified bidding firms.
But last month, the Nigeria Governors’ Forum, through their Chairman, Governor Aminu Tambuwal of Sokoto State, rejected the sale of 10 power plants and headed to court to stop the move of privatisation of the plants by the Federal Government.
The NGF disclosed that its lawyers had moved to prevent the regime of the President, Major General Muhammadu Buhari (retd.), from selling the power plants.
Reacting to this on Tuesday, the BPE stated that the matter was resolved last week, as proceeds from the assets would be used to fund the 2023 budget.
Okoh said, “The expectation (of BPE) in the fiscal plan for 2023 is N260bn and the key assets that we are looking at are the power assets. Five of the NIPP plants; incidentally we are reaching some understanding with the state governors for the sale of those five power plants.
“And that is what has dragged this transaction for at least the past two years; just getting a common stakeholder understanding on the critical need to realise value from these assets now, before they depreciate beyond value.
“Thankfully, last week we were able to resolve the issues with the governors. So for those assets, we are likely to reach the financial opening of the bids before the end of the year, which is maybe next week.”
He also revealed that the United Bank for Africa had secured a core investor to acquire 60 per cent stake in Abuja Electricity Distribution Company, while efforts were ongoing to get competent investors to repossess the majority shares in other four Discos that were recently taken over by financial institutions.
The BPE boss, who further hinted that the Federal Government was trying to restructure Nigeria’s healthcare delivery after the United Kingdom system, stated that there had been progress with the proposed sale of five NIPP power plants.
Media had reported that in April 2021, the National Council on Privatisation approved the adoption of a fast-track strategy for the privatisation of the five power plants listed as Geregu, Omotosho, Olorunsogo, Calabar and Benin-Ihovbor.
He added, “But the proceeds itself would come in the first quarter of next year. So we actually project that in the first quarter of next year we will be able to exceed the expectation of the budget for N260bn.
“Let me also add that from the projected sum from the sale of the assets, the portion that actually becomes available to the Federal Government for the funding of the federal budget is 47 per cent, 53 per cent goes to the states.
“This is because the assets are not federal as such. They are federation assets and they are owned 47 per cent by the Federal Government and 53 per cent by the states.
“So we will remit 53 per cent of the entire proceeds to the state governments, while the Federal Government will keep 47 per cent, which will be in excess of the budget that you mentioned.”
UBA secures investor
Commenting on the order by the Federal Government mandating banks to sell off the 60 per cent shares in the five Discos that were recently taken over by the financial institutions, Okoh explained that the process was being followed thoroughly.
He said, “This is a topical issue and I’m glad that you raised it. First it is important that we state this for what it is. It is not a government expropriation of the assets of the core investors, because that will negate the principle of privatisation itself.
“This is purely a commercial transaction between a lender and a borrower. The borrower in this case being the core investor in the 60 per cent shares of the (affected) Discos.
“Now the step-in right, according to the loan agreement, provides for the banks to repossess the shares should the Disco owners, the core investors, are not being able to pay on their acquisition loans. That is what has happened.”
“I know that in some quarters, that may have been misrepresented that the government took over the Discos. Nothing of such happened.”
He added, “Now the banks, like you mentioned, in the case of Ibadan Disco, AMCON (Asset Management Corporation), bought the debt of the initial lending institutions; Benin Disco, Fidelity Bank; Kaduna Disco, Afriexim and Fidelity Bank; Kano Disco, Fidelity Bank; and Abuja Disco, UBA.
“So the banks were allowed to step in to exercise their rights over the shares, at least to mitigate their exposure on the acquisition facilities to the Discos.
“But the government, which has 40 per cent shares in all of these Discos, realising that banks are not utility or Disco operators, then gave the directive that they (banks) must exit the ownership of those shares in a maximum period of 12 months.”
Okoh stated that the initial period was six months and there was another extension of six months, within which the banks had to sell those shares to qualified, technically competent Disco operators, who could then manage the affairs of a utility that supplies electricity.
The BPE boss revealed that a investor was set to take over Abuja Disco, as work was still ongoing on the remaining four Discos.
He said, “You recall that the intervention in Abuja Disco preceded the other four Discos. Abuja Disco was about this time last year.
“So that 12-month period is about expiring and we are aware that UBA and the core investor are about to close out on the sale so that they can meet the deadline.”
On the liabilities or market shortfalls by the Discos, in terms of their remittances to the electricity market, the BPE boss explained that they would remain on the books of the Discos.
“Those liabilities will remain on the books of the Discos and it will still be an obligation of the Discos to NBET (Nigerian Bulk Electricity Trading Plc) and to the market for the outstanding bills that they have not paid,” Okoh stated.
He added, “The distinction, however, is that the acquisition liability is a core investor issue. However, the market obligation is for the operating entity, the Disco, which includes the BPE. So it is the company, the operating entity, that owes the market those liabilities, not just the core investor.
“However, it is core investor that owes as regards the acquisition loan to the bank. So the core investor will settle the acquisition loan, while the company will settle its obligation to the market.”
BPE examines investors
On the role of BPE in this matter, Okoh said, “Our role is to ensure that a fit and proper investor acquires those shares. So our consideration should align, but may be different from that of the banks.
“The banks will be looking for the highest off-take, so that they can cover as much of their loan as possible. But for us, we are not looking for that. Rather we are looking the technically competent investors to operate the facilities.”
Okoh said the BPE in collaboration with the Ministry of Health, had embarked on a comprehensive health sector reform that would be legacy achievement of the government of President Muhammadu Buhari.
He said, “We actually started this reform before COVID. Around 2019, we engaged a consultant to help do a diagnostic on the health sector, essentially with the aim of ensuring that there is the availability of health care of out-of-pocket expenses.
“This is because you’d notice that about 80 per cent of the population of the nation are not covered by any form of insurance, health insurance or the other. So when they engage in health care delivery, they have to pay out-of-pocket.
“And we felt that the issue of health is something that is extraneous to any individual. It is not something that anybody would deliberately wish on himself, unless maybe there’s an indulgence in the lifestyle that predisposes you to a certain type of ailment.”
He continued, “And as such, government, as we see in other climes, should take on the responsibility of providing healthcare across the citizens. So we dimensioned the various segments of the health delivery system, from primary to secondary and tertiary.
“We were able to find out that the major challenge with our health sector delivery was around funding. So the President has set up a health reform committee, which is headed by the Vice President and we looked at the entire health sector along specific things.
“The committee met about three weeks ago and we’ve come up with what we call a green paper or concept note, essentially on how to restructure the healthcare delivery system in Nigeria. We are also looking beyond the funding.
“We are looking at moving a lot of the administrative and decision-making arms to the institutions themselves, especially the medical centres and teaching hospitals where healthcare is delivered.
“We are trying to reposition the healthcare delivery framework for Nigeria along what you have with the NHS in the UK (United Kingdom), where the public can consume healthcare delivery and the government, through various means, including insurance, will pay for that.”
He assured Nigerians that the new model would adequately address the challenges currently bedeviling the health sector in Nigeria, stressing that efforts were on the ensure the successful implementation of the initiative.
Commenting on the development, a former President of the Association of National Accountants of Nigeria, Dr. Sam Nzekwe, said the decision to privatise the plants was in order, but stressed that the government must have stakes in the assets.
He said the plants should not be sold entirely to private investors, adding that it would not be in the interest of Nigerians to hand over the assets to private entities to control 100 per cent.
Nzekwe said, “Privatisation is what should be done instead of selling the plants outrightly. This is to avoid a situation where the assets would go to the same people who may not want it to work.
“Privatisation is okay, because the government and private investors would be the owners, but the facilities would be run more or less as a private sector-driven project. So I think it is a good move, considering the fact that the government has not done well in managing public assets.
“Some of these critical assets in this country need the touch of the private sector, because if you leave it for government they will not make progress and won’t work. So we need a private sector driven economy.”
On his part, the National President, Electricity Consumers Association of Nigeria, Chijioke James, said the government must ensure that the interest of consumers were protected in the process.
He said, “Before the assets are sold to the private sector, the government needs to further strengthen the regulatory framework in the power sector, to give the consumer the necessary safeguards.
“We are not opposing private sector participation, we are not opposing government privatising the assets, but what we are calling for is national security interest. The government must take into consideration the right safeguards that will protect generality of Nigerians.”