Under the privatisation programme as announced on July 20, 1998 by H.E Gen Abdulsalami Abubakar, Government will retain 40% of the telecom, electricity, petroleum refineries, coal and bitumen production, tourism, and spill-overs from the first phase of privatisation equities of the affected enterprises whilst 40% will be alienated to strategic investors with the right technical, financial and management capabilities. The remaining 20% will be sold to the Nigerian public through the Stock Exchange.

1.(b) President Olusegun Obasanjo in his Presidential order to the Vice President of the Federal Republic of Nigeria dated 6th July 1999, directed that as the first step in the phased implementation of the administration's privatisation programme, action was to be initiated to enable the sale of shares listed on the Lagos Stock Exchange and owned by the Federal Government and its agencies in:

The sales are to be completed by December, 1999 and Core Investors are to be encouraged to buy into any of the privatised enterprises which will be paid in foreign currencies.

1.(c) The second phase will consist of hotels and vehicles assembly plants, amongst others.

1.(d) The third phase will involve work on the companies currently being prepared for privatisation or currently being audited, including NEPA, NITEL, NAFCON, Nigeria Airways, Refineries, etc.

The objectives of the Privatisation and Commercialisation programme are:

• to restructure and rationalise the public sector in order to lessen the dominance of unproductive investments in the sector;
• to re-orientate the enterprises for privatisation and commercialisation towards a new horizon of performance improvement, viability and over all efficiency;
• to raise funds for financing socio-economic developments in such areas as health, education and infrastructure;
• to ensure positive returns on public sector investments in commercialised enterprises, through more efficient management;
• to check the present absolute dependence on the Treasury for funding by otherwise commercially oriented parastatals and so, encourage their approach to the Nigerian Capital Market to meet their funding requirements;
• to initiate the process of gradual cession to the private sector of such public enterprises which are better operated by the private sector;
• to create more jobs, acquire new knowledge and Technology and expose the country to international competition.

The legal framework, for the programme is the Public Enterprises (Privatisation and Commercialistion) Act of 1999. It was promulgated by the previous administration.

The legal framework, for the programme is the Public Enterprises (Privatisation and Commercialistion) Act of 1999. It was promulgated by the previous administration.

For the purpose of this programme the following definitions will be used:

1. Full Privatisation
   Means divestment by the Federal Government of all its ordinary shareholding in the designated enterprise.
2. Partial Privatisation
   Means divestment by the Federal Government of part of its ordinary shareholding in the designated enterprise.
3. Full Commercialisation
   Means that enterprises so designated will be expected to operate profitably on a commercial basis and be able to raise funds from the capital market without government guarantee. Such enterprises are expected to use private sector procedures in the running of their businesses.
4. Partial Commercialisation
   Means that such enterprises so designated will be expected to generate enough revenue to cover their operating expenditures. The government may consider giving them capital grants to finance their capital projects.
   

In both full and partial commercialisation, no divestment of the Federal Government's shareholding will be involved, and subject to the general regulatory powers of the Federal Government the enterprises shall:

• Fix rate, prices and charges for goods produced and services rendered;
• Capitalise assets; and
• Sue and be sued in their corporate names.
  

Local manufacture of switching and transmission equipment is requird since no single company exists in Nigeria or even neighbouring countries for this purpose. Hence any company that goes into the venture will have its market beyond the frontiers of Nigeria.

In Nigeria, there are three companies engaged in the production of telecommunication cables using imported copper and other local resources like poly vinyl chloride materials for insulation. There is no company that is cuurently producing fibre optic cables in the country.

The copper cable producing companies are producing only low pair capacity of 50, 100, 200 pairs. There is need for a plant that will produce high pair capacity cables that will enhance massive provision of lines to the teaming population.

Public offer of shares through the Stock Exchange will be the dominant method of privatisation to be used in the sale of the 20% equity reserved for Nigerian investors under the programme. In order to handle the floatation of the shares of affected enterprises on the Stock Exchange, the National Council on Privatisation (NCP) shall appoint professional advisers, in accordance with powers conferred on it to do so by Section 13 (c) of the Public Enterprises (Privatisation and Commericialisation) Act of 1999. The most important professional advisers in each case are:

• The Issuing House
• The Solicitor to the Issue
• The Reporting Accountant
• The Stockbroker to the Issue
• Asset Valuers :

Public offer of shares through the Stock Exchange will be the dominant method of privatisation to be used in the sale of the 20% equity reserved for Nigerian investors under the programme. In order to handle the floatation of the shares of affected enterprises on the Stock Exchange, the National Council on Privatisation (NCP) shall appoint professional advisers, in accordance with powers conferred on it to do so by Section 13 (c) of the Public Enterprises (Privatisation and Commericialisation) Act of 1999. The most important professional advisers in each case are:

• The Issuing House
• The Solicitor to the Issue
• The Reporting Accountant
• The Stockbroker to the Issue
• Asset Valuers :

The general character and recent history of the company's business with particular reference to its main products, markets, customers, suppliers, labour force and trend of results.

The accounting policies normally adopted in preparing the Company's Annual Accounts and the fact that those have been consistently applied in the preparation of profit forecasts.

Whether or not the preparation of the forecast was consistent with the economic, commercial, marketing and financial assumptions which the Directors have stated to be the underlying bases.

The Company's general procedures in the preparation of forecast. In particular, the accountant would ascertain whether forecasts are regularly prepared for management purposes and if so, the degree of accuracy and reliability normally achieved. He would also wish to discover the extent to which the forecast results of the expired period are supported by reliable interim accounts; and how the forecasts take account of any material exceptional items;

Matters of general interest including the adequacy of provisions made for foreseable losses and contingencies, and the adequacy of working capital as indicated by properly prepared cash-flow forecasts. All these are done to ensure that ultimately, the new shareholders would be buying a good product.

The Solicitor is expected to primarily advise on compliance with the law at every stage of the exercise. He is expected to:

• Examine the Company's Memorandum and Articles of Association to ensure that those provisions which are considered unnecessary in a public limited liability company are deleted.
• Cause all the necessary resolutions for the different stages of the floatation e.g. restructuring of capital, creation of new shares etc., to be passed.
• Registration of all documents and resolutions with the Corporate Affairs Commission and other Regulatory agencies.
• Following up verifications with the Land Registry etc., on the title deeds held by the company.
• Preparation of Management Agreements, Sale and Purchase Agreements, Shareholders' Agreement etc., where necessary or reviewing same to ensure that the interest of the company and country are safeguarded.
• Take such actions as are considered necessary in a public floatation in accordance with the law.

The principal role of the Stockbroker is to introduce the Securities on the trading floor of the Stock Exchange. Technically, shares of a publicly quoted Company can only be traded on the floor of the Stock Exchange.

• Asset Valuers
  Asset Valuers undertake the professional valuation of the assets of the affected enterprises to provide a guide on the current replacement value of the Company.

10.3 Limitation on Individual Shareholding
No individual shall be allowed to acquire more than 1% equity in any enterprise whose shares are offered for sale under this programme and where applicants resort to multiple applications, these will be rejected outright or cancelled if subsequently discovered. In the event, they will be refunded their application money only.

10.4 General Allotment
The shares on offer to Nigerians shall be sold on the basis of the equality of Federal Constituencies and of the residents of the Federal Capital Territory, Abuja.

11.1 Core Investors or Strategic Investors can be described as formidable and experienced groups with the capabilities for adding value to an enterprise and making it operate profitably in the face of international competition.

• They should possess the capabilities of turning around the fortune of such an enterprise, if by the time of their investment, the enterprise is unhealthy.
• The major characteristics that distinguish strategic/core group investors are: They must posses the technical know-how in relation to the activities of the enterprises they wish to invest in. For example, a Core Investor into a Cement Company must have access to cement production expertise with regard to optimal use of the machinery, maintenance of such machinery and other technical aspects of Cement Production such as procurement of raw materials, etc.
• The Core Investors must also posses the financial muscle, not only to pay competitive price for the enterprise they wish to buy into but also to turn around its fortune, using their own resources without relying on the Government for funds. Each Core/Strategic Investor is expected to prepare a Short/Medium/Long term plan for the development of the enterprise and indicate how it will be financed.
  The Core Investor must have the management know-how to run a business profitably in a competitive environment where market forces dictate the business environment.

  11.2 Given the magnitude of investment level in the utilities earmarked for privatisation, the lack of absorptive capacity of the Nigerian Capital Market, our low technological level among other reasons, it is quite obvious that there is need to utilise the services of core investors in the new dispensation.

  11.3 In consonance with S(4) of the Privatisation Act, privatised enterprise which requires participation by Strategic Investors may be managed by the Strategic Investors as from the effective date of privatisation on such terms and conditions as may be agreed upon.

12.1 There is need to employ the services of world class investment banks, lawyers and other consultants (as privatisation advisers) in the identification and selection of Core Investors. The starting point in the identification of strategic/Core Investors is to place advertisements in Local and International Journals and Magazines inviting strategic investors to submit their expressions of interest to invest in the specified public enterprises. They are then supplied with copies of laws and regulations on privatisation of the country and an information memorandum on the affected enterprise. At the same time, they are given a specific period within which to undertake due diligence studies on the subject enterprise and submit economic bids to the implementation agency for evaluation. After submission of their bids interviews would be held with the parties concerned to discuss their bid contents and the National Council on Privatisation will select the Core Investors. This has been the procedure scrupulously followed by the Bureau of Public Enterprises so far, which has ensured transparency of the system.

12.2 The Council intends to use the Technical and Financial Advisers (Privatisation Advisers) as the leading light in the identification and assessment of Core Investors. Such advisers know fairly intimately who are the major actors in the different industries and almost invariably they would have dealt with them elsewhere in the world. A Committee of the Council, supported by the Advisers will pre-qualify and later interview those adjudged suitable for further negotiations culminating in recommendations to be made to the Council for ultimate appointment as the Strategic/Core Investor to acquire up to 40% of the equity capital of the affected enterprise. Management and Shareholders Agreements will be signed to protect the enterprise from undue interference in routine business decisions by ministry officials post privatisation.

12.3 The critical areas of interest in negotiations with the potential strategic/core investors are

13.1 The Council will draw up a detailed implementation time table covering the entire list of enterprises to be privatised and prioritise the pace of implementation. In the first batch, all those enterprises already listed on the Stock Exchange will be privatised subject to the absorptive capacity of the capital market. The other phases will be implemented as outlined by Mr. President.

13.2 In respect of the 20% equity reserved for Nigerian investors in NITEL, NEPA, NAFCON and others, adequate time will be given to the Strategic investors to settle down and add value to these organisations before arrangements are made to offer the shares of the affected enterprises to the general investing public through the Stock Exchange. This may take anything between two to three years. It is also quite clear that due to the size of the offering it would be necessary to stagger such offerings in tranches to accord with the absorptive capacity of the Nigerian Capital Market.

Share Certificates shall be issued within the usual time specified by applicable regulations to enable successful allotees to exercise their ownership rights in the affected enterprises. However, the Council in collaboration with the SEC and the Stock Exchange will together institute measures designed to outlaw nominal transfers post-privatisation, so as to prevent irregular accumulation of privatised shares.

All proceeds from completed sales shall be paid into the Consolidated Revenue Fund and Federal Government will decided on the use of such funds. This will include the use of the funds for productive investment and for the improvement of education, agriculture, health and the settlement of Nigeria's External Debts.