4 December 2012

Nigeria: The Messy Back-and-Forth Over Manitoba Hydro


The long-drawn privatisation of the unbundled successor companies of the Power Holding Company of Nigeria (PHCN) ended almost in an anti-climax.

Although wise counsel prevailed in the end, the episode that led government to withhold issuing licence to Manitoba Hydro International of Canada, one of the successful bidders in the privatisation exercise, leaves a sour taste. Presidential spokesman Rueben Abati said after the exercise that Manitoba Hydro's 3.84 billion naira contract to manage Nigeria's national power transmission network had been terminated, claiming that due process was not followed.

"Mr President has cancelled the Manitoba power contract with immediate effect, Abati said in a statement.

Thereafter, reports followed suggesting that the Bureau of Public Procurement (BPP) had found some flaws in the bidding process, and had advised the President to cancel the Manitoba licence.

It was a jarring note to an exercise that almost everyone praised had been transparent. However, President came out strongly to contradict Abati, restating that the contract had not been cancelled; it was only being 'reviewed', he said.

Manitoba's contract is for managing the Transmission Company of Nigeria (TCN), one of the PHCN successor companies. Technically, this was not a direct privatisation, but procurement. Manitoba Hydro won the bid after beating an Indian firm in a process that began during the President Obasanjo regime. The government's initial position was apparently bolstered by the red flag raised by BPP that 'procurement' is a subject within its domain, and that Manitoba was 'mis-procured'.

In the meantime, the BPE said that "the powers that the BPP exercises do not extend to the BPE as the Act establishing the BPE's processes had made it superior to that of BPP." The privatisation agency also wondered why the BPP, which has been operating without a governing council since inception, as provided under the Public Procurement Act establishing it, would accuse another government agency of violating its own Public Enterprises (Privatisation and Commercialisation) Act.

The episode suggested a division in the government on the issue and cast a pall over its sincerity in the privatisation exercise.

On whose instruction, for instance, did Dr Abati issue his Manitoba termination statement?

Deepening the suspicion of division was last week's dismissal by the government of Ms Bolanle Onagoruwa, Director General of the Bureau of Public Enterprises (BPE), the government's agency that conducted the bidding process. Ms Onagoruwa's dismissal without clear explanation sends the wrong signals to the investor community that government itself does not trust its own processes, muscling into matters that cannot evince confidence, especially in a sector like the power industry.

That the president eventually reversed himself on the potentially embarrassing cancellation of the Manitoba contract is good development; but the prevarication that preceded it could have done serious harm to the quest by Nigeria's leaders to cast the country as a safe haven for investments. It also portrays the country as a high-risk investment zone to foreign investors, a profile that could make the cost of doing business here that much higher. Obviously, there were people who were bent on scuttling the process, not out of any patriotic concern, but purely to achieve selfish ends.

The embarrassing episode should not be swept under the carpet as just another small matter; that it certainly is not. In order to send positive signals to both domestic and international audiences, the government has a duty to assure potential investors that such uncertainties like the one that dogged the Manitoba Hydro saga, will not happen again. It can do so by inquiring into what led to it and punishing those involved.

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