By Gabriel Ikese
The year 2019 has not been a good one for Nigeria on the international scene. It seems to be one sordid story of alleged financial impropriety, fraud or a different sort of shady, underhand dealings or the other.
Nigeria remains the centre of attraction for every watcher of the continent’s critical indices and rightfully so. It has been posited countless times that sustainable growth in Nigeria will automatically signal a replication of similar scenarios across the continent.
As a matter of fact, our earliest leaders believed in this leadership role so much that they went ahead of themselves, standing up for African nations everywhere and anytime needed. Nigeria also led the way in the setting up of state enterprises and the hosting of several high-profile Pan-African institutions.
These moves gave Nigeria a very positive image in the eyes of other Africans and despite the undercurrents of rivalry that may be felt between it and other nations, deep-seated respect remains. Most African business and political leaders look to Nigeria for continental models. It is only when the model they seek is not of African origin that they look to the west or east.
This does not mean that there haven’t been many actions in the past and even present that have shaken people’s faith about this Nigeria ‘of their dreams’.
Many businesses, African and global have received different levels of shock from the Nigerian system and Nigeria today ranks as one of the nations with the highest degrees of sovereign risk. Policy summersaults, an environment filled with landmines for non-locals, corruption and a judicial system that can be manipulated by external forces have made the country, more and more unattractive to foreign investors. No matter how large the market and all the positive feelings they may have for the country, the risk is just too great for many business people.
An interesting case study is that of the power sector. When the federal government under President Goodluck Jonathan commenced the process of sourcing investors to purchase the power distribution and generation assets in 2010, one of the main concerns that militated against a robust interest by investors, despite the glaring potentials of the Nigerian market, was concern about the propensity for political considerations and interference in the business sphere.
When therefore some investors eventually braved the decades of such negative history to source for and put down hundreds of millions of dollars, everyone else waited with bated breath to see how this venture will play out.
Of course, the sector has remained unstable over the last six years and several policy inconsistencies had also left their mark but the outcome that most people expected for did not happen …at least not until recently anyway.
Over the last two weeks, most Nigerian newspapers have published, in one form or the other, details of a struggle currently ongoing for the soul of one of the most promising electricity distribution companies in the country. Abuja Electricity Distribution Company (AEDC) has become something of a model in a sector plagued with many inefficiencies in terms of investment in its network, reforms in human resource capacity, etc.
For those yet unfamiliar with this rapidly unfolding drama, at the centre of the squabble between the shareholders of AEDC’s parent company – CEC Africa (a Zambian company) and Xerxes Global Investment Limited (a Nigerian company) – is the issue of who paid for the shares, how that affects the ownership of the entity and allegation of a ploy to sell off the company.
Now CEC Africa alleges that it paid the initial 25% acquisition payment to the Bureau for Public Enterprises (BPE) plus the $40m Debt Service Reserve Account to the United Bank of Africa (UBA) to secure the balance of 75% of the cost of acquiring the shares in the Disco. It said it had to do so because when it was time to raise the funds, Xerxes could not come up with their own part of the amount. In their response which was also published over the weekend by a cross section of newspapers, Xerxes argued that it was their “goodwill” that enabled the parent company to acquire Abuja Disco but remained silent on whether or not they made any financial contribution to back their equity stake.
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All this became more worrisome when leading business newspaper led its edition of Wednesday, November 20, with a story that alleged a company that presently provides services for the presidency is being lined up to take over the Disco.
For a country battling credibility issues with respect of its investment climate and following the hesitation of investors in 2010 to venture into the sector, this drama sends all the wrong signals.
In the first instance, the confession from Xerxes that what they brought into the deal was “goodwill” does a lot to strengthen the view of many that the power sector assets were sold to friends and cronies who could muster technical partners. It also means that the required due diligence may not have been conducted since the main determinant was this amorphous currency called “goodwill”. It is doubtful if any bank anywhere receives deposits of “goodwill” in place of cash. It will also be interesting to Nigerians to know that part of the payment the country was supposed to have received for the Disco was denominated in “goodwill”.
Bottom line: The shares came at a cost and that cost needed to be fully paid up for.
Secondly, it creates a sense of serious concern where even when a competent technical and financial partner is on board – and where that investor is railroaded into fully funding the acquisition simply to ensure that all prerequisites are met – a non-performing party can insist on laying claims to equity that they have not paid for and show interest in selling off the company to another company which is alleged to also have political links (even though there is a subsisting Arbitration Award in favor of the partner that is alleged to have made the payment).
Africa as a continent needs to get a lot of things right and one of those things is how business is conducted between key players on the continent. This will go a long way in determining how much wealth is retained and redistributed on the continent. The likes of Aliko Dangote and Tony Elumelu have been leading the way in this agenda to create African super-businesses, but progress will be slow if we are known to be hostile to our African brothers who express desire to do business in our land.
We should be at a point now where any African country seeking investors in any of its sectors can confidently expect that African investors will quickly jump at such opportunities rather than having to go cap in hand to off-continent investors. No matter how big those investments get, they will remain sources of capital flight off the continent.
We recently beat our chests in celebration of our climb up the ease of doing business index. Stories like this reinforce the belief that those indices are on paper and differ from the reality on the ground.
Nigeria, are we serious about doing business?
- Gabriel wrote in from Jos, Plateau State.
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