Investment Opportunities in the Nigerian Public Enterprise Reform & Privatisation Programme APRIL 17-20

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2 Profile Alex Okoh Director General/CEO of the Bureau of Public Enterprises (BPE). Prior to his appointment, he was Managing Partner, Ashford & McGuire Consulting Limited. 32 years experience in the banking industry and management consulting. Managing Director/CEO of NNB International Bank Plc from 2001 to Worked for Citibank Nigeria and United Bank for Africa Plc. Studied Sociology at the University of Benin, Nigeria and holds a Masters degree in Banking & Finance from the University of Ibadan. Alumnus of Harvard Business School, Advanced Management Program (AMP) 2

3 THE PRESIDENCY BUREAU OF PUBLIC ENTERPRISES Investment Opportunities in the Nigerian Public Enterprise Reform & Privatisation Programme BY APRIL Alex A. Okoh Director General Bureau of Public Enterprises

4 Nigeria: Heart of Africa Center of the world 4

5 Nigeria - Location and Governance Nigeria: 927, 000 Square Kilometers 190 million people, 40% of which is under 20 years old, and 65% between years old) o most populous in Africa, o 1/5 th of Africa and o highest global black population Enormous raw materials including oil and gas, solid minerals Hub for West & Central African trade 70% of total trade in West & Central African sub-region 36 states + FCT, 774 local government areas American-style presidential democracy; bicameral legislature 5

6 Enterprise Reform The BPE The Bureau of Public Enterprises is the agency of the Federal Government of Nigeria responsible for the reform of state owned enterprises and other sector reforms within the economy. Enabled by the Public Enterprises (Privatisation and Commercialisation) Act of 1999 to reform government owned enterprises through privatisation, commercialisation and other divestment and reform strategies. The enactment of the Act became necessary due to poor performance of Enterprises (PEs) following from: Public Creation of over 600 PEs with increased non-performing workforce and ironically, a decline in industrialisation. Spending of an estimated US$3 billion of annually on PE s by way of grants, subventions, subsidies (both direct and indirectly) PE s became avenues for political patronage and rent seeking, with more than 5,000 board appointments controlling funds in excess of US$3.2billion. 6

7 Divestment Overview BPE has recorded significant achievements in the reform of enterprises in various sectors. From 1999 to date, a total of 143 enterprises have undergone reform in one way or another. Banking, Insurance, MVAP, Telecoms, Electric Power, Marine ports, Manufacturing, Aviation The privatisation exercise in the telecoms and ports sectors has improved the quality of public services and increased tax-based revenues. Privatisation has reduced the cost of governance subventions that would have been paid to the PEs that have been privatised. 7

8 The BPE Programme A Current Snapshot An ambitious privatisation and commercialisation work plan which includes the following: Privatisation, commercialisation and/or concession of over 50 public enterprises cutting across several sectors including: Electric Power Oil & Gas Telecoms Development Finance Institutions, including BOA Agriculture & Water Resources, Mines & Steel, Manufacturing & Services. Signature transactions in the electric power sector include: Afam Power Plant & Yola Electricity Distribution Company 10 integrated power plants among others. 8

9 Investment Opportunities in Nigeria The Nigerian power system has a significant gap between supply and demand; current power demand is estimated at 17,520MW including latent and suppressed demand, against 5,300 7,000MW peak generation. Targets power production of 10,200MW by In order to achieve this, it is estimated that the country will require investments in power generating capacity alone of at least US$3.5 billion per annum. Correspondingly, large investments are also required in the other parts of the supply chain. 9

10 Privatisation & Opportunities Electric Power Generation Additional capacity of 10,000 MW required to meet immediate electricity demand (17,000MW) and eventually 40,000 MW for national growth Afam Generation Power Plant 12 Generation plants under special intervention program (NIPP) Transmission Expansion, upgrade and reinforcement of grid to support generation expansion Reduction in T & D losses (energy audit and metering) Management of the TransCo to be concessioned Distribution Improvement in revenue collection Additional investment in network infrastructure to compliment generation and transmission plan Appropriate and effective metering etc. Energy conservation and demand side management Yola Electricity Distribution Company 10

11 Infrastructure & PPP Programme Nigeria currently has an infrastructure deficit estimated at c.$100bn per year. Huge implications for economic growth, for example: Less than 56% of Nigerians have access to electricity. Translates to an average of 24 hours in a week. Research shows that infrastructure investment results in an equivalent increase in GDP, highlighting the correlation between infrastructure and economic growth. Both public and private investment in infrastructure are on the rise, years of neglect necessitate significant infrastructure spending from all stakeholders. 11

12 Infrastructure & PPP Programme A report from the Infrastructure Concession Regulatory Commission (ICRC) shows the required investments in the following sectors: SECTOR AMOUNT Oil and Gas $60 billion Power $20 billion Transportation $35 billion Other sectors that require huge investments include housing and highways, ports, airports, dams, bridges, water and telecommunication. the total amount of funds required to provide quality infrastructure in Nigeria over the next six years is about $100 billion per year - ICRC 12

13 Investment Opportunities through BPE Afam Power Plant At optimal capacity, Afam Integrated Power Plant is expected to contribute up to 1200MW to the national grid. Advanced design requiring only about 65% of the gas needed by similar existing plants. Commenced Afam Three Fast Power in 2016 To be privatised in 2018 via a strategic sale to a core investor.

14 Investment Opportunities through BPE National Integrated Power Projects (NIPP) NIPP is a multi-billion dollar investment in large scale generation project. Special intervention crucial to improving power generation nationwide, 39 gas turbine generators in 10 plants with a total capacity of 4,775MW. 1 Benin Generation Company 2 Alaoji Generation Company 3 Calabar Generation Company 4 Egbema Generation Company 5 Gbarain Generation Company 6 Geregu Generation Company 7 Ogorode Generation Company 8 Olorunsogo Generation Company 9 Omoku Generation Company 10 Omotosho Generation Company

15 Investment Opportunities through BPE Yola Electricity Distribution Company (YEDC) Responsible for the distribution of electric power to Adamawa, Taraba, Borno, and Yobe states in North Eastern Nigeria. Originally privatised in 2013 but returned to the Government under a force majeure declaration by the core investor in 2015 due to insurgency in the region. YEDC is currently under FGN management and up for re-privatisation in The return of relative peace and stability in the region of the country represents an excellent opportunity for investors.

16 Privatisation & Opportunities Aviation 22 airports (5 International and 15 Local airports) by Concession Initial phase (4 International Airports) Government retains key aviation infrastructure, traffic controls navigational aids, meteorological services, airspace management 10.2million passengers (2016) 75.5 million kg of cargo (2016) 14.4million kg of mails (2016) SKYCAT (Aviation Catering company) 16

17 Privatisation & Opportunities Rail Transport Less than 1% of total freight traffic Expansion of existing rail network through PPP BOT for new tracks Vertical concession of; o Western Railway (Lagos to Kaura Namoda and Nguru via Kaduna) o Eastern Railway (Port Harcourt to Maiduguri via Kafanchan including the Kaduna Kafanchan Link o Central Railway (Itakpe to Warri via Ajaokuta) Sales of Non-core assets 17

18 Investment Opportunities through BPE Other Sectors NIPOST reform and the restructuring/commercialisation of NIGCOMSAT (telecoms sector). Concession of the Lagos International Trade Fair Complex (LITFC). Reform and commercialisation of: 12 River Basin Development Authorities (RBDAs) and 3 National Parks (agriculture/water resources and eco-tourism sectors). Restructuring and commercialisation of: Bank of Agriculture (BOA) Federal Mortgage Bank of Nigeria (FMBN).

19 Privatisation & Opportunities Provision of Transaction Advisory Services Financial / Lead adviser Technical Advisory Services Accounting Legal Services Asset Valuation Environmental Impact Assessment Marketing Communication 19

20 Regulation and Taxation Foreigners can own 100% of investment (outside the petroleum sector) Guarantee against expropriation Guaranteed repatriation of profits net of 10% withholding tax Nigerian laws apply equally to domestic & foreign investors Security and Exchange Act 1999 forbids monopolies, insider trading & unfair practices in securities dealings National Office of Technology Acquisition & Promotion Act 1979 Business transactions are governed by English common law 20

21 Tax Regimes 30% company income tax (excluding the petroleum sector) 5-7 years tax holiday for industry with pioneer status (a list of 69 pioneer industries) 20% tax deductible for cost of investment in infrastructure 100% tax holiday for 7 years plus 5% capital depreciation allowance over initial depreciation allowance for investments in disadvantaged areas Generous tax concessions for industries that employ labor intensive mode of production 10% tax concession for 5 years for local value added

22 Conclusion Investment in Nigeria remains very attractive due to growing opportunities in virtually every sector of the Nigerian economy where demand far outstrips current supply. The potential for strong economic growth is high with a population of over 190million people, a growing and stable middle class, and government s commitment to reforms in several sectors of the economy. BPE, as the Reform implementation agency, partners with investors to harvest the huge opportunities presented by the reform, privatisation and PPP programs of the Goverment. 22

23 THANK YOU FOR YOUR ATTENTION 23