Nigeria 
Nigerian privatisation venture cooperation fails

Misanet.com / IPS, 23 May - Officials of the World Bank's private sector lending arm the International Finance Corporation (IFC) have confirmed that the institution had quit its advisory role in the privatisation of Nigerian Airways due to differences with the government of president Olusegun Obasanjo.

- The IFC and the government of Nigeria have mutually agreed to terminate the IFC's privatisation mandate for Nigeria Airways, Denise Leonard, manager of the Joint Private Sector Advisory Service, a unit of the World Bank and IFC said Wednesday.

- The government has opted to enhance air services via competition, such as an open-skies policy, said Leonard, ending months of speculation that the institution wanted out of a two-year arrangement to sell off the debt-ridden airline.

Nigerian Embassy officials in Washington were not immediately available for comment.

Last month the country's National Assembly called for Nigeria Airways not to be privatised claiming it could cost the government more than 65 million dollars to write-off the airline's debts.

Chairman of Nigeria's Senate Committee on Aviation Idris Kuta told journalists last month that President Obasanjo had been convinced that it was not wise to sell the ailing airline "at least not within the next 18 months". The idea, it appears is to turn the airline around first, so it can fetch more on the market.

Against the advice of IFC and World Bank officials, the country adopted an open skies policy, which would mean opening itself to competition on routes on which the national airline enjoyed a monopoly.

Last year, Nigeria signed an open skies policy with the United States during the visit of former president Bill Clinton and this year Nigeria Airways was able to re-launch flights to New York through a joint arrangement with South African Airways.

Nigerian authorities have also recently allowed British Airways to increase flights to the country and have also opened up the London-Lagos route to Virgin Atlantic.

The IFC has cited the auction of Nigeria's international air traffic rights as one of the reasons for withdrawing and in excerpts of a letter to Obasanjo, IFC vice president Peter Woicke said "the opportunity for a successful near-term privatisation of Nigeria Airways has been diminished".

Inconsistent government policies were also cited by British telephone company Vodaphone as reasons for the collapse of its alliance talks with the state-owned Nigerian phone company, Nitel.

Obasanjo has committed to deregulating or privatising many of the 600 public enterprises currently involved in almost all aspects of the economy - power, telecommunications, petroleum and the steel sector. Since taking office, Obasanjo's government has privatised four cement companies which account for 90 percent of domestic production.

The state has also relinquished control or is in the process of selling off its interest in several banks, petroleum companies, insurance firms and hotels through loan arrangements with the International Monetary Fund (IMF).

The IFC and the World Bank have been working with the Obasanjo government since shortly after it took office in May 1999, to privatise key infrastructure in Nigeria and have been advising on the sale of Nigeria Airways and Lagos State Water Corporation. The IFC also has a 120 million dollar loan extended to a number of Nigerian banks.

Since 1964 the IFC, sub-Saharan Africa's major source of private finance, has had an on-again-off-again relationship with Nigeria, one of Africa's dominant economies. Besides its work on privatisation, it is involved in financing small and medium scale enterprises.

An IFC official was at pains to explain that the withdrawal of the joint advisory committee of the IFC and Bank would not have any effect on the institution's portfolio in Nigeria.

It is unclear whether the refusal to sell off Nigeria Airways will influence other World Bank and IMF activity in the country.

Under a 12-month, one-billion-dollar, stand-by credit arrangement negotiated with the IMF last year, Obasanjo's government agreed to privatise key state-owned enterprises such as Nitel and the National Electric Power Authority (NEPA). The sale of Nigeria Airways is not a condition of the stand-by arrangement.

- If the privatisation of the airline is not a performance criteria of the IMF loan, then there won't be a domino effect, says Sarah Grusky of the Globalisation Challenge Initiative, a non-governmental organisation that monitors IMF and World Bank policies.

Performance criteria are loan conditions which, if not met, may result in the suspension of a loan arrangement by the international financial institutions. 

After drastically scaling back lending to Nigeria from about 600 million dollars a year in the late 1980s to about 250 million dollars during the 1992-1993 financial year, the World Bank says it is now gearing up to raise its level of involvement.

By Gumisai Mutume, IPS

© IPS    You can contact us at mail@afrol.com