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Privatisation: BPE freezes planned IPOs on selected firms

Public apathy on shares triggers decision

Eleme Petrochemical, Nigeria Re inclusive

The Bureau of Public Enterprises (BPE) has frozen a decision to take four enterprises to the capital market for Initial Public Offerings on account of prevailing apathy on share sales. The four firms affected by the decision include Eleme Petrolchemical, Machine Tools in Osogbo, Nigeria Reinsurance, and a cargo handling company, Skypower Aviation Handling Company (Sahchol). A Keep in View (KIV) decision taken on the four, according to a source, was informed by poor outcome generated in respect of SAHCOL, which BPE attempted testing the market with.

Responding to an inquiry by New Telegraph, Direc-tor-General, BPE, Mr. Alex Okoh, admitted the decision as regards the IPO. “Yes, you are right. That wasn’t in 2020, it was in 2019. We had planned to take four companies to the capital market. Nigeria Re-insurance, SAHCHOL, Eleme Petrolchemical and Machine tools, Osogbo.

“We wanted to face the process, so we started with SAHCOL, which is an aviation handling company, that was privatised by BPE in 2009 or thereabouts. “The response wasn’t too encouraging. And for us, we adjudged the capital market to still be a bit uncertain in terms of being able to retain value. it’s still quite highly speculative now. And the three other companies, especially Eleme Petrochemical, was very nervous having seen the outcome on SAHCOL.

So, we slowed down until the market becomes more stable before we proceed with other public offers,” he said. The Privatisation Act makes provision for ceeding parts of State Owned Enterprises shares to the general public via IPOs. Usually, while 51 per cent shares are sold to a core investor, the remaining 49 per cent is often reserved for the public through IPO subscription.

The strategy is to accord the public a sense of ownership in SOEs. “I agree with you that the best way to privatise national assets, best way to democratise or liberalise the process is to make it available for ordinary folks to go to the exchange and buy their own1,000 shares.

That way, we are not accused of selling these national assets to friends and cronies of government. But we also have to be careful, so that we don’t destroy value in the process. We are still watching the stock market right now. Once we are confident it can deliver value, we go that way,” Okoh said to New Telegraph. This came as he admitted that BPE encountered subtle push back from interest group with attachment to the MDAs resisting their privatisation. The development, he said, slowed down the privatisation process. “The slow pace in sale of government assets bothers us too.

We are concerned- the privatization and reform of these enterprises. “What we can say is that privatisation is not a very popular agenda, that I can tell you. It is just tough because the natural inclination is to push back, especially by the MDAs on those assets that naturally give them a platform to control and do other things. So, to work into an agency or a ministry that supritends an enterprises that is about to be privatised and expect that they will cooperate with you and embrace you, it doesn’t happen.

“There are various challenges, which include labour and general opposition slowing down the process. If you link that with the fact that the wheel of government, which naturally turns slowly, the red tape, the bureaucracy and all of that, it just compounds the challenges around privatisation.

“But we are not really bothered with that. I think as a country we need to be more serious and resolve that we don’t take strategic decision to libralise the economy and ensure that government does not continue to play this domineering role in business.

“Unless we just focuse on governance and allow business people to run business, then is going to be a very tough challenge for us. There is a way that reality will impose rationality on us as a country. The reality is that, the revenue is dwindling and to continue to support whether by granting subventions to these enterprises from the fiscal purse is not longer feasible. The reality would force us to become more rational with how we deal with these assets,” he said.

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