THE NIGERIAN SOCIETY OF ENGINEERS
MEMORANDUM ON THE PRIVATISATION AND COMMERCIALISATION OF PUBLIC ENTERPRISES (PCPE) BILL, 2004

1.0       PREAMBLE
The on-going privatization has the goal of full or partial divestment of Federal Government in more than one hundred and twenty public enterprises in which FG had minority or controlling interest. Some one hundred of these enterprises are engineering infrastructures including Petroleum Refineries, Petrochemical Plants, Electric Power Generation, Transmission and Distribution Systems, Telecommunications Plants, Iron & Steel Plants & Mills, Motor Vehicle Assembly Plants, Railways System, Natural Gas Transmission Systems, Petroleum Pipelines, Pump Stations and Depots, Merchant Marine Dockyard, Machine Tools Complex, Fertilizer Plants, Pulp & Paper Mills, Sugar Plants, River Basin Facilities etc. The other twenty enterprises like hotels and services entities have a high content of engineering infrastructure embedded in their real estate character.
It is thus imperative that Nigerian engineers participate in the Privatization exercise at all levels, in the Council (NCP) as Board Members, the Bureau (BPE) as employees, in the technical and steering committees, and as consultants/advisers. This needs be addressed by law because so far the discretion of N CP /BPE has been exercised to frustrate or minimize the contribution of Nigerian engineers to the success of the privatization exercise. The law also has to constrain the latitude of the government in exercising discretion in applying the proceeds of the privatization programme to sharing among state governments etc.

2.0       PARTICIPATION OF NIGERIAN ENGINEERS AS BOARD MEMBERSOFNCP
The relevant professions whose expertise would need to be injected to the Council's wisdom bag for effective and efficient decision and policymaking are ENGINEERING, LAW, FINANCE, ECONOMICS, BANKING, BUSINESS & LABOUR. The last six are mono-disciplinary, and each can generally be represented by one person. Engineering on the other hand has an infinite number of disciplines, each as different from the other as law is different from finance, or the latter is from economics. However, the multidisciplinary engineering field is usually grouped into five broadly representative kinds that generally can cover all the disciplines. These are,

The backgrounds of all persons who are or were players in industrial, commercial, or financial enterprises are invariably from engineering, law, finance, economics, banking, business and labour. It is from these specializations that such persons make their contributions to industrial, agricultural, infrastructural, commercial, financial and other services sectors.
Professionally an agricultural engineer cannot represent the interest of a materials engineer and vice-versa, for an example.
The groupings also roughly cover the sectors of the enterprises listed for privatization. Thus the River Basin Development Authorities, Palm Oil Enterprises can only be effectively covered in terms of science, engineering and technology (SET) at the board level by an AGRICULTURAL ENGINEER. The sports, transport, works and housing enterprises can most meaningfully be covered at the board level, from the angles of SET by the CIVIL ENGINEER.
The Electric Power Generation, Transmission, and Distribution Enterprises, and the Broadcasting and communications businesses in the same consideration are best covered from SET perspectives at the board by the ELECTRICALIELECTRONICS ENGINEER.
The motor vehicles, printing, machine tools, dockyard, airways, railways etc enterprises can only be manned completely at the Board level from the point of view of SET by the MECHANICAL ENGINEER. For the cement, fertilizer, chemicals, mining, coal, iron & steel, aluminum, petroleum, petrochemicals~ gas, pulp & paper, etc the PROCESS / MATERIALS ENGINEER is it.
Sec. 8 (3) of the PCPE Bill proposes to appoint the Chairman of NCP from either the public service or the private sector. It is our considered view that the goal of privatization will be best achieved through a Chairman from the private sector.

2.1       AMENDMENT OF SEC. 8 (3) PCPE BILL 2004 8(3)
NSE proposes the person and qualification of Chairman be defined as:
"Sec. 8 (3) The Chairman shall be a person from the private sector who by reason of his ability, experience or specialized knowledge of engineering, fiscal, corporate, industrial, commercial, financial or economic matter or business or professional attainments would in the President's opinion be capable of achieving the objectives of the Council. "

2.2        AMENDMENT OF SEC. 8(2)(ix)
In the light of the explanations in paragraph 2.0 supra there is need to amend Section 8(2)(ix) to read as follows:
"Eight other members in the following professions, Agricultural Engineering, Civil Engineering, Electrical/Electronics Engineering, Mechanical Engineering, Process/Materials Engineering, Investment Banking, Business, Labour to be appointed by the President, from the private sector in consultation with the relevant professional bodies. "
It will be observed that the interests of Law, Finance, and Economics are already well taken care of by the seven government representatives. Besides the Secretary to the Council vide Sec. 15 (3) of the Bill is now a lawyer.

2.3       BENEFITS FROM THE AMENDMENT
Apart from maximizing the efficiency and the economics of each privatization transaction, a balance will be struck between government and private sector representation in the Council. This balance is critical to the success of the exercise since the goal is to move from state control to private or rather market control.

3.0     PARTICIPATION OF NIGERIAN ENGINEERS IN THE STANDING COMMITTEES The guidelines on Privatization of Government Enterprises Sec. 8 (b) explain that NCP will from time to time appoint committees and sub-committees comprising knowledgeable individuals to tackle some of the preparatory works necessary at enterprise level in order to ensure a speedy and smooth privatization/commercialization exercise.
PCPE Bill 2004 in the Schedules lists enterprises to be privatized or commercialized in the following sectors:


Telecommunication
             *          Electricity
             *          Petroleum/Oil
             *          Fertilizers
             *          Machine Tools
             *          Gas
             *          Steel & Aluminum
             *          Mining & Solid Mineral
             *          Media (Print)
             *          Insurance
             *          Transport & Aviation
             *          Pulp & Paper
             *           Sugar
             *          Commercial & Merchant Banks
             *          Agro-Allied
             *          Boat/Ship Building
             *           Motor Vehicles & Truck Assembly
             *          Hotels
            *           Ports
             *          Stadia
             *          Railways
              *         Cultural Buildings
            *          Commercial Arenas
            *          River Basin Development Authorities
            *           Media (Broadcasting)
            *           Postal Services
            *           National Parks
            *           Housing
            *           Development Banking

In the 3rd Schedule Sec.3, it is provided that the Council may appoint one or more committees to carry out, on behalf of the Council, such of its functions as the Council may determine. Such a committee may include non-members of the Council.
Examining the sectors listed above it is evident that the overwhelming majority of these enterprises are engineering infrastructures within which the services functions are easier performed with a background and sound basis of engineering.
The need to have engineers on board of committees dealing with these engineering-based enterprises cannot be overemphasized.


              
3.1       AMENDMENT OF SEC.10 (i) OF PCPE BILL 2004
NSE in consideration of the explanations in the previous section proposes that Sec.10(i) of the PCPE Bill 2004 be amended as follows:
"10(i) appoint standing committees (when necessary) of the Council comprising persons from private and public sectors with requisite technical, engineering, and professional competence to advise it on the privatization or commercialization of specific public enterprises and such standing and ad-hoc committees shall stand dissolved at the discretion of the Council before or after completion of their mandate;"

3.2       BENEFITS OF AMENDMENT
The presence of relevant engineers in each and every committee or sub-committee on the various enterprises and sectors would guarantee optimal scientific, engineering, and technological value-adding to the deliberations and business of each of such committees/sub-committees.

4.0       PARTICIPATION OF NIGERIAN ENGINEERS AS ENTERPRISE OFFICERS IN THE BUREAU
PCPE Bill 2004 Sec. 15-(1) provides for the appointment of a Director General who inter alia by reason of his ability, experience, or specialized knowledge in fiscal, corporate, legal, industrial, commercial, economic, business, or professional attainment would in the opinion of the Council be capable of achieving the objectives of this Act. The Director General vide Sec. 15-(5) is empowered to appoint for the Bureau such number of persons as managers or heads of the various departments or directors in consultation with and approval of the Council provided that the appointment shall reflect the federal character of Nigeria. The Bureau before 2002 had operated a functional organization structure with the following departments: Operations, Planning & Monitoring, Council Affairs, Finance & Administration, and Legal Services.
BPE then managed the diversified portfolio of state controlled enterprises to be privatized as if only one enterprise were involved.
Since 2002 the Bureau introduced a decentralized sector-related kind of organization structure with the following departments: Organizational Support; Infrastructure & Networks; Natural Resources; Oil & Gas; Services; Industry & Manufacturing. All this while the Bureau must have adhered to the federal character principle, yet recording less than optimal results.
The state of affairs is such that no Head of any Department since the Bureau commenced operation is an engineer. Worse still, no junior, middle level or senior enterprise officer is an engineer. The only engineers working in the Bureau are deployed for organizational support services for the maintenance of computers and InfoTech systems. Yet 83 % of the enterprises listed for privatization are engineering infrastructures. In all of the enterprises slated for privatization there are technical and valuation reports from consultants that are coded in engineering language. Who analyses these reports in-house for the Bureau? The answer is 'Nobody'. These reports are simply ignored. The multi-various professional character of the sectors to be reformed, and enterprises to be privatized particularly as that pertains to engineering disciplines, has been ignored by design to the peril of the privatization programme, which so far has not recorded the successful privatization of even one engineering infrastructure.
Still it is accepted within NCP inner circles that the critical issue here is that the ability and the political will to carry out an effective/efficient privatization programme for engineering infrastructural facilities that would be well designed, maintained, properly coordinated, credible and widely acceptable hinge on genuine participation of engineers and engineering firms in all stages and levels of the programme.
To further quote Alhaji Umaru Shehu Ndanusa OON eminent member of NCP and former Chairman NEPA on areas where engineers have critical role to play in the privatization exercise:


"The Engineering Family has a critical role to play in many areas such as:

I therefore implore the Engineering Family to rise up to the call of national duty and take up the challenges and opportunities created by playing its vital roles accordingly, to ensure successful implementation of the privatization of engineering infrastructure in the country. THIS IS SO BECAUSE IT IS ONLY YOU THE ENGINEERS THAT CAN COMPETENTLY DO THE FOLLOWING:

Unquote.
Even though within NCP there are such noble intentions of involving engineers as key players in the privatization exercise, the looseness of the enabling statute offers BPE the leeway to frustrate and ward off engineers from the programme.

4.1       AMENDMENT OF PART III OF PCPE BILL. 2004
To bring the management of the Bureau to permanent focus of the professional issues especially the engineering issues critical to success in the privatization exercise there is obvious need to amend Sec. 15 as follows:
"15- (1) (b) not below the rank of a Permanent Secretary in the Public Service of the Federation, but shall be either from the public service or the private sector and who by reason of his ability, experience or specialized knowledge in fiscal, corporate, engineering. Industrial, commercial, economic, business or professional attainment would in the opinion of the Council be capable of achieving the objectives of this Act.
15 (5) The Council shall appoint for the Bureau such number of persons as managers or heads of the various departments or directors to represent as much as feasible the key success expertises of Engineering, Law, Economics, Finance and Business. The appointments shall reflect the federal character of Nigeria.
15- (6) The Bureau may appoint such number of the persons with backgrounds in Engineering, Law, Economics, Finance, Business and other relevant fields to be employees of the Bureau in the performance of its functions under this Act. "

4.2       BENEFITS OF AMENDMENT
Implementation of the policies of NCP and the day-to-day administration of the Bureau would be brought up to an optimal level with the injection of engineering wisdom to those of the other professions presently represented in the management committee. This will also pave the way for the employment of engineers as enterprise officers for the relevant enterprises in the privatization programme. With the separation of the office of the Secretary to Council from that of DG, and fusing the former with Legal Adviser, there is no urgency for appointing a legal person as DG since the law has taken care of the interests of the legal community by establishing the office of Secretary/Legal Adviser.


5.0       INCLUSION OF ENGINEERS IN THE STATUTE LIST OF PROFESSIONALS REQUIRED FOR PRIVATISATION
One of the functions of BPE on privatization is "12(1)(f)
Make recommendations to the Council on the appointment of consultants, advisers, investment bankers, issuing houses, stock brokers, solicitors, trustees, accountants and other professionals required for the purpose of privatization;"
In a privatization programme where 83 %( 100 out of 120) is engineering infrastructure, the absence of engineers in the above list is a regrettable omission. This must have encouraged BPE not to include "Engineers" in all the listings of required professionals in the (i) Guidelines for Privatization of Government Enterprises, (ii) Guidelines for Commercialization of Public Enterprises, (iii) Guidelines for the Selection and Employment of Consultants/Core Investors, and (iv) Blue Print of the Privatization Programme. Thus, in the Privatization Handbook, 3rd Edition, a compilation of these four documents and the enabling legislation, a book of 114 pages, the word "Engineers" does not appear even once.

5.1       AMENDMENT TO SEC. 12 OF PCPE BILL 2004
To align the function of BPE to the realism of the engineering character of the privatization programme and constrain the capacity and penchant ofBPE to sideline engineers and engineering, Sec. 12 (f) of the subsisting law has to be amended thus:
"12 (f) make recommendations to the Council on the appointment of consultants, advisers, engineers, investment bankers, issuing houses, stock brokers, solicitors, trustees, accountants and other professionals required for the purposes of privatization. "

5.2       BENEFITS OF AMENDMENT
This amendment will statutorily signpost the vital role engineering has to play in particularly the preparatory phase of the privatization of each enterprise, along side the other professions listed in the legislation.

6.0       UTILIZATION OF FUNDS IN THE PRIVATISATION PROCEEDS ACCOUNT (PPA)
The empowering of the Government of the Federation to determine the purposes the funds in the PPA can be applied, is detrimental to the privatization programme in particular, and economic development of the country in general. The law in this regard ought to be specific and for the purpose of promoting the local manufacture of machinery and equipment. NSE had in 2002 drawn the attention of the nation that Nigeria is the only country of that size that is pursuing her privatization programme for the benefit of foreign equipment and machinery manufacturers. The proceeds of the privatization programme should thus be channeled to the immediate establishment of local manufacturing capability for switching, generating, transmission, distribution, processing and customer equipment and machinery for the telecoms, electric power, energy, chemical, motor vehicle, transportation, defence, aviation, agriculture/agro-allied, fertilizer, pulp & paper, sugar, cement, wood, metallurgical, hospitality, sports, maritime, water resources, housing etc sectors.

6.1       AMENDMENT OF SEC.17 QF PCPE BILL 2004
In view of the issues raised in para 6.0 supra, the said Sec. 17 of PCPE Bill 2004 should be amended as follows:

"17 (2) The funds in the account established under subsection (1) of this section shall be used for promoting the establishment of local manufacturing capability of input equipment & machineries for the various enterprises being privatized, and for measures to ensure the success of  the privatization programme, subject to appropriation by the National Assembly. "
 


 

6.2       BENEFIT FROM AMENDMENT
While without additional effort to the privatization programme, the country would enter the club of machine, hi-tech, computer and electronic manufacture, substantial savings in terms of foreign exchange will be realized. Diversification of the Nigerian economy would also be achieved with the attendant creation of millions of jobs.

7.0      DEFINITION OF INDEPENDENT VALUER

Sec. 10 (g) of the PCPE Bill 2004 grants the Council power to cause a valuation of the assets of the public enterprise to be carried out by independent valuers who shall issue properly authenticated certificates of valuation to the Council and the Bureau.
Sec. 137 (I) of Companies & Allied Matters Act (CAMA) 1990 also requires that where a company agrees to accept payment for its shares otherwise than wholly in cash, it shall appoint an independent valuer who shall determine the true value of the consideration other than cash and prepare and submit to the company a report on the value of the consideration. Independent Valuer was defined in Sec. 137 (6) as follows:
" For the purposes of this section "valuer" means an auditor, a valuer, a surveyor or an accountant not being a person in the employment of the company nor an agent or associate ,of the company or any of its directors or officers.
This definition was amended by Sec. 3 CAM (Amendment) Act No. 46 1991 as follows:
Immediately after the word "surveyor" appearing in subsection (6) of section 137 of the principal Act, there shall be inserted the words" or engineer".
Since the assets of the public enterprises listed for privatization commercialization include real property, personal property, and intangible property, there would be need for real property valuers, machinery and technical specialties valuers, personal property valuers and business valuers. To avoid misinterpretation NSE proposes that the term "Independent Valuer" be defined in the PCPE Bill 2004.

7.1        ADDITION TO SEC. 30 OF PCPE BILL 2004
It is suggested that immediately after the definition of "Host Community" there shall be inserted the following definition:
"Independent Valuer" shall have the meaning assigned to it by Companies and Allied Matters Act No.1 of 1990 Sec. 137 as amended by Companies and Allied Matters (Amendment) Act No 46 of 1991 Sec3."

8.0       PARTICIPATION OF ENGINEERS IN DISPUTE RESOLUTION
Sec. 25 of the PCPE Bill 2004 stipulates that any dispute arising from the provisions of a Performance Agreement shall be determined in accordance with the provisions of the Arbitration and Conciliation Act. The composition of an arbitral tribunal is left to the discretion of the parties to an arbitration agreement, by Sec. 6 of Arbitration and Conciliation Act No.11 of 1988. The Act however provides that when the number of arbitrators is not determined by the said parties, it shall be deemed to be three.
Since the matters that are likely to be remitted to an arbitral tribunal under the PCPE Bill 2004 would involve mostly questions on Performance Agreement related to over 120 multivarious enterprises, and 30 diverse sectors/sub-sectors, there is need to determine by law the composition of the arbitration tribunal for this purpose.
NSE believes Part V of the extant Public Enterprises (Privatization and Commercialization) Act 1999 with some amendments is still adequate.


SCHEDULE OF AMENDMENTS

A         AMENDMENT OF SEC. 8 (3) PCPE BILL 2004
"Sec. 8 (3) The Chairman shall be a person from the private sector who by reason of his ability, experience or specialized knowledge of engineering, fiscal, corporate, industrial, commercial, financial or economic matter or business or professional attainments would in the President's opinion be capable of achieving the objectives of the Council. "

B       AMENDMENT OF SEC. 8(2) (ix)
          “Eight other members in the following professions, Agricultural Engineering, Civil Engineering, Electrical/Electronics Engineering, Mechanical Engineering, Process/Materials Engineering, Investment Banking, Business, Labour to be appointed by the President, from the private sector in consultation with the relevant professional bodies.”

C       AMENDMENT OF SEC. OF (i) OF PCPE BILL 2004
"10(i) appoint standing committees (when necessary) of the Council comprising persons from private and public sectors with requisite technical, engineering, and professional competence to advise it on the privatization or commercialization of specific public enterprises and such standing and ad-hoc committees shall stand dissolved at the discretion of the Council before or after completion of their mandate; "

D       AMENDMENTOF PART III OF PCPE BILL,2004
"15- (I) (b) not below the rank of a Permanent Secretary in the Public Service of the Federation, but shall be either from the public service or the private sector and who by reason of his ability, experience or specialized knowledge in fiscal, corporate, engineering, industrial, commercial, economic, business or professional attainment would in the opinion of the Council be capable of achieving the objectives of this Act.

E         15 (5) The Council shall appoint for the Bureau such number of persons as managers or heads of the various departments or directors to represent as much as feasible the key success expertises of Engineering, Law, Economics, Finance and Business. The appointments shall reflect the federal character of Nigeria.

F         15- (6) The Bureau may appoint such number of the persons with backgrounds in Engineering, Law, Economics, Finance, Business and other relevant fields to be employees of the Bureau in the performance of its functions under Act.”


G       AMENDMENT TO SEC. 12 OF PCPE BILL 2004
"12 (f) make recommendations to the Council on the appointment of consultants, advisers, engineers, investment bankers, issuing houses, stock brokers, solicitors, trustees, accountants and other professionals required for the purposes of privatization.

H      AMENDMENT OF SEC. 17 OF PCPE BILL 2004
"17 (2) The funds in the account established under subsection (1) of this section shall be used for promoting the establishment of local manufacturing capability of input equipment  & machineries for the various enterprises being privatized, and for measures to ensure the success of the privatization programme, subject to appropriation by the National Assembly. "

I        ADDITION TO SEC. 30 OF PCPE BILL 2004
"Independent Valuer" shall have the meaning assigned to it by Companies and Allied Matters Act No.1 of 1990 Sec. 137 as amended by Companies and Allied Matters (Amendment) Act 1991 See 3. "

J        AMENDMENT OF SEC. 25 OFPCPE BILL 2004
Establishment and membership of the Public Enterprises Arbitration Panel
"25 (1) There is hereby established under this Act an ad-hoc body to be known as the Public Enterprises Arbitration Panel (in this Act referred to as "the Panel'') which shall be responsible for effecting prompt settlement of any dispute arising between an enterprise and Council or the Bureau.
"25 (2) The panel shall consist of seven persons appointed from the following professions: Engineering (2 No), Law, Finance, Economics, Business, and Labour. One of the two engineers is a permanent member while the second is to be appointed on enterprise by enterprise basis depending on the sector/discipline. These persons shall be of proven integrity and one of whom shall be the Chairman.
"25 (3) The members of the panel shall be paid such remuneration and allowances as may be determined by the Government of the Federation.
25 (4) The Council shall appoint the members of the Panel on such terms and conditions as it deems fit.
Powers of the Panel.
26 (1) The Panel shall have power to arbitrate-
            (a)       in any dispute raising questions as to the interpretation of any of the
provisions of a Performance Agreement; or
(b) in any dispute on the performance or non-performance by any enterprise of its


 

Undertakings
Under a Performance Agreement.
(2) A dispute on the performance or non-performance by any of the parties to the Performance Agreement shall, in the case of a commercialized enterprise, lie to that Panel providing that such reference may be made "after all reasonable efforts to resolve the dispute have been made and have not been proved.

. (3) The ruling of the Panel shall be binding -on the parties and no appeal shall lie from a decision of the Panel to any court of law or tribunal.

Proceedings of the Panel Cap. 192 LFN

27-(1) Subject to this section and section 27 of the Interpretation Act, the Panel, may make standing orders regulating its proceedings.
(2) The Chairman of the Panel shall preside at every section of the Panel.
(3) The quorum at any session of the Panel shall be the Chairman and four other members.
Other arbitration laws not applicable. 1988 No. 11
28. The provisions of the Arbitration and Conciliation Decree 1988 or any other enactment or law relating to arbitration shall be applicable to any matter which is the subject of arbitration under this Decree.

INSTITUTE OF APPRAISERS & COST ENGINEERS

A Division of
The Nigerian Society of Engineers
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