Essential Action   >Structural Adjustment and Labor

Nigeria

Memorandum of Economic and Financial Policies, February 22, 1999

Containment of the wage bill in 1999 to a doubling from the 1998 level (an increase of 44 billion). The quadrupling of wages announced in September 1998 has been partially rolled back.

Furthermore, with the aim of making competitive enterprise the moving force in the national economy, the government has assigned privatization and related institutional reforms a high priority. Our programme encompasses the privatization or commercialization of all public enterprises engaged in activities of a commercial nature; once this programme has been completed in three- to four-years' time, no activity of a strictly commercial nature should be carried out by the federal government. Our strategic objective over the next few months is to make the privatization process difficult to reverse, while observing the sound practices and full transparency needed to ensure sustained public support. To help guide the privatization process and establish the necessary legal and regulatory structures, advice will be sought from the World Bank. Furthermore, the government will seek specific assistance from the International Finance Corporation (IFC) on the sale of selected enterprises.
Our privatization programme was launched in October 1998 by inviting from potential strategic investors expressions of interest in the acquisition through joint-venture arrangements of a 40 percent share in 19 major public enterprises slated for partial privatization. The intent was to sell at least a 40 percent share to strategic investors initially and then 20 percent to local investors, with the remainder to be retained by the government. At the same time, we sought applicants to serve as our financial and technical advisors in this process, and several international merchant bankers have already been selected. The government will shortly be signing contracts with those advisors selected for enterprises slated for early action, and it is expected that they will begin their due diligence work in Nigeria by mid-February.
27. The companies slated for early action include the following:
· NAFCON (fertilizer). We will bring this key manufacturer of fertilizer to the point of sale (i.e., commencement of negotiations with the selected strategic investor) by end-May 1999.
· Nigerian Airways. With IFC as advisor, we expect to bring Nigerian Airways to the point of sale by end-May 1999.
· Refineries. The rehabilitation of the Kaduna refinery is now near completion. We expect that it can be brought to the point of sale by end-May 1999. The partial privatization of the other three refineries will follow during the second half of 1999.
· NITEL (telecommunications). We will ensure that the selected advisor completes due diligence, taking into account alternative sector structures, by end-May 1999, with a view to bringing NITEL to the point of sale by end-September 1999. Necessary revisions of the legal framework and NCC's mandate will be enacted by end-May 1999.
· NEPA (power). We will ensure that the selected technical advisor initiates by the end of March 1999 a study on the restructuring of NEPA into various component entities (generation, transmission, distribution, and/or regional); a decision on its breakup and initiation of the privatization of the various entities will follow by September 1999. The supporting regulatory mechanism will, as stated above, have been enacted by end-May.
· Other firms. We will sell off the remaining government and parastatal shares in five banks and in most of the cement and oil marketing companies already listed on the Lagos stock exchange by end-May 1999.
The government will, in consultation with the World Bank, establish by February 12, 1999 an institutional arrangement that should enable it to achieve the privatization objectives described above. In addition, we anticipate that by the end of 1999 several of the remaining enterprises in the programme will have been brought to the point of sale, and that the others will have moved to the valuation, bidding, or negotiation stages. It is also expected that the government's remaining shareholdings in the major enterprises discussed above (NAFCON, NITEL, NEPA, the refineries, etc.) will be partly or fully divested in the future.

Moreover, the government will no longer tolerate acts of indiscipline in the administration and management of our ports, and it will henceforth be mandatory for cargo inspections to be conducted at the appointed time by the recognized agencies. Efforts will continue to be made to limit the delay in clearance at ports to 48 hours; this will be facilitated by the installation of the ASYCUDA system at the Lagos and other ports, and by a reduction in the number of agencies authorized to operate at the ports. In addition, we have abolished the system of preshipment inspection of imports and exports, effective April 1, 1999, and replaced it with a system of destination inspection for imports; the performance of the preshipment inspection has been mixed at best, and its abolition has been requested by the representatives of the Organized Private Sector. Assistance from international experts will be considered to help ensure effective destination inspection, as is currently being discussed with experts in this area. Furthermore, in cooperation with international agencies, we will study the possibility of privatizing customs clearance at the major ports and of redeploying customs agents to the border posts throughout the country, with a view to increasing efficiency and reducing cross-border smuggling. This is to be achieved by end-March 1999.

More generally, we recognize that a sustained effort is needed to strengthen the civil service and improve its capacity for efficient administration and the delivery of essential services. We have begun dispensing with the services of all civil servants who have committed serious offenses; eliminating "ghost workers" who fail to register every six months for their paychecks; reinstating automatic retirement after 35 years of service or age 60, whichever comes later; and redeploying redundant or underemployed civil servants to areas where they can be more productive. We have begun the computerization of the civil service rolls and are seeking assistance from international agencies to study how best to implement, update, and monitor a centralized pay system. We have recently completed an assessment of certain tasks that we intend to transfer to private vendors during the course of 1999. We also intend to commence systematic manpower studies in 1999 and will initiate a comprehensive assessment of the appropriate functions and associated staffing levels of the civil service in June 1999.

By end-September:
· Bring to the point of sale to a strategic investor 40 percent of NITEL.

Letter of Intent and Memorandum on Economic and Financial Policies, July 20, 2000

The government has prepared a comprehensive economic program for the year 2000, that is designed to reduce poverty, achieve faster sustainable growth, and raise living standards. Our strategy focuses on the encouragement of the private sector to lead this process and comprises the following major elements:

Deregulation and privatization, with emphasis on speedy actions in the power, telecommunications, and downstream petroleum sectors, and steps to develop an improved regulatory framework in these and other sectors; […

The budget envisages containing the wage bill to 173 billion (4.9 percent of GDP) in 2000.6 This should accommodate the doubling of wages in the public service, brought about by the introduction of the new salary structure effective May 1. The 1999 wage bill included a sizable amount of payments on arrears, "ghost workers," and underpayment of benefits. Following the completion, by end-September 2000, of an inventory of federal civil servants, payments to line ministries and public institutions will be made on the basis of staff strength, rather than the number of positions or other criteria. In addition, measures are being taken to eliminate ghost workers and to "right size" the civil service (see section on governance). The hike in civil service wages should offset, in part, the decline in real wages experienced by the Federal Civil Service over the past decade and lay the foundation for the development of a professional, results-oriented civil service that would be less susceptible to corruption.
35. In the power sector, we have retained the services of an expert to develop a national power policy whose objective is to ensure the efficient provision of reliable, low cost power supply to the domestic market. The policy statement has now been completed and formally adopted by the government. The government is also developing a new Electricity Law and Regulatory Framework Law, which will be approved by the Council of Ministers by end-December 2000 for subsequent submission to the National Assembly. The new regulatory body for the power sector will be established by end-March 2001. To address the immediate need to reduce serious power shortages, the government has developed an emergency power program that includes inviting independent power producers (IPPs) to tender to supply short-term emergency power to the national grid, so that the power shortages will be reduced by 75 percent within 12 months, and fully eliminated within 24 months. The tariff structure will be adjusted so as to remove the electricity subsidy in urban areas within three years. Finally, with the assistance of the World Bank, by end-June 2001, the national power company (NEPA) will be restructured to create self standing companies; these will subsequently be privatized.
The Government has now brought its policy for the telecommunications sector up to international standards. We will also develop a new telecommunications law which will be approved by the Council of Ministers by end-December 2000 for subsequent submission to the National Assembly. Once approved by the National Assembly, we will then complete the reform of the legal and regulatory framework, with a view to finalizing it by January 2001. We are also strengthening the telecommunication regulatory authority (NCC) by providing enhanced autonomy, appropriate human resources, and necessary equipment to enable it to conduct its functions efficiently and effectively. We will retain the services of a merchant bank for the privatization of the national telecommunication companies (NITEL/M-TEL) and intend to bring them to the point of sale9 by end-March 2001 (a strategic investor will be allowed to purchase up to 40 percent of the shares).

Following the completion of a petroleum sector review by the World Bank, the Government will adopt, by end-January 2001, an action plan for the reform of the petroleum sector, including privatization of the refineries. We intend to bring the refineries to the point of sale by end-October 2001.

The government is also sharply reducing its involvement in other sectors of the economy. In the year since taking office, the government has privatized four cement companies (Ashaka Cement, Benue Cement, the Cement Company of Northern Nigeria, and West African Portland Cement). Together, these four cement companies account for 90 percent of domestic production. The government has also sold its shareholding in the FSB International Bank and Unipetrol. Together with the sale, by end-September, of government's share in African Petroleum and NOLCHEM-which will take place in conjunction with Shell's sale of its share in the latter company-the government will have ended its ownership of companies involved in the downstream marketing of petroleum products. We will also issue a call for competitive bids for the sale of the fertilizer company (NAFCON), by end-December 2000, pending resolution of legal action; complete the ongoing sale of 5 banks by end-September 2000; bring to the point of sale the government shareholdings in NICON Insurance, Nigerian Reinsurance, the Nicon Hilton Hotel, and Nigeria Hotel Ltd. by end-December 2000; and finalize the divestiture of another three hotels by March-2001. The issuance of calls for competitive bids for the privatization of Nigerian Airways will be made by end-March 2001.

Civil service reform. To this end, we will develop an action plan. In line with recommendations made in the Vision 2010 report, this will incorporate firm proposals for right-sizing the Federal Civil Service, concomitant with the proposed shift in responsibilities from federal to state and local governments under fiscal federalism. Procedures are being established for close scrutiny of the public sector payroll, including centralization of administration and control, with precise steps to eliminate ghost workers. On May 1, the government announced an increase in civil service salaries by about 100 percent. In addition, consideration is being given to monetizing all public service benefits and make necessary adjustments to the personal income tax rates to cushion the tax effects of monetization. In the medium term, a system to periodically review the conditions of service will be established.

By end-December 2000:
Bring to the point of sale of NICON Insurance, Nigerian Reinsurance, the Nicon Hilton
Hotel and Nigeria Hotel Limited.

By end-March 2001
Bring to the point of sale of NITEL/MTEL.