The Accidental Public Servant
Page 22
We also lost other opportunities particularly in the public sector for the same reason of "not playing
ball". It is a double-edged sword, but we chose what makes us sleep well at night!
In government, I began learning that there were a couple of twists on this dynamic. Firstly, word got
around much quicker – as I said, as soon as people heard, there were not many more overt attempts.
Secondly, this did not mean there were not more attempts, period. The attempts to coerce and
compromise an honest official would take on different forms, some of which I will discuss shortly.
Thirdly, there is outright bribery which became rare, and then there are covert methods of gaming the
system to one’s advantage. Fourthly, there is the meta-statement of what this all means. Some of my
friends in the West have asked me or suggested that perhaps what sets Nigeria, Africa, or the
developing world apart is that so-called corruption has come to be viewed as a sort of ‘tolerated
ugliness’, but I do not think this is really accurate. I just think it has gotten to a point, particularly in
the last few years, that only the fool does not do it. Finally, quite apart from bribery, kickbacks or
anything else that would fall under the very broad-stroke ‘corruption’ umbrella is the simple premise
that certain people have a certain emotional investment in seeing certain projects done a certain way,
or not done a certain way, as the case may be, and this can set the stage for a big conflict of interest.
This last point can be particularly challenging when that conflict of interest is with the president of
Nigeria.
Nigeria Airways or Two and a Half Planes
The two different arguments we had the very first time I met President Obasanjo was clearly some
sort of foreshadowing of what our relationship was destined to become, for we had constant quarrels
over all manner of things. Someone recently asked me if I could boil down my relationship with
President Obasanjo into three simple words, and the closest I have come so far is to simply say, ‘a
roller coaster’ or a ‘love-hate relationship’.
One of our first big disagreements was over the proposed privatization of Nigeria Airways. President
Obasanjo clearly had an emotional attachment to the airline. When he was military head of state in the
late 1970s, he expanded its fleet from a handful of planes to more than two dozen aircraft. He also
expanded government contribution to GDP from 22 per cent to 44 per cent, so he was very interested
in state-directed development then. He also purchased 16 huge merchant ships for Nigeria’s national
shipping line, established six automobile assembly plants, built 22 airports and a steel plant. He
really believed that only government could be fair, only government could be just, so government
should be big in business - and do everything.
Shortly after he assumed office as president in 1999, the joke among us at the BPE was that Nigeria
Airways only had two and a half planes – ‘two and a half’ because two were flying and one was
grounded as it was due for ‘D check’, which is what a plane goes through every five years after
logging a certain number of flying hours. We did not have the money to pay for the D check though, so
we had the plane, it was fine, it could fly, but no pilot could be willing to fly it without that
inspection. So really we had two planes flying and neither one was flying any international routes.
Nigeria Airways’ total fleet had gone from nearly 30 in 1979 when Obasanjo left office the first time,
to two and a half in 1999 when he returned to the presidency.
As a result, the president had great difficulty seeing this child that he had raised die, and was,
therefore, very reluctant to see it privatized. His attitude was, “Look, why can’t we get Boeing or
Airbus to give us some planes and we pay them back over time?” How we would pay them when
Nigeria Airways staff siphoned off the revenues into private pockets I suppose was an afterthought.
Nigeria Airways managers were known for giving free tickets to friends and relations and nobody
paid for excess baggage or any cargo on their flights. The only way out was to take the national
carrier license, bilateral air services agreements and the two and a half planes as assets, get some
private sector entrepreneurial spirit to acquire them so he could then use his balance sheet to borrow
and buy more planes, and hopefully keep it as a going concern, and preserve some of the 2,000 jobs.
The IFC had been appointed as transaction advisers in the privatization of Nigeria Airways. This sent
a very positive signal to the rest of the world that Nigeria was serious about privatization. As we all
soon learned, President Obasanjo did that just for show, so that he would look good internationally,
but had no intention of allowing the sale to happen quickly. Perhaps his plan to drag it out would have
succeeded if not for the fact that some two weeks later, he appointed me as BPE’s director general.
When I came onto the scene, I honestly thought selling off a near-dead airline was a no-brainer!
Once I took over, we were going too fast by Obasanjo’s mental timeline. There were a number of
obstacles to privatizing the airline. To begin with, it had a staff of 2,000, down from 6,000 at its peak,
and two aircraft, making for an average of 1,000 employees per plane. Meanwhile, the international
standard was 200 employees per plane. This meant that in the short term, something on the order of
1,500 people would have to be sacked, and their terminal benefits settled prior to privatization.
Obstacle number two was the psychological process of coming to terms with a major asset sale like
that - a privately-owned national carrier meant no free flights for ministers, officials and their
relations. President Obasanjo had a minister of aviation who was very close to him, Dr. Olusegun
Agagu. Agagu was not interested in hastening the privatization of Nigeria Airways, despite the fact
that it was an airline with two aircraft and no revenues, and the reason was very simple - money!. In
the airline industry, each country signs bilateral air services agreements, commonly referred to as
BASAs, with other countries. In a given country, any foreign airline that earns more than the host
country airline pays a fraction of its excess revenues to the host country.
This quasi-socialist framework was set up to prevent bigger countries from taking advantage of
smaller countries. In the case of developed country revenues flowing to underdeveloped countries,
the purpose of these monies was intended to help develop infrastructure for the poorer countries’
aviation industries. Nigeria Airways, in 1999, received about $35 million just on the basis of this
agreement, paid in from Lufthansa, KLM, British Airways and others – essentially free cash for doing
absolutely nothing. Contrary to the provisions of the Nigerian constitution, these funds do not go into
the distributable pool of revenues or even the treasury of the Federal Government. Much like oil
money, it just rolls in freely, but into an unaudited account under the control of the ministry of
aviation.
As the money is off-budget (it does not go into the federal treasury to be accounted for and
appropriated by the National Assembly), it could be spent pretty much entirely at the discretion of the
recipient-agency. This was what the successive ministers of aviation were feasting on, and it was
not
a bad chunk of revenue for a person or two or even ten. So there was obvious resistance to the
privatization of Nigeria Airways in the Ministry of Aviation because of that annual $35 million
income. Minister Agagu consistently made a case to keep the airline for sovereignty, pride, and
'national security' reasons – everything other than BASA account, and what not, and Obasanjo
listened. Approvals needed to terminate excess staff, close high-cost centres, fund terminal benefits
and so on returned with questions and further questions.
To say there were huge tensions would be an understatement. Soon enough, Obasanjo replaced Agagu
with a woman and I was initially relieved because I knew I was being successfully obstructed on
account of Agagu’s closeness to Obasanjo. We later learnt that this woman was even closer to
Obasanjo, with a longer history of family connections, which worsened the challenges of privatizing
the airline. The new minister, Dr Kema Chikwe, is the sister-in-law of Ajie Ukpabi Asika, the
Administrator of the then East-Central State during the civil war, and had been close family friends
with Obasanjo from the 1960s. We therefore made little progress, and decided within the BPE, and in
the interest of our institutional credibility, that we had to go public with the ministerial obstructions
and our frustrations. The IFC was equally bewildered by the attitude of the Nigerian leadership and
the conflicting signals about the political will to privatize moribund public enterprises.
At one point, one of Obasanjo’s domestic aides came to me and said, “Look, just slow down on this
Nigeria Airways thing, because you will never win with this lady. The president will never consent
to any action that she is opposed to. It is not a question of whether you are right and have a better
argument or not. You will simply never win.” But I did not care, I believed I had a job to do, and it
was not Obasanjo's but Nigeria's.
Our arguments over Nigeria Airways even made several headlines in Nigerian newspapers – that was
how open the quarrel was. President Obasanjo was quoted as saying that if I ever insulted his
minister again he was going to fire me, and I responded that I was going to privatize Nigeria Airways,
no matter what. I asserted that I was sure in two years the airline would be dead unless it was placed
in private hands. Many people thought I was crazy but the truth was at that point, I really did not care
if he fired me. In the end, the airline was never privatized, the lady minister tried setting up another
airline, Airwing, with the airline's assets and BASA, which we successfully foiled, and Nigeria
Airways finally ceased operating in 2003, shortly after I left BPE, much as predicted. The chief of
staff to the president reconciled Dr Chikwe and I in May 2003 and asked me to write her a letter of
apology on 'the inappropriate use of language' since she was older than me, even though I felt she was
wrong. I had no problems with that and wrote the letter, as life must go on and one must not hold
grudges for too long, or be seen to be unforgiving.
Years later in 2006, Kema Chikwe confidently visited me to seek the support of our group – the
economic team - in her bid to run for the governorship of Imo State. My friend and perceived
nominee, Hakeem Belo-Osagie, had been appointed the chairman of the PDP gubernatorial screening
committee for the South-East zone, and Kema needed my help to discredit and discountenance some
petitions filed to disqualify her. I was gracious and mentioned the visit to Hakeem who went on to do
a professional job of the screening exercise. The nature of political relationships is dynamic and
susceptible to change sometimes overnight, and often unpredictably.
The ending to this story I did not fully know until I was in exile, when I met one of the air transport
union leaders deployed by the aviation minister to resist the sale of Nigeria Airways. He was abroad
for medical treatment. He complained that all his union members were then not only unemployed, but
had not received their terminal benefits – even the negotiated fraction of what they were entitled to on
paper. I was unsympathetic. I felt that it served them right, and told him so. He admitted that they
erred, but was honestly persuaded by Kema Chikwe that the government would bail out the airline
with the acquisition of new planes and fresh injection of funds with the BPE as the only stumbling
block. The union leader admitted that the Ministry of Aviation financed the union’s campaign against
the privatization of Nigeria Airways and their support of the ‘turnaround’ option. An example of such
media campaigns was a paid advert on page 7 of the Daily Champion of 25th September 2002 titled –
“Air Nigeria, El-Rufai, BPE and the Rest of Us: What Does El-Rufai Want?” He admitted that they
felt swindled when Obasanjo approved the liquidation of the airline shortly after I left the BPE, a
process that resulted in job losses and substantially discounted terminal benefits.
Nigeria Telecommunications Limited (Nitel)
One of the underlying reasons for my quarrels with President Obasanjo those first few years was his
constant suspicion that the vice-president and I were up to no good in the privatization
implementation. I do not fully know where he got this idea but my sense is that it was a combination
of the president’s generally suspicious nature and the fact that unlike some other senior government
officials, I never made a practice of paying him regular visits just to chat, or more correctly, gossip
about others, despite his frequent invitations. This all changed – not our quarrelling, but his suspicion
of me – as a result of our flagship privatization transaction for 2001: Nigerian Telecommunications
Limited, better known as Nitel.
Nitel was the telephone monopoly and the effort to privatize it was a huge challenge, because Nitel,
like Nigeria Airways, was a big cash cow that had made a lot of politicians, generals, bureaucrats
and business persons very rich. Those who were benefiting from the status quo therefore saw our
effort to privatize it as a threat to their livelihood and rent-seeking. But because I came into my job in
the BPE with a telecommunications background, I knew the industry well and what needed to be
done. We rewrote the national telecommunications policy, and actively spearheaded the deregulation
of the telecommunications industry[33] such that licenses would be issued to other operators to
compete with Nitel because we did not want to just make it a private monopoly as other countries
have done. Instead, we proposed to both deregulate the industry and privatize Nitel in parallel. We
were fairly successful overall though the Nitel privatization did not succeed as well as the
deregulation path.
The moment we invoked the provisions of the privatization act, all of Nitel’s shares came under the
finance minister’s oversight, who in turn gave the power of attorney to the BPE since the intent was to
auction off majority shares of the company. Because BPE effectively became the sole shareholder of
Nitel, I joined the board of directors. Shortly thereafter, we dissolved the board (made up largely of
politicians) and constituted our own technical board to steer the company more directly onto a path
toward privatization.
Of course, the main element of the privatization process involved auctioning off 51 per ce
nt of the
company itself, plus management control. While this sale over the years has morphed into something
that I do not think anyone could have foreseen, the very first bid attempt ended up actually quite
indicative of the sort of dynamics to expect. A consortium known as Investors International London,
Ltd. (IILL) bid $1.317 billion to acquire a 51 per cent stake in Nitel in 2001. The terms of the sale
dictated that 10 per cent of the bid price be paid in immediately as a non-refundable deposit - $131.7
million – with the other 90 per cent due within 60 days. Failure to pay in the balance would result in
the deposit being forfeited and the company being offered, hopefully to the second highest bidder - the
reserve bidder - someone hopefully more solvent.
After paying in the nearly $132 million deposit, the consortium failed to comply with the 60 day
deadline, even after being granted a 30-day extension, approved by the NCP. The consortium’s
leader, Chief Bode Akindele, then attempted to get the deposit refunded, despite the fact that everyone
was warned well ahead of time what the rules were. I did not find out until later, but he apparently
was offering $10 million in cash to anyone who could convince the BPE to change its mind. When
this did not work, he appealed to First Bank Nigeria to discuss the matter with me since First Bank
had made an unsecured loan to Akindele of about $92 million for part of the initial down payment.
Had the lender been a small bank, we might have debated the issue or reconsidered, and made a case
to the Privatization Council for reconsideration to avoid systemic risk. But First Bank had the balance
sheet and financial strength to take the hit and should have known better, really. In short order, we
paid the $132 million into the treasury, so the only way for anyone to get the money back would have
been via an appropriation bill requiring National Assembly approval.
I do not know what it was about the rules we devised, but the procurement process for Nitel’s GSM