War of Wits over Air Nigeria

Posted by on 10/14/2002 10:39:16 PM
Post Comment War of Wits over Air Nigeria Nigeria

By Solomon Ibharuneafe

Kema Chikwe An uneasy atmosphere prevailed at the public hearing of the House of Representatives committee on aviation, privatisation and commercialisation on the Nigeria Airways Limited, NAL/Airwing Aerospace Limited, AAL, Joint Venture Agreement, JVA, from September 26 to October 3.

Nasir El-Rufai, director-general of Bureau for Public Enterprises, BPE, and Kema Chikwe, aviation minister, the leading figures in the controversy over the JVA, were in combative moods throughout the hearing. Both of them held tenaciously to their well-known positions on the issue. While El-Rufai insisted that the minister usurped the functions of the Bureau of Public Enterprises, BPE, by privatising NAL, Chikwe pointed out that the JVA was not an outright sale of the federal government majority shares of NAL, but part of the efforts to restructure and reposition NAL for privatisation. The restructuring of NAL has seen the staff strength of the company reduced to 1,722 from 10,532. The airline with 30 aircraft as at 1983 now has only one functional aircraft.

El-Rufai said the JVA was an outright sale of NAL through the backdoor and thus breached the laws of the Federal Republic of Nigeria. He identified such laws as the Privatisation and Commercialisation Act of 1999 and the Companies and Allied Matters Act, CAMA, 1990.

According to El-Rufai, Section 11 of the Act empowered the National Council on Privatisation, NCP, headed by Atiku Abubakar, vice-president, to among others, approve guidelines and criteria for privatisation and choice of strategic investor; determine whether the shares of a listed public enterprise should be public or private issue or otherwise and advise government accordingly. He said Section 13 of the Act also empowers the BPE to carry out all activities required for the successful issue of shares and sale of assets of the public enterprise to be privatised. Although he did not elaborate on the provisions of CAMA breached, the BPE helmsman was of the belief that Chikwe acted alone by sidelining the BPE whose duty it was to sell public enterprises.

He said the BPE's immediate reaction upon learning about the plan by MOA to sign the JVA was to write a letter to the minister on August 5, seeking confirmation on the status of the transaction. According to him, up till the time of appearance before the committee, the ministry had neither acknowledged nor provided the BPE with details of the JVA, but rather chose to ignore them.

He said this illegality and disregard to due process in the way and manner the purported privatisation was transacted was reported to the president and vice- president in a memo.

El-Rufai said the BPE conducted a preliminary investigation on AAL and obtained the company profile which portrayed that AAL had no experience in management and operation of a domestic or international airline. He said the secrecy, lack of transparency, open, competitive tendering and disregard for due process by the Ministry of Aviation was a clear breach of reasonable guidelines with regards to the disposal of public enterprises, and assets, adding that these were some of the frustrations posed on the way of the NCP's privatisation programme.

But Chikwe countered: If I have taken any step to resuscitate our ailing national carrier, it has been purely in the national interest. According to the minister, the ministry as the supervisory ministry of NAL could not fold its hands and watch the comatose state of the national carrier considering the workforce that had been rendered redundant even before the inception of the Obasanjo administration.

Giving a historical analysis of problems of NAL since 1983, the minister said NAL had been on the decline from a position of 30 aircraft in its fleet in 1983 to only one functional aircraft in September 2002. She attributed the decline to mismanagement, persistent accumulation of huge operational losses and deficits amounting to USD130 million, reckless abandonment of serviceable aircraft over the years in various locations of the world. She said the situation was so bad that the BPE/NCP had requested from the presidency in a letter dated January 15, 2001 , that the NCP should hands-off the privatisation of NAL.

Chikwe recalled that the general public and the National Assembly in their representations to the president December 2000 requested that the airline should be kept as a going concern prior to its privatisation. She said government from then supported the stance of the National Assembly that NAL should not be sold as scrap which was the most favoured option by the BPE and the international finance corporation, IFC.

In the main, the minister said the IFC's report appeared to have been geared towards the sale of the airline as scrap in the sense that the purchaser was to buy the physical and legal assets of NAL without the corresponding liabilities.

The minister lamented the frustration of the efforts of her ministry to resuscitate the airline by the BPE. She said prior to her assumption of duty, efforts were made to source the sum of USD 30 million from Afrexim Bank, Cairo, to help buy new aircraft and resuscitate NAL's fleet. I met this project and pursued it till I got approval of the loan from both Afrexim and the presidency, she said adding that the implementation was frustrated by the BPE's withdrawal from the project, because according to her, their interest was to sell off NAL and not to resuscitate or rehabilitate the airline.

The result, she said, was that the ministry through the Bi-lateral Air Services Agreement, BASA, account continued to absorb the huge overheads of NAL while waiting for its sale. Government, she said was also determined to stop the over-dependence of the airline's operations on BASA funds. NAL was required to meet all operational requirements from revenues generated from its operations from 2001. She questioned the reasons for subsidising the inefficiency of NAL, saying all the problems made government to favour the turn-around of NAL prior to its privatisation.

Against the backdrop of federal government's decision to postpone NAL's privatisation, the Ministry of Aviation, according to Chikwe, was constrained to consider the management options aimed at efficiently rehabilitating the airline prior to its eventual privatisation. The minister said various proposals were made by Lufthansa and SABRE of the US . to turn around NAL but these proposals were turned down by BPE.

The minister traced the failure of these proposals to sabotage and opined that she would continue until a competent managerial expertise was put in place for NAL.

Airwing Aerospace, a London-based aircraft-leasing company was among the proposals received in 2002. The minister said following the proposal from the company, a team from Singapore Airline came to assess the state of NAL, its equipment and infrastructure before making a more comprehensive final proposal to the Ministry of Aviation. The major features of AAL, the minister said, included: the take-over of all existing liabilities of NAL including all operational debts, provision of one B747, one A310-300 and one B737-400 on wet/dry lease arrangement, provision of a complete comprehensive management, technical and material support for the operation of a new joint venture company for a minimum period of five years.

At the resumed seating Thursday, 3rd, October, Jonathan Jiya, managing director of NAL, told the audience in his testimony that he embraced the JVA because he was told of the involvement of Singapore Airline in the deal. He said he attended two meetings with the minister of aviation at the Presidential Villa where the president gave his blessing to the proposal by AAL.

The atmosphere in the hall became charged when Jiya told the audience of the payment of USD885,000 to Ned Nwoko and Co, legal practitioners for litigation job done for NAL. He said since he had no control over the BASA fund, he told the minister that as far as he was concerned Nwoko had received his final payment long ago, in 1997 for incorporations and litigations, and wondered why he should be paid this money again and for what purpose. Nwoko is a member of the House of Representatives and a member of the House committee on Aviation. He is a board member of Nigeria Civil Aviation Authority, NCAA, and a governorship aspirant in Delta State . Nwoko was not allowed to cross-examine Jiya because, Habib Fashiro, chairman of the committee said the enquiry was not targeted at Nwoko.

The unions in the aviation sector were not left out. Abdurazak Seidu, secretary, union grand alliance, told the audience of the sorry state of the airline. He traced the depletion of the aircraft to the inactivities of government, whom he said, authorised the sales of some of the aircraft.

Jonathan Ibrahim, a captain and member of GAPAN, another workers union, praised the effort of the minister to resuscitate NAL through Air Nigeria . He appealed to the committee to give the minister free hands to right the wrongs in the NAL so that workers could smile again.

Some people, who spoke to Newswatch on condition of anonymity, said the proposal was good but the negotiation was not transparent. They said though the minister had good intentions she did not carry along other Nigerians who had inputs to make into the deal.

However, President Olusegun Obasanjo last week ordered the BPE to hands off Air Nigeria deal.  Given the frequency with which you have been making comments on the issues and the damage caused to the efforts aimed at finalising the arrangement for privatisation generally and the smooth conclusion one way or the other of the arrangement on Air Nigeria, I am directing that you should not speak to the press unless with the express written permission of either myself or the vice-president on issues of privatisation that are receiving executive action until such issues were concluded. You are to put your hands off Nigeria Airways issues for now until further notice, he said.

Newswatch learnt that Air Nigeria would have an initial share capital USD150 million. The share structure of the JVA shall be the FGN and Airwing in the reconstituted Air Nigeria PLC. Equity structure after effecting necessary revaluation of NAL assets which include, routes rights, landed properties and so on will be FGN 51 percent equity and Airwing 49 percent.




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