Business Hilights
Tracking Nigeria's Headline Business News Online

The error in revocating concession of Lagos trade fair complex

By Gozie Irogboli

The said revocation of the concession agreement of the Lagos International Trade Fair Complex (LITFC) to Aulic Nigeria Limited was like a rude shock coming at a time the economy is in a comatose state and business firms reeling under harsh operating environment and the government straining to attract foreign direct investment or so it seems. The revocation decision appears to contradict the whole essence of the privatization and deregulation programme of the government. It is a wrong signal to prospective foreign investors. It creates an atmosphere of instability and the unsavoury impression of a government that is not capable of keeping its agreement. Genuine investors are always skeptical about investing in areas like this. Investors are usually motivated by their perception of their investment destination and the most important consideration of investors apart from returns on investment is the security of their investment.

The pertinent questions that are begging for answers are: why was the asset concessioned in the first place? What is the concessionaire expected to do? What is the government expected to do? Has the government played its own part fairly? And if not, what are factors militating against it? Is there no other way out? Has all avenues to peaceful resolution been exploited?

When these issues are examined critically, you will find out that the underlying factor in all of this is vested interest of some corrupt government officials who for parochial reasons are bent on frustrating an otherwise well-conceived economic programme. And for a government that is fighting anti-graft war, it is expected that a thorough probe of why the 322 hectare LITFC was not fully handed over to the Aulic the company that won the competitive bid ab initio, would have been launched and those frustrating it sanctioned according to the law. It is also possible that those corrupt officials have been misleading the National Council on Privatization (NCP).

The programme of Privatization is predicated on sound economic logic. The history of Economic Thought is replete with pro and con argument concerning the participation of government in economic activities. Market inadequacies and the need to maximize social welfare are the main factors in support of government involvement. There is also the issue of provision of public goods and other essential services which may not be attractive to individuals to invest in on account of the cost outlay and returns on investment. The classical economic theories believed that for growth and efficient resource allocation, private individuals and not government should manage economic resources. Current realities seem to reinforce this position for the issues of official corruption, bureaucracy; monopoly and political consideration have made nonsense of government direct participation in economic activities.

Again, the contemporary issue of new public management that emphasizes, prudence and lean government is a factor to be considered. Global interconnectivity and the need to adopt global best practice is also an issue for consideration.

It is believed that government’s role should be limited to providing enabling environment for economic activities to thrive. This will be through planning and provision of economic infrastructure and incentives that will support economic activities. Government is also expected to provide security as well as legislations, guidelines and regulations that will define the conduct of business.

Government direct participation by owning and managing investment has been counterproductive, wasteful, growth inhibiting rather than promoting because those who control government business are individuals with parochial group interest that are not driven by performance

This is what informed the Nigeria government to adopt the new public management policy. The deregulation / liberalization policy is designed to remove monopolies and other investment bottlenecks by encouraging competition. The General System Mobile (GSM) is the result of the deregulation of the telecom sector. It is the purpose of the government to attract Foreign Direct Investment (FDI) by opening up the economy through private sector involvement.

Privatization and commercialization are aimed at productivity enhancement by eliminating corruption, wasteful spending and unproductive investment in the public sector. Commercialization is concerned with the practice of allowing the public enterprises to operate like a business concern for profit making purposes. Privatization is divestment or transfer of government interest in public enterprises into private hands. The purpose as highlighted earlier is for these public cooperation to run efficiently. It is also designed to encourage the great majority to participate in business activities through the acquisition of shares in the privatized companies. It is to eliminate corruption, monopoly and wasteful government expenditure.

In the main, it is supposed to allow government concentrate on planning and provision of infrastructural facilities that will support economic development. It is also suppose to put more money in the hands of the government to fund the educational sector, health and other social services in order to improve the quality of lives of the citizenry.

Since the advent of the much-criticized Structural Adjustment Programme, the Privatization Programme has become a key component of the Federal Government Economic Reform Agenda. Under the privatization arrangement, the government identified the enterprises to be privatized. Some are to be privatized fully, or partially while some are to be concessioned. For full privatization government will sell the investment completely to a core investor whereas for partial privatization the government will divest part of its shares.

The concession option is like a lease arrangement where the government transfers the management of a national asset / corporation to private management for a period of time. Within this period the government will not invest in the enterprise. The concessionaire is expected to Rehabilitate, Operate and Transfer (ROT) or Build, Operate, Own and Transfer (BOOT) as the case may be. The Apapa Ports, Tafawa Balewa Square and Lagos International Trade Fair Complex are some of the national assets under concession arrangement. The Concessioned Assets are viewed as national monuments which ownership cannot be wholly transferred to individuals. During the period of the lease, the asset is still government property, only that the government will not interfere in the Management until the period of the lease is over. However, the concession is subject to renewal depending on performance.

In the light of the above, it sounds worrisome that the government would through its agents takes decisions that are antithetical to the principles it espouses as epitomized in the recent decision to revoke the concession of the LITFC without due process and without considering the effects of such decision.

Government decisions are expected to be legally and ethically justifiable but when things are done contrariwise, it gives room to unhealthy insinuations as is already being speculated in some quarters that the decision of the government was politically motivated.

However, it is not too late for the government to rescind its decision in view of the unsavoury consequences. Those who have the courage to invest their resources at home should be encouraged with right incentives in order to persuade others to invest at home.


*Irogboli, an economist and a public policy analyst, wrote in from Lagos