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ALSCON: Ending a Deadlock

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Save for the recent amicable resolution, Akwa-Ibom-based Aluminium Smelter Company of Nigeria (ALSCON) located in Ikot Abasi was a thorn in the flesh of Bureau of Public Enterprises (BPE).

Its nightmares were shared by other stakeholders, the host community and feuding core investors locked in legal battle with the Federal Government over ownership dispute. To them, ALSCON was a burden that must be expeditiously resolved.

The Journey

ALSCON was incorporated in 1989 with the Federal Government of Nigeria, Ferrostal of Germany and Reynolds Incorporated of America as shareholders on an equity holding of 70 per cent, 20 per cent and 10 per cent respectively.

The company was established with clear cut objectives to utilise and enhance the country’s gas reserve and discourage gas flaring in the Niger Delta.

Its broad terms include establishing a self-reliant aluminium factory, provide employment to Nigerians and impact technical and develop trained technical manpower, to conserve and earn foreign exchange by meeting local aluminium demands, and aid the development of aluminium downstream industries.

Hitherto, the firm was under the purview of Ministry of Industries until 1991 when it was handed over to the then Ministry of Mines, Power and Steel to manage.

The plant, designed to produce 197,000 metric tonnes of aluminium ingots and billets per annum, commenced production on October 15, 1997.

Failed Privatisation

ALSCON enjoyed uninterrupted production, hitting production target before a snap on June 6, 1999. The major factors that accounted for production pack up included irreconcilable differences between Ferrostaal and Reynolds, lack of working capital, insufficient gas supply and non-dredging of Imo River among others.

To break the jinx and restart production, ALSCON was listed in the 2nd phase of the privatisation programme in the Privatisation and Commercialisation Act of 1999.

In September 2002, the Bureau of Public Enterprises (BPE) commenced the privatization process and requested for core investors to express interest in acquiring the Federal Government’s shares. Five companies expressed interest in acquiring the firm. They were ALCOA Inc. of America; Glencore AG of Switzerland; UC Rusal of Russia; ALCAN of Canada and Ferrostaal AG of Germany

After the due diligence, only UC Rusal and Ferrostaal submitted technical and financial bids. Ferrostaal was, however, disqualified by BPE for submitting conditional bids.

This left UC Rusal as the only qualified bidder and the process was therefore aborted.

The process was restarted in 2004. BPE invited interested companies to bid for ALSCON majority stake of which only BFI Group and UC RUSAL satisfied the initial pre-qualification requirements.

BFI Group emerged the preferred bidder with a bid price offer of $410 million, while UC Rusal was disqualified for submitting a conditional bid.

However, BFI Group failed to meet the deadline of July 8, 2004 for the payment of 10 per cent of the bid and was therefore disqualified. Consequently, BPE reopened negotiations with UC Rusal on the basis of a negotiated sale strategy (otherwise known as willing-buyer-willing-seller).

UC Rusal won the FGN equity as core investor and the transaction was approved by the National Council on Privatisation. BPE subsequently handed over ALSCON to UC Rusal at a bid price of $250 million with $120 million out of the total sum set aside for the dredging of Imo River.

Legal Battles

In September 2004, the core investor-BFI Group, dragged BPE before an Abuja High Court for overturning its victory and handing over ALSCON to UC Rusal.

The Federal High Court decided the case in favour of BPE, but BFIG appealed and also lost at the appeal court. BFI Group then took the case to the Supreme Court.

However, in between the period, UC RUSAL commenced production in 2008, but insufficient gas supply to the smelter as well as staff agitation due to non-payment of the balance of their terminal benefit amounting to N2.3 billion constituted a major challenge among others to the smooth operation of the plant.

On July 6, 2012, the Supreme Court revoked the sale of ALSCON to UC Rusal and reinstated BFI Group as preferred bidder for ALSCON.

The Supreme Court ordered inter alia (1) “An order of specific performance is hereby decreed directing the Defendant/Respondent (BPE) to provide the mutually agreed Share Purchase Agreement for execution by the parties to enable the Plaintiff/Appellant (BFIG Group) pay 10% of the accepted bid price of US$410 Million (i.e. the sum of US$41Million) within 15 working days from the date of execution of SPA in accordance with the agreement dated 20/5/2004 and 90% bid price shall be paid within 90 calendar days.”

  1. ii) “An order for the Defendant/Respondent to accept payment of the 10 per cent of the bid price from the appellant within 15 days from the date of signing the Share Purchase Agreement (SPA).”

iii) An order of Perpetual Injunction restraining the Defendant/Respondent (BPE), its servants, agent, privies, management or howsoever called from inviting any further bidding for the sale and acquisition of ALSCON in violation of the contract between the Plaintiff/Appellant and the Defendant/Respondent and/or from negotiating to sell, selling, transferring or otherwise handing over ALSCON to any person or persons in violation of the contract between the Plaintiff/Appellant and the Defendant.”

The transaction for the core investor sale of ALSCON to BFIG was terminated after the expiration of the deadline of March 18, 2013 given to them to sign the SPA and pay 10 per cent of the bid price as ordered by the Supreme Court. BPE reinstated UC RUSAL again as the core investor in ALSCON.

Meanwhile, BFI Group has again gone back to court to compel BPE to reinstate them in ALSCON and the court has ruled in their favour, but BPE has filed an appeal and the case is yet to be determined.

As a result of the uncertainty created by the Judgment and the delay to resolve the case, UC Rusal and ALSCON has been suffering grave damages, as most developmental projects at the smelter have been put on hold. ALSCON/RUSAL is incurring enormous losses having to maintain the plant and staff without being in operation. Consequently, the company retrenched most of the workforce in order to minimise losses.

Finding a Solution

To navigate the firm from the shores of protracted crisis, Minister of Mines and Steel Development, Dr. Kayode Fayemi, and the BPE worked assiduously to bring the firm back to its feet. BPE sent a memo to the Vice President, Prof Yemi Osinbajo, to invite the parties with a view to reconciling them. Several mediatory meetings were held, some at the ministerial level to explore both administrative and political approaches to resolving this impasse to enable ALSCON realise and optimise its potential to the benefit of the nation.

At the meeting of the NCP held in August 2017, the council approved an out of court settlement to resolve the lingering dispute between the FGN, BFIG AND UC Rusal through mediation with the active collaboration of Ministry of Mines and Steel Development.

Subsequently, BPE provided the SPA to BFIG for execution in compliance with the order of the Supreme Court and asked BFIG to provide a business plan as required in the SPA and to execute the SPA within a period of seven days as contained in the judgment of the Supreme Court.

Again, BFIG failed to execute the SPA as ordered by the Supreme Court and could not meet the terms of the transaction by close of business on Tuesday, October 3, 2017 (making it the 3rd time the company has failed to meet terms of this transaction), indicating lack of good faith to resolve the impasse.

The renewed Share Purchase Agreement was signed during a brief ceremony at the Ministry of Mines and Steel Development, Abuja, witnessed by Fayemi; Minister of State, Hon Abubakar Bawa Bwari; Director General, Bureau of Public Enterprise (BPE), Alex Okoh; Russian Ambassador to Nigeria, Nickolai Udovichenko; CEO/Member of the Board of Directors UC Rusal, Vladislav Soloviev; Managing Director ALSCON, Dmitry Zavyaiov; and Head of Legal, UC Rusal, Piter Maxsimov.

Speaking at the event, Fayemi said President Mohammadu Buhari was keen on seeing to the conclusion of the agreement as soon as possible so that the company could get back on its feet and Nigeria and Russia can strengthen the historical partnership between the two countries.

The Drector General, BPE, Alex Okoh, in his remarks, commended the efforts of Fayemi and his commitment in ensuring the success of the negotiation.

The BPE boss said he was optimistic that the remaining issues would be resolved both on the legal side as well the technical and production issues, adding that government still retained 20 per cent equity in the firm.

Ambassador Nickolai Udovichenko, who led the Russian Government delegation to the event, thanked the Nigerian Government for resolving the impasse, while also lauding the efforts of the minister. He described the development as a new beginning for the two countries.

On his part, The traditional ruler of Ikot Abasi, His Royal Majesty, Edidem U.J Ntuk Obom XII, urged the Federal Government to do everything possible to ensure that ALSCON is revitalised so that economic prosperity of the town could return.

The monarch said ALSCON was the life wire of the community, stressing that the company gave the community 24-hour power supply, employments and awarded scholarships to its students.

Last line

ALSCON’s journey has been a tortuous one, no doubt. However, it is reassuring to know it ended on a pleasant note with the hurdles, hitherto, stalling production uprooted, a new dawn sets in for ALSCON.

_________________________________________________________________________________________

This feature story first appeared on Newtelegraphonline.com by ABDULWAHAB ISA

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BUSINESS

IMF urges Nigeria to expand tax base, streamline currency policy

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Nigeria should widen its tax revenue base to finance growth-enhancing upgrades to the nation’s infrastructure and social programs, said a senior International Monetary Fund official.

While the administration of Muhammadu Buhari has made progress in addressing issues such as corruption, the West African country needs to pick up its reform efforts if it wants to boost economic growth, said Abebe Aemro Selassie, director of the Africa department at the Washington-based fund.

“To address the education, health, road, electricity and other infrastructure needs they have, they have to have a much higher revenue base than they do now,” said Selassie. “There is tremendous scope to broaden tax bases,” he said, citing property tax as an example.

Nigeria should also move to a single unified foreign-exchange rate, Selassie said in an interview in Washington. In addition to the official exchange rate for the naira, Nigeria offers several different foreign-exchange windows, including one for investors and exporters.

‘Right Direction’
“They have reduced the gap between the parallel market and the official market significantly, so that’s a movement in the right direction, but there are still several foreign-exchange rates,” he said. “Even though the gap is narrower, the country would strongly benefit from having a unified and liquid single foreign-exchange market.”

Nigeria was one of several African oil exporters hit hard when crude prices crashed in 2014.

Now with oil prices rebounding, Nigeria’s recovery is helping drive a “modest” upswing in sub-Saharan Africa, the fund said Tuesday in its latest economic outlook for the region. But turning the recovery into a prolonged period of strong expansion requires bolder steps to support private investment and lift potential growth, the IMF said.

The fund projects Nigeria’s economy will grow 2.1 percent this year and 1.9 percent in 2019. The government has been battling an Islamic insurgency in the country’s northeast since 2009 that’s diverted resources to security from public programs.

Sub-Saharan Growth
The IMF predicts sub-Saharan African gross domestic product will expand 3.4 percent this year and 3.7 percent in 2019. While regional growth has picked up, it remains well below the pace of expansion before the global financial crisis.

About 40 percent of low-income countries in the region are “in debt distress or high risk of debt distress,” said the IMF. Delays by oil exporters in adjusting to the crude shock have left some with high debt levels, said the fund, which lends to nations with balance-of-payments shortfalls.

Selassie noted the region’s debt levels have recently risen from a relatively “low base.” But it’s still a cause for concern, because countries in the region don’t have ample capacity to service their debts, he said.

Fiscal and monetary policy in South Africa, another major economy in the region, is well calibrated, Selassie said. However, the government of President Cyril Ramaphosa should step up efforts to open markets such as telecommunications services and implement labor-market reforms to make it easier for young people to work, he said.

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NCC seals firm, bank in Uyo, Calabar, for violating regulations

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For failing to comply with the guidelines for the deployment of 5.4GHz frequency band, some companies in Uyo, Akwa Ibom, and Calabar, Cross River states have had their premises shut down by the Nigerian Communications Commission (NCC).It is a criminal offence to provide service in frequency band not validly assigned or licensed by the NCC, as provided under Section 121, and 122 of the Nigerian Communications Act, 2003.

The NCC Enforcement team took Compliance Monitoring to the states on April 26 and 27, respectively, to enforce compliance with its Guidelines for the Deployment of Service in the 5.4GHz Frequency Band.The Commission, based on the Guidelines issued a public notice dated April 3, warning unlicensed operators and the general public to vacate illegal transmission in the 5.4GHz frequency Band within 14 days.

The deadline for vacation ended on April 17, consequently the Enforcement team visited Hot Minet Services located on 80 MCC Road, Calabar, and United Bank for Africa (UBA), on Udo Udoma Banking Layout, Uyo, for failing to comply with the Guidelines and the public notice issued by the Commission.

Accordingly, the Enforcement team led by the Director, Compliance Monitoring and Enforcement Department, NCC, Efosa Idehen, shut down the operations of Hot Minet Services. The team also confiscated the non-type approved equipment used by the Company in providing the illegal services. The team also directed Hot Minet to ensure that it obtains the requisite licence before its premises can be unsealed.

Also, the Enforcement team also came hard on UBA for illegal deployment of service in the said 5.4GHz frequency band. Consequent upon the enforcement action, the equipment (radio) used in the provision of the service was removed and held in custody of the Commission. More so, the Enforcement team had to order the arrest of some officials of the Bank for their resistance.

The punishment for the offence is a fine for the initial fee for the relevant licence; a fine not exceeding 10 times the fee for the relevant licence; imprisonment for a term not exceeding one year; or both fine and imprisonment.The suspects have been handed over to the relevant security agency for discreet investigation and possible prosecution.

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‘Nigeria’s economic recovery poised to build momentum in Q2’

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Market optimism over the recovery of Africa’s largest economy has increased steadily throughout the first trading quarter of 2018.

The combination of appreciating oil prices, foreign exchange stability and easing inflationary pressure has boosted confidence in Nigeria’s economy. With the nation’s GDP hitting 0.82% in 2017 and predicted to register a positive trajectory amid strengthening domestic demand, the outlook continues to look highly encouraging.

The improving macroeconomic conditions and ongoing efforts to diversify away from oil reliance are likely to attract foreign investors, further fueling economic growth.

It is fair to suggest that Nigeria’s stabilizing fundamentals may encourage the Central Bank of Nigeria to cut interest rates sooner than anticipated. With oil prices appreciating, domestic production improving and foreign exchange reserves rising to $46 billion, most of the ingredients are in place for the CBN to act.

There is a strong suspicion that inflationary pressures need to ease further into the realm of single digits before the central bank loosens its monetary policy. An interest rate cut has the ability to stimulate the current recovery because it encourages consumer borrowing and businesses to increase investments.

While an interest rate cut in April may be slightly premature, the CBN could surprise markets near at the end of Q3 if inflation continues to decline.

Although domestic economic conditions continue to improve, investors must not overlook external risks that may impact Nigeria’s current recovery. Oil price volatility remains a key risk for Nigeria despite the nation’s ongoing efforts to diversifying to other sustainable sources of growth. With oil accounting for roughly 90 percent of exports and 80 percent of public revenues, a sharp depreciation in prices could easily spell trouble for Nigeria.

While WTI crude has followed a positive trajectory in recent months amid expectations of demand increasing and optimism over OPEC’s production cuts, the upside may face headwinds. It must be kept in mind that soaring production from US Shale remains a threat to higher oil prices and is likely to result in a selloff medium to longer term. While Nigeria could continue enjoying the benefits of oil trading around $64, the clock is ticking as oversupply remains a market theme.

In addition to oil prices, attention should also be focused towards the Dollar’s performance and US rate hike expectations. Higher US interest rates have the ability to trigger capital outflows from emerging markets and weaken EM currencies with the Naira falling into the category.

While the Naira may be slightly bruised by capital flight in the event of higher US interest rates, Nigeria’s rising foreign exchange reserves and rising oil prices could cushion the impact.

The Naira witnessed stability against the Dollar in March with prices trading around N360 on the parallel markets and N304 on the official market. While the local currency’s appreciation may be attributed to intervention by the CBN, the improving sentiment towards Nigeria has also played a leading role.

The ongoing trade drama between the United States and China is unlikely to have a direct impact on Nigeria’s economy. Indirectly, the uncertainty and anxiety over a potential global trade war could spark risk aversion consequently impacting emerging markets like Nigeria. A scenario where foreign investors remain guarded and maintain a safe distance from risk, could weigh on Nigeria in the recovery stages.

As we enter the second quarter of 2018, much focus will be directed towards domestic monetary policy, inflation and external risks that could impact Nigeria’s positive momentum. Easing inflationary pressures remain one of the most encouraging aspects for Nigeria as consumer prices hit $14.33 in February. Not only will falling inflation boost the rate of return for savers and increase disposable income in Nigeria, it creates an opportunity for the CBN to cut interest rates- ultimately stimulating economic growth.

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New CBN deputy govs, MPC members assume office

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The new Deputy Governors of the Central Bank of Nigeria (CBN), Mrs Aisha Ahmad, and Mr Edward Adamu have formally assumed office.

Their resumption is following the confirmation of their appointments on March 22 by the Senate.

According to a statement signed by the bank’s acting Director, Corporate Communications, Mr Isaac Okoroafor on Wednesday in Abuja, Prof Adeola Adenikinju, Dr Robert Asogwa and Dr Aliyu Sanusi also commenced their tenure as Members of the Monetary Policy Committee (MPC).

Okoroafor said CBN Governor, Mr Godwin Emefiele congratulated them on their respective appointments and subsequent confirmation by the Senate.

Emefiele expressed gladness that the bank now had a full complement of Deputy Governors to enable it operate optimally as well as the required quorum to enable the MPC hold its statutory meetings for formulating monetary and credit policy.

He, therefore, charged the Deputy Governors and MPC members to bring their experience to bear in the discharge of their new responsibilities, stressing that much was expected of them.

According to Okoroafor, the two Deputy Governors and the three new MPC members later took their Oaths of Office, administered by the acting Director, Corporate Secretariat at the CBN, Mrs Alice Karau.

Thereafter, the Director, Monetary Policy Department, Mr Moses Tule, read out the Charter of the MPC to new members and then they retired into their first MPC retreat.

The retreat is in preparation for the first MPC meeting for 2018 scheduled to hold on Tuesday, April 3 and Wednesday, April 4.

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