Laying To Rest The ‘Ghost’ Of The 2001-Attempted Sale Of NITEL TO IILL

By

Ajayi Olatunji Olowo

Ajayi.olowo@buckingham.ac.uk

 

It was a welcome relief when the Thisday newspaper issue of 8th July 2005 published information released from credible official sources that Investors International (London) Limited (otherwise referred to as IILL) had finally lost its highly pursued battle to recover the ten percent (10%) non-refundable deposit it paid on 12th December 2001 in the process that would have seen it acquire 51% controlling stake holding in the Nigerian Telecommunications Limited (NITEL), the Nigerian first telecommunications operator, by 12th February 2002.  The news item as published by Thisday was captioned “NITEL: IIL Loses $131m”.

 

The news item had been sequel to IILL’s loss before the Arbitration Panel set up following a verdict of the Federal High Court, Abuja Division, in a suit filed by IILL declaring a dispute over the Share Sale Agreement of 28th November 2001 signed between the London based company and the Federal Government of Nigeria (FGN) over NITEL 51% stake holding. Thisday newspaper quoted Mr. Chigbo Anichebe, Head of Public Communications of the BPE thus: “…the Tribunal further held that it is incontestable that by 11 February, 2002, IILL had failed to make requisite payment.  Consequently FGN was justified in retaining and appropriating the 10% non-refundable deposit and that by 11 February, 2002, actions of the House of Representatives could not have been determinative or even relevant to IILL’s default because no such actions by then had taken place”.

 

The publication further summed up that while the Arbitration Panel noted the hardship the IILL and its backers – First Bank of Nigeria (FBN) might have sustained, it held that “the failure of the NITEL privatisation was of great regret not only for IILL but also the Federal Government of Nigeria”.

 

The analytical review of the news item referred to above could never be better done at any auspicious time than now in view of its importance to the efficacy of the economic reform programme of the FGN in general and particularly the implementation of the privatisation programme (the nucleus of the economic reform agenda) by the National Council on Privatisation {(NCP) – Headed by His Excellency the Vice President} through its Secretariat – the Bureau of Public Enterprises (BPE).

 

In the first instance, the ruling of the Arbitration Panel is final as it is not subject to appeal.  The composition of the Panel and the legal procedure of setting it up make its objectivity impeccable.  Apart from the procedure giving the parties to the dispute unhindered ample chance of input, the panelists are reputable international jurist of unblemished judicial records.  They are Judge Stephen M Schwebel – a foremost Judge in the United States of America; Justice Kayode Eso (a retired Justice of the Supreme Court of Nigeria); Justice Mohammad Bello (a former Chief Justice of Nigeria who passed onto the great beyond in the life of the arbitration and was replaced by Alhaji Abdullahi Ibrahim – a Senior Advocate of Nigeria).

 

The ruling of the arbitration panel has given measurable credence to the fact that the guidelines for the implementation of the privatisation programme were well thought of and packaged by the NCP.  In like manner, the implementation agenda of the programme as duly executed by the BPE since November 1999 has been thoroughly handled.  This has brought to the full glare of the public the non-sustainability of the arguments of the critics of the implementation who have never seen anything plausible in the manner of the execution of the programme.  Contrary to the loud malignant views often expressed by the self-serving elitist critics, the execution agenda, particularly as it related to the attempted privatisation of NITEL in 2001, was based on a meticulous implementation of the rules, steps and procedures as appropriately drawn, well controlled, honestly, objectively, transparently executed and duly communicated to participants in the process and the entire world through local and international media.

 

Another worthy effect of the ruling of the arbitration panel is that the class of advisers employed for the 2001 attempted privatisation of NITEL was flawless.  Having applied the world acceptable standard of objective criteria of employing such advisers, the PricewaterhouseCoopers (PwC) with corporate headquarters on 1, Embankment Place, London emerged and provided the required technical, advisory and ancillary roles as required under the terms of engagement.  The ruling of the panel has justified the preponderance of assertion of the good quality of the efforts put into the process then by both the BPE and the advisers contrary to the unjustifiable, bias, teleological and pediatric sentiments expressed at some quarters that the inconclusiveness of the process was due to ‘poor advice or advisers’ and the ‘inadequacy of the implementation agenda’ as drawn and executed by the BPE.  The Machiavellian end of the dispute arising from the 2001 transaction on NITEL has ultimately and obviously justified the means.

 

More importantly, the arbitration process and its result have gone one step further to convince the entire world of the irreversible and unwavering resolve of the FGN to carry to a logical conclusion the ongoing privatisation programme which is a panacea to the magic wand of turning around the Nigerian economy for the present and future generations.

 

It is pertinent to note that the Share Sale Agreement between IILL and FGN had required the payment of a non-refundable 10% deposit within 10 days of the endorsement by relevant parties and the payment of the 90% balance of the bid price (of $1.317 billion) at the expiration of 60 days thereafter.  IILL had paid the non-refundable 10% deposit amounting to $131.7 million on 12th December 2001 but failed to meet the payment of the balance of 90% amounting to $1.1853 billion at the expiration of the deadline.  IILL had been deemed liable for anticipatory breach of the Share Sale Agreement in which case the 10% deposit of 12th December 2001 became forfeited in accordance with the bidding criteria.  IILL and its backers had put enormous pressure on the FGN, BPE/NCP for the recovery of the non-refundable deposit contrary to the letters of the underlying agreement; while citing frustration as a result of the probing of the transaction by the second chamber of the Nigerian Legislative Assembly (The House of Representatives).  The ruling of the panel supports the legal opinion that the constitutional oversight function of the House of Representatives on the transaction in accordance with section 88, Nigerian 1999 Constitution, which however arose after IILL defaulted could not have as a matter of defacto and dejure been responsible in any form for the petitioner’s inability to meet its obligation under the agreement underlying the transaction.

 

The 2001 NITEL transaction, unknown to many observers and commentators on the programme and the transaction process, actually laid the foundation for the current rapid breakthrough of the privatisation programme in other utilities sectors of the economy.  While the core investor sale of 51% controlling in NITEL in year 2001 was what was actually known to many in real terms, the reform agenda had encompassed the following:

ü      Formulation of a National Telecommunications Policy in 2000;

ü      The liberalization of the Telecommunications sector; and

ü      The development of appropriate legal and regulatory framework.

 

The National Telecommunications Policy drafted by the BPE, in its operational capacity as Secretariat of the NCP and approved by the FGN in September 2000 paved the way for the issuance of the first set of Global System of Mobile (GSM) Communications to MTN, ECONET (now VMOBILE) and NITEL in February 2001.

 

The liberalization of the telecommunications sector had resulted in the strengthening of the Nigerian Communications Commission (NCC) in its ability to effectively control the sector and issue appropriate class of licenses.

 

The 2001 Telecommunications bill drafted by the BPE, channeled through the NCP to the Federal Executive Council and submitted to the National Assembly in September 2001 eventually got enacted and signed into law as the Nigerian Communications Act 2003 on 8th July 2003.

 

It is incontrovertible that the ruling of the Schwebel Panel on IILL’s claim has been a vindication of the flawlessness of the criteria on which the implementation of the privatisation programme are based since the emergence of democratic governance in Nigeria in 1999. The rules of the game are reassuring enough for any serious world class investors as the legal and regulatory framework put and being put in place are capable of effectively protecting all shades of overlapping interests inevitably warranted by the on-going privatisation programme.

 

The fact that the IILL’s bid to recover a non-refundable deposit in a transaction of such a magnitude was duly subjected to a judicial review and promptly resolved within the precinct of the existing legal framework justifies the reliability of the economic reform agenda of the Nigerian Government and due observance of the rule of law.  This is however a morale booster for the renewed efforts of the BPE/NCP nay the FGN currently being undertaken to divest the controlling share holding of the telecommunications giant (NITEL) to credible investors in conformity with the economic reform programme of the Government.

 

 

 

 

Ajayi Olatunji Olowo writes from the Faculty of Law, University of Buckingham in England.