Cablegate: Nigeria: Nitel Privatization Delayed

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS ABUJA 002396

SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN NI
SUBJECT: NIGERIA: NITEL PRIVATIZATION DELAYED

REF: ABUJA 2301

1. Summary. The GON recently announced a two-month delay in
the privatization of Nigerian Telecommunications, Ltd.
(NITEL) originally scheduled for September 2001. According
to BPE Advisor Michael Dan, NITEL's privatization would more
likely be delayed until February-March 2002 and may not
attract top-notch international telecommunications companies
due to an uncertain regulatory environment. End Summary.

2. In August, press reports revealed that the GON had decided
to extend the period for interested companies to conduct due
diligence on NITEL's accounts. As a result of the extension,
the Bureau of Public Enterprises (GON privatization agency)
released a statement that the GON would not choose an
investor until early November. On September 12, Econoff met
with Michael Dan, who heads a five-person team of
USAID-sponsored advisors to the Bureau of Public Enterprises
(BPE) to discuss the delay.

3. The extension, according to Dan, was granted because the
information memorandum for investors was not ready. This
memo is to provide interested buyers with information on
NITEL's accounts and other sale details. Although the
memorandum has now been sent to prospective investors, the
audits of NITEL accounts are not finished. Specifically,
account information regarding receivables and pensions may
not be accurate, said Dan.

4. Dan insisted that these delays were technical and did not
reflect a lack of political will to proceed with the
privatization. He asserted that the original schedule had
been much too ambitious, commenting that "Nigerian officials
would argue that the current timetable of November is still
very accelerated." In fact, Dan suggested that the November
timeframe was not realistic either; "the privatization will
not occur until February-March 2002," he said. Once the
buyer is identified, negotiations between the buyer and the
GON regarding telecommunications regulations would ensue.
Dan commented that these negotiations could stretch on for
months due to Nigeria's uncertain regulatory environment.

5. The regulatory structure for the telecommunications
industry is in flux; a draft telecommunications bill is
before the National Assembly and, therefore, subject to
change. Dan argued that the uncertain environment generated
by the absence of a clear regulatory structure would make the
negotiations between the GON and the buyer difficult; even a
one Naira change in the maximum local telephone rate would
have a major impact on the buyer's offer terms. Moreover,
Dan pointed out, once the GON had divested itself of NITEL,
its only interest in telecommunications would be to keep
prices low.

6. Dan asserted that these uncertainties would likely
dissuade first class international telecommunications
companies from bidding on NITEL. He anticipated that NITEL's
sale price would end up much lower than the GON expected. He
also hypothesized that the buyer would likely be an insider
who has been able to obtain assurances that the
telecommunications bill would be favorable to their
interests.

7. Comment. The GON has established an extremely ambitious
privatization schedule in order to satisfy pressures from the
IMF and international donor community. Consequently, delays
in the schedule are likely to occur frequently. Moreover, if
the IMF decides not to extend its program in Nigeria, the GON
would likely lessen its focus on the privatization program in
general. End Comment.
Andrews

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