By Guardian Nigeria
A partner with J. O. Fabunmi & Co and Director, Business Law Academy, Olukayode Fabunmi, in this interview with The Guardian, argues that the proposed Public Reform Bill, if properly understood and eventually passed into law, will ensure efficiency, financial prudence and transparency in the use of public assets in the country.
What is your assessment of the Public Reform Bill being proposed in the country?
The proposed bill is aimed at improving the efficiency and management of public assets and financial health of the Federal Government. The effective management of public assets for increased efficiency is what taxpayers and the public expect from those entrusted with the mandate to administer public assets. Thus, the need to reform the administration of Public Asset may be the right step in the right direction, if the reform is properly understood and conceptionalised to ensure the efficiency, financial prudence and transparency in the use of public assets. It focuses more on repealing the Public Enterprises Act and enacting the Public Reform Bill without taking cognisance of the overall implication this would have on the Nigerian Infrastructure Investment Market.
What will it achieve if it eventually becomes a law?
The primary aim of the bill is to repeal the Bureau of Public Enterprises (BPE) Act and enact the Act for improved efficiency and management of public assets in Nigeria and for related matters. However, the legislative framework, that is, the Acts of National Assembly that regulates the procurement, disposal, management and commercialisation of Public Assets is much wider than the scope of the legislation that this current bill seeks to repeal.
What are some of the changes introduced by the proposed bill as opposed to the existing Act?
There are several changes in the bill that were absent in the present legislation. One of which is some of the nomenclatures adopted in the bill. The bill has substituted the word “Enterprise” with “Asset” throughout, which mostly creates a lot of confusion, because when we talk about Enterprise we are referring to a juristic person. It may include a juristic person, or mostly so, non-juristic persons. This major difference is sufficient ground to critically review the intended purpose of this bill and the unpleasant consequences it may bring if it is passed into law. This substitution defeats the intended purpose for repealing the BPE Act, and will create Judicial nightmare in the administration, owing to the numerous litigation cases that may arise from the implementation of the bill vis-à-vis current legislations on the procurement, disposal, commercialisation and private sector management for public assets. The phrase “Public Assets” and “Public Enterprises” are technical and have meanings that the bill, has not conveyed in the definition clause.
Furthermore, the Act that the bill seeks to repeal covers only privatisation and commercialisation of public asset, but it also seeks to expand the scope to include disposal of public assets, Public Private Partnerships (PPPs), Infrastructure Concession and Joint Ventures without recognising the existing legal framework that governs the areas it seeks to incorporate into the bill. This may confuse the market, as multiple government agencies may give conflicting regulations or directives over the same, or similar issues. One of the major incentives to a successful infrastructure investment is a clear legal and regulatory regime. The Bill, if passed in its current form, will be a great disincentive in attracting infrastructure investments to Nigeria, which is its intended purpose.
You mentioned earlier that the substitution of enterprises for assets in the proposed document might be problematic, what is the difference between the two terms?
Public Assets typically mean the legal ownership of tangible or intangible property vested in the state or a Procuring Entity as the Public Procurement Act stipulates, and most especially procured using public funds, while Public Enterprises refer to institutions in which the government holds units of shares (shareholder). When government holds a percentage of shares in an enterprise, it becomes a Public Enterprise by virtue of the Public Enterprises Act. Unlike a Public Enterprise that is divisible by shares, a Public Asset is not divisible. For example, the government may hold 100 per cent shares in Real Estate Enterprise like FHA who owns a building of ten floors and it decides to divest 10 per cent shares in the enterprise to the public through Initial Public Offer (IPO). On the other hand, government cannot own a 10-floor building and it then decides to sell one floor to the public. The unintended effect of substituting Public Enterprises with Public Asset, is that, if the bill is enacted as an Act of National Assembly, it will superintend over all legal ownerships of assets of the government i.e. the assets owned by the Executive, Legislative and Judicial arms of Government without any distinction. This bill if passed will cause all Public Assets irrespective of what they are to be under the control and supervision of the proposed National Council of Public Assets and the Bureau of Public Assets.
What are some of the defects in the proposed bill?
There are a number of provisions in the proposed bill that will make it problematic. One is that it provides that the National Council of Public Assets will have the sole discretion to deal with Public Assets, which means that it will be vested with wide powers that will usurp existing administrative and statutory bodies like the National Council of Public Procurement, the Bureau of Public Procurement, the Board of Infrastructure Concession Regulatory Commission, and the Federal Executive Council. Furthermore, the procurement of assets is governed by the Appropriation Act and by virtue of this, any asset subsequently acquired by the government, automatically goes to its inventory. Therefore, the National Council of Public Assets cannot have the prerogative to assume the powers to alter, add, delete, or amend any Public Asset.
The bill also fails to define certain technical terms that are used frequently in the bill and those defined are defined vaguely and ambiguously, terms like; Reforms, Commercialisation, Bureau, Public assets, Partial privatisation, Public Private Partnership and Concession. These words are used repeatedly in the bill without a proper definition given to them and this can lead to confusion due to multiple interpretation of the terms. While this bill adopts the wider definition, the intended legal consequence would be that it will create a quagmire in relation to the disposal of Public Assets as opposed to just Privatisation of Public Enterprise.
The Bill seeks to establish an Arbitration panel referred to as ‘the Public Assets Arbitration Panel’, for settlement of disputes between an enterprise and the Council or the Bureau. The hearings will be governed by the Arbitration and Conciliation Act and it will make arbitration proceedings compulsory, which negates arbitration as an Alternative Dispute Resolution (ADR) option and should be left to the discretion of the parties to the contract. The wordings of the bill suggest that the parties do not have a choice either to accept or refuse Arbitration proceedings, thus equating it with litigation in some way.
What are the powers and functions of the Bureau of Public Assets on reforms that you mentioned earlier and what challenges do you envisage if the bill is passed?
In specific terms, the bill gives the Bureau powers to carry out periodic monitoring of all reformed, privatised, commercialised, concessioned and public private partnership sectors to assess performance and enforce compliance with the terms and conditions of the relevant contracts entered into between the Bureau and private investors. This bill imposes the functions and powers that have already been given to the Federal Executive Council and the Infrastructure Concession Regulatory Commission under the ICRC Act on the National Council of Public Assets and the Bureau of Public Assets, which includes the approval of any contract that any Ministry, Department or Agency of the Federal Government of Nigeria enters into with respect to the financing, construction, operation, or maintenance of Public Assets of the Federal Government and as the regulator for Public Private Partnerships, Concessions and Joint Ventures, respectively.
The powers conferred on the Bureau of Public Assets in the bill conflicts with the powers of the Federal Executive Council and Infrastructure Concession regulatory Act under the ICRC Act. This will cause confusion in the administration of Public Private Partnerships, Concession and Joint Venture between the Public sector and Private sector. The established legal and regulatory framework for Public Private Partnerships, Concessions, and Joint Venture of Public Asset derives its authority from the ICRC Act. The Commission has through the instrumentality of its Act, carried out hundreds of Public Private Partnership transactions in Nigeria. Conferring the same powers on two different bodies will just create more problems and confusion both legally and on the economy.
What is your final thoughts on the bill?
After an extensive review of the Public Assets Reform Bill, my opinion is that we need to go back to the drawing board to review the Privatisation Act. There are a few changes that need to be proposed to make the BPE relevant and important to administration of Public Assets. I think they have a role to play, but this bill does capture the role. Instead of creating potential problems, we can put heads together to create a model that will work for Nigeria such that other countries will start copying from us.
