NIGERIA - Towards Deregulation And Privatisations.

As soon as the civilian government took over, it was faced with a proposal to fully deregulate the energy market and the telecommunications sector. That was to be part of a programme, proposed by the military government in late 1998, to privatise the power sector, telecommunications, oil refining and a number of state companies in other sectors.

President Obasanjo and his top aides have considered a revised version of this programme. Western donor states have indicated that if the new administration adopted a full deregulation of the energy market and an accelerated privatisation it could be on line for a major funding by the IMF, the World Bank and other multilateral institutions. The funding could be made available by September, if these measures were introduced in the meantime, and could be followed by Paris Club negotiations on debt relief by end-1999.

There are more than 1,500 state-owned companies which have cost Nigeria about $2.2 bn per annum, equivalent to about a third of the federal government's budget.

The proposed sale and ultimate revamping of the state power and telecommunications companies, as well as the oil refineries, is seen by the private sector as a vital step to economic recovery. It may also be key to the survival of the new democratic system.

Successive governments have invested more than $70 bn in about 60 of these companies, including the power and gas utilities and the oil refineries. But attempts to privatise some of the big-spending companies have been stalled for years, because of opposition from the Muslim north. The northerners remain powerful under the current regime.

State ownership has played an important role in the political dominance of the Muslim north. While many influential northerners now appear to have accepted the principle of privatisation, fears remain that the sale of public enterprises - from which their patronage power has derived - will benefit southern rivals who control most other aspects of the Nigerian economy.

Disagreements over the relative merits of golden shares and other side issues, for example, have taken up valuable time when work on the complex regulatory system and due diligence reports has not begun.