FG’s $400M telecom project: In whose interest?

In a nation where government’s missteps and anti people’s policies and measures appear to be the norm, the recent dust raised over the federal government’s decision to secure a $400 million loan for Information and Technology Backbone Infrastructure from Bank of China under some conditions with grave implications for the nation’s sovereignty needs to be properly dissected to appreciate why it is ill-suited for the nation at this point in time.

Between 2015 and 2020, Nigeria’s external debt profile has risen from $9.7 billion to $27 billion. Last May, the government requested the National Assembly to approve additional N5.51 trillion external borrowing to fund its revised 2020 budget. That brings the country’s total external borrowing to about N41.6 trillion. There are fears that the country may be heading towards economic enslavement, particularly in the hands of China.

Just recently, the House of Representatives Committee on Treaties, Protocols and Agreements, identified some clauses in one of such loans to be sourced from China- the $400 million loan for the National Information and Communications Technology Infrastructure Backbone (NICTIB) Phase II project. In identifying with public outcry, the lawmakers had pointed out that such terms and conditions are potential threats to the sovereignty of Nigeria.

In 2018, Galaxy Backbone Limited, the agency through which the government is executing the project said it had completed the first phase of the project but industry stakeholders were not excited about the claim as the benefits of the projects are yet to be felt by the public.

Beyond the potential threats to the nation’s sovereignty, there are questions over why the government is taking loans to compete with investors in an industry that it has handed over to the private sector? Globally, governments have been identified as lacking in the ability and capability to run businesses profitably like the private sector. At least that is the experience in this country.

In the telecom sector where the government is making moves to establish its presence ones again through this questionable loan, the experience has not been a particularly rewarding one. The privatization of Nitel, the government’s former telecommunications monopoly, was a protracted one. The reason was that the enterprise was running aground before the government offered it for sale. When it eventually did, many investors were not keen on buying the enterprise. It was obvious that the government failed in managing the assets of the corporation profitably and to the benefits of Nigerians.

It is noteworthy that, in order to expand their services and make millions of their subscribers have access to fast internet services, NATCOM, the successor company of Nitel, Glo and other telecom operators have invested heavily and are currently developing telecoms infrastructure similar to the one the federal government is taking a $400 million loan. They are all doing this with admirable progress and success. Why then would the regulator suddenly become a   competitor in a business where it ought to be overseeing the activities of players and providing the enabling climate for businesses to thrive? The government’s decision to raise this humongous loan, therefore, raises suspicion as to whether the country is not embarking on yet another ego trip; whether some people in government are not just into this for self- aggrandizement and ulterior motives.

Why would the government go into a venture it has no competence to run?  Given past experiences where the government failed woefully to run businesses profitably, what is the rationale behind the new move to compete with the private sector investors? This move is, in all ramifications, suspect, if not dubious.

More worrisome is the fact that the government is not plunging into this with resources that are available and handy, but through a contentious loan arrangement that has the potential of bringing many problems for the nation in the future. This is an avoidable misadventure; one that the government can do without.

Nitel is a classical example of how bad the government is in managing a business. Here was a public enterprise with vast assets across the country but the government allowed most of its structures and valuable assets to rot away. As at the time of its privatization, foreign investors viewed the entire enterprise as one huge junk. But NATCOM, a consortium led by local investors braved the odds and acquired the ailing enterprise at a cost no foreign investment would have attempted to long after several investors, foreign and local, had distanced themselves from the enterprise.

For the massive investments they have made in the telecom sector, what local investors and indeed, stakeholders in the Nigerian economy expect from the government is to create the enabling environment for the investors to be able to access foreign capitals to execute their projects rather than competing with them in sourcing foreign loans which can only put the fragile economy under further considerable pressure.

Only last May, Paul Budde Communications’ focus report on Nigeria indicated that several microwaves and fiber-based national backbone networks are being rolled out by various companies. As part of its efforts to boost telecommunication services in Nigeria and the rest of West Africa, Globacom, one of the major operators, in 2018, began the construction of its multi-billion naira optic fiber submarine cable named Glo 2, an ultra-high-speed facility. This telecom infrastructure, the first of its kind to land outside Lagos, was built from the existing Glo 1 landing station along the Alpha beach axis in Lagos.

Similarly, in a more definitive move to offer the best of telecom services to its subscribers, Ntel has shown a strong commitment to delivering a cutting-edge broadband-based solution that utilizes the best technology – SAT 3, which is the first undersea-cable that connects West Africa to Europe, South Africa, and Asia.

It is disheartening that rather than building on the modest achievements the country has recorded in the privatization of state-owned enterprises under successive administrations, government officials appear to be taking the country many steps backward. They have failed to learn from good examples of better economies.

In the United Kingdom, for instance, the privatization program repositioned its economy and placed it on an upward path since the 1980s and 90s when the state began to divest from public enterprises. According to Harvard Business Review, by 1979, the borrowings and losses of state-owned industries were running at about three billion pounds a year. But from 1989 to 1990, companies privatized by the Thatcher government fattened the government purse by some two billion pounds. Economic experts say the success story of privatization under the Thatcher administration was due to political will and uprightness of the government at the time. That is a lesson for the Nigerian government.

In South Africa, President Cyril Ramaphosa ran an electioneering campaign, promising privatization of state-owned enterprises. Although there were initial doubts and questions about its desirability, even those who were opposed to it later realized that Ramaphosa’s deep understanding of how businesses work around the world was not questionable. The privatization of state-owned businesses is now seeing as the elixir that can bring back that country’s economy to sound health. In 1984, Japan liberalized its monopolies in the tobacco and salt industries. That was followed by the privatization of its telecommunications and railway services a few years after. Following the success story of the privatization of those enterprises, the state went ahead and privatized several infrastructural assets such as roads, bridges, and buildings.

In these countries and indeed, several other countries, the government showed commitment to supporting the private sector. And there is no instance of turning back to become a competitor with private sector investors who had staked their monies to turn-around moribund enterprises.

This is what the managers of the Nigerian economy must imbibe and adhere to at this point in our economic trajectory. The move to source $400 Million to build ICT backbone infrastructure by the federal government is certainly not in the interest of the nation and should be jettisoned forthwith.


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