The Curious Case of Nigercem

08 Apr 2013

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BEHIND THE FIGURES by Ijeoma Nwogwugwu;

That our state governors like to travel overseas is stating the obvious. The primary reason they give for their overseas junkets is the search for foreign investors to set up industries and businesses in their respective states, which would provide employment opportunities and create new avenues for revenue generation by the states. No survey has however been conducted to ascertain the success or lack thereof of their trips to foreign lands.

In addition to their overseas travel, the governors have identified a few foreign firms already in Nigerian and local investors with the capacity to set up industries in their locales. They woo them too and offer them attractive incentives to consider their states viable investment destinations. The likes of Dangote Group, the Zimbabwean farmers, Thai rice producers, Lafarge and Bua Group, among others, are constantly on the radar of governors trying to deliver the dividends of democracy for their people.

Given the need for investors in their states, I find the dispute between the Ebonyi State Government and some of its federal legislators, on one side, and the owners of Nigerian Cement Company Plc (Nigercem) as well as indigenes of the company’s host community, on the other side, over the rehabilitation and resuscitation of the cement plant, rather puzzling.

Nigercem, the first cement plant ever to be established in Nigeria in 1954, was privatised in 2002. Prior to its sale, it was owned by the federal government (11 per cent), the five south-eastern states (65 per cent) and the general public (24 per cent). In order to facilitate its sale, the federal government handed over the power of attorney to dispose off its 11 per cent to the five south-eastern states alongside their own stake in the plant which they were willing to sell. The transaction led to the emergence of Eastern Bulkcem Nigeria Limited as the new strategic core investor with a 65 per cent stake in Nigercem. Ebonyi State Government, as the host state in which the planted is situated, was given 10 per cent while the outstanding shares remained in the hands of the public.

Unfortunately, Eastern Bulkcem was unable to resuscitate the old cement factory, which had been lying moribund for well over a decade. Instead, the new owners resorted to asset stripping and used its ownership of the plant to obtain import licences for bulk cement, much to the chagrin of its minority shareholders who had hoped that the plant would be brought back to life. Frustrated with the situation, Ebonyi State Government resorted to extra-judicial means by shutting down the plant, revoking Nigercem’s certificate of occupancy and set up a Judicial Commission of Inquiry to investigate the state of affairs in the company.

In resorting to these means, the state government was unmindful of the Companies and Allied Matters Act, its rights as a minority shareholder to seek redress at the courts, and the wrong message it was passing to other prospective investors who might want to invest in the state. More importantly, it acted in contravention of the Nigerian Minerals Act, 2011, which vests the “entire property and control of all mineral resources in, under or upon any land in Nigeria, its contiguous shelf and all rivers, streams and water courses throughout Nigeria, in the Government of the Federation for an on behalf of the Nigerian people.” The same Act states that the “use of land for mining operations shall have priority over other uses of land and be considered for the purposes of access, use and occupation of land for mining operations as constituting an overriding public interest within the meaning of the Land Use Act” In view of both provisions, the Ebonyi State Government’s revocation of Nigercem’s certificate of occupancy clearly cannot withstand rigorous legal scrutiny.

Owing to its inability to access the cement factory and the revocation of its certificate of occupancy, Eastern Bulkcem sued the Ebonyi State Government and obtained a ruling from the federal high court declaring the judicial commission set up by the state as illegal. The same court however ruled that Nigercem, as a party to the suit, which had prayed to have the revocation of its certificate of occupancy nullified, could only be determined by a court of jurisdiction on land matters; in other words, the state high court.

This was the sorry state of affairs at the plant when Ibeto Cement Company Limited in 2012 acquired Eastern Bulkcem. With the change of ownership, Ibeto Cement now controls 60 per cent of the shares in Nigercem, Ebonyi State Government, 10 per cent, while the public comprising institutions such as NICON Insurance Plc and the public own 30 per cent. But despite all efforts by the new owners – Ibeto Cement – to take possession of the plant and recover the certificate of occupancy, the state government has remained adamant and rejected all entreaties to reach an out of court settlement on the issue.

Rather, what the public has been regaled with are adverts signed by some federal legislators from the state accusing Ibeto Cement of running a campaign of calumny against the government and people of Ebonyi State. Even worse, an interview granted last month by the traditional rulers of the host community – Igbo Essa clan – throwing their weight behind Ibeto Cement and encouraging the new owners to reopen the cement factory so that it can provide jobs for their people, led to their sudden dethronement by the state government.

Even if we were to empathise with and understand the anger of the state government with Eastern Bulkcem, which failed to live to its promise to revamp Nigercem, it us uncertain what its angst is with the new owners, Ibeto Cement. Enquiries have shown that the state government might not be favourably disposed to Ibeto Cement because its owner – Cletus Ibeto – does not hail from Ebonyi. It also has indicated plans to set up a new cement factory wholly owned by the state, starting with a capital outlay of N500 million.

Prior to this, the same state government had incorporated the Ebonyi State Cement Company, which was given a consent letter by the Igbo Essa clan to commence operations in the area. Based on the Nigerian Minerals Act, the consent letter has since expired and the state-owned company shown no signs of renewing it. In addition, the state government has stated that it is prepared to bring in time-tested investors to revive Nigercem.

From all indications, the Ebonyi State Government is clutching at straws. On the one hand, it is disenfranchising the host community and its people as well as preventing the majority shareholder of Nigercem from reinvesting and reopening the cement factor.

The bigger irony is that Ebonyi, which by all socio-economic indices is disadvantaged and has just been declared technically insolvent by the Debt Management Office, is toying around with idea of establishing a cement factory, which it can ill afford. At the same time, the state is promising to sell shares not held by the state to so-called “time-tested investors”, but those held by Ibeto Cement. It remains to be seen how the state intends to go about selling Nigercem shares it does not own.

Clearly, the Ebonyi State Government and its governor, Martin Elechi, whom I believe is a rational man, must see the futility of the course they have taken with respect to Nigercem. The federal and state governments have shown time and time again that they incapable of successfully running certain enterprises best left in the hands of the private sector. They should not allow their irritation with Eastern Bulkcem throw away a perfect opportunity offered by a new investor to rehabilitate the cement plant.

Granted that Nigercem, being the oldest cement company in Nigeria, must hold some sentimental value for the people of Ebonyi, but this is certainly not a time for sentiments. The state government as a minority shareholder in the plant should sit down with Ibeto Cement and agree to a realistic business plan and capital injection programme that would lead to the reopening of the plant and commencement of cement production. Right now, the pledge made by Ibeto Cement that it has the capacity to commence operations in six months is rather ambitious and might be unrealistic. The state government would therefore have to demand that Ibeto Cement shows the right commitment and has the wherewithal to turnaround Nigercem.

As it stands, the impasse over Nigercem has not done the state, the people of Igbo Essa clan, the cement plant, Ibeto Cement and the minority shareholders any good. The state government needs to rethink its strategy and reach an out of court settlement that will result in a win-win for all parties concerned.a

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