Eleme Petrochemicals: The Poster Boy for Privatisation


In this article, Sunday Jonathan and Ehis Nzewuji highlight the positive impact of the privatisation process on the economy, citing Eleme Petrochemicals Company as one of the projects that attest to the positive impact of the programme

The narrative is alluring but few would have bet on that prospect in 2004 when the Bureau of Public Enterprises set in motion the privatisatisation process for Indorama Eleme Fertilizer & Chemicals Limited (formerly Eleme Petrochemicals Company Limited).


Eleme Petrochemicals Company Limited (EPCL), located in Port Harcourt, Rivers State, is a petrochemicals complex originally fully-owned by the Federal Government of Nigeria and commissioned in 1996. Although constructed to international standards, located to take advantage of Nigeria’s abundant supplies of natural gas, and designed to manufacture products for which there was consistently high demand, EPCL was never managed properly, at no time operated to its potential, and was a significant loss maker and drain on the State treasury.

The company operated for about nine years from 1996, never operated effectively, although it was technologically a state-of-the-art facility. Severe management problems and continuing financial losses led to the Federal Government’s decision to privatise it. Some of the operating problems were identified as follows:

  • Poor plant management, bureaucratic approach to business, and absence of international-standard management systems;
  • Poor condition of essential equipment, exacerbated by inadequate supply of spares and consumables;
  • Inadequate plant maintenance, including the total lack of turnaround maintenance; and
  • Shortage of working capital.

EPCL was one of the most challenging enterprises the BPE has privatised in terms of the impediments, which had impinged on the company’s ability to achieve near-full capacity and which led to consistent losses .The impediments proved to be enormous challenges, which BPE faced and had to surmount in the course of its quest to privatise EPCL. They involved colossal debt burden such as project finance debts: The major impediment to EPCL’s existence and privatisation was the huge project finance debt of US$ 53 million owed to a consortium of international financial institutions. The repayment of the debts was tied to total proceeds from export sales of all the company’s outputs. The consent of the creditors was required before any transfer of ownership (via privatisation) could be effected on the company. This was because of the nature of the loan agreements, which Nigerian National Petroleum Corporation (as EPCL’s parent and guarantor) entered into with the various consortia.

 In order to commence the privatisation, the BPE sought and obtained the approval of the National Council on Privatisation to constitute a Federal Government team. The team negotiated with the creditors to release EPCL from its loan repayment obligations, as these debts were part of Nigerian’s debt stock to the Paris Club. The team also obtained the creditor’s consent to privatise EPCL.

There was also the issue of trade debts and statutory debts. EPCL was also indebted to various trade creditors and to the Federal Government. These liabilities totalled US$ 259 million as at 30th June 2005. An analysis of the liabilities revealed that 63.6% of the total debt was due to FGN agencies namely the Federal Inland Revenue Service and NNPC.

The main challenge that these liabilities posed on the privatisation was whether it was more expedient for the core investor or the FGN to assume the repayment of the liabilities. On the basis of the FGN being in a better position to negotiate the private and public sector aspect of the liabilities, the FGN approved for the FGN to assume the liabilities.

Other challenges included inadequate working capital caused by the restrictive clauses in the project finance loans, which denied the company access to export sales proceeds of its polyethylene and polypropylene products; and absence of the mandatory turn around maintenance (TAM. EPCL’s plants were terribly dilapidated because it had not carried out the mandatory two-year TAM on its plants since it commenced operations in 1995.

In 2006, EPCL was privatised by the sale of 75% of its shares to a core investor through a competitive bidding process. Little international interest was attracted. The company was sold to Indorama Group for $225 million, without liabilities which were retained by the FGN. Much of the acquisition cost was financed with debt, with the IFC lending Indorama $150 million for the acquisition cost and the new Eleme borrowing $130 million for its turnaround programme and working capital.


It is interesting to note that the available report on EPCL stated that “the absence of the two-year turnaround maintenance (TAM) of the company’s plants and facilities made it impossible for the company to achieve profitability” and “the level of the company’s indebtedness…also greatly hampered the company’s ability to achieve profitability”, whereas after four months of turnaround maintenance, the company was operating at a healthy profit; for the first full year of operation earned a net profit margin of 36.1% after tax; and in the second full year of operation had increased its net profit margin to an astounding 43.4% after tax. The company was able to pay its owners a dividend of N9.5 billion (approximately $74 million) after only one year of operation.


The Share Sale and Purchase Agreement (SSPA) between Bureau of Public Enterprises and Indorama International Finance was signed on February 27, 2006 and the company was handed over to the Purchaser on October 26, 2006. Following the hand over, the core investor was required to comply with all the covenants of the SSPA including some specific clauses as described in clauses 8.2, and 8.4 of Annexure 1 for a continuous period of five (5) years after the handover date. Clause 8.2 states that “the purchaser shall within a period of five years continue to maintain and operate the existing business of the Company as a going concern and shall not take any steps or actions the effect of which may diminish the value of the Company, except for any diminution as a consequence of the operations in the normal course of business.”

Clause 8.4 states “that for a period of not less than five years after Handover Date, purchaser shall as far as possible adhere to and implement in full the Post Acquisition Plan which it has submitted to and agreed with BPE. The Post Acquisition Plan may be modified from time to time with the prior written consent of BPE (not to be unreasonably withheld).  The Purchaser acknowledges and agrees that BPE or its agents shall be entitled to undertake biennial monitoring of the Purchaser’s compliance with the Post Acquisition Plan.”

On March 14, 2014, Indorama Eleme Petrochemicals Limited’s management wrote to the BPE intimating her that the company had complied with all the covenants of the said SSPA, including its specific clauses 8.2, and 8.4 and that the Company has completed five years monitoring period as at 6th August, 2011 since the handover date of 7th August, 2006.

The Post Privatisation Monitoring (PPM) Department of the BPE consistently carried out performance evaluation of the Strategic Business Plans and monitored compliances of EPCL’s covenants as contained in the SSPA within the five year lock- in- period. The verdict was that the compliance status of EPCL is “highly outstanding and commendable as the company exceeded the projected production targets from the first year of operation to date.”

For instance, from the SSPA in the first year, the purchaser was to produce 85,200 MT of polymers, that is, High Density Polyethylene (HDPE) and Polypropylene (PP) but produced 135,000 MT which exceeded what was contained in the Post Acquisition Plan (PAP). This was more than the sum total of what EPCL produced in its 10 years of operation before privatisation. The plants were fully revamped with the purchaser investing about US$170million for turnaround maintenance. BPE’s conclusion was that “the Company has therefore complied with all the covenants in the Share Sale Purchase Agreement.”

It was that laudable achievement that made the acting President, Professor Yemi Osinbajo a guest of the company on Thursday, July 27, 2017 when he presented a Certificate of Discharge to the Chairman of Indorama Group, Mr. Sri Prakash Lohia and the Managing Director, Mr. Manish Mundra, for successfully accomplishing the post purchase agreement entered into with the Bureau of Public Enterprises on behalf of the Federal Government of Nigeria.

He said: “Following the 2006 handover, the BPE carried out routine monitoring on the enterprise to ensure that the core investor adhered to and implemented the post-acquisition plan it had laid out for the company. Today is the culmination of that process of monitoring and oversight by the BPE. I am delighted that it is taking place on an inspiring and hopeful note, and that we are all here today celebrating a thriving and promising company. We should not take this state of affairs for granted.”

According to the acting President, the company has turned out to be a huge success story. “I am glad that we’re here today to see one of the success stories of the Federal Government’s privatisation programme, ’’ he pointed out.  “We will continue to support Indorama Eleme Petrochemicals Limited’s expansion ambitions. Our commitment to the privatisation programme is equally assured, and we will continue to do everything to support investors to maximise the potential of their assets.”

On that occasion, the Acting President inaugurated a giant world-class fertilizer plant built by Indorama Eleme Fertilizer and Chemicals Limited at the cost of $1.5 billion. The construction of the plant commenced in April 2013 and completed in December 2015—and commercial production started in June 2016.

The acting President used the opportunity to remind Nigerians that time has come for them to grow whatever they eat and produce whatever they consume. “What Indorama is accomplishing today is very much in line with President Buhari’s vision for a country that produces what it consumes and grows what it eats. If you had to sum up our vision for the Nigerian economy in a few words, these would suffice.  Grow what we eat, produce what we consume,” he said.

Prof Osinbajo commended Indorama for keying into the Presidential Fertilizer Initiative which President Buhari launched last year to make fertilizers cheaper nationwide. “At the end of last year, the President launched a Presidential Fertilizer Initiative, to ensure the availability of cheaper fertilizer to our farmers, to support what we’re doing in agriculture, in the production of rice and wheat and other staples,” he pointed out.

The fertilizer Initiative, now well underway, has created significant economic opportunities for companies like Indorama Eleme Fertilizer & Chemicals Limited. Said Osinbajo: “I have been informed that Indorama will this year alone supply about 360,000 metric tonnes of urea to fertilizer blenders, which, in turn, will produce NPK fertilizer for the benefit of farmers across the country. This is the kind of economic progress we’re after, in which every unlocked opportunity proceeds to unlock several others, across multiple sectors of the economy.”

In his address, the Chairman of Indorama Corporation, Mr. Sri Prakash Lohia, said that the plant which has capacity to produce 1.5 million metric tons of fertilizer per annum is the largest single-train urea plant in the world. The plant has a production capacity of 4000 metric tons (MT) of nitrogenous fertilizers per day or 1.5 MT per annum. The fertilizer plant is well supported by Port Terminal at the nearby Onne Port Complex, and a Gas Pipeline of 83.5KM for gas supply.

That said, the dismal performance of public enterprises is a direct result of many factors that make efficient operation difficult. Such factors include lack of adequate investment capital, slow decision making process, bureaucratic bottlenecks, frequent government interference, economic decisions based on political expediency and massive corruption of public enterprise managers in collaboration with officials of the supervising ministries.

The privatisation vision is encapsulated in the reform programme whose aim is the development of the entrepreneurial abilities of Nigerians, the widening of available economic opportunities and the creation of a judicious economic mix and intervention mechanisms that would bring about a conducive business environment.  The overall aim is that investors, who demonstrate capacity to add value through efficient provision of goods and services, have the chance to do so. This involves putting back to effective use, public enterprises that are moribund or not providing the required services. It also entails providing the opportunity for operators to participate competitively in the expanded business horizon leading to an enlarged and active private sector driven economy. Eleme Petrochemicals Company Limited has been a prime case that projects the positive impact of privatisation on the economy.

  • Jonathan and Nzewuji are of the Public Communications Unit of the BPE

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