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McKinsey and company to handle Nigeria Free Zone Strategy



McKinsey & Company is one of the few companies to handle the actualisation of project MINE (made-in-Nigeria for export) as approved by federal Government of Nigeria.
The memo advanced by the Ministry of Trade and Investment, stated that request made by Nigeria Export Processing Zones Authority (NEPZA), to the Bureau of Public Procurement (BPP), to consider and approve for NEPZA to adopt the Direct Contracting Method to engage M/S McKinsey & company Nigeria Global Limited, given the company’s expertise. Though no emphasis on whether they are grounded in Free Zone matters.
The federal Government of Nigeria recently approved N250 billion for the establishment of Special Economic Zones in the six geopolitical areas of the country.
The Minister of Trade and Investment, Ikechukwu Enelamah was quoted as saying that the zones would be sited in Aba, Lagos, Katsina, Calabar and Kano, most of where already have Free Zone.
He said the consultants to facilitate the zones were to be paid a total aggregate amount of N3.172,431 billion. But the amount that has been invested in zones in Nigeria are much larger. The country’s 2017 budget had over N40 billion. The 2018 budget has over N40billion in it. The total budget of developing the zones would be in excess of N250 billion and to be handled by a public private partnership company called The Nigeria Special Economic Zones Company Limited (NSEZCO).
Stakeholders in Nigeria cannot reconcile the intention of the ministry in this approach. For a private company to be entrusted with expending N250billion of Public fund, leaving the two supervising Agencies of federal government, NEPZA and Oil & Gas Free Zone Authority, whose responsibility it is to administer and manage all Free Zones, poses some questions.
The Minister was reported as saying that federal government own 20% of the new company. The question is whether N250 billion naira is the 20% share capital of federal government, if so, who own the 80% and how much is their share capital being put forward or expected?
Free Zone stakeholders in Nigeria are pensive on this, more so, since nobody is ready to volunteer further explanation to the issue.
As a Matter of fact, the document used for securing approval for the said money has replaced NEPZA/OGZA with the private company (NSEZCO). One wonders if this is the right approach to solving the problem of Free Zones in the Country or is it the Perpetuation of establishing another conduct pipe for siphoning public fund. Activities around creating free zones with public fund should have been made more public to get more expert advice than "the behind the scene" action of the line ministry.
This is happening at the time when the federal Ministry of Finance is battling with disclosure of spending details of N700 billion disbursed in 2017 to some MDAs for capital projects.
Mr Chidi Okeke, a free zone expert, said that federal government through its Free Zones Authority (NEPZA & OGZA) should address the problem of the 38 zones we have in the country and ensure their operation" before thinking of establishing more. “According to him, only eight (8) out of the 38 approved zones in the country are currently functional at different low level of functionality”. He cited Abuja Technology Village, Tinapa, Maigatateri Boarder Free Zone and others as examples of Zones that should be assisted to take off.
“Most of the zones have the problem of power and roads which the government should have first looked into. Calabar Free Trade Zone and Tinapa need just power, water and road and Nigeria will be surprise with the foreign investment they will attract,” he said.
Most persons that spoke on this issue spoke against the huge amount of money that is passing behind the organizations statutorily set up handle matters concerning Free Zones in Nigeria and setting up another, possibly for personal and political interest.
 “There is more than meet the eye”, Mallam Bashiru Ibrahim tweeted. Equally, the staff of NEPZA & OGFZA feel that their service is threatened. They wondered a situation where two Free Zone Agencies with more than 300 staff are still existing and a new company is formed, what is the assurance that their job is still there for them.
The Honourable minister in his memo to the President stated that provision has been made to further contribution to the capitalization of NSEZCO. A statement which automatically ends the doubt whether NSEZCO has come to stay on not.
The nation await further briefing/clarification from Minister of Trade and Investment on how the three (3) agencies will be working and with which law, because Act 63 of 1992 and act 8 of 1996 did not accommodate NSEZCO.
McKinsey & Company, the godfather of management consulting, in South Africa once got itself into a mess when it thought it could help the state owned power company, Eskon, but was not sure that it should, according to people involved in the debate. The risk was huge. Could McKinsey fix the problems? Would it get paid? Would it be tainted by South Africa’s rampant political corruption?
In late 2015, over objections from at least three influential McKinsey partners, the firm decided the risk was worth taking and signed on to what would become its biggest contract ever in Africa, with a potential value of $700 million. It was also the biggest mistake in McKinsey’s nine-decade history.
The contract turned out to be illegal, a violation of South African contracting law, with some of the payments channelled to an associate of an Indian-born family, the Guptas, at the centre of a swirling corruption scandal. Then there was the lavish size of that pay-out. It did not take a Harvard Business School graduate to explain why South Africans might get angry seeing a wealthy American firm cart away so much public money in a country with the worst income inequality in the world and a youth unemployment rate over 50 per cent.
And a bitter irony: While McKinsey’s pay was supposed to be based entirely on its results, it is far from clear that the flailing power company is much better off than it was before.
By Chris Okwy Ndibe
The Eskom affair is now part of an expansive investigation by South African authorities into how the Guptas used their friendships with Jacob Zuma, then the country’s president, and his son to manipulate and control state-owned enterprises for personal gain. International corruption watchdogs call it a case of “state capture.” Lawmakers in South Africa called it a silent coup.
Yet despite extensive coverage of the scandal by the local news media, one question has remained largely unanswered: How did McKinsey, with its vast influence, impeccable research credentials and record of advising companies and governments on best practices, become entangled in such an untoward affair? But McKinsey admits errors in judgment while denying any illegality. The firm missed warning signs about possible involvement of the Guptas, and only belatedly realised the insufficiency of its risk management for state owned companies and ministries. Hope they will polish their boot as the come into NSEZCO saga in  Nigeria.

Further analysis continues Next week