Thursday, 20 November 2008


By Louis Brown Ogbeifun November 7, 2008
‘Even a man regimented in every sense of the term would carry out his duties with more vigour and better spirit if treated as someone who really mattered and who understood the overall importance of the project in which he was involved’
- Field Marshall Montgomery.
It is with immense joy and gratitude to God that I present this paper today to enable me contribute to the re-engineering process of our great Union (PENGASSAN). I consider this a rare privilege because of the importance of this topic to the survival of members of the Association not only in the NNPC but to all Oil and Gas companies facing Employers’ restructuring processes because of the emerging global concepts. I therefore thank you Mr. President and the Central Working Committee (CWC) for this opportunity.
However, let me say that I am not here to teach or tell you something new about the topic because you have been at the vanguard of resisting the ill motivated “sell the refineries as scrap syndrome”. For us to deal with any labour pact and labour issues, there is the need to take a cursory look at the concept of privatization, its impact on labour in order to appreciate the seriousness of what your members might face and the elements needed for an ideal labour pact.
It is primarily aimed at divesting the state’s interests in public enterprises to the private sector, thereby removing what is tagged state monopoly through liberalization of such utilities as energy, water, telecommunications, air and water transportation etcetera. Some of these fall in the domain of what we perceive as welfare oriented services. This process is a subset of the globalization concept, which seeks to remove trade barriers and encourage competition by both local and foreign investors in the running of these enterprises. This concept is premised on market driven competition with the assumption that the private sector is better managed, provides consumers with choices, more effective, efficient, yields better returns on investment, removes government’s intervention the internal affairs of the enterprise.
Laudable as these reasons are, one has found out that the success of any public or private enterprise depends largely on the operators. In recent times, several Multinational companies have collapsed and hundreds of thousands of workers retrenched. In addition, they have been fingered in issues of tax evasion and high-level corruption. Therefore, Privatization has never been able to resolve all issues of mis-management, corruption, management recklessness, abuse of office and organizational collapse.
Reasons for privatization by the Nigerian Government
Stemming the tide of dwindling fortunes of our national economy with a view to restoring it to the path of sustainable growth and global competitiveness
Unproductive investment or low productivity in public owned enterprises
Corruptionv Gross mismanagement of the enterprises slated for privatization
Collapse and increasing decadence of public utilities
Huge recurrent expenditure with a limited room for capital investment
Restoration of International Investors’ confidence
Improving managerial processes
Determination of prices through market price mechanism
Raising funds for other spending purposes
Transfer of technology from advanced nations
Government has no business in business
Introduction of free market economic reforms in alignment with the dynamics of global processes
Efficiency and improved capacity building and utilization
Resolution of Nigeria huge debt crises
Removal of government interference in the enterprises to be privatized.
Types of Privatization.
Full Privatization
Partial Privatization
Strategic Partnering
Management Contracts.Why oil workers’ Unions resist outright privatization of the NNPC downstream sector
Lack of transparency in the privatization process. It is common knowledge that millions of naira are hidden from would be investors making profitability of running the new enterprise impossible and with this scenario, workers become the first victim when areas for cost curtailment are to be considered
Low-ball bidding
Collapse of deals, which were improperly conducted
Loss of strategic National assets to foreign interests and or government cronies
Privatization proceeds not being properly utilized
Fear of shares not being fairly distributed. Workers’ shares have been re-purchased by core investors or powerful society elites at the expense of labour in some privatized companies.
Improper valuation of assets
Job insecurity
Increased casualization and contract staffing
Non-payment of terminal benefits
The level of insecurity in the nation as typified by increased politically motivated killings, fatal robbery incidents, youth restiveness because of large-scale unemployment especially in the Niger Delta region and hostage taking of oil workers
Inconsistency in government policies and lack of will to see programmes through
Security implications.
Privatization of NNPC downstream.
The ultimate motives for the privatization on NNPC downstream sector are:
Demonopolization of state-owned refineries, petrochemical and pipelines and product marketing companiesv Autonomy to ensure competition with the objective of ensuring that all aspects of production, refining, distribution and dispensing of petroleum products are self sustaining, accountable and yield adequate returns on investments
Involving the multinationals in the refining process
Deregulation of the Nigerian downstream petroleum sector to allow for appropriate pricing.
While nobody can controvert the soundness of the aforementioned reasons, the unions were never convinced of the real intention of government going by the happenings in other sectors. We were however vindicated, when the much orchestrated deals of PENTASCOPE/NITEL, SOLGAS/STEEL; BFIG/ALSCON collapsed. After a warning strike in September 2001 and series of meetings with the Government, all strategic stakeholders agreed to the Strategic Partnering option using the NLNG model of privatization for privatizing the Refineries. This means that both the investors who must be global Refiners, Government and Workers are co-owners of the enterprise.
No matter how laudable and viable this option is; downsizing and the right of the new owners to determine the manning levels cannot be ruled out. Apart from all these, it seems to the Association that the general rule of law does not favour the transfer of employment or personal services to the new owners of a private company. This is why the Oil and Gas Unions have also been very vocal in asking for due process and that a labour pact is in place for the transiting enterprise for several reasons viz:
That Government should refurbish the Refineries to attract efficient and global refiners as investors
Ensuring that due process is followed in the process of privatization
Ensuring that the investors chosen are global refiners who will have the genuine interests, in turning the refineries around for effective and efficient service deliveries
To ensure that severed workers are paid their end of service entitlements and any involuntary severance attracts a special package
Ensuring that NNPC workers are considered for shares in the privatized outfit
To determine the fate of other retirees who are currently drawing pension from the NNPC.
Labour issues.
Job cuts
Collapse of social categories
Dislocation to family systems
Reduced income
Dwindling strength and vibrancy of trade unions
Friction between union and management if labour issues were not properly tidied up
Discouraging inter-union solidarity
Paucity of funds for trade union activities
The continuous survival of the Unions
Welfare loss
Labour pact.
To resolve the aforementioned Labour issues and forestall the negative consequences of privatization in the downstream sector of NNPC as highlighted above, there is the need for the unions to ensure that there is a reduction of the negative impact on its members to the extent that they can live a near normal life after the transition.
Therefore, Labour Pact can be defined as a set of rules and or agreements entered into by the stakeholders, which include the Unions on one hand, the government’s agency, which in this case is the Bureau for Public Enterprises and or the Core Investor. The advantage of a proper labour pact is that it helps in midwifing the privatization process into a deliverable process, in which the new investor can have a smooth take over of the enterprise. In addition, it helps in removing distrust and assists in nurturing an enduring relationship between Labour and the new Management.
On the Union’s side, the fact that the investor may decide to change its objects and names, streamlining of the workforce without any notice, discontinuation of unionism through Yellow dog contract, in which a new employee pledges not to join the union; makes the need for a labour pact that will fully guarantee their rights become imperative. In addition, the Federal government is unlikely to honour any agreement signed with the Union on emoluments for the calculation of severance benefits beyond the year 2000.
The only instrument that will assist employees in putting in perspective and addressing their concerns is a labor pact. Therefore, the labour pact is sacrosanct in the protection of workers rights and continued sustenance of labour practices.
It should cover such areas as:
Retention of current conditions of service and any modification, Management and the Union shall use the collective bargaining (CBA) tool.
Dealing with wage arrears
Pension obligations and liabilities
Redundancy Benefits(Severance package)
End of service benefits
Social Safety Nets
Right to voluntarily exit
Share holding
Rights to unionization
Pledge to fair labour practice by the new Management.
Retention of conditions of service.
The pact should ensure that BPE, the union and the new management sign an agreement that will ensure the continuity of the current conditions of service, with modifications jointly agreed to by the stakeholders using CBA. This is necessary in order to forestall the rule of unilateralism by the new investor.
Dealing with wage arrearsAll arrears of salary and allowances should be paid to date to both workers being severed and those opting to work for the organization.
Pension and gratuityThis is perhaps the most crucial element that should be properly tied up because the union must protect the interest of those staff that will be deselected and those retirees who draw their entitlements from the NNPC. It is the wish of every working adult to continue to have means of support and livelihood on retirement. For those outside the service, the union should get in clear terms who shall be responsible for the payment of their pension benefits (enterprise, government or core investor), while an option that is viable and sustainable will be jointly agreed upon for those in service without any breach of the Pension’s Act.
Redundancy benefits.
The pact must expressly state what shall constitute redundancy in the new dispensation in line with industry practice and the financial benefits attached unambiguously stated. This will cover those that are being deselected or involuntarily separated from work by the core investor. Subsequent use of the clause in the new dispensation must also be clearly stated.
End of service benefits
All entitled end of service benefits to be paid to all the workers that are to be severed
The workers that have made contributions towards end of service benefits and or in form of provident fund must be appropriately charged into the necessary accounts with the accrued interests
The contributions of those in service should also be calculated and charged into the appropriate accounts, which the Union, Staff and Management would have agreed upon
The end of service benefits will be paid along side with the severance benefits
Where the union and staff so desire, all staffs’ end of service benefits may be paid as lump sum as per the existing collective agreement; while a new collective agreement may be negotiated for the new concern.
Social safety nets.
The major concern here is provision of some basic back up systems that will ensure that severed staff transit smoothly. This will include organizing pre-severance training for those leaving the organization on investment opportunities. In addition, workers should be retrained to enable them put to use the skills necessary to continuously remain useful to themselves and the society.
This is to ultimately empower them into small and medium enterprise (SME) development. The BPE should be of tremendous assistance to the severed staff in:v Re-employment services, including job placement assistance for those desirous of being re-engagedv Counseling on Job creation programsv Access to micro credit facilities The pact should encourage management to give former employees priority in the provision of services by third parties.
Right to voluntary exit.
The pact should ensure that workers shall have the opportunity to express interests in voluntary exit pre-privatization from the organization. In doing this, the Union must also respect the wish of management to veto the exit of essential staff that is key to its operations. Where a staff is refused voluntary exit, such staff must be given additional incentive.
Share holding.
The pact shall ensure that a percentage of the divested shares are allotted to members of staff as per agreed ratio. They must also impress it on government, enterprise or core investor to provide the loans for such purchases, which should be instalmentally deducted from their salaries and or end of service benefits.
Right to unionize.
The pact should guarantee workers’ rights to unionization in the new concern. This is a non-negotiable item.
Unfair labour practice.
During the transition period, the pact must restrain management from:
Retrenchment of workers
Downward adjustment of salaries
Abrogation of conditions of service currently in force
Threat of mass lay off of employees.
Going through manuals, seminar and workshop papers of Government agencies on privatization issues, the safeguards are in prints but the implementation process, just like so many other agreements are not being strictly adhered to. This in truth, has been the bane of the country’s privatization process. In addition, getting a pact as a working document, your association may be able to forestall arbitrary job cuts, redundancy, ensuring commensurate compensation and benefits for affected Association members during privatization, ensuring the security of pensions benefits for your members in line with the Pension Act, the existence of the union in the new environment and improved membership strength.
In the pursuit of the above, there are going to be very serious bottlenecks as investors and government may not readily accede to the severance package due to its financial implications, especially with the post 2000 wages and emoluments. This should not deter the unions from working hard to give a future worthy of living to their members. Government should realize that, it is an imperative to carry the unions along for self-expression on matters that affect them directly. This is where the quote from Montgomery becomes a reference point. All the stakeholders must learn from the experiences of the past on privatization issues, to ensure that we do not leave oil industry workers at the domain of perpetual poverty after a meritorious service to this great nation.
The plight of workers in some privatized or proposed privatized enterprises as typified by that of Daily Times, Nigeria Airways, ALSCON; NAFCON and Delta Steel Complex and that of Pensioners in the Public service and the Military should imprint in your hearts, the need to put up a labour pact that shall protect your members both serving and retired, who have toiled and shall continue to toil to oil the wheel of the Nigeria’s economy through their service.
However, it is not enough for the Unions to resist the privatization of the refineries without ensuring that your members do all within their spheres of influence to do all they could to sustain the optimum productivity of the plants to reduce downtime. You should eschew any act of compromising standards. You are the conscience of the organization and you must blow the whistle when things predjudicial to the interests of the organization are being perpetrated. Collective solutions to the Niger delta issues should be your goal and you should try to protect all the assets under your protective custody. Most of those who vandalize the pipelines are from the same towns and villages with some workers, some could be your brothers and sisters. When the refineries have no crude to run, your members are likely to be the victims because the plants will be forced to shut down. Therefore, you owe yourselves the duty of reaching out through seminars and workshops like this for enlightenment and advocacy.
This paper has only attempted to create the skeleton that you will at the end of this workshop adorn with the desired flesh. In the future, you may wish to consider inviting BPE and other stakeholders for a more thorough discussion on this sensitive issue and reach a concensus on how to jointly manage the exercise.
Solidarity! Forever!!!
Akpotaire, V.(2003); Privatization of the downstream sector of the NNPC, Abuja.
Bureau of Public Enterprises (2002) Training Manual for Labor Policy Framework (Dealing with Redundancy, Severance Package, and Social Safety Net), Abuja.
Otobo, D.(2003) ; Career planning in a deregulated Economic Environment, Port-Harcourt.
Ogbeifun, L. B.(2004); Privatization and the challenges of Human Resource Management, Warri.
Ogbeifun, L.B. (2003); The challenges of globalization and Liberalization to Industrial Relations in Nigeria, Lokoja.
PENGASSAN(2002); Position paper on Privatization of NNPC Downstream Sector.

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