Nigerian President Goodluck Jonathan has set up a panel to probe the sale of Nitel and its M-tel arm following complaints that the bidding process was manipulated and bribes were offered.
Jonathan has further suspended the head of Bureau of Public Enterprise (BPE), the body responsible for overseeing the sale. BPE officials have been accused of manipulating the privatization process of the company in order to receive bribes from bidding companies.
In Zambia and Ghana, the sales of incumbent operators are also embroiled in corruption allegations and are being challenged in courts of law.
The sale of Nitel became bogged down in confusion last month, centering on financial backers for a US$2.5 billion preferred bid approved by the privatization body.
Doubts arose when China Unicom, a Chinese telecom company, denied any involvement in the race to buy the company, but later acknowledged that its European unit had shown interest in joining the group bidding for Nitel although it had never entered formal negotiations. China Unicom is part of the New Generation Telecommunication consortium that won the Nitel bid.
Questions over the bids further arose because of the mysterious identity of a Dubai company, Minerwa, which the bidding consortium said would provide much of the financing for a bid that was five times higher than the company is worth.
The panel has seven days to submit its report to the National Council on Privatization (NCP), according to a statement from the NCP.
Nigeria is Africa's biggest telecom operator in terms of investment and subscriptions. Nigeria has been trying to sell Nitel for almost a decade, and controversy over the latest effort to put the company in private hands is likely to scare international telecom investors.
The Nigerian government is selling Nitel after failing to recapitalize it to keep in business. The operator had initially been sold to Transnational Corporation of Nigeria in 2006, but last year the PBE revoked the company's 51 percent equity stake in Nitel, citing a breach of Share Sale Purchase Agreement (SSPA) by the company.
Two weeks ago, the NCP, BPE's governing body, said it had cleared up the confusion concerning the new bid and allowed it to go for final approval. NCP claimed the bid had been examined by its technical committee and was satisfied that due process had been followed to the highest international standard. Surprisingly, the NCP later changed its position. This week, NCP refused to give the final approval of the sale.
Instead, the NCP instituted a seven-member ad hoc committee to undertake further due diligence on the new investors and to investigate allegations of financial impropriety said to have beset the transaction. The committee will also probe the bidding process and the bidder, as well as investigate the allegations that bribes were offered to officials from the BPE to influence the outcome of the bidding process.
"Corruption is really eroding investors' confidence in the African telecom market. No investor wants to invest in a market where officials are corrupt in their dealings," said Edith Mwale, telecom analyst from Center for ICT Development.
The problems surrounding the sale of Nitel underline the difficulties that African governments face in privatizing incumbent telecom companies. Generally, corruption and lack of transparency among senior government officials has been at the root of the problems surrounding the privatization of African telecom companies.
The sale of the incumbent operator in Zambia (Zamtel) is being challenged by organizations as well as former Zambian Minister of Communication and Transport Andrew Kashita, who claims the Zambian government did not follow the privatization procedure.
The privatization of Ghana Telecom (GT) to Vodafone of the U.K. was also marred with similar accusations, and the matter is still being challenged in court.