Privatization Of Public Enterprises In Nigeria: A Critical Assessment Of Its Politicisation

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Privatization Of Public Enterprises In Nigeria: A Critical Assessment Of Its Politicisation


Chapter One


Introduction

1.1 Background of the Study

In the era of post colonialism, Nigeria has at one time or another, embarked upon certain policies that have political economic implications. For instance, from 1960 to date, Nigeria has introduced indigenization and nationalization policy, operation feed the Nation (OFN), Austerity measure, structural adjustment programme (SAP), Deregulation of oil sector, Resource control Privatization and commercialization of public enterprises to mention but a few. The critical question here remains. How many of these policies have been able to restructure the political economy of Nigeria to the tune of alleviating the yearnings and aspirations of the working class.

The world no doubt is moving towards capitalization and any nation that is not moving towards this direction is seen as either not developing or even retrogressing. A capitalist economy is a free market economy which allows most economic decisions to be guided by the twin forces of demand and supply. Since capitalization discourages monopoly but encourages competitive market, it therefore enhances efficiency and high productivity which is very vital in any developing country’s economy. In Nigeria, most government owned industries and establishments remain citadels of corruption, studies in efficiency and consequently a heavy drain on the economy. As a means of curbing this menace, the Brettonwoods institutions (IMF & WORLD BANK) have advocated the twin policies of privatization and commercialization. Incidentally, Nigeria has fully adopted this policy and is embarking on it with frenzy


1.2 Statement of Problems

Privatization and commercialization of public enterprises is a vital tool for the upliftment of a country’s political economy, more especially the developing countries like Nigeria. Regrettably, the problems facing this privatization and commercialization program is numerous to include:

  1. Corruption
  2. Lack of transparency
  3. Lack of accountability
  4. Inconsistency and
  5. Incredibility.

However, it is based on these problems that the basic propositions of this privatization and commercialization program are being hindered. In trying to look into these discrepancies and proffer a way forward towards a positive state of privatization and commercialization of public enterprises in Nigeria, this research work emanated.


1.3 Objectives of the Study

This paper will take a general look on the evolution of public enterprises in Nigeria, after and the rationale for its establishment. To assess the factors that led to the privatization and commercialization of these public co-operations and its origin. Thirdly, this work will also evaluate the various privatization and commercialization programs embarked by the Nigerian government from 1988 to 2010. Finally, it is the objective of this research work to fish out those problems that have obstructed the full propositions of privatization and commercialization program as it concern its implementation and as well proffer a way towards actualizing its objectives so as to foster political cum economic growth and development of this highly endowed country Nigeria.


1.4 Research Questions

This work will tend to ask some relevant questions like:-

  1. What caused the evolution of the public enterprises in Nigeria?
  2. What are the reasons why these public enterprises have to be sold despite the rationales for its establishment?
  3. Can these corporations function well under the care of the state rather than being privatized whether wholly or partly?
  4. How far has this privatized enterprises gone in boosting efficiency and high productivity to benefiting Nigerians as a whole whether poor or rich, higher place or less privileged?
  5. Who are the main beneficiaries of the privatization and commercialization program?

1.5 Hypothesis

  1. Corruption is the cause of the poor performance of the public corporations
  2. Good and transparent governance is the key to an efficient public enterprise
  3. A well implemented privatization and commercialization programs boosts political economy of a country.
  4. Politicization of privatization and commercialization of public enterprises will lead to theses enterprise inefficiency when sold out.

1.6 Scope of the Study and Limitation of Study

The scope of this research work focused strictly on those privatization and commercialization programs that have been embarked upon by Nigerian government from 1988 to 2010. This work will lead us to the evolution of public enterprises in Nigeria and also examine why they later turned out to be sold or privatized, partly or wholly. Finally, to analyze how politics been played by past administrations since 1988 towards this programme have ridicules this whole exercise.


1.7 Limitations of the Study

On the course of this research, the following problems were encountered, like short time frame. Financing problem, scarcity of information or data, etc. this is due to mainly, the wide scope of this study which emphasizes on a complex institution like Nigeria. The longer duration of the subject matter to study, which dates from 1988 to 2010 concerning privatization and commercialization program of public enterprises in Nigeria, also contributed. Now, the implication is that the short time frame mapped out for this research work posed a problem of assessing these programs as whole, but that doesn’t threat the authentication and quality of this work.
Again, enough financing of the accomplishment of this work became a problem in the sense that gathering information was costly, the researcher needed enough money to gather them.


1.8 Significance of the Study

This research work will help the government and readers to understand those benefits that privatization and commercialization programme embodies which we have neglected and politicized with in the past. In understanding this on the side of the government, it will allow them to rethink and work towards real implementation of it thereby creating a room for the rapid growth and development of this country. At the other hand, it will go a long way to create an avenue for more academic research.

Haven known this, it is worthy to conclude that the main beneficiaries of this study lies on the government and other readers respectively.


1.9 Definition of Terms

Public Corporations:

Public corporation or enterprise as defined by Adamolekun (1983), are organizations that emerged as a result of government acting in the capacity of an entrepreneur. They can be seen as those corporations or enterprise built, owned and managed by the government. They are being financed with public fund, especially through taxation and also operate on monopoly.

Privatization:

Privatization can be defined as the transfer of ownership and control of enterprises from the state to the private sector. Iheme, (1997) defines privatization as any of a variety of measurers adopted by government to expose a public enterprise to competition or to bring in private ownership or control or management into a public enterprises and accordingly to reduce the usual weight of public ownership or control or management.

Commercialization:

Commercialization is act of making government owned enterprises profit oriented. Commercialization can be full or partial according to the Bureau of public enterprises Act of 1993. In both full and partial commercialization, no divestment of the federal Governments shareholding will be involved and subject to the general regulatory powers of the federal Government.

Capitalism:

Capitalism means the economic system in which property is privately owned and goods are privately produced. It is some times referred to as the private enterprise system. It is the private ownership of the business of a society with the freedom of private owners to use, buy and sell their property or services on the market at voluntarily agreed prices and terns, with only minimal interference with such transactions by the state or other authoritative third parties.


Chapter Five


5.0 Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings

The summary point is that if privatization and commercialization program is carried out with sincerity of purpose almost every group will come out ahead as a result of divestiture. The idea of privatization is that the state should ensure that essential goods and services are provided but not aimed to be the sole producer or deliverer. Whereas in the past government was seen as often squeezing out market supplies, it is now expected to support their development and promote competition. Meanwhile, in the three years since the implementation of the privatization program began, the Technical committee on privatization (TCPC) has been able to complete privatization work on 62 out of the 73 enterprises slated for full privatization, and 22 out of the 25 enterprises slated for partial privatization. On the commercialization aspect of the program, the number of public enterprises with whom performance Agreements have been entered into stood at 22 as of mid 1992. so far, the exercise has generated ( for the Government) over #1, 6 billion as privatization revenue, created over 600,000 new share holders in the country, bridging both income and geo-political divides, radically changed the structure and depth of the Nigerian capital Market and created awareness of the virtue of share ownership as a form of savings. The program has relieved the Federal Government of what was the huge and growing burden of financing debts and deficits of public enterprises it has improved the allocative efficiency of the national economy, and enhanced the volume of corporate taxes accruing to the national treasury.

However, privatization is not a blanket solution for the problems of poorly performing state owned enterprises. It cannot in and of itself make up totally for lack of competition, for weak capital markets or for the absence of an inappropriate regulatory framework. But where the market is basically competitive, or when a modicum of regulatory capacity is present, private ownership yields substantial benefits.


5.2 Conclusion

The program of privatization and commercialization is a major opportunity for reform of Nigeria’s ailing public enterprises and to prepare them to save the needs of the Nigerian economy in the 21st century. Enterprises will be made more efficient more accountable and more responsible to the needs of the clientele it is meant to be serving the Nigerian public. The Nigerian private sector will also benefit tremendously in the creation of new investment opportunities and a better investment climate. A lot of new shareholders have been created and now have a say in the affairs of the organized private sector. The performance of the Nigerian Capital Market will be enhanced greatly, as well the growth potentials of the Nigerian economy. But, what lessons are there for Nigeria, Africa and the Third world countries undertaking similar programs? Our experience in Nigeria points to the fact that it is difficult, if not impossible, for the government in developing countries to divest its interest in enterprises completely. In many African countries, the institutional infrastructures for viable divestiture do not exist. Furthermore, local capital with which to facilitate implementation of divestiture is not available. Therefore it would seem that the viable option for most African countries is to subject a substantial part of the public enterprise sector to reforms that will help them achieve management and productive efficiency.


5.3 Recommendation

Haven gone this far gathering problems that have continued to pose a threat to full implementation of privatization and commercialization programs in Nigeria, the following solution became necessary for real privatization objectives to be achieved:-

1) Capturing the confidence of labour: Government should endeavor to win over labour’s acceptance of privatization by giving them ownership of shares in the enterprises. Workers could be allocated a percentage of the shareholding at a special discounted price. There is need for good follow up on privatized enterprises, there is need to keep a record of accurate figures on pre- and post- privatization employment levels including statistics to show whether employment is declining or increasing to calm the fear of labour unions. Other statistics should includes how much of capable and qualified labour will be absorbed by the buyers, etc. labour on the other hand must also realize that many of the jobs also might have been cost anyway by retrenchment, since government could not keep subsidizing crises- ridden public enterprises indefinitely; the only exercise that could be guaranteed is constant lay off.

2) Inclusion of Labour: – Interaction with the unions as stakeholders is often a good strategy. One of the major mistakes that is common in privatization in Nigeria is taking the workers for granted. When the unions are not involved in the organized process, it may be difficult to gain their corporation. The stakeholders must be sensitized to the impending constraints that privatization is likely to bring about, especially in the short run.

3) Monitoring of privatization processes

4) Transparency and Accountability: This is one of the most important issues in privatization exercise in Nigeria. Suspicious of corruption that follow privatization deals require that separate auditing and House of Assembly oversight committee be established to help in the monitoring process. It is also my considered opinion that money realized from sale of public enterprises and saved through withdrawal of subsidies should be invested in the hinter land for provision of infrastructure. This will not only enhance development but also will check the drift of rural urban migration, especially among the youth, since the cities are getting over populated while the rural areas are quickly deteriorating .

5) Consistence and Credibility: The key to credibility is consistency and communication. Whenever government lacks credibility, people refuse to change, until the confrontation that that ensues imposes unavoidable cost on the warring parties at the expense of the economy.

6) Need to make strategic administrative re-engineering to enable BPE staff interact extensively with stakeholders in the exercise especially the staff and consultants of bidding firms.

7) The Nigerian economy will also require financial market expansion to include derivative, future and options, credit and debt swaps etc. several of these foreign investments funds are willing to invest in Nigeria on the condition that the country puts financial house in order.

However, it is quite instructive to note that successful structural reform cannot be recorded unless:

  • The government trusts, respects, and most importantly, informs the public adequately every step of the way, as to why certain actions are being taken.
  • Privatization is done properly with no special concessions or privileged when selling public enterprises; and
  • The creditor countries consider Nigeria’s specific circumstances while mounting pressure on the speed of the privatization exercise because ours is a low- income country characterized by poverty.

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