Wednesday, March 23, 2011

Privatization of public enterprises in nigeria: A critical assessment of its politicisation

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
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:
a. Corruption
b. Lack of transparency
c. Lack of accountability
d. Inconsistency and
e. 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.
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.
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?
a) Corruption is the cause of the poor performance of the public corporations
b) Good and transparent governance is the key to an efficient public enterprise
c) A well implemented privatization and commercialization programs boosts political economy of a country.
d) Politicization of privatization and commercialization of public enterprises will lead to theses enterprise inefficiency when sold out.
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.
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.
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.
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.
The history of public corporations in Nigeria dates back to the colonial era. The colonial government established some public enterprises to provide essential services like railways, roads bridges, electricity, ports and harbors waterworks, and telecommunication. Social services like education and health were still substantially left in the related hands of the Christian Mission. But even at this initial stage government it moved positively into some of the direct productive sectors of the economy: the stone quarry at Aro, the colliery at Udi, and the saw mill and furniture factory at Ijora. However the post independent era marked a watershed in the growth and spread of public corporations.
Ake (1981) has offered four reasons for the growth of public enterprises in the immediate post colonial period. The first reason has to do with the desire of the national petit-bourgeoisie which inherited political power from the colonial masters to create an economic base for its political power. Being essentially capitalists without capital, the petit- bourgeoisie used the instrumentality of the state to empower themselves economically public corporation served as a conduit through which public funds were channeled to private pockets.
The second reason has to do with the struggle by Nigerians for the control of the economy as well as the struggle for economic independence. Nigerian politicians felt that they had to build up enterprises that can compete with the foreign ones. Thirdly, some public enterprises were established as a means of promoting experts and to realize import substitution. Finally, some of the state enterprises came into being as a result of nationalizations of foreign owned private enterprises.
Many reasons have been adduced as the justification for creating public enterprises. Following are six important ones:
1. The first of these, especially in the context of developing countries such as Nigeria, is the developing emphasis. In many developing countries, the resources available to the private sector are not adequate for the provision of certain goods and services. Fro example, the investments required in the construction of hydroelectricity- generating plant or a water scheme for a large urban center are quite enormous and the returns on such investments will take a very long time to realize.
2. Secondly, political considerations influence governmental involvement in the provision of certain social and economic services. In many African countries, development is closely associated with the provision of social services; consequently, the performance of the government, in many of these countries, is evaluated on the basis of its ability to provide different types of public services in areas where such services do not exist.
3. The third reason fro governmental intervention in the provision and management of goods and services in many parts of world is the fact that no person should be permanently deprived of the access to such facilities because of lack of finances or by reason of geographical location.
4. A fourth reason relates to the need to protect the consumer, which may not be of interest to the private sector. For example, government intervenes in the provision of education in many countries to protect children, who are not capable of making important decisions for their selves, by making education up to a certain age compulsory and free.
5. The fifth reason for governmental intervention in the provision of certain goods and services relates to the indivisibility that characteristic such services. Some facilities, such as bridges, tunnels, roads, streetlights, and waste disposal facilities, cannot be divided or partially provided for the benefit of everybody in the community or they are not facilities of this type must therefore be provided publicly and financed through taxation.
6. The last but not the least is the consciousness of the national security. Certain facilities, like the National ports Authority and the police, are too vital to be left at the mercy of private citizens.
In Nigeria, the issue of mismanagement and under-utilization which led to huge wastage of resources and manpower potentials gave the government of the day no other option but to pursue quickly the privatization and commercialization program. There are about 600 public enterprises in Nigeria run by or controlled by the Federal Government. Many more are controlled by state Governments these companies takes a sizable portion of the federal Budget and account for over 5,000 appointments into their management and Board- a powerful source of political patronage. Transfers to these enterprises run into billions of Naira. These transfers were in form of subsidized foreign exchange, import duty, waivers, tax exemptions and / or write off of arrears, unrequited revenues, loans and guarantees and grants/ subventions. These companies were also infested with many problems which became an avoidable drag on the economy such as:-
1. Abuse of monopoly power
2. detective capital structure
3. Heavy dependency on treasury funding
4. Rigid bureaucratic structures and bottleneck
5. Mismanagement
6. corruption and Nepotism
With all these problems following the economic recession of 1980’s the government had no other option but to take a positive step. Apparently, the economy can no longer sustain the level of wastages associated with public enterprises. Also as a step to get out of this malaise, a solution has to be found on how to reduce wastes. Privatization and commercialization are one of such solutions.
Privatization in Nigeria was formally introduced by the privatization and commercialization Decree of 1988 as part of the structural Adjustment program (ASP) of the Ibraham Badamosi Babangida administration (1985-93). As McGrew argued, SAP is a neo-liberal development strategy devised by international financial institutions to incorporate national economics into the global market.
The vision of a “global market civilization” has been reinforced by the policies of the major institutions of global economic government namely up to the mid 1990s. Underlying their structural adjustment programs has been a new- liberal development strategy- referred to as the washing on consensus which prioritizes the opening up of national economics to global market forces and the requirement for limited government intervention in the management of the economy.
One of the main objectives of SAP was therefore to pursue deregulation and privatization leading to removal of subsidies, reduction in wage bills and the retrenchment of the public sector ostensible to trim the state down to size.
The privatization and commercialization Decree of 1988 set up technical committee on privatization and commercialization (TCPC) under the chairman of Dr. Hamza Zayyad to privatize 111 public enterprises and commercialize 34 others in 1993, the TCPC concluded its assignment and submitted a final report having privatized 88 out of the 111 enterprises listed in the decree. Based on the recommendation of the TCPC, the federal military Government promulgated the Bureau for public enterprises Act of 1993, which repealed the 1988 Act and set up the Bureau for public enterprises (BPE) to implement the privatization programs in Nigeria.
The overall objectives of the privatization exercise were:
1. To improve on the operational efficiency and reliability of our public enterprises;
2. to minimize their dependence on the national treasury for the funding of their operations;
3. To roll back the frontiers of state capitalist and emphasize private sector initiative as the engine of growth;
4. To encourage share ownership by Nigerian citizens in productive investments hitherto owned wholly or partially by the Nigerian Government and, in the process, to broaden and deepen the Nigerian market.
The TCPC transformed to Bureau for public enterprises (BPE). The Bureau was to monitor the performance of the enterprises privatized in the past exercise and plan for the future phases. Because of the success of the past exercise, the military government under General Abdulsalam Abubakar promulgated the public enterprises (privatization and commercialization) Decree No. 28 in early 1999 (before the hand-over to a democratically elected government). The Decree allows BPE to alter, add, delete or amend the provisions in the document in the best interest of the country. Initially, sixty-one (61) enterprises were slated for privatization ( 36 partial and 25 full privatization) but because of the new powers granted BPE, it has increased the list by 37 extra enterprises (some of which were originally meant for commercialization) some of the big government companies being privatized now include – National Insurance Corporation of Nigeria (NICON), Nigerian Reinsurance Corporation, Nigerdock Plc, National Aviation Handling company (NAHCO), Nigeria Railways Corporation (NRC), Nigerian postal services (NIPOS) and Savannah sugar company. This is an indication of the enhanced interest in and success that privatization has achieved in Nigeria.
In December 1999, the democratically elected government of President Olusegun Obasanjo picked interest in the privatization exercise and gave it a boosts by establishing the National Council on privatization (NCP) with the Vice- president, Alhaji Atiku Abubakar, as its chairman. The council is empowered among other things:-
i. To determine the political, economic and social objectives of the privatization and commercialization program
ii. Approve guidelines and criteria for valuation of public enterprises marked out for privatization – including choice of strategic investors.
iii. Identification of enterprises to be privatized or commercializes
iv. Approve the price for shares or assets of the public enterprise to be offered for sale
v. Determining the timing of privatization of particular enterprise.
vi. Interfacing with the public enterprises, together with the supervising ministries, in order to ensure effective monitoring and safeguard of the managerial autonomy of the public enterprises.
The Act also established the Bureau of public Enterprises (BPE) as the secretariat of the National council on privatization. The functions of the Bureau include:
i. Implementing the council’s policy on privatization and commercialization
ii. Preparing public enterprises approved by the council for privatization and commercialization
iii. Advising council on further public enterprises that may be privatized or commercialized
iv. Ensuring the update of accounts of all commercialized enterprises for financial discipline
v. Making recommendations to the council in the appointment of consultants, advisers, investment bankers, issuing houses, stockbrokers, solicitors, trustees, accountants and other professionals required for the purpose of either privatization or commercialization.
vi. Ensuring the success of the privatization and commercialization exercise through effective post transactional performance monitoring and evaluation.
vii. Providing secretarial support to the council
Former Nigerian presidents from Ibraham Badamosi Babangida (IBB) to Obasanjo passed the ownership and control of Nigeria’s state owned enterprises to their friends, family relations and themselves in the name of privatization. For example, some of the most celebrated Nigeria’s privatized public assets during Obasanjo’s regime (1999-2007) include Ajaokuta steel Mill; Delta Steel Complex; Jos still Rolling Mill; Oshogbo Machine Tools and Itakpe Iron Ore Company. Others include Nigeria Airways; Nigeria Telecommunication company (NITEL) and its Mobile phone subsidiary company- MTEL; NICON Hilton Hotel (Transcorp Hilton Hotel); African petroleum Limited (AP); National Oil and Petrol Chemical Company; National Fertilizer Company (NAFCON); Cement companies; Oil blocks and Banks, just to mention but a few. The way and manner in which these assets changed hands and the selection of who owns what and at what price are still generating many unanswered questions and concerns in Nigeria. There concerns and questions were some of the challenges former president Yar’ Adua confronted.
Some of the reasons why the Nigerian public is not happy with Obasanjo’s privatization policy and programs are largely that they were done in bad faith and were out of tune with the principles of transparency, accountability and due process. Moreover, they widened the existing gap between “haves” and “have-nots”. In addition, the much taunted expected improvements of service and products delivery did not happen. The scheme created lasting sense of injustice, parochialism and nepotism in the polity. Furthermore, it discredited the anti- corruption stance of the administration. The political economy implications of the affair are many. For example, the scheme created a new crop of oligarchs in the mould of Transcorp and other similar outfits with concentrated economic and political powers in their hands. Theses concentrated economic and political powers are dangerous to the sustainability of democracy institutions, rule of law and good governance in Nigeria. Privatization also serves as a money laundering instrument to a great extent, in order to legalize illegally accumulated wealth, such as income from international drug trafficking.
The Bureau of public enterprises recorded only one deal worth $32.5m (about #4.27bn) within the few years that former president Yar’Adua stayed in the saddle, (Everest 2009). This contrasts sharply with the speed of privatization under form president, Chief Olusegun Obasanjo, when many public companies and enterprises that had been poorly managed were sold to private sector operators. In 2006, for instance, the privatization agency handled 39 transactions that fetched 134.74bn while in 2005, it handled 45 deals that fetched # 98.08bn. in 2004, the agency succeeded in selling seven companies that brought in #50.11bn.
In 2000, the year Obasanjo marked his first years in office, BPE handled six (6) major transactions that raked in #14.65bn into the treasury and got rid of ailing organizations that continued to drain federal Government’s purse. It followed this up with 11 transactions in 2001 that brought #12.14bn into the Government. The single deal that has been recorded under the Yar’Adua presidency is the sale of the Nigerian Newsprint manufacturing company Oku/bokun, Akwa-Ibom state, which was sold to Negris Holdings for $32.5m on August 12, 2008.
The administration of late president Yar’Adua have relocated the sale of Nigerian Telecommunication Limited (NITEL) to TRANSCORP by the federal Government over non-adherence to due process of privatization of companies by the Bureau of public enterprises (BPE) from 1999 to date. Deputy Chairman of the House committee on privatization and commercialization, Rep. Abbas Braimoh (PDP Edo), confirmed the effort to launch a comprehensive investigation into the privatization of Federal Government owned companies by former president Olusegun Obasanjo in Abuja, said:
We have just done a nation wide tour of all the privatized companies’ n different geo-political zones and I can tell you without any doubt that most of the companies we visited are not doing well Elombah 2009).
Relievingly, former president Umar Musa Yar’Adua had reversed number pf policies, actions like the privatization of the refineries, projects and appointments undertaken at the last hour by the OBJ administration among others. As Barr. Rafindadi noted.
Most of them (privatized enterprises) are found to be anti people, inimical to their interests and a rip off of their national pride and assets.
Some of the most interesting actions of the late president Yar’Adua include the reversal of the sale of former vice president Atiku’s official guest house which he declined to buy and in a memorandum asked his former boss Obasanjo to leave it for the use of the incoming vice president. But because of sheer ego that was not to be, El Rufai, as the chairman of the committee on the disposal/ sales of government houses in the FCT under its monetization program went ahead and sold the house to him self at a give away. Also on this same vein, house sales to former president Obasanjo’s aides were cancelled.
Another landmark decision of Yar’Adua is the cancellation of the 419 sales of the Kaduna and Port Harcourt refineries also, at a give away price to Obasanjo’s economic friends, Aliko Dangote and Femi Otedola. In fact, one of the major issues that necessitated the last labour strike in the country was the case of asking government to reverse the sale of the refineries among others as they saw it as the biggest rip off of Nigerians ever in the strongest terms ever about that the dashing out of public assets to OBJ’s friends under the guise of privatization.
However, in his usual patronage of his business political associates, Obasanjo also sold African Petroleum, AP to his number one business stooge, Femi Otedola’s Zennon Oil at a give away. For the avoidance of doubt, AP was first sold to Barrister Jimoh Ibrahim’s Global Fleet Group through a near due process at the cost of #17.5 billion. But in his usual dictorial style, Obasanjo overruled the transaction and single handedly offered the prime shares of the federal government in AP sold to Global Fleet at the first instance are according to Barr. Rafindadi (2009), far below its current value. The NNPC had earlier on in 2005 acquired AP in a #10billion debt swap.
It is again a fact that the fortunes of AP began to reduce shortly after the 30% government equity was sold to Sadiq Petroleum, the country’s fuel market was dominated by a handful of multinational and local retailers including AP. This was an indication that AP was prior to that period a very viable government owned enterprises. All it needed was competent management and board teams to push it through. No more, no less. It is also a statement of fact that the present managing Director/ chief Executive of AP, Zira Maigadi has certainly turned the fortunes of the company for good. As a proven astute administrator and manager, Maigadi has proven his worth as an asset to the company for the few years he has been on the saddle of leadership. Under his stewardship, AP recorded a turn-over of #8193 billion last two years showing an increase of more than 86% against its record in 2005. the company under Maigadi, a Chiaddeved accountant of repute who rose from a senior manager and later an executive Director before becoming an MD also showed it, recording a profit of #2.44 billions in 2006 as against a loss of #3.37 billion in 2005. if these figures are truly correct, is it not then possible that the company can do better under government control with Nigerians like Maigadi putting in the expertise to work.
The Independent Petroleum Marketers Association, IPMAN President, Engineer Tunde Runsewe, as an interested party in the AP sale of the company and called for cancellation of the sales to Zenon oil. According to IPMAN, AP can be better managed under the government control with the present crop of management at the helm of affairs however; Nigerians are hoping the president Goodluck Jonathan will cancel the sale of AP to Zenon Oil for the sale of nation interest now he has started revisiting past privatization exercise.
Because of limited space, we will address a theory of public choice to explain privatization of state owned enterprises. This theory was propounded by James M. Buchanan and Gordon Tullock in their book ‘The calculus of consent: logical Foundations of constitutional Democracy” (1962). The major assumption of public choice theory is that although people acting in the political market place have some concern for others, their main motive, whether they are voters, politicians, lobbyists, or bureaucrats, is self- interest. In the neo-classical price-auction model, individuals maximize utility and firms maximize profit. Given their characteristics, most public goods cannot be efficiently provided by market mechanism hence government becomes a substitute fro the market. Perhaps, this explains the relevance and reason for the establishment of the SOEs, that is, market failure. It is also a trite fact that deregulation, commercialization and privatization of state owned enterprises are consequences of failure of the SOE to effectively deliver services.
The area of this study is the Federal Government of Nigeria. Nigeria is made up of thirty six (36) states with Abuja as the federal Capital Territory (FCT). The country is located in West Africa and shares land boarders with Republic of Benin in the west, Chad and Cameroon in the east, and Niger in the north. Its coast lies on the Gulf of Guinea, a part of the Atlantic Ocean, in the south. The threes largest and most influential ethnic groups in Nigeria are the Hausa, Igbo and Yoruba.
Nigeria was the former colony of Britain and got her independence in Oct. 1, 1960. Nigeria is the most populous country in Africa, the eight most populous countries in the world, and the most populous country in the world in which the majority of the population is black. The present or current president on Nigeria is Dr. Goodluck Ebele Jonathan. He succeeded President Umaru Musa Yar’Adua. The economy Of Nigeria is one of the fastest growing in the world, with the international Monetary Fund projecting a growth of 90% in 2008 and 8.30% in 2009. in the early 2000, the majority of the population lived off less than .us $1.25 (ppp) per day. It is the second largest economy in Africa, and is a regional power that is also the hegemonic West Africa.
Due to the fact that this work focuses on a complex society like Nigeria to examine how privatization and commercialization of public enterprises programs from 1988 to 2010 have worked towards its main objectives and propositions, it is therefore necessary and more reliable to use the secondary source of data collection.
However, this study will not neglect the importance of showing the current population of Nigeria. The results of the most recent census were released in Dec. 2006 and gave a population of 140,003,542, the males numbered 71,709,859, females numbered 68, 293, 08. Nigeria is divided in thirty-six (36) states and of Federal Capital Territory, which further sub-divided into 774 local Government Areas (LGAs). The Nigeria state has six cities with a population of over one (1) million people (from largest to smallest: Lagos, Kano, Ibadan, Kaduna, Port Harcourt, and Benin City). Lagos is the largest city in sub- Saharan Africa, with a population of over 10 million in its urban area alone. Population of Nigeria’s cities over a million includes Lagos ( 7,937,932), Kano ( 3, 848, 885), Ibadan ( 3, 078, 400), Kaduna ( 1, 652, 844), Port Harcourt ( 1, 320, 214), Benin city ( 1, 051, 600), Maiduguri ( 1, 044, 497) and Zaria ( 1, 018, 827). According to current data one out every four (4) African is Nigerian.
Since there s no use of questionnaire on the research process of this work, the sample size can not be specified. This work rather focuses interest on various past privatization and commercialization programs in the country from 1988 to 2010. This therefore redirects our interest on the use of secondary source of data collection to be able to arrive on a more reliable and original study complexity of this topic or study deters us from applying primary source of data collection which implies using of questionnaire.
Here, we will only be able to access some privatization and commercialization programs of the Federal Republic of Nigeria starting from 1988 to 2010, and restricted to study a particular enterprise. The reason is to be able to draw a clear and unbiased comparison of findings among them, so as to know their contributions after implementation to the growth and development of Nigerian economy.
The secondary source of data collection is used in this work and embodies, use of library materials like textbooks and journals; published articles on the web or internet and also use of Newspapers and magazines. These are already made works from different scholars, analysts and other academic professionals who have done a research on most of this privatization and commercialization programs and came out with a presentable research work. Others like newspapers i.e. national dailies embody daily activities of the government and the views of the people towards government actions. With these including internet which even have more information to compare with the secondary data, one can come out with an original work for academic purposes.
A careful examination of privatization and commercialization programs in this country from 1988 to 2010 will help us analyze them and understand their implications on the basis of their implementation and then come out with a good findings and proffer a recommendation where necessary.
Under this, we will look into the two separately to be able to understand each in isolation that is data presentation and data analysis.
This will not be treated as it is applicable in survey research which makes use of questionnaire and interview. So since we are carrying out a library research, we will present the research question of this study which asks questions like whether these corporations can function well under the care of the state or government than that of the private individuals. Under our literature review we were able to understand that private firms concentrate on profit making to the detriment of essential public service, private firms render more expensive services, private firms fail to invest in infrastructural, reduction of public workforce and experience, they are interested in short term benefits, etc. in the presence of all these problems, privatization encourages competition, and competition encourages market economy where production is high.
At the other hand we were able to look into many privatization and commercialization programs haven been done in Nigeria since 1988 to 2010 like Technical committee on privatization and commercialization Act of 1988 (TCPC), Bureau for public enterprise Act of 1993 (BPE) and public enterprises privatization and commercialization Act (1999). Their assessment includes their various main objectives and how they have gone so far in achieving them.
Here we will try to analyze various reason why privatization will be a welcome development in Nigeria and also why some enterprises should be left in the hands of the government in this work’s data presentation above we were able to highlight some shortcomings of private enterprises, but also found out that despite its shortcoming that privatization still remain a vital instrument for economic advancement of any country, mostly in the third world countries. Privatization however is not inherently good or bad, but the poor performance or effectiveness depends on implementation (Nightingale and Pindus, 1997). Invariably, a privatization programs ought to be judged and assessed by the extent to which the stated objectives have been met. Furthermore, privatization could take a show but steady developmental speed (Nwoye M.I. 1997).
Again, the objectives of these privatization programs will be analyze to assess their contribution towards a well implemented privatization and commercialization exercise. There is no doubt that mistakes have been made in the past and that promises have not been kept, for instance the incidence of interference from political office holders. However, it may turn out to be a mistake to judge privatization from a limited perspective. The set of objectives privatization prorams are meant to achieve is broad and involved; it has many fundamental components that can act together for the enhancement of micro-economic efficiency. There are indeed, some critical long run objectives to be achieved through privatization including the following:
Ø Increasing productivity efficiency;
Ø Strengthening the role of the private sector in the economy, which guarantee employment and higher capacity utilization;
Ø Improving the financial health of public services with savings from suspended subsidies;
Ø Freeing more resources for allocation to other needy areas of governmental activities ( for example, finances that would have been applied for subsidies should now be channeled to the development of rural communities); and
Ø Reducing corruption because interference by politicians will cease.
On the course of this study it is observed that privatization program in Nigeria is not a part of a compressive public sector reform agenda. The question of providing an appropriate regulatory environment is not taken seriously. The implementers of the program are in a hurry to sell off all state owned enterprises even without adequate preparation taking into cognizance, labour, gender and equity issues. Both the political leadership and the implementers of privatization is the only solution to poorly performing state owned enterprises, smuggling and effective distribution of goods and services.
In addition, the standard procedures for privatization are not followed as can be seen from the scandals that followed the aborted sale of Nigeria Airways of U.K. which had neither solid capital base nor the required experience to merit taking over the national carrier. Again, people are concerned that there is no effective monitoring and evaluation of the privatization and commercialization programme in Nigeria. For instance, as it is put by Igbuzor .O. (2007), it has been documented that fifteen (15) years after the initiation of privatization program in Nigeria, there has not been a comprehensive assessment of the post- privatization performance of affected enterprises. It is noted by Brooke Chambers (2008) that only 10% out of 400 privatized firms in Nigeria are properly functioning as at today. It further stated that the specifics of this discontentment can be attributed to several technical complications inherent in the gamut of the exercise. It all begins with inchoate or lopsided asset acquisition and share purchase agreements, non enforceable clauses and breach of share purchase agreements, due diligence of large corporation conducted at the data room of the BPE instead of a full financial and physical audit, under valuation of state assets, asset stripping by the private sector firm acquiring the state firm, trade and competition interest between the acquired Government enterprises and the acquiring firm operating and competing in the same market, lack of capacity of the acquiring private firm, lack of technical knowledge or experience of the particular industry by the acquiring firm, inability of bidding firms to meet financial benchmarks, creation of an industry monopoly, unnecessary retrenchments of public officers by the acquiring firm, unexplainable or unfair assignment of the properties of the state agencies to subsidiaries or vice – versa, favoritism in the selection of core investors, disproportionate size of sector regulatory agencies as compared to the size of agencies under it supervision, etc.
These technical complications are how ever direct consequences of several structural defects in the legal, policy and implementation frameworks of privatization and commercialization exercise in Nigeria- other problem encountered are antagonism by labour, lack of publicity and public enlightenment, and bottleneck in the system.
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.
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.
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:
a) The government trusts, respects, and most importantly, informs the public adequately every step of the way, as to why certain actions are being taken.
b) Privatization is done properly with no special concessions or privileged when selling public enterprises; and
c) 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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Prices of selected privatized Enterprises as at Sep. 2006
Privatized company
Date of offer
Offer price (#) (2)
Market price as at 7/9/06
% change
Capital Appreciation (#) (5) =(3)-(2)
National Oil Plc (Conoil)
African petroleum Plc
Union Nigeria Plc (Oando)
UNIC Ins.Plc.
Crusader Ins. Plc
Niger lns Plc
Ashaka cement Co.Plc
Benux Cement Co.Plc
Flour Mills Nig. Plc
Okomm Oil
Guinea Ins. Plc
Law. Union & Rock Ins. Plc
NEM Ins. Plc
Prestige Assurance Plc
Sun Ins. Plc
Royal Exchange
Afribank Nig Plc
First Bank Plc
Union Bank Plc
Cement Co. of Northern Nig Plc
Union Dicon Salt Plc
Source: Obadan and Ayodele (1998) and Business Day (2006).

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