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The Concept Of Privatization In Nigeria

A BRIEF HISTORICAL PERSPECTIVE ON DEVELOPMENT OF PUBLIC ENTERPRISES IN NIGERIA

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INTRODUCTION

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.

Policy is a plan of action, a statement of aims and ideas or a statement of intent made to guide activities in a particular field of endeavor, for example housing (Agbola, 1998). In other words a policy is generally a statement of intent usually made by the government on a subject such as Health, Education, Housing, Energy, Population etc which is meant to guide the subject’s activities by stating its goals, objectives and strategies to achieve the goals/objectives, the institutional frame work and the required finance, Human and material resources. A policy is therefore a guide line provided by the government which is aim at meeting the people’s housing needs through a set of appropriate strategies, which involves fiscal, institutional, legal and regulatory framework.

 CONCEPT OF PRIVATIZATION

The concept of privatization in recent times evokes sharp political reactions from many angles. Privatization can be defined as the transfer of ownership and control of enterprise from the state to the private sector. Various groups have also defined it differently. The Privatization and Commercialization Act of 1988 and the Bureau of Public Enterprises Act of 1993 defined privatization as the relinquishment of part or all of the equity and other interests held by the Federal Government or any of its agencies, in enterprises whether wholly or partly owned by the Federal Government. But, however privatization is defined, it transfers ownership of production and control of enterprises from the public to the private sector. It is an ideological concept.

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The evolution of public sector enterprises often takes one of two forms. First, they could evolve from local calls or responses to an ad-hoc economic crisis, a specific shortage, flagrant abuse of monopoly or oligopoly powers by private producers, economic bottlenecks and scarcities, apparent market failures in resource allocation, etc. It is economic crises that create socioeconomic conditions that justify public intervention. Alternatively, the evolution can take the process of a carefully planned body of ideas involving the issues of management, financial control, and/or pricing. In most situations, the primary interests of the society such as “welfarism” are predetermined and postulated. These two processes have characterized the evolution of public sector enterprises in Nigeria, which dates back to the precolonial era.

A BRIEF HISTORICAL PERSPECTIVE ON DEVELOPMENT OF PUBLIC ENTERPRISES IN NIGERIA

The private sector was the traditional structure of the world’s economies. The Nigerian economy is largely private-sector based. The public sector emerged in Nigeria as a result of the need to harness rationally the scarce resources to produce goods and services for economic improvement, as well as for promotion of the welfare of the citizens. The involvement of the public sector in Nigeria became significant during the period after independence.

The railways were probably the first major example of public sector enterprises in Nigeria. At first, conceived mainly in terms of colonial strategic and administrative needs, they quickly acquired the dimension of a welcomed economic utility for transporting the goods of international commerce, like cocoa, groundnut, and palm kernels. Given the structural nature of the colonial private ownership and control of the railways in the metropolitan countries, it would hardly be expected that the Nigerian Railways Corporation could have been started as any other project than as a public sector enterprise for such mass transportation.

The colonial administration was the nucleus of necessary economic and social infrastructural facilities that private enterprise could not provide. Facilities included 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 itself 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. Those were the early stages.

The emergence of the crude oil industry into the Nigerian economy, after the civil war in the 1970s, with the associated boom intensified governmental involvement in production and in control of the Nigerian economy. One major aim of government at that time was to convert as much as possible of the growing oil revenue into social, physical, and economic infrastructural investments. The Nigerian Enterprises Promotion Decree of 1972, which took effect on 1 April, 1974, with its subsequent amendment in 1976, provided a concrete basis for government’s extensive participation in the ownership and management of enterprises. Given these developments, public enterprises at the federal level had exceeded 100 in number by 1985; and these had spread over agriculture, energy, mining, banking, insurance, manufacturing, transport, commerce, and other service activities.

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Before long, the range of Nigerian public enterprises had stretched from farm organizations to manufacturing, from municipal transport to mining, from housing to multipurpose power, and from trading to banking and insurance. At the state and local governmental levels, the range of activities that had attracted public sector investment also had become quite large. Thus, a variety of enterprises – with public interest in terms of majority equity participation or fully-owned by state and local government as well as other governmental entities – became visible in various parts of Nigeria. Between 1975 and 1995, it was estimated that the Federal Government of Nigeria had invested more than $100 billion in public enterprises.

The Concept Of Privatization In Nigeria

Privatization in Nigeria was formally introduced by the Privatization and Commercialization Act of 1988, which later set up the Technical Committee on Privatization and Commercialization (TCPC) chaired by Dr. Hamza Zayyad with a mandate to privatize 111 public enterprises and commercialize 34 others. In 1993, having privatized 88 out of the 111 enterprises listed in the decree, the TCPC concluded its assignment and submitted a final report. 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 program in Nigeria. In 1999, the Federal Government enacted the Public Enterprise (Privatization and Commercialization) Act, which created the National Council on Privatization chaired by the Vice President, Alhaji Atiku Abubakar. The functions of the council include:

  • making policies on privatization and commercialization;
  • determining the modalities for privatization and advising the government accordingly;
  • determining the timing of privatization for particular enterprises;
  • approving the prices for shares and the appointment of privatization advisers;
  • ensuring that commercialized public enterprises are managed in accordance with sound commercial principles and prudent financial practices; and
  • interfacing between the public enterprises and the supervising ministries in order to ensure effective monitoring and safeguarding of the managerial autonomy of the public enterprises.
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The 1999 Act also established the Bureau of Public Enterprises (BPE) as the secretariat of the National Council on Privatization. The functions of the bureau include among others to do the following:

  • implement the council’s policies on privatization and commercialization;
  • prepare public enterprises approved by the council for privatization and commercialization;
  • advise the council on capital restructuring needs of enterprises to be privatized;
  • ensure financial discipline and accountability of commercialized enterprises;
  • make 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; and
  • ensure the success of privatization and commercialization implementation through monitoring and evaluation.

Conclusion

The concluding point is that if privatization is carried out with sincerity of purpose, almost every group will come out ahead as a result of divestiture. Workers will be shareholders. Consumers will be better off because of better services. New graduates and the unemployed will get jobs because of expansion. Government will be relieved of the burden of subsidies. Investors will gain investment opportunities. Ultimately, the public (both foreigners and nationals) will be free to pursue any private economic interest.

Given the enormity of the socioeconomic problems facing Nigeria, there is every reason to worry about the state of our plans and actions. The issues involved, from development of infrastructure through production of vegetables, all have serious ramifications, not only for the public sector but also for the economy as a whole.

References

Aboyade, O. [1974]: “Nigerian Public Enterprises as an Organizational Dilemma” in Public Enterprises in Nigeria. Proceedings of the 1973 Annual Conference of the Nigerian Economic Society.

Federal Republic of Nigeria [1986]: Structural Adjustment Programme for Nigeria. Lagos: Federal Government Printers.

Nightingale, S.M; Pindus, M.N. [1997]: Privatization of Public Social Service: A Background Paper. Unpublished.

Nwoye, M.I. [1995]: Small Business Enterprise: How to Start and Succeed. Benin: Benin Social Science Series for Africa.

Nwoye, M.I. [1997]: Management Practices and Performance Determinants of Public and Private Sector Enterprises in Anambra, Edo and Delta States of Nigeria: A Factor Analysis.

National Productivity Centre, [1991]: Productivity for Self-Reliance and Excellence.

Proceedings of the 1st National Productivity Day Celebration, 21 February 1991, Lagos.

Obadan, M.I. [1993]: Wither Structural Adjustment in Nigeria. Ibadan: NCEMA Monograph Series No. 3.

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