INTRODUCTION
The
Privatization and Commercialization Act 1988 and the Bureau of 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.
In Nigeria, only a few successful
enterprises, flour mills, African Petroleum, National Oil and Chemical Company
Limited (NOLCHEM) were partially privatized. The commercialization of
enterprises such as National Electric Power Authority (NEPA), Nigerian
Telecommunications (NITEL) and Nigerian petroleum corporation (NNPC) hardly
showed any significant improvement in their operational and economic
performance.Employment levels were affected by privatization. Between 1989 and
1993, the public sector accounted for more job losses than privatized
companies. When privatized, firm’s employment rose, public and private sectors
still had lower employment levels. The sharp in prices between 1992 and 1994
did not create a sufficient increase in gross earnings for 1994. Profits
increase but the extent to which this increase can be attributed to reduction
in government is not clear. Results showed that privatization has improved
companies performance, especially in the efficiency of resource utilization.
Higher profit to capital ratio has been witnessed since privatization. However,
the heydays of public enterprises in Nigeria are gone for good.
CONCEPTUALIZATION
OF PRIVATIZATION
Although
the concept of privatization is an emotive ideological and controversial ambiguous,
that why Iheme defines privatization
as; any of a variety of measures adopted by government to expose a public
enterprise into competition or to bring in private ownership or control or
management into a public enterprise and accordingly to reduce the usual weight
of public or control or management. Starr
defines privatization as a shift from the public to the private sector, not
shift within sectors. According to him, the conversion of a state agency into
an autonomous public authority or state owned enterprise is not privatization,
neither is conversion of a private non-profit into a profit making form. Privatization
in Nigeria was formally introduced by the Privatization and
Commercialization
Decree of 1988 as part of the Structural Adjustment Programme (SAP) the Ibrahim Bademosi Babaginda
administration (1985 – 1993). As McGrew argued, SAP is a neo-liberal
development strategy diverged by international financial institution to
incorporate national economics into the global market.
OBJECTIVES OF
PRIVATIZATION
It
is possible that some if this popular and critical perceptions and assertions about
privatization are accurate. 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 limited perspective. The set of objectives privatization
programs are meant to achieve is broad
and involved; it has many fundamental components that can act together for the
enhancement of microeconomic efficiency. There indeed some critical long run
objectives to be achieved through privatization including the following;
· Increasing productive
efficiency;
· Strengthening the
role of the private sector in the economy which will guarantee employment and
capacity utilization;
· Improving the
financial health on public services with savings from suspended
· Subsidies;
· Reducing corruption
because interference by politicians will cease.
Invariably,
a privatization program ought to be judged and assessed by the extent to which
the state objectives have been met. Furthermore, could take slow but steady
development.
PROS AND CONS OF
PRIVATIZATION
BENEFITS OT
PRIVATIZATION
Privatization
has several benefits such as reduced government bureaucracy, reduced state
monopolies and financial structures, increased competitiveness, increase in
quality of goods and services reduce corruption and control by government, increase
staff quality and supervision, improve market analysis, free up government funds
for more pressing problems, create employment, re-invigorate the local economy,
expand local businesses, attract direct foreign investments, expand capital
markets, redistribute wealth, improve technological transfer, enhance control
trade regulations e.t.c.
DEMERITS OF
PRIVATIZATION
Globally,
privatization has been engulfed with complex problems with each country having
its own peculiar solutions. These problems include private firms concentrate on
profit making to the detriment of essential public service, private firms
render more expensive service, private firms fail to invest in infrastructure, reduction
of public workforce and experience, private companies are not interested in
short term benefits, privatization replaces state monopolies with private
monopolies, private firms find it difficult to render public services such as water,
public health and transportation services, the exercise usually creates wealth for
the rich while making the poor poorer, it reduces public accountability, private
companies replaces public corruption with state corruption e.t.c.
SELF INFLICTED
COMPLICATIONS
Strict
compliance of both regulators and participants to the rules and time frames of
the 1999 Privatization and Commercialization Act and customary international privatization
practices would had ensured the evolution and development of a near perfect
policy and economic reformation and restructuring of Nigeria’s political
economy. The expected trajectory of the entire privatization exercise
immediately took a dangerous derailment after the first five years of implementation,
especially under the Directorship of a former and now exiled minister, renowned
for drumming World Bank consultancy standards while always trying to keep these
same standards. The final balkanization and contamination of the exercise was
cemented by key players in the entire privatization process of the last civilian
administration. By the twilight of the last administration in Nigeria, a
plethora of discontentment on the exercise had reached fever pitch. A panoply
of privatization policies in Nigeria includes the entangled privatization
exercise of NITEL, Pentascope, NEPA or PHCN, the power reforms, the oil sector
reforms particularly NNPC and Nigerian LNG, the post reforms, the inability of
18 successor companies to Power Holding company of Nigeria (PHCN) to function,
the sale of national steel companies namely; Ajaokuta Steel and Delta steel to
Global infrastructure, Daily Times, African Petroleum, ALSCON, NAFCON, Eleme
petrochemicals, the constant labour disputes, the draconian sale of Federal
Government in Lagos and Abuja considered by patriotic civil servants to be the
greatest economic heist of the 21st century in Africa, the
revocation of 18 private refineries licenses, the proposed and ill advised
privatization of Unity Schools, the sale of the Trade Fair Complex, the
controversial auction of African petroleum, the sale of Stallion House, the hastic
and obscurantic sale of refineries at twilight of the last administration
e.t.c.
By
a recent administration of the BPE in an international newspaper, only 10% out of
400 privatized firms in Nigeria are properly functioning as at today. 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,
undervaluation of assets, asset stripping by the private sector firm acquiring
the state firm, trade and competition interest between the acquired Government
enterprise 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 the
competing firms to meet the financial benchmarks, creation of an industry
monopoly, unnecessary retrenchment of public officers by the acquiring firm, unexplainable
or unfair assignment of the properties of the state agencies or subsidiaries or
vice versa, favouritism in the section of core investors, disproportionate size
of regulatory agencies as compared to the size of angencies under its
supervision, e.t.c. These technical complications are direct consequences of
several structural defects in the legal policy and implementation frameworks of
the exercise.
BIAS AGAINST
PRIVATIZATION
Given
the fact that the initial impetus for privatization in Africa came from creditor
institutions especially the IMF and the World Bank, as part of the push for structural
adjustment, many believed that there must be a hidden agenda in form economic
exploitation.
Several
of these arguments against privatization are as follows;
·
Rising
price
·
Creating
poverty
·
Corruption
·
Breaking
of unions
·
Exploitation
of capitalist countries.
THE BOTTOM LINE
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 level of socioeconomic problems facing Nigeria, there is always a reason to
worry about our state of our plans and actions. The issues, from development of
infrastructure through production of vegetables, all have serious ramifications,
not only for the public sector but for the economy as a whole.
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