A question may arise “What right or
reason has Government in going into business or production Enterprising”? I
shall treat this question in its two limbs of right and reason. Government has right to own property, so
it has right to own Enterprises. We learn from ancient history on Economic
ideologies[1]
that Countries have always practiced socialism, capitalism or mixed economy.
A
country is socialist when its Government controls all it means of production,
while it is capitalist when means of production are owned by individuals. Where
both elements of socialism and capitalism are in a Nations economy, that Nation
is said to be practicing mixed economy. Nigeria’s economy is a perfect example.
Therefore Government has right to own its own Enterprises.
Having established that the state has
right to establish and own Enterprises, the following are reasons why a state
may need or is obliged to own an Enterprise.
Firstly, a state may need to own a
Public Enterprise because of the necessity to provide certain essential goods
or services to its citizens. The State or Government has duty to provide for
its citizens some goods and services which are essential to them. Services like
the supply of electricity and pipe born water can best be provided for by the
state. Thus, corporations like the National Electrical Power Authority [NEPA]
and water boards and corporations are a must for the state.
Secondly, the state at times wades into
the provision of certain goods and services in order to break private monopoly.
Certain economic factors may make it impossible for a Private Enterprise to
have a monopoly of the provision of certain goods and services. Some
consequences of monopoly have grave economic defects. For instance, monopoly
can lead to rise in price, the monopoly may decide to be producing standard
goods and services since there is no one competing against him, a monopoly may
be inefficient, it restricts the right of the consumer to choose his goods and
services from a list of options. So the consumer suffers it all. It is this
reason that at times forces or makes the Government to venture into such
Enterprises to break this monopoly for the interest of the consumer. Yet experiences
show us that at times the attempt of Government to break private monopoly often
result in public monopoly with the same ugly consequences.
Again, the cost-intensive nature of
certain business organization makes it possible for only Government to embark
on it. A project may be so costly that individual funds may be inadequate to
face it. For example, the construction of a steel industry, hydroelectricity
generating plant or water scheme are some of such capital-intensive projects.
Also 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.
Another reason for Governmental
intervention in the provision and management of goods and services in many
parts of the 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.
Another reason for Governmental
intervention in the provision of certain goods and services relates to the
indivisibility that characterizes 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.
Facilities of this type must therefore be provided publicly and financed
through taxation.
Another is the consciousness of national
security. Certain facilities, like the National Port Authority [NPA],
immunization program and the police,
are too vital to be left at the mercy of private citizens.
Furthermore, where the state sees that
too many actors in an industry may lead to an unhealthy competition, it becomes
necessary that only Government itself could step in and stop the waste of
resources that may result from duplication, for example, construction of
railway lines where built in absurdity, dangers of avoidable accidents may
become imminent. This necessitated the establishment of the Nigerian Railway
Corporation [NRC].
These and many others are the reasons
why states go into the business of Production Enterprises.
RE-DEFINING THE
ROLE OF THE STATE
Until recently, the state’s scope of
activities had no defined limits. In addition to its sovereign functions,[2] it
was involved in economic life through direct control over the production and
distribution of many goods and services. In a number of countries, the state
was also responsible for managing financial institutions, as well as
controlling trade and capital flow between the national economy and the rest of
the world. This interventionist system, which was justified in various ways,
eventually ran out of steam. For whatever reason, the outcome was in most
cases, the establishment of a Government monopoly, which in time created
imperfection in the market for goods and services. Thus what starts as a
theoretical justification for public intervention, ended up in establishing a
replica of what is to be eliminated.[3].
The state came to release the need to withdraw from the commercial sector and
devote more time and resources to the delivery of essential public services.
The tool for this is the Privatization of inefficient Public Enterprises. No
doubt, the private sector is far better equipped than the Government to manage
commercial activities effectively, because its decision making apparatus is
less unwieldy and its ability to adapt changes in the environment is
greater. The state’s central task
therefore becomes limited to liberalizing economic activities, promoting free
Enterprises and encouraging healthy competition among businesses while
eliminating economic rents and mechanisms that confer a dominant position on a
firm or economic agent. A framework for allowing market forces to determine
prices needs to be instituted. Such a framework would encourage competition
among businesses and suppress the distortions inherent in any system of
administered price control[4].
In the context of globalization, the private sector is the main engine for
growth. Accordingly, its operations must be free of heavy-handed and cumbersome
regulatory or bueaurocratic procedures that could show its expansions. To take
full advantage of the opportunities globalization offers, the private sector
needs high-quality human resources and managerial capabilities. The sector itself
must assume some responsibility for the education and training of the
workforce; enable workers to take advantage of potentials offered by new
information and communication technologies and to benefit from the relocation
of industrial businesses and services.
Instrumental and easing the path of
globalization and creating a business environment that attracts and encourages
private sector activities[5] is
regional integration.
THE IMPERATIVE
FOR PRIVATIZATION
Before the Public Enterprises
[Privatization and Commercialization] Act Cap38 Laws of the Federation of
Nigeria, 2004[6]
was enacted, there were over one thousand [1000] state owned companies in
Nigeria and these companies were runned and funded from the Government
treasure. Any discussion on why the state of things in our public corporation
under the previous regime was
ineffective and in need of improvement,
must start and end with the fact that Government spend a lot and gained
nothing from companies that were virtually unprofitable.
12 years ago, President Olusegun
Obasanjo told the nation that successive Governments of Nigeria have invested
up to Eight Hundred Billion Naira (N800, 000,000,000) in public owned
Enterprises and that actual return on these huge investments have been well
below 10%.[7]
These inefficiencies and, in many cases,
huge losses are charged against public treasure. The effect was that instead of
spending its money on providing basic amenities, Government was busy spending
its fund on redundant Public Enterprises from which it received no return. This
was responsible for the low standard of living expected in Nigeria.
Under the previous regime, state
enterprises suffered from fundamental problems of detective capital structure,
excessive bureaucratic control, political intervention, inappropriate
technology, gross incompetence and mismanagement, blatant corruption and
crippling complacency which monopoly brings about.
So, as it were, these short comings
posed serious barrier to the growth and development of our national economy. It
was these and other reasons that gave birth to the necessity for Privatization
and Commercialization.
[1]
cc. s. okeke Textbook on Economics 1st edition p.112
[2]
E.g; security, justice, education and health care.
[3]
See Pius Okigbo, A layman’s guide to privatization; modus international laws
and business quarterly vol2, No3, September, 1997 at P.35.
[4]
Seyni N’diaye; op. cit. at p. 19.
[5]
Through harmonization of rules and procedures, free circulation of goods,
people and capital and the elimination of customs barriers.
[6] As
decree No.29 of 1999
[7]
Statement of the president on the occasion of the inauguration of the national
council on privatization.