A full appreciation of the legal
framework for Privatization in Nigeria entails not only an understanding of the
laws governing the process, but of the process itself. Indeed, every stage of
the Privatization process has legal implication[1].
The walls of our Privatization structure
will not stand unless the right legal, institutional and financial framework
exists in the country. This has two broad positive effects. First, the right
framework engenders a conducive environment for private sector participation
and growth. Secondly, it enables the Privatization agency to carry on more
confidently, being conscious of the definite parameters within which to
operate.
The laws governing and regulating the
Privatization Program in Nigeria can be categorized into three as follows:
1.
The
Public Enterprise (Privatization and Commercialization) Act, 1999.
2.
Specific
laws establishing and regulating the enterprises to be privatized. These are
specific laws enacted to establish and regulate the business of a particular
enterprise that is being privatized. These laws are the instrumentality from
which a particular enterprise derives its existence and they set out the
guidelines for their operations. Eg NICON ACT, NIGERIAN RE-INSURANCE ACT,
NIGERIAN PORTS AUTHORITY ACT etc.
3.
General
laws regulating the business and conduct of publicly owned enterprises. These
general laws includes[2]:
a.
Sector
specific laws such as Nigerian Communications Act, the Mining Act, and the Insurance
Act etc.
b.
Commercial
laws such as Companies and Allied Matters Act and the Investment and Securities
Act.
c.
The
Land Use Act and other use laws.
Analysis of the
Privatization and Commercialization Decree of 1988
Privatization in Nigeria was formally
introduced by the Privatization and Commercialization Decree which was
promulgated on the 5th of July, 1988 as part of the structural
Adjustment Program (SAP) of the Ibrahim Badamosi Babangida administration
(1985-1993). As McGrew argued, SAP is a neo-liberal development strategy
devised by international Financial Institutions to incorporate national
economics into global market.
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. Consequently, user charges for
social services and utilities which are statutorily established in the past
will be decontrolled and allowed to reflect the scarcity or values of the
resources committed into their production. Also investment funds based on
statutory allocations, grants and loans will be scrapped since it will be the
responsibility of the financial market on their own. Furthermore, all types of
administrative controls will be eliminated.
The Decree defines “Privatization” as “the
relinquishment of part or all of the equity and other interests held by the
Federal Government or its agency in enterprises whether wholly or partly owned
by the Federal Government”[3]
“Enterprises” (Public) is defined by the
Decree to mean “any corporation, board, company or parastatal established by or
under any enactment in which the Federal Government or any of its departments,
ministries, or agencies has ownership or equity interest and shall include a
partnership, joint ventures or any other form of business or management of
organization”
The Decree also defines “Commercialization”
to mean “the re-organization of enterprises wholly or partly owned by the
Federal Government in which such commercialized enterprises shall operate as
profit-making commercial ventures and without subventions forms from the
Federal Government”
The Decree has two schedules, each of
which contains two parts. Part I of the first schedule lists forty three (43)
companies which are to be partially privatized. This category comprises
enterprises in which the Federal Government’s existing equity holdings are to
be maintained, and those where the Government is to divest partially to a
specified percentage. Included in this group we have Commercial and Merchant
Banks, Agricultural Cooperative and Development Banks, oil marketing companies,
Sugar companies, Cement and Steel Rolling Mills etc. Part II of the same
schedule comprises of the largest category (65 enterprises) which are to be
fully privatized. Most of these have been existing as incorporated companies
before the decision to privatize them. These enterprises are mainly in the sub
groupings of Agro-allied, manufacturing, Insurance, Hotels and Construction.
Etc.
The second schedule similarly consists
of two parts. Part I lists fourteen (14) enterprises which are to be partially
commercialized. These are in diverse categories and include the Iron and Steel
plants, Radio and Television, utility and the Nigerian Security Printing and
Minting Company. Part II of the same schedule, lists eleven (11) enterprises to
be fully commercialized. These comprise enterprises in exploration and mining,
Telecommunication service and insurance.
A quick examination of the schedules
will reveal that the Government intends to retain its control in strategic
enterprises such as iron and steel, currency and minting, electricity generation,
airport, railway, radio and television network, mining and telecommunications.
However, sections 1(3) and 12(3) of the
Decree empowers the president or Head of state to make orders at any time to
alter, modify, add to, or delete from or amend any of the enterprises listed in
both schedules to the decree so as to alter the category to which any
enterprise belongs. By section 2 of this decree, “The control, management and
composition of the boards of director of privatized enterprises shall as from
the date of Privatization reflect the ownership structure of the enterprise”.
The provision appears to have limited the scope of Government interference,
though it has not eliminated it, given the likelihood that Government’s
minority stake of up to 35% in some cases may well decide the fate of the
Public Enterprise slated for partial Privatization. This is because of the
implication of the situation in which the Federal Government has 40% equity and
as it is possible by virtue of the provisions of S. 7(2) and 7(6) of the
Decree, no other shareholder, cooperate or individual can have more than 1%
equity in the hands of bureaucratic Government officials, and as usual, Government’s
undue interference in Public Enterprise operational activities, high turnover
in the board membership and top management of such enterprises. It is therefore
submitted that ‘Partial Privatization’ with Government singly owning 40% equity
while the remaining 60% is spread in infinitesimal and insignificant
proportions over a large number of individual shareholders will not remove the
elements that characterize the failure of Public Enterprise also ‘Partial Privatization
in the context of Decree No. 25 is not a sufficient cure for the ills of the
Public Enterprise unless it is accompanied by a private control and management.
It is submitted that anything short of private control and ownership should not
be regarded as Privatization at all.
However, no specific guidelines as to
principles, procedures and modalities are provided by the decree in respect of
enterprises that have been given limited autonomy in fixing rates, prices and
charges and may capitalize their assets in order to improve their access to the
capital market. They are also allowed to borrow on their own and issue debenture
stocks[4].
There is also the general requirement that they should now operate as profit
making commercial ventures without subventions from the Government[5].