TABLE
OF CASES
Kill
v. Hollister I wills 129.
Thompson
v. Charnock, 8 TR 139.
Pierey
v. Young. (1879) 14 Ch. D. 200.
The
United Nigerian Insurance Co. Ltd v. Leaner Stucco (1973) 3 Sc.11.
Ita
V. Idiok (1920) 4 NLR, 100
Khawam
and Bros Ltd v. Ediht Ltd (1967) NLR, 125.
Nipol.
v. Bioku Investment and Property Co. Ltd (1992) 2 SCNJ, 58
Home
Development Ltd v. Scancilia Contracting Co. Ltd. (1994) 9 SCNJ. 87.
Re
North Anstraham Territory Co. Achers Case (1891-4) All ER 150 at 152 (1882) 1
Ch. 322.
TABLE OF
STATUTES
i.
Arbitration
and Conciliation Act, Cap. 19, Laws of the Federation of Nigeria, 1990.
ii.
The
Banks and Other Financed Institutions Decree (BOFID) 1991…
iii.
The
Public Enterprises Decree No. 18 of 1994.
iv.
The
Public Enterprises decree No. 35 of 1996 – S.38.
v.
The
1999 Constitution of the FRN
1.
S.4
(8)
2.
S.6
(6)
3.
S.
36
4.
S.215
vi.
The
Public Officers Protection Act.
vii.
The
Public Enterprises (Privatization and Commercialization) Act No. 28 of 1999.
1.
S1(1)
and (2)
2.
S.2
3.
S.3
4.
S.5
5.
S.6
6.
S.8
7.
S.9(1)
(2) and (3)
8.
S.10
9.
S.11
10.
S.12
11.
S.13
12.
S.14
13.
S.15
14.
S.16
15.
S.17
16.
S.
23(1) (2) (3) and (4)
ABBREVIATIONS
Co. – Company
Ltd. – Limited
Plc. – Public Limited Company
TOPIC: AN APPRAISAL OF THE PUBLIC ENTERPRISES
(PRIVATIZATION AND COMMERCIALIZATION) ACT NO. 28 OF 1999: ITS IMPACT IN NIGERIA
ECONOMIC DEVELOPMENT.
1.0 CHAPTER ONE - GENERAL INTRODUCTIONS
1.1 Background of the Study
1.2 Statement of Problem of the Study
1.3 Research Questions
1.4 Objectives of the Study
1.5 Hypothesis
1.6 Significance of the Study
1.7 Scope and Delimitation of the Study
1.8 Limitations of the Study
1.9 Methodology.
2.0 CHAPTER TWO – LITERATURE REVIEW
2.1 Conceptual Clarification
2.2 Definition of terms
2.3 Origin and Evolution of Public
Corporations in Nigeria
2.4 Basis & Necessity for State
Enterprises
2.5 The Imperatives for Privatization
2.6 Specific Reasons for the Inefficiency in
our Public enterprise
2.7 The Objectives of Privatization &
Commercialization Act No. 28 of 1999
2.8 Staff Involvement in Privatized and
Commercialized Enterprises
2.9 Enterprises to be Privatized and
Commercialized.
3.0 CHAPTER THREE - PUBLIC ENTERPRISE AND ITS
AGENCIES
3.1 Legal & Institutional Framework for
Privatization Commercialization in
Nigeria.
3.2 Analysis of the Privatization and
Commercialization Decree of 1988
3.3.1 The Bureau for Public Enterprise (BPE)
3.3.2 Functions,
Powers and Staff of the Bureau
3.3.3 Legal
Proceedings
3.3.4 Public
Enterprises Arbitration Panel
3.4.1 National Council on Privatization (NCP)
3.4.2 Functions and Powers of the NCP.
4.0 CHAPTER FOUR - THE ACT AND IT’S IMPACT ON
THE NIGERIAN ECONOMIC
DEVELOPMENT
4.1 The Effects of the Act on our Legal
System
4.2 Profits of Privatization so far
4.3 Short comings of the Privatization
Exercises
4.4 Politics of Privatization in Nigeria.
5.0 CHAPTER FIVE - CONCLUSION
5.1 Summary of Findings
5.2 Recommendations
5.3 Conclusion.
LEGAL AND
INSTITUTIONAL FRAMEWORK FOR PRIVATIZATION AND COMMERCIALIZATION OF PUBLIC
ENTERPRISES IN NIGERIA
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].
THE BUREAU FOR
PUBLIC ENTERPRISES ACT OF 1993
The
Act in its S.12 (1)
established the Bureau. It is a body corporate with perpetual succession and a
common seal and may sue and be sued in its corporate name. It is the
secretariat of the National Council on Privatization and is charged with the
overall responsibility of implementing the Privatization and Commercialization
program of the Federal Government of Nigeria and with a vision of being the
model reform agency.
The Technical Committee on Privatization
and Commercialization Act of (1988) (TCPC), submitted its Final report in 1993
and recommended the establishment of the Bureau of Public Enterprises (BPE) to
continue the Privatization process. The Federal Government accepted the
recommendation and promulgated the BPEs Decree No. 78 of 1993. The Decree
repealed the TCPC Decree and transferred its functions to the BPE. With the
promulgation of the Decree which was gazetted in Government Notice No. 45B of
1st September, 1993, the members of the TCPC metamorphosed into the management
Board of the BPEs. Because of the success of the past exercise, the Military Government
under General Abdusalam Abubakar promulgated the Public Enterprises
(Privatization and Commercialization) Decree No. 28 in early 1998 (before the
handover to a democratically elected Government) which made it an Act. The Act
repealed the BPE Decree of 1993 and the Decree allows BPE to alter, add, delete
or amend the provisions in the document in the best interest of the country. It
was created by the National Council on Privatization (NCP).
FUNCTIONS
OF THE BUREAU WITH RESPECT TO PRIVATIZATION
S.3 of the BPEs Decree No. 78, 1993,
provides for the functions of the Bureau. With respect to privatization, the
bureau shall;
a.
Implement
the Council policy on Privatization.
b.
Prepare
Public Enterprise approved by the Council for Privatization.
c.
Advise
the Council on further Public Enterprise to be privatized.
d.
Advise
the Council on the capital restructuring needs of the Public Enterprise to be
privatized.
e.
Carry
out all activities required for the successful issue of shares and sale of
assets of the Public Enterprises to be privatized.
f.
Make
recommendations to the Council on the appointment of consultants, and advisers,
investment bankers issuing houses, stock brokers, solicitors, trusted
accountants, and other professionals required for the purposes of Privatization.
g.
Advice
the Council on the allotment pattern for the sale of the shares of the Public
Enterprises set out for Privatization.
h.
Oversee
the actual sale of shares of the Public Enterprise, by the issue houses, in
accordance with the guidelines approved from time to time by the Council.
i.
Ensure
the success of the Privatization exercise taking into account the need for
balance and meaningful participation by Nigerians and Foreigners in accordance
with the relevant laws of Nigeria.
j.
Perform
such functions with respect to Privatization as the Council may, from time to
time assign to it[6].
FUNCTIONS OF THE
BUREAU WITH RESPECT TO COMMERCIALIZATION
(a)
Implement
the Council’s policy on Commercialization.
(b)
Prepare
Public Enterprises approved by the Council for Commercialization
(c)
Advise
the Council on further Public Enterprise to be commercialized.
(d)
Ensure
the success of the Commercialization exercise and monitors on a continuous
basis for such period as may be considered necessary the operations of the
Public Enterprises after Commercialization.
(e)
Review
the objective for which Public Enterprises were established in order to ensure
that they adapt to the changing needs of the economy.
(f)
Ensure
that Public Enterprises are managed in accordance with sound commercial
principles and prudent financial practices.
(g)
Interface
with the Public Enterprises, together with the supervising ministries, in order
to ensure effective monitoring and save guarding of the Public Enterprises Managerial
Authority.
(h)
Ensure
that the board and management of each commercialized enterprise and the
Government of the Federation keeps to the terms and conditions of the
performance agreements if any between the Public Enterprise concerned and the
Government of the Federation.
(i)
Maintain
and review on a continuous basis any performance agreement between a Public
Enterprise and the Government of the Federation.
(j)
Evaluate
and recommend to the Council whether or not a Public Enterprise is eligible for
funding through grants, loans, subventions or equity and
(k)
Perform
such other functions with respect to Commercialization as the Council may from
time to time assign it[7].
POWERS OF THE
BUREAU
The bureau shall be subject to the
overall supervision of the Council to have power to:
(a)
Acquire,
hold and manage moveable and immovable properties.
(b)
Enter
into contract or partnership with any company, firm or person which in its
opinion will facilitate the discharge of its functions.
(c)
Request
for and obtain from any Public Enterprise statistics and other information
including reports memoranda and audited accounts and other information relevant
to its functions under the Act and
(d)
Liaise
with relevant bodies or institutions locally or overseas for effective
performance of its functions under the Act.
STAFF OF THE
BUREAU
According to S.17 (1) of the Act, there shall be appointed for the bureau, a
Director General who shall
(a)
Be
appointed by the President of the Federal Republic of Nigeria.
(b)
Not
to be below the rank of a permanent secretary in the Civil Service of the Federation.
The Director General shall be the chief
executive of the Bureau and the secretary to the Council[8]
and shall hold office for a period of four years in the first instance and may
be re-appointed for a further period of four years and on such terms and
conditions as may be specified in his letter of appointment[9].
There shall be established for the Bureau
a management committee comprising the Director General and departmental head
who shall be responsible for implementation of the policies of the Council and
the day to day administration of the Bureau[10].
The Bureau may appoint such member of
other persons to be employee of the Bureau in the performance of its functions
under this Act[11]
but this notwithstanding employees of the Bureau may be appointed by way of
transfer or secondment from any of the public services of the Federation[12].
The Bureau being a mere implementation
agency of the Council should not perform functions that conflict with or usurp
that of the Council.
But I discover that the function of the
Bureau under S. 13 (10) (e), that is issuing and selling shares and assets of
an enterprise to be privatized is just the same as, and then, in direct
conflict with that of the Council under S. 11(h). It may be argued that if
there is such actual conflict, the functions, powers of the Council shall
prevail, but I think that such inconsistencies will lead to uncertainty of
roles or overlap or abandonment.
For this reason therefore, I submit that
the Act be amended and functions be allotted to the Council and the Bureau in
such a way there will be no doubt as to who is to do what and how.
The establishment of these bodies and
their functions has gone to show how the objectives of Privatization and Commercialization
are to be achieved. But this is not all. The Act has made some other provision
that will see to the realization of these objectives.
LEGAL
PROCEEDINGS
The draftsman of the Act rightly
observed that in the process of divesting and resting of shares and ownerships,
disputes may arise. So provisions are made on how to go about legal proceedings
arising therefrom.
S.23(1)
of the Act
provides that subject to the provisions of this Act, the provisions of the Public officers Protection Act shall apply
in relation to any suit instituted against any officer or employee of the
Bureau. The whole essence of this Act is to shield Public Officers from actions
which their acts or omissions would normally have brought about. This is no
doubt a violation of the Rule of Law as enunciated by Prof. A. C. Dicey that everybody should be treated equally under
the law. That all who goes contrary to the law should be tried in the ordinary
court of law. The big question we need to answer is what is so peculiar about
officers and employees of the Bureau that warrants their exclusion from legal
proceedings.
LIMITATIONS OF
SUITS AGAINST THE BUREAU
“Notwithstanding
anything contained in any other law or enactment, no suit shall lie against any
member of the council, the Director General or any other Officer or employee of
the Bureau for any act done in pursuance or execution of this Act or any other
law or enactment or any public duty or authority or in respect of any alleged
neglect or default in the execution of his duty under this Act or any other law
or enactment, duty or authority, shall lie or be instituted in any court unless
it is commenced within three months next after the acts, neglect or default
complained of; or in the case of a continuation of jury, within six months next
after the ceasing thereof”[13].
It seems to me that this limitation
period for action under the Act is too short. Acts have always validly provided
for limitation periods for actions or acts done or omissions made under them,
but when we consider the Act in review and the nature of disputes that are
likely to arise under it, we realize the shortcoming I am pointing at. Since
the Privatization and Commercialization process are somewhat new to us, I
submit that there is need for some judicial liberalization. Let people be given
time enough to bring their disputes to Court after finding out their causes of
action. This will not only enhance a peaceful execution of the program, it will
also afford our Courts the opportunity to research and study the intricacies of
the program and come out with seasoned legal decisions and principles that
reflect our circumstances.
SERVICE OF
NOTICES, DOCUMENTS AND SUMMONS
S. 23(1) Provides that:
“No
suit shall be commenced against a member of the Council, the Director General,
officer or employee of the Bureau before the expiration of a period of one
month after written notice of intention to commence the suit has been served
upon the Bureau by the intending plaintiff or his agent”.
We need recall that under S. 23(2), the limitation period for
action under this Act is three months. Then under this Subjection (3) one out of the three months must be spent on filing
notice and waiting. This is clearly a further reduction of the limitation
period to two months.
This situation is made worse by S. 24 which provides that:
“A
notice, summons or other documents required or authorized to be served upon the
Bureau under the provisions of this Act or any other law or enactment may be
served by delivering it to the Director General or by sending it to the
Director General at the principal office of the Bureau”
This provision makes palpable the
difficulties which the intending litigant encounters in filing his notice
within one month. He has to get to the Director General in person at the
principal office of the Bureau. It means that if someone in Cross River State
wants to sue the Bureau he must go to Abuja with his notice to see the Director
General who he is most unlikely to actual see. It occurs to me that this good
for nothing provision has the singular effect of frustrating litigants and
their actions against the Bureau.
Furthermore, this provision is a
violation of the rule of natural justice that nobody shall be judged in his own
case. If for instance, I want to sue the Bureau for a claim the Director
General is both my personal and nominal defendant. It may be that serving
notice on the Director General does not mean that it is him that hears the
matter but it nonetheless clothes him an air of superiority over the claimant.
The question is why then am I presenting a notice of the action to the Director
General? More seriously considered why must I be bound to wait for a month for
my notice before I go on with the suit. These are fundamental legal questions,
and I hope that when the time comes the legislature shall answer them and make
corresponding amendments to the Act.
RESTRICTION ON
EXECUTION AGAINST THE BUREAU
The Act[14]
says that in any action or suit against the Bureau, no execution or attachment
of process in the nature thereof shall be issued against the Bureau. This
Provision though a pervasion of the normal judicial execution process, is
tolerable for two reasons. One is that it will guard against hijacking public
properties.
Furthermore the same Act in S. 25(2) has
provisions for payment of sums of money awarded by the Court against the Bureau
from the general reserve fund of the Bureau.
PUBLIC
ENTERPRISES ARBITRATION PANEL
There is also established under the Act
an Adhoc body to be known as the Public Enterprise Arbitration Panel (in this
work referred to as “Panel”) which shall be responsible for effecting prompt
settlement of any dispute arising between an enterprise and Council or Bureau[15].
The panel shall consist of five persons
who shall be persons of proven integrity one of whom shall be the chairman[16]. S. 27 (4) of the Act provides that:
“The
Council shall appoint the members of the panel on such terms and conditions as
it may deem fit”
The Panel shall have the power to arbitrate:
a.
In
any dispute raising questions as to the interpretation of any provisions of a
performance Agreement, or
b.
In
any dispute on the performance or non performance by any enterprise of its
undertaking under a performance agreement[17]
The ruling of the Panel shall be binding
on the parties and to appeal shall lie from a decision of the Panel to any
Court of law or Tribunal[18].
Two questions agitate my mind on this
arbitral Panel. The first is about its impartiality. I have made efforts in
vain to find out whether there is any difference between an arbitral tribunal
as in general and an arbitral panel specifically under the Act. S. 57 of the Arbitral and Conciliation Act
even defines an arbitral tribunal as a sole arbitrator or a panel of
arbitrators.
I therefore take them to be the same,
and assume the same rules guide them. Under S. 6 of the Arbitration & Conciliation Act,[19] parties
to an arbitration tribunal appoint members of their arbitration tribunal on
equal basis. But S. 28 (4) of the Act
No. 28 of 1999 empowers the Council to appoint all the five members of the
arbitral Panel to adjudicate on a matter wherein the Council itself is a
disputant. It is impossible to see how the arbitrators appointed by the Council
can hand down any decision (award) that is impartial or in favor of the
Council. There is a serious need for review on this point.
The next problem with the provisions on
the arbitration panel lies in S. 28 (3)
of the Act which provides that:
“Ruling
of the panel shall be binding on the parties and no appeal shall lie from a
decision of the panel to any Court of law or Tribunal”
This provision reminds me of S. 6 (6) of the 1999 constitution of the
Federal Republic of Nigeria which gives judicial powers to the Courts. Of S. 251 of
the same Constitution which gives the Federal High Courts unlimited
jurisdiction to try matters relating to incorporated Company and of S. 4 (8) of
the same constitution which precludes the legislature from making laws which
oust the jurisdiction of the courts. Even within the confines of arbitration
law, the case of Agu v Ikewibe[20]
has stipulated that parties to an arbitrator cannot undertake to be bound
by the arbitration award handed by their arbitrators.
The matter again needs the attention of
the Legislatures or the Courts should be allowed to give it an appropriate
interpretation[21].
So far, this is all the Act has done to ensure a smooth and fair achievement of
the objective of the Privatization and Commercialization Program. The next
chapter shall consider the contributions of the Act and its program to our
legal system.
NATIONAL COUNCIL
ON PRIVATIZATION (NCP)
The NCP is a think tank sponsored by the
Nigerian government to determine the political, economic and social objectives
of the Privatization and Commercialization of Nigerians Public Enterprises. In
other words it is the apex body charged with the overall responsibility of
formulating and approving policies on Privatization and Commercialization.
The council was established and
inaugurated in July 1999 under the Tenureship of President Olusegun Obasanjo.
S. 9 (1) of the Act provides for its establishment.
The legal framework, for the program is
the Public Enterprises (Privatization and Commercialization) Act and it
consists of the Vice President as Chairman, the Minister of Finance as vice
chairman; the Attorney-General of the Federation and Minister of Justice; the
Minister of Industry; and a host of
others as provided in S. 10 of the Act. S. 9 (2) of the Act provides that the
council may co-opt the supervising minister of an affected Public Enterprise to
attend relevant meeting of the council.
FUNCTIONS AND
POWERS OF THE COUNCIL
Being the supreme regulatory body in
charge of the Privatization and Commercialization program, the Council is
charged with multi-various and supervisory functions and powers to do the
following.
(a) To determine the political, economic
and social objectives of Privatization
and Commercialization of Public Enterprises.
(b) To approve
policies on Privatization and Commercialization.
(c) To approve Privatization and choice
of strategic investors
(d) To approve
guidelines and criteria for valuation of Public Enterprise which should be by public or private issue or
otherwise and advise the
Government of the Federation accordingly.
(e) To approve the legal and regulatory
frame work for the Public Enterprises
to be privatized.
(f)
To determine whether the shares of a
listed Public Enterprise should be
public or private issue or other wise and
advise the Government of the Federation accordingly.
(g) To determine the time and when a
Public Enterprise is to be privatized.
(h) To approve the
prices for shares or assets of the Public Enterprise
to be offered for sale.
(i)
To review, from time to time the
socio-Economic effect of the program
of Privatization and Commercialization and decide
on appropriate remedies.
(j)
To approve the appointment of Privatization
advisers and consultants and their
remuneration.
(k) To appoint as and when necessary
committees comprising persons from
private and public sectors with requisite technical
competence to advise on the Privatization or Commercialization
of specific Public Enterprises.
(l)
To approve the budget of the
council.
(m)
To
approve the budget of the Bureau.
(n) To supervise the
activities of the Bureau and issue directions
from the implementation of the Privatization
and Commercialization program.
(o) To receive and
consider for approval the audited accounts of the
Bureau.
(p) To submit to the
President of the Federal Republic of Nigeria in
each year a report on the activities of the council and Bureau.
(q) Receive regular
and periodic report from the Bureau on program
implementation and give appropriate directions.
(r)
Perform such other functions as may
from time to time be necessary to achieve its objectives[22].
Note here that the basic problems the
Nigerian populace had and still have with the Privatization and Communication
program was the question of transparency.
It was in the beginning of the program
as it still is today in the lips of everybody that Privatization meant nothing
more than Obasanjo and his cliques taking over the Nigerian Public Enterprises
and converting them into their own private business. I too hold this view.
In the face of these doubts, one would
expect a transparent and incorrupt Chief Executive or the National Council on Privatization
in such a way that it will be substantially independent of both the Chief Executive
and the National Council. But no such effort was made here.
It is pertinent to note here that twelve
out of the thirteen members of the Council are members of the National
Executive Council. The eleven ministers in the Council are appointees of the
President and the Vice President who is the Chairman of the Council is a
loyalist to the President, as we know. The thirteenth member of the Council is
the Director General of the Bureau for Public Enterprises. He too is an
appointee of the President[23].
The fact is everywhere that President
Obasanjo made all his Ministers and appointees sign undated letters of
resignation. The essence is that the moment a Minister appointee disagrees with
him, he shall put a date on the letter and carry it that the Minister has
resigned.
The point I am making here, is that the
Council is not independent and cannot therefore be transparent and efficient.
Shares and assets of privatized companies cannot be sold by the Council the way
the President does not approve of, if any members of the Council dares disagree
with His Excellency, he loses his job.
The insecurity of the tenure makes them
comfortable with being stooges of the President. So the fear of the populace
that President Obasanjo and his allies will eventually buy and own up all the
Public Enterprises in this country has not been removed.
CHAPTER
FOUR
THE EFFECT OF
THE ACT ON OUR LEGAL SYSTEM
Like every other law or program, the Act
and the Privatization and Commercialization Program is bound to have effects on
our legal system and even on the entire strata of socio-political system. Some
of these effects will be favorable and some adverse. So I shall discuss the
points in this chapter under two heads, is favorable effects and adverse
effects.
PROFITS OF
PRIVATIZATION SO FAR
(i)
Nigeria
has been a mixed economy, that is, some factors of Production has been owned by
individuals while some owned by the State. It is a mixture of Socialism and Capitalism.
If the indices that regulate demand and supply are in good function, they will
determine equitable price in a mixed economy. Then since most Public Enterprises
are not profit oriented, their goods and services come cheaper than those from
Capitalist. This will mean lower prices and higher demands for the public goods
and services. Since the Capitalist are always in competition with the Public Enterprises,
they are forced to reduce their own prices too. It is always a lease of life to
customers. But in the Nigerian example, the Public Enterprises are not efficient
and can so not make its goods and services cheaper. This means that we do not
have need of them. The Act has effect of returning us to capitalism. Let us
watch it unfold.
(ii)
The
second favorable effect and contribution of the Government of its shares, is
the enterprises making it spend less or nothing on them anymore. What is saved
in this way is channeled to areas like health, education and other
infrastructure. This will bring about socio-economic growth and development.
(iii)
The
Act will invariably solve the unemployment problem in Nigeria. It is hoped that
companies after Privatization will become more efficient with absorption of
more labor.
(iv)
Privatization
and Commercialization are bound to create new investment. Most of the core and
strategic investors that buy up shares in these companies are Foreign
Investors. If they taste it and like it then we will have invariably regained
faith and confidence which the Nigerian investment has lost before now.
(v)
Privatization
and Commercialization brings about competition, and competition will on the
long run bring about steady supply of goods and services at lower prices. The
telecommunication sector has started working this miracle. We see today that
“simpacks” of telephone service providers which were selling for Twelve
Thousand Naira (N12,000.00) some years back, now sell for One Hundred Naira
(N100.00) only.
SHORT COMMINGS
OF THE PRIVATIZATION EXERCISE
i.
The
major adverse effect of the Act is its penchant for being inconsistent with
pre-existing laws. For instance, while S.
36 of the 1999 Constitution generally makes everybody subject to the law, S. 23 (1) of the Act precludes officers
and employees from legal proceedings. This is pure conflict with the aged
doctrine of the Rule of Law. Again Sections 6 & 7 of the Arbitration and
Conciliation Act gives both parties to an arbitration an equal hand in appointing
arbitrators, while S. 27 (4) of the Act provides that only the Council shall
appoint all the five arbitrators to seat in an Arbitral Panel on a matter
involving the Council itself. These and some other provisions in the Act only
guarantee the unsettling of our legal system.
ii.
Privatization
and Commercialization will lead to further Capitalism of the bourgeoisie at the
expense of the already hungry proletariat. Experience has shown us that shares
of privatizes companies are sold at prices that only the rich can afford if
this trend is not watched, we shall find that the program and its whole essence
will be incapable of bettering the lot of the poor.
POLITICS OF
PRIVATIZATION IN NIGERIA
Past Nigerian Presidents with the likes
of Ibrahim Badamosi Babangida (IBB) and 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 tenure
(1999-2007) includes; Ajaokuta Steel Mill, Delta Steel Complex, Jos Steel
Rolling Mill, Oshogbo Machine Tools and Itakpe Iron Ore Company. Others include
Nigeria Airways; Nigerian 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 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. These 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 the “haves” and “have-nots”. In addition, the
much taunted expected improvements of service and product 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 oligarchies
in the mould of Transcorp and other similar outfits with concentrated economic
and political powers which are dangerous to the sustainability of democracy,
institutions, rule of law and good governance in Nigeria. Privatization also
serve as a money laundering instrument to a great extent, in order to legalize
illegally accumulated wealth, such as income from international drug
trafficking.
Despite the fact that Privatization and
Commercialization have their bad effects, these are out weighted by their good
effects. I believe we are still at the experimental stage of this program. In
time we shall find a way of eliminating these adverse effects or at least make
sure the good effect predominate them.
CHAPTER
FIVE
SUMMARY OF
FINDINGS
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 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 of the implementation of Privatization, 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 commercial aspect of the program, the number of Public Enterprises whose
performance agreements have been entered into stood at 22 as at mid 1992. So
far, the exercise has generated (for the Government) over N1.6 billion as
Privatization revenue, created over 600,000 new share holders in the country,
bridging both income and geo-political dividers, 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 financial debts
and deficits of Public Enterprises. It has improved the allocation 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 the 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 medium of regulatory capacity is present,
private ownership yields substantial benefits,
CONCLUSION AND
RECOMMENDATION
At this juncture, one must acknowledge
that all over the world, the right of Government to participate in the economic
activities has been established and there is no Government which completely
abdicates its economy to the private sector. The degree of intervention varies
from country to country. Government also needs to generate funds for the
provisions of its social responsibility which it cannot abandon to the private
sector. Thus enterprises which render essential services and are virtual
monopolies in their industries need not be privatized. They are better
commercialized. Full commercialization usually indicates the strategic nature
and the high profit potentials of an enterprise. Commercialization of such an
enterprise will enable Government to earn the high profit which it can then use
for the performance of its social duties and economic development. Deliberate
care must be taken never to replace Government monopoly with private monopoly.
Accordingly, enterprises such as NITEL, PHCN and NNPC etc. should not be
privatized in the absence of any competition in the market. They are better
fully commercialized so as to enable them to be financially independent and
improve their economic performance.
The above does not however suggest that
Commercialization is the only means of achieving Public Enterprise reform where
Privatization is not suitable. But what lessons are there for Nigerian, Africa
and the Third World countries; undertaking similar programs? Our experience in
Nigerian 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 infrastructure for
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.
So far, there have been provisions of
the Act that appeal to me, yet there have likewise been some I think are in
need of repeal or at least an amendment.
In general however, I see the Act as
being worthy of existence provided certain amendment are made.
1.
The
present constitution of the council seems improper. It makes it too dependent
on the Chief Executive of the Federation. Therefore S.9 of the Act should be
amended and members of the Council reconstituted in such a way that makes it
independent of both the President and the National Executive Council. It is
only this independence that can guarantee that the Privatization and
Commercialization Program shall be carried out in a transparent, impartial,
selfless, dispassionate and uninfluenced manner.
2. One of the
factors that informed the Privatization and Commercialization of our Public
Enterprises was that the management of these companies where inefficient. It is
in a bid to solve this problem that S. 5(3) of the Act was enacted. The
subsection mandates staffs of the Public Enterprise to be privatized to buy not
less than 1% of the shares of the enterprises to be privatized
This provision
is inefficient. A commitment to only one percent of the shares is too meager to
make the staff handle affairs of the enterprise with seriousness.
Since in most of
the privatized companies individual Nigerian investors are allowed to hold 20%
of the share and its strategic investors 40%[24]
and since both these individual investors and strategic investors form the bulk
of the staff, making up to 60% share-holding. I recommend that up to 20% of the
shares of the privatized companies be held by staff, as this will make them see
the companies as theirs and then put in their best to ensure its efficiency[25].
3. As established
earlier, the Council is the supreme regulation body overseeing the whole
Privatization and Commercialization Program.
The Bureau is responsible
for the actual implementation of policies of the Council. It will be improper
therefore for the Act to give functions of the Council. S. (13)(1)(e) of the
Act provides that the Bureau can carry out all activities required for the
successful issue of shares and sales of assets of the Public Enterprise to be
Privatized and S. 11(h) of the same Act provides that the Council shall approve
the prices for shares or assets of the Public Enterprise to be offered for
sale.
It occurs to me
that the implementation of this similar function given to the two disparate
bodies will surely lead to conflict.
The Legislature
can avoid this conflict by drawing up the functions of each of the bodies in
thematic confinements.
4. S. 23(1) of the
Act which provides that the provisions of the Public Officers’ Protection Act,
shall apply in relation to any suit instituted against any officer or employee
of the Bureau, is lagging behind in the quest for advancement of our law. It
makes caricature of the old internationally accepted doctrine of the rule of
law.
I hope that when
the legislature finds the opportunity it shall amend it to restore the dignity
of the rule of law.
5. S. 23(3) of the
Act provides that an intending litigant who wants to bring an action against
the Bureau shall file a notice to that effect to the Director General of the
Bureau in the principal office of the Bureau; this provision does not seem to
have anything to contribute to the judicial process of dispute settlement. It
rather has the unavoidable effect of frustrating litigants and their actions. I
do not see any reason why the Bureau should be treated as a sacred cow. If an
intending disputant does not succeed in filling this notice to the Director at
the said place and within the specified one month, what else does he do? I humbly
submit in this respect that if at all there is any need to file such notices,
the Bureau should create state or Zonal officers where they should be received.
6. S. 27(4) of the
Act provides that the five members of the arbitration panel to adjudicate on
matters between the Council and any enterprise. The law on the appointment of
members of an arbitration panel (Tribunal) is that both parties to the dispute
appoint arbitrators on equal basis.
I have searched
all through the Act in vain to find any justification for this provision.
If the council
solely appoints arbitrators in this case, then it has become a judge in its own
cause. This is against the Nemo judex in
causa sua Rule of Natural Justice and as such needs to be amended[26].
7. S. 28(3) of the
Act provides that the ruling of the arbitral panel shall be binding on the
parties and no appeal shall lie from a decision of the panel to any court of
law or tribunal, this is against the Audi
alteram partem Rule of Natural Justice.
8. In respect of
the privatized enterprises, Government should put in place effective control
machinery to monitor and regulate general business conducts in the economy. To
achieve an effective control does not necessarily require Government ownership
of the business.
9. Government
should endeavor to win over labor’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 discount 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 labor
unions. Other statistics should include how much of capable and qualified labor
will be absorbed by the buyers, etc. labor 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.
10.
Inclusion
of labor is often a good strategy in boosting the Privatization Program because
one of the major mistakes that is common in Privatization in Nigerian is taking
the workers for granted. When the unions are not involved in the organized
process, it may be difficult to gain their corporation.
11.
Accountability
and transparency should be given adequate attention and this can only be
achieved where there exists a separate auditing and House of Assembly oversight
committee to help in the monitoring process. It is also my considered opinion
that money realized from sale of Public Enterprises and those saved through
withdrawal of subsidies should be invested in the hinterland for provision of
infrastructures.
12.
There
is also the 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.
13.
On
the whole, government should avoid policies that are likely to stymie private
initiatives or entrepreneurship.
14.
Lastly,
the Nigerian economy will also require financial market expansion to include
derivative future and options, credit and debts swaps etc. several of these
foreign investment funds are willing to invest in Nigeria on the condition that
the country puts her 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 taken.
b.
Privatization
is done properly with no special concession, or privileged when selling Public
Enterprises and
c.
The
creditor countries consider Nigeria’s specific circumstances while mounting
pressure on the speed of Privatization exercise because ours is a low-income
country characterized by poverty.
[2]
Akin Kekere Ekun;
[3]
S.14 of the 1988 Decree.
[4]
Sections 12 and 13
[5]
Section 14
[6] S.
13 of the Public Enterprises (Privatization and Commercialization) Act Cap P.
38 LFN 2004
[7]
I. S. 14 of the Public Enterprise (Privatization and Commercialization) Act Cap
P.38 LFN 2004
[8] S.
17 (2) of the Act
[9] S.
17 (2) (a) and (b) of the Act
[10]
S. 17 (3) of the Act
[11]
S. 17 (4) of the Act
[12]
S. 17 (5) of the Act
[13]
S.23(2) of the Act
[14]
S. 25(1) of the Public Enterprises (Privatization and Commercialization) Act
Cap P. 38 LFN
[15]
S. 27(1) of Act
[16]
S. 27(2) of Act
[17]
S. 28(1) of Act
[18]
S. 28(3) of Act
[19]
S. 30 of the Act. No. 28 of 1999 say that the Arbitration and Conciliation Act
Applies to Public Enterprises disputed.
[20] (1991) 3 N.W.L.R. (opt.180)
385
[21]
Ample statutory and Judicial Authority exist that a party to arbitration can
apply to the Court to set aside the award; This is inconsistent with the Act’s
provision that no Court can entertain further matters arising from the decision
of the arbitral panel. See order 49 Rule 13 0f the High Court of Lagos Rules.
SS. 29 & 30 of the Arbitration and Conciliation Act Cap 19, 1990; The
United Nigerian Insurance Co. Ltd v. Leandro Stocco (1973) 3 S C 11; Ita v
Idiel (1923) 4 NLR, 100,Kmawam & Bros Ltd v. Edilit Ltd (1967) LLR. 23; Nipol
v Bioku Investment & Property Co, Ltd (1992) 4 SCNJ 58; Home Development
Ltd v SCANCILIA Contracting Co. Ltd (1994) 9 SCNJ 87
[22]
S. 11 of the Public Enterprises (Privatization and Commercialization) Act Cap
38 LFN 2004
[23]
S. 17 (1) of the Public Enterprises (Privatization and Commercialization) Act
Cap 38 LFN 204.
[24] 1st Schedule to the Act.
[25] S. 27(2)(c) Companies and Allied matters Act, 1990
[26]
S. 27(2) © Companies And Allied matters Act, 1990
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