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Full Project – THE ROLE OF THE NIGERIAN GOVERNMENT IN THE PRIVATIZATION AND COMMERCIALIZATION OF PUBLIC ENTERPRISES

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CHAPTER ONE

1.0 INTRODUCTION

There are rapid and sweeping changes taking place in the political economy of most developed and developing countries. This is dominated by liberal democracy in the political process and free-enterprise in the economic sphere. In the economic sphere, these changes are characterized by economic reform programmes whose fundamental objective is the rationalization of national economics for the achievement of efficiency and effectiveness in resource allocation and laying the foundation for future growth. By economic reforms, it means a significant movement by governments to expand the use of market signals in shaping production and distribution patterns, and the reduction of direct state ownership and direct stale controls over the economy.

Typically, these reforms occur across several important sectors and include changes in the degree of stale ownership and regulation, in pricing, personnel and other management decisions at the enterprise level.

It is important to observe that state enterprises suffer from fundamental problems of defective capital structure, excessive bureaucratic control or intervention, inappropriate technology, gross incompetence and mismanagement, blatant corruption and crippling complacency which Monopoly engenders. Inevitably, these shortcomings take a heavy toll on the national economy.

Nigerian economy from colonial history through independence and up till today has been characterized by huge government investment in Public Enterprises (P.E.) had always arrived in a mixed economic system where government at all levels, being the major spender, sought to nurture and increase commonwealth for the greatest good of the greatest number through heavy capital investment.

The deciding factor propelling such investments by successive governments in Nigeria was (and still is) the availability of enormous spendable resources more than anything else. Thus, one might, especially given the topic of this discourse, well, extend the argument to say that the shortest act to our economic blues is to legislate government out of the control of excessive disposable resources via privatization.

Privatization has emerged as a major public policy issue in many countries of the world in the decade of the 80’s, following the revival and efficiency of the doctrines of the market forces in the leading industrial countries. This programme entails the transfer of some government owned enterprises to the private sector, either fully or partially and the adoption of National commercialization practice in some enterprises which still remain publicly owned.

Thus, going by definition, section 14 of the Decree Number 25 defines privatization as the “relinquishment of part of all the equity and other interest held by the Federal Government”. Commercialization, which appears to be a different concept from privatization, aims to re-organize enterprises whether owned wholly or partly by Federal Government, to profit making ventures. Thus, the key words to note in the case of enterprises to be commercialized are: re-organization and profit-making.

For the avoidance of doubt, however, it is important to state that, the term privatization does not just mean the transfer of ownership of shares or equity from one sector – the public sector, to another sector. Nor does it just mean the relinquishment of part or all the equity and other interest held by the Federal government or its agencies. The term privatization means a good deal more. It also means the transfer of power and functions from the public sector, viz-a-viz from the Government, to the Private sector. Suffice it to say that, this is the crux of the matter that has attracted divisive debate.

The case for privatization is clear evidence that P.E. have contributed to our economic stagnation and poor national image. The foregoing state of Affairs partially reveals why government justifiably did a rethink on increased investment in such enterprises. Privatization is not a cure all panacea for economic difficulties, but a situation where the option of continued investment in P.E. has been proven a failure, the trial of the next best alternative (Privatization) recommends itself to consideration.

Efficiency and effectiveness today demand that government units itself to a. regulatory role, creating enabling environment, facilitating and encouraging the activities of the private sector. In line with this over arching need, the Federal government of Nigeria is determined to develop, install and maintain institutional capacity, which is compliant with our defined need. Moreso, government role in this exercise must therefore be seen to be directed at creating relevant institutional and regulatory framework with the necessary incentives to facilitate the development of the private sector as the engine of economic growth as well as protect the public interest.

The justification for privatization is to assist in restructuring the public sector in a manner that will affect a new synergy between a learner and more efficient government and a revitalized, efficient and service-oriented private sector. Hitherto, privatization was directed at removing the financial burden which these enterprises constitute on the public and release resources for the essential functions of government.

Thus, this study is precipitated on these real issues aimed at examining government role in the privatization exercise as a deliberate strategy to entrench efficiency and effectiveness in our public enterprises.

Here lies the litmus test for the Bureau of Public Enterprises (B.P.E) whose implementation task calls for optimizing its organizational skills and repositioning its administrative machinery in the pursuit of its mandate.

1.1 THE HISTORICAL KACKROUND OF BUREAU OF PUBLIC

ENTERPRISES (B.P.K.)

The Technical Committee for Privatization and Commercialization (TCPC) was established as an ad-hoc implementation agency in 1989. The agency later metamorphosed into BPE in 1993, with a supervisory and technical board, but it retained the organizational structure and personnel of the TCPC and was made part of the public service. B.P.E. was recreated in 1999 by Privatization and commercialization Act 1999, as an independent body without a board, reporting only to the National Council on Privatization (NCP) – National Council on Privatization. The Director General of the BPE is also the member-secretary to the NCP, which is Chaired by the Vice President of the Federal Republic of Nigeria.

1.2 STATEMENT OF THE PROBLEM

The capacity of the exercise to generate undesirable socio-economic and political problems issue has been whether the accruable economic benefits justify the potential socio-political problems. That contention is still much alive even though the exercise has now gone beyond the stage off take it or leaves it” argument.

Two broad groups of problems are bound to emerge in an economic restructuring exercise of the nature and magnitude of the privatization and commercialization programme. The first group comprises problems that arise from the basic system change inherent in the exercise – a change from public sector ownership to private. Sector ownership and control, from highly subsidized public sector parastatals to commercialized public enterprises from economic management that must reflect socio-political balance to one that has to be guided by marketing place efficiency considerations. Systemic problems are therefore, fundamental attributes of the exercise. They are first order problems, the resolution of which require political will on the part of government and patriotism and willingness to make sacrifices on the part of the governed.

The second group of problems are implementation problems. These are problems that could arise from short-comings of the implementation procedures, problems associated with implementation personnel as well as problems arising from imperfections in the socio-economic infrastructure available for the implementation exercise. Implementation problems are, of course, easier to handle. They are second order problems that could easily be contained by altering the implementation strategies and/or by fine tuning procedures.

However, these multitudes of problems constitute a mammoth task to the B.P.E. In this regard, what role do government play to avert or ameliorates these attendant problems? This study will seek to unravel government employed strategies in this direction.

At the level of implementation, the socio-economic and political question hinges on the issue of equity. The basic question is whether the divestment process would lead to post-privatization concentration of economic power either within economic classes or geo-politically. The issue could be restated as that of ensuring even accessibility to investment opportunities created by the exercise for all Nigerians irrespective of economic class or geo-polity. Here lies the challenges-to the Bureau of Public Enterprises (BPE), whose duties and responsibilities must be open, fair and transparent.

1.3 AIMS AND OBJECTIVE OF THE STUDY

There is a large consensus among Nigerians that the privatization and commercialization programme is desirable on rational .economic grounds. This consensus benefits could accrue from the programme. The exercise is, for instance expected to minimize waste in P.Es and introduce the discipline of market forces into public sector endeavors.

Born out of this, this study is undertaken under these broad objectives

(a) To identify with government role in the faithful implementation of the

Privatization and commercialization programmer.

(b) To appraise the overall performance of P.E.’s in order to ascertain its relevance or

otherwise.

(d) To change the orientation of all public enterprises engaged in economic activities

towards a new horizon of performance, improvement, viability and overall

efficiency

(e) To emphasize the need for the Federal Government to create an enabling

environment that will promote and enhance transparency, honesty and equity in

the implementation process.

(f) to clearly understand the rational for privatisation and commercialization as

instruments of economic reform.

(g) To uncover germane factors militating against this programme and also· proffer

solutions to the government to fine-tune the exercise and purge it of undesirable

side effect.

(h) Lastly, the recommendations of this study will provide appropriate remedial initiatives aimed at identifying and articulating the emerging socio-economic and political problem3 of the exercise.

1.4 SIGNIFICANCE OF THE STUDY

This project recognizes the intrinsic importance of the privatization programme to the nation and international community. This will serve as a test case for the efficacy and efficiency in the pursuit towards economic emancipation. The design of this study will give a practical meaning and illustration to the redefined role of government as an enabler as well as our commitment to transparency and accountability.

It is hoped therefore that the relevance of this study will serve as a ready-made tool for government to apply strategic ways and means highlighted in the work in strengthening her institutional capacity in order to achieve its goals and objectives.

The study will also provide information on the emerging socio-economic problems from this exercise as it affects stakeholders, for this will serve as a guide in the formulation and implementation of policies.

Nonetheless, this research will be of immense benefits to researchers, social scientists and the Nigerian populace at large to gain an insight on its theoretical and academic expositions that will boost and enlighten their intellect. It will also serve as a reference point to promote further study.

Finally, it is also expected that the findings and recommendations of this study will enhance credibility and also add to the pool of knowledge that could promote integrity and transparency in the exercise which should be adopted and built upon.

1.5 SCOPE AND LIMITATION

The scope of this study covers the privatization and commercialization exercise of the Nigerian Public Enterprises as an instrument of economic reform.

The programme is a multidimensional one in which the economic growth strategy is combined with the interventions by government, investors and stakeholders aimed at creating a synergy to effect efficiency and productivity in the Nigerian economy.

Thus, this project will direct its focus on B.P.E, the institutional machinery charged with the responsibility of executing the Privatization programme.

1.6 OPERATIONAL DEFINITION OF TERMS

Bureau of Public Enterprises (B.P.E.)

B.P.E. is the secretariat of the National Council on Privatization (N.C.P.) and is charged with the overall responsibility of implementing the policies and decisions of the council.

Privatization

Privatization means the divestment by the federal government of its ordinary share holding in the designated enterprises.

Commercialization

Commercialization means to re-organize enterprises whether owned, wholly or partly by the Federal government to profit making ventures.

Public Enterprise (P.E)

Means any corporation, board, company or parastatal established by or under any enactment in which the government of the Federation, a Ministry, or Extra-Ministerial Department or Agency has ownership, or equity interest and includes a partnership, joint venture or any other form of business arrangement or organization.

Efficiency

This refers to the quality of doing something well and effectively. It is also referred to as an input-output relationship~ that is maximum work achieved for a maximum layout of energy or resources.

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