THE ROLE OF THE NIGERIAN GOVERNMENT IN THE PRIVATIZATION AND COMMERCIALIZATION OF PUBLIC ENTERPRISES
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THE ROLE OF
THE NIGERIAN GOVERNMENT IN THE PRIVATIZATION AND COMMERCIALIZATION OF PUBLIC
ENTERPRISES
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.
(c) To
examine the rational for a private sector-led economy.
(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. 1.8
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