Towards New Public Management In Nigeria: Implementing Privatization Policy

08 June 2012

By Abdul-Warees Solanke

No where else is the challenge of transformation and modernization of the public sector more daunting than the sub-Saharan Africa where most of the countries are still grappling with the crisis of government and development.

Largely colonial appendages who assured independence from the imperialist overlords especially Britain and France in the latter half of the 20th century, governments in the newly liberated sub-saharan African nations inherited public services structured to serve the interests of the metropolitan governments.

By the 1980s when much public service reforms were taking roots in Britain, the United States and New Zealand for instance, countries of sub-Saharan Africa were still attached to their immediate past independent traditional public administration structures, inherited from their former imperial masters which have become evidently dysfunctional, lethargic, nepotistic and corruption infested.

This essay, in discussing the rationale and features of New Public Management in the light of public service reforms in developed countries, shall offer some reflections on Privatization, a core NPM policy tool, and how it is applicable to the Nigerian public administration that compelled the global paradigm shift to NPM.


The 1980s saw the emergence of a new managerial approach n the public sector, as a response to the inadequacies of the traditional model of public administration (Saim: 2007) Using the British experience, Nutley, S and Osborne, S.P (1994)2 highlighted ways in which public sector organisations have changed over time and tried to establish whether these changes add up up to a different philosophy of public sector service.
According to the two authors, the consensus of opinion among writings on the phenomenon is that those changes amounted to a new philosophy or doctrine as to how public services should be provided or managed, often referred to as New Public Management: The key elements as listed by the two writers include:

• The introduction of cash limits and a concern to demonstrate that resources have been well used (value for money)
• Decentralization of service delivery, coupled with devolved responsibility and accountability.
• Identification of explicit standard and measures of performance
• An increasing focus on quality and the rights of consumers to have quality public services.
• The rights of public service users to have some form of consumer choice
• Separating out the responsibility of policy setting from that of service delivery.
• The introduction of internal trading
• Greater competition
• Appointing visible managers who should be free to manage
• A stress on private sector styles of management.

(Jones, D.(2007), also linked the recent emphasis upon new public management to a number of factors including the perceived poor performance, inefficiency and ineffectiveness of traditional government bureaucracy due to the following:

• Lack of market discipline and proper political and organisational accountability manifesting in over-manning waste, inefficiency and poor service provision
• The rigidity, excessive rule domination and hierarchical constrains which result in goal displacement and lack of innovation and initiative.
• In Third world countries, the evidence of corruption in their bureaucracies is apparent
• In the developed countries, catalyst for NPM was threefold:

1. the necessity of reducing public expenditure
2. balancing the budget and avoiding fiscal deficits
3. the need to reduce state bureaucracy and state regulation, and the realization of creating maximum scope for private sector and maximizing resources at its disposal.

Generally however, the fundamental rationale for NPM frenzy in democratic states as explained by Jones D (2008)3 was the pressure on politicians, responsible to the electorate to give the taxpayer value for money, given the non-voluntary nature of tax payment to finance the state bureaucracy and public services.

In order to fully justify these rationales, it is appropriate to have a depth of understanding of the traditional public administration which informed such dramatic and revolutionary paradigm shift of New Public Management Contemporary scholars and authorities of public policy and administration agree on some salient features of traditional public administration, which when condemned, denote the traditional public sector as being concerned mainly with process rather than result. Unfortunately, pre-occupation with process usually does not enhance the desired and result of effectiveness, efficiency and economy demanded in a rapidly globalizing world confronted by the challenges scarcity, efficiency of resource mobilization and allocation competition, and diversity of consumer needs.

Jones (2008)4 further highlighted such limiting features as including bogus bureaucratic organisations, accounting for their inertia, high degree of centralization and hierarchical control with extensive framework of rules, regulations, official procedures, creating bottlenecks and the red tape syndrome apart from stifling initiatives. The assurance of long tenure for public servants working within the traditional public administration framework, ironically is fraught with an inherent tendency complacent to render them complacent, while the structure of the service in which they operate is quite complex and confusing as one organisation could be involved in both commercial and non-commercial activities.

These deficiencies or dysfunctions of traditional public administration necessarily validate the quest for a new approach to public sector management which pays far greater attention to the achievement of result and personal responsibility of managers, making organisation's personnel and their employment terms and conditions more flexible and incorporating clear setting of organisational and personal objectives in addition to enabling measurement of achievement with key performance indicators(KPI).

Denoted with various descriptions including managerialism, market based public administration, post bureaucratic paradigm and entrepreneurial government, the bottom line of New Public Management is the urgency to inculcate public sector organisations with the best techniques of private sector practices n order to bring the inherent discipline and efficiency of the market place to state activities. Scholars like Massey, Hood Allison, Steward and Ranson agree on the above features while the Organisation for Cooperation and Development, OECD succinctly summarizes NPM as implying the following:

• improving human resources including performance pay
• staff involvement in decision making
• Relaxing controls, but imposing performance targets
• Using information technology
• User charges
• Deregulation of Monopoly

In other words, NPM suggests the breaking up of large organisations into their component functional units, separation of policy department from service delivery function: detaching commercial arm from non-commercial organisational briefs, with operational autonomy given to service delivery department. Referred to as disaggregation, this new NPM culture, according to experiences, injects the ideals of accountability and dynamism into the public sector, as public servants working on terms similar to what obtains in the private sector ar motivated to delivery service while bearing in mind that there is target to meet with clear performance measures in place to assess them NPMs other associated features include innovation of contractual employment with many serniorposts becoming fixed, short term fixed tenure renewable on satisfactory and revolutionary performance, contracting out public services, inter-agency, point of delivery charging, cost recovery, adoption of accrual accounting system, revenue retention and surplus retention

In these scenarios, public sector providers hitherto bogus, lethargic and concerned with process are now expected to be business-like, innovatively strategic: profit-oriented and customer-driven or simply put, dynamic. But it also means the existence and relevance of public sector organisations will be determined by the market, while the career progression and mobility of public sector employees would be charted according to the growth and direction of the new or reformed public sector, whose most evident tool is privatization and commercialization.

Privatization may entail selling the operation or contracting out: granting vouchers to service recipients to purchase services from private providers, using volunteers (for staff support or service delivery) providing subsidies and financial incentives to private operators, initiating self-help or co-production programmes in which citizens perform services for their own benefit or share in providing them and selling off or shedding activities to private operators or simply ceasing them so that private operators can take them over. (Zahra et 2000)5

In an overview, Saim, S (2007)6 noted that privatization has received greater emphasis lately as a strategy for dealing with tightened budgets in the public sector (and the consequent need for reducing costs and increasing efficiency) and for escaping alleged weaknesses of government through innovative and flexible ways of delivering public service. Saim also (2007)7 pointed out that proponents of privatization often overlook the point that privatization increase the imperative for effective public management rather relaxing or easing it and noted, despite that privatization has produced many benefits, its history has been fraught with scandals and problems, while private service providers may perform poorly or even illegally….page (11)

It is however generally agreed that the drive for privatization as a tool for economic reform globally, was spurred by a combination of factors and events in the world socio-economic and political scene, including the world wide recession of the 1970s that resulted in the financial difficulties in many developed countries (Federal Ministry of Information and National Orientation, FMNIO, Nigeria: p5)8. another reason adduced for the privatization fever is the agitation for the reform of public finance involving the overhaul of public enterprises to satisfy international obligations and aspirations: and the realization that private sector investment and opening up of the political space were pre-conditions for market economies growth and development.

As explained by FMNIO, several studies have so far indicated significant positive side effects" Quoting a working paper of the International Monetary Food, IMF, the publication also revealed that "a study conducted on the post-privatization financial and operating performance of 79 companies in 21 developing countries and 32 industries between 1980 and 1992 conclude that there were economically and statistically significant post-privatization increases in output (real sales) operating efficiency, profitability, capital investment spending, dividend payments, employment as well as decreases in leverages (FMNIO:p5)10. The publication also cited another study on the impact of privatization on fiscal and macro economic performance as showing that privatization process is strongly correlated with an improvement in macro-economic performance in the form of higher GDP growth and lower unemployment rates. It further affirmed that between 1991 and 2002, about 23000 privatization transactions took place in sub-Saharan Africa, generating a total sales value estimated at US$9 billion (2006.p6)11.


These realities as explained above seemed to justify the pursuit of a policy on the deregulation of the Nigerian economy between the late 1980s and the early 1990s, the core of which was privatization and commercialization of public enterprises with the setting up of the Technical Committee on Privatization and Commercialization (TCPC).

Under the democratic government since 1999, the privatisation policy was given an added impetus with the re-designation of TCPC as Bureau of Public Enterprises (BPE)

An agency directly under the Presidency, FMNIO offered strong rationales for the embrace of privatization in Nigeria as it highlighted the mess that have characterized Nigerian public enterprises over the years and their burden on the national economy, graphically illustrating this with the following facts:

• As at 1999, the Federal Government owned a total of 590 public enterprises, controlling most of the petroleum, minerals, development banking, telecommunications, power and steel sectors of the economy
• These sectors alone constituted at least 40 percent of the entire National GDP
• Over one third of the money realized from the sales of oil since 1973 had been expended the public enterprises
• As at 1996, the investment on the public enterprises stood at over US$100 billion
* About 55 percent of Nigeria's external debts with the Paris Club of creditors were due to funds sourced for the establishment of the Public Enterprises

Return on these investments accounted for between 30 to 40 percent of fixed capital investments and nearly 50 percent of normal sector employment
These Public enterprises engaged in economic activities employing only about 4000000 people (2006 p1)12

Given this dismal and discouraging picture, concerns for the reform of the public enterprises in Nigeria led to the setting up of a number of commissions of inquiry and study groups. Their findings generally reveal that the Nigerian public enterprises were patently rotten, afflicted with the malaise of abuse of monopoly of powers, defective capital structure resulting in heavy dependence on the treasury for funding, bureaucratic bottlenecks, mismanagement, corruption and nepotism. These features, evidently, are not merely of economic dimensions, but are also political and cultural in nature, as they have affected the stability of the nation's polity, apart from corruption of public ethics and morality.

As the Bureau of Public Enterprises has documented, the objectives and benefits of Nigeria's privatization policy are broad, and its scope covers three phases including the partial or total divestment of the shares owned by the federal government, its parastatal and other agencies in over 100 public enterprises active or dormant in 14 key sectors of the nation's economy (FMNIO, 2006:p7)13. Government's explanation of privatization is that it was targeted at liberalization of the economy, making the private sector the engine of growth, rehabilitation of dead or moribund enterprises, and promoting efficiency and better management of the public enterprises. Other objectives include:

• Creation of employment opportunities in the country
• Reduction of corruption and parasite mentality
• Modernization of technology in Nigeria industries.
• Strengthening of the capital market
• Dismantling of monopoly and removal of service arrogance
• Resolving massive an perennial pension fund gaps
• Broadening Ownership base and creating popular capitalism
• Promoting transparency in corporate governance
• Generating funds to government for investment in social sectors - educaton, health, security etc.
• Attracting Foreign investment and positive re-imaging
• Attracting capital flight back to Nigeria (FMNIO,2006,p6)14

To an appreciable extent therefore, the pursuit of privatization of public enterprises would seen a logical policy in public sector management in Nigeria, given the gains being recorded as earlier explained. But there is a note of caution for the country in this:
Throwing open the public enterprises to the vagaries of the market as privatization and commercialization policy implies must be carefully scrutinized and implemented, as the free market morality does not respect the ideals of the provision of public goods, nor is it much concerned about protection an security of national pride and public interest in the obsession about the bottom line: profit and competitiveness,. What this suggests is that the adoption of privatization policy as a new public management tool in the country must be with an awareness of inherent market failures in efficient and desirable supply or provision of public goods, including pure collective goods, partial collective goods, merit goods, private goods with negative externalities and goods/services involving information asymmetry. Subjecting the supply or provision of these goods and services to the forces of free market and privatisation as a demand of new public management implies the abdication of the responsibility of government and compromise of the essence of its existence.

A government that is not discreet with privatization cannot be said to exist for public or citizens interest as it will through such policy bring the nation to an era of neo-mercantilism, with the disadvantaged in the society becoming victims in the social dissonance and widened poverty gap that could result from inequitable, inefficient or undesirable provision of goods and service, under the privatization arrangement.

Saim, S (2007)15 acknowledged that growing body of experience and research has increasingly documented the problems that can occur and the conditions that need to be in place for effective contracting out. In her review of what various authors present as contingency theory of privatization, she listed four contingencies that managers have to deal with in successful privatization initiatives.

• Having a range of contractors submitting competitive bids for the contract to avoid monopolistic bidding situations

• Effectively managing strong employee or union opposition to the contract

• Carrying out effective pro-contract planning and analysis including such precautions as well-developed cost comparisons and meetings with potential bidders.

• Establishing effective contracts, with clear stipulation of goals and performance criteria and provision for monitoring, evaluation incentives and sanctions which must include consideration for equity, effects on the community, social goals and other typical public sector issues.
While privatization may have justifications and benefits, Nigeria must be careful of its traps which set the basis for questioning the legitimacy of any government that is blind that to the realities that this option does not contain all the recipes for reforming public enterprises. Public sector and economic reform process is deeper and more embracing than merely transferring the responsibility of public economic management to private hands. It demands value to orientation and institutionalization of good governance in the public domain, instead of reliance on mere application of economics theories, concepts and tools which are not in themselves exclusively immutable over time. The bottom line here is that implementing the privatization and commercialization policy in Nigeria should transcend the technocrats in BPE and apostles of total deregulation of the economy. It is a policy that must not discount the sentiments of all stakeholders in the Nigerian reform project, but must align totally with the role and obligations of the state as enunciated under the Section 2 which outlines the fundamental objectives and directive principles of state policies.

Abdul-Warees is the Head of Training, Voice of Nigeria, Ikoyi, Lagos, (  , ) 08090585723


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