The Logic of Privatization: Assertion A Very Much True Of Nigeria

10 June 2012

By Abdul-Warees Solanke

Is  privatization  of public services  good  for  Nigeria?  There is no straight  to the question, although  the country's public sector is faced with the serious challenge of transiting from a  decaying  system to one that is manageable,  cost effective, efficient  and economical  so that other  vital and  potentially productive sectors of the  national economy can be afforded funds for growth, which ideally is the purpose of privatization.  

According  to Saim, hjh S (2007) privatization has  received greater emphasis  lately as strategy for  dealing  with lightened  budgets in the public  sector (and the consequent need  for reducing  costs and increasing  efficiency)  and  for escaping  alleged weakness of government  through  innovative and  flexible  ways of delivering public service. 

This  assertion a  very much true of Nigeria  where the public sector, despite its  strategic  importance, is burdened  by the subsisting   dysfunctional political and cultural environment  which makes  it difficult  for it to deliver according to public needs and expectation despite the huge  government  commitment into the  sector.  However, the sordid picture of poor  service delivery and challenging  socio political  and economic  environment  that compels privatization is not peculiar to Nigeria, as it is a phenomenon of global  dimension in the last  two decades. 

Nigeria's   privatization  project  began in late 80s when, the  government in response to demands from the World Bank, donor countries  and other  multilateral  financial  institutions  that  the country must  embark on structural adjustment  programme to qualify for  assistance  and loan.  One  of the reform  strategies  prescribed as  privatisation of some  services of the  bloated, expensive  yet  inefficient  public sector. 

As at 1999, there   were almost 600 public  enterprises  owned  by the federal government of Nigeria.  The  control spread over such vital sectors as. 

  • Petroleum

  • Solid minerals

  • Development banking

  • Telecommunication

  • Power  and  steel 

Together, they account for  40s of the country's  Gross Domestic  Product  but not less  than one third of the nation's oil earnings  since 1973 were  expended  on them. .According to estimates  of Nigeria's Vision 2010 Committee, the federal Government's investment in Public Enterprises  as  at  1996 stood  at US $100 billion.The bulk of Nigeria's external debt with  the Paris Club of creditors, not less than 55%, was  due to funds  sourced to establish  these public enterprises.Yet, returns on them, 0.5% pr annum did not in any way match the  huge government investment. 

A  survey conducted  by  the Technical Committee on Privatization and Commercialization, the first body  charged  with executing  the privatization programme, public enterprises  in Nigeria accounted  for 30-40 % of fixed capital investment  and nearly 50% of normal sector  employment.

From available data and  statistic, Public enterprises engaged in economic activities employ  far less than half  a million citizens in a country whose  population exceeds 130 million. 

These  glaring  facts  suggest that public  enterprises in Nigeria  are more of a  drain pipe of the country's wealth,  a cesspit  of corruption and inefficiency, a field of political intrigues and a strong  indicator of why the country was not progressing. Five of the Public  enterprises  which  have been  ran aground  bears  eloquent  testimony to the  rot that is in the Nigeria public  sector. 

The  National  Electric  Power  Authority (NEPA)  The government  committed billions  of dollars  into the  authority with  the  expectation that it would provide the nation uninterrupted electricity  supply, yet electricity is epileptic  causing  her a loss of not less that US$800  MILLION

The  Nigeria  Telecommunication Limited (NITEL) Between 1975 and 1999, NITEL  attracted  from the government subsidies  to the tune US$30 billion   providing  a meagre  service 400,000 lines  telephone density in the most populous  nation in Africa.                                                                       

Nigeria Airways in 1979, the airways  had more than 30  aircraft flying to all  parts of the world  which by 1999 were reduced to one.  Yet this airline  has 2500 workers on its pay roll, with huge  debts  from incurred  from unpaid aircraft maintenance  fees hanging  heavily on its neck.

Nigeria  National Shipping Line: as  at 1979, it had  five  ocean plying vessels, with 19 specially others  still on order.  Twenty  years  later, all but one were gone with the wind.

Nigeria Railway Corporation: Nigeria  Railway Corporation is a study in irrelevance to growth.  Today in Nigeria railway is the least  [preferred mode of transportation as the services  it provides  is not in tune  with modern times. Yet on annual basis, government  has  to pay N250 million to run the railway hospital  with nothing to show. 

As at 1998, the total  transfer, waivers and subsidies to Nigerian  public enterprises stood at N265 billion. 

Yet all of them were sick and comatose, Coupled with this, they were known  to stifle  entrepreneurship in the country, fostered  economic  stagnation, and promoted selfish political objectives.

In  addition, Nigerian public enterprises  suffered from operational interferences just  as they  contributed to economic redistribution or widening  the gap between the rich and  the poor  as those who controlled  them saw the enterprises  as honey pots. Looting  is the name of the game played in Nigerian public enterprises  which unfortunately imposed  a burden of not less than US$200  billion on the nation's economy. 

Several  commissions set  up to find  the problem  with Nigerian public enterprises  always came up with damming  reports of abuse of monopoly  of powers, defective  capital structures (they all depend on the government purse) bureaucratic  bottlenecks, mismanagement, corruption and  nepotism. 

The  burden of the  inefficient, loss  incurring  and asset  wasting  albatross  that  Nigerian  public enterprises became  convinced  the new  government  in 1999 to pursue privatization vigorously so as to  liberate the government  purse  from  suckers  and afford Nigerians,  better, competitive and  affordable  services. 

The  sordid  performance  would seem to suggest  that  privatization is one of the  best possible ways out of the  mess created by past  managers  of the nation's public  affairs, as the  country is still in a process of  transition  from  rot of the past  50 years and embarking on different  reform projects in the political economic  and social spaces. 

In adopting privatization,  as a tool  of systemic reform in the  public sector  of any nation, it is not a matter of  whether privatization  is good  or not but  determining  what  should be privatized  and  justifying  why it should be privatized. In order to understand  this vital issue, the fundamental  objectives  and directive  principles of state policy of the country have to be  taken into account, because  these principles st in clear  terms  the purpose of government  or  what  any government  should pursue to be deemed as responsible  government. 

In  essence,  if  the government  is pursuing  privatization as a reform option, it should  be with a clear  awareness that  it will  assist it to deliver  according to the social  contract  that exists  between  the government  and the governed. Thus, if the government must be seen to be committed  to what will satisfy  the public interest or  the national interest, it will first have to address  the relevance  of privatization to public  or national interest, or  to the  attainment of the fundamental  objectives and directive principles of state policy. 

Privatization is not only an economic reform instrument  as it has to be understood in the wider  context of the country's overall  development framework.  The whole of chapter two of 1999 constitut9on of the federal  republic  of Nigeria  detailed  the fundamental obligations of the  government  and the social contract  between  the government  and  the governed, It also in greater detail defined  the  political, economic, social, educational foreign policy, and environmental objectives. In addition, it spelt  directive on Nigerian  culture, obligations of the mass media, national ethics and duties of the citizen. 

Therefore, the salient issue in deciding whether  privatization  of public services is good for Nigeria  is to understand how  well  it will assist the  realization of the fundamental objectives and directive  principles of state policy.  What must be borne in mind  is that  privatization  of public  services does not possess all the answers  to re-inventing  the nation economy. In fact, it has  the potential of increasing  the socio-economic  imbalance, because  it is a market  instrument  that  tends  to address  the demand of those  who can afford  it and pay for public  services. Yet public goods or  services are not about affordability, but  about  equalizing  opportunities  and  guaranteeing access to all the  citizens, regardless of their economic status. 

Government  involvement  in Public  service delivery is also about  protecting  some vital aspects of the  national economy that  are seen as as  national assets and source  of national pride. So throwing them open to all-comers  can compromise  national pride. It is also a form of national identity  and  the nation could  lose  its identity and sovereignty in that  economic domain when it is exposed  to foreigners  as privatization oftentimes also entails  attracting  foreign capital. 

Privatization no matter  the prospects  it holds, and no matter the  acclaimed  justifications and expertise of its implementing  authorities, it will make meaning  only if it does not compromise  the purpose  and essence of government. That is, for it to be meaningful, it must be pursued  with the required  sincerity of purpose  and commitment, avoiding exploitation and  excessive  profiteering. Privatization in a  developing, but not yet advanced  market economy  should be driven by the utilitarian ideal of providing  the greatest good  to the  greatest  number of people in a liberalized  environment that gives equal opportunities  and access to public  utilities  and services. 

For Nigeria,  the  challenging of ensuring  efficiency in public  service  delivery is not so much  of privatization, but of injecting  accountability  and  dynamism into the  administration and management of public  services, which is highly  emphasized in the concept of new public management  (NPM).

Abdul-Warees Solanke, Head, Voice of Nigeria Training Centre, Broadcasting House, Ikoyi Lagos studied Mass Communication and Public Policy and  writes via



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