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Impact of Privatisation in Nigeria

Keywords: privatization in nigeria, impact of privatization

Privatization is an essential component of the reform procedure for buildings and economies in the globalized world today. Producing countries have embarked on intensive development

programmes some documented as successful plus some a failure. Despite the impressive level of

privatization in Africa, the empirical knowledge of the program is limited. Aside from theoretical

predictions, very little is well known about the procedure and results of privatization exercises in Africa

in spite of the impressive degree of activism and execution.

As generally in most African growing countries, Nigeria witnessed the growing engagement of state in

economic activities until when the united states used the Structural Modification Programme (SAP) in

1986 and the Privatization and Commercialization Decree (1). The Privatisation and

Commercialisation Function of 1988 and the Bureau of Open public Enterprises

Act of 1993 described privatization as the relinquishment of part or all the collateral and other

interests presented by the government or some of its firms in companies whether wholly

or partly had by the government. Although privatization is not defined in the

Public Enterprises (Privatisation and Commercialisation) Act, we can assume that it

is deemed to have the same meaning.

Privatization became the forefront as a significant component of Nigeria's monetary reform process.

With the federal government trading over N36 billion in form of loans, eqity and give in over 500

companies between your period of 1973- 1990, there was not much development throughout the market. This lead

to serious fiscal deficits which business lead to the inefficient open public sector opportunities to be questioned.

Introduction:

In both developed and expanding countries, privatization and in a few cases

commercialization have become in acceptance and acceptability. It has also become an

important tool that government can use to promote monetary development,

improve the creation and syndication of goods and services, stream line

government structure, and reinvigorate establishments controlled or monitored by their state.

( Rondinelli and Iacono 1996).

The articulation of federal government insurance policy on Privatisation in Nigeria was concretized in the Structural

Adjustment Programme (SAP) embarked after in July 1986, 2 through the Ibrahim

Badamasi Babangida supervision (1985 - 1993). As McGrew has argued, SAP is a

neo-liberal development strategy devised by international financial institutions to

incorporate countrywide economics in to the global market. In his words:

The vision of any "global market civilization" has been reinforced by

the procedures of the major organization of global financial government

namely up to the mid 1990's. Root them as Structural

Adjustment Programmes has been a new-liberal development

strategy - known as the cleansing on consensus which

prioritizes the checking of countrywide economics to global market

forces and the necessity for limited government intervention in

the management of the economy.

One of the aims of SAP therefore, was to follow deregulation and Privatisation

leading to removal of subsidies, decrease in wage expenses and the retrenchment of the

Pubic Sector ostensibly to cut the State down to size. 4

To actualize this goal, in July 1987, the federal government create a Tech Committee

on Privatisation and Commercialisation (TCPC) which was backed up by the

Privatisation and Commercialisation Decree5; which grouped all State-owned

enterprises and parastatals into four main groupings, namely:

(a) Those to be partially privatized

(b) Those to be fully privatized;

(c) Those to be partly commercialised

(d) Those to be fully commercialised.

Those slated for full privatisation included 13 insurance companies where the Federal

Government possessed between 25 percent and 49 percent shareholding; 10 medium - to large

- scale creation businesses; 2 hotels; 4 companies in the travelling sub-sector and

15 agricultural and agro-allied businesses. The total value of shares that your government

expected to market in these organizations was approximated at about N150 million. Corporations billed for

partial privatisation were made up of 27 commercial and merchant lenders, 23 major

manufacturing companies spanning cement creation, vehicle and car set up plants,

fertilizer factories, newsprint and newspaper mills, anatomist and electricity component

plants. In addition they included three metallic rolling mills, papers, engine oil companies, shopping

and air range companies, and so forth. The total value of federal government holdings in these firms

was put at over 2. 1 billion naira. Towards the finish of 1989, the four commercial vehicle

assembly crops in the united states were put into the set of businesses to be privatised. About 10

major Status Owned Businesses (SOEs) were to be fully commercialised, and 14 others

to be partially commercialised. (THE LEGAL AND INSTITUTIONAL FRAMEWORKS OF PRIVATISATION IN NIGERIA: A DISCOURSE. )

This paper is aimed at learning the impact of privatization in Nigeria with regards to the case of

utilities especially the Electricity Source company and the Telecomm company. The newspaper has 5

major parts, the ideology of privatization, privatization in Nigeria, the electricity company in

Nigeria, the telecoms company and the fiscal impact of the whole privatization process on the

Nigerian market and labour market; while the newspaper is concluded with remarks on the

privatization of the specific utility companies ; what exactly are the conclusion regarding the efficiency of the privatization activities in the united states.

2. 0 The Ideology of Privatization

Privatization is becoming an acceptable paradigm in politics economy of claims.

It is a strategy for reducing how big is government and moving investments and service

functions from open public to private possession and control. Privatization is dependant on the ideas that:

a. Federal is intruding into private venture and lives more than it should be;

b. Government is unable to provide useful and effective services to the public;

c. government officials and government agencies are not properly responsive to the general public;

and

d. Government uses too many resources and in so doing threatens economic development. ( D. O Adeyemo, A. Salami (2008), AN ASSESSMENT of Privatization and Public Enterprise Reform in

Nigeria. Modern Management Research pp 401-418, Vol. 4 No. 4, Dec, 2008. )

Early economists such as Adam Smith claim that the government in expanding countries(Africa)

; giving ownership of its companies to the private sector would lead to monetary benefits to the

society. Expanding countries also need a competitive market that is effective and such can only just be

attained by private business people (thesis). The traditional economists believe economic

development is an activity attained through earnings accrued from positive fruitful activity that is

beneficial to all sectors in the economy. The Keynesian college on the other hand have the notion that

government plays a crucial role in controlling economic crisis and stop economic unhappiness.

Keynes proposes that the issues in expanding countries are based in investment behavior of

capitalist organizations under conditions of inadequate aggregate needs for goods and services ( davino

1995).

Privatization is a trend concept which became more and more important in the 20th century

especially the 80's when it commenced to rise. Privatization has different meanings to different people.

To some it is the a competition of public businesses in a competitive market although some just think

of it as a monopoly situation which can be subdivided into natural monopolies by restricting the

ability of the other enterprises to enter the marketplace.

However privatization is defined, it is intimately destined with the public, political and economic

agenda of the government. The idea of privatization is inherently ideological.

This chapter will review the concepts, priorities and problems of privatization most especially

within the Nigerian context.

2. 1 Ideas and Priorities:

Privatization in Nigeria:

Since the Margaret Thatcher age when privatization was introduced in the united kingdom, many other countries

adapted the ideology of privatization including developing countries that have launched

privatization programs in pursuit of its mandate of further monetary development by encouraging

the growth of fruitful enterprises. Nigeria was not left out in this new ideology of fostering

economic performance.

Nigeria's political overall economy after self-reliance from Britain in 1960 was an adopted form colonial

capitalism alongside the British isles model of parliamentary system of Federal government. The private sector

was at its first stage. Because of the first armed forces coup in 1966, a fresh form of politics economy emerged

in the state in the form of hybrid of status capitalism and socialism. All Federal government functions and

responsibilities were delegated to Federal Ministries, Departments, and Agencies. The Federal

Government also became a major player in the economy by creating statutory organizations and

private investment companies. It also invested substantially in other private companies. From the 70's

the Indigenization Decree of 1973 was promulgated. It guaranteed the conversion of private controlled

international companies in Nigeria into point out owned organizations. The result was the

creation of over 1000 talk about owned corporations in practically all areas of the overall economy operating

as monopolies without competition from the thin private sector. These corporations were funded by Nigeria's

new found olive oil wealth. Their scope of operation covered coal and oil, agriculture, lenders,

mass transit, cover, ability, security, education and manufacturing, etc

By the early eighties, the olive oil prices crashed and the most common vast amounts of Naira

pumped into these organizations annually could no longer be suffered by the government.

At once, annual profits of the firms tumbled down as a consequence largely to convey corruption

and inefficiency. There have been also the operational problems of gross incompetence in general management, complacency increased bureaucracy, defective ownership structures, faulty capital

structures, lack of effective control and guidance by the federal government, out-of-date technology,

international competition etc. Because of the later eighties, these factors worsened the already

stunted and extended Nigeria private sector market. It became essential to encourage private

participation in the countrywide economy and increase the Nigerian market by direct deregulation. The

alternative option was the collapsed of the whole Nigerian overall economy.

The establishment of an exclusive sector motivated market became imperative to ensure the provision of

efficient and quality services, improve infrastructure, improve local manpower

development while lowering the amount of revenue the federal government spends for public services

such as defence and security. As in those days privatization of public corporations, businesses, companies

and services became the most feasible economical solution.

In 1988, the Federal Government of Nigeria (FRN) duly responded to the recommendation of the

International Monetary Finance (IMF) and the planet Bank; that loss making corporations have for

many years been draining the federal government resources in producing countries and such enterprises

burden the government authorities into borrowing to assist their fund operating losses. This business lead the IMF to

refuse subsequent lending options applied by Nigeria hence; led to the adoption of the

Structural Adjustment Program (SAP). SAP was targeted at reforming the market and making it

more efficient.

The rule for privatization in Nigeria commenced in 1999 with desire to to diversify totally or

partially the shares owned by the government, its companies and parastatals in public

enterprise productive or dormant.

The main aim of the privatization in Nigeria is to reduce the dominance of the general public sector in

the economy and invite the private sector to experience its proper role as the best engine of progress.

Nigeria established the Tech Committee on Privatization of Community Companies

(TCPC). Its commitments and goals were the removal of Administration equities in the Nigerian

capital market, the privatization of commercial and vendor bankers, etc. This

movement had drastic yet successful results. The immediate impact was the expansion of the

Nigerian market buoyed by private sector involvement. Public services upgraded in the

selected corporations as well as their financial bases by the injection of private sector capital. To

build on these financial landmarks, the Bureau for People Businesses (BPE) was founded in

1999 as a successor to the TCPC. The Country wide Council on Privatization (NCP) was also established

as the supervising body to BPE. Both of these regulatory organizations on Nigeria's privatization were

established through the promulgation of the Public Corporations Privatization and Commercialization

Act 1999.

The directive of the BPE and NCP was to formulate guidelines on privatization and

commercialization, approve guidelines and requirements for valuation of general population enterprises slated for the

exercise, approve selection of strategic shareholders, approve show prices and property of condition owned

enterprises, designate and approve privatization advisers and consultants, approve companies for

commercialization etc. The BPE is the Secretariat of the NCP specified to perform all the above

functions of the NCP.

The statutory mandate of the BPE and NCP are specifically spelt out in the Public Enterprises

Privatization and Commercialization Work 1999. The specific mode, constructions and timetable of

privatization of Nigerian public businesses were also spelt out in the 1999 Take action. All designated

Nigerian state corporations were categorized into broad sector communities with the name of the venture,

shareholding framework, expected level of ownership to be sold out, privatization policy put together, and

time schedules.

Some of the cardinal categories are the financial corporations group comprising NICON Insurance,

Nigerian Reinsurance, Nigerian Bank for Commerce and Industry, Guarantee Bank, FSB Bank or investment company,

Afribank BIAO shares. State owned Industries group comprised NAFCON, National Super

Phosphate Fertilizer Company, Nigerian Machine Tools, Nigerian Newspaper Manufacturing Company

Limited, Nigerian Sugar Company, Bachita, Ashaka Concrete, Sunti Sweets Company, Benue Cement

Company, Calaber Concrete, Leyland, Peugeot Auto Nigeria Limited, Volkswagen Nigeria

Limited etc.

The electricity and steel group comprised Oshogbo Metal Rolling Mills, Jos Metallic Rolling Mill, Delta

Steel Rolling Mill, Ajaokuta Steel Rolling Mill, Aluminum Smelter Company Small, National

Iron Ire Mining Company Small etc. Solid mineral deposits comprised Nigerian Mining Firm,

Nigerian Coal Corporation, Nigeria Uranium Company Limited etc. The info sector group

contained Daily Times of Nigeria, National Radio Corporation of Nigeria, New Nigerian

Newspapers, News Organization of Nigeria and Nigeria Tv Authority etc. In the travel sector,

several state companies were slated for privatization. They are simply Nigeria Ports Power, Nigeria

Railways, Nigerdock, NAHCO etc. The petroleum sector group comprised Nigerian National

Petroleum Organization, Eleme Petrochemicals, Kaduna, Dock Harcourt, Warri refineries, Nigerian

Gas Company, Petroleum and Pipelines Marketing Company, African Petroleum, UniPetrol,

National petrol, Dresser Nigeria Limited, Baker Nigeria Limited etc. Within the housing sector, we had

Federal Mortgage Bank, Federal Mortgage Money Limited, Federal Cover Authority etc. In

natural resources, all 12 Normal water River Basin Development Government bodies were slated for privatization.

In agriculture, we'd National Park Mother board, Ore Oil Palm, and Ihechiowa Olive oil Palm etc. Hotels were

grouped to add Nigeria Hotels Limited and Festac 77 Hotels. Telecoms and postal services

group comprised NITEL, MTEL and NIPOST. Condition power firms group contained NEPA and its

subsidiaries. Airlines and airports were grouped into Nigeria Airways, FAAN, NEMA etc.

As at May 1999 the government investment in these general population enterprises was in your community of

US$100 billion. In spite of these massive purchases, however, public companies have failed to

perform the functions and attain the aims for which these were set up.

The gross inability of these businesses to surpass expectations is partly accountable for the current

move towards economic liberalization, competition and privatization. The beliefs behind

privatization therefore is to restructure and rationalize the public sector not only to lessen the

dominance of unproductive purchases in the sector but also to initiate the procedure of gradual

cession to the private sector of general population enterprises which are better controlled by the private sector. It

is also expected that the privatization program provides the route for reintegrating Nigeria

back in to the global economy as a program to attract foreign direct investment in an open, reasonable and

transparent manner.

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