Wednesday 3 December 2014

WITH CONCRETE EXAMPLE CRITICALLY ASSESS THE PRIVATIZATION POLICY OF THE FEDERAL REPUBLIC OF NIGERIA.


INTRODUCTION
The issue of privatization has been a subject of intense global debate in recent years. In Africa, it has remained highly controversial and politically risky. Privatization in Nigeria has not been a popular reform; it has received so much criticism from labor, academia, and individuals. There have been numerous strikes against proposed sell-offs by unions fearing loss of jobs. While proponents of privatization see that aspect of economic reform as an instrument of efficient resource management for rapid economic development and poverty reduction, the critics argue that privatization inflicts damage on the poor through loss of employment, reduction in income, and reduced access to basic social services or increase in prices. Whatever are the views of the two parties, the only group that has no voice in the matter is the poor. The author is of the view that privatization is not inherently good or bad, but the poor performance or effectiveness depends on implementation (Nightingale and Pindus, 1997).
WHAT IS POLICY?
A policy is a principle or rule to guide decisions and achieve rational outcomes. A policy is a statement of intent, and is implemented as a procedure or protocol. Policies are generally adopted by the Board of or senior governance body within an organization whereas procedures or protocols would be developed and adopted by senior executive officers. Policies can assist in both subjective and objective decision making. Policies to assist in subjective decision making would usually assist senior management with decisions that must consider the relative merits of a number of factors before making decisions and as a result are often hard to objectively test e.g. work-life balance policy.
WHAT IS PRIVATIZATION?
            Privatization can be defined as the transfer of ownership and control of enterprises from the state to the private sector. Iheme, (1997) defines privatization as any of a variety of measurers adopted by government to expose a public enterprise to competition or to bring in private ownership or control or management into a public enterprises and accordingly to reduce the usual weight of public ownership or control or management.
PRIVATIZATION PROGRAM IN NIGERIA
Privatization in Nigeria was formally introduced by the privatization and commercialization Decree of 1988 as part of the structural Adjustment program (SAP) of the Ibraham Badamosi Babangida administration (1985-93). As McGrew argued, SAP is a neo-liberal development strategy devised by international financial institutions to incorporate national economics into the global market.
The vision of a “global market civilization” has been reinforced by the policies of the major institutions of global economic government namely up to the mid 1990s. Underlying their structural adjustment programs has been a new- liberal development strategy, referred to as the washing on consensus which prioritizes the opening up of national economics to global market forces and the requirement for limited government intervention in the management of the economy.
One of the main objectives of SAP was therefore to pursue deregulation and privatization leading to removal of subsidies, reduction in wage bills and the retrenchment of the public sector ostensible to trim the state down to size.
TECHNICAL COMMITTEE ON PRIVATIZATION AND COMMERCIALIZATION ACT OF (1988) (TCPC)
The privatization and commercialization Decree of 1988 set up technical committee on privatization and commercialization (TCPC) under the chairman of Dr. Hamza Zayyad to privatize 111 public enterprises and commercialize 34 others in 1993, the TCPC concluded its assignment and submitted a final report having privatized 88 out of the 111 enterprises listed in the decree. Based on the recommendation of the TCPC, the federal military Government promulgated the Bureau for public enterprises Act of 1993, which repealed the 1988 Act and set up the Bureau for public enterprises (BPE) to implement the privatization programs in Nigeria.
The overall objectives of the privatization exercise were:
1. To improve on the operational efficiency and reliability of our public enterprises;
2. To minimize their dependence on the national treasury for the funding of their operations;
3. To roll back the frontiers of state capitalist and emphasize private sector initiative as the engine of growth;
4. To encourage share ownership by Nigerian citizens in productive investments hitherto owned wholly or partially by the Nigerian Government and, in the process, to broaden and deepen the Nigerian market.
BUREAU FOR PUBLIC ENTERPRISES ACT OF 1993
The TCPC transformed to Bureau for public enterprises (BPE). The Bureau was to monitor the performance of the enterprises privatized in the past exercise and plan for the future phases. Because of the success of the past exercise, the military government under General Abdulsalam Abubakar promulgated the public enterprises (privatization and commercialization) Decree No. 28 in early 1999 (before the hand-over to a democratically elected government). The Decree allows BPE to alter, add, delete or amend the provisions in the document in the best interest of the country. Initially, sixty-one (61) enterprises were slated for privatization ( 36 partial and 25 full privatization) but because of the new powers granted BPE, it has increased the list by 37 extra enterprises (some of which were originally meant for commercialization) some of the big government companies being privatized now include – National Insurance Corporation of Nigeria (NICON), Nigerian Reinsurance Corporation, Nigerdock Plc, National Aviation Handling company (NAHCO), Nigeria Railways Corporation (NRC), Nigerian postal services (NIPOS) and Savannah sugar company. This is an indication of the enhanced interest in and success that privatization has achieved in Nigeria.
PUBLIC ENTERPRISES PRIVATIZATION AND COMMERCIALIZATION ACT 1999
In December 1999, the democratically elected government of President Olusegun Obasanjo picked interest in the privatization exercise and gave it a boosts by establishing the National Council on privatization (NCP) with the Vice- president, Alhaji Atiku Abubakar, as its chairman. The council is empowered among other things:-
i. To determine the political, economic and social objectives of the privatization and commercialization program
ii. Approve guidelines and criteria for valuation of public enterprises marked out for privatization includes choice of strategic investors.
iii. Identification of enterprises to be privatized or commercializes
iv. Approve the price for shares or assets of the public enterprise to be offered for sale
v. Determining the timing of privatization of particular enterprise.
vi. Interfacing with the public enterprises, together with the supervising ministries, in order to ensure effective monitoring and safeguard of the managerial autonomy of the public enterprises.
The Act also established the Bureau of public Enterprises (BPE) as the secretariat of the National council on privatization. The functions of the Bureau include:
i. Implementing the council’s policy on privatization and commercialization
ii. Preparing public enterprises approved by the council for privatization and commercialization
iii. Advising council on further public enterprises that may be privatized or commercialized
iv. Ensuring the update of accounts of all commercialized enterprises for financial discipline
v. Making recommendations to the council in the appointment of consultants, advisers, investment bankers, issuing houses, stockbrokers, solicitors, trustees, accountants and other professionals required for the purpose of either privatization or commercialization.
vi. Ensuring the success of the privatization and commercialization exercise through effective post transactional performance monitoring and evaluation.
vii. Providing secretarial support to the council
POLITICS OF PRIVATIZATION IN NIGERIA
Former Nigerian presidents from Ibraham Badamosi Babangida (IBB) to Obasanjo passed the ownership and control of Nigeria’s state owned enterprises to their friends, family relations and themselves in the name of privatization. For example, some of the most celebrated Nigeria’s privatized public assets during Obasanjo’s regime (1999-2007) include Ajaokuta steel Mill; Delta Steel Complex; Jos still Rolling Mill; Oshogbo Machine Tools and Itakpe Iron Ore Company. Others include Nigeria Airways; Nigeria Telecommunication company (NITEL) and its Mobile phone subsidiary company- MTEL; NICON Hilton Hotel (Transcorp Hilton Hotel); African petroleum Limited (AP); National Oil and Petrol Chemical Company; National Fertilizer Company (NAFCON); Cement companies; Oil blocks and Banks, just to mention but a few. The way and manner in which these assets changed hands and the selection of who owns what and at what price are still generating many unanswered questions and concerns in Nigeria. There concerns and questions were some of the challenges former president Yar’ Adua confronted.
Some of the reasons why the Nigerian public is not happy with Obasanjo’s privatization policy and programs are largely that they were done in bad faith and were out of tune with the principles of transparency, accountability and due process. Moreover, they widened the existing gap between “haves” and “have-nots”. In addition, the much taunted expected improvements of service and products delivery did not happen. The scheme created lasting sense of injustice, parochialism and nepotism in the polity. Furthermore, it discredited the anti- corruption stance of the administration. The political economy implications of the affair are many. For example, the scheme created a new crop of oligarchs in the mould of Transcorp and other similar outfits with concentrated economic and political powers in their hands. Theses concentrated economic and political powers are dangerous to the sustainability of democracy institutions, rule of law and good governance in Nigeria. Privatization also serves as a money laundering instrument to a great extent, in order to legalize illegally accumulated wealth, such as income from international drug trafficking.

PRIVATIZATION AND COMMERCIALIZATION EXERCISE FROM 1999 TO 2010
The Bureau of public enterprises recorded only one deal worth $32.5m (about #4.27bn) within the few years that former president Yar’Adua stayed in the saddle, (Everest 2009). This contrasts sharply with the speed of privatization under form president, Chief Olusegun Obasanjo, when many public companies and enterprises that had been poorly managed were sold to private sector operators. In 2006, for instance, the privatization agency handled 39 transactions that fetched 134.74bn while in 2005, it handled 45 deals that fetched # 98.08bn. in 2004, the agency succeeded in selling seven companies that brought in #50.11bn.
In 2000, the year Obasanjo marked his first years in office, BPE handled six (6) major transactions that raked in #14.65bn into the treasury and got rid of ailing organizations that continued to drain federal Government’s purse. It followed this up with 11 transactions in 2001 that brought #12.14bn into the Government. The single deal that has been recorded under the Yar’Adua presidency is the sale of the Nigerian Newsprint manufacturing company Oku/bokun, Akwa-Ibom state, which was sold to Negris Holdings for $32.5m on August 12, 2008.
The administration of late president Yar’Adua have relocated the sale of Nigerian Telecommunication Limited (NITEL) to TRANSCORP by the federal Government over non-adherence to due process of privatization of companies by the Bureau of public enterprises (BPE) from 1999 to date. Deputy Chairman of the House committee on privatization and commercialization, Rep. Abbas Braimoh (PDP Edo), confirmed the effort to launch a comprehensive investigation into the privatization of Federal Government owned companies by former president Olusegun Obasanjo in Abuja, said:
We have just done a nationwide tour of all the privatized companies’ n different geo-political zones and I can tell you without any doubt that most of the companies we visited are not doing well Elombah 2009).
Relievingly, former president Umar Musa Yar’Adua had reversed number pf policies, actions like the privatization of the refineries, projects and appointments undertaken at the last hour by the OBJ administration among others. As Barr. Rafindadi noted.
Most of them (privatized enterprises) are found to be anti people, inimical to their interests and a rip off of their national pride and assets.
Some of the most interesting actions of the late president Yar’Adua include the reversal of the sale of former vice president Atiku’s official guest house which he declined to buy and in a memorandum asked his former boss Obasanjo to leave it for the use of the incoming vice president. But because of sheer ego that was not to be, El Rufai, as the chairman of the committee on the disposal/ sales of government houses in the FCT under its monetization program went ahead and sold the house to him at a giveaway. Also on this same vein, house sales to former president Obasanjo’s aides were cancelled.
Another landmark decision of Yar’Adua is the cancellation of the 419 sales of the Kaduna and Port Harcourt refineries also, at a giveaway price to Obasanjo’s economic friends, Aliko Dangote and Femi Otedola. In fact, one of the major issues that necessitated the last labor strike in the country was the case of asking government to reverse the sale of the refineries among others as they saw it as the biggest rip off of Nigerians ever in the strongest terms ever about that the dashing out of public assets to OBJ’s friends under the guise of privatization.
However, in his usual patronage of his business political associates, Obasanjo also sold African Petroleum, AP to his number one business stooge, Femi Otedola’s Zennon Oil at a give away. For the avoidance of doubt, AP was first sold to Barrister Jimoh Ibrahim’s Global Fleet Group through a near due process at the cost of #17.5 billion. But in his usual dictorial style, Obasanjo overruled the transaction and single handedly offered the prime shares of the federal government in AP sold to Global Fleet at the first instance are according to Barr. Rafindadi (2009) far below its current value. The NNPC had earlier on in 2005 acquired AP in a #10billion debt swap.
It is again a fact that the fortunes of AP began to reduce shortly after the 30% government equity was sold to Sadiq Petroleum, the country’s fuel market was dominated by a handful of multinational and local retailers including AP. This was an indication that AP was prior to that period a very viable government owned enterprises. All it needed was competent management and board teams to push it through. No more, no less. It is also a statement of fact that the present managing Director/ chief Executive of AP, Zira Maigadi has certainly turned the fortunes of the company for good. As a proven astute administrator and manager, Maigadi has proven his worth as an asset to the company for the few years he has been on the saddle of leadership. Under his stewardship, AP recorded a turn-over of #8193 billion last two years showing an increase of more than 86% against its record in 2005. the company under Maigadi, a Chiaddeved accountant of repute who rose from a senior manager and later an executive Director before becoming an MD also showed it, recording a profit of #2.44 billions in 2006 as against a loss of #3.37 billion in 2005. if these figures are truly correct, is it not then possible that the company can do better under government control with Nigerians like Maigadi putting in the expertise to work.
The Independent Petroleum Marketers Association, IPMAN President, Engineer Tunde Runsewe, as an interested party in the AP sale of the company and called for cancellation of the sales to Zenon oil. According to IPMAN, AP can be better managed under the government control with the present crop of management at the helm of affairs however; Nigerians are hoping the president Goodluck Jonathan will cancel the sale of AP to Zenon Oil for the sale of nation interest now he has started revisiting past privatization exercise.
CONCLUSION
The program of privatization and commercialization is a major opportunity for reform of Nigeria’s ailing public enterprises and to prepare them to save the needs of the Nigerian economy in the 21st century. Enterprises will be made more efficient more accountable and more responsible to the needs of the clientele it is meant to be serving the Nigerian public. The Nigerian private sector will also benefit tremendously in the creation of new investment opportunities and a better investment climate. A lot of new shareholders have been created and now have a say in the affairs of the organized private sector. The performance of the Nigerian Capital Market will be enhanced greatly, as well the growth potentials of the Nigerian economy.

REFERENCES
·         Aboyade, O. (1974). “Nigerian Public Enterprises an Organizational Dilemma” In Public   Enterprises in Nigeria: Proceeding Of the 1973 Annual Conference Of The                                    Nigerian Economic Society.
·         Adoga Onjetu (2008) “A Critical Appraisal of Privatization in Nigeria       Hhp”//Www.Hg.Org/Article.Asp?=5491.
·         Amaefule, E. (2009: 18) Privatization: Bpe Records Only One Deal Under Yar’adua. The   Punch.
·          Leenneth J. (1951, 2nd Ed., 1963). Social Choice and Individual Values.
·         Black, Duncan (1958). The Theory of Committees and Elections. Cambridge: Cambridge University Press

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