Gains of privatisation in Nigeria

It would be recalled that the public sector reform, privatisation and commercialisation programme in Nigeria was formally introduced following the enactment of the Privatisation and Commercialisation Decree of 1988, which set up the Technical Committee on Privatisation and Commercialisation (TCPC), the precursor to the Bureau of Public Enterprises (BPE).

Based on the recommendations of TCPC after it concluded its initial assignment, the Federal Military Government promulgated the Bureau of Public Enterprises Act of 1993, which repealed the 1988 Act and set up the Bureau of Public Enterprises (BPE) to implement the privatisation programme in Nigeria.

Again, in 1999, the federal government enacted the Public Enterprises (Privatisation and Commercialisation) Act, which created the National Council on Privatisation (NCP).

The NCP is the apex body charged with the overall responsibility of formulating and approving policies on privatisation and commercialisation.

The 1999 Act also established the Bureau of Public Enterprises (BPE) as the Secretariat and implementation arm of the NCP.

It is pertinent to briefly revisit the fundamental reasoning behind the privatisation policy and why Nigeria decided to sell or commercialise some of its public or state-owned enterprises (SOEs) and to transfer their management into private hands.

Nigeria chose to create SOEs for good reasons.  SOEs were the product of post-independence policies grounded in the honest and sincere belief that public enterprises (PEs) would provide better services and create more jobs than the private sector.

The Nigerian state, like most other developing countries, under the theoretical argument of import-substitution industrialisation strategy, pursued relentless establishment of public enterprises.

The indigenous private sector was perceived as weak, lacking both the capital and managerial expertise to manage industries and businesses.

It was also argued that for Nigeria to rapidly propel its economic growth and development, the state should play the leading role as “the engine of growth” of the economy.

Thus, Nigeria established many public enterprises in various sectors of the economy and even acquired controlling stakes in many private companies in a bid to control the “commanding heights” of the economy and protect “national interest” anchored under the “Indigenisation Programme” of the 1970s.

Unfortunately, many years down the line, the result has been hugely disappointing.

The performance of most of the PEs was very poor and with the increasing fiscal balance sheet deficits following the dwindling revenue from crude oil exports in the 1980s, Nigeria decided to sell some of those SOEs.

This position was succinctly amplified by then President Umaru Musa Yar’Adua at the inauguration of the National Council on Privatisation on Tuesday August 28th, 2007, when he said:

“The problems associated with state-owned enterprises and monopolies are not peculiar to Nigeria.

“It is true, however, that many developed and developing economies have overcome the problems through a well designed and single-minded pursuit of privatisation programmes.

“The objective is to assist in restructuring the public sector in a manner that will effect a new synergy between a leaner and more efficient government and a revitalised, efficient and service oriented private sector.

“We are privatising for the benefit of our economic recovery and our social life.

“It is not designed to share our national assets to a few rich people.

“We are not about to replace public monopoly with private monopoly.

“Rather, in our determination to be unyielding and uncompromising in the pursuit of the best interest of this country, we want to remove the financial burden which these enterprises constitute on the public and release resources for the essential functions of government.”

This was the mandate given to BPE to realise the vision of ensuring that it contributes to making Nigeria one of the top 20 economic powers of the world by the year 2020.

Thus, from its creation to date, the Bureau has privatised or commercialised over two hundred and thirty-four (234) public enterprises and assets covering all the sectors of the Nigerian economy.

Most of the privatised or commercialised public enterprises are thriving under new private sector operators.

The Bureau has privatised enterprises in the financial sector comprising banks and insurance companies – FBN, Union Bank, UBA; oil marketing and services companies-Oando, Conoil, AP; cement companies-WAPCO, Ashaka, CCNN; the sea ports, electric power sector, etc.

A less known but very important aspect of BPE activities with far reaching impact has been the reform of sectors to provide the enabling environment for the private sector to thrive. It prides itself in these sector reforms:

1. i) Telecoms sector (which led to the complete liberalisation of the sector and entry of private service providers that has revolutionised access to telecoms services in Nigeria).
2. ii) Management of public pensions (which led to a new contributory pension scheme managed by the private sector, and the creation of PENCOM).

iii) Resolution of public debts led to the establishment of the Debt Management Office(DMO) and a more robust management of public debts.

1. iv) Power sector: unbundling of PHCN, creation of NERC, NBET and NELMCo.

Having achieved a lot in the area of reform, privatisation and commercialisation, the BPE is now focused on playing a significant role in the facilitation of Nigeria’s infrastructural development through public-private-partnership arrangements.

The importance of infrastructure as a catalyst to economic growth and development is well documented.

Good network of physical infrastructure facilitates and spurs economic growth by providing better connectivity and enhancing productivity and efficiency.

In a study by the World Bank (World Development Report, 1994), which critically reviewed the role of infrastructure in the development process, it attributed the underdevelopment and slow growth of many economies in the world, especially in the developing and least developed nations to insufficient investment in infrastructure due to growing pressures on governments’ budgetary provisions and general concern/apathy about service provision by state enterprises and agencies.

As a result, the bank advocated public-private partnerships in the provision of utilities.

The imperative of Nigeria attracting private sector investment in the development of its infrastructure is even more glaring.

Clearly, the federal government cannot provide these resources alone and there is a need to leverage private sector capital in a variety of ways but especially through well-articulated and mutually beneficial public-private partnership arrangements with private investors.

Thus, concerted efforts are required to bridge the huge gap.

BPE can play a major role in driving this process and provide a one-stop-shop for prospective investors under a consistent, fair, equitable and transparent process given its antecedents and many years of interaction with international and local investors in the privatisation and commercialisation of public assets.

This can only be achieved expeditiously if the present overlap in coordination, governance and institutional framework for infrastructure development of the country through PPP is addressed.

Investments in infrastructure are necessarily long term and therefore private investors require a clear legal and regulatory framework that will give comfort on both the integrity of the process and protection of their investments.

Umar is an Abuja- based public affairs commentator.