CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background to the Problem

A global trend has emerged aimed at reducing government‘s involvement in the economy. This global trend came about through the process of privatisation or both privatisation and commercialisation of government owned enterprises. In Nigeria, as part of its programmes of National Economic Reforms, the Federal Government introduced privatisation along with commercialisation. Thus, commercialisation was conceived as an alternative to privatisation in some cases. That is to say, commercialisation was introduced as an alternative to privatisation which was deemed inappropriate.

The reasons offered for this economic policy vary from country to country. For example, in Britain it was resorted to as ―an ideologically based program, devised and driven by a powerful leader, motivated by a combination of intellectual conviction of the benefits of free markets and hatred of the power of organised labour‖. In some jurisdictions, commercialisation is not used in the same context as it is being used in Nigeria. Thus in Jurisdiction like South Africa, it is believed that commercialisation is one of the phases of privatisation. Hence, it was submitted that ―the entity should first be corporatized, then commercialized, but in South Africa, Privatisation was perceived, and thus, embraced as a veritable instrument in the restructuring of its troubled economy. This is in tandem with reasons given by the International Monetary Fund (IMF), which universalized the programme as a key element in economic restructuring of distressed economies especially in Africa. Hence, Privatisation and Commercialisation became components of structural adjustment program of the IMF.

In Nigeria, and in most countries of Africa, interest in the program is motivated by the desire to correct past failures of development policies and reduce money losing trends of government owned enterprises. The programme of privatisation and commercialisation became imperative with the national aspiration to strike a balance between political independence and economic independence. This reason is apt since a country with political independence devoid of economic independence will not thrive. For any country in the world to survive and develop, the duo of political and economic independence must co-exist side by side. The political stability of every country depends largely on its sound economic policies, growth and development.

The foregoing economic background, paved way leading to privatisation and commercialisation law and policy in Nigeria in 1988, as part of the Structural Adjustment Programme (SAP) of General Ibrahim Babangida‘s Administration. This law established the Technical Committee on Privatisation and Commercialisation (TCPC) to implement and oversee the privatisation programme. SAP is a neo-liberal development strategy by international financial institution to incorporate national economy into global market. This has been summarized thus:

The vision of a ‗global market civilization‘ has been reinforced by the policies of the major institutions of global economic government… up to the mid 1990s underlying the structural adjustment programs has been a new liberal development strategy referred to as the Washington consensus which prioritizes the opening up of national economies to global market force and the requirement for the limited government intervention in the management of the economy.

It, therefore, became one of the main objectives of SAP to pursue deregulation leading to removal of subsidies, reduction in wage bills and the retrenchment of the public sector ostensibly. The privatisation and commercialisation law provided the regulatory frame work for the programme, as well established the TCPC which was entrusted with the responsibility of ensuring correct and speedy implementation of the programme. The TCPC privatised 111 public enterprises and commercialized 34 others. In 1993, the TCPC concluded its assignment and submitted a final report having privatised 88 out of the 111 enterprises specified in the Decree.

In 1993, the TCPC was transformed into the Bureau of Public Enterprises to oversee the commercialized parastatals. By virtue of the Bureau of Public Enterprises Decree, new phase of the programme was designed which introduced rules and set up a new agency to continue the programme. In 1999, the Federal Government again revisited the programme and enacted the Public Enterprises (Privatisation and Commercialisation) Act.

The Act is the current legal framework on privatisation and commercialisation policy in Nigeria. It creates the National Council on Privatisation under the chairmanship of the

Vice President. It also establishes permanent secretariat for the programme, the Bureau of Public Enterprises, which is charged with implementation of the programme and the NCP charged with policy formulation. Further innovation under the Act is the establishment of Public Enterprises Arbitration Panel to facilitate the implementation of commercialisation programme.

The emergence of this policy, among other things, provides incentives for private investment. Thus, privatisation and commercialisation, which is still on course, seeks to motivate private participation in the economy as government divests itself of its equity holding, or part thereof. The divestment of government equity holdings in hitherto publicly owned enterprises is not an end in itself. It, therefore, behoves both political and economic stakeholders, to critically follow the spirit and letter of the legislation especially in terms of implementation in order to fully harness the wholesome benefits associated with privatisation and commercialisation. The program if implemented honestly and with a sense of detachment aimed at promoting and protecting national interest will ultimately provide an enabling environment for full private investors‘ participation both from within and outside the country. Also, proper implementation of the program with the incidental divestment by government of its equity holding, or part thereof as the case may be, will restrict government to core policy-making function and the issue of national governance as against meddlesome interference in the corporate governance. This will breed an era of sound political and socio-economic policies. Furthermore, an uncompromised implementation of the program will relieve the government of the onerous financial burden in form of allocations to these state-owned enterprises (SOEs).

On its own, privatisation and commercialisation program is not without prospects. These prospects are best appreciated in terms of management efficiency, development of capital markets, cost control, and above all, customer service. This has proved true in Britain. It was admitted that after privatisation, British Steel (‗Corus‘ as its post privatisation name) became one of the best managed and lowest cost steel producers in the World; British Airways raced ahead of other European Airlines by concentrating on cost control, marketing and customer service. In the same vein, British Telecom did better after privatisation than as a nationalized industry.

In fact, while making a case for privatisation, the South African former Minister of Finance, Derek Keys, stated that ―from a pragmatic viewpoint privatisation was the only realistic solution to the financial problems of the government.‖ As a matter of fact, the benefits associated with successful privatisation and commercialisation program are made glaring from the six-point plan identified by the South African Cabinet on a major campaign to give impetus to the ‗RDP‘. They are to wit:

1. A ‗belt-tightening‘ exercise of cutting unnecessary expenditure and putting state assets to more productive use;

2. Reprioritizing of expenditure;

3. A fundamental restructuring of the public service;

4. Re-organisation of state assets and enterprises;

5. Building new inter-government relations; and

6. Developing an internal monitoring capacity for the above programs.

Apart from the foregoing analysis on the importance of privatisation and commercialisation, it is submitted that, privatisation of SOEs will bring about economic equilibrium. At the inception of a democratic government in South Africa, Mandela stated that:

Privatisation should be used as an instrument for black empowerment… privatisation is seen as the single, most effective instrument in the hands of the black residents of South Africa. If Privatisation helps to realize this empowerment the political obstacles would have been overcome. Shares in privatised enterprises should be made available to black South Africans…