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THE POLICY OF PRIVATIZATION AND COMMERCIALIZATION OF PUBLIC ENTERPRISES IN NIGERIA: AN APPRAISAL OF TELECOMMUNICATION

THE POLICY OF PRIVATIZATION AND COMMERCIALIZATION OF PUBLIC ENTERPRISES IN NIGERIA: AN APPRAISAL OF TELECOMMUNICATION

PRIVATIZATION

Abstract

It is because of social issues like economic inequalities, unemployment that made the state to interfere in economy of Nigeria. Government chose public sector as a means or medium for economic and social development due to poor managerial skill, weak technological base etc, this enhanced the zeal to establish various enterprise institutions in Nigeria. Then, due to inadequate capital and lack of finance, public enterprises in Nigeria are confronted with many problems by the employees, managers and political interference in affairs of public enterprises. The project title is the policy of privatization and commercialization of public enterprises in Nigeria: An appraisal of telecommunication. The problems are; is political interference and mismanagement of resources responsible for the poor performance of public enterprises in Nigeria? Could policy of privatization and commercialization enhance the efficiency of public enterprises? Structural-functional theory is used as suitable framework of analysis for the policy of privatization and commercialization of public enterprises in Nigeria. The researcher reviewed some relevant textbooks, also used the secondly method of data collection. He found out that privatization is seen as means to harness economy or as measure to increase efficiency of the public sector or organization. Also, the privatization and commercialization has improved the potential, the efficiency and service delivery in Nigeria by making telecommunication easily accessible and affordable. These are the recommendations; as the privatization is in the hands of few individuals government should ensure that before granting the license or opportunity, they should examine and select the competent people who will handle private enterprises and not people of questionable character. The only thing left is for government to hands – off from those enterprises as advocated in the current or present privatization and commercialization exercises.

Table of Contents

Chapter One: General Introduction

1.1     Background of the Study

1.2     Statement of Problem

1.3     Objective of the Study

1.4     Significance of the Study

1.5     Literature Review

1.6     Theoretical Framework

1.7     Hypothesis

1.8     Method of Data Collection/Analysis

1.9     Scope of the Study

1.10   Definition of the Concepts

References

Chapter Two: Origin of Public Enterprises in Nigeria

2.1     Origin and Development of Public Enterprises in Nigeria

2.2     Justification for Public Enterprises

2.3     Financing and Control of Public Enterprises in Nigeria

2.4     Problems of Public Enterprises in Nigeria

References

Chapter Three: Policy of Privatization in Nigeria

3.1     History and Development of Public Enterprises in Nigeria

3.2     Objectives and Forms of Privatization

3.3     Necessary Conditions for Success of Privatization

3.4     Process of Commercialization in Nigeria

References

Chapter Four: An Appraisal of Telecommunication

4.1     History of Telecommunication in Nigeria

4.2     Policy Objectives

4.3     The Structure of Nigeria’s Telecommunication Sector

4.4     Privatization and Commercialization of

Telecommunication in Nigeria

References

Chapter Five: Summary, Conclusion and Recommendations

5.1     Summary

5.2     Conclusion

5.3     Recommendations

References

Bibliography

Chapter One: General Introduction

1.1    Background of the Study

The importance for the establishment of public enterprises or corporations was felt in 19th Century and there after. There were a lot of upheavals in European society because of industrialization and urbanization. Social issues like unemployment and economic inequalities necessitated state intervention in economies. Britain is widely referred to as the father of public enterprises.

A good number of African Countries chose the public sector for economic and social development. This account for the reason why many more functions like industrial production, transport, social services, communication etc were assigned to the state in addition to its traditional functions like security, justice etc.

Despite the several exercises of Nigeria economic policies to promote agriculture, industries and other activities, government still depend on monoculture commodity (oil) which failed to provide good capital investment and development due to weak technological base, poor managerial skill etc. This promoted or enhanced the desire to establish various enterprises and massive establishment of government agencies and institutions. 1979 constitution of Nigeria described the official operating of these enterprises and public servants they managed as well as private enterprises. After reviewing the performance of the Nigeria Railway Corporation in 1967 the commission that carried out the exercise recommended that corporation should have an Executive Board whose Chairman would also be the Chief Executive.

The government enterprises require constant financial backing for the smooth running. Due to inadequate capital and lack of financial autonomy public enterprises in Nigeria are confronted with a lot of problems, by managers and employees, government interference, inadequate capital, technological limitation, and political interference in the affairs of public enterprises in Nigeria.

Since monoculture economy cannot meet the demand or generate large sum of revenue to run the economy or by public enterprises, the government seeking ways to reduce the rapid increase of bad economy by adopting policy to boost our economy.

Privatization and commercialization policies are adopted by federal government as a remedy to problems that emanated from public enterprises. There are economic policies which grant full autonomy to public enterprises so that they can operate without government subvention, control and interference which ultimately resulted in efficient provision of service and high productivity that contribute to national growth and development. Although, these two concepts have identical goals and purpose, that is provision of efficient services to the public, high productivity and profitability, yet, they are different in nature and character.

The Federal Government of Nigeria in (1988) through Decree No. 25 set up the Technical Committee on Privatization and Commercialization (TCPC). The TCPC was charged with the responsibility of privatization and commercializing some selected government enterprises. The main reason was to promote greater efficiency and productivity in the public enterprises.

1.2    Statement of Problem

Public enterprises were established by the Federal Government especially in the 1960s and early 1970s when the public sector was seen as a major contributor to economic growth and socio-political stability. The public enterprises of Nigeria set up by government to perform definite social and economic functions for the public.

The functions that informed the establishment of these public enterprises are to control the resources and raise funds for the provision of certain infrastructure facilities particularly in service requiring heavy financial investment e.g. Railway, Electricity, Telecommunication etc. also, to perform the function of generating revenue that will add for financing development programme and projects as veritable instrument for creation of jobs.

Therefore, since those functions are not performed, creditable, or efficiently privatization and commercialization policy is introduced by Federal Government of Nigeria. In identifying the problems militating against their performance, the problems are stated clearly below:

(1)      Is political interference and mismanagement of resources responsible for the poor performance of public enterprises in Nigeria?

(2)      Could policy of privatization and commercialization enhance the efficiency of public enterprises?

(3)      Does the privatization and commercialization improve the potential, the efficiency and service delivery in Nigeria telecommunication?

1.3    Objective of the Study

There are some certain aims and objectives for which the researcher embarked on this work such as:

(1)      To ascertain if political interference and mismanagement of resources is responsible for poor performance of public enterprises.

(2)      To ascertain if privatization and commercialization could enhance performance of public enterprises.

(3)      To discover if the privatization and commercialization of public enterprises has improved the efficiency of service delivery.

1.4    Significance of the Study

The importance of any research is tied to find out solutions to the various problems that face mankind in the environment or society. The study creates awareness to every citizen of this country and economic planners on the implications of these privatization and commercialization of the public enterprises in Nigeria economic development.

It helps policy makers to assess the performance of NITEL following the privatized and commercialization policy. It helps researchers on contemporary issues have first-hand knowledge of the performance of privatized and commercialized public enterprises.

1.5    Literature Review

There are various kinds of opinions by many scholars on activities of privatization and commercialization of public enterprises. The federal government has restated its commitment to the privatization programme saying that it would not allow obstacles to make it change its focus.

Ukwu (1982:87) said that the perennial problem of public enterprise arise from the composition of the Board and its relationship with management. In particular, the conflict between the chairman and the chief executive himself usually a direct appointee are appointed for reasons of political patronage rather than any contributions they are capable of making to enhance performance.

Ugoo .E. Abba (2008 : 248) argued that some public enterprises whose establishments are hinged on regulatory philosophy have also not lived up to standard. Due to endemic corruption in these enterprises, officials collect bribes and truncate their primary reasons for establishment.

But in the words of Chief Olusegun Obasanjo (1999) in his assessment of the decline in Nigeria’s public enterprises asserts that these enterprises suffer from fundamental problems of defective capital structure, excessive bureaucratic control or intervention in appropriate technology, gross incompetence and mismanagement, blatant corruption and crippling complacency which monopoly engenders.

Excessive ministerial control and political interference according to Ogunna (1999:246) defeat the primary objective of living-off public corporations and therefore, are anti-thetical to effective performance.

Ryndima et al (1980:45-55) dealing on the political economy of surplus argued that for there to be an increase on productivity or output commonly known as “surplus value”, there will be intensified exploitation of the workers in the public corporations”. These measures can be lengthening the hours of work, were these can measure up; there are other ways of getting their desired objective, example by speeding up work (production) over time and underpayment of workers.

In the words of Ogunna (1999), the poor performance of public enterprises in Nigeria can be approached from the perspective of inadequate financial and material resources, poor management, corruption and lack of continuity of public corporation boards.

On the other hand, the civilian governments of first and second republic appreciated the need for the policy of privatization and commercialization, which was reflected in the various panels to that effect which they established.

Ollor (1986:4) was in support when he said that given the economic recovery objective of government “privatization will relieve the financial burden of government and release fund for it to use in other areas.

General Abdusalami Abubakar (rtd) came to power in June (1998), he continued with the policy with much more vigor and planned to privatize or at least commercialize all public enterprises which he believed would not only salvage the ailing public enterprises, make them more effective, but would in addition, provide enormous funds to government for other public services.

Obadan hints that the enhancement of efficiency should be the primary objective of a privatization programme. This is because maximum efficiency will bring more sustained gains, which can then be distributed to a wider segment of the society.

Lewis (1994:178) supports the view of efficiency, that the private sector is to be more efficient, more productive and more profitable. In short, privatization according to him would increase government revenues and cut down or eliminate waste and unnecessary bureaucracy.

Nellis (1999) in Obadan 2000:19 agreed with above assertion by saying that in empirical terms, various assessment of privatization outcomes, particularly in the industrial and middle-income countries have concluded that privatization leads to improve performance of private companies and that privately owned firms outperforms “state owned firm”. He posits that increasing evidence also shows that privatization yields positive result in lower income and transition countries as well.

Guislain (1997:173) is of the view that the move for privatization is that most government find themselves facing deep budget deficits and public finances crisis”. The state no longer has the financial resource either to offset the losses of state-owned enterprise (SOEs) or to provide the capital increases necessary for their development. Thus, emphasizing that privatization is the answer as most of SOEs are deeply involved in corrupt practices that have depreciated its values, to achieve the basic requirement expected of it.

The Director General, Bureau of Public Enterprises (BPE), Dr. Christopher Anyanwu said that government would hinder it from meeting its privatization objectives.

He listed the objectives of the privatization among other things to include the restructuring and rationalization of the public sector in order to lesson the dominance of unproductive investments, beside, privatization was targeted at raising funds for financing social-economic development in areas such as health, education and infrastructure.

General Ibrahim Babangida’s administration was the first to take concrete steps towards privatization and commercialization of some public enterprises.

Having reviewed some books on administrative and management problems of public enterprises and possible ways of reformative measures and the cause of these problems that have engulfed these public enterprises especially from the external and internal factors and also having reviewed some books and articles on these privatization and commercialization policy has been detrimental to the poor in the society. Let us now attempt a review of some books and articles that see privatization and commercialization as an exploitative tool in the hands of ruling class and its foreign allies.

Nnoli .O. (1981:4) historically, introduced the issues of initial rationale why government involved in business activities, that those reasons should not be sacrificed at alter of bourgeoisie inclined profit maximization. He contends because public parastatals was only peripheral to the interest of the foreign capitalist conditions of work in it particularly the wages were attractive than in the private companies with a consequent lowering of workers moral and productivity. That the public sector should not be blamed for its inefficiency because at the dawn of independence, change has occurred in public sectors, most of its activities were performed by private contractors and their failure is the success of the private sector.

Another article assessed the different dimensions of which privatization and commercialization have been viewed by various scholars. I think the programme from the on set had no clear focus. The government was not really sure what it wanted from the programme and consequently the TCPC itself did not know where its true mission was. They never knew whether their mission was raising money for the government or sharing of the national cake.

Furthermore, Bala (2004) found out that the privatization in Nigeria has been able to replace the public monopoly with private monopoly. However, the major impact of the reform has been in the area of increased competition and efficiency. These were evident in the telecommunication, petroleum and banking sectors.

According to Garba on Vanguard, Thursday, September 10, 2009, today, the world has virtually become a global village in terms of communications and doing business is gradually shifting from boardrooms to individual homes, courtesy of teleconference. In view of these developments, two countries are looking up to you the experts to ensure that their relations are boosted by the content innovative trends in Telecommunications.

Mr. John Odey, the Minister of Environment (2009) said although the telecommunications industry had impacted positively on the economy and lives, it should not be allowed to hamper people’s health and environment. We must balance the social, economic and environmental aspects of our developmental areas.

Kalu (1999) contributed that as at the end of 2005, over 10 enterprises have been privatized while over 30 enterprises have been commercialized. For example, National Electric Power Authority (NEPA), now Power Holding Company of Nigeria (PHCN), Nigeria Telecommunications Limited (NITEL), now Nigeria Telecommunication Plc etc.

According to Federal Government of Nigeria (1993), the long term goal of a telecommunication enterprise is not only to be self financing but also to generate a reasonable return on investment and provision of digital exchanges; transmission links, gateways, and cellular telephone system all over the country.

Amechi argues that with the Nigerian belief which holds that government enterprises are nobody’s property every one inside and outside then strives to loot them and no one preserves them. He argues that privatization is a step fighting this ugly trend.

1.6    Theoretical Framework

According to Ogban-Iyam who sees theory as a set of interrelated concepts that are used to explain, describe, interpret and predict the relationship between phenomena or variables. Theory helps to provide us with a way of looking at the real world.

Here, Structural – Functional theory is used as suitable framework of analysis for the policy of privatization and commercialization of public enterprises in Nigeria. Structural – Functionalism as a theoretical framework is intended to explain the bases for maintaining order and stability in society and relevant arrangement within the society. This theory originated in the biological and medical sciences. It was adopted as a mode of analysis in sociology and anthropology as evidenced in the work of Emile Durkhim and Talcott Parson. It was developed for political analysis by Gabriel Almond, S.P Verma who stressed that structural-Functionalism involves two main concepts, such as structures and functions. Structure refers to the arrangements within the system which perform the functions. Also, structure is the way in which the parts are connected together in order to be arranged or organized.  Function has been defined by Merton Robert as those observed consequences which make for the adoption or adjustment of a given system. According to Oran Young function is generally defined as the objective consequences of a pattern of action for the system in which it occurs.

The basic assumption of the structural functional framework is that all system have structures which can be identified and these structures perform functions within the system necessary for its persistence. It refers to the structures that are found in any system and functions performed by structures. Thus political system is defined as the various structures and institutions in the society that perform political functions or that bear on political decision – making policy. Eme Awa (1976) clearly defines political system as “the peculiar structures in any particular system performing political functions”.

In analysis, there are three branches or structures of government such as legislature, executive and judiciary. The structure can be analyzed from three main levels as person, institution and subsystems. The whole of structure is analyzed into parts – each dealing with a particular sphere of activities for instance political, economic and social subsystem.

Therefore, structure of government lead to substructure. It is government and their bureaucracy makes rules, administering, adjudicating and formulated those economic policies through legislature and implemented those policies by the executive for economic growth of the country. Substructure is the basis of analysis of this research work. It studies the economic laws or policies governing the production and distribution of material benefits on human society at the various stages of its development. It is by means of productive activity that he is able to obtain the economic means that he needs to sustain life.  Functions have their parallel in three branches of government perform important functions.

If the economic structure such as Industries, Nigeria Telecommunication Limited, Power Holding Company etc which are established by the government are well organized and harmonized, also their various functions are performed smoothly there must be well stable economic development in public enterprises. This theory can achieve purpose of privatization and commercialization, if the Government makes use of it and apply it to the various structures of government or substructure to perform effective functions for smooth running of government activities which enhance economic growth of Nigeria. Take for instance, Telecommunication which is privatized brought about positive change in Telecommunication sector and contributed in economic development of the country.

In application, all political systems are therefore to perform two basic functions such as input and output functions. Privatization and commercialization of telecommunication of public enterprises (Input) are demand from government, the legislature and other organs of government help to process some of the demands that have reached the system in which certain functions should be performed and give out or allocate values by means of the “Output” Law or policy.

Structural – Functionalism according to Marxist concept of substructure; superstructure is wholly determined by the substructure. The argument perhaps appears to be that the economic sphere is omnipotent and that the individual consciousness is prisoners of material forces. Also, functions must be related to the structure of society. All other activities in the society revolved around economics, both social and political activities are based on economic activities.

1.7    Hypotheses

According to learner’s dictionary hypothesis is an idea or explanation of something that is based on a few known facts but that has not yet been proved to be true or correct.

Therefore, based on the nature of this work the researcher possesses the following hypotheses to guide the study.

(1)      Political interference could affect the efficiency or performance of public enterprises.

(2)      The policy of privatization and commercialization could enhance the efficiency of public enterprises.

(3)      The privatization and commercialization has improved the potential, efficiency and service delivery in Nigeria by making telecommunication easily accessible and affordable.

1.8    Method of Data Collection/Analysis

The researcher makes use of secondary sources of data collection and it involves Journals, Text books, Newspapers, Magazines etc.

The method of the data analysis was content analysis. The various data correction were edited, it involved objective, systematic and qualitative description.

1.9    Scope of the Study

The scope of this study is limited to the activities of privatization and the commercialization of public enterprises in Nigeria which was enhanced as a result of the inadequacy and failure surrounding its activities and programmes to the public which are the major benefactors of the services been rendered by these public corporation. It is limited to 1985-2009.

1.10 Definition of Concepts

Privatization: Privatization is the policy of selling off public enterprises to individuals, groups and organizations; they should operate under the principle of profitability, effectiveness, efficiency and viability than in public interest.

Commercialization: Commercialization is a policy in which government grants full commercial status to corporations which enable them to operate strictly under business principles and practices without government control or interference and exercising absolute financial autonomy.

Public Enterprises: According to Ogunna (1999), who sees public enterprises as enterprises set up by government to perform definite social and economic functions for the public .

Telecommunication: According to Oxford Learner’s Dictionary telecommunication can be known as the technology of sending signals, images and messages over long distances by radio, mobile phone, satellite etc.

Political Interference: It can be defined as a situation whereby the government or leaders are in control of the affairs or activities of the public for their own interest

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