PRIVATISATION OF PUBLIC ENTERPRISES AND ITS IMPLICATION ON ECONOMIC POLICY AND DEVELOPMENT OF NIGERIA( case study of a telecommunication industry in Cross River state )

PRIVATISATION OF PUBLIC ENTERPRISES AND ITS IMPLICATION ON ECONOMIC POLICY AND DEVELOPMENT OF NIGERIA( case study of a telecommunication industry in Cross River state )

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ABSTRACT

Privatization as an economic policy is of no doubt a good economic tool for development but in Nigeria, the policy has generated many controversies. Some Nigerians argued in its favour while others are antagonistic about its introduction in the country. This research work, therefore, sets out to examine the impact of privatization of public enterprises on poverty reduction Nigeria as a form of measuring economic policy and development using the telecommunication industry as a case study.

Private sector-driven economy comes on the heels of the failure of government and its institutions to live up to their responsibilities. Evidence of government failure abounds but thickens with its direct engagement in the creation and supply of goods and services. Public companies are known to perform badly when compared with their private sector counterparts. With sharp reductions in government’s revenue, adequate subventions to these institutions could not be sustained. Some are closed down while a good number operate beneath installed capacity. Salaries of workers are not paid and many of them are disengaged. Privatization is seen as a solution to the problem of public enterprises. In other words, the size of the public sector needs to be reduced, allowing greater share to private sector. Even at that, some fears are entertained as to the workability of privatization in developing countries.

This study is divided into five chapters, chapter one looked at the background study of privatization and statement of problem. Also some hypothesis were formulated to serve as guides on the subject matter. Chapter two discussed the conceptual framework, the growth of telecommunication industry and the impact of privatization on the poor. The research itself was designed to be descriptive, hence the survey research approach was adopted. Chapter three took care of the methodology used for collecting data, which involved questionnaires’ administration and secondary data collection. Chapter four handled data presentation, analysis and interpretation, the Chi - Square (X2) was used for testing the hypotheses formulated.

Finally, chapter five contains summary, recommendation and conclusion which will help the stakeholders to take a stand on the argument about governments’ privatization programmes in Nigeria.

CHAPTER ONE

                                            INTRODUCTION

1.1    BACKGROUND OF THE STUDY

Privatization (the transfer of government owned share-holding in public enterprises to private shareholders) is one of the revolutionary innovation in economic policies of both developed and developing countries (Igbuzor 2003: Chambers 2008).The ultimate goal of any credible and legitimate government is to ensure sustained improvement in the standard of living of the citizenry. Towards this end, Nigerian government found it necessary to design a developmental plan that will facilitate effective mobilization, optimal allocation and efficient management of national resources. To achieve this aim, public enterprises were established across the country to carry out these obligations. Towards the end of 1980, the public enterprises which had grown too large began to suffer from fundamental problems of defective capital structures, excessive bureaucratic control and intervention, inappropriate technologies, gross incompetence and blatant corruption (Aboyade, 1974). With the deep internal crises that included the high rate of inflation and unemployment, external debt obligation and foreign exchange misalignment, Nigeria and many other African countries were strongly advised by the World Bank and I.M.F to divest (privatize) their public enterprises as conditions for economic assistance (Nwoye,1997).

This economic policy (Privatisation) is a product of neo-liberal economic reforms that became popularised and globalised through the World Bank and International Monetary Fund (I.M.F). As an innovative economic policy, Privatisation started in Chile under the Military Government of General Augusto Pinochet in 1974 and was adopted in Britain between 1986 and 1987 as a central part of economic policy shift (Hanke, 1987). Privatization in Nigeria started in 1986 as an integral part of Structural Adjustment Programme (SAP) (F.G.N, 1986: Ndebbio, 1991).

Prior to this period, the Nigerian state has participated actively in public enterprises (Nwoye, 2003). This trend continued until 1988 when privatization programme was officially launched (Anya, 2000; Igbuzor, 2003). The Federal Government privatized 89 Public Enterprises (PEs) between 1988 and 1993 in the first phase while 32 enterprises were privatized in the second phase which ran from 1999 to 2005 (Mkpuma, 2005). It was envisaged that privatisation would improve


operational efficiency of our inefficient public enterprises (PEs), reduce government expenditure, increase investment and employment as well as ensure job security in Nigeria (Subair and Oke, 2008; Jerome, 2008).

Surprisingly, since the official introduction of privatisation in 1988, the policy has been a subject of intensive debate and has remained highly controversial in Nigeria (Nwoye, 2010). Most Nigerians hold divergent views on the contribution of the privatization programme to the Country’s economic development in its two decades of existence in Nigeria. Therefore this study attempts to convey the message that privatisation is in the interest of the masses both in terms of poverty alleviation and enhancement of national development, through a careful study of Nigerian telecommunication sub-sector.

PRIVATIZATION AND ECONOMIC GROWTH IN NIGERIA

             Many countries of the world have embarked on privatization programmes at different times. Chile introduced it in 1974. The United Kingdom implemented a rigorous privatization programmes during the regime of Margaret Thatcher in the 1980s (Iheme, 1997). The decision for Britain to embark on privatization programme was largely informed by the need to cut back on public spending rather than the need to promote efficiency and competition. Countries like Russia, Romania, Czechoslovakia among others witnessed the implementation of privatization in the 1990s. Privatization in Nigeria was introduced by the privatization and commercialization Decree of 1988 as part of the structural Adjustment Programme (SAP) of the Babangida regime (1985-1993). The vision of a "global market civilization" has been reinforced by the policies of the major institutions of global economic government named up to the mid 1990s. Underlying the SAP, 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 (Ayodele, 2002).

             One of the main objectives of SAP was therefore to pursue deregulation and privatization leading to removal of subsidies reduction in the wage bills and the retrenchment of the public sector ostensible to trim the State down to size (Egwu, 1998). The privatization and commercialization decree of 1988 set up the Technical Committee on Privatization and Commercialization (TCPC) under the chairmanship of Dr. Hamza Zayyad. He was mandated to privatize three public enterprises and commercialize 34 others, in 1993, the TCPC concluded its assignment and submitted a final report privatizing 88 out of the three 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 of public enterprises (BPE) to implement the privatization programme in Nigeria. In 1999, the Federal government enacted the public enterprises (Privatization and Commercialization) Act which created the National Council on privatization under the chairmanship of the Vice President Alhaji Atiku Abubakar (Igbuzor, 2003). The functions of the council were:

 i. To make policies on privatization and commercialization.

 ii. To determine the modalities of privatization and advising the government accordingly.

 iii. To determine the timing of privatization for particular enterprises.

 iv. To approve the prices for shares and appointment of privatization advisers.

 v. To ensure that commercialized public enterprises are managed in accordance with sound commercial principles and prudent financial practices, and

 vi. To interface with 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 function  of  the  bureau  include:

 i. Implementing of the councils policy on privatization and commercialization;

ii. Preparing public enterprises approved by the councils for privatization and commercialization;

 iii. Advising the 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. Advising the council on capital restructuring needs of the public enterprises to be privatized;

 vi. Making recommendations to the council in the appointment of consultants, advisers, investment bankers, issuing house, stockbrokers, solicitors, trustee, and other professionals required for the purpose of either privatization or commercialization;

 vii. Ensuring the success of the privatization and commercialization exercise through effective post transactional performance monitoring the evaluation, and

viii. Providing secretarial support to the council.

 Underlying the move to privatize public assets appears to be a basic belief that government owned and managed enterprises are inherently less efficient than private enterprises. While there is a great deal of evidence to suggest that this is true, it does not appear to be a significant alternative push to increase the efficiency of government enterprises, except in those cases where the body politics has defined enterprises as a uniquely governmental function (Gauche, 2000). Thus, this definition is becoming increasingly narrow over time. Consequently, privatization of public assets appears to stem from a desire to bring market discipline to bear on enterprises that were once sheltered by government ownership. This desire may stem from increasing realization that international trade of those nations and people who participate fully in the international economy. However, a country or an enterprise cannot participate fully in the international economy without being fully competitive. Thus, a basic thrust of privatization appears to be the promotion of economic growth. It is the objective which will be thwarted to a great extent if the privatizing governments fail to link up the privatized capital with those who will use the earnings from capital with those who will use earnings from that capital for consumption. If that capital goes primarily to those who reinvest rather than consume the income from the capital, total activity in the economy will be less than otherwise possible and economic growth will suffer as a result (Kelso and Hetter, 1982).

1.2    STATEMENT OF PROBLEM

The operational inefficiency of some privatized companies like Electric Meter Company of Nigeria Zaria and National Electric Power Authority (NEPA) now Power Holding Company of Nigeria (PHCN) among others is even more worrisome. The supply and distribution of electricity to consumers is still grossly inadequate (Subari and Oke, 2008). These variables and others have provoked more arguments, some in favour of privatization and others against it. The position of the critics over privatization in Nigeria is that the economic reform is a plot by few elites to sell public enterprises to themselves at the expense of the masses and that privatization cannot rescue Nigeria from its precarious economic situation. Those in favour of privatization argue that it aids poverty reduction through efficient operation, increase in productivity, employment, and job security. They are also of the opinion that privatisation widens the distribution of wealth in our society (Jerome, 1999; 2005).

More than twenty years of privatization in Nigeria, there are still mixed feelings about the efficacy of the policy, especially as government has fully privatize the Power Holding Company of Nigeria (PHCN). Some have asked for total stoppage of the programme while others still see privatization as a revolutionary policy with the ability of addressing the inadequacies of our Public enterprise. The last school of   thought has argued that what the government needs to do is to reassess and  rethink on the  implementation of the  programme.

1.3 OBJECTIVES OF THE STUDY

This study is therefore set to reassess the privatization of telecommunication industry in Cross River State, Nigeria and its effects on economic development specifically on poverty reduction in the areas of consumer satisfaction, job creation, public enterprises’ management, reduced government debts, strengthened capital market, ownership of capital, competition and technology and skill transfer which serves as a means of measuring economic development.

1.4    RESEARCH QUESTIONS

-              What are the relationships between privatization and poverty reduction in in Cross River state?

-              What are the greatest impacts/ benefits of privatization to the inhabitant in Cross River State?

-              What are the challenges faced by the on- going privatization programme in  Cross River state?

1.5   HYPOTHESES

Ho:    Privatization of public enterprises has a significant relationship with poverty reduction in Cross river state.

H1:    Privatization of public enterprises has no significant relationship with poverty reduction in Cross river state.

Ho:    Privatization of public enterprises has created more job opportunities to the citizens in Cross river state.

H1:    Privatization of public enterprises has not created more job opportunities to the citizens in Cross river state.

Ho:    Privatization of public enterprises has encouraged price increase of goods and services in Cross river state.

H1:    Privatization of public enterprises has not encouraged price increase of goods and services in Cross river state.

1.6    SIGNIFICANCE OF THE STUDY

   This study shall be of immense importance to a cross-section of people, Organization and the government of Cross river state and Nigeria at large.

Ø      It will assist the government on the implementation of the on-going privatization exercise and improve on the existing policy.

Ø      It will help to provide a clear assessment on some of the privatized enterprises.

Ø      It will provide an avenue for the people to decide on whether to support the privatization programme or to kick against it and equally assist students as a reference material in their libraries and for future research work.

1.7   THE SCOPE OF THE STUDY

The scope of the study shall be limited to the effects of privatization on poverty reduction and infrastructural provision of Cross river state through a proper coverage of telecommunication sub sector of the economy only. The major constraint faced in trying to address privatization issues in Nigeria, is the lack of adequate data on the quantitative impact of privatization. Several studies have been conducted but most of these covered developed countries in general with little emphasis on Nigeria. Despite this shortcoming, however, an attempt has been made to conduct a thorough analysis based on the limited information available. Secondly, time and money is required for transportation to meet appointment with those to be interviewed, procurement of relevant research materials and the preparation and administration of research instruments.


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