Femi Aborisade
Privatization essentially refers to selling public bodies, public enterprises to private owners.
Economic and financial reasons are usually the formal reasons declared by governments for privatization. The current Government, for example, claims it will help to finance this year’s budget through proceeds from privatisation of some public assets which has been put at around N200 billion. Planned sales include, the Integrated Power Plants in Geregu, Omotosho, and Calabar, the National Arts Theatre and the River Basin Development Authorities. In addition, the National Stadium in Lagos, the Moshood Abiola Stadium, Abuja, and two others are pegged for concessioning.
Privatisation is political
In reality, however, the key reasons for privatization in Nigeria are political and ideological – to transfer resources from the public to the private sector. If economic reasons alone determine which companies to be privatized, then, companies that are self-financing and generate additional funds for government should not have been included in the list of companies to be privatized.
This was eloquently captured by Nasir Ahmad el-Rufai, the then Director General of Nigeria’s Bureau of Public Enterprises. In 2001, he stated: “Privatization is inevitable – state capitalism has failed, and is outdated and unsustainable. Globalization is at our door step – unless we act quickly and decisively, we will surely be left behind even more than where we are now”.
The National Council on Privatisation, in 2000, identified the primary goal of privatisation and commercialisation as – “to make the private sector the leading engine of growth of the Nigerian economy and to reintegrate Nigeria back into the global economy, as a platform to attract foreign direct investment”.
In the history of Nigeria, from the colonial up to 1980, five main development plans had been formulated and implemented, through which the public enterprises being privatised today were built up through equity interests, loans, grants and subventions.
Before 1986, about 1,500 public enterprises existed in Nigeria – 600 at the Federal level and 900 smaller ones were at state/local government levels.
All that started to change in July 1986 when the policy of privatization was formally declared. What is important to stress is that the process leading to the paradigm shift from state centrism to the private sector being the engine of economic growth was not an inevitable phenomenon. In fact, it is a recent phenomenon.
The process of change from ‘state capitalism’ to ‘rolling back the state’ did not occur on its own accord. Unlike Adam Smith, the direction of the economy is not simply influenced by the invisible hand of the market (i.e. the forces of supply and demand). Rather, supply and demand are influenced by conscious social policies in the process of social interaction or class struggles. Hence, Marx talks of political economy, i.e. economy that is influenced by political decisions and state-civil society relationships.
Massive public investments in public enterprises
Between 1975 and 1995, the Federal Government alone spent $100billion on public enterprises and that on an annual basis, public enterprises consumed about N200billion of national resources by way of grants, subsidies, import duty waivers, tax exemptions, and the like. A colossal investment in public enterprises evidences.
With the 1986 formal introduction of Structural Adjustment Programme (SAP), a major component was commercialization and privatization. This was a contradictory phenomenon as, on the one hand, government declared its intention to divest from public enterprises and on the other hand, huge resources continued to be pumped into the same enterprises under the guise of making them attractive to investors.
Overview of Privatization Programme
The first exercise started in 1988 under the Babangida regime. This phase ended in 1993. The programme identified 111 public enterprises to be fully or partially privatized and 34 others including NNPC, NEPA, NITEL for commercialization. In the end, between 55 and 82 enterprises were privatised and subventions were withdrawn from some commercialized enterprises.
The programme generated only a paltry sum of around N3.5bn. Obviously, the privatized public enterprises were ridiculously undervalued. The Senior Staff Association of Statutory Corporations and Government Owned Companies (SSASCGOC) in a joint advertisement with the junior staff union, the National Union of Postal and Telecommunications Employees (2001) had cause to condemn the then Director General of the BPE, El-Rufai, for saying that the over 500 buildings and land owned by the Nigerian Telecommunications Limited (NITEL) all over the country would not be reckoned with in determining the value of NITEL.
Government also divested interest in nine banks – eight of them were sold by public offer and one by private placement. The eight banks were Union Bank, Afribank, United Bank for Africa, Savannah Bank, International Merchant Bank, NAL Merchant Bank and Merchant Bank of Nigeria.
There was no privatization exercise throughout the Abacha period, between 1993 and 1998. Rather, government adopted the policy of a 10-year contract-leasing programme. By this programme, the lessees were to have unfettered use of the facilities of the enterprises and the Federal Government was only to share a percentage of profits and foreign exchange earnings declared by private companies that won contracts to manage the affected enterprises.
Second phase of privatization
The second phase of the privatization programme was initiated in 1998 by General Abdulsalami Abubakar shortly before he handed over power. This embraced the major infrastructure and public utilities omitted in the first programme. This included public enterprises such as the railways, ports, NIPOST, Savannah Sugar.
The implementation of the second major phase of privatization actually started with President Obasanjo in1999. A total of 101 companies were privatized between 1999 to May 2006. The Proceeds realised from 52 of them amounted to less than N50bn.
In many cases many of the new owners did not even pay the full value of the already low bid prices. So this was nothing but looting of public heritage in the name of privatization.
Legal protection for beneficiaries of privatization
Fearing resistance against privatization at one time or the other and in different forms, the Federal Government put in place legal protection for private capital and investments in privatized companies against nationalization or expropriation.
Job destruction under privatization
In preparation for privatisation, massive retrenchment was undertaken in public enterprises to remove “bloated” and over-staffing levels. For example, in the Nigerian Railways staff numbers were progressively brought down from about 45,000 in the 1970s to less than 14,000 by natural attrition as well as retrenchment.
In addition, many companies failed, the Bureau of Public Enterprises in
(2006) an attempt to assess the employment effects of privatization sampled 41 companies and found that ‘six of the privatized companies had folded up while five became moribund’ (2006).
This process is continuing, for example in the electricity distribution companies (that were NEPA), excuses are still being found to retrench older staff and where necessary replacing them with younger staff who are paid less.
Conclusions
As socialists, we are fundamentally opposed to privatisation. This is because it is a means of looting public infrastructure and providing the corrupt elite with further ways of enriching themselves. We believe that it is fundamentally unfair that public enterprises developed and extended with public funds should be provided to private individuals at prices that do not reflect these historic public investments.
We are also concerned that privatisation results in further attacks on public jobs and conditions of service. We do not believe that public enterprises like NEPA and NITEL were islands of socialism. But they were protected, to a certain extent, from the ravages of the market.
It was possible for electricity and telephones to be provided at prices that were not dictated by the need to maximise profits. In addition, in many cases public enterprises allowed trade unions to organise and to negotiate more freely than is the case in the private sector. In addition, privatisation has led to the loss of many jobs and increased the level of unemployment.
We believe that the relevant trade unions, the NLC and TUC should be leading a campaign against the proposed privatisations. In addition, many privatised companies, especially those in the electricity sector should be brought back into the public sector. This could allow electricity to be provided as a public good rather than just to make profits for a few.
