Does privatisation serve public interests? ( 2)

THE functions of the council include: Making policies on privatization and commercialization, determining the modalities for privatization and advising the government accordingly, determining the timing of privatization of particular enterprises, approving the prices for shares and the appointment of privatization advisers, ensuring that the commercialized public enterprises are managed in accordance with sound commercial principles and prudent financial practices, Interfacing with the 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 functions of the bureau include: Implementing the council’s policy on privatization and commercialization, preparing public enterprises approved by the council for privatization and commercialization, advising council on further public enterprises that may be privatized or commercialized, advising council on capital restructuring needs of the public enterprises to be privatized, ensuring the update of accounts of all commercialized enterprises for financial discipline, making recommendations to the council in the appointment of consultants, advisers, investment bankers, issuing houses, stockbrokers, solicitors, trustees, accountants and other professionals required for the purpose of either privatization or commercialization, ensuring the success of the privatization and commercialization exercise through effective post transactional performance monitoring and evaluation and Providing secretarial support to the council.

When President Olusegun Obasanjo, GCFR, took over in 1999, the central government owned a total of 590 Public Enterprises ( PES). The government controlled most of the petroleum, minerals, development banking, telecommunications ( fixed line), power and steel sectors of the economy. These sectors alone constituted at least 40 per cent of the entire Na - tional GDP. It is instructive to note that over one- third of the money the country realized from the sale of oil since 1973 has been expended on PES. Estimates of the Vision 2010 Committee indicate that the Federal Government’s investments in public enterprises stood at over US$ 100 billion in 1996. It was also estimated that about 55 per cent of Nigeria’s external debts with the Paris Club of Creditors were due to funds sourced to establish these public enterprises. However, the return on these investments averaged less than 0.5 percent per annum. According to the Technical Committee on Privatisation and Commercialisation survey, public enterprises accounted for between 30 and 40 percent of fixed capital investments and nearly 50 percent of normal sector employment. Yet, the PES engaged in economic activities employing only about 400,000 people.

Data obtained from various government departments and estimates revealed that in 1998, Nigerian PES enjoyed about N265billion in transfers, subsidies and waivers, which could have been better invested in the country’s educational, health and other social sectors. Government’s response to these problems in the past was the setting up of one form of public commission and study group or the other on the performance of the public Enterprises. Their findings usually concluded that the Public Enterprises were infested with problems such as: abuse of monopoly powers, defective capita structures resulting in heavy dependence on the treasury for funding, bureaucratic bottlenecks, mismanagement, corruption and nepotism. Thus the broad objectives and benefits of Nigeria’s privatisation programme included: liberalization of the economy making the private sector “the engine of growth”, others were to: rehabilitate dead or moribund enterprises, promote efficiency and better management, create employment opportunities, reduce corruption and parasite mentality, modernize technology in our industries, strengthen capital markets, dismantle monopolies and remove service arrogance, reduce debt burden and fiscal deficits, resolve massive and perennial pension funding gaps, broaden ownership base and create popular capitalism, generate funds to government for investment in social sectors-education, health, security, etc, promote transparency in corporate governance, attract foreign investment and positive re- imaging and attract back flight capital into Nigeria. If we are to go with the 2004 phase three of the Privatisation programme, by now the Nigeria Ports Authority, the Nigeria Railway Corporation and the Nigerian National Petroleum Corporation and their subsidiaries should have been privatised.

The privatization of enterprises had scheduled under the first phase was completed between 1999 and 2003. These were commercial and merchant banks, cement companies that were already quoted on the Stock Exchange. These enterprises which were divested through public offers or a combination of public offer and core investor sale were: NAL Merchant Bank, International Merchant Bank ( IMB), FSB International Bank, Unipetrol, African Petroleum ( AP), Assurance Bank, National Oil and Chemical Company Plc. ( NOLCHEM), West African Portland Cement Co ( WAPCO), Ashaka Cement Co. Plc ( Ashaka Cem), Northern Nigerian Cement Company Plc ( NNCC) and Benue Cement Company ( BCC).

The second phase was concerned with public enterprises engaged in sectors where the prices of their respective output/ services were largely market- determined. A number of enterprises in this phase have either been fully privatized or partially privatized through sales to strategic/ core investor groups and offer to the investment public on the floor of the Nigerian Stock Exchange.

Concluded.

Teniola, a former director at the presidency wrote from Lagos.