ROLE OF COMMERCIALIZATION AND PRIVATIZATION ON PUBLIC SECTOR PERFORMANCE
1.1 BACKGROUND OF THE STUDY
The importance for the establishment of public enterprises was felt in 19th century and thereafter. 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.
Public enterprises were established to enhance Nigeria’s socio economic development especially after independence in 1960. The major concern in this regard had been to accelerate development and economic self- reliance through “economic nationalism”. Public enterprises thus reflects one of those instruments by which government intervenes in economic development rather than allow market forces to dictate the pace of development.
According to Ayodele (2004) Nigeria relied heavily upon public enterprises up to the mid-1980s for the development, management and allocation of utilities and social services. They were seen as a major instrument not only for the mobilization and allocation of public investment resources, employment generation and income redistribution but also for determining government finances and the acceleration of overall economic development. Adeyemo (2005) reflecting on Turkey, Mexico, India and Nigeria noted that the establishment of public enterprises was premised on what he considered as obstacles to economic development in the post-independence states. It is also instructive to note that in Nigeria like many developing countries, public enterprises are used as employers of last resort. According to Hemming and Mansor (1998) state owned enterprises enable government to pursue goals of social equity that the market ordinary ignores.
According to Laleye (1985) the bewildering number and types of the organisations called public enterprises’ their different contents and the rationale for which they are set up accounts for lack of authoritative and generally acceptable definition of public enterprises. Sosna (1983) opined that there are many reasons why in developed capitalist countries, there is no single standard definition of public enterprises. Public enterprises were established at different periods and each epoch naturally brought forth the types of public enterprises most clearly matching its conditions. Efange (1987) define public enterprises as institutions or organisations which are owned by the state or in which the state holds a majority interest, whose activities are of a business in nature and which provide services or produce goods and have their own distinct management.
Similarly, Ugorji (1995) observed that public enterprises have been established for political reasons. Many government undertakings were used to provide jobs for constituent’s political allies and friends. The location of public enterprises and the distribution of government employment have further been defended on the need to maintain federal character and promote national integration. Other factors that accelerated the growth of public sector were the indigenization policy of 1972 as enacted by the Nigeria enterprises promotion decree. It was designed to control the commanding height of the economy. The policy further provided the much needed legal basis for extensive government participation in the ownership and control of significant sector of the economy. It also reinforced the increasing dominant of the public sector in the economy. In 1989, the Technical committee on privatization and commercialization remarked that as at 1980, there were 70 non- commercial and 110 commercial Federal enterprises and parastatals; many of which depended on government support to cover their operational losses. (TCPC, 1993).
Consequently, Nwoye (2010) stated that privatization in Nigeria was formerly introduced by the privatization and commercialization Act of 1988 which later set up the Technical committee on privatization and commercialization (TCPC) chaired by Dr. Hamza Zayyad with a mandate to privatize 111 public enterprises and commercialized 34 others. The federal military government promulgated the Bureau of public Enterprises 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 chaired by the vice president.
According to Adesanmi (2011), the government set up the Bureau of public Enterprises (BPE) to privatize and commercialized as the case may be, public enterprises with the objective of reducing or eliminate the drain on public treasury. It seek to reducing corruption, modernise technology strengthen domestic capital markets; promote efficiency and better management for reduced debt burden and fiscal deficit resolve massive pension funding problem. Others include generating funds for the treasury promoting governance, attract flight capital. This is to promote greater efficiency and productivity in the public enterprises.
All over the world, the public service as a matter of experience has not been known for their capacity to create wealth. Consequently, public enterprises have usually been perceived as drain pipes for government budget, thus creating budgetary strains and avoidable burden on the economy. It became a National policy imperative therefore to disengage the public sector from those areas where private sector has the comparable advantage to perform. While letting the state concern itself with the provision of infrastructure security and the enabling environment for business to thrive through enhanced wealth creation. It is important to observe that for many developing countries like Nigeria it was perhaps unavoidable for the government, in an earlier epoch, to promote the initial investments in the early phase of national development when the private sector was almost non-existence. Unfortunately, the government got her so involved in business that could best be talked by private sector, that government could no longer perform her traditional functions.
Privatisation as a tool for economic management came to the front burner when Chile became the first country to turn public assets/business to operators in the early 1970s. Since then, over 140 countries (both developed and developing) have embraced privatisation as a route to economic growth and prosperity. While the details and strategies of the privatisation exercise may vary in each of these countries, the ultimate objective is to liberalise the economies through increasing private sector involvement and capacity utilisation. It is worth noting that over 120 countries have embraced the idea of privatisation. In the process of privatisation, more investible capital have been injected into the various economies through local and foreign investors to the benefit of the country at large. In the process, funds that would have been committed to the maintenance of otherwise inefficient enterprises have been freed into more productive sectors of the economy.
In the case of Nigeria, the issue of mismanagement and under- utilisation which led to huge wastage of resources and manpower potentials gave the government of the day no other option but to pursue quickly the privatisation programme. There are about 600 public enterprises in Nigeria run or controlled by the Federal Government. Many more are controlled by State Governments. These companies take a sizeable portion of the Federal Budget and account for over 5,000 appointments into their management and Board-a powerful source of political patronage. Transfers to these enterprises ran into billions of naira. These transfers were in form of subsidized foreign exchange, import duty waivers, tax exemptions and /or write-off of arrears, unremitted revenues, loans and guarantees and grants/subventions. These companies were also infested with many problems which became an avoidable drag on the economy such as abuse of monopoly power, defective capital structure, heavy dependence on treasure funding, rigid bureaucratic structures and bottlenecks, mismanagement, corruption and nepotism.
Obadan (2000), Obadan and Ayodele (1998) have seen public enterprises as organisation whose primary functions is the production and sale of goods and/or services and in which government or other government controlled agencies have no fellowship stake that is sufficient to ensure their control over the enterprises regardless of how actively that control is exercised.
1.2 STATEMENT OF THE 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 social political stability. The public enterprises of Nigeria set up by government to perform definite social and economic functions that informed the establishment of these public enterprises are to control the resources and raise fund for the provision of certain infrastructural facilities particularly in service requiring heavy financial investment like 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 creditably or efficiently, privatization and commercialization became necessary for the government of Nigeria. The problem militating against the performance of public enterprises are political interference and mismanagement of resources which is responsible for the poor performance of public enterprises in Nigeria, coupled with corruption, nepotism, poor funding, monopoly and excessive bureaucratic control.
1.3 OBJECTIVE OF THE STUDY
The objective of the study can be stated as follows
- To ascertain if political interference and mismanagement of resources is responsible for poor performance of public enterprises.
- To justify the need for privatization and commercialization as a means of enhancing the performance of public enterprises.
- To evaluate if privatization and commercialization of public enterprises has improved the efficiency of service delivery.
- To identify the problems associated with privatization and commercialization in Nigeria.
1.4 RESEARCH QUESTIONS
The questions for this research are
- To what extent has political interference and mismanagement of resources responsible for poor performance of public enterprises?
- How does privatization and commercialization enhance the efficiency of public enterprises?
- How does privatization and commercialization improve the potential efficiency and service delivery in Nigeria’s telecommunication?
- How do corruption, nepotism and monopoly affect the performance of public enterprises?
1.5 SIGNIFICANCE OF THE STUDY
The importance of any research is tied to find out solutions to the various problems that face mankind in the society. The study is meant to create awareness to every citizen of this country and economic planners on the implication of privatization and commercialization of public enterprises in the Nigeria economic development. It will help policy makers to assess the performance of NITEL before its privatization and also help researchers on contemporary issues have first-hand knowledge of the performance of privatized and commercialized public enterprises and to determine if privatization and commercialization is the solution for low productivity and inefficiency facing public Enterp
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rises in Nigeria.