From structural adjustment to privatisation in Nigeria

Abstract

Since the arrival of the International Monetary Fund (IMF) at its shores via the great IMF debate of 1985, Nigerian leaders have learnt to demonise public enterprises, castigating them, facilitating their sales to cronies of government officials and using the channels of mass communication to impress upon the citizens that these enterprises are of no use. Today, the general wisdom is that the state should completely recede and that private ownership of the means of production is the only viable approach to efficient production of goods and services, economic growth and development. However, the same factors that led to the collapse of the public enterprises are also afflicting the privatisation exercise. In this paper, the practice of privatisation meant to promote private means of ownership and in turn increase the production capacity of every sector is critically examined. Focusing on the wave and sad experience of privatisation in a period of 2000-2012 which was riddled with corruption, nepotism, lack of good corporate governance and incompetent manpower in the country, the paper concludes that total privatisation of every sector will never solve the economic impasse of Nigeria.

Keywords: Privatisation; Corruption, Nigeria, Politicians, Structural Adjustment, IMF

Introduction

Life has a way of re-presenting issues that may have been in existence for a while in ways that make these issues glaring and the lessons there-in more laconic and concise. The recently released poverty data by the Nigerian National Bureau of Statistics generated a lot of questions concerning the degree at which the Nigerian leaders with their current policies of privatisation have succeeded in turning around the lives of the people they govern. The poverty data suggested that 112 million Nigerians are poor: they live below poverty line on less than $1 or 164 Naira per day. While 100 million are in absolute poverty, 12.6 million are moderately poor^[1].

This intimidating statistics has, among other things, brought to the fore the fact that a lot of work is still required from the government if it must lift a huge portion of the populace out of poverty. It beats the imagination that majority of Nigerians still wallow in poverty in the midst of affluence and vast natural endowment, coupled with the myriads of promises of better living that is expected to emanate from the introduction of privatisation in large scale across the country. While the government continues to introduce one form of privatisation policy after the other, the economic condition of its citizens are becoming worse by the day.

For example, beginning from June 1st 2012, President Jonathan government introduced new electricity tariff with an increment from its former rate of N4.00 per kilowatt-hour (pkwh) to N18 per kilowatt hour (pkwh). This was the continuation of a bid to privatise the Power Holding Company of Nigeria (PHCN). Despite the negative implication of this increment on the citizenry, government claimed that the increase in tariff would attract investors into power sector. In other words, Nigerians must pay heavily for electricity that was, and is, hardly available in order to gratify the drive for super profit of the investors.

This policy has raised a lot of questions such as; is privatisation about meeting peoples’ needs or a new avenue for the Nigerian ruling elites to acquire more wealth? Is this agenda of privatisation not a continuation of the grand corruption and primitive accumulation which has gone unabated since the advent of the Structural Adjustment Programme in the mid 1980s? Is it true that in a society like Africa, Public Enterprises cannot serve as necessary machinery for development such as being promoted by the proponents of privatisation? These questions, among others, are what this research paper set out to explore.

Public Enterprises in Nigeria Before 1980s

That a State has an important and indispensable role to play on the improvement of its citizenry standard of living is a universal fact in both capitalist as well as socialist economies of the world. The subject of State involvement in the means of production has thus been an issue of incessant and unbroken debate over the years in different socio-economic environment. The State began to play superior economic role in certain periods of time, followed by the doctrine of “accommodation”. The Industrial Revolutions in the 18th and 19th centuries in the West and the colonial rule in a number of Asian and virtually all the African countries resulted in massive societal imbalances among the human race. Concentration and absorption of economic influence and deepened poverty, dearth and paucity among the huge numbers of people obligated, forced and required the State to step into the business of controlling Public resources in a large scale in the first half of the 20th century (Prahlad 2007).

The two Global wars which happened in quick succession and the utter economic destruction that went with them led to further amplification of the role of State over the economic procedures. In the immediate aftermath of the Second World War in 1945, Europe, principally Britain, who colonised Nigeria, turned to Socialist ideas, which supported the viewpoint of Welfarism State in health, education, infrastructure and other sectors with State-ownership of the means of production in the public utilities during the first half of the 20th century. This involvement was expended and consolidated upon by the Colonial Welfare Development Plan (1946-1956) that was formulated when the Labour Party came to power in Great Britain.

Since then, numerous Public Enterprises have been established in both developed and the developing countries to deal with market scarcity capital deficit, uphold fiscal development, trim down mass joblessness and guarantee public management of the overall direction of the financial system, particularly in developing countries. By providing capital and technology to premeditated and strategic areas where the private sector either shirk away from or lacked the aptitude to invest, nearly every government resorted to Public Enterprises to increase capital configuration, produce essential goods at lower costs, create employment and generally contribute to the economic development of the nation state.

This trend continued till the early 1980s when rising corruption, nepotism, management inefficiencies, overstaffing, inflation and rising current account discrepancies of the 80s, exposed the limitations of Public Enterprises as major players in economic development. It would be recalled that many governments in the developing parts of the world viewed Public Enterprises as painless and simple route for job creation as well as a comfortable means of seeking peoples approval by dishing out jobs to every Tom Dick and Harry without due regard to the economic viability and capacity of the Enterprises. In addition to management deficits, many of these Enterprises also suffered from technological shortcomings. Imported through either foreign assistance or soft lending from abroad, many of the Public Enterprises were either equipped with low or second rated facilities thereby contributing to low capital or output percentage, or were established without due regard to their economic and monetary sustainability (Igbuzor, 2003). In the Philippines for instance, a nuclear power plant constructed at a cost of approximately $2 billion during the mid-eighties did not produce a single Kilowatt of power, mainly due to sub-standard technological infrastructure that was acquired at overstated and exaggerated prices (Khan, 2007). This in itself is a clear allusion to the corrupt activities that has become the order of the day among many developing countries.

In Nigeria, the involvement of the state in enterprises went as far back as the colonial epoch. Due to the absence of the indigenous companies or the indisposition and disinclination of foreign companies to provide the requisite capital to invest in social and economic projects, the task fell on the colonial regime (Olaniyi, 2013). After independence, the trends continued. In fact, one of the factors that accelerated the growth of Nigeria’s public sector was the indigenization policy of 1972 as enacted by the Nigerian Enterprises Promotion Decree (Adeyemo&Salami, 2008). This policy provided the much needed legal basis for extensive government participation in the ownership and control of significant sectors of the economy. It also reinforced the increasing presence of the public sector in dominating the economy.

Like what happened in other developing countries where economies were largely controlled by the Public sector, Nigeria also had its fair share of the problem. Nigeria’s problem was so gargantuan and gigantic that it left the Nigerian state in a great disenchantment and cynicism. This disparagement ranges from lack of accountability, profitability and over-reliance on large government subsidies (Adeoti, 1992).

Between 1975 and 1985, government capital investments in public enterprises totaled about 23 Billion Naira; in addition to equity investments in public, government gave subsidies of 11.5 Billion Naira to various state enterprises ( Ogundipe, 1986). All these expenditures contributed in no small measure to the increment in government expenditures and deficits. In the latter part of the twentieth century, therefore, the role of the State experienced a radical turn-around. This turn-around was first made by the Great Britain while other nations rapidly went after it. Dismantling of the State’s role in industrial activity in the defunct Union of Soviet Socialist Republic (USSR) brought about on the other hand a sea change in the concept of Public Sector i.e. State ownership. The prevailing opinion in early 1980’s in many countries was that the State-owned Enterprises had become a drain on national economy (Yarrow, 1986).

Privatisation thus emerged as a significant element of the economic reform process. Its major objective was reduction of fiscal deficits, subsidies and costs of debt servicing.

Privatisation in Nigeria

The clamouring for privatisation in Nigeria can be traced back to the World Bank Reports on Africa in 1981 which declared that:

“African governments should not only examine ways in which public sector can be operated more efficiently but should also examine the possibility of placing greater reliance on the public sector… what is needed is straight forward acceptance of the principle that under certain circumstances, liquidation of public enterprises may be desirable” (Adeyemo&Salami, 2008).

By the late 1970s and the turn of the 1980s, African countries like their colleagues in other developing parts of the world were met with immense economic drain and domineering debt load which were heightened by the International Economic slump (Nwagbara, 2004). Accordingly, the dearth of required and needed finances served an impediment to the execution of essential national programmes of economic development and political modernization. The seemingly available option at that time was the choices of soliciting the financial assistance from the international bankers, which they were reluctant in providing due to the fear that many of these developing countries may found it difficult to pay the money back since they had already accumulated huge arrears of debt. As a result, consequent granting of monetary aid was attached to stern and strict conditionality of some form of structural adjustment in the internal structure of the economy of the borrowing countries. Thus, one of the obvious outcomes of developing nations’ response to economic crisis is the obligatory implementation of structural policies resulting either in the form of stabilisation or structural adjustment, or both.

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^[1] This statistics is released by the National Bureau of Statistics (NBS) in February, 2014. For more see http://www.punchng.com/business/business-economy/112-5-million-nigerians-live-in-poverty-nbs/