The Bureau of Public Enterprises recently admitted that over 30 per cent of state firms unloaded unto private hands have failed or are failing. But this is a generous self-appraisal; by the reckoning of the National Assembly, 70 to 80 per cent of them have buckled or are failing. Privatisation, however, is a globally tested approach to stimulating productivity, sustainable job creation, innovation and delivering efficient utility services.
A dynamic tool employed everywhere to unleash the innovation, resources and productive energy of the society, officials have managed to give it a bad name in Nigeria. Alex Okoh, the current Director-General of the BPE, confessed that 52 formerly state-owned enterprises out of the 142 privatised since 2004, representing 37 per cent, were not performing. The remaining 63 per cent, he told members of the House of Representatives Committee on Privatisation, were however performing creditably.
This sounds overly optimistic, going by other assessments. A few years ago, the Reps had voiced concern that close to 90 per cent of the SOEs privatised since the early 1980s had failed or were failing concerns. Erasing all doubts, however, the then vice-president and statutory chairman of the National Council on Privatisation, Namadi Sambo, said in 2011 that 80 per cent of the privatised firms had failed. Okoh is following a pattern where the BPE DGs paint a rosier picture of the privatised enterprises than every other stakeholder.
The landscape is littered with the carcasses of the SOEs as well as faltering privatised ones. The BPE is, for instance, in talks with the new owners to revitalise Nigerdock, the integrated maritime engineering and fabrication company that once had an international customer base and employed over 6,000 persons, but is now moribund, debt-ridden and has only about 500 workers. NITEL, the former state-owned telecommunications monopoly, sold four years ago, is struggling; some assembly plants, paper mills and even steel companies now in private hands have similarly failed to deliver on production, job creation and attraction of foreign direct investment. Privatised electricity distribution companies are a mess. However, there are some success stories such as NAHCO and oil marketing companies.
Privatisation still offers a strong route to stimulating the economy. It is recognised as a major factor in freeing public funds for investment in health, education, security and social welfare, attracting FDI and local investment, stimulating job creation, innovation, competition and productivity. A study of privatised or partially privatised companies between 1981 and 1990 in 12 developed countries reported increased sales and productivity, increased investment and greater efficiency.
According to OECD, the value of privatisations globally totalled $30 billion by 1990 and over $100 billion by 1997. In Britain where privatisation was rejuvenated in the 1980s, Margaret Thatcher saw it as “fundamental to improving economic performance,” and to “rejuvenate Britain’s economy.” Over 50 companies were sold or privatised while she was in office, bringing in £50 billion to the exchequer, a trend that continued well after her exit as prime minister. Privatised firms in Europe such as British Telecoms, Lufthansa, Air France and BAe Systems, the defence and aerospace giant, are doing well globally, though they had often struggled as state enterprises.
We should interrogate why privatisation has succeeded elsewhere but has failed to fully deliver here. Enquiries by the Senate and multilateral agencies identified lack of transparency, outright fraud, favouritism and political interference as major reasons. Underlining all this is the monster of corruption: Nigerian officials have been too steeped in corruption and made a mess of privatisation and concession of the SOEs. One recent and devastating example is the power sector asset sales of 2013 that saw 11 electricity distribution and six generation firms unloaded largely onto unprepared and incompetent consortia promoted by politicians, ex-public office holders and their business cronies. The country is paying a prohibitive price for the treachery of the Goodluck Jonathan government that superintended over that programme, saddled with power shortages that have held the economy back.
Two critical values have been missing since Nigeria began unloading the SOEs in the late 1980s; the strong political will and transparency. There is, for example, an obvious reluctance by President Muhammadu Buhari and his inner circle to privatise. Absence of transparency has scared away the best global players in key sectors whose financial, technical and managerial muscles would have brought the desperately needed FDI, expertise and global best practices.
The BPE should be reformed; it has too often been a willing tool in the hands of vested interests. The NCP that oversees it should drop the rigid adherence to the highest bidder option that insiders have manipulated to assist favoured but incompetent investors to bid high for assets they lack the ability to run.
For strategic, high job-yielding sectors like steel, mining and industry, the BPE should opt for a mix of targeted sales, share flotation and narrowing the field — it should not be all comers’ affair. We should target Western and South East Asian expertise and capital as well as their relatively better adherence to global best practices. Because powerful vested interests often acquire sold assets, the state does not vigorously apply the available legal options to intervene for the public good post-privatisation, when those companies derail from agreed MoUs or are failing. This should change, beginning with the power companies.
But privatisation is just one side; the Nigerian government should realise that fostering competition is a major goal as it drives efficiency and consumer values. Therefore, setting up strong liberalising and regulatory framework for all economic sectors is crucial. Australia’s federal and state governments have continued to tweak the rules to respond to unfolding challenges after privatisations that netted $11 billion in the 1990s.
The economy will not soar until the power sector sale is reviewed, and SOEs in the oil and gas downstream, steel, aviation and maritime assets privatised outright, transparently and to the right mix of foreign and local investors under a strong liberalising environment.
