Privatization and Commercialization of Public Entreprises

In recent times, there has been a policy shift to the commercialization and/or privatization of public enterprises. This was aimed at enhancing their level of productivity, and ensuring overall national development. However, the performance of these privatized enterprises has been replete with varying contradictions. In assessing the productivity of the privatized public entities in Nigeria, certain indices were used for analysis, such as profitability, output and employment. Analysis showed that certain factors such as corruption, lack of transparency, etc, have led to low level of productivity in the goal attainment of the policy. Consequently, suggestions were made for the sustainability of the reform and a better level of productivity in Nigeria.

As a concept, privatization is the process of transferring ownership and sometimes control of a business, an enterprise, an agency, a sector or public enterprise from the public sector to the private sector. Similarly, the Privatization and Commercialization Act of 1988 and the Bureau of Public Enterprises Act of 1993, defined privatization as the relinquishment of part or all of the equity and other interests held by the Federal Government. This implies that privatization is the selling off of Public Enterprises (PEs) to private investors after the sector has been deregulated. In other words, deregulation gives birth to privatization. Privatization is a programme of divestiture of Public Enterprises (PE) introduced within the framework of macroeconomic reform. It involves the transfer of ownership and controlling share from public to private sector. Commercialization involves reform of the PE sector to subject them to market discipline while still remaining a PE. Privatisation abounds in sectors such as telecommunication, banking, the cement industry, the hospitality industry, power supply, transport and aviation, fertilizer plants and the construction industry, among others.

According to the provisions of section 14 of the Privatisation and Commercialization Act, ‘commercialization’ means the reorganization of enterprises wholly or partly owned by the Federal Government in which such commercialized enterprises shall operate as profit-making commercial ventures and without subventions from Federal Government, such as the Nigerian Ports Authority, Nigerian National Petroleum Corporation, Shippers Council, among others.

In simple terms, commercialization is the shift of the primary motive of PEs from service rendering to money-making. It ensures the survival of the enterprise although it contrasts the original motive of setting up such an enterprise. Although the Act did not define ‘commercialization’, section 8 of the Act provides thus: Notwithstanding the provisions of any other enactment and without prejudice to the generality of section 6 of this Act, a commercialized enterprise shall operate as a purely commercial enterprise and may, subject to the general regulatory power of the Government of the Federation fix the rates, prices and charges for goods and services it provides; capitalize its assets; borrow money and issue debenture stocks; and sue and be sued in its corporate name.

It is clear, therefore, that when a public enterprise is fully commercialized, the expectation is that it should operate as a purely commercial enterprise without subventions from the Federal Government.

An effective evaluation of privatization and commercialization in Nigeria must provide an account that is sufficient enough to appropriately capture the complexities of their intentions and achieve consequences, whether intended or not. They are to create employment, control public spending and reduce national debt, to develop the capital market, increase the stakes of individual citizens in public enterprises through share ownership and encourage activities in other sectors of the economy. Others include; encourage foreign investors, reduction of government expenditure and provide income and curb corruption, promote operational efficiency and effectiveness through better corporate governance.

Managers overseeing privatization, public-private partnership programmes and private participation in infrastructure should integrate public communication programmes into the initiatives to build support and understanding that is crucial to managing a privatization project’s risk.

Comprehensive communication programmes may play other valuable roles as well. The design, sequencing and strategy employed in a privatization will be most effective when accompanied by an integrated communication approach. It enhances the sustainability of project objective over the medium and long term by involving interest groups and civil society in the decision making process.

The programme of privatization and commercialization is a major opportunity for the reform of Nigeria’s ailing public enterprises and to prepare them to serve the needs of the Nigerian economy in the 21st century. Enterprises will be made more efficient, more accountable and more responsible to the needs of the clientele it is meant to be serving – the Nigerian public. The Nigerian private sector will also benefit tremendously in the creation of new investment opportunities and now have a say in the affairs of the organized private sector. The performance of the Nigerian Capital Market will be enhanced greatly, as well as the growth potential of the Nigerian economy. But, what lessons are there for Nigeria and less developed countries undertaking similar programmes?

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