Nigeria Commercialisation and Privatisation Policy

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Commercialisation and Privatisation Policy in Nigeria

Privatisation and commercialisation policies were first introduced under the Structural Adjustment Programme (SAP), which was imposed on the country by the Bretton Woods Institutions (i.e International Monetary Fund (IMF) and the World Bank) in 1986.

Under the programme, Nigeria was required to devalue her currency, reduce government spending, remove subsidies, deregulate the economy, liberalise foreign trade, credit and money supply, commercialise and privatise public enterprises, and redirect resources from the public to the private sector.

Nigeria Commercialisation and Privatisation Policy
Nigeria Commercialisation and Privatisation Policy

With the promulgation of Decree No. 25 of 1988, the Nigerian Federal Government embarked upon the implementation of the programme with vigour.

Components of Privatisation and Commercialisation Programme in Nigeria

There are four components of the Privatization and Commercialization Commission in Nigeria, namely,

  1. Partial commercialisation
  2. Full commercialisation
  3. Partial privatisation
  4. Full privatisation

(1) Partial Commercialisation

Partial commercialisation is the first stage of the programme. An enterprise that is partially commercialised is required to, at least, cover the cost of its operations. The balance may then be given to it by the government. There were 20 enterprises scheduled to be partially commercialised.

(2) Full Commercialisation

The enterprises to be fully commercialised were required to set their pricing policies appropriately so as to make profit. The enterprises would remain wholly government-owned but they would no longer receive subvention from government. They could raise money through the money and capital markets.

(3) Partial Privatisation

Partial privatisation implies that the government only divests itself of some of its shares in the affected companies. There were 25 firms scheduled for partial privatisation including the five iron and steel industries at Ajaokuta, Aladja, Katsina, Osogbo and Jos.

(4) Full Privatisation

In full privatisation, the government was required to sell all its shares in a public corporation. There were 51 enterprises in this category including the Nigeria National Supply Company (NNSC) and the Nigeria National Shipping Line (NNSL). All these corporations have been fully privatized.

Implementation of the Privatization and Commercialization Programme in Nigeria

The implementation of the privatisation and commercialisation programme was, at the beginning, vested in the Technical Committee on Privatisation and Commercialisation (TCPC). By Virtue of Decree 78 of 1993, the TCPC metamorphosed into the Bureau for Public Enterprises (BPE).

Under the Abdulsalam Military Administration (1998-1999), the BPE was reinvigorated as privatisation featured prominently in the government’s agenda. The BPE drew up a new list of public enterprises to be privatised.

The programme kicked off with invitation on the Internet and local media for expression of interest from potential investors willing to acquire 40 percent shares in the affected public enterprises.

The Obasanjo Government, perhaps more than any other government took the privatisation programme to new heights. On assumption of office, the government inaugurated the National Council on Privatisation (NCP) under the leadership of the Vice President, Atiku Abubakar.

At the inauguration, the former President disclosed that privatisation would be implemented in three phases, namely; .

  • The sale of government shares or interest in breweries and cement manufacturing and marketing companies listed on the Nigerian Stock Exchange.
  • The sale of government interest in hotel, sugar manufacturing and motor assembly plants.
  • The sale of utilities and refineries – Only 60 percent equities were to be offered with 60 percent going to core investors and 40 percent to the Nigerian public.

The NCP formulated broad policies relating to the privatisation of public enterprises while the refurbished BPE, a government parastastal was speciiically charged with the implementation of the programme.

The other important implementing agencies included the Department of Petroleum Resources (DPR), the Nigerian National Petroleum Corporation (NNPC) and the Petroleum Products Pricing and Regulatory Agency (PPPRA).

The PPRA was in particular notorious for always recommending increase in the price of petroleum products at the drop of the hat especially under the General Olusegun Obasanjo eight years democratic rule (1999-2007).

Several approaches have been adopted in the implementation of the privatisation and commercialisation programme. In some cases, the public corporations have been sold directly to investors.

In this category were the NICON Noga Hotel Ltd, Abuja, the Nigeria Hotels Ltd (the owners of Ikoyi Hotel, Durbar Hotel, etc), the Daily Times, Nigerian Telecommunications Ltd (NITEL), African Petroleum, Unipetrol and Nigeria Airways which was liquidated in 2003.

Others such as the Power Holding Company of Nigeria (PHCN), National Fertiliser Company of Nigeria Ltd (NAFCON), the refineries and the paper mills were at different Stages of privatisation before the exit of the Obasanjo Administration. Most of these companies and their subsidiaries have remained Imprivatised several years after.

The BPE has also sold assets such as the Games Village in Abuja. the ‘1004Flats, the Games Village Towers and the Bar Beach Towers in Lagos.

The deregulation of the downstream sector of the petroleum industry has led to the active involvement of private oil marketers such as Oando and Conoil in he importation of petroleum products. Nevertheless, the NNPC still maintains its monopoly position as it supplies over 80 percent of the products to the market.

Following the assumption of office by the late President Umaru Musa Yar ‘Adua on May 29, 2007, the privatisation programme was slowed down, and in some cases, some of the decisions of the previous administration were reversed.

The sales of the refineries, NITEL, NICON and Nigeria Re-Insurance have been reversed and the concessioning of the 102 Unity Schools to private managers has been revoked. The privatisation of several other public enterprises and assets is being reviewed by the Federal Government. One thing is certain however.

It is the fact that the tempo of the sale of public assets has to change so that a proper evaluation of the status of the privatised enterprises can be carried out by the Federal Government. More importantly, the government would need to demonstrate its avowed commitment to due process and transparency in the privatisation process.

In particular, the government should publish the names of the buyers of the privatised enterprises, the amount realised from the sales and the use to which the funds were put.

The Goodluck Ebele Jonathan Administration which came to power in 2010 following the death of President Umaru Yar’Adua has pursued the privatisation and deregulation agenda with utmost determination, perhaps more than any other government.

For example, on January 1, 2012, it increased the pump price of petrol from N65 to N141 in one fell swoop. It was only forced to reduce the price to N97 after a one-week strike which virtually shut down the whole country.

In October 2012, it sold the subsidiary companies of PHCN to private interests.

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