AN EVALUATION OF COMMERCIALISATION AND PRIVATISATION OF PUBLIC OWNED ENTERPRISES IN NIGERIA

STORE PROCEDURES IN MANUFACTURING INDUSTRY

CHAPTER ONE

GENERAL INTRODUCTION

It is importance to look at the historical development of the word privatisation globally and locally. According to Dennis O. Odufe the word privatisation has come from the private as opposed public sector. The action itself followed or flowed from the activities of Margaret that cheirs basis for the argument of privatisation was crafted over 100 years earlier by Adam smith in the wealth of Nations.

After the second world war the British embarked on a deliberate policy of nationalization of the basic industry with the view of enhancing efficience planning on the British economy and to guarantee an unilterapted flow of essential goods and services to the populace but with the transfer of 14 large companies to private hands, and also many smaller one employing total of about 860,000 people.

According to ElRufai 2002, the industry of privatisation in Europe needs to be understood. Those who sought privatisation in Europe were the children or grand children or descendants of rich capitalists who parent enterprises were taken over or acquired by the state during the development of the welfare state in Europe these people were therefore not urging for divestiture in state asked industry but in state acquired industry.

Second, even in Europe particularly in Britain that became the first capitalization country in the world the state had to invest in certain sectors of the economy because of the private sector that did not have capacity to invest on those sector alone one of such sectors is transport, or specifically the raloway industry in Britain. The state was massively and actively involved in its development using state funds. Another sector is the energy sector in Britain. Till today the issue of privatisation of the transport sector or the railway industry is still a contentious issue on Britain the British Airway is publicity owned enterprise. Yet the Nigeria Airway is being privatised even in the face of mass audience and documents to the superlative Compton and unspeakable stealing that took place in FAAN and with various management of the Nigerian Airways.

Third, where is nowhere in the world where subsidy is not extended to strategic and sensitive sectors of the economy some of such sectors are the energy agricultural, educational, health and transportations rectors. This takes place in all advanced countries of the world. During the peak of the incident of the mad cew disease in Britain, the British government was subsidizing farmers in British, with about 80 million pound sterling every week. Transportation is still subsidised in Britain, so is education particularly higher education for citizens public health is subsidised and so M. In the united state of America farmers are not only subsidised they are even paid to destroy their grains, as part of the U.S. political strategy towards world wide hunger.

In Nigeria basic subsidy to farmer have been withdraw, the River basin Authorities have been handed over to individuals who know next to nothing about agriculture.

The critical and crucial question then is who are we copying who is our teacher As Fela would say. Teacher done teach me nonsense where our examples coming from

If the crisis in Argentina is anything to go by we realise that is indeed a result of private sector. In other to appease the IMF and World Bank and attract so called private investors the government of Angentina threw its economy open to all comers and all interest, all in the name of privatisation state enterprises were also sold. The result FDI decreased did not increase the state became politically volatile and hence unable to attract investors. Argentinas foreign debt soared they did not reduce. At the time of social upheavals and apprising of November December 200 which overthrew the government Argentina was owing US 132. At preset Argentina does not have a capacity to service its debt its foreign reserves are in red and cannot import food even for one month. The entire banking sector in Argentina has collapsed. Those who soared monies even on foreign currencies cannot have access to them and they are being told that they have to be paid in pesos and at half the anginal value of their monies the entire appear and middle classes of Argentina old and young are all in the streets in protest with many of them sleeping in frone of key banks where they budge their monies.

Over the years there has been deliberation by stakeholder on how to put the Nigeria economy on financial analyst are of the opinion that privatisation is one of the panacea within a larger frame work for redressing economy problems. As a result of this, a consensus has emerged on the significance of privatisation and commercialisation of public enterprises.

The terms privatisation refers to the transfer of services and interest from the state to private enterprise and can cover a number of different matters, e.g.

i. Selling of nationalised concerns to private shareholder

ii. Issue of share traded on the Nigerian Stock Exchange

iii. Share placement with institutional investor

iv. Sales of assets

v. Joint venture with the private sector

vi. Relaxing monopoly rights to allow competition

vii. Allowing private contractors to tender for the provision of services.

Privatisation is a pare of structural adjustment with the overall objective of achieving economic efficiency. It implies a fundamental change in the role of the state in relation to the promotion of industrialization, creation of employment and provision of infrastructure facilities B.S Adebusuyi 1999.

Privatisation is asked at achieving efficient pricing of public sector goods and services, as well as attainment of overall operational efficiency sensitive sectors of the economy. Some of such sectors are the energy, agricultural, educational, health and transportation sectors. This takes place in all advanced countries of the world. During the peak of the incident of the mad cow disease in Britain, the British govnerment has subsidizing farmers in Britian with about 30 million point sterling every week. Transportation is still subsidised in Briitain, so is education particularly higher education for celizens public health is subsidised and so on. In the united state of America, farmers are not only subisidised they are even paid to destroy their grans, as part of the U.S. political strategy towards world wide hunger.

In Nigeria, basic subsidy to farmers have been withdraw, the River Basin Authorizes have been handed over to individuals who know next to nothing about agriculture.

The critical crucial question then is who are we copying, who is our teacher As Fela would say: Teacher dont teach me non sense where are our examples coming from

If the crow in Argentina is anything to go by we realise that it is indeed a result of the failure of the market the failure of the private sector. In other to appease the IMF and World Bank and attract so called private investors the government of Argentina threw its economy open to all comers and all interest, all in the name of privatisation state enterprises were also sold. The result FDI decreased did not increase the state became politically volatile and hence unable to attract investors. Argentinas foreign debt goared they did not reduce. At the time of the social upheavals and uprising of November December 2001 which overthress the government. Argentina was arming U.S. 132. at present Argentina does not have a capacity to service its debts its foreign reserves are in red and cannot import food even for one month. The entre banking sector in Argentina has collapsed. Those who saved monigs even in foreign currencies cannot have access to them and they are being told that they have to be paid in persons and at half the original value of their monies. The entre offer and middle closes of Argentina old and young are all in the streets in protest, with many of them sleeping in found of key banks where they lodged their monies.

PRIVATISATION AND COMMERCIALISING DECREE 1988

In Nigeria, the first privatisation programme of the federal government commenced in 1988. under the technical committee on privatisation and commercialisation decree No 25 of July 1988 the committee completed the first phase of privatisation programme in August 1993 before it metamorphosed into Bureau of public Enterprises BPE A total of 89 enterprises were privatised our of III stated for privatisation.

The second privatisation kicked off in November 1999, about 15 enterprises have been fully or practically sold each sale process has come with its controversies.

Moreover, the privatisation and commercialisation decree 1988 provides for the privatisation and commercialisation of federal government enterprises and other enterprises in which the federal government has equity interest.

The decree also establishes the Technical Committee on privatisation and commercialisation with the objective of ensuring a through implementation of Governments policy on commercialisation and privatisation of its enterprise and interests.

Eighteen firms were privatised by their ownerministries prior to the establishment of TCPC in 1988 and, as at 31^st May, 1992, the TCPC has privatised 27 enterprises through public offer, one through private placement and seven through sale of assets.

In is important to observe that there was a time when it has considered sound economics policy for government to establish and invest in statutory corporation and state owned companies. It was argued that public owned companies were better for stimulation and accelerating national economic development than private sector.

However, state enterprises suffer from fundamental problem of defective capital structure, excessive bureaucratic control or invention, and management, blatant corruption and crippling complacency which many engenders.

By and large, one may be tempted to ask why is the federal government privation and commercialising It to replace public monopoly What are the benefits and the cost of this programme to the federal government and financial institution, especially the capital and to the public at large.

TECHNICAL COMMITTEE ON PRIVATION AND COMMERCIALISATION TCPC

A Technical Committee consisting of a chairman and seven other members was appointed by the president, commander in chief of the Armed forces, dream from both the private and public sectors of the economy to perform the following functions:

a advise on the capital restricting needs of enterprises to be privatised or commercialized in order ensure a good reception in the Stock Exchange market for those to be privatised as well as to facilitate good management and independent access to the capital market.

b Carry out all activities for the successful public issues of shares of the enterprises to be privatised including the appointment of issuing house, stockbrokers, trustees, accountant and other expert to the issue;

c approach through the appointed issuing houses, the securities and Exchange Commission for a fair price for each issue;

d Advise the Federal Military government, after consultation with securities and Exchange Commission and the Nigeria Stock Exchange, on the allotment pattern for the sales of the shares of the enterprises concerned as follows;

1 Not less than 10 percent and not more than 20 percent of the total shares on offer shall be allocated to associations and interest group such as state investment agencies, workers, trade unions, market women organizations, universities, friendly societies, local and community association fair price for each issue;

2 Advise the Federal military government, after consueltation with securities and Exchange Commission and the Nigeria Stock Exchange, on the allotment pattern for the sales of the shares of the enterprises concerned as;

The reminder of shares not distributed in accordance with above allotment shall be sold to the public in such manner and at such amounts as may be determined by the Allotment Committee of Securities and Exchange Commission. And approved by the federal Military Government

3 Oversee the actual sale of shares of the enterprise concerned by the issuing house in accordance with the guidelines approved by the Federal Military Government.

4 Submit to the Federal Military Government from time to time, for the purpose of approval, proposals in sale of Government shares in such designated enterprises with a view of ensuring a four price and even spread in the ownership of the share;

5 Ensure the success of the privatisation and commercialisation exercise tailing into account the need for balance and meaningful participation by Nigeria and foreign interests in accordance with the relevant lairs of Nigeria;

6 Ensure the up dating of accounts of all commercialized enterprises with a view to assure financial discipline.

The Technical Committee shall perform such other functions as may be assigned to it, from time to time, by the president, commander in chief of the Armed forces. Wherever. The technical Committes is of the view that many enterprise is not sultable for dispoisal by public issue of shares, the technical committee shall recommend to the Federal Military Government the mode of disposal of such enterprise. The technical committee shall seek and obtain the prior of any share in respect of any designated enterprise and the pattern of its allotment.

OFFER OF SALE AND MODE OF SALE OF PRIVATISED ENTERPRISES

All shares of enterprises to be privatised onder the decree shall be offered for sale in Nigeria Capital market. All offers for sale of shares shall be public issue except when the Federal military Government, on the advice of the Technical Committee, decides that the shares of any affected enterprises should be sold for private placements.

ALLOTMENT OF SHARES OF PRIVATISED ENTERPRISES

Not less than 10 percent and not more than 20 percent of the total shares on offer shall be allotted to associations and interest groups such as, but not limited, to state investment age agencies, workers, trade union, market women organisations, universities, friendly societies. local and community association provided that in the case of over subscription not more than I percent of the shares one offer shall be allotted to each state through its investment agency.

The reminder of shares not distributed in accordance with the above prevision shall be sold to the public in such manner and at such manner and at such amounts as may be determined by allotment committee of the securities and Exchange Commission and approved by the Federal military government. The allotment of shares as above mentioned shall give priority to subscription by workers and management as well as non management of the particular enterprises to be privatised.

Not more than 10 percent of the shares on offer shall be reserved for the staff of the company, and in the case of over subscription, no individual shall, be allowed to hold more than I percent equity in any one enterprise.

1.2 STATEMENT OF PROBLEM

It is imperative to state the area of general problems which the research examines and suggest possible selection to the following questions

a What are the objectives behind privatisation and commercialisation

b What are the consequences of privatisation and commercialisation on financial institution in Nigeria

c What are the cost and benefits of the programme

d Analysis of the Nigerian privatisation programme with emphasis on the definition of the programmes concept as they relate to the programme.

1.3 OBJECTIVES OF THE STUDY

The objectives of the study is to enable the users of this research to acquaint themselves with the following:

a The type of government owned enterprises that are being privatised and commercialized

b The reasons for which they are being privatised and commercialised

c The problem as a result of implanting the policy

d The prospect of the policy on Nigeria Economy

e Assessment of the effect of privatisation

f The impact of the policy on cetisens and economy as a whole

g The benefits and costs of the programme

1.4 SIGNIFICANCE OF THE STUDY

Since the study analyses the gravity of privatisation as well as the costs and benefits of the programme and also analyzed the impact of the programme on Nigeria economy. Sincerely speaking the study will be of an immense benefit to following.

a. The national coinal on privatisation who is to determine the political and economy as well as social objective of privatisation and commercialisation of public enterprises

b. The Bureau of public Enterprises

c. The six keys stakeholders in the programme who are the Rank and the file of the work force, the leaders of the organized labour the management of public enterprises being privatised, the government as the seller of the state armed enterprise; and the prospective buyers.

d. Students in management sciences i.e. business education, banking and insurance etc

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