Thomson Ayodele : Is Privatization a cure-all for the economic ills?

In the last two decades, the resurgence in the economic policies all over the world has been unprecedented. As a result, economic policies have changed their trend, tempo, and complexion.Thus a growing number of governments has adopted measures with the sole intention to make their economy freer, open and less interventionist.
Part of these reforms is the trend of removing government from the business of doing business.Considering the failure of government in business ventures, there is generally agreed position that provision of adequate security is perfectly the function of any responsible government so as to usher in the right clime to do business.
After the Nigerian Civil War, many felt that state ownership of certain industries was the best way forward. Government in response to the situation then and thereafter resorted to a wide range of interventionist measures: control on prices and wages, inter-governmental deals and state monopolization of energy and telecom sectors, bailing out of loss making firms and industries, trade protection, and water-tight foreign exchange control.
However, given the economic disaster that later ensued, it is hard to see how anyone can rationally canvass the continuation of these measures today.One major reason for government involvement was that it could raise large amount of resources. Sadly, these resources were not invested efficiently and effectively. As a result, many state-owned parastatals became loss makers and avenue for large-scale corruption. Noticing these monumental failures, the present government has been drumming it loud and clear its intention to privatize and commercialize the over 90 state-owned enterprises.
When one considers the result in other countries, privatization has proved to be a far-reaching and truly innovative line of reform. Across the continent as at June last year, almost 3400 privatization transactions were reported as concluded with sales over $7.1 billion. Government should not simply think of the proceeds of privatization alone but also to really consider the direct economic benefits: releasing the grip of the state in commercial activities, rekindling private sector development, shoring up stock market capitalization, stemming capital flight, bolstering of domestic saving rate and, above all, inducing accountability.
Granted that privatization will also increase the scope for private competition in markets which had been exclusively for public monopoly enterprises and dismantle statutory controls over price and entry. Privatization is also an important economic reform to attract both increased in genuine local and foreign investments. However, the way it is being touted by the Obasanjo regime, it is seen as an all in all cure for an ailing economy like ours. If the perception is that privatization alone will kick-start the Nigerian economy, honestly we will all be disappointed again. Only a well-managed privatization programme can be successful if all the economy and social fundamentals are put in place.
Absolutely, the end-view is about attracting investment and the right type of investment. But after many years of both incompetent and despotic regimes, we need to establish and nurture a political regime which will promote democracy, the rule of law, limited government, transparency and other values associated with good governance. This is very important because neither foreign investors nor Nigerians themselves would like to invest in an environment which does not offer a political framework for promoting market-oriented economic development with protection for private property and human rights.
The basic infrastructure, road, transport, energy, telecom and port facilities, are pivotal to whatever economic growth we may have in mind. As at now, the National Electric Power Authority(NEPA) Nigeria Telecommunication(NITEL) and the Nigeria Ports Authority(NPA), privatization have been put on hold thus raising serious questions over the commitment of the whole programme.If the moribund state of the parastatals is left to continue, the whole exercise will never achieve the target result.Inadequacies in these infrastructure and persistent of such gross inadequacy will greatly discourage investment. We must be seen to serious and committed. The prompt privatization of NEPA, NITEL and NPA will be a clear signal that Nigerian government is fully determined and courageous to take the path of economic reform.
A lot has been said and written about privatization. Of course there are ardent admirers as well as critics. The latter have questioned the tempo and strong fillip with which government is sermonizing it.To them, privatization is seen as a subterranean ploy to further enrich the rich and pauperize the poor. However, there is a handful of evidence to lend credence to this assertion. On the contrary, employment level is bound to pick-up as new investments and improved performance are felt. This group of people has not talked about how these government parastatals have become an avenue for some people to line their pockets.
The heart-warming aspect of the present reform is that it is vigorously pursued by technocrats who are well- versed in private sector management. They include individuals who understand the benefits of private investment and they can see the bigger picture ahead. If the economy is to achieve substantial growth, NEPA, NITEL and NPA, all of which provide the backbone of Nigeria’s infrastructure, must be privatized. The multiplier effect on the whole economy, of course, will be colossal.
Nigeria’s natural resources endowment and high population is a clear indication that it can play a tremendous role in the world’s economy. But our ability to achieve real income growth and a rising standard of living is dependent on public policy. There is no basis, therefore, for fellow Nigerians to see the privatization exercise as a new form of imperialism.


The Comet
Wednesday, May 23, 2001
Thompson Ayodele is of the Institute of Public Policy Analysis in Lagos

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