In analysing the series of events last month, it is easy to deduce that the instability in Nigeria’s privatization process has been brought to the fore once again by the dramatics of March. The NITEL/Pentascope revelations, the Privatization Shares Purchase Loan Scheme investigations, the sacking of Dr. Julius Bala as Director General of the Bureau of Public Enterprises, the alleged Afribank privatization scams and the open letter written from London by one Alan Maryon to the President of Nigeria on the ports concessioning bidding process are pointers to this conjecture.
In 1990, John Williamson of the Institute for International Economics wrote a commentary titled “What Washington Means by Policy Reform”. In it, he listed 10 policy instruments he believed were considered by political and financial Washington – the White House, the International Monetary Fund and the World Bank as a desirable set of policy reforms to be undertaken by Latin American countries and indeed the developing world. The 10 policy prescriptions (infamously) tagged ‘the Washington Consensus’ are fiscal discipline, reordering public expenditure priorities, tax reform, liberalizing interest rates, competitive exchange rate, trade liberalization, increased foreign direct investment, privatization, deregulation and secure property rights.
The jury is still out on the success or failure of ‘the Washington Consensus’, especially in Latin America (where it was first prescribed) and later sub-Saharan Africa (where it was later recommended and adopted). However, there is no doubt that these policy instruments in and of themselves add to the recipe book of Homo economicus.
On privatization, Williamson wrote, “…the main rationale for privatization is the belief that private industry is managed more efficiently than state enterprises, because of the more direct incentives faced by a manager who either has a direct personal stake in the profits of an enterprise or else is accountable to those who do. At the very least, the threat of bankruptcy places a floor under the inefficiency of private enterprises, whereas many state enterprises seem to have unlimited access to subsidies. This belief in the superior efficiency of the private sector has long been an article of faith in Washington…”
It is for this kind of argument that the Obasanjo administration added fresh impetus to Nigeria’s privatization programme since coming into office in 1999. It must be recalled though that President Obasanjo is a late convert to the privatization creed as exhibited in his public show of apparent hostility at his first press conference as President-elect in 1999. But confronted with a stark conundrum of completely run-down state- owned enterprises (SOEs), his volte-face gave an added fillip to the high priests of privatization.
At the commencement of the privatization process in Nigeria by the military regime of General Ibrahim Babangida, over 1,500 SOEs were slated for privatization but by the time the civilians finally took office in 1999, only the banking sector (in the ‘premier league’ of SOEs) had been successfully detached from the Moving embrace’ of government subsidies and waste. Other ‘big name’ SOEs in the clutches of the state were in the petroleum, power, telecommunications, transport, aviation, tourism and steel sectors. The civilian administration of President Obasanjo had its work cut out from the onset, if it was to make a success of the privatization agenda. As a fact, it is a cardinal pillar of the government’s reform programme later encapsulated in the National Economic Empowerment and Development Strategy (NEEDS). The government also inherited the Bureau of Public Enterprises (BPE), which is the agency charged with the arduous task of completing the programme.
Like every process supported by institutions, it is the leadership of the particular organisation that drives its success or failure and personality traits of such leaders are usually brought to bear on the means and, consequentially, the end itself. It is usually manifested in the sequence, speed and substance of the transactions. This point is very crucial at this stage for the BPE, especially as a new leadership takes charge of the organisation and the privatization process with the appointment of Mrs. Irene Chigbue as the third Director General of the BPE since 1999.
There are determinate factors that characterize the success of a complex and intricate process required in the privatization of SOEs. On the other hand, the intrinsic persona of the headship of an organisation like the BPE has a direct effect on the operational dynamics of these critical success factors. A cavalier attitude to the work, taking ‘grand’ decisions and making high-sounding speeches on privatization instead of checking on important transaction details led to the advertisement of SOEs for sale without confirming if there were agreements with minority investors that prevented the general offering of the enterprises to the public. This was the case sometime ago in the BPE.
Again, being scholastically qualified may obscure the need for (but absence of) the management skills required for managing privatization. This created the adoption of an administrative attitude without end-results in privatization. Trying to sell federal enterprises without their accounts for example left too much to closed-door negotiation with buyers (rendering the ‘tendering’ process useless and causing endless complaints from serious investors). Many attempted privatizations became bogged down in disputes about the true financial picture, and many Nigerian buyers received money back after they had bought the companies. All these characterized the latter stages of the privatisation process in Nigeria and helps to explain the inability to conclude transactions.
Fortunately, the new leadership has the past to learn from in addition to Mrs. Irene Chigbue’s intelligence and experience in Nigeria’s privatization processes. It is expected that she will rise above entanglements with the past to tidy up and reinvigorate the privatization programme as well as fix (yet unknown and unseen) failing transactions. She should also ensure that she has a firsthand understanding of imminent transactions and build a solid and knowledgeable in-house team. Importantly, she must realize the political nature of the job. However, one can hold political office and exercise the politician’s skills while refusing to be a prisoner to other politicians.
Above all, she must appreciate and exploit the power of perception. As the President of the World Economic Forum, Prof. Klaus Schwab, said, “Success depends on perception.” If she creates the right perception of the privatization process, she will galvanize a critical mass of support required for the success of the entire programme. She can start by tackling widespread ignorance about privatization among our influential political elite. For example, how much will be saved from government coffers in the form of subsidies, wasteful investments and budget allocations & dud loans to federal-owned enterprises? How many enterprises are closed or almost-closed and how much has been wasted building them in the first place? Such information will help to reinforce the effectual consequence of privatization to the Nigerian economy and not this Schumpteterian creative destruction that it is erroneously perceived which is caused largely by the shenanigans of some its past murky transaction processes and the scandals that trail the programme. To do this, she must develop a strategy to put the case for privatization to major stakeholders. In the final analysis, a well-implemented privatization programme is not only good for the economy and the nation; the people will be the eventual privatization winners.
For now, the burden rests on the new Director General and auspiciously, the times favour her: the public finance reforms of Dr. Mrs. Ngozi Okonjo- Iweala, drug administration reforms of Dr. Mrs. Dora Akunyili, public procurement reforms of Mrs. Obiageli Ezekwesili, immigration reforms of the late Lady Uzoamaka Nwizu and the (often unpublicised) airport reforms of Dr. Mrs. Kema Chikwe are all testaments that this is the era of the Nigerian woman. For Mrs. Irene Chigbue, history also beckons.