Sisaa Agboh
7 September 2008
opinion
Lagos — Privatization, according to experts, is an economic policy that seeks to place the commanding heights of business activities in the hands of private entrepreneurs as against the hitherto dominance of the public sector, that is, the government and its parastatals.
Privatization as a policy preaches the doctrine that an economy, any economy, ought to be private sector-driven. It also preaches market forces which has its Modus Operandi, the interplay of forces of demand and supply in the fixing of prices of goods and services
Privatization emphasizes the profit motive. Privatization assumes that there would be efficiency in the management of resources. It expects the enhancement of productivity. It is also generally believed that privatization would rev up the engine room of economy and make it move faster. Privatization also engenders liberation.
However, privatization does not mean the absence of government because it (the government) still has to provide the enabling environment without which private business initiative might not thrive as it should. The enabling environment include legal/policy framework, provision of infrastructure like power, roads, adequate manpower and water, putting in place the micro and macro economic frame work, providing security as well as the diplomatic support base, necessary to give foreign investors the assurance and confidence to do business in the country.
With the disavowal of dictatorship in Africa and other developing countries as well as the ascendancy of democracy as a system of government, the clamour for less government in business has become even more strident. Some countries where democracy has taken root have had to embrace privatization as a way of facilitating their economic resurgence. Some model countries in Africa include Botswana, Ghana, Nigeria and the impact has been tremendous. They, along side other countries like China, India, Taiwan, Indonesia, Malaysia, have been classified as emerging markets, a demonstration of the international community's confidence in their economic upsurge.
For Nigeria, the impact has been immediate especially with the liquidation of the foreign debt profile by the Obasanjo administration and the liberation of the banking sector with its consolidation agenda spear-headed by the Central Bank. Today the 24 surviving banks are big enough to attract foreign partnerships, loans, finance projects with inputs from their affiliate foreign banks, a practice that was non-existent prior to consolidation. As against the past practice of having mere correspondent banks abroad, today Nigerian banks have full fledged branches operating like any other in the international business environment. With privatization, especially with market forces as its cozy bed fellow, micro-economic indices in the government fiscal policy like exchange rate, interest rates, inflation and also foreign exchange rate have continued to be favourable.
For instance, the exchange rate has continued to hover between N115-N117 to the dollar for long time as against the former rate of almost N130 to the dollar. Inflation rate has remained with a single digit level for sometime now while interest rate that used to be as high as 36 percent has come down to about between 16.5 and 18 percent. These, by international standards, are still on the high side. But, prior to privatization and reforms, these rates existed only in dreams.
A visited to Nigeria's capital market will expose even greater impact the benefit of privatization. At the moment, it is said to be the most lucrative capital market in the world with returns in excess of 700 percent. Foreign interest in its operations has been phenomenal. For a country that was some years back a pariah state, that, indeed, is the eight wonder of the world. Thanks to privatization.
Perhaps, the most spectacular and remarkable of the advantages of privatization is what is going on in the telecommunications sector. Before privatization, government officials told us, as a way of justifying the high cost of owning a telephone line and servicing it, that telephone was not for the poor. But with privatization and the competition it engenders, the poorest of the poor can today own a telephone line and service it without having to break a bank. Actually, investors have described events in the sector as a revolution with the nation's tele-density going down so dramatically. For all the networks put together, the subscriber base is close to 50 million up from less than 3000,000 six years ago when it was only NITEL servicing the whole country.
Another area where privatization has proved itself a handmaid of economic growth is in the area of education. From less than 30 universities owned by both Federal and state governments, the system today has well over 100 universities and still counting. The impact of this has been immediate as it has reduced the drudgery and frustration students are exposed to in their desire to acquire tertiary education. The cost may be higher in terms of the fess paid but placed side by side with the corruption in public schools; the cost in fact, balances up.
One other area pf privatization that will boom soon is the public/private partnership, a policy that seeks to encourage the private sector to participate in the provision of public infrastructure like power, roads, waste management, water and so on. It is a policy thrust that Governor Raji Babatunde Fashola of Lagos State perceives as an initiative whereby "serious minded investors will utilize our infrastructure challenges as opportunities to do profitable business". In the past, private sector provided infrastructure in their location of business as Corporate Social Responsibility (CRS), a euphemism for charity. But today, privatization has changed all that. Murtala Mohammed Airport terminal 2 is a good example. Another is the repackaging of the Lagos-Ibadan Expressway. All through a public/private sector co-oporation.
Before privatization, pension fund management was a rip off as far as workers were concerned. Even with their contributions to the National Provident Fund, (NPF), retirement was a nightmare. Contributors' money lodged with the Central Bank (CBN) and loaned to government at very ridiculously low rates became like the proverbial joke, "giving monkey water is not the problem but who will retrieve the cup from the monkey".
With liberalization and the emergence of private sector managed pension funds, workers can now, hopefully, look forward to a future where they are sure to reap the fruits of their labour when they retire.
If one were to cast one's mind to the days of the aviation sector when Nigeria Airways was the only national airline, air travel was indeed a luxury reserved only for the affluent. Even then, booking the flight and talismanic boarding pass made the rich cry. But today, With liberalization and the coming into being of private airlines, air travel is a bit leisurely, less hectic with choice to pick from, though one may contend with occasional flight cancellation.
Never Expect Power Always is a Swan song to reflect the hopelessness of the power situation in the country. Though it is still with us, but the liberalization of the sector and the infusion of private initiatives through the Independent Power Project (IPPs) gives one hope of a bright future with a stable power supply. The delay in the manifestation of the benefits of private participation in the sector is yet another proof of the depth of corruption in the system dominated by public interest. However, that private initiative is allowed at all is an acknowledgement of the indispensability and one may dare say, inevitability of the private participation as a catalytic factor in economic growths and development.
The nation's ports with the concession policy record one of the successes of privatization.
Over and above all else, privatization has reduced waste in business transaction, created new and better paying jobs, introduces competitive pricing, quality service delivery and flexible and dynamic labour market.
Agreed, there have been grumblings here and there in the exercise, however, all these pale in the face of the benefits of privatization. What this means is that the benefits of the policy far outweigh its disadvantages and suggests that a policy reversal at this time will not only set the hand of the clock back but also prove disastrous for the economic well-being of the country.
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