Greener Journal of Social Sciences

Vol. 10(2), pp. 26-30, 2020

ISSN: 2276-7800
Copyright ©2020, the copyright of this article is retained by the author(s)
https://gjournals.org/GJSC

Privatization and Commercialization in Nigeria:

Political or Economic decision, woe or blessing?

Adisa, Olufemi Peniel;Adefabi, Ibraheem Adewale;Sheu,

Habeeb Abidoye

Department Of Political Science, School Of Secondary Education, Arts and Social Science
Programmes, Emmanuel Alayande College Of Education Oyo, P.M.B. 1010 Oyo State, Nigeria

ARTICLE INFO ABSTRACT

Article No.: 031820050 This paper considers the issue of and on privatization and
Type: Review commercialization in Nigeria if it is a political or economic decision and
whether the action is a woe or blessing to the country. In doing this, the
researcher employed secondary source of information gathering, thereby
defined some concepts such as; privatization, commercialization, politics,
Accepted: 20/03/2020 economy etc. Benefit, problems and reasons why government privatizes
Published: 15/09/2020 and commercializes her organization were considered. After which
conclusion was reached through thorough examination if the decision
*Corresponding Author could be considered to be woe or blessing, finally recommendations were
Adisa, Olufemi Peniel made on ways by which privatization and commercialization in Nigeria ca
E-mail: penielizabeth824@ be more of blessings to both the government and the governed and not
gmail.com; dnpenieliza@ woe.
eacoed.edu.ng

Keywords: privatization;
commercialization; politics;
economy

Greener Journal of Social Sciences, vol. 10, no. 2, pp. 26-30, 2020
 Adisa et al / Greener Journal of Social Sciences 27

CONCEPTUAL FRAMEWORK a. Fix rates, prices, and charge for goods and services
rendered.
The Concept of Privatization and Commercialization b. Capitalize assets
c. Barrow money and issue debenture stock
Nwabuzor (1992:39) given a dearth of capital and d. Sue and be sued in their corporate names
indigenous entrepreneurial capability and a distrust of
foreign capital most countries choose the path of stated Privatization
industrialization building on the colonial heritage, virtually
every aspect of the economy was subject to varying Dike (2002:12) defined privatization as the
levels of state intervention. Government administered transfer of state-owned enterprises to the private sector.
price controls and increasingly regulated and intervened He went further to say that in commercialization, only
in labour markets, mining agriculture, manufacturing and privatization of management contracts, leases and
financial markets. concession may be involved. Under the Decree No. 25
Onuoha (1999:101) states that government of 1988, defined, privatization as the relinquishment of
ownership of business represents the ultimate in all or parts of the equity and other interests held by the
regulation of private business. In Nigeria, government government or its agents in the enterprise.
participation in business dates back to the colonial days Privatization has served the strategic role of
when those business were considered as vehicles for transforming state controlled economies and hence,
the “maintenance of minimum civilized standards as well changing the role of the state in economic development.
as facilitating the maintenance of law and order in the Privatization is the process of transferring an
territories. enterprise or industry from the public sector to
On the other hand, the performance of public the private sector.
enterprise is not encouraging, Nwabuzor (1990:15) has Privatization is the process of transferring an
this to say about public enterprise, the one point in which enterprise or industry from the public sector to the
virtually all Nigerians will agree is that state-owned private sector. The public sector is the part of the
enterprises over the years have performed frustratingly economic system that is run by government agencies. ...
poor. The term has alternate meanings within business and
It is necessary to attempt a clear definition of the finances.
concept, “privatization” and “commercialization‟ before The public sector is the part of the economic
we can go further. Public enterprises are business system that is run by government agencies. Privatization
organizations established to provide certain services and may involve either sale of government-held assets or
carry out specific activities. They are state participation removal of restrictions preventing private individuals and
in production activities, which includes public owned businesses from participating in a given industry.
enterprises controlled by the federal government or Privatization is an ongoing trend in many parts of
state-owned enterprises. In Nigeria, they are defined to the developed and developing world. Proponents of
comprise all organizations run by employees of any of privatization maintain that the competition in the private
the government or in the equity holdings. sector fosters more efficient practices, which eventually
yield better service and products, lower prices and less
Commercialization corruption. On the other hand, critics of privatization
argue that some services -- such as health care, utilities,
Commercialization can be defined as a substitute policy education and law enforcement -- should be in the public
meant to imply the adoption by public enterprises of sector to enable greater control and ensure more
strict commercial objectives in all aspects of their equitable access.
operation including investment, recruitment, board The term has alternate meanings within business
appointment, pricing, setting new projects. and finances. For example, if an individual or
Under the Decree No. 25 of 1988 on organization purchases all the stock in a publicly-traded
privatization and commercialization, commercialization company, that effectively makes it private, so that
was defined as „the re-organization of enterprises wholly process is sometimes described as privatization.
or partly owned by the federal government such that However, in contrast to the primary understanding of
these enterprises operate as profit-making (commercial) privatization, the company in question is in the private
ventures and without subventions from the federal sector to begin with and remains there.
government. In short Privatization can be defined as the act of
Commercialization can be full or partial. transferring ownership of specified property or business
Commercialized enterprises have powers to: operations from a government organization to
a privately owned entity, as well as the transition of
27
28 Adisa et al / Greener Journal of Social Sciences

ownership from a publicly traded, or owned, company to

a privately owned company. For a company to be Often privatisation of state owned monopolies occurs
considered privately owned, it cannot secure funding alongside deregulation – i.e. policies to allow more firms
through public trades on a stock exchange. to enter the industry and increase the competitiveness of
the market. It is this increase in competition that can be
Potential benefits of privatization the greatest spur to improvements in efficiency. For
example, there is now more competition in telecoms and
 Improved efficiency. distribution of gas and electricity.
 Lack of political interference. However, privatisation doesn‟t necessarily increase
 Short Term view. competition, it depends on the nature of the market. E.g.
 Shareholders. there is no competition in tap water because it is
 Increased competition. a natural monopoly. There is also very little competition
 Government will raise revenue from the sale. within the rail industry.
 Natural monopoly. A natural monopoly occurs
when the most efficient number of firms in an industry is 6. Government will raise revenue from the sale
one.
Selling state owned assets to the private sector raised
 Public interest.
significant sums for the UK government in the 1980s.
However, this is a one off benefit. It also means we lose
1. Improved efficiency
out on future dividends from the profits of public
companies.
The main argument for privatisation is that private
companies have a profit incentive to cut costs and be
more efficient. If you work for a government run industry,
Disadvantages of privatisation
managers do not usually share in any profits. However,
a private firm is interested in making profit and so it is
1. Natural monopoly
more likely to cut costs and be efficient. Since
privatisation, companies such as BT, and British Airways
A natural monopoly occurs when the most efficient
have shown degrees of improved efficiency and higher
number of firms in an industry is one. For example tap
profitability.
water has very significant a fixed cost, therefore there is
no scope for having competition amongst several firms.
2. Lack of political interference
Therefore, in this case, privatisation would just create a
private monopoly which might seek to set higher prices
It is argued governments make poor economic
which exploit consumers. Therefore it is better to have a
managers. They are motivated by political pressures
public monopoly rather than a private monopoly which
rather than sound economic and business sense. For
can exploit the consumer.
example a state enterprise may employ surplus workers
which are inefficient. The government may be reluctant
2. Public interest
to get rid of the workers because of the negative
publicity involved in job losses. Therefore, state owned
There are many industries which perform an important
enterprises often employ too many workers increasing
public service, e.g health care, education and public
inefficiency.
transport. In these industries, the profit motive shouldn‟t
be the primary objective of firms and the industry. For
3. Short Term view
example, in the case of health care, it is feared
privatising health care would mean a greater priority is
A government many think only in terms of the next
given to profit rather than patient care. Also, in an
election. Therefore, they may be unwilling to invest in
industry like health care, arguably we don‟t need a profit
infrastructure improvements which will benefit the firm in
motive to improve standards. When doctors treat
the long term because they are more concerned about
patients they are unlikely to try harder if they get a
projects that give a benefit before the election.
bonus.
4. Shareholders
3. Government loses out on potential dividends.
It is argued that a private firm has pressure from
Many of the privatised companies in the UK are quite
shareholders to perform efficiently. If the firm is
profitable. This means the government misses out on
inefficient then the firm could be subject to a takeover. A
their dividends, instead going to wealthy shareholders.
state owned firm doesn‟t have this pressure and so it is
easier for them to be inefficient.
4. Problem of regulating private monopolies.
5. Increased competition
 Adisa et al / Greener Journal of Social Sciences 29

Privatisation creates private monopolies, such as the state assets, but deregulation and contracting out of
water companies and rail companies. These need public services to private providers.
regulating to prevent abuse of monopoly power. However, privatization simply means the
Therefore, there is still need for government regulation, divestment of government shares in enterprises there by
similar to under state ownership. allowing the ownership management and control to be in
private hands.
5. Fragmentation of industries Reasons why government wants to divest some of
its companies are:
In the UK, rail privatisation led to breaking up the rail
network into infrastructure and train operating i. Economic recession
companies. This led to areas where it was unclear who ii. Structural adjustment
had responsibility. For example, the Hatfield rail crash iii. Inefficiency of government enterprises.
was blamed on no one taking responsibility for safety. iv. Restructuring the economy
Different rail companies have increased the complexity
of rail tickets.
i. Economic recession: The Nigeria economic
6. Short-termism of firms. has been in a very poor state for quite sometime now.
The level of unemployment is simply unacceptable.
As well as the government being motivated by short term Apparently, the economic can no longer sustain the level
pressures, this is something private firms may do as of wastages associated with public enterprise. Also, as a
well. To please shareholders they may seek to increase step to get out of this malaise, a solution has to be found
short term profits and avoid investing in long term on how to reduce wastages. Privatization and
projects. For example, the UK is suffering from a lack of commercialization are one of such solutions.
investment in new energy sources; the privatised
companies are trying to make use of existing plants ii. Structural adjustment: Following the down turn in
rather than invest in new ones. the Nigeria economy in the early eighties, the
government of Allaji Shehu Shagari started the Austerity
Evaluation of Privatisation measures which were aimed at bring about a reduction
in government expenditure and imports.
 It depends on the industry in question. An
industry like telecoms is a typical industry where the iii. Inefficiency of government enterprises: Over the
incentive of profit can help increase efficiency. However, years, government enterprises have become so
if you apply it to industries like health care or public inefficient as epitomized by the services they render to
transport the profit motive is less important. the public. Despite the fact that the government has and
 It depends on the quality of regulation. Do still continues to pump in a lot of money into the
regulators make the privatised firms meet certain enterprise.
standards of service and keep prices low?
 Is the market contestable and competitive? v. Restructuring the economy: Anyanwu
Creating a private monopoly may harm consumer (1993:10) argues that privatization will help public fund
interests, but if the market is highly competitive, there is to efficient users, create a self-sustaining culture, attract
greater scope for efficiency savings. foreign investors, and services will reflect real values.

Reasons for Privatization and Commercialization in

Nigeria CONCLUSION AND RECOMMENDATIONS

Government participation in business enterprises in most From the discussions above it is crystal clear that
colonial African and the predominance of state-owned Privatization and Commercialization in Nigeria have
enterprises reflected a desire to control the economy achieved the purpose it is theoretically meant for by the
after wrestling political control from the colonialists. proponents. This is because, Privatization and
Nigeria found that, in the absence of local Commercialization as a policy( ies) is/are meant for
enterprises and viable indigenous private sector, the effective and efficient delivery of services to improve the
government had to move into the large empty space left lots and betterment of the citizenry but which it has not
by society to take over the building economy. been so in Nigeria. The reason for this is not far fetched,
Harvey and Henig (1997:77) See privatization because Privatization and Commercialization process
exercise to include any initiative that increases the role are not patriotically followed, in the sense that these
of the market in areas previously considered the corporations and parastatals were sold to political
province of the state; this include not only the sale of the cronies, friends, associates, etc. at the expense of
eligible that will be able to manage the affairs of these
29
30 Adisa et al / Greener Journal of Social Sciences

investments, the result of which citizens are at the any public enterprise(s) to be privatized, or in the
receiving end of suffering, e.g. epileptic/erratic power alternative if such a person(s) must do so because of
supply, poor telecommunication network, plane crashes, their fundamental human rights as a citizen, they can
etc all because sincerity of purpose, transparency and resign from such a public office in order not to use the
patriotism was not involved in the process. And influence and paraphernalia of office to illegally acquire
therefore, it is too much to conclude here that the public property(ies).
Privatization and Commercialization in Nigeria is more of
if not all political decision than economic decision and
thereby a woe and not a blessing, because despite the REFERENCES
fact that people are paying through their nose to enjoy
these services yet reverse is the case. Anyanwu, J.C. (1993) Monetary economics : theory,
policy, and institutions Onitsha, Nigeria : Hybrid
To avoid or correct the aforestated situations the Publishers.
followings are recommended Eze, C.M. (2009) „ the privatized state and mass poverty
in Nigeria. The factor of Economic development
 Review the current privatized companies:- programme since 1980s‟, African Journal of political
This is pointing to the fact that the rule and procedures science and international Relations 3 (10); 443-450.
for privatization on the privatized companies were not Harvey and Henig (1997:77 Shrinking the State: The
properly followed if followed at all. This is because it is Political Underpinnings of Privatization
crystal clear that majority if not all the privatized Johnson, I.E (1996): Public Sector Accounting and
companies were sold to families and cronies against the financial control (2nd edition) surulere financial
laid down procedures of the public that should be the training.
real beneficiary of privatization. Kankwanda, M. (2002). Poverty Eradication, where
African stands. Lodon: Economica.
 Government must stop funding the Kingsmill (2005): an interview on sector development
privatized companies:- Meaning that all the privatized and poverty reduction in Nigeria: Mainstreaming the
companies should be allow to fund themselves without SME sector NESG Economic indicator. vol.II No.1,
wasting public/tax payers money on them again in as Jan-March
much as they‟ve been sold to the interested buyers, and Nkwede, J.O (2009): Nigerian universities and the
this means that they are now privately owned by the challenges of financial administration: a random
buyers, why funding them with public/tax payers money analysis. A journal of the Nigerian public
again, if something is not fishing or not belonging to the administration review, I (I)
people in the corridor of power or their cronies? Nwabuzor (1990). The Concept Of Privatization And
Commercialization. Sur n Study
 Openness and transparency must be Ojedele, P and ilusanya, G (2006): “planning and policy
employed while privatizing:-What this is explaining is of higher education in Nigeria”. In educational
that another aspect and part of accountability in management, thoughts and practice edited by
administration is Openness and transparency. Babalola, J.B et al Codat publications.
Therefore, government and all stake holders involving in Onuoha (1999:101) Mechanism and Environmental
privatization must be Open and transparent in the future Sustainable Strategies in Nnewi, Nigeria,” Journal of
and subsequent privatization process in the country so Agricultural and Environmental Ethics 11
as to cement the trust of the masses in them. (1999), 101–109
UNC (2005): “institutional resource management control
 Government official(s)/ should not be and protection in Nigeria universities” A document
allowed to bid for any company(ies) to be released from the UNC directorate of academic
privatized:- To corroborate the principle of openness, planning and research to all vice chancellors of
transparency and accountability, it should be enshrined Nigerian university.
in the constitution and privatization law and process that
any government officials be it elected, selected or
appointed must not and should not be allowed to bid for

Cite this Article: Adisa, OP; Adefabi, IA; Sheu, HA (2020). Privatization and Commercialization in Nigeria: Political or
Economic decision, woe or blessing? Greener Journal of Social Sciences, 10(2): 26-30.