AN APPRAISAL OF THE PRIVATISATION AND COMMERCIALISATION LAW AND POLICY IN NIGERIA

AN APPRAISAL OF THE PRIVATISATION AND COMMERCIALISATION LAW AND POLICY IN NIGERIA

ABSTRACT
A global trend has emerged aimed at reducing government’s involvement and attracting private partnership in the economy. This global trend came about through the process of privatisation or both privatisation and commercialisation of government owned enterprises. The reasons offered for this economic policy vary from country to country. In Nigeria, as part of its programmes of National Economic Reforms, the Federal Government introduced privatisation along with commercialisation. The research which focused on law and policy in the privatisation and commercialisation process sees the spirit and letter of the law as not being given unfettered expression in terms of implementation in accordance with the existing legislations on the policy. The apparent ineffectiveness and inefficiency of the programme leaves one in doubt as to whether adequate provisions were not made in the law and policy to succinctly swathe the operations of the programme; hence the investigation of the law and policy. The regulatory framework on privatisation and commercialisation set up by the Nigerian Government is a matter of law, which has been juxtaposed among the government agencies. The research adopted a doctrinal methodology with considerable attention to both primary and secondary materials through which relevant laws on or connected to the programme from 1987 till date was examined. Certain findings were made which included the fact that Section 1(3) and Section 6(3) of the Act offend the provision of Sections 4(1), (4), (a), (b) of the CFRN, 1999 (as amended) and paragraph 17(b) of the Concurrent Legislative List of the Constitution and by virtue of Section 315(1) (a) of the CFRN 1999 (as amended) as an Act of the National Assembly who can constitutionally exercise the power and not the Council (NCP). Furthermore, Section 19 (1) of the Act establishing opening Privatisation Proceeds Account and subsection (2) providing that such funds be utilized for such purposes as may be determined by the Government of the Federation contradicts Section 162(1) of the CFRN, 1999 (as amended) dealing with the Federation Account. Equally, the Act does not provide for measures to probe and punish erring officers of the Bureau. This work also discovered that the Act does not provide for post-privatisation regulations to regulate the activities of privatised enterprises.
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TABLE OF CONTENTS
Page
Title page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Abstract vi
Table of Contents
CHAPTER ONE: GENERAL INTRODUCTION.
1.1 Background to the problem 1
1.2 Statement of the problem 7
1.3 Objective of the Research 8
1.4 The Scope of the Research 8
1.5 Research Methodology 9
1.6 Literature Review 9
1.7 Justification 13
1.8 Organisational Layout 13
CHAPTER TWO: PRIVATISATION OF ENTERPRISES IN NIGERIA
2.1 Introduction 15
2.2 The Concept of Privatisation 17
2.2.1 Partial Privatisation 26
2.2.2 Full Privatisation 35
2.3 Mode of Privatisation 38
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2.4 Concluding Remark 46
CHAPTER THREE: COMMERCIALISATION OF ENTERPRISES IN NIGERIA
3.1 Introduction 49
3.2 The Concept of Commercialisation 51
3.2.1 Partial Commercialisation 55
3.2.2 Full Commercialisation 57
3.3 Modes of Commercialisation 59
3.4 Concluding Remark 61
CHAPTER FOUR: THE REGULATORY FRAMEWORK ON PRIVATISATION AND COMMERCIALISATION IN NIGERIA
4.1 Introduction 64
4.2 National Council on Privatisation 66
4.3 The Bureau of Public Enterprises 68
4.4 The Public Enterprises Arbitration Panel 70
4.5 Concluding Remark 71
CHAPTER FIVE: PRIVATISATION AND COMMERCIALISATION POLICY IN NIGERIA
5.1 Introduction 72
5.2 The Birth and Motive of the Policy 73
5.3 The objectives of the policy 80
5.4 The Positive Impact on the Nigerian Capital Market 81
5.5 Economic Development 84
5.6 Private Sector Investment 89
5.7 Foreign Investment 94
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5.8 Ownership and Control 99
5.8.1 Management 109
5.9 Concluding Remarks 111
CHAPTER SIX: CONCLUSION
6.1 Summary 112
6.2 Findings 114
6.3 Recommendations 117
Appendix 120
Bibliography 155

CHAPTER ONE GENERAL INTRODUCTION 1.1 Background to the Problem
A global trend has emerged aimed at reducing government‘s involvement in the economy. This global trend came about through the process of privatisation or both privatisation and commercialisation of government owned enterprises. In Nigeria, as part of its programmes of National Economic Reforms, the Federal Government introduced privatisation along with commercialisation. Thus, commercialisation was conceived as an alternative to privatisation in some cases.1 That is to say, commercialisation was introduced as an alternative to privatisation which was deemed inappropriate.
The reasons offered for this economic policy vary from country to country. For example, in Britain it was resorted to as ―an ideologically based program, devised and driven by a powerful leader, motivated by a combination of intellectual conviction of the benefits of free markets and hatred of the power of organised labour‖.2 In some jurisdictions, commercialisation is not used in the same context as it is being used in Nigeria. Thus in Jurisdiction like South Africa, it is believed that commercialisation is one of the phases of privatisation. Hence, it was submitted that ―the entity should first be corporatized, then commercialized, but in South Africa, Privatisation3 was perceived, and thus, embraced as a veritable instrument in the restructuring of its troubled economy.4 This is in tandem with reasons given by the International Monetary Fund (IMF), which universalized the
1 Synge, R. (1993). Nigeria- The Way Forward. London: Euromoney Books.
2 Kay, J. (2002). Twenty Years of Privatisation @ www.johnkay.com/2002/06/01/twenty-years-of-privatisation 3 Brynard, P. A. (1993). Privatisation and Deregulation as Part of Economic Reforms in South Africa. Journal of Economic and Management Sciences 4 Brynard, P. A. (1993). Ibid
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programme as a key element in economic restructuring of distressed economies especially in Africa.5 Hence, Privatisation and Commercialisation became components of structural adjustment program of the IMF.
In Nigeria, and in most countries of Africa, interest in the program is motivated by the desire to correct past failures of development policies and reduce money losing trends of government owned enterprises.6 The programme of privatisation and commercialisation became imperative with the national aspiration to strike a balance between political independence and economic independence. This reason is apt since a country with political independence devoid of economic independence will not thrive. For any country in the world to survive and develop, the duo of political and economic independence must co-exist side by side. The political stability of every country depends largely on its sound economic policies, growth and development.
The foregoing economic background, paved way leading to privatisation and commercialisation law and policy in Nigeria in 1988,7 as part of the Structural Adjustment Programme (SAP) of General Ibrahim Babangida‘s Administration. This law established the Technical Committee on Privatisation and Commercialisation (TCPC) to implement and oversee the privatisation programme. SAP is a neo-liberal development strategy by international financial institution to incorporate national economy into global market. This has been summarized thus:
5 Owasanoye, B. (1996). Legal Framework for Privatisation of Banks in Nigeria. In: Ayua I.A. (ed) Privatisation of Government Owned Banks and the Issue of Ownership and Control (Legal and Economic Perspectives), Nigeria Institute of Advanced Legal Studies, Lagos, Nigeria, p. 8 6 Industrialization In Nigeria – A Handbook Published for Federal Ministry of Industry and Technology by Sahel Publishing and Printing Co. Ltd Lagos, Nigeria. 7 Privatisation and Commercialisation Act. Cap. 369, Laws of the Federation of Nigeria (LFN), 1990 formerly P&C Decree No. 25,1988. Where necessary, the Act and Decree will be used interchangeably.
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The vision of a ‗global market civilization‘ has been reinforced by the policies of the major institutions of global economic government… up to the mid 1990s underlying the structural adjustment programs has been a new liberal development strategy referred to as the Washington consensus which prioritizes the opening up of national economies to global market force and the requirement for the limited government intervention in the management of the economy.8
It, therefore, became one of the main objectives of SAP to pursue deregulation leading to removal of subsidies, reduction in wage bills and the retrenchment of the public sector ostensibly.9 The privatisation and commercialisation law10 provided the regulatory frame work for the programme, as well established the TCPC which was entrusted with the responsibility of ensuring correct and speedy implementation of the programme. The TCPC privatised 111 public enterprises and commercialized 34 others. In 1993, the TCPC concluded its assignment and submitted a final report having privatised 88 out of the 111 enterprises specified in the Decree.11
In 1993, the TCPC was transformed into the Bureau of Public Enterprises to oversee the commercialized parastatals. By virtue of the Bureau of Public Enterprises Decree,12 new phase of the programme was designed which introduced rules and set up a new agency to continue the programme.13 In 1999, the Federal Government again revisited the
8 Otive, I. (2003). Privatisation in Nigeria: Critical Issue of Concern to Civil Society. In: Eze Onyekpere (ed) Readings on Privatisation, Socio-Economic Right Initiative, Lagos P. 38 citing McGrew, A: Sustainable globalization? The Global Policies of Development and Exclusion in the New World Order’ in Allen, T. et al (eds.), Poverty and Development into the 21st Century, New York Oxford University Press Inc. 9 Ibid 10 Cap. 369, LFN, 1990 (now repealed) 11 Otive, Igbuzor, op. cit, fn. 8 12 Decree No. 78 1993 (which repealed and replaced the Cap. 369, LFN, 1990). 13 Iheme, E. (2003). The Legal Regulation of Privatisation in Nigeria: A Critique. In: Eze, O. (ed). Readings on Privatisation, Socio-Economic Right Initiative, Lagos p.9
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programme and enacted the Public Enterprises (Privatisation and Commercialisation) Act.14
The Act15 is the current legal framework on privatisation and commercialisation policy in Nigeria. It creates the National Council on Privatisation under the chairmanship of the Vice President. It also establishes permanent secretariat for the programme, the Bureau of Public Enterprises, which is charged with implementation of the programme and the NCP charged with policy formulation. Further innovation under the Act is the establishment of Public Enterprises Arbitration Panel to facilitate the implementation of commercialisation programme.
The emergence of this policy, among other things, provides incentives for private investment. Thus, privatisation and commercialisation, which is still on course, seeks to motivate private participation in the economy as government divests itself of its equity holding, or part thereof. The divestment of government equity holdings in hitherto publicly owned enterprises is not an end in itself. It, therefore, behoves both political and economic stakeholders, to critically follow the spirit and letter of the legislation especially in terms of implementation in order to fully harness the wholesome benefits associated with privatisation and commercialisation. The program if implemented honestly and with a sense of detachment aimed at promoting and protecting national interest will ultimately provide an enabling environment for full private investors‘ participation both from within and outside the country. Also, proper implementation of the program with the incidental divestment by government of its equity holding, or part
14 Public Enterprises (Privatisation and Commercialisation) Act, Cap. P 38 Laws of the Federation (LFN), 2004. This Cap. P38 shall subsequently be referred to as “The Act” where the context permits. 15 Ibid
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thereof as the case may be, will restrict government to core policy-making function and the issue of national governance as against meddlesome interference in the corporate governance. This will breed an era of sound political and socio-economic policies. Furthermore, an uncompromised implementation of the program will relieve the government of the onerous financial burden in form of allocations to these state-owned enterprises (SOEs).
On its own, privatisation and commercialisation program is not without prospects. These prospects are best appreciated in terms of management efficiency, development of capital markets, cost control, and above all, customer service. This has proved true in Britain. It was admitted that after privatisation, British Steel (‗Corus‘ as its post privatisation name) became one of the best managed and lowest cost steel producers in the World; British Airways raced ahead of other European Airlines by concentrating on cost control, marketing and customer service.16 In the same vein, British Telecom did better after privatisation than as a nationalized industry.17
In fact, while making a case for privatisation, the South African former Minister of Finance, Derek Keys, stated that ―from a pragmatic viewpoint privatisation was the only realistic solution to the financial problems of the government.‖18 As a matter of fact, the benefits associated with successful privatisation and commercialisation program are made glaring from the six-point plan identified by the South African Cabinet on a major campaign to give impetus to the ‗RDP‘. They are to wit:
16 John, Kay (2002). op. cit, p.1 17 Ibid 18 Brynard, P. A. (1993). Privatisation and Deregulation as Part of Economic Reforms in South Africa. Journal of Economic and Management Sciences
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1. A ‗belt-tightening‘ exercise of cutting unnecessary expenditure and putting state assets to more productive use;
2. Reprioritizing of expenditure;
3. A fundamental restructuring of the public service;
4. Re-organisation of state assets and enterprises;
5. Building new inter-government relations; and
6. Developing an internal monitoring capacity for the above programs.19
Apart from the foregoing analysis on the importance of privatisation and commercialisation, it is submitted that, privatisation of SOEs will bring about economic equilibrium. At the inception of a democratic government in South Africa, Mandela stated that:
Privatisation should be used as an instrument for black empowerment… privatisation is seen as the single, most effective instrument in the hands of the black residents of South Africa. If Privatisation helps to realize this empowerment the political obstacles would have been overcome. Shares in privatised enterprises should be made available to black South Africans…20 1.2 Statement of the Problem
It is clear that the ultimate goal of privatization includes the actualization of the economic objectives in the Constitution when the provisions of section16 of the Constitution are read with the provisions of all enactments on privatization and commercialization and other relevant enactments dealing with the review of the ownership structure and control
19 Ibid 20 Ibid
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of business enterprises operating in the country. It is imperative to note that almost all commentators on this section 16 always reproduce section 16(1) to (2) and sometimes subsection (4) without reproducing subsection (3) that validates the enactments on privatization and control of the economy21, which constitutes the focus of this work. On the whole, this work considers the legal framework of the policy. Being an economic policy, a case will be made for the programme as the economic catalyst capable upon proper implementation of enhancing economic growth and development and private investors‘ participation in the development of national economy through transfer of ownership, management, or management and control though subject to the policy-making powers of the government. In giving appraisal to the current statutes regulating the programme, the work will look at the far-reaching powers of the National Council on Privatisation under the Act. That is to say, the legislative powers, issue of transparency, accountability, strategic investors, projects and the challenges posed and the desirability or otherwise, of the privatization and commercialization law and policy in Nigeria. However, the apparent ineffectiveness and inefficiency of the programme leaves one in doubt as to whether adequate provisions were not made in the law and policy to succinctly swathe the operations of the programme. In addition, the high level of corruption has bedeviled the programme in that the political class exploit the policy for their personal and selfish aggrandizement by selling the SOEs to themselves.
1.3 Objective of the Research
21 Idornigie, P. O. (2012). “Privatisation and Commercialisation of Public Enterprises in Nigeria”, being a paper presented at the National Conference on Law and Economic Transformation in Nigeria organised by the Faculty of Law, OAU, Ile-Ife: 11 -13th July.
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The objective of this research, given the prevailing socio-economic and political conditions of the Nigerian Economy, is to examine the policies on privatisation and commercialisation, the application of these policies to privatisation and commercialisation as well as their justification for institutional reform of public enterprises. Findings will be drawn from the application of these policies and adequate recommendations will be made. 1.4 The Scope of the Research The research work sets to examine the institutional and policy reform so far carried out in Nigeria through the instrumentality of privatisation and commercialisation of the hitherto state owned enterprises. Also, it‘s within the ambit of this research work to make a serious case in support of the program in Nigeria with respect to these SOEs that are yet to be privatised or commercialized. In the course of the work, a review of similar socio-economic policy in other jurisdictions both within and outside the shore of Africa may become inevitable for the purpose of ascertaining the successes or otherwise of privatisation and commercialisation program as instrument of socio-economic reform. This means that apart from having recourse to the existing legislations which regulate privatisation and commercialisation policy in Nigeria, provisions of the constitution, text books and research works of others within the country, those emanating from other jurisdictions will of necessity be examined and considered in the appropriate stages of the research work. 1.5 Research Methodology
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The research methodology is mainly doctrinal with considerable attention on both primary and secondary materials. Primary materials involve the examination and consideration of the relevant laws on or connected to privatisation and commercialisation from 1987 till date especially the current Public Enterprises (Privatisation and Commercialisation) Act,22 and the Constitution.23 On the other hand, secondary sources involve consideration of text books, journals, seminar papers and other relevant writings and materials where opinions and submissions on privatisation and commercialisation have been made. 1.6 Literature Review Privatisation and Commercialisation of State Owned Enterprises (SOEs) in Nigeria is an economic policy, adopted by the government as a means of salvaging the infrastructural and industrial assets, as well as the attendant embarrassing revenue of the public enterprises from total collapse and to enable Nigerians participate in the policy objectives and targets. The programme was embarked upon to help in reducing the financial burden through government internal and external borrowing, in order to meet up with its commitments, especially in financing the hitherto unproductive SOEs.
Privatisation and Commercialisation law and policy in Nigeria is an off-shoot of economic policy of the Federal Government designed to address the country‘s peculiar socio-economic and political conditions, and to lay the foundations for greater private sector participation in the national economy. This explains the policy and institutional reforms embarked upon since 1987 as mechanism for correcting the internal economic
22 Cap. P.38 (LFN) 2004 23 Constitution of the Federal Republic of Nigeria (CFRN), 1999, (as amended)
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distortion which had hitherto impeded economic progress in Nigeria. These reforms range from fiscal policy, monetary policy, exchange rate policy, trade and price policy, and external public debt management among others.
Thus, ―Readings on Privatisation,‖24 a compendium of both legal and socio-economic writers, which was edited by Onyekpere discussed extensively on the program but not without limitations. First, over sixty percent of the contributors wrote from purely economic stand point, thereby overlooking the legal framework regulating the program. On the other hand, those who wrote from legal perspective dwelt so much on academic issues hence omitting the economic relevance of the program.
Another reviewed work on the program is ―Privatisation of Government owned Banks and the Issue of Ownership and Control‖25 edited by Ayua and Owasanonye. This work apart from limiting its discussion to privatisation only further restricted itself to banks. Whereas, the twin economic policy privatisation and commercialisation – ought to have been married in a systematic discussion at least to justify their legal union under the various Laws that introduced the program in Nigeria. Also, banks though very important aspect of the economy is still fragment of the nation‘s economy so that a discussion on banks cannot accurately and adequately represent an appraisal of all other enterprises.
In the same vein, ―The powers of Directors in Nigeria company: An Analysis of the Dynamic of Director‘s Dominance in Modern Company‖26. Ali, writing comprehensively
24 Onyekpere, E. (ed)(2003). Readings on Privatisation; Socio-Economic Right Initiative, Surulere, Lagos. 25 Ayua, I. A. et al (eds) (1996). Privatisation of Government Owned Banks and the issue of Ownership and Control, Nigeria Institute of Advance Legal Studies, Lagos. 26 Ali, H.L. (1996). ―The Power of Directors in Nigeria Company: An Analysis of the Dynamic of Director‘s Dominance in Modern Company‖ being LL.M Thesis (unpublished), Department of Commercial Law, ABU, Zaria, Nigeria, p. 32.
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on company Law, only discussed privatisation and commercialisation in passing. It is however conceded here that extensive discussion on privatisation and commercialisation may have been beyond its research mandate; this thesis notwithstanding, views it expedient to leave at the disposal of both lecturers and researchers a more comprehensive work on the programme of privatisation and commercialisation in Nigeria.
Also on the list of reviewed works, is ―Privatisation and Market Development: Global Movements in Public Policy Ideas,‖27 edited by Hodge. This book in its entire analysis on privatisation leaves readers and researchers in doubt of the concepts of partial and full privatisation. It may be true that the choice of its presentation reflects the law on the concept as it is in ‗western‘ jurisdictions from where it originated. But, since its circulation is not restricted to those jurisdictions, it is therefore submitted that, the book ought to have addressed the functional distinctions of privatisation. More so, any discussion on the subject which omitted these functional distinctions cannot guarantee proper understanding of the concept.
Among the works reviewed also include ―Economic Deregulation and Corporate Investment in Nigeria‖28 by Akume. In his work, he notes that ‗the primary role of any government in economic activity is the provision of enabling environment and infrastructure necessary to stimulate economic growth‘ as well as the provision of opportunities for industries to spring up. It is with view to this government has been adopting policies that would not only promote economic growth but also protect its
27 Hodge, G. A. (2006). Privatisation and Market Development: Global Movements in Public Policy Ideas. Australia: Edward Elgar publishing. 28 Akume, A. A (2010). Economic Deregulation and Corporate Investment in Nigeria. In Agom et al. Ogebe and the Law. Nigeria: Tamaza Publishing Company Limited.

indigenous enterprises from competition from foreign enterprises. Among these policies include the indigenization policy of 1972 and the privatization policy of 1988; the latter giving way to a free market economy. His work concerned itself primarily with the various forms of corporate investment which he classified into indigenous, foreign and alien corporate investments exploring the legal implications of such investments in Nigeria as well as the jurisdiction of the Nigerian Courts in entertaining conflicts that may arise in the cause of doing business of such enterprises. Akume in his work mentioned privatization and commercialization in parsing but discussed in detail deregulation and corporate investment, which is only part of the privatization and commercialization policy.
Idornigie, in his contribution, wrote on ‗Privatisation and Commercialisation of Public Enterprises in Nigeria‘29 outlining the historical emergence of the concept from Ancient Greece. Today, several countries in the developed world practice it and Nigeria has also come to adopt the policy. He examined the challenges of privatization in appositive with its objectives which include efficiency and development of the economy, efficiency and development of the enterprise, budgetary and financial improvements, income distribution or redistribution in addition to constitutional challenge. He went further in addressing these challenges through the first phase (1988 – 1993), second phase (1993 – 1999) and third phase (1999 – present). He argues that for any progress to be made, certain reform activities must have to be implemented.
29 Idornigie, P. (2012). Privatisation and Commercialisation of Public Enterprises in Nigeria, Being a Paper Presented at the National Conference on Law and Economic Transformation in Nigeria Organised by the Faculty of Law, Obafemi Awolowo University, Ilfe-Ife: 11-13 July.
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Idornigie focused more on the challenges and reforms of privatization and commercialization with less emphasis on the policy and law of the economic concept thereby leaving a lacuna which this present work seeks to fill. 1.7 Justification Considering the gains of privatisation and commercialisation to the economies of the world and the challenges of the implementation of such policies in Nigeria, the implementing institutions of this program will find this research work a coherent and solid foundation upon which a viable and profitable privatisation and commercialisation scheme will be built. In fact, this work is intended to benefit government, the implementing institutions, the academics, economists, students especially of law, judges, to mention but a few. 1.8 Organisational Layout The body of the work comprises six chapters: chapter one, General Introduction which introduces the matter and foundation on which the research will stand. Chapter two dwells on the Regulatory Frame Work on Privatisation and Commercialisation in Nigeria. That is to say, National Council on Privatisation is discussed and its functions and powers, the Bureau, for Public Enterprises is also discussed extensively and the Public Arbitration Panel is considered too.
Chapter three starts with Privatisation of Enterprises in Nigeria. This touches on the concept of privatisation, full and partial privatisation, mode of privatisation of public enterprises and the concluding remarks.
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Chapter four dwells on the Commercialisation of Enterprises in Nigeria – the concept of commercialisation, partial and full commercialisation, mode of commercialisation and the concluding remarks. Chapter five discusses Privatisation and Commercialisation Policy in Nigeria, its birth and motive of the policy, the objectives of the policy, its positive impact on the Nigeria Capital Market, economic growth and development, private sector investment, foreign investment, ownership and control, management and the concluding remarks.
Chapter six, which is last the chapter, deals with the conclusion. This chapter summarizes the whole work and gives concluding remarks, findings and recommendations for the possible reforms of the policy and amendment of the current legislation on the policy.

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