THE EFFECT OF COMMERCIALIZATION AND PRIVATIZATION OF GOVERNMENT OWNED COMPANIES A STUDY OF NEPA AND NITEL
Price: 2000 Naira (BSC, MSC)
1.0 GENERAL INTRODUCTION All over the world, the public service as a matter of experience has not been known for their capacity to create wealth. Consequently, public enterprises have usually been perceived as drain pipes, thus creating budgetary strains and avoidable burden on the economy. It became a national policy imperative therefore to disengage the public sector from those areas where the private sector has the comparable advantage to perform, while letting the State concern itself with the provision of infrastructure, security and the enabling environment for business to thrive through enhanced wealth creation. It is important to observe that for many developing countries like Nigeria, it was perhaps unavoidable for the government, in an earlier epoch, to promote the initial investments in the early phase of national development when the private sector was almost non-existent. Unfortunately, the government got herself so involved in business that could best be tackled by the private sector, that government could no longer perform her traditional functions: the provision of infrastructure and security through the maintenance of law and order as well as the promotion of an enabling and conducive environment for investments and wealth creation. (Any a, O. A., 2000 p4) 1). The import of this economic step is anchored on “the belief that entrepreneurs can manage the industries and can operate services more efficiently and at a lower cost than the public enterprise. (Onodugo,V.A. 1995 P3).
The introduction of privatization and commercialization fourteen (14) years ago has provoked a lot of public attention and discussion. However, it is clear that as opposed to the 1980s when there were two strong schools of thought on privatization – one for and another against, dissenting voices are much fewer these days. This perhaps, may be an indication of the widespread acknowledgement and acceptance that the merits of privatization and commercialization far outweigh its demerits. It is therefore the purpose of this study to critically analyze this government policy of privatization and commercialization, with a view to finding out whether it has the economic remedy, for which it is meant. In doing this, the researcher will carry out investigation using two government parastatals namely – The Nigerian Telecommunication Limited (NITEL) and National Electric Power Authority (NEPA), both of which have been commercialized. 1.1 STATEMENT OF THE PROBLEM The economic depression of the late 1930’s with it’s deep and severe consequences coupled with the revolution in the Union of Soviet Socialist Republic (USSR) led to a situation where governments, that hitherto had no business in running enterprises, dabbled into business. This became possible when private sector enterprise, especially in Western Europe collapsed due to the recession. Nigeria, like many African countries on attaining independence, embarked on establishment of public enterprises. The oil boom of the 70’s further accelerated the growth of the public enterprises. Government presence was felt in virtually every aspect of our economy such that “it became the largest producer, the largest consumer, the biggest employer, the biggest owner of property, the biggest investor, the biggest insurer and the biggest debtor’ (Ubaigboma 1995 P. 8).
However, by the 1980s, it was clear that a nightmarish mistake has been done indicated by the common features of the public enterprises, which are huge annual losses, gross inefficiencies, low returns, mismanagement etc. All these necessitated a move towards competitive market system by the use of economic tools of domestic Deregulation, Privatization and Commercialization (Iromantu, 1999). Privatization has become a major element of economic reform and an important instrument for advancing the global competitiveness of nations. It is therefore, the problem of this study succinctly examine and analyze the extent to which the objectives of the privatization and commercialization programmes have been achieved with special reference to the Nigeria Telecommunication Limited (NITEL) and the Nigeria Electric Power Authority (NEPA). The above problem brings to the fore the following sub-problems: – 1. What effect will the privatization and commercialization of public enterprises have on the economy of Nigeria? 2. Whether the privatization and commercialization programmes has improved management efficiency? 3. Whether the parastatals have achieved the much-needed economic objectives for which it was set out to pursue? 4. Are the structures put in place for the proper implementation of the privatization and commercialization programme adequate? 5. What do the general public stand to benefit from the privatization and commercialization programme? 1.2 OBJECTIVE OF THE STUDY:
This Study is essentially a critical evaluation of the privatization and commercialization exercise in Nigeria with a view to identifying the problems associated with the implementation of the programmes and therefore come up with solutions to them as related to NITEL and NEPA. Based on these and following the problem statement above, it is therefore the specific objective of this research work:1. To identify any organizational structure of NITEL and NEPA that is interfering with the effective realization of the objectives of the privatization and commercialization programmes. 2. To examine the incessant interference of government and their agencies on these parastatals and establishing whether it contributes to their inefficiency. 3. To ascertain the public assessment of the economic policy, using their perception of the services rendered by NITEL and NEPA. 4. To examine the reasons these public enterprises suffer from lack of purpose, role conflict and misplaced objectives. 5. To determine the extent to which the privatization and commercialization programme have had a positive impact on the operations of NITEL and NEPA. 1.3 RESEARCH HYPOTHESIS: For the purpose of achieving a reasonable degree of accuracy and relevance in this research work, the following hypothesis have been posited and tested.
1. That NITEL and NEPA have not attained higher productivity levels since implementation of privatization and commercialization. 2. That there has been no improvement in economic growth as indicated by increases in government income, per capita income and GDP since the implementation of the programme. 3. That there has not been marked improvement in the management efficiencies of NITEL and NEPA since privatization and commercialization.
4. That the services rendered by NITEL and NEPA have not improved reasonably since the privatization and commercialization programme was implemented. 1.4 SIGNIFICANCE OF THE STUDY The services sector has enlarged to become a dynamic sector whose importance has continued to rise in most economies in the late 1980s and the 1990s. The sector currently represents over 60% of GNP in most of the developed economies. There is no doubt that these public enterprises are growing in importance over the years. In Nigeria, the number of public enterprises has increased tremendously and now occupies a central position on the economy and has therefore become major instrument of development (Project Work). These have necessitated increasing investments in these enterprises by the government but inspite of these investments, the returns have been extremely poor. The public sector has thus gained the reputation of constituting sources of waste, and being inefficient coupled with bad attitude to work, undue interference, corruption and low morale. It is therefore the objective of this study to determine the root cause of these problems and to proffer probable solutions or directions to follow. In the view of this, it is therefore hoped that the study of the effect of the privatization and commercialization programmes in two parastatals NITEL and NEPA both in Enugu, will help the management and indeed the government in the formulation of effective policies to enable them continue the implementation of these programmes. It is also hoped that workers, the society and especially scholars who might wish to conduct further research on the subject matter in the future will find it very reliable.
1.5 SCOPE AND LIMITATIONS OF THE STUDY: This Study is aimed at investigating the government’s economic policy of Privatization and Commercialization with a view to determining the extent to which the set objectives have been attained in these establishments – The Nigeria Telecommunications Limited and the National Electric Authority both in Enugu. Whenever a research of this nature is being conducted, there is bound to be some constraints militating against the study. A major area of limitation was the attitude of respondents most of which were non-cooperative, nonchalant, illiterate and ignorant about the subject of study and this heavily hindered the completion of the questionnaires. Another major area of limitation was the unavailability of secondary sources of data considering the fact that both parastatals are yet to be privatized.. This constituted a major set back as there was basically nothing on which judgments and inferences could be based on.
Finally, this study was also constrained in terms of time, money and logistics and of which none came cheap. 1.6 HISTORICAL BACKGROUND OF CASE STUDY: THE NIGERIAN TELECOMMUNICATION LIMITED (NITEL), ENUGU The Nigerian Telecommunication Limited (NITEL) started as a postal branch of the British Post Office in 1851 and in 1885 an internal telecommunications arm with better system of telecommunications was established to serve the interest of the colonial masters. In 1966, the Postal and Telecommunications (P&T) a quasi-commercial department of the Ministry of Communications was formed and backed by Decree 22 of the miscellaneous provisions. In 1985, the Nigeria Telecommunications limited was formed.
The external telecommunications concerned with the provision of direct telegraph services between Nigeria and London, made possible hi 1886 by the African District Telegraph (ADT) and the Cable and Wireless Company of London. In 1997, the Federal Government acquired 51% equity ownership of the Cable and Wireless Company and changed its name to Nigerian External Telecommunications (NET) Limited. By 1972, the government acquired the remaining 49% and made it a Federal Government wholly owned company which was to provide external telecommunications services. In 1984, P&T and NET were merged and incorporated as a Limited Liability Company under the companies Decree of 1968. This merger saw the birth of the Nigerian Telecommunications Limited (NITEL), which officially kicked off on 1st January 1985. On 22nd May 1992, there was a contract agreement between the Federal Government, NITEL and the Technical Committee on Privatization and Commercialization (TCPC), now known as the Bureau of Public Enterprises (BPE). This agreement marked the beginning of the era of Privatization and Commercialization of NITEL, which will now become NITEL Plc. On incorporation, the company had an authorized share capital of N 4,000,000 shares of N 1.00 each with N 2,000.000 fully paid up by Government. This was reviewed in 1992 when the company was re-registered as a Public Limited Company with an authorized share capital of N 5.5 billion all of which was fully paid. In almost a century of providing telecommunications services, Nigeria could boast only of 250,000 lines most of which were of the analogue technology. The transmission link was also mainly of the analogue system while the two gateways located at Oyo State and Kaduna State were aging and going out of fashion.
NITEL was also characterized with other problems such as undue interference from the government, labor turnover, management inefficiency, fraudulent practices by some staff, abandoned projects, uneconomic investment decisions, low returns, inadequate network capacity, low tariff structure and delayed dial tone. To overcome these problems and more, long term development strategies were mapped out during the formative years, but these strategies hardly saw the light of day because of the limited power of NITEL, as they relate to decision making and policy implementation.
To overcome these, the Government decided to embark on commercialization of the company, which took off in May 1992. This action granted NITEL autonomy especially as regards business oriented and customer oriented decisions. This enabled it embark on network expansion and to adequately maintain existing facilities and modernize others. The effect of these developments resulted in the provision of digital facilities in Abuja (20,000 lines), Lagos (45,000 lines), Kaduna (10, 000 lines), Enugu (30, 000 lines) and Ibadan (25, 000 lines). NITEL also extended its services to the rural areas with the installation of digital exchanges using the colophony technology. On the part of International Connectivity, NITEL established dual antenna (digital) satellite earth stations in Lagos and Enugu and a third to be finished in Kaduna. In addition to the conventional services of telephone, telex and fax, NITEL also introduced value-added services like Mobile Cellular Phone System, Voice mail, Paging Services and Internet services. FUTURE NITEL has set itself challenging targets for the future in its effort to improve on its services to the masses.
These include: i) To have a revision from the present 90% dependence on telephone to 70% telephony and 30% data services. ii) To extend the cellular mobile telephone services which at present covers Enugu, Lagos and Abuja to the entire country. iii) To include value-added services like fax and data packet switching into the cellular network. To achieve these and more, NITEL has a set of corporate objectives that are guiding them and they include: – a) To ensure the development of telecommunications technology as an infrastructure facility for the economic development of the country.
b) To improve the efficiency and availability of telecommunications services. c) To carry on for profit, the business of internal and external or overseas telecommunications common carriers and to that end, to conduct telecommunications services of all kinds within Nigeria and to such points outside Nigeria as the company shall see fit and to this end, to administer plan, provide and operate all kinds of telecommunications services to all parts of the Federation and beyond including ship to shore in an efficient, co-ordinate, economical and profitable manner. d) To generate, borrow or raise money for the purpose of the company’s business by the sale of services, issue of debenture, debenture stock (perpetual or terminable), bonds, mortgages or any other securities founded or based upon all or any of the property and rights of the company or without any such security, and upon such terms as the company shall think fit. (Omeata, E. C., 1995).