Privatisation is a concept defined as the transfer of ownership and control of enterprises from the state to the private sector. It can also be described as a process by which a publicly- owned company is controlled by few people in which the stock of the company is no longer traded in the stock market and the general public is no longer involved in holding stake in such companies.
Privatisation arises in situations whereby public enterprises are no longer efficient and the private sector is seen as a sustainable source and a more efficient engine in relation to the growth of the economy. Privatization is considered to bring more efficiency and objectivity to the company, a necessary factor the government company is not really concerned about. It has the potential to reduce government budgetary costs, reduce governments role of influence on organizations and also broaden direct ownership of productive assets.
Privatisation can take up many forms of which include, Privatisation of responsibilities, Privatisation of ownership, Privatisation of operation, Privatisation of financing and Privatisation of commercialisation.. However, regardless of the form taken, it changes the culture, system and structure of the organization.
The topic of Privatisation has drawn an intense debate most especially in a developing country, taking Nigeria to be our case study. Critics argue that Privatisation is likely to short change the labor force in redundancy, pay-cuts, lay-offs and retrenchment in order to increase profit margins of private investors. On the other hand, proponents argue that Privatisation promotes efficient management of resources for economic development of the country.
Development in economic term means achieving a sustained rate of expansion that is greater than the growth rate of the population. In other words, for an economy to develop, positive changes in all factors of production must be put in place.
Just as we mentioned earlier, Privatisation is the transfer of ownership and control of enterprises, from the state to the private sector. Therefore, the reason for this ownership shift is mainly for the reason that it became evident that the public enterprise became unreliable and inefficient . Privatisation was focused on responding to the deteriorating conditions of the economy and the downturn of socio-economic development in Nigeria. Some of the other factors which also called for Privatisation to be in place includes :
- Reduces Budget deficit by breaking off some kind of public spending coalitions. With this, corruption is eliminated thereby restoring the confidence of foreign investors and attracting new technologies.
- Increases capacity utilization in order to maximize market rewards in order to realize enterprise goals. Privatisation empowers the community for entrepreneurial development most especially the area in which the enterprise is based.
The main objective of privatisation is to transform Nigeria into a private sector economy where the governments will only regulate and focus on the art of governance. Due to high school external debt, unemployment, death of foreign exchange, and the drastic global drop of oil prices, the main source of the Nigerian revenue, and with all of this, the sustenance of these public enterprises became impossible. However, the reformatory nature of Privatisation, curbed public enterprise inefficiency, revives the economy, records tremendous growth, attracts both local and foreign investors. Amidst all of this, privatisation deals with its own challenges. Some of this challenges include:
- The problem of corruption and indiscipline. Corruption in Nigeria has moved from alarming to the fatal stage as it has marred the objectives of Privatisation in the economy.
- Transparency. This happens to be a common element said to be missing in Privatisation policy. Privatisation in Nigeria has been lacking in transparency and irregularities. The activities of our leaders and those saddled with the responsibilities of Privatisation has displayed greed which has compelled some Nigerians to question the genuiness of Privatisation.
- The challenge of attracting viable investors. For a political system in Nigeria which is polarised, politically dominant ethnic groups, dominate domestic buyers of public assets at the expense of the minorities who may be more equipped with managerial and technical skills.
- Privatising to political allies. Gains of privatisation may be sacrificed in the effort of satisfying the incumbent beauracrats, allies, supporters and politicians, except in a situation whereby the incumbent government has strong desire for transparency.
- Privatisation undermines national economic sovereignty. The sovereignty of the country is compromised most especially when foreign investors predominate in privatised companies.
Globally, Privatisation is an avenue to pull out economic imbalances. Privatisation offers some prospects for development, which includes:
- It boosts and improves performance as the private sector seems to be more productive and efficient. More jobs are created to reduce poverty and expand the scope of the economy.
- It encourages a healthy competition as private investors take advantage of the free market economy in order to maximize their operations.
- It increases government revenues, eliminates public finance crises, and reduces budget deficit. It equally creates needed revenue meant to settle existing debts so as to reduce interest rate as well as increase the level of investment.
- It raises funds needed for financing socio-economic development such as health, education and infrastructures. Privatisation is working towards refocusing the operations of government enterprise while trying to fight the ugly trend that government enterprises are nobody’s property and as a result should be looted.
In summary, the prospects for development include, increase in revenue, reduction in budget deficit, improve performance, provision of funds to finance socioeconomic sector such as health and education.
In conclusion, Privatisation is seen as an effort to alter the structure of public enterprises in order to make them more efficient and more result-oriented for economic development. It is also a policy aimed at reforming Nigerian public enterprises and also prevent them from going extinct. Apart from increasing the status and population of investors and shareholders it also enhances the performance of the country’s stock exchange, and growth rate of GDP. As much as Privatisation diminishes the status of the country’s sovereignty most especially in a situation whereby the economy is dominated by foreign investors and international organizations such as World Bank and IMF determine major economic policies, however there are potentials of reorganizing tge economy if transparency is applied in doing so.
Privatisation should be accompanied by appropriate legal instruments for the structural reforms, guided by transparency so as to eliminate misinformed ideas and allegations of corruption to prevent suspicion. Government on the other hand should work in evolving policies that deal with the enumerated challenges of privatisation so that a greater level of development that supersedes the reason for the exercise is attained.