Chapter V: High-Dimensional Change-Point Estimation: Combining Filter-
5.3 Convex Programming for Change-Point Estimation
The repealed Privatisation and Commercialisation Act of 1988 and the Bureau for Public Enterprises Act of 1993 (Federal Government of Nigeria, 1993) defined privatisation as the relinquishment of part or all of the equity shares/interests held by the government or any of its agencies, in enterprises whether wholly or partially owned by the government. It refers to the transfer of ownership of or functions (management, operations, financing) previously performed exclusively by government or public authorities to the private sector.
The Bureau for Public Enterprises Act set up the Bureau for Public Enterprises to implement the privatisation programme in Nigeria. In 1999, the Federal Government promulgated the Public Enterprises (Privatisation and Commercialisation) Act, which created the National Council on Privatisation chaired by the then Vice President, Alhaji Atiku Abubakar.
Commercialisation on the other hand, means the reorganisation of enterprises, wholly or partly owned by the government in which such commercialised enterprises shall operate as profit-making commercial ventures and without subventions from the government. Enterprises means any corporation, board, company or parastatal established by or under any enactment in which the government or any of its departments, ministries, or agencies has ownership or equity inherent and shall include a partnership, joint venture or any other form of business arrangement or organization.
3.1.1 Definition of Privatisation
As earlier stated in section 3.1, privatization is defined as the relinquishment of part or all of the equity shares/interests held by the government or any of its agencies, in enterprises whether wholly or partially owned by the government. It refers to the transfer of ownership of or functions (management, operations, financing) previously
performed exclusively by government or public authorities to the private sector.
3.1.2 Arguments in favour of Privatisation
The arguments in favour of privatisation are:
1. it installs appropriate pricing regime, which implies that a consumer will pay full cost of goods and services thereby eliminating under pricing
2. it enhances competition thereby assuming highest quality, lowest prices and introduction of new technology
3. it ensures consumer satisfaction. It enhances individual liberty and freedom of choice
4. it opens up innovative thinking, enhances seizing new opportunities and coming up with new service delivery system and new technology
5. it reduces public sector’s borrowing requirements, less load on public treasury
6. it promotes macroeconomic, sectoral and enterprise level efficiency:
• from improved competition
• improved domestic market
• new technology
• innovation
• new management methods.
7. it is a good political instrument in the sense that it reduces political meddlesomeness. Reform programme is irreversible by future government
8. it reduces opportunity for corruption/misuse of government property
9. it encourages broader capital ownership thereby promoting people’s capitalism.
3.1.3 Arguments against Privatisation
On the other hand, the arguments against privatisation are as follows:
1. Price Hike – It will lead to price hikes/rising prices. There is the fear that the private sector will exploit consumers where there is monopoly or oligopoly.
2. Creating Poverty – It is perceived that privatisation will hurt the poor and the vulnerable workforce, while benefiting the rich, the powerful and the privileged thereby perpetuating poverty.
3. Breaking of Trade Unions – Workers dismissed as a result of privatisation have difficulty finding jobs. With less people in employment, the power of trade unions is weakened.
4. Foreign Domination – It may lead to loss of control of the economy through foreign domination.
5. It may lead to replacement of public monopoly by private monopoly.
6. Aids Corruption – It aids corruption through negative effect on the distribution of wealth.
7. Injustice – It is believed that the politicians and bureaucrats that caused the enterprises to perform poorly are also asked to carry out the reform.
8. Privatisation is seen as an imposition by foreign capital agencies like the IMF and World Bank. It is seen as a way of exploiting developing countries. Workers felt threatened by loss of jobs.
9. State governments buy federal public enterprises. For example, federal government shares in NAL Bank were sold to Kano State.
This is an aberration, since privatisation means transfer of ownership of business enterprises from public to the private sector. Later, Kano State transferred the shares to Dantata Investment, thereby making Dantata the single largest shareholder in the NAL Bank. In November 2001, Ogun, Bauchi and Akwa Ibom State governments belonged to the Investors International London Limited that won the bid for 51 percent (majority) share in NITEL.
10. The implementation of privatisation in Nigeria was highly politicised. The Bureau of Public Enterprises (BPE) is always at loggerhead with the Ministers of the ministries supervising public enterprises to be privatised. The directors of BPE were going frequently for hearings at the National Assembly. Politicians and officials who enjoy powers of patronage are maintaining strong resistance to the sale of some public enterprises.
11. There is no adequate provision for checks and balances as the National Council on Privatisation is accountable only to the President.
12. Privatisation proceeds do not seem to be well utilised. They are used to finance yearly budget rather than being used to offset debts owed by the government (Ayodele Thompson, www.ipga.niger.org).
13. Privatisation is being portrayed as a cure – all for the ills of an ailing economy like Nigeria’s, but this did not happen.
Privatisation can only be successful if it is well managed. The current argument is that it is “the rulers and the institutions that make for poverty or prosperity” (Heritage Report in Ayodele 2011).
14. Public enterprises should stay. All they require is good management and less political interference.
3.1.4 Objectives of Privatisation
The objectives of privatisation are usually formulated by policy makers.
Some relate to economic gains, while others emphasise socio-political gains. Some objectives are, however, not stated. The objectives of privatisation have been summarised as follows (Obadan, 2000:21-22 in Ezeani, 2006):
(a) improving economic efficiencies (productive, allocative and X- efficiencies produced by the enterprises) against the background of poor economic performance of public enterprises. Improved efficiency is to be reflected in lower product prices and improved product quality
(b) reducing fiscal deficits through increased tax revenues on enterprise output, reduction in central government transfers to the enterprise sector and receipts from privatisation sales
(c) reducing government interference in the economy and shifting of the balance between public and private sectors, as well as developing the private sector and promoting market forces in the economy. This is a more ideological and controversial objective as it rests on the idea that the role of the state should be diminished (Cook and Kirkpatrick, 1998)
(d) broadening ownership of businesses through wider shares and assets ownership, thus creating popular capitalism and fostering economic equity
(e) generating new investments, including foreign investments (f) developing the capital market and deepening the financial system (g) enabling public enterprises to access markets, capital and
technology, and expose them to market discipline (h) reducing the administrative burden of government; and
(i) providing the opportunity to introduce competition. African countries have, however, generally not been citing the encouragement of competition as a specific objective of privatisation, although it may be inferred from the objectives of private sector development and increased economic efficiency.