BPE October 18, 2018

What is the current condition of Nigeria’s public enterprises?

There were about 590 public enterprises at the end of 2000, of which only 160 were involved in economic activities, generating goods and services. Over 5,000 board appointments are made to man these enterprises, with enormous patronage power given to high-level officials, such as the directors, managing directors, and boards. About $100 billion was spent by the Federal Government of Nigeria (FGN) to establish these public enterprises between 1973 and 1999. Unfortunately their rate of return is less than 0.5%, while they employ just 420,000 workers, out of a total Nigerian population of nearly 170,000,000. These public enterprises, on average, consumed $3 billion annually in direct and indirect subsidies between 1992 and 1999, and they pose major stumbling blocks for obtaining debt relief for Nigeria.

The continued inefficiencies of our public enterprises have negative consequences as listed below:

• The quality of services from public enterprises, including NITEL, NEPA, NNPC, Steel companies, and Nigeria Airways, are very bad and leave much to be desired;
• Public enterprises operate below capacity and are among the most inefficient in the world;
• Public enterprises have become a source for political patronage, corruption, parasitism and rent seeking for the political elite, to the harm of the nation’s long-term economic growth;
• Rather than helping the nation and the people in alleviating poverty, Nigeria’s public enterprises have become reverse Robin Hoods. Privatisation is the only way to remove these problems and promote efficiency, transparency, and corporate governance;
• Public enterprises take government attention and funds away from areas important to individual Nigerians.  Government should do what it is supposed to do, which is to focus on providing adequate healthcare, education opportunities, infrastructure development (running water, garbage removal, sewage), environmental protection, and good governance; and
• The continued drain of public enterprises endangers Nigeria’s position in the global economy.  If we do not take this opportunity to expedite structural reform and privatisation, Nigeria will be left out of the moving train of liberalization and globalization.