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Public Assets Concession: A Tool for Economic Development in Nigeria

Nigerian government is proposing to sell or concession 36 of its public infrastructure to raise funds, largely to finance the 2021 budget. President Muhammadu Buhari on December 31, 2020 signed the budget of N13.58 trillion for the year 2021.Low oil prices have exposed the fragility of an economy that gains 90 per cent of its export earnings from crude.Therefore, there is a renewed interest in the private sector participation.

In Nigeria, before and after the independence, economic activity was growing in the northern as well as in the southern parts of the country. The new philosophy of the oil boom era was generally predicted on the fact that the indigenous were mostly capital – deficient and could not afford to invest in most industrial ventures. This inadequacy left the commercial sector largely in foreign hands, which made the indigenization programme of 1972 inevitable if Nigerians were to play a meaningful role in the economy.In the role of the public sector in owning and managing economic assets was reduced. Policies such as privatisation, deregulation and commercialisation were encouraged – the idea was that market forces would allocate resources more efficiently. This led to the establishment of public enterprises that were funded from the public treasury.

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As at 1990, these public enterprises were worth over N36 billion at their historic book values. Replacement cost probably worth over N500 billion in 2002. In a nationwide survey, it was found that there were a total of 600 public enterprises at the Federal level alone and some 900 smaller ones at the state and local government level. Public Enterprises (PEs), before the introduction of privatization, used to consume a large portion of national resources amounting to over $3 billion annually, by way of grants, subsidies, import duty waivers and tax exemptions. The huge burden that Public Enterprises impose on the economy had become untenable, unbearable and unsustainable, hence the justification for their privatization.The privatization programme was reinvigorated in 1999 with the promulgation of the Public Enterprises (Privatization and Commercialization) Act No. 38 of 1999, which established the National Council on Privatization (NCP) with the Bureau of Public Enterprises (BPE) as its Secretariat. Bureau of Public Enterprises is the Secretariat of the NCP and is charged with the overall responsibility of implementing the policies and decisions of Council.

Bureau of Public Enterprises noted that the current move towards economic liberalization, competition and privatization is partly informed by the gross failure of Public Enterprises to live up to expectation. Concession agreements are varied in form deepening on the needs of the grantor, for instance, the Concessionaire may be required to design the infrastructure, build and operate it for profit and then transfer ownership back to the grantor after the end of the concession period (i.e Design, Build, Own and Transfer – DBOT) whilst some specify that the concessionaire just build (or rehabilitate), operate and transfer the infrastructure (Build Operate Transfer- BOT) leaving the design phase to the pubic authority grantor.

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Experts says an infrastructural overhaul would be difficult to achieve solely at the government’s expense. Meanwhile, privatisation has not had the result of turning Nigeria’s state owned enterprises around. Some successes have been reported among small and medium firms producing tradeable goods and the service sectors in some countries. But large utilities and infrastructure enterprises in the rail and power sectors and the large natural resource producers are tougher cases.

The political and economic hindrances facing the sale of these public assets often led to faulty privatisation process. And in many instances, the process of privatising them was never completed.The Nigerian National Petroleum Corporation, Nigerian Railway Corporation, National Broadcasting Corporation, and other government establishments still alive, operate below expected level and are not viable in the real sense – as the government yearly fund them through the annual budget, except the NNPC, whose performance is still below level year in year out. They exist just to create jobs and not for profit in the actual sense.

In Nigeria, privatisation is usually achieved through specialized arrangements with the government, which will allow the government to deliver the minimum standard of services or facilities, with the private sector providing skills and core competencies, while donors and investors provide funding and other resources. These arrangements are what are known as Public Private Partnerships (PPPs).

The Public Private Partnerships is a system through which the skills and assets of the public and private sectors collaborate in delivering a service or infrastructure for public benefit through the allocation of risks and responsibilities between both public and private sectors.

Prospects of Public Private Partnerships 

  • Speedy, efficient, and cost-effective delivery of projects.
  • Optimal risk transfer and risk management.
  • Upgrade of financing and operation in design, construction, and maintenance of public infrastructure.
  • Alleviation of capacity constraints and bottlenecks in the system.
  • Accountability in the delivery of public services.
    Innovation and diversity in the provision of public services.
  • Effective utilization of state assets to the benefit of all users of members of the public.

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Propose assets concession

Nigeria’s 36 properties have been categorized into five government departments – Energy has nine projects, Industries and Communications has eight projects, while the Development institutions and Natural Resources departments have six projects according to a government NCP Approved 2021 Work Plan. The papers shows the names of the “projects” (as described by the document), the sale strategy, the duration of the process as well as the cost of the properties.

NCP Approved 2021 Work Plan shows different sale strategies for the moribund assets. While some are ‘core investor sales’, a few others are for ‘share sales’. Some are for ‘concessioning’ and others for ‘full or partial commercialisation’.

Unfortunately, a Non-governmental organization Socio-Economic Rights and Accountability Project (SERAP), has written to the National Assembly asking it to stop the president from selling off national properties – an act which it said would amount to a fundamental breach of constitutional and fiduciary duties. However, proposed a cut in the cost of governance in areas like lawmakers’ salaries, constituency allowance, wardrobe allowance, recess allowance, and entertainment allowance to help generate revenue.

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