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Privatisation and the entrepreneurial revolution

By Peter Osalor

In the latest Ease of Doing Business ranking from the World Bank, one country made a spectacular leap—from 143rd on the list to 67th. It was Rwanda, whose population and institutions had been decimated by genocide in the 1990s. On the World Bank list, Rwanda catapulted out of the neighbourhood of Haiti, Liberia, and the West Bank and Gaza, and sailed past Italy, the Czech Republic, Turkey, and Poland. On one sub=index in the study, the ease of opening a new business, Rwanda ranked 11th worldwide.

You can see and even smell the signs of Rwanda’s business revolution at Costco, one of the retail world’s most demanding trade customers, where pungent coffee grown by the nation’s small farmer-entrepreneurs is stocked on the shelves. And in Rwanda itself the evidence is dramatic—per capita GDP has almost quadrupled since 1995. Considering that less than two decades ago, almost one million people were slaughtered in Rwanda in 100 days, the country’s current standing in global business circles is stunning.

This is the kind of change entrepreneurship can bring to a country. As Rwanda’s president, Paul Kagame, put it recently, “Entrepreneurship is the surest way of development.” He is not a lone voice: Economic studies from around the globe consistently link entrepreneurship, particularly the fast-growth variety, with rapid job creation, GDP growth, and long-term productivity increases. This is a challenge to Nigerian government. My question is what is wrong with Nigeria or what have we done wrong and can’t the wrong be done right?

Nigeria has pursued major privatisation initiatives in the effort to grow and diversify its economy. The thrust of the government’s endeavours has been on curbing state expenditure and involvement in direct economic production, and the promotion of local and foreign investment. The broad parameters of Nigeria’s privatisation initiative drew on past successes elsewhere in the world, from the UK to Russia, and from Europe to the USA and Asia.

Nigeria’s formal introduction with the concept came about with Bureau of Public Enterprise (BSE) was set up by federal government enactment to prepare and implement the government’s privatisation policies. Embarrassingly, a number of the first privatisation deals ended in fiasco.

The administration of President Obasanjo sold off two refineries to a private consortium, but the sale was later overturned by the administration of president Yar’Adua over allegations of wrongdoing. Subsequent efforts to privatise refineries have stalled. Divestment of the Nigerian public sector telecom monopoly NITEL, ended in disaster when the company suffered huge losses and failed debt obligations, forcing the government to retake control.

The now defunct national carrier, Nigeria Airways, likewise failed to take off despite several attempts at commercialisation. Besides indicating ineptitude in policy and implementation, these instances, more importantly, serve to highlight the extensive failure of big business in Nigeria: Depending on product implementation, privatisation can help strengthen capital markets by widening local ownership through reservation of shares for citizens.

Many governments have successfully reduced national debt by raising money through disinvestment and related instruments, curbing the need for subsidies and tax concessions. Privatisation engenders healthy competition that helps expand markets, establishes best practices and improves production and service standards. World bank research confirms substantial performance improvement in private enterprises with the removal of administrative constraints typical of public sector operation.

Developing countries like India and Brazil with strong commitment to free markets have succeeded in acquiring massive foreign investment by privatising public sector monopolies. Considering its past experiences, it is imperative that Nigeria formulate effective public sector reforms before pushing ahead with any further sale of public assets. Moreover, such measure must be undertaken as part of a larger effort at promoting economic efficiency.


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