Global Issue Paper No. 12
By Ademola Ariyo and Afeikhena JeromePublished by the Heinrich Böll Foundation, July 2004
Introduction
The ultimate goal of any credible and legitimate government is to ensure sustained improvement in the standard of living of the citizenry. Towards this end, the government usually evolves development plans that will facilitate effective mobilisation, optimal allocation and efficient management of national resources. In such efforts, priority is usually given to the provision of development facilitators, such as transportation and communications, as well as social overhead, such as education and health.
Drawing on the successful experience of most developed economies, all developing countries have also adopted a similar development process. In addition, for several reasons, such as the small size of the private sector, or for the so-called “security reasons”, the development process had been largely dominated by the public sector. Available evidence suggests that this public sector dominated process has not achieved the desired impact over time, prominent among which is the lack of an inclusive framework on the consequent alienation of the people from the public policy process.
This, coupled with recent development in the globalising world, have precipitated the clamour for comprehensive national economic reforms that will facilitate more efficient macroeconomic management and thereby steer the economy back onto the path of sustainable growth and development. The major components of this reform are the deregulation that augurs well for the promotion of a private sectorled economy. This was informed by the assumption that the private sector is more efficient in the allocation of resources, and that this level of efficiency will be enhanced in a competitive environment emanating from the deregulation of the economy. This implies that the reliance on the market rather than the state is the accepted antidote against the problem of underdevelopment in affected economies. The privatisation of state-owned enterprises (SOE), is the major strategy for obliterating the culture of public sector domination of the economy.
While acknowledging the desirability of enhanced efficiency in the management of national resources and better service delivery, the extension of wholesale privatisation programme to the utility sector had of recent been of concern to development analysts and concerned groups of stakeholders. This concern arises from the fact that unguided privatisation cannot be classified as ordinary commodities, given the implications of their non-accessibility and affordability of some of these utility items to the citizenry, especially the poor and the vulnerable groups in the society.
Nigeria is committed to following the footsteps of several countries that have embarked upon the privatisation of the national economy. The scope of the nation’s privatisation programme covers several sectors, including banking and finance, manufacturing, hospitality and tourism, among others. The privatisation train has now arrived into the utility sector and it is operating at varying degrees within the subsectors therein. Given the criticisms that have trailed the implementation of the privatisation programmes in other sectors, it appears timely to evaluate the proposals for the privatisation of the nation’s utility sector. This is with a view to ensuring compatibility of the new policy orientation with the overall goal of poverty alleviation through wealth creation and sustainable development, rather than focusing on growth as an end by itself. It will also facilitate a proactive framework towards ensuring a pro-poor privatisation of the utility sector in Nigeria, with special emphasis on water, which is a necessity for human existence
Towards this end, the remainder of the paper is organised as follows. The next section highlights the objectives and process of Nigeria’s privatisation programme, followed in section three by a brief discussion of the concept of poverty. In section four, the paper characterizes the microeconomic and macroeconomic linkages between utility and poverty, while section five summarises current developments in the privatisation of Nigeria’s utility sector. Greater attention was devoted to efforts towards water sector privatisation in section six. The policy issues towards a pro-poor utility privatisation process in Nigeria were highlighted in section seven, followed by concluding remarks in the last section.