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Arguments for privatisation of loss making public enterprises


[[FILE] Ajaokuta steel

The government has no business doing business. The inherent obligation of the government is to regulate and ensures the business terrain reflects a fair level playing ground that is transparent enough to absorb healthy competition and innovation among industry players. It is also the duty of the state to ensure there is constant sanity in the ecosystem that sustains the value chain of economic production.

Business can only be business if the utility value of the system remains sacred. The rights of Investors, consumers, and all other players in the ecosystem must be well safeguarded in building a fair level playing ground.


During the course of my observation over the years, I safely concluded that privatisation is the only viable means we can use to rejuvenate our loss-making public enterprises back to life. Because of the “rocket science” complexity of governance as reflected in the political trajectory of Nigeria, running and raising a public enterprise to a competitive edge might be very difficult; because of the recurrent administrative bottlenecks and bureaucratic malfeasances that characterize our public service.

In checking this anomaly, we need to start questioning the system. One should wonder what business a politician has in managing an enterprise. Of what consumption value is the expertise of subject matter technocrats if they are often schemed out of the ‘control’ equation? Again, what business does a politician have in managing a business?


If we take a snapshot of our existential economic realities, it is irrefutable that almost all the enterprises ran by successive governments in Nigeria fell short of survivability – which eventually resulted in loss-making. This performance indicator shows the state lacks the corporate intuition and bureaucratic discipline to sustain a business venture for a longer period. Building a profit-turning public venture goes beyond having unrestrained access to government loans and finances to run it. The quality of personnel at the management and supernumerary level and the extent of entrenchment of corporate governance matters more. Most certainly, if the concerned state-owned venture is one that is run by individuals with varying altruistic political interests, colossal failure is almost predictable. The government needs to be reminded that: failing to give Caesar what belongs to Caesar usually comes with overwhelming consequences – which may end up maligning real growth and development.

In crossing all the Ts and dotting all the Is, privatisation seems to be the most compelling solution largely available to tackle all the challenges confronting our state-owned ventures. The argument is one with a unidirectional approach. Government should always endeavor to invite willing private investors to come and take over the control of the loss-making state-owned ventures – of which some technical arrangements may be made to assess whether they would be shedding off their inherent equity in whole or in part to the interested private parties. A guideline for complete or partial interest acquisition may be designed to reflect the mode of ownership transfer, profit-sharing formula, and procedures for merger (if any), among others. Apart from the many competitive advantages that come with it; privatisation kills crony capitalism and unnecessary political interferences while ensuring the free market concept thrives. It also broadens the extent of private participation in significant economic decision-making.


As argued by some pundits and adopted by my very self, privatising our petroleum refineries which seem to be in comatose – is the surest way forward. Extending the managerial gestures to the members of the business community would bring about a paradigm shift to the inefficient structure. The privatisation framework for reviving the refineries may be designed as a public-private partnership endeavor. While advocating for structural deregulation of the downstream sector of our petroleum industry, attempts should be made at building a viable transport system that would ensure a hitch-free production cycle.

Furthermore, the same revival model may be extended for the resuscitation of other struggling state-owned ventures like Ajaokuta Steel Project, National Iron Ore Mining Company Limited, and others. We can all recall that our mining sector only contributes just two per cent to our Gross Domestic Product (GDP). This clearly shows the sector is still largely unexplored. Hence, the need to revisit both the front-end and back-end structures of our economy.

Smart, a Lawyer, writes from Lagos


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