The True Nature of the Private Sector in Nigeria

The True Nature of the Private Sector in Nigeria – By Ikechukwu A. Ogu.

Generally, every free market economy is divided into two sectors, the public sector and the private sector. The former is “the portion of a nation’s affairs, especially economic affairs, that is controlled by government agencies”, while the latter is “the part … that is made up of companies and organizations that are not owned or controlled by the government.” Despite this distinction, instances exist where the state invests in private sector concerns and becomes part-owner thereof, in addition to floating new companies or commercializing existing ones to compete with private sector organizations in economic activities.

The above distinction between the two sectors is upheld in Nigeria on paper. But a scrutiny of the composition and modus operandi of most ‘private sector’ organisations and the intricate connection between them and ‘public sector’ institutions and officials in Nigeria reveals something quite contrary to the commonplace understanding of the two expressions. This distortion is rooted in the pervasive corruption and mal-administration which give every principle a different colouration and meaning in the country. As a result, we have the Nigerian version of almost every concept, such as the amusing Nigerian “home-grown democracy” which is nothing but a pervert of the generally accepted principles of democracy.

As we shall soon see, many ‘private sector’ outfits in Nigeria are actually owned by public officers, their relations or fronts. This creates the impression that such organisations are extensions of the public sector and makes it difficult to know, in real terms, what constitutes the ‘public sector’ and ‘private sector’, respectively, in Nigeria. However, I will present my perception of the true nature of the Nigerian private sector, by looking at the actual structure and operations of the organisations which are passed off as such in Nigeria. This analysis does not pretend to be exhaustive.

In the first group, we have corporations and institutions built and operated with public funds which are privatized and sold, under suspicious circumstances, to persons or companies fronting for high-ranking government officials, and thereafter presented as ‘private sector organisations’. Often, these government institutions are first run down by the officials who are bent on privatizing them, in order to justify their privatization. Then they are undervalued and sold at a discount, with no store set by the value of their assets and government’s investments therein. The funds used to purchase them, which were initially looted from public treasury, are further looted after their ‘remittance’ by the ‘buyers’ to government coffers. Till date, no one can point to any specific, genuine project to which the proceeds of the privatization of public institutions in Nigeria were channelled. The new owners may liquidate the company, merge or combine it with existing companies to form a monopoly or cartel for the exploitation of poor Nigerians. For instance, it was alleged that the ‘core investor’ who ‘bought’ the Ajaokuta Steel Company was busy cannibalizing and taking outside Nigeria the raw materials and products found within the complex.

The next group is made up of companies incorporated by serving government officials, either using their names or (often) those of family members and friends as members/directors. What do these government officials do? They channel almost all juicy contracts in their organizations to such companies, while exploiting their links in other government institutions to secure more lucrative jobs for them. Such contracts are hardly ever executed according to specifications; most times, from the outset, the intention to do a shoddy job is shared by the parties, yet the company gets paid handsomely and continues to earn patronage from public institutions.

Closely related to the above is another group consisting of companies owned by retired high-ranking government officials who corruptly enriched themselves while in service. These persons become contractors immediately upon leaving public office, use their ill-gotten wealth to establish blue chip corporate outfits and continue the looting of government funds in a private capacity. Where they have a good rapport with their successors-in-office, they easily secure very lucrative contract awards based on quid pro quo basis, and also exploit their connections in other government agencies to the same effect.

The fourth group comprises private companies or organizations that depend solely on government patronage in order to remain afloat; they have no other customer(s) outside the government and its officials. These corporate outfits do everything – including bribing and blackmailing influential government officials – to secure contract awards from governments, its ministries and agencies. Thereafter, they supply substandard goods, render low-quality services, fail to execute jobs or execute same poorly, and then share the windfall with their benefactors. The companies here could be owned by politicians-cum-contractors, retired or serving public servants and their private fronts. From the proceeds of such corrupt contracts, some of these people make a public show of acts of philanthropy and arrogate to themselves the appellation ‘philanthropist’.

The fifth class consists of companies owned by expatriates and their Nigerian collaborators. Here, we have the multi-national companies which have acquired the status of sovereign nations, being treated as extensions of their countries of origin. These outfits, whether owned solely by expatriates (which Nigerian law permits) or in association with their Nigerian fronts, create the impression of being in the country to do genuine business. The reality is that their mission is profit maximization, even at the loss and pain of their host nation. Aided by their local fronts and collaborators, they do everything to milk the country dry and contravene its laws. The recently unearthed bribery scandal involving the USA company Halliburton and some Nigerian officials is a case in point.

In the sixth type are banks which depend heavily on deposits by the government and its agencies. Although they complement this with unwholesome, sharp banking practices against innocent depositors, most of these banks will soon collapse should state funds be withdrawn from them. Under the dubious ‘public private partnership’ (PPP) arrangements, these banks collude with public officials in a sham sponsorship of public projects by applying government funds in their custody thereto, which moneys are then presented as coming from the banks and to be repaid by the government with high interest charges.

Also within this group are some private estate developers. Rumour has it that, based on underhand deals between them and some government officials, they easily get land allocations from the government and funds from public institutions like the National Housing Fund (NHF) with which they execute mass housing projects. These low-quality houses are then offered for sale to Nigerians at cut-throat prices, under the guise that the funds came from the private estate developers. This may explain why the NHF hardly ever gives housing loans to civil servants who are entitled to same, being legally bound to make monthly contributions to the Fund. At this juncture, I commend President Goodluck Jonathan’s decision to give housing/land loans directly to public servants.

In the seventh group are some prominent Nigerians who are granted oil blocs by the government or granted licences to lift crude oil or import refined petroleum products. These select few undeservedly feed fat on our common wealth and short-change Nigeria and Nigerians. In a country with more than 80% of its citizens in the throes of abject poverty, where successive governments ascribe their abysmal failure to ‘paucity of funds’, one is dumbfounded that few persons are given official licence to amass immense wealth from what belongs to all. Where is the sense in an oil-producing country, with four refineries, importing refined petroleum products? Some past rulers, after defrauding Nigeria, use their loot to build refineries in other countries to which our crude oil is now sent for refining! Again, allegations are rife that the licensed importers lift refined petroleum from Nigeria, move some nautical miles away, return to the country and make claims on government for importing same! This unchecked fraud accounts for the huge money successive regimes in Nigeria since the middle 1980s claim to be spending as ‘subsidy’ in the downstream sector of the petroleum industry!

The eighth category is made up of companies which, apparently, may not depend much on government patronage in the real sense of it for their operations, but rely on the complicit indifference of regulatory agencies to their unwholesome business activities whereof they rip off poor Nigerians. The telecommunications and transport outfits are some very handy examples. These companies subject Nigerians to subhuman treatment and untold exploitation, while the authorities exhibit inertia. For instance, it is certain to the average Nigerian that the Nigerian Communications Commission, National Assembly and Ministry of Information and Communications are apathetic to the exploitation of Nigerians by the providers of mobile telephony. These companies impose whatever tariffs that suit their fancy, and arbitrarily review same upwards.

The use of the expression ‘private sector organisations’ here includes the supposed non-profit oriented NGOs and companies limited by guarantee. A common characteristic of almost all these ‘private sector’ concerns is their penchant to do everything to frustrate any form of regulation in their relevant industries. The government agencies charged with their regulation easily become victims of regulatory capture, willingly or owing to blackmail, enabling the companies to feed fat on corrupt contract awards and profiteer at the expense of Nigeria and poor Nigerians.

Without prejudice to the pervasiveness of this version of ‘private sector’ in Nigeria, one does not deny the existence of some private sector concerns in the real sense of the expression. Granted that some of the proprietors here may be fraudulent and predatory, others eke out an honest living in the midst of epileptic power supply, high expense on alternative power supply, bad roads, insecurity of lives and properties, high cost of transportation and other militating factors. Most of these people sold their family lands, buildings or other choice assets or even borrowed money from shylock-like money lenders to establish their businesses, and have no connection with public funds in terms of inflated, poorly executed or unexecuted contracts and corrupt deals through which public funds are embezzled in Nigeria.

In my humble view, the foregoing is the true nature of the Nigerian private sector. It is this ‘private sector’ that successive Nigerian governments since the middle 1980s claim is duty-bound and best positioned to provide and manage basic amenities such as motorable roads, potable water, hospitals, schools, housing and electricity for the citizenry! But how organizations and proprietors that depend solely on government patronage, corrupt deals with public officers, shady contract awards from government agencies, the inertia of regulatory agencies, and who hardly deliver on such jobs are considered better placed to carry out this alien ‘duty’ remains a mind-boggling puzzle to me.

Against this background, it is no wonder that despite huge annual budgetary allocations to capital projects and overheads, no appreciable progress has been made in Nigeria over the years. Almost the entire funds meant for capital projects and overheads end up in the pockets of serving or retired government officials, their fronts and private persons who are parasites on government funds. The much talked-about Public Procurement Act has not changed anything, for it is still business as usual in the award of government contracts. Government contracts are still awarded to the categories of ‘private sector’ organisations whose modus operandi we have seen above.

Contrary to the accusing fingers the government points at the impoverished civil servant who earns less than N18,000 monthly, it is the incidence of corrupt contract awards, other corrupt deals, outrageous salaries and allowances of Federal legislators and political office holders, wastage of huge resources on white elephant projects, Nigeria’s sponsorship of several ventures which benefit foreign countries, etc, that deplete government funds. Within a space of four years, the salaries of political office holders have been reviewed upwards twice because same is no longer realistic under the prevailing economic conditions, while poorly paid civil servants are not considered equally entitled! It is not large workforce but misappropriated capital and overhead budgetary votes that greatly account for Nigeria’s stagnation. Is it the poor civil servant that awards contracts or disburses overhead votes?

By induction from the foregoing, one can confidently say that Nigeria serves both the privileged public servant and the ‘private entrepreneur’ and nobody serves the country. If this ugly, unfortunate and dangerous trend is not checked, Nigeria will never move forward. In the midst of these corrupt practices, whatever lofty plans the government may have will certainly come to naught. May the merciful God salvage Nigeria and poor Nigerians from evil Nigerians in Jesus’ name, amen.

Ikechukwu A. Ogu, a legal practitioner, writes from Central Business District, Abuja, Nigeria (