Utility Privatization and the Poor: Nigeria in Focus
In Nigeria as in many developing countries, strong positions are being held for the privatization of the service sector – i.e. because it is assumed that the private sector is more efficient than the state.

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 mobilization, 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 inclu-sive 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 clamor 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 alloca-tion 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 privatization 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 privatization program 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 privatization 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 em-barked upon the privatization of the national economy. The scope of the nation’s pri-vatization program covers several sectors, including banking and finance, manufacturing, hospitality and tourism, among others. The privatization train has now arrived into the utility sector and it is operating at varying degrees within the sibsectors therein. Given the criticisms that have trailed the implementation of the privatization programs in other sectors, it appears timely to evaluate the proposals for the privatiza-tion 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 pro-active framework towards ensuring a pro-poor privatization of the utility sector in Nigeria, with special emphasis on water, which is a necessity for human existence.

(excerpt from the introduction)

Global Issue Paper No.12 by Ademola Ariyo and Afeikhena Jerome, published by the Heinrich Böll Foundation, July 2004

The paper can be downloaded from this page (pdf, 28 pages,123 KB)