Prior to 1985, Nigeria like most African countries relied heavily on public sector led growth. But today, this is changing gradually as the federal government has embraced the privatization of its establishments since the Obasanjo/Atiku regime.
Nigeria, like most developing nations across the world now lay emphasis on private sector led development to drive government economic programs.
And of course, this doesn’t mean that there are no challenges facing the private sector in Nigeria today because private sector growth has not been very influential despite a remarkable increase in the number and brands of financial institutions operating in Nigeria presently.
Contributions of the Private Sector in Africa
There are a lot of evidence to prove that private sector led economies in Africa experience more quicker and faster growth, and also helps a lot in reducing the poverty levels in countries that have given the right backing to the private sector, compared to economies characterized by extreme government intervention.
Countries like Botswana and Mauritius have been recognized as development models with their success attributed to their involvement in private sector and market oriented growth. Both countries once had the fastest per capita economic growth rates and witnessed improved socio-economic conditions for almost a decade.
In direct opposite, countries that have relied on the government to provide growth have performed far worse where private sector led economies have prospered.
Contributions of the Private Sector in Nigeria
Before 1985, the public sector dominated the economy of Nigeria. But after the introduction of the Structural Adjustment Program in 1986, the private sector was then looked upon as the catalyst for economic development.
Following this program, several others were also introduced to support the private sector activities in Nigeria. For example; The 2004-2005 financial policy of recapitalization which set N25 billion as the minimum paid up capital for commercial banks, the establishment of Small and Medium Industries Equity Investment Scheme in which banks contributed 10% of their after tax profit, and also Vision 20-2020 which aim is to make Nigeria the 20th largest economy in the world by 2020.
The private sector in Nigeria plays a huge role in helping to fight the problem of extreme poverty by taking responsibility of tasks performed by the state, thereby relieving the pressure on public expenditure and allowing the federal government to focus its resources on key social and physical infrastructure.
The private sector also helps in broadening the economic base, making Nigeria less susceptible to external stimuli. The private sector also helps in human resource development education and training job skill formation.
It also teams up with foreign partners to provide a springboard for foreign direct investments in vital infrastructure like transportation, communication, power and information technology.
It also forms partnerships that will enable it to remain globally competitive and maintain market shares. These partnership help in creating a dynamic economy with a multiplier effect in the movement of people, goods and services, capital and technology.
The benefits of the private sector are numerous because of the profit maximizing model of private enterprises and their well defined economic goal.
However, private sector growth for the past 30 plus years has not been encouraging despite an increase in the number and brands of financial institutions because of various reasons.
In direct contrast to current development practice, the Nigerian government hasn’t fully embraced the idea of investing in the basic health and education of its people.
The lack of access to electricity is another issue that is greatly slowing down the impact of the private sector. These factors that affect private sector investments in Nigeria have not been improved upon over the years as a result of political instability, poor macroeconomic management, corruption and inadequate infrastructure. Therefore, the federal government needs to:
- Focus on providing the necessary infrastructure and a conducive environment to enable private sector investments to thrive.
- Develop a policy framework to boost participation of foreign investors in the Nigerian economy.
- Embark on development programs that will make the environment enticing for private sector growth and development in Nigeria.
- Make sure policies of government are consistent because in the past, inconsistency in policies has led to the closure of many manufacturing industries.
- Educate and train investors so that existing business opportunities both in manufacturing and agricultural sectors be improved upon.
- Introduce a sustainable legal framework that discourages the importation of substandard products at the expense of local manufacturers.
- Establish micro-finance banks to complement the efforts of banks by providing micro-credit to low income investors in the agricultural sector of the economy.
The private sector operators also need to make sure that:
- They come together and synergize to lead to the set up of bigger companies and improve their business activities in the country.
- The private sector need to take advantage of the transfer of technology that are readily available within Nigeria to boost their productivity and efficiency.
- Make serious effort to produce goods and services that meets international standard and international best practices.
- Get out of the business of entering into partnerships for product distribution but rather enter into joint ventures that will ensure the transfer of productivity and technology.
The private sector in Nigeria has the ability and the capacity to change the narrative of the Nigerian economy if its potentials are well harnessed, and the ease of doing business generally improves and also, if the environment is conducive.
The private sector is originally the backbone of national development of any nation whether developed or developing.
So all hands need to be on deck and efforts need to be made by all stakeholders involved in the economic activities of the country to support the federal government in their renewed vigor to transform and revitalize the economy of Nigeria so that the Sustainable Development Goals can be achieved.
It is therefore safe to say that only when the political will and powers of the federal government combines with the financial capital of the private sector that Nigeria’s economy will be able to achieve vision 20-2020.
Click here to Join Recharge and Get Paid
Click here to Read Latest School News in Nigeria