Public Service Reforms and the Nigerian Telecommunications (NITEL) PLC

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  • ABSTRACT

    Due to fiscal maladministration in the public sector and consequent inefficiency of public corporations, the Nigerian government has opted for laissez faire reforms in the public sector. One of the public corporations the government has put up for sale is Nigerian Telecommunications (NITEL) PLC. This paper examines the privatization process of NITEL and consequent impact on NITEL employees.


  • KEYWORD

    Privatization , NITEL , Nigeria , Predatory Corruption , Telecommunications

  • Introduction

    Nigeria built its immediate post-independence development on the Welfarist approach, and the government is saddled with the task of providing or subsidizing basic social infrastructure such as health, education, road, electricity and communication along with other public utilities. Ravaged by corruption and inept fiscal maladministration, Nigeria’s once-buoyant economy, started faltering especially after the oil glut of the 1980s and eventually led to economic depression (Omobowale 2009; Montinola and Jackman 2002).

    Economic depression hence clearly revealed the precarious state of Nigeria’s public corporations that had been surviving only on government subvention while political office holders and executives fleeced these corporations. These corporations were centres of predatory corruption where officials dishonestly extracted huge funds to line private pockets which left the corporations inefficient (Sowunmi, Adesola, and Salako 2010; Szeftel 2000; Agbese 1988). The Nigerian experience is indeed similar to other occurrences across Africa. According to Olivier de Sardan (1999), what goes on in Africa is a generally accepted culture of corruption, which pervades every spectrum of African society, such that “To stand out or distinguish oneself in public (by rejecting the ‘privileges of one’s status,’ for example) generates shame” (p. 46). Hence, corruption is “…socially embedded in ‘logics’ of negotiation, gift-giving, solidarity, predatory authority, and redistributive accumulation” (p. 25). In order to put an end to deliberate acts of corruption bedeviling the public service sector in most Third World nations, there is an international campaign for the enthronement on the New Public Management Order1 (see Haque 2001; Denhardt and Denhardt 2000). Following the World Bank promptings, Nigeria adopted a public restructuring through privatization supposedly directed at tackling corruption and enhancing efficiency.

    It is pertinent to note, however, that reforms in the public service sector are not novel in Nigeria. It was pioneered by Generals Mohammed/Obasanjo regime(s)2 in the late 1970s. Then, the government claimed it was done tackling corruption, inefficiency, and other social ills in the civil service by making the public service sector compact and accountable to the people. By the end of the exercise, about 10,000 public officials had lost their jobs (Adamolekun and Ayo 1989; Otobo 1986). The return of Chief3 Obasanjo as a civilian head of state in 1999 signaled another round of reforms in the public sector. Particularly, in the telecommunications sector, the government moved to break NITEL’s monopoly by licensing private fixed and mobile networks and putting NITEL up for sale. Indeed, as shown in the figure below, this has resulted in the growth of the telecommunications sector.

    Figure 1 above shows progressive increase in telephone density in Nigeria since 2001 when private GSM came into operation. Thus, access increased from 553,374 in 2000 to 1,223,258 by 2005 for fixed telephone subscribers and 35,000 to 18,587,000 for mobile phone users, resulting in a total telephone density of 19,810,258 by 2005 (National Bureau of Statistics 2006). In spite of this monumental increase, it is important to note that the influence of NITEL as a major player in the telecommunications sector rather gradually began its abysmal decline. As customers opted for other networks considered more efficient, its lines began to dwindle. In government circles, this more than ever before justified the need to privatize NITEL. It was  indeed a new phase in the “life” of a seemingly once buoyant4 public parastatal. This study examines NITEL’s privatization process, consequent estructuring, and the impact this had on the organisation’s staff. Data for this study were collected through interviews and secondary sources.

    1The New Public Management Order involves the adoption of neo-liberal/private sector approaches in public service management such that citizens are seen as customers who must be served efficiently in economic terms (see also SERVICOM 2007; Brune, Garrett, and Kogut 2004; Trebing and Voll 2006; Hefetz and Warner 2004; Nicholson-Crotty 2004; Armijo and Faucher 2002; Savas 2001; Morgan and England 1988; Haruna 2001; Christensen and Laegreid 1999; Terry 1993, 1998).   2General Obasanjo became the head of state after Colonel Dimka led an abortive coup that claimed the life of General Murtala Mohammed on February 12, 1976.   3Nigeria’s political class members who came out of the military socio-political structure  apparently prefer civilian titles, perhaps in order to sustain acceptance in a social structure of highly anti-military rule that pervaded Nigeria in the late 1990s.

    The Story of NITEL

    NITEL was the result of a merger between Nigeria External Telecommunications (NET) and the telecommunications arm of the Post and Telecommunications (P&T) department of the Ministry of Communications in 1985 by the proclamation of the General Buhari government that merged (Aroge 2000). As a state monopoly, it gradually grew and stretched its presence to at least all of the state capital and other major towns. The company experienced financial turn-around in 1992 when it was commercialized by the federal government. Thenceforth, it stopped receiving subvention from the government and, therefore, had to survive on its own by expanding its customer base and by generating higher income.

    Nevertheless, as much as its profit profile and customer base increased, it was largely similar to the National Electric Power Authority (NEPA), a sister government monopoly in charge of electric power generation, which was also bedeviled by endemic corruption and inability to supply adequate power (Olukoju 2004). Indeed, NITEL was such that could be described as huge but hollow telecommunication company which survived as long as it did not have competition. Its customers were rather treated as servants who could not complain against the decisions of the master. NITEL officials apparently saw the organization’s deplorable service as social service to the few relatively rich Nigerians who can afford this luxury while the poor majority should not even think of it. This was a period in which application for a telephone line would take months—if not years—to be approved by the officials in charge while those with connections in the corridors of power could have their applications approved quickly, and even if the lines were approved and put in place, the connections were bedeviled with constant failure while many lines summarily go dead when raining. A NITEL customer desirous of having his/her line back on track had to wait at a NITEL office, sometimes providing transportation for a NITEL official, carrying ladders, and following a NITEL technician to other repair sites until it reached his/her turn. By the time the customer had his/her line fixed, s/he might have spent up to eight to ten hours at the mercy of a NITEL technician whom s/he would have to tip at the end in order to secure the technician’s “favour” when next such is needed. In spite of all these, however, NITEL remained a profit-making organization due, of course, to the monopoly it enjoyed.

    The story changed in 2001 with the granting of operational licenses to independent GSM companies, namely MTN and ECONET, and much later GLOBACOM. In real terms, this was a welcome development for many Nigerians and an opportunity to escape from the strangle-hold of monopoly that had taken the citizenry for granted. Hence, the gain of the new telecommunication companies became the loss of NITEL, as it found it difficult to compete with the other firms.

    For the government, this may have further justified the resolve to move from mere commercialization to privatization. The first attempt at privatization in 2002 failed as the preferred buyer, Investment International Limited (ILL) of Britain, failed to pay the sum of $1.317 billion it had offered for NITEL within the stipulated period (Nigerian Newsday 2007). Thereafter, the Bureau for Public Enterprises (BPE) opted for a management consultant to run NITEL to modernize and increase its lines in preparation for privatization. The criterion prescribed was that:

    Of course, the guiding perquisite for NITEL management was to ensure it would only get into to the hands of experienced managers who could positively turn it around. However, it ended up in the hands of Pentascope, a company set up just about a year earlier with eight staff members, whose address was traced to a dilapidated church building in Amsterdam, Netherlands, at $4 million per annum, to be paid by the federal government (Daily Independent 2007; Nigerian Village Square 2006).

    Within one year, the failure of Pentascope became just too glaring! When Pentascope took over NITEL, it had 455,000 lines and about N17.7 billion in its coffers. By the time Pentascope was sacked, NITEL lines had dwindled to 288,000 and it had also lost about N100 billion with a backlog of unpaid wages (Daily Independent 2007; (Nigerian Newsday 2006).

    NITEL remained in this moribund state until another solution was found for it through its sale to Transcorp, a supposed Nigerian multinational corporation, which Daily Independent described as “…an indigenous company without pedigree.” Transcorp is indeed an organization in which President Obasanjo5 and some other economic and political elite have substantial interests. The sale to Transcorp was rushed without giving other firms equal chance of bidding on NITEL. This transaction again reflected predatory tendencies meant to satisfy the whims and caprices of a few members of the privileged political and economic class. With Transcorp came staff rationalization, which claimed over 7,000 jobs out of the former workforce of about 10,000.

    The Bureau of Public Enterprises, which was saddled with the task of privatizing NITEL, opted for a buy-out scheme that left the disengaged staff and pensioners with little to gain, unlike the gratuity/pension scheme enshrined in the NITEL Staff Conditions of Service (see table 1 below).

    The table above specifies the retirement benefits NITEL staff would enjoy. A close scrutiny shows that it was designed to reward loyalty and long service to the company. Thus, NITEL staff would be morally constrained and motivated to put in their best and avoid anything that may jeopardize the benefits they are to enjoy. This was indeed a better welfare package than the buy-out which the government opted for. Although the disengaged workers asked for a 10-year salary as severance pay, BPE opted for a graduated scheme on the basis of years put in service as presented below:

    As for those who had retired prior to the privatization programme, they were simply bought out via the three-year pension. Indeed, improving the situation of NITEL through reforms may be a welcome development which definitely requires proper implementation (this shall be addressed later on in the paper). For now, it is important to consider the plight of the disengaged workers and pensioners in view of the manner they were bought out.

    4NITEL was only seemingly buoyant once. Its weakness was clouded in the excesses of its officials whom customers had to plead with to have lines secured, installed, or repaired. Since there was no competitor, customers could hardly complain, as such may attract refusal to connect or repair lines by the officials for whom customers who desired to have and maintain telephone lines, not just as a necessity but as a status symbol, were somewhat in awe.   5President Obasanjo handed Transcorp over to President Yaradua on May 27, 2007.

    Pre-Privatization Conditions of Service and Post-Privatization Experience

    NITEL employees generally described pre-privatization conditions of service at NITEL in glowing terms. Interviewees recounted with nostalgia NITEL’s conditions of service as one of the best in Nigeria prior to privatization. For example, an employee (a senior manager) who was retained after privatization stated:

    Likewise, another respondent further corroborated the claim above with a stint of distinction from what happened from the pre-merger days:

    Still another interviewee who started his career from &T states:

    What could be deduced from the data above is that the respondents were convinced of the successful/benefiting service period for as long as they remained at NITEL and thereafter. Even the respondent who had misgivings at the merger of NET with P&T to form NITEL stayed on due to security of tenure and other benefits at NITEL. Aside from good remuneration, NITEL also trained its staff both locally and internationally. These were aimed at building and ensuring experienced and skilled staff that would be capable of sustaining the growth and dominance of the company in the telecommunications sector. As long as NITEL’s monopoly lasted, it seemed NITEL was achieving its aim. Nevertheless, NITEL was only achieving its aim of running a profitable state monopoly; it was not delivering efficient service to its customers. This was confirmed by an interviewee as thus:

    This is one of the ills of monopoly as pointed out by Morgan and England (1988). If NITEL was not optimally efficient as it should be, it was not because its employees were not well paid or untrained, nor was it because of the dearth of equipments. It was due to negligence and unwarranted acts of customer disloyalty. NITEL customers were at the mercy of its staff. Indeed, in such a situation, the client was not a valued customer, but rather just another hapless individual who may be exploited for his/her quest for a functional line. Of course, under a monopoly, customers had to endure NITEL’s inefficiency without NITEL realizing its faults. Once GSM came into operation, NITEL’s inefficiency became overwhelmingly pronounced and NITEL could not compete with other telecommunications companies in spite of its advanced human, technological, and capital resources. In fact, new GSM companies attracted NITEL staff that had technical expertise, and these companies also depended initially on some vital NITEL equipment for their operation. As a public corporation, NITEL did not enjoy the full commitment and loyalty of its employees. An interviewee gave insight into why NITEL employees were not fully committed:

    Training is considered essential for organizational success and survival, but at NITEL, socio-political consideration was allowed to overshadow the essence of training. Nigeria has a quota system, which is enshrined in the country’s federal character policy. The quota system was put in place in Nigeria’s constitution to ensure that the different ethnic groups are represented in public office and to also ensure that all ethnic groups have access to state resources. Strict adherence to the ethos of the quota system at NITEL resulted in disregarding the values of merit, ability, and efficiency in the organization’s reward system in favour of ethnic spread/balance. This must have somewhat resulted in disenchantment among staff members who have received training but were denied promotion, leading, therefore, to institutional inefficiency and widespread corruption despite the huge training structure put in place.

    Likewise, interviewees cited several cases of institutional misappropriation of funds and corruption perpetrated by the government. An interviewee puts what happened during the military era as thus:

    Another interviewee states:

    By and large, what the interviewees have highlighted is the siphoning of NITEL’s funds to the management of other government agencies, misappropriation of funds, and corruption especially during Nigeria’s long years under military rule. One should rightly wonder why the military and other government agencies are financed from NITEL’s funds. Inasmuch as it  might have gone against civil service rules, refusal to comply with the directive of the military government, however illegal and/or irrational, by any government official would lead to his/her removal from office and possibly detention and prosecution over trumped up charges. Therefore, in order to tow the line drawn by the military government and remain in office, NITEL management had to transfer funds as demanded, to the detriment of the company, even as top management staff unduly profited through embezzlement as well. NITEL’s supposed success under a monopoly quickly collapsed after market reforms. In spite of its state-of-the-art equipments and highly trained staff, NITEL could not compete with private telephone companies once the stage was set for competition.

    Those who had to pay the price of NITEL’s failure, however, were not government officials or the management that mismanaged its funds. Neither did the government take the blame for sticking to an ethnic balancing principle which resulted in stifled efficiency. Rather, the negative sanction came on the employees and retirees who were laid off and bought out by BPE  in preparation for a takeover by Transcorp, the new buyer. This translates to immense hardship for the disengaged workers. An interviewee presents his case below:

    Yet another interviewee states:

    A different interviewee states:

    The data presented above reveal feelings of gloom among former NITEL staff who feel cheated by an organization they had served under the promise of continued sustenance after meritorious retirement. Their plight was even further compounded by the liquidation and sale of the properties of the hitherto viable NITEL pension fund, which could have assured continued pension payment even after privatization. As much as making NITEL efficient and viable to compete favourably with others may be desirable, even if it means privatizing, the question that deserves an answer is the rationale behind “abandoning” the workers who had sustained it via their human resources. Is it because they were deemed corrupt as well? Of course, this may be an indication of the complexity of corruption, which Olivier de Sardan has earlier identified as the bane of Africa.

    Just as management contract with Pentascope ended in massive failure due to the half-hearted implementation of reforms that could have revamped NITEL, the seemingly questionable sale of NITEL to Transcorp,6 which was  described as an organization without pedigree, gives every hint of a process still not devoid of corruption. And so, whereas the privatization was supposed to ensure efficiency and timely delivery of service, the unethical process of NITEL’s sale therefore rather ensured a process in which disengaged staff and retirees who were seen as burdensome to the new managers were simply dispensed with through the buy-out. One wonders what this buy-out really means. Is this sale a buying out of employment or survival/life? So far, the NITEL staff and retirees were already disengaged and, hence, not a buying out employment or compensation for disengagement. Rather, it is buying out the responsibility to continue to take care of NITEL workers whose activities had also contributed to the deplorable state of NITEL.

    6At present the government of President Yaradua has re-acquired NITEL from Transcorp due  again to mismanagement, corruption and failure to revamp the company. The Management Team of Transcorp is also on trial for the embezzlement of N15 billion from NITEL coffers.

    Conclusion

    NITEL is another glaring example of inefficiency, government failure, and massive corruption practiced in the Nigerian state. Attempts at revamping NITEL have been foiled by predatory privatization where public office holders have once again influenced the process of selling it to favoured companies in which they have vested interest. And thus, little emphasis is put on the welfare of the workers or retirees who have been bought out and, in fact, abandoned.

    While NITEL was buoyant, it was an epicenter of corruption perpetrated by both its employees and government officials. And at wit’s end, it has been taken over by representatives of the political and economic elites who have, of course, abandoned NITEL’s retirees and laid off about 70 per cent of its workforce. At present, the Nigerian government under President Yaradua has re-acquired NITEL from Transcorp, again due to mismanagement, corruption, and failure to revamp the company, and the management team of Transcorp is also on trial for embezzling N15 billion from NITEL coffers, while NITEL remains comatose. This paper, therefore, argues that the case of NITEL is representative of predatory corruption in the Nigerian system.

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  • [Fig. 1.] Growth of Nigerian telecommunication industry.
    Growth of Nigerian telecommunication industry.
  • [Table 1.] Computation and Payment of Pensions and Gratuity in Pre-Privatized NITEL
    Computation and Payment of Pensions and Gratuity in Pre-Privatized NITEL