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World Bank asks Nigeria to partially list state owned business on capital market to curb corruption

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The World Bank has suggested that Nigeria should partially list some of its State Owned Enterprises (SOEs) on the capital market in a bid to reduce corruption and incompetent practices.

In a report, the bank said where some of the SOEs cannot be privatized, they should be exposed to capital market discipline through partial privatization.

It stated this in areport titled, ‘Enhancing Government Effectiveness and Transparency: The Fight against Corruption.’

“Where privatisation or private sector participation is not a viable option, SOEs can still be exposed to capital market discipline through partial listings,” the bank stated.

It noted that phasing or sequencing of SOE reforms based on their political and institutional feasibility can help overcome entrenched interests and provide confidence to policy makers to take further steps.

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“Opening up markets to greater competition to reduce monopoly power and market share and incentivise financial and fiscal discipline, strengthening SOE legal and regulatory frameworks and practices, building a commitment to good governance and capacity of state-owned entities,” could help improve integrity in the SOEs, the bank said.

It also proposed that, “professionalising the SOE board of directors and senior management, establishing effective internal controls, compliance, and risk management, promoting transparency and full financial disclosure, including of SOE debt,” are other measures that could cut down corruption in SOEs.

“Reforming governance of SOEs alone may not always be enough to prevent corruption and assure efficiency,” the bank stated, adding that breaking large SOEs into smaller units for greater efficiency could be adopted as well.

SOEs are generally regarded as corporations created by a government to participate in commercial activities on its behalf.

They are also solely or partly owned by the government which usually allot specific commercial activities to them.

The Bank said that corruption in SOEs has gained prominence in recent years due to high-profile scandals in countries like Brazil, South Africa, Angola, and Malaysia.

Corruption risks in SOEs arise from various sources such as monopoly or quasi-monopoly rights which provide an opportunity for abnormal profit generation, the bank said.

It also said risks arise in SOEs from weak legal and regulatory frameworks, corporate governance weaknesses, lack of transparency and disclosure of finances as well as limited effective government and citizen oversight.

The bank stated that corrupt acts committed in SOEs with these shortcomings have defining effects on the economies of countries and government’s abilities to provide critical public goods and services.

 

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