PRIVATIZATION AND COMMERCIALIZATION OF GOVERNMENT OWNED COMPANIES PROBLEMS AND IMPLICATIONS IN A DEPRESSED ECONOMY LIKE NIGERIA A CASE STUDY OF NITEL PLC

ABSTRACT

This  research work  has  the  title  Privatization and  commercialization of government owned companies in a depress economy like Nigeria.

The study was embarked upon to appraise the implication and problems of privatization government companies using NITEL as a test case. Issues like how do we assess the likely impact of privatizing government utilities like

NITEL with respect to GNP growth and unemployment? How also we check whether privatization and commercialization will lead to effective redistribution of income among Nigerian citizens? How do we ascertain the implication of privatization and commercialization on market prices.

A good number of works already caring similar topic were reviewed. In order to achieve the objectives, care was taken in collection of relevant data, using appropriate primary and secondary data like interviews, questionnaire, observation and personal experience. Target population was appropriately segmented into sample size of individual department. Bewly’s formula was used in the determination of sample size and proportion allocated to individual department. Chi-square was used for hypothesis test.

The data gathered were subsequently analyzed and interpreted using percentage weight.

Consequently, the research found out that there is a significant relationship between economic growth and privatization and commercialization programme if NITEL is privatized. Also that privatization and commercialization will enhance the equitable distribution of the nation’s wealth.

The research concluded that privatization and commercialization might not lead to an immediate decrease in market price for the product of the firm. Finally, the research recommended that following as some administrative tools to improve on privatization exercise.

–        Continuous research by Bureau of Public Enterprise (B.P.E) on ways of improving the operation of the exercise.

–        Encouragement  of   private  entrepreneurship  in   order  to   ensure competing Nigeria Interest.

–        The book should give in these companies

CHAPTER ONE BACKGROUND TO THE STUDY

1.1     INTRODUCTION

Privatization is the partial or complete transfer of ownership or interest in state owned enterprises to the public sector it is a gradual or total shift from command or mixed economy to free market economy or pure capitalism. Ubeku (2001) asserted that privatization and commercialization can be full or partial. Full privatization means that federal government invested all its ordinary shareholding in the designated enterprises. While partial privatization is investment of part of its ordinary shareholder in the designated enterprises. Nkem (1999) adduced that full commercialization means the enterprises so designated will be expected to operate profitably on a commercial basis and be able to raise fund from the capital market without government guarantee. Such enterprises are expected to use private sector procedures in the running of their business and may be subjected to general regulatory powers of  the  federal government. Akpala (1998) stated that partial commercialization means that such enterprises so designed will be expenditures. The government may consider giving them capital grants to

finance their capital projects. Udo (1989) the concept of privatization and commercialization of public enterprises first emerged as a policy in Great Britain. At the end of the world war 11, the British governments while trying to revitalize the economy and promote rapid expansion in the production of essential goods and services started a policy of extending activities that traditionally fall within the confines of the private sector.

However, it was necessary for government to intervene in rebuilding the economy after world war 11, it must be appreciated that the policy had a socialist orientation under the administration of labour parties. This factor accounted for the wide spread presence of the public sector in the economy of  Great  Britain.   Apart  from  their  extensiveness,  these  nationalized industries had nothing to commend them. Most were burden on the rest of the economy. Their losses and bowings were high productivity, industrial relations were poor and their services to the public were endless joke.

It  is  important  to  note  that  other  developed  countries  pursed  a different strategy of rebuilding their economies after the  world war 11. Owusu (2000) observed that countries like Germany, France, and industrial countries of south east, Asia like Japan, South Korea and Hongkong pursued

a growth strategy that emphasized the role of the private sector against a back ground of government guidelines, control direction, policies and incentives. The fact that these economies have grown faster than that of Great Britain in relative terms shows the effectiveness of the alternative policies. It was against this background that British government under conservative party regime instituted from 1979, the policy of privatization and commercialization this  was  perfected by  freeing the  economy from excessive government controls through polices and allowing the reign of competitions and private management initiations. Most of the less making nationalized industries have been turned around to the path of greater efficiency and profitability to the extent that the economy of Great Britain recorded faster growth during the period.

On the Nigeria experience at independence in 1960, the indigenous private sector was made up mainly of small farmers, traders, artisans, while a few small companies dominated large scale trading, transportation, construction, manufacturing etc.

Further more it should be noted that Nigeria gained independence from Great Britain when the labour party was in government. This may have

influenced government intervention in the business sector that was one of the policies of our colonial masters

Lawal (1983) stated that indigenization movement of the early 1970’s and relative buoyant revenues of the oil boom era gave added impetus to the acquisition and establishment of public enterprise, therefore there was good reason for government at the time to have ventures extensively into commercial activities.

Privatization is one of the preconditions laid down by the international monetary fund to assist financially to developing the countries of which Nigeria is one. This was to enable them open up to market forces. The collapse of oil prices and the consequent contraction in foreign exchange earnings coupled with the surge in imports resulting mainly from an over- valued Nair lead to serious balance of payment debt crisis and huge budget deficit. (2007) observed that prior to the oil prices collapse, the huge wind fall revenue accruing from  oil exports prompted the government to assume a greater role in the economic life of the nation by embracing the concept of entrepreneurial state as the engine of growth, the government mining manufacturing transport, commercial and other service.

With the coming of power of a new military government in 1985, the level of subsidiaries to parastatals and government companies as part of the overall public expenditure policy of the assumed a new dimension. In his broad cast to the nation on the occasion of the silver jubilee independence anniversary in October 1985, the then head of states, General Ibrahim Babangida made an important policy pronouncement on the failure of parastatals and government companies. He announced that as part of process of mopping up of liquidity on the Nigerian financial system, the government would divest equity holdings in the several potentially viable parastatals and state owned companies such as hotels breweries and distillers.

In addition, the president declared that parastatals would be generally be encouraged to submit themselves to the discipline of the capital market. A few months later, the federal government’s statement of intent crystallized into a coherent and clear-cut policy, which was announced in the 1986 budget speech. On that occasion the president stated that government has now declared that as from 1986, the volume of non statutory transfers to all economic parastatals would constitute more than 50% of their present levels. They are to find the balance from increases in their price charges tariffs and

rates. A detailed articulation of the government’s policy emerged in the structural adjustment programme which was embarked upon in July 1996 as a comprehensive attempted to tackle the economic crises from its roots.

1.2     STATEMENT OF THE PROBLEMS

The problem of privatization and commercialization of government owned enterprises in Nigeria developed as a result of poor technology in the management of her economic resources. According to the proponents of privatization and commercialization, the twin programme will to retrenchment of staff and workers of the allied industries of government owned enterprise. When this happens, staffers of these enterprise will face financial difficulties.

High costs of goods and services which will not arguer well for the poor masses of the country. This will result to widening the gap between the poor and the rich.

Furthermore, there are doubts that the enterprises can not be correctly or accurately evaluated. So, their privatization may result to colossal loss to the  country.  In  Nigerian system of  management is  to  be  assessed,  few powerful Nigerians in collaboration with their foreign friends may corner

these enterprises at  give away prices. Nigerian market  is  imperfect, the economy should not be left to be determined by the market forces of demand and supply.

It is the an attempt to investigate the causes of these problems and solutions that will be recommended that prompted this research work.

1.3     OBJECTIVE OF THE STUDY

The study intends to achieve the following objectives

(a)     To access the likely impact of privatizing government utilities like

NITEL, to GNP growth and unemployment

(b)     To check whether privatization and commercialization will lead to effective redistribution of income among Nigeria citizens

(c)     To ascertain the implication of privatization and commercialization on market prices

(d)     To critical appraise whether or not  method adopted by Bureau of public Enterprises (B.P.E) in the privatization and commercialization are fair and likely to lead to the desired result.

(e)     To determine the impact of political influences on the exercise.

(f)      To  identify  the  likely  problems  which  have  hindered  effective implementation of privatization and commercialization in Nigeria?

1.4     HYPOTHESIS

The following research hypotheses are thus formulated to guide this work..

1)      H0: There is no significant relationship between the GNP growth and privatization and commercialization

H1: There is a significant relationship between the GNP growth and privatization and commercialization

2)      H0:  There  is  no  significant relationship between privatization and commercialization and income redistribution of Nigerian citizens

H1:  There  is  significant  relationship  between     privatization  and commercialization and income redistribution of Nigerian citizens.

3)      H1:  There  is  no  significant  relationship  between  privation  and commercialization and decrease in market prices.

1.5     SIGNIFICANCE FOR THE STUDY

Privatization and commercialization of  government owned companies in

Nigeria is significant to the public because it will restructure and rationalize

the public sector in order to lessen the dominance of   un productive investments in the sector.

The study will also be significant to the government because the study will help to check whether privatization and commercialization will lead to effective redistribution of income among Nigeria citizens

To the economists, it will expose the implication of privatization and commercialization on market prices and determine the impact of political influences on the exercise.

1.6     SCOPE OF THE STUDY

The study will be  focus on the privatization   and commercialization of government owned companies. Problems and implications in a depressed economy like Nigeria. The

(1)     Study will asses: The likely impart of privatizing government utilities like NITEL with respect to GNP growth and unemployment.

(2)     Check  whether  privatization  and  commercialization  will  lead  to effective distribution of income among Nigeria citizens

(3)     Ascertain the implication of privatization and commercialization on market prices.

(4)     To critically appraise whether or not method of adopted by Bureau of public  enterprises  in  the  privatization  and  commercialization and likely to lead to the desired result.

1.7     LIMITATION OF THE STUDY

Some constraints are naturally expected to pose problems in a research like this. Few of these constraints are summarized below:-

(1)     Time:- due to time constraints, it is impossible for the researcher to go round all the potential respondents to obtain a first hand information.

(2)     Finance:- lack of sufficient funds to conduct such extensive research work proved to be a serious problem that handicapped the progress of the research work.

(3)     Availability of data:-   scarcity of data for use in the research work hindered the progress of the study. As a result of this, the researcher was compelled to restrict this study to use of related literature and other secondary sources data.

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