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Full Project – The effect of privatization and commercialization policy on national development

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CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

Among the ills that have plagued the Nigeria economy over the years is the inefficiency of some of the government controlled enterprises. Rather than on government revenue. In the words of Kadiri (1989) of the Securities and Exchange Commission, they are vampires that suck the public purse dry. Therefore, with adjustment programme, it is perceived that the government policy of privatization and commercialization aims at reducing government expenditure on loss making enterprises and complete divesture of its entire interest in a good number of others.

Government therefore sets up a committee known as the “Technical Committee on privatization and commercialization” to review its interest in such enterprises, and seek ways of impacting and improving on their performance. In other words, this committee was charged without the responsibilities of seeking ways to make these enterprises more viable. The result of their studies resulted in the promulgation of Decree No 25 of 1988 titled “Privatization and Commercialization Decree 1988”.

The Structural Adjustment Programme (SAP) gave birth to privatization and commercialization. The official banking was given by the government and the machinery to implement was set in motion. While some companies selected full privatization and commercialization. Others were to be partially privatized and commercialized.

Taking a survey of the phenomenon of privatization and commercialization (P&C), it will be discovered that it is not a subject in the economic literature. Trace back to the end of the second world war, Britain embarked on a deliberate policy of nationalization of its basic industries, with a view to enhancing efficient planning of the British economy, and to ensure an uninterrupted flow of essential services and goods to the generality of the populace with transfer of fourteen large companies and many smaller ones employing a total of 800.000 people from public to private hand over the first eight years. Britain is today a leader in the course of privatization of public enterprises with over 80% of the economy in the private sector.

STATEMENT OF PROBLEMS

Most government establishments are operating below desired level. They infact do not turn in enough return to justify the huge sum invested in theme by the government. Rather, they constitute a drain on the nation’s treasury.

A research in Nigeria into 150 public companies and corporation as at the end of 2008 discovered that the return on government’s N12.21 billion investments was only 10%. It was discovered that the 10% return was contributed by a handful of government enterprises like NNPC and some Banks.

This study is designed to seek answers to the following problems.

Political Interference: Government participation in business provide avenues for wholesale corruption in management decision, recruitment, promotion, retention of redundant staff prostitution of disciplinary procedures by ethnocentric consideration, appointment of board members and employees deficiency in relevant knowledge and experience.

Tribalism and Ethnicism: It has also had its share in the factor responsible for the poor performance of public controlled enterprises. Tribalism has partly been responsible for the appointment of mediocre into the Parastatals. The executive and principal functionaries

PURPOSE OF STUDY

The main purpose of this research was to access the impact of privatization and commercialization policy on national development.

To identify the basic differences between commercialization and privatization
To access the merit and demerit of privatization and commercialization programme.
To access the government view/policy on privatization and commercialization in Nigeria.
To identify the stages of privatization and commercialization.
To identify reasons for privatization and commercialization by the government.
To identify aims and objectives of privatization and commercialization.

1.4 RESEARCH QUESTIONS

The following research question would serve as a guide for the study

What are the basic differences between commercialization and privatization?
What are the merit and demerit of privatization and commercialization?
What is the government view/policy on privatization and commercialization in Nigeria
What are the stages of privatization and commercialization?
What are the reasons for privatization and commercialization?
What are the aims and objectives of privatization and commercialization?

1.5 SIGNIFICANCE OF STUDY

Since the idea of privatization and commercialization some public enterprises was first conceived and made announced in 1986, so much in terms of materials and human resources had been sunk into the execution of programme, it is therefore necessary at this juncture to look back and see if any success had been achieved so far and the effect on those public enterprises affected with particular emphasis on Bureau. As a result, this project work shall evaluate the role, which privatization and commercialization has played so far in enhancing the efficiency and effectiveness of the public sector enterprises.

On completion, this little research work will be of use and importance to the following groups of people.

i) Government: As a result of the thorough and proper research into the subject matter, government will always find this work a useful yardstick to measure the success of policy implementation and take appropriate decision whether or not to continue to privatize more Parastatals.
ii) Investors: It will guide investors in their investment decision-making and serve as a yardstick to measure the performance of investment already made.

iii) Students: Students wishing to know the effectiveness of the privatization and commercialization policy would easily find this work a good material to draw their conclusion from. It will help them for further studies on the subject.

1.6. SCOPE OF THE STUDY

The essence of this study is to examine the effect of privatization and commercialization of public enterprise in Nigeria with reference to Bureau of Public enterprise.

The study of privatization and commercialization are twin concepts of government directed socio economic development. The decision is based on that fact, the bureau of public enterprise is one of the homogenous all respects.

1.7. LIMITATION OF THE STUDY

The limitation of this study is greatly handicapped by paucity of information on privatization and commercialization in Bureau of public enterprise. Questionnaires sent to some staff have not been responded till the time of writing despite several reminders, while those who respondent left some vital column unanswered.

Other inabilities of factors to the research work includes:

finance: Being a student researcher, it was difficult for me to cover all their financial constraints facing the researcher.
Time constraints: the time produced for the execution of the study is rather too short for a thorough and detailed research on this topic.
Present course work: The combination of lecture and this research work did not give me enough time to carryout a thorough study of the subject matter.

1.8. DEFINITION OF TERMS

Commercialization: it means the re-organization of enterprises partly or wholly owned by the government in which such commercialization enterprises should operate as profit making ventures and without subvention from the
Privatization: This term is used to refer to the relinquishment of part or all of the equity and other interests hold by the federal government or nay of its agencies in enterprises that are wholly or partly owned by the government.
Divesture: it is another form of privatization which involves the full range of mechanism including full or partial sale or transfer of ownership, sale of assets leasing arrangement or contracting out.
Management contract: It denotes the same thing as leasing and is a situation whereby the government decides to hand over the management of public enterprises to private interests sometimes as a repulse to outright privatization/ or commercialization of such enterprises.
Deregulation: This is a situation whereby a private sector has the freedom or free entry into certain productive activities devoid of government control and regulation and based on open competition.
Management by out: Government may authorize outright sale of state owned enterprises to private entrepreneurs who are supposed to take over their management, a part, private investors may be allowed to acquire majority equity shares, in state-owned enterprises to enable them take the management of such enterprises.
Golden shares: these are nominal equity share owned by the government and which can be acquired by the government to enable it re-establish control even in privatized enterprises.
Dissubsidizaiton” this means the removal of subsidies on goods and services provided by public enterprises.
Liquidation: This is a situation whereby state owned enterprises are packaged for outright sale to the private enterprises

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Full Project – The effect of privatization and commercialization policy on national development

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INTRODUCTION

Full Project – The effect of privatization and commercialization policy on national development

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