The Benefit Of Privatization And Commercialization On Nigeria Economy “Marketing Focus” (A Case Study Of Power Holding Company Of Nigeria PHCN)

Project and Seminar Material for Marketing

The Benefit Of Privatization And Commercialization On Nigeria Economy “Marketing Focus” (A Case Study Of Power Holding Company Of Nigeria PHCN)


Privatization is a very broad sense may be defined as the transfer of ownership and control right over a firm from the government owned industries to the private sector.

Commercialization in the other sense is said to be the withdrawal of government funding from parastatals to enable it operate commercially to fund for its existence of operation.

This research work is aim to investigate into the benefit of privatization and commercialization on the Nigeria economy “Marketing focus”.

In recent tine the management of our parastatals has been a subject of debate. This research will look into the inefficient utilization of resources and financial mismanagement of most of the public sector enterprises over the year resulted into a very weak economic balance sheet, excessive debts incurring and in most case negative network.
This research work will be grouped into five chapters which shed more lights on the benefits of privatization and commercialization on Nigeria economy “Marketing Focus”.

  • CHAPTER ONE, Shed light on the introduction (background) Statement, of problem, Objective, of the study, Scope, of the study, Significance, of the study, Limitation, and constraints of the study, Definition of terms.
  • CHAPTER TWO, Deals with the meaning of privatization and commercialization, the benefit of privatization and commercial, activities of techniques committee on privatization and commercial and its shortcoming associated with privatization and commercialization references.
  • CHAPTER THREE: Concentrate on research methodology, population of the study, sampling and sample size, research designing, type of data, method of data collection, method of data presentation, method of data analysis.
  • CHAPTER FOUR: Deals with history of PHCN, data presentation, data analysis, data interpretation and discussion of findings.
  • CHAPTER FIVE: Also deals with summary of findings, conclusion said recommendation.

Chapter One


1.1 Background of the Study

Recently, the mismanagement of our parastatals has been a subject of debate. The inefficient utilization of resources and financial mismanagement of most of public sector enterprises over the years resulted into a very weak economic balance sheet, excessive debts incurring and in most cases negative network.

In addition, the fact that the insolent performance of the state in administration of public business establishment creates a situation in which national funds that could have been used or spent to generate new economic activities and employment opportunities are being used to subsidize “dead wood that will never grow nor change” as analogy for the public enterprises.

Taking survey of the phenomenon of privatization and commercialization has also been extend to garbage collection, bore-hole drilling, air traffic control and likes many other countries like Britain, USA, Spain, Italy are also involved in various degrees in the process of privatization and commercialization and this is not so exceptional case with Nigeria.

Privatization and commercialization is seen to many observes as a situation to our economic predicament. The debate in privatization has been on the presumed efficiency of the private sector vis-à-vis the public enterprises and how the latter can be made more responsive to market forces and signs. It has been realized that inefficient companies are typical drain on national treasures and that they contribute greatly to the enormous current debt problems.

Thus, if efficiency can be elevated in relating to profitability cost saving and consumer satisfaction and the liks. Do we consider privatization and commercialization to be the solution and to what proportion should factors of production and distribution be held by the state private individuals.

As government could no longer continue to support the monumental waste and inefficient of these public enterprises, the programme of privatization and commercialization was developed to address our peculiar socio-economic and political condition.

1.2 Statement of Problems

A research in Nigeria into over 127 public companies and corporation as at the end of 1990 showed that the return of government N36 billion invested was not encouraging. At today replacement costs, they are probably worth about N200 million as stated by our former present, Gen Abubakar (rtd). Appraising the system, the former head of state said “is clearly unsustainable and injustivable in a period of dividing financial resources”.

Among the problems encountered by the process of privatization and commercialization includes;

  • Problem of over supervision of parastatals by the supervising ministries is government able to grant enough freedom of action to the state owner establishment.
  • Problem of subjective criteria in appointment of executive of parastatals. Are chief executive and principal functioning of parastatals appointed because of their integrity and capability to deliver and not because of nepotism.
  • Problem of political interference in considering the problem of our parastatals will government inference not create chances for political meedle someness and large scale competition, retention of redundant staff, prostitution of disciplinary procedure by ethnocentric considerations, award and inflating frivolous contracts, appointment of board members and employee that do not possess the relevant knowledge and experience? Will all these the relevant factors not erode the efficiency, effectiveness and productivity of public business enterprises? All these shall be looked into in the course of study.

1.3 Objective of Study

A company’s or corporation’s main objective is profit realization. This objective of prompt making ca not be achieved when the company or corporation in question is being operate at a loss. Privatization and commercialization of public enterprises is not an end itself nor is it a panacea for the ills of the public enterprises.

To this, the following are the objectives of the study.

  1. To restructure and rationalize the public sector in order to lesser the dominance of unproductive investment in the sector.
  2. To increase efficiency of government-owned enterprises.
  3. To ensure positive returns on pubic sector investment in commercialization enterprises.
  4. To check the present absolute dependence of commercialization oriented parastatals on the treasury for funding and to encourage their approval to the Nigeria capital market.
  5. Increased competition that is capable of leading to improve efficiency.
  6. Development of under business relations
  7. Creating favourable investment climate for both local and foreign investors.
  8. Re-definition of organizational objectives and implementation of its policies.

1.4 Scope of the Study

In recent years, the idea of privatization and commercialization has gained universal appeal in all part of nations.
The time scope of this research could be the periodic depth of the research, time scope determine the depth of the data to be collected on the case study.

The industrial scope is the specification of the industry of study and the industrial scope of this research is (PHCN) Power holding company of Nigeria.

Theoretical scope is about the aspect if the subject matter that the researcher covers. And this research work, theoretical scope is the benefit of privatization and commercialization.

1.5 Significance of the Study

The importance of privatization and commercialization to companies enable the companies to exploit the available opportunities of production and profit maximizing.

The importance of privatization and commercialization could enable the market or consumers to get their needs satisfied and therefore improve the standards of living.

The importance of privatization and commercialization to students as a writer who engages on the study in the partial fulfillment of the requirement of the award of Higher National Diploma in Marketing.

The research also broaden the academicians knowledge and likewise the researcher will be able to withstand any tasks of this nature in future assignment.

1.6 Limitations of the Study

The limitation could be secrecy: this connoles the situation whereby the needed information is being kept for confidential reasons; and this serves as a threat to the researcher.

Financial constraints: This could also occur as a result of lack of find for the properrunning of the research work nad if this is not sufficienty and not effective to solve problem at hand.

Fime constraint: the research time is always bery long, and if proper time or adequate time is not being given to the researcher the work will be meaningless and the reseaecher will be unable to solve the problems time is more vital in carrying out a research work, regardless of the type of research being it primary or secondary research.

Wrong sampling could also be a problem or threat to a researcher. A situation whereby a researcher collects and analyzes wrong sample, this will make the research work not reliable and become more complex.

1.7 Definitions of Terms

1. Privatization:

Is the transfer of ownership and control right over firms from the government owned industries to private sector.

2. Commercialization:

This is the withdrawal of government funding from parastatals to enable this operate commercially to fund for its existence of operation.

3. Performance Contract:

This is said to designed to govern the relationship between the government and commercialized enterprises.

4. Economy:

Avoidance of waste of money, strength pr anything else of value.

5. Resources:

Wealth, suppliers of goods, raw materials etc. which a person, country, company has or can use.

6. Owner’s Equity:

The financial interest of the owners.

7. Values:

Is the amount obtainable in the market for the exchange of goods and services. This is the owrht of an asset prevailing at a particular period of time.

8. PBIT:

Profit before interest and taxation

9. C.E:

Capital employed

10. Paid:

Profit after interest and taxation

11. Asset:

Assets are things of value owned by the business. They are also resources of the business.

12. Terms of Agreement:

This is said to be the rules or agreement that governs the privatized company and the government.

13. Stewardship Accounting:

Act of giving doubt free account one’s property and resources being managed.

Chapter Five

Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings

Will privatization and commercialization of PHCN call for efficient and uninterrupted power supply. Certainly yes. Adequate generation capacity with suitable plant with which provide enough spring observe is vital for an efficient and reliable power supply system. A power supply system depends solely on gas supply which becomes incapacited when gas supply falls for various reasons for example, on a number of occasions Egbin Therma Power Station has to reduce generation from 800mm to 300mw because of maintenance work on the ESERAVOS Lagos pipeline or at utorogus has failed there by causing deficit in thermal generation, which has to be complemented from Hydro during period of draught.

In the normal years from March to June, hydro power generation is constraints by the volume of water available. Efficient electricity supply throughout the country is about to education and information technology
Government policies and educational programms can be easily disseminated through television and radio throughout the country when electricity is available.

With privatization and commercialization is vogue, a good point mix contingencies cannot be over emphasized for stability and security of power supply. Nigeria is blessed with abundant resources for the production of electricity. What is required in the privatization of PHCN to harness these resources to establish a strong and reliable power supply system.

5.2 Conclusion

Even without the present economy despondency of the country, it is not financially with adequate return indirectly, it means slashing grant for good project to prop up bad ones.

There are qualitative and quantitative benefits then can be achieved with proper implementation of privatization and commercialization. It will stop the financial heamprage that most parastatals have caused the national treasury. A large number of profitable privatized to companies which were hitter to loss markers will increase government to generate her cone from selling aside a part of its personnel to monitor the planning findings and controlling of the enterprises.

The improve delivering of public goods and service will help to create a higher and non inflationary growth.
The over all government approach to commercial and control must be fully appreciated. The commercial ventures in which government has interest must be encouraged to perform fully like their counterparts in the private sector of the economy like their counterparts in the private sector of the economy. Also, the federal government is expected to enact loss and designs policies to protect and event social consequences such as increase in prices, tariffs and inflations.

It helped that the enterprises after the exercise will be able to stem the tide of wasteful expenditure by utilizing their resources more efficiently.

Also, it is expected that government revenue will increase due to taxes reduced subdivides and sales proceeds which can be utilized in important areas such as infrastructure, education, defense power generation etc.

These are era which need consolidation so as achieve the much desired economic and political independence.

5.3 Recommendation

Since the choice of privatization and commercialization of PHCN and other government parastatals and development, therefore an attempts must be made to ensure that people with financial muscles are most place at advantage position to corner the shares of the privatized enterprises to the charge of other less privileged people who may meet the capacity (enough money to participate. The topic on privatization and commercialization is to ensure that the distribution of the shares to be sold is equitable and reasonable well spread across the country.

Furthermore, I would like to say that in order to allow for equitable sales of privatized shares, state government must direct all employers in the state to give out loans to their patronize the shares being privatized right now, most workers in Nigeria today hardly could afford to say anything, let alone the capital for investment in any of the sector of the economy, so in order to allow for workers participation in the exercise, the employer of Nigeria labour force must be directed and instructed to grant loans to their staff for the purse of shares.

To this end, government has however indicated that individuals and association interested in participation may obtain loans from commercial banks, but the cost of capital in the money market has become too high as to discredit banks are source of financing the purchase of privatized shares.

For the government and foreign sector to be reassured of government bonanfide intention towards privatization of it has made it known, it should go about it gradually. The following will go along way to demonstrate the validity of these intentions.

  1. Announced a comprehensive industrial development policy to guide investors. The new policy has spelt out government position incentives available to new investors and provide adequate guidelines for new investment.
  2. Implication of regulatory control and greater use of the market forces aimed at removing redtapsim and official corruption.
  3. Providing tax incentives for investment in economically disadvantages areas of the country.
  4. All nonprofit making individuals establishments belong to the public sector should be considered for management contract and leasing to private sector with a view to selling them out eventually. Its my considered opinion that if all these measure are judiciously executed, they promise to offer a more pelfic fixture for the government. The government and the national economy at large, as this would result in the promotion and stimulation of new productive investment by the private sector.

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