The Economic Implication Of Privatization And Commercialization Of Ailing Industries In Nigeria

Project and Seminar Material for Political Science

The Economic Implication Of Privatization And Commercialization Of Ailing Industries In Nigeria

Abstract

Privatization and commercialization of public enterprise is an end itself, but as a means toget government interested in fostering a new division of labor between the public and private sectors in order to increase the efficiency and contribution to the development of both sectors. Therefore, the success of privatization should be judged not in terms of the sale or contract itself or the price paid to government, or even the survival or expansion of the enterprise sold, but rather, on the basis of whether there are net benefits to the economy
This study is aimed at investigating the Economic Implication Of Privatization And Commercialization Of Ailing Industries In Nigeria. Three (3) research questions and Two (2) hypothesis guided the conduct of the study.

Questionnaire was used to collect relevant data from Rusal Aluminium Company resident in Ikot Abasi of Akwa Ibom state. 200 staff were randomly selected. Pearson Correlation statistics was employed to test each hypothesis at 0.05 level of significance. The findings revealed that there is a significant relationship between the privatization and commercialization of ailing industries and efficient resources management for economic development in Akwa Ibom State. The study also revealed that Bottlenecks in the System, Geo-political Spread, Opposition from Ministry Officials and Access to Credit are the problems associated with the implementation privatization and commercialization in Akwa Ibom State. Finally, the study also revealed that Privatization and commercialization of ailing industries has impact on the Akwa Ibom State economy.

In view of this, it was among others recommended that there should be full support of the highest level of authority in Government at all times to arise the interest of both domestic and foreign investors and The government should create an environment favorable to private economic activity. This can bedone by truly committed to the reduction of the opportunities for corruption and misuse of public property bygovernment officials.

Table of Content

  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Content
  • List of Tables
  • Abstract

Chapter One:

Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objective of the study
  • 1.4 Research Questions
  • 1.5 Significance of the study
  • 1.6 Scope of the study
  • 1.7 Definition of terms

Chapter Two:

Review of Literature

  • 2.1 Review of concepts
  • 2.2 Theoretical Framework

Chapter Three:

Research Methodology

  • 3.1 Research Design
  • 3.2 Population of the study
  • 3.3 Sample size determination
  • 3.4 Sample size selection technique and procedure
  • 3.5 Research Instrument and Administration
  • 3.6 Method of data collection
  • 3.7 Method of data analysis
  • 3.8 Validity and Reliability of the study

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Answering Research Questions

Chapter Five:

Conclusion and Recommendation

  • 5.0 Summary
  • 5.1 Conclusion
  • 5.2 Recommendation
  • References
  • Appendix

Chapter One

Introduction

1.1 Background of Study

Governments across the globe have come to reassess their ownership and involvement in enterprises that could otherwise be managed by the private sector. In many developing countries where state ownership of public enterprises were regarded as a necessary social service aimed at providing employment for their citizens, privatization and commercialization of such public enterprises have been on the increase as a result of the short comings from government ownership of such enterprises.

However, the problems of public enterprises which include ill-conceived investment, political interference in decision making, costly and inefficient use of public resources, increased budgetary burden, over-extension of government’s managerial capacity, diversion of credit and other resources meant for expansion to private pockets, abandonment of projects and the harsh economic realities have forced Nigeria government to embark on privatization and commercialization of her major enterprises like National Electric Power Authority (NEPA), Nigerian National Petroleum Corporation (NNPC) and others. Moreso, privatization and commercialization have helped to break up monopolies which hitherto have been enjoyed by some of the above named Nigerian enterprises.

Therefore, central planning and state ownership has become a thing of the past citizens are encouraged to participate in the privatization and commercialization scheme of the Federal government of Nigeria.

Although method of privatization and commercialization may differ from country to country, the central objective has always been to increase revenue generation for the state, relieve the sate from the burden of supporting non-performing businesses or enterprises and also to encourage competition.

Privatization and commercialization in Nigeria is not without problems. Some of these problems are bottlenecks in the system, geopolitical spread, opposition from Ministry Officials, antagonism by labour unions and unco-operative attitude of workers in enterprises to be privatized and commercialized by Nigerian government.

1.2 Statement of Problem

For sometimes now in Nigeria and in Akwa Ibom State, public companies have been badly managed and often times inefficiently run.

Based on data from various government departments, public enterprises consumed as much as N265 billion within one year. In Past years, the Adeso (1969), Udoji (1973), Onosode (1981) and ALhakim (1984) commissions assessed and determined that public enterprises are responsible for huge wastages in funds which create budgetary strains and avoidable burden on the economy.

From the above studies, failures of government owned enterprises are because agents within government have a tendency to pursue their own interest or the interest of special groups at the expense of the public.

Also, the lack of effective strategies characterized by political instability, poor technology, lack of basic infrastructure, over politicization of projects and widespread incompetence in the management of public enterprises, is a function of excessive government participation in the management process.

Thus a combination of inadequate and costly gas supplies for electricity, lack of transportational access for the transfer of raw materials and finished products and untimely release of funds by government also lead to the closure of the Aluminiun Smelter Company of Ikot Abasi in the year 2000.

From the fore goings above, it thus became a national policy imperative therefore to disengage the public sector from those areas where the private sector has the comparable advantage to perform by turning around poorly managed and cash strapped state enterprises, whose inefficiencies have hampered economic development, thereby stopping the monumental waste and inefficiency of the public enterprise sector. This necessitated the need for government to set up the programmes of privatization and commercialization so as to address peculiar socio-economic and political conditions in Nigeria as part of the country’s structural adjustment programme.

This concept by the government, in restructuring the economy has thus prompted this research in ascertaining the economic implications of privatization and commercialization of ailing industries in Akwa Ibom State with particular reference to the Aluminium Smelter Company of Ikot Abasi.

1.3 Purpose of the Study

This research is conducted generally to examine the economic implication of privatization and commercialization of ailing industries in Akwa Ibom State with particular reference to the Aluminium Smelter Company, now known as Rusal Aluminum Smelter Company, Ikot Abasi.

More so, the specific objectives of this research are as follows:-

  1. To identify the problems and prospects of privatization of ailing industries in Akwa Ibom State.
  2. To find out the reasons for the effectiveness and ineffectiveness of service delivery in the public and private sector in Akwa Iborn State.
  3. To identify the reasons behind the concepts of privatization and commercialization of ailing industries in Akwa Ibom State.

1.4 Research Questions

  1. Is there any significant relationship between the privatization and commercialization of ailing industries and efficient resources management for economic development in Akwa Ibom State?
  2. What is the impact of privatization and commercialization of ailing industries in Akwa Ibom State?
  3. What are the problems associated with the implementation privatization and commercialization in Akwa Ibom State?

1.5 Research Hypothesis

  • H1 Privatization and commercialization of ailing industries has no impact on the Akwa Ibom State economy.
  • H2 There is no relationship between the privatization and commercialization of ailing industries and efficient resources management for economic development in Akwa Ibom State.

1.6 Significance of the Study

It is hoped that this study would provide ideas and useful information to those who might conduct further research on this subject. The findings of this study will be useful to both Federal and State governments, core investors, business executives and the general public who have interest in this subject.

1.7 Scope of the Study

This research is undertaken to study the economic implications of privatization and commercialization of ailing Industries in Akwa Ibom State with particular reference to the Aluminium Smelter Company in Ikot Abasi now owned by Rusal Aluminium. This work will also seek the reasons for the poor performance of government owned enterprises.

In carrying out this research work effectively, attention in this study will focus on the past, present and future prospects of the Rusal Aluminum Smelter Company, Ikot Abasi as a result of its privatization and commercialization.

1.8 Limitation of the Study

Some limitations of this study include:

  1. Time and financial constraints, which did not allow for a total coverage of all the proposed areas needed in this work.
  2. The researcher could not gather enough information on the topic as a result of lack of access to text books and journals. This is because of the fact that privatization and commercialization concepts although long introduced into the Nigerian economy has only drawn more attention in recent times as such making these concepts sound as though they are new concepts in Nigeria.

1.9 Definition of Terms

Commercialization:

Commercialization is the process of bringing new products or services to market. The broader act of commercialization entails production, distribution, marketing, sales, customer support, and other key functions critical to achieving the commercial success of the new product or service.

Privatization:

The transfer of ownership, property or business from the government to the private sector is termed privatization. The government ceases to be the owner of the entity or business.

Enterprise:

An enterprise is a business organization that is involved in the undertaking of activities associated with the production, sale or distribution of products or services.

Industries:

This is an organization concerned with economic activities such as processing of raw materials and manufacture of goods in factories.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary

The research studied the Economic Implication Of Privatization And Commercialization Of Ailing Industries In Nigeria. Chapter one of this study gave a brief background to the topic of the study, statement of the problem and highlights of the purpose of the research. Based on the purpose identified, three research questions and two research hypothesis were formulated for the study. Chapter one also highlighted the significance and limitation of the study; it also gave the definition of terms used in the study. Chapter two presented a review of related literature to the study. Special effort was made to review the works of authors related to various aspects of Privatization and Commercialization. Research methodology, with special attention on research design, population, sampling technique and sample size, method of data collection and method of data analysis were presented in chapter three. Chapter four presented the analysis of the data collected in the course of this research. The presentation was made according to the three research questions and two (2) research hypothesis stated in the study and the findings were highlighted accordingly. This chapter aims at presenting a summary and conclusion of this study as well as the recommendations made by the researcher.

5.2 Conclusion

This study has made it crystal clear that there is a significant relationship between the privatization and commercialization of ailing industries and efficient resources management for economic development in Akwa Ibom State. It was discovered that Bottlenecks in the System, Geo-political Spread, Opposition from Ministry Officials and Access to Credit are the problems associated with the implementation privatization and commercialization in Akwa Ibom State. Finally, the study also revealed that Privatization and commercialization of ailing industries has impact on the Akwa Ibom State economy.

5.3 Recommendation

There should be full support of the highest level of authority in Government at all times to arise the interest of both domestic and foreign investors. In addition, enabling environment such as favourable economic and political stability should be created for effective and efficient implementation and privatization and commercialization in Nigeria.

Privatization is a good policy measure, it should be pursued with vigor, truth, sincerity and transparency. The privatization equity loan program of government should be reactivated and made available. In addition, the government should endeavor to set aside politicking when privatizing or avoid selling off public property to cronies and family members. Put differently, privatization and commercialization in Nigeria and the attraction of private investors to infrastructure delivery will be a mirage unless institutional reforms take place. The government should create an environment favorable to private economic activity. This can be done by truly committed to the reduction of the opportunities for corruption and misuse of public property by government officials.

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