Effect Of Privitalization And Commercialization Of Government Owned Industries In A Developing Economy

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Effect Of Privitalization And Commercialization Of Government Owned Industries In A Developing Economy


Emphasis on affects of privatization and commercialization of government owned industries in developing Economy. (A case study of Nitel Enugu) in order to emulate a concrete result the researcher constricted questionnaire. At the end of the work the research result in identifying some effects emanating from privatization and commercialization and among them are Increase in employment due to GSM Increase in productivity an efficient. Reduction in government expenditure. Increase in profitability. Based on the findings male, recommendation, were made by the research while in her view would help to improve privatization and commercialization in this economy. It should also be noted that the recommendations were made in solution, which were based on the response chosen by the respondent

Chapter One


1.1 Background of the Study

In the past the years, Nigeria has witnessed a tremendous growth in the telecommunication industries by this growth NITEL not only become one of the heading public company in the country but also placed the country on top of the telecommunication area in Africa. Thanks to NITEL that today, Nigeria can boast of about 600,000 telephone lines, which have equally been improved with the introduction of digital system. Apart from making life comfortable for its works, NITEL has contributed to the economic and social advancement of Nigeria through its revenue generation. In terms of performance NITEL several associates and awards have gone a long way to prove that NITEL is really running the race fast. In 1992 for instance it was confirmed with the Herbert Macaelory Award for Engineering excellence and a certificate of co-operate excellence. Others are the merit award for cooperate leadership by the University of Nigeria Nzukka and a rotary club of Nigeria. It is however, distrusting that’s despite NITEL’s good inventions and social well being of the citizens are being subrogated by unscrupulous Nigerians. These people of evil intentions instead of joining millions of Nigerians in extolling the achievements of Nitel have decided to purist the company vandalizing its installations all over the country costing millions of Niara. For instance in Enugu, Nitel plc lost about 10 million worth of cables were damaged. However, the researcher followed with considerable interest on the controversy surrounding the deregulation of tile communications in Nigeria. The controversy started with aspiring entrants purported “I concede” by the Nigeria that Nitel was been frustrating their efforts at getting of the ground and reached its peale when Nitel disconnected its joint measure company, the mobile telecommunication service (MTS) fronts network. Millions of unsuspecting Nigerians have lost their land earned money through what was an unregulated deregulation of the banks industries while the village was going on, much fraud what banks and bankers were being hailed as the progressive and innovation banks and bankers. This same situation is being repeated in the telecommunication industry by uninformed communicators. The insiders in the industry renew this and many of the intending entrants only want to have their cut from the new national cake which they assumed been backed by the telecommunication deregulation decree and called Nitel. Dispassionate analysis and a careful study of decree No 75 November 1993 will show that Nitel has been keeping to the letter of the decree while like any commercial organization. They are however strictly not for, public subscription. The only networks open for public transaction as per the second schedule are payphone telephone and mobile communication service. Private operator who have applied for hence from NCC need to make a careful strictly of the second schedule. Especially why the operative word is private in terms (3) and public in terms (2) and (4) There is also the misconception that decree 75 of 1992 precludes Nitel from engaging in certain services. a careful study of section (10) subsection (2) and (3) will definitely remove such misconceptions. Generally, the objective of decree 75 of 1992 is to continue Nitel to its existing role of providing conventional telecommunication mainly telephone and telex services while making the ionconventional new technology in mobile communication information transfer, etc. free for all in which Nitel too can seek a hence to participate. Already, certain aspects of the decree have been overtaken by technology. These controversies of the effect of privatization and commercialization on a developing on a developing are what this work is sit to remain with special references to Nitel Plc. Enugu.

1.2 Statement of the Problem

According to Werner Sombort if capitalism has its own spirit which is profit making spirit” the motive to make profit from investment is considered as a force which is moving that drives investors. People’s major aim of invested is to have return on the fund invested is to have return on the fund invested in the profit. Whenever the return on investment is considered not form coming such investment may be taken as avenue financial loss. There was this economic situation which confronted the Nigeria society when the return of 93.7 million (1.4%) was received do 11 Billion Nana invested on parastatals and private own companies. The poor returns portray the fear that such investment is a waste of public revenue which was then on a decline following a global recession on the Nitel’s revenue. The first official public statement on privatization was in the 1986 budget speech by the head of state, President Ibrahim Babangida when the said (government parastals have for long been subjects of study and policy review). They have too generally come to constitute on unnecessary high burden government resources. They have been variously classified for purposes of reforms. Government has now decided that as from 1986. The volume of non statutory transfers to all economic and quasi economic parastatals would constitute no more than so to it their levels. There are to fund the balance from increase in the price of their product and service charges tariff and rates”. According to another Mbamele, (yp) there is no doubt that excessive participation by government of developing countries like Nigeria in business ownership created great imbalance on their economy. It is obvious that under. Living cause of privatization exercise is the attempt to increase efficiency by making public owned enterprises more productive as well as more responsive in the market place and on competitive pressures. Privatization and commercialization of publicly owned enterprise is expected to block the drain on government revenue by bringing profit spirit into such needed for the execution of public programmes and this need for this study.

1.3 Objective of the Study

The major objectives of the study are:

  1. To determine whether privatization and commercialization helps to solve the problem of poor masses.
  2. To identify the impact of privatization on the general masses
  3. To determine the impact of privatization on government funding.
  4. To proffer solution to problems associated with privatization and commercialization of government parastatals.

1.4 Research Hypotheses

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

  1. H0: there is no impact of privatization on government funding
    H1: there is impact of privatization on government funding
  2. H02: privatization and commercialization does not help to solve the problem of poor masses
    H2: privatization and commercialization help to solve the problem of poor masses

1.5 Significance of the Study

The study is of a great importance in the fact that privatization and commercialization at public enterprise was being resort to as a solution to their unpredictability; inefficiency and unproductively public companies in the western countries are privatized for maximum profitability and efficiency. Such companies include the British telephone company’s the British railway’s, the united state postal agency etc. The study is very timely since privatization and commercialization on public owned enterprise was pursued with many investors still ignorant of the benefit derivable from such investment considering the that there are limited literature on the effect of the activity this research therefore seeks to enlighten the general public about the effect of privatization and commercialization of our inefficient public enterprises. It is also hoped that this research will create or stand as a point of reference for further research or this issue.

1.6 Scope and Limitation of the Study

The scope of this research is limited to Enugu state. Focus is also on Nitel formally owned by this state government. This company is expected to make profit while charging competitive prices. The researcher encounters some constrain which limited the scope of the study;

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational Privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.7 Definition of Terms


Privatization is the sale of formerly public enterprises to private individuals and groups. Also this is a process whereby the government or its agency’s relinquishes port or whole of its equity and other interests in enterprises whether wholly or partially.

Full Privatization:

This would imply that the government ownership and control would be renowned to permit such public enterprises to operate like their private sector counterparts.

Partial Privatization:

This means that the part of the government’s equity holdings and interest will be sold out and following that, they would be expected to operate as private companies.


This means that the enterprises will continue to be owned by the government that will have a financial structure that will enable the raise capital. They are expected to operate without any government operating subventions and without treasury support for future capital development.

Partial Commercialization:

It means that the enterprises will continue to be owned by the government but will necessarily have to generate a fair proportion of the financial requirements for their operations but right continue to need some government support towards the operating costs of future capital programme.


This means any corporation, board, company or parastatals established by or under any enactment in which the government or any of its departments, ministries or agencies has ownership or equity interest and shall include a partnership, joint venture or any other form of business arrangement or organization.


This means the outright sale of state owned enterprises or industries to the private sector.

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain effect of privatization and commercialization of government owned industries in a developing economy

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of privatization and commercialization of government owned industries in a developing economy

5.2 Summary

This study was on effect of privatization and commercialization of government owned industries in a developing economy. Four objectives were raised which included: To determine whether privatization and commercialization helps to solve the problem of poor masses, to identify the impact of privatization on the general masses, to determine the impact of privatization on government funding, to proffer solution to problems associated with privatization and commercialization of government parastatals. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of NITEL, Enugu State. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up business intelligence analysts, NET developers, customer acquisition managers and computer operators were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies.

5.3 Conclusion

Privatization has been embraced by most countries as one of the panacea within a larger framework for redressing recurring economic problems. It is hoped that by transferring ownership of government owned enterprises to the private sector, economic growth would be enhanced because of these Privatized enterprises. The approaches to Privatization have been varied while the outcome has been generally diverse. The economic implication of such programme depends largely on the institutional administrative arrangement used in the implementation, the technique of Privatization adopted and other policy reforms implemented along with the Privatization and Commercialization. Survey of Privatization and Commercialization experiences shows that different approaches to Privatization and Commercialization produce different results. In Nigeria, very strong legal and administrative machinery have been put in place to guarantee the success of the programme. The aims, objectives and scope have also been defined, more importantly, the programme is not being carried out in a vacuum, and it is being supported by deregulation, stabilization and liberalization policies aimed at ensuring rapid turnaround of the economy. The economic impact of the programme is unquestionably desirable. To derive the maximum benefits from the programme, however, some of the current policies and procedures should be reviewed to ensure improved efficiency of these government enterprises after their Privatization and Commercialization, so that such enterprises do not die under the yoke of unscrupulous investors.

5.4 Recommendation

The Privatization and Commercialization programme is one of the most controversial economic policies confronting Governments worldwide. It therefore becomes imperative that the design and implementation of the programme to be carried out meticulously. Some of these controversies usually arise from government officials who have vested interest in the enterprise and the employees of the affected enterprise whose fear augur imminent job loss. It is therefore recommended that government must ensure that the regulatory environment and competition policies must be part of the process of Privatization. Accordingly, government must repeal all decrees/laws that inhibit competition and must pass laws that protect investors.+

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