The Impact Of Privatization On The Nigerian Economy

Project and Seminar Material for Economics

The Impact Of Privatization On The Nigerian Economy


This paper examines the outcome of privatization in the Nigerian economy within the context of a globalized economic system and against the supposed inefficiencies of state owned enterprises. It argues that the privatization process in Nigeria as in other developing countries represents among other characteristics a new phase in the export of capital from the advanced countries.

Having examined some key economic variables, the paper further argues that the privatization process has not resulted in any significant improvement in the Nigerian economy. Data gathered for this study was from secondary sources and were treated and analyzed by the use of descriptive statistics, with quantities appearing in tables and percentages.(Reduce the abstract to 100 words or less)

Chapter One


1.1 Background of the Study

Privatization refers to the reduction or total withdrawal of public sector intervention in economic activities. It involves the relinquishment of part or all of the equity and other interest held by the government or its agency in enterprises whether wholly or partly owned by the government, the reduction in state provisions, reduction in state subsidies and reduction in state regulation of industries (enterprise).

Privatization may therefore be full (total) or partial. For reasons of transparency and credibility, as well as widespread share ownership, the popular trend has been of divest through the stock market and as such, the Act gave preference to the capital market as a divestment vehicle, with government divesting its holding through the market. Thus, enterprises which met the criteria of the stock market were divested through it. The privatization and commercialization programme of the government has provided new opportunities (which never existed before for individuals, organization and government in and outside Nigeria to buy and sell securities.

However, with this chosen channel of divestment, experience has also shown in Nigeria that privatization has increased the activities of the Nigerian stock market as well as broadened and deepened the stock market in a number of ways.

This research is aimed at examining the impact of privatization on the stock market development in Nigeria with a view of focusing on the degree of awareness and innovation engendered into the capital market by the policy, in relation to the Nigerian stock market.

The thesis is equally aimed at discussing such topic like privatization, the Nigerian stock exchange, impact of the exchange in privatization programme, the capital market. Special attention will be paid to such question as to, how the programme has further enlarged both the outstanding shares, shareholders and widened the type and quantity of share holders in the stock market, what extend the policy has increased awareness in the capital market on the part of the shareholders, general public and the principal operators and if privatizing through the market has made the market better appreciated by policy makers which may consequently les to the ignition of policies conducive to its growth.

1.2 Statement of Problems

Privatization of public enterprises is a vital tool for the upliftment of a country’s economy, more especially the developing countries like Nigeria. Regrettably, the problems facing this privatization program is numerous to include:

  1. Corruption
  2. Lack of transparency
  3. Lack of accountability
  4. Inconsistency and
  5. Incredibility.

However, it is based on these problems that the basic propositions of this privatization program are being hindered. In trying to look into these discrepancies and proffer a way forward towards a positive state of privatization of public enterprises in Nigeria, this research work emanated.

1.3 Objective of the Study

In view of the issues raised in the research problem, this study has a number of objectives all of which are directed towards appraising privatization policy as a development strategy for the economy.

These objectives include:

  1. To determine the post privatization effect on the activities of the Nigerian economy
  2. To make a comparative analysis of what innovations the policy has brought into the economy
  3. To point the implications of the policy on economic development in Nigeria.
  4. To investigate the extent to which the policy in relation to the statutory role of the Nigerian economy has helped in advancing the scope of private participation in government equities.
  5. To determine to what extent the policy has improved the degree of investment in the economy.
  6. To identify whether privatization has any effect on the economy.

1.4 Scope of the Study

The scope of this research work focused strictly on those privatization and commercialization programs that have been embarked upon by Nigerian government from. This work will lead us to the evolution of public enterprises in Nigeria and also examine why they later turned out to be sold or privatized, partly or wholly. Finally, to analyze how politics been played by past administrations since 1988 towards this programme have ridicules this whole exercise.

1.5 Limitations of the Study

During the conduct of this research work, some factors posed constraints to the determined efforts of the research to carryout the research study to such a depth and in such a manner that it ought to have been carried out. Some of these factors are:

a. Time Constraint:

Time is also another factor that acts as hindrances in carrying out this research study. This is as a result of the fact that other things were still being attended to in the course of carrying out this research work.

b. Financial Constraint:

Money also acts as a problem in the conduct of the research work. Traveling expenses were incurred in getting the materials for the research work. Also incurred, were expenses for the typing and distribution, building and a lot of other expenses.

1.6 Significance of the Study

The result to be obtained from this study is expected to give an insight into the impact of privatization on Nigerian economic development. It will also be exposing the attendant benefits of the policy which would accrue to the society, government, industries in general, investors and other interested parties.

The study is inspired to a large extent by a desire to appraise the impact of privatization policy on the economy and hence will be of great assistance to the user of the Nigerian organizations who are in need of what privatization policy in Nigeria entails in relation to the statutory role of the economy.

1.7 Definition of Terms

Public Corporations:

Public corporation or enterprise as defined by Adamolekun (1983), are organizations that emerged as a result of government acting in the capacity of an entrepreneur. They can be seen as those corporations or enterprise built, owned and managed by the government. They are being financed with public fund, especially through taxation and also operate on monopoly.


Privatization can be defined as the transfer of ownership and control of enterprises from the state to the private sector. Iheme, (1997) defines privatization as any of a variety of measurers adopted by government to expose a public enterprise to competition or to bring in private ownership or control or management into a public enterprises and accordingly to reduce the usual weight of public ownership or control or management.


Capitalism means the economic system in which property is privately owned and goods are privately produced. It is some times referred to as the private enterprise system. It is the private ownership of the business of a society with the freedom of private owners to use, buy and sell their property or services on the market at voluntarily agreed prices and terns, with only minimal interference with such transactions by the state or other authoritative third parties.

Full Privatization:

Sales of entire government shareholding or stake in the company. This also means divestment by the federal government.

Partial Privatization:

This means divestment by the federal government of part of its ordinary shareholding in the designated enterprise.

Listing Requirements:

These are condition which every application (companies seeking to be listed in the stock exchange must satisfy.

Daily Official:

it is an authoritative document showing useful cooperate data on daily business rating for all quoted securities to aid investors in appraising or monitoring their portfolio performance for best result. This document also reflects changes in the prices and earnings of the listed securities.

Quoted Companies:

These are companies whose shares have been admitted in every way with listing requirement of the exchange.

Chapter Five

Summary Conclusion and Recommendation

5.1 Summary of Findings

The summary point is that if privatization program is carried out with sincerity of purpose almost every group will come out ahead as a result of divestiture. The idea of privatization is that the state should ensure that essential goods and services are provided but not aimed to be the sole producer or deliverer. Whereas in the past government was seen as often squeezing out market supplies, it is now expected to support their development and promote competition. Meanwhile, in the three years since the implementation of the privatization program began, the Technical committee on privatization (TCPC) has been able to complete privatization work to some extent.

However, privatization is not a blanket solution for the problems of poorly performing state owned enterprises. It cannot in and of itself make up totally for lack of competition, for weak capital markets or for the absence of an inappropriate regulatory framework. But where the market is basically competitive, or when a modicum of regulatory capacity is present, private ownership yields substantial benefits.

5.2 Conclusion

The program of privatization is a major opportunity for reform of Nigeria’s ailing public enterprises and to prepare them to save the needs of the Nigerian economy in the 21st century. Enterprises will be made more efficient more accountable and more responsible to the needs of the clientele it is meant to be serving the Nigerian public. The Nigerian private sector will also benefit tremendously in the creation of new investment opportunities and a better investment climate. A lot of new shareholders have been created and now have a say in the affairs of the organized private sector. The performance of the Nigerian Capital Market will be enhanced greatly, as well the growth potentials of the Nigerian economy. But, what lessons are there for Nigeria, Africa and the Third world countries undertaking similar programs? Our experience in Nigeria points to the fact that it is difficult, if not impossible, for the government in developing countries to divest its interest in enterprises completely. In many African countries, the institutional infrastructures for viable divestiture do not exist. Furthermore, local capital with which to facilitate implementation of divestiture is not available. Therefore it would seem that the viable option for most African countries is to subject a substantial part of the public enterprise sector to reforms that will help them achieve management and productive efficiency.

5.3 Recommendation

With the revelations made in these findings, I therefore recommend that it is high time for the federal government of Nigeria to give the newly privatized companies more independence in order to carryout independent development planning which will in turn boost income generation of the privatized companies which will in turn lead to more economic development.

It is recommended that there should be an early passage of appropriation bill and a sustained implementation of the privatization programme, especially as it affects the economy.

I also recommend that public organizations on which the public is heavily relied on such as water board, electricity, security and other public organization met to provide basic amenities should not be privatized because such organizations are better run and manage by the government.

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