Privatization As Effective And Efficient Tool For Economic Development In Nigeria

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Privatization As Effective And Efficient Tool For Economic Development In Nigeria


This study examines privatization as effective and efficient tool for economic development in Nigeria; a study of Power Holding Company of Nigeria. It adopted a survey design to elicit data. 100 PHCN staff in the selected case study was used as sample using scientific sampling technique. Questionnaires were used as the instrument for data collection and the collected data were statistically analyzed with simple percentage and Chi – Square statistical tool. All the hypotheses tested were rejected. The findings revealed that there is a relationship between privatization as effective and efficient tool for economic development. The study also found out that there is a direct relationship between privatization and regularity in supply of good and services. In view of these findings, the study made the following recommendations: To achieve privatization of PHCN, policy should be made to would be buyers to retain the staff. Also the problem of the seller being the buyer, government should hand off in the buying of privatization because what is not managed well as seller cannot be managed well as buyer.

Chapter One


1.1 Background of the Study

Several reasons ere usually adduced for the unsatisfactory performance of most public enterprises, such as inability to fund their own programmes without seeking assistance elsewhere, total disregard for financial procedures e.g. non-auditing of accounts for year, poor debt recovery mechanism, failure to remit taxes collected to the relevant authorities, corruption, stealing of public funds and award of highly inflated contracts (Johnson 2004).

Dissatisfied with the poor performance of state enterprises in the country, the government was determined to sell off all unprofitable government-owned companies so that the federal government could spend its dwindling resources on other vital sectors of the economy. In order to remedy the situation, there have been tendencies towards privatization in order to gained economic development (Johnson, 2004:95).

Privatization as a jtool5 for economic management came to the front burner when Chile became the first country to turn public assets/businesses Ito private operators in the early 1970s, since then over 140 countries both developed and developing have embraced privatization as a tool to economic development (Anger, 2008). But privatization became the major policy thrust of the former civilian government of Chief Olusegun Obasanya on assumption of office on May 29, 1999.

There is no doubt about the fact that privatization is a very topical issue in Nigeria today and it means to make private and Includes the entire process by which government transfers its interest in a corporation or enterprise, by way of selling its investments to private individuals or groups (Johnson, 2004). It also involves the selling of state enterprises to the private sector (Ron, 1995).

Gusau (2000) noted that different countries have pursued different objectives using the privatization policy. Some have used it to address increasing budget deficit; some have used it to pursue the goal of national debt reduction; some have used it to fight inefficiency, etc. according to him, some of the goals that privatization has been used to pursue have direct bearing on development. Thus privatization in Nigeria cent on eh above objectives, ·has direct bearing on development.

In the context of economic development, a look at the conceptualization of economic development will help us to appreciate privatization. The encyclopedia of Wikipedia argues that economic development includes the process and policies by which a nation improves the economic, political and social wellbeing of its people. It was also considered as a static theory that documents the state of economy at a certain time. According to Schumpeter (2003), the changes in this equilibrium state to document in economic theory can only be caused by intervening factor coming from outside. Now, privatization will be a working tool in this respect, for efficiency and effectiveness which will eventually result into economic development.

Power Holding Company of Nigeria (PHCN) embraced this idea as she took privatization as a priority and this is done for a number of reasons which among others includes: economic development, regular supply of services, improved standard of living and increase the performance of the company.

It is important to note that in order to achieve privatization, there must be competition according to the Market Conditions Model and not ownership per se according to the Schumpeterian Model.

1.2 Statement Of Problem

One of the problems that have bedeviled public enterprises in Nigeria, especially those rendering essential services to the public such as Power Holding Company of Nigeria (PHCN), Nigeria Railway Corporation (NRC) etc, is inefficiency. One of the major roles of these enterprises is the promotion of national development through the creation of employment and reduction in the level of poverty, which will in turn increase standard of living of the people. Over the years, these government parastatals have performed below expectation ‘due largely to a plethora of problems that have confronted them. A lot of reasons have been adduced as factors responsible for the abysm performance of these enterprises by different scholars who have researched extensively into the activities of these enterprises, ranging from under funding, corruption, mismanagement, political interference and other factors too numerous to mention. In order to save these enterprises from these problems that seem to be insurmountable, different groups have advocated a variety of strategies that can be adopted to rescue these enterprises from the mucky water of inefficiency.

One of the possible solutions that have been advanced is Privatization. In Johnson (2004), privatization is seen as gradual withdrawal of the state from economic activities for efficiency and effectiveness to enhance economic development. Different groups have risen for and against this move of making public enterprises effective through the instrument of privatization. While the protagonists u of the view that privatization will bring improve efficiency in the system, the antagonists view strongly rejected privatization as an option. To them, privatization brings about unemployment, and increase the level of poverty. This yet to be resolved problem, seems to have hampered government efforts to privatize the nation’s public enterprises as all government efforts are always greeted with mass protest from different interest groups.

The major problem this study intends to investigate is whether privatization can truly be used as an effective and efficient tool for economic development as advocated by the protagonist group.

1.3 Objectives of the Study

The main objective of this study is to validate the fact that privatization is an effective and efficient tool for economic development in Nigeria.

Other specific objectives include:

  1. To investigate how privatization can crease regularity in the supply of goods and services.
  2. To investigate how privatization can improve the standard of living of the people in Nigeria.
  3. To examine the effect of privatization on the performance of public enterprises in Nigeria.

1.4 Research Hypotheses

This study will be geared towards testing the following hypothesis:

Hypotheses One
  • Ho: There is no relationship between privatization and standards of living of people in Nigeria
  • Hi: There is a relationship between privatization and standards of living of people in Nigeria
Hypotheses Two.
  • Ho: Privatization does not enhance the performance of public enterprises in Nigeria.
  • Hi: Privatization enhances the performance of public enterprises in Nigeria.

1.5 Significance of the Study

This research project will be of major significance to the government. Government serves as the wheel of the state, the machine which runs the affairs of a state. To run the affairs of any state, one deserves a good knowledge of what goes on within the state, how to run the state, how the state can be improved, how economic development or activities in such state can be enhanced. For this purpose, this study can be of significance to the government.

This study will also be of significance to policy makers who make potlces for implementation. Policy is the bedrock of any organization and its effectiveness and efficiency determines an organization. Policy is what an organization does to do and what it chooses not to do, therefore, this study can provide knowledge to policy makers when making polity on the issue of privatization.

This study will also be of significance to scholars, students and other researchers who will also want to undertake similar topic and serve as secondary source of data to them and also give them insight into what the topic is about.

This research study will be of significance to the organization under study that is Power Holding Company of Nigeria (PHCN). One of the objectives of any organization is to attain certain degree of productivity that would help in improving level of performance to achieve economic development. It is necessary for organization to be effective and efficient in achieving its goals, it is in the tight of this, that this study will provide more knowledge about privatization which serves as a tool for enhancing performances.

The study will also be of significances to the general public by enlightening them on the essence or importance of privatization and how it affects their standard of living and their general wellbeing.

1.6 Scope and Limitations of the Study

This study is primary concerned with privatization as effective and efficient and effective tool for economic development in Nigeria. This study/project work covers Power Holding Company of Nigeria (PHCN). The researcher encountered some constraints, which limited the scope of the study. These constraints include but are not limited to the following

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.

1.7 Definitions of Terms


Privatization involves the selling of state enterprises to the private sector. Is an ‘umbrella term’ which encompasses, among others, direct sale of public assets into private bands, the transfer of functions previously carried out directly by the state into the private sector and the withdrawal of the state from responsibilities previously undertaken, leaving such matters to be faced by individual citizens.


Commercialization entails detaching the enterprises from government departments and ministries and making them to be a cost accountability centers as done in the private sector. Commercialization on the other hand, can be defined as the re organization of enterprises, wholly and partially owned by the government, in which such commercialized enterprises shall, operates as profit making commercial ventures without subvention from the government.

Economic Development

Economic development is the increase in the amount of people in a Nation’s population with sustained growth from a simple, low income economy to a modern, high-income economy. Put in another way, is the analysis of the economic progress of nations.

Power Holding Company Of Nigeria

The Power Holding Company of Nigeria abbreviation as PHC or PHCN), was formerly the National Electricity Power Authority abbreviated as (NEPA) is an organization governing the use of electricity in Nigeria.

Public Enterprises

Public enterprises is defined as organizations whose primary function is the production and sale of goods and or/ services and in which government or other government controlled agencies have no ownership stake that is sufficient to ensure their control over the enterprises regardless of how activity that control is exercised.


Performance is activities carried out to the benefit of any organization, members and the public. That is the, sum total of individuals and group effort to the benefit of the organization in particular and the public in general.

1.8 Organization of the Study

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

  • Chapter one is concerned 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 a critical analysis of privatization as effective and efficient tool for economic development in Nigeria.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations are made, which in the opinion of the researcher will be of benefit in addressing the challenges of poor privatization in Nigeria.

5.2 Summary

This study aimed at havinga critical analysis of privatization as effective and efficient tool for economic development in Nigeria. Three objectives were raised. These objectives include: To investigate how privatization can crease regularity in the supply of goods and services, to investigate how privatization can improve the standard of living of the people in Nigeria, to examine the effect of privatization on the performance of public enterprises in Nigeria.

5.3 Conclusion

Based on the above findings pertaining to the objectives of the study the following conclusions are drawn.
As already argued, privatization has a potentially high impact on poverty alleviation and economic development when effectively carried out. In light of this potential link, privatization should be adequately integrated as a core part of any poverty alleviation strategy. Whatever the objective of the programme, it is important to take not of the concerns of the poor and where necessary, adequate measures are put in place to guarantee that in the end, the benefits of privatization will reach the poor. If privatization is carried out with sincerity of purpose, almost every group will come out and accept the result of divestiture. Workers will be shareholders, while consumers will be better off because of better services. New graduates and the unemployed will get jobs because of expansion and government will be relieved of the burden of subsidies. Similarly, investors will gain investment opportunities, and ultimately, the public will be free to pursue any private economic interest relating to the privatized industry. In conclusion, if privatization must be of necessity and bring forth the desired benefits, it has to be viewed not as an end itself, but as a means to get government interested in fostering a new division of labour between the public and private sectors. Therefore, the success of privatization should be judged not in terms of the sales or contract itself, rather on the basis of whether there are net benefits to the economy (Shirely, 1998). Privatization must result in better services at lower prices as desired by consumers who, oftentimes are not bothered about economic philosophies. If privatization does not bring tangible benefits in one form or another, the opponents of privatization who argue that the benefits are not worth the cost would feel justified.

Finally, this study has gone so far to finding out the major challenges to successful privatization of which majority of the respondents were of the opinion that corruption, lack of policy implementation, lack of infrastructures and awareness are the major factors that hindered privatization in Nigeria.

5.4 Recommendation

Nigerians would obviously not resist policies that add great value to the economy and significantly improve the standard of living, be it privatization, commercialization, liberalization, deregulation etc. What the populace find distasteful is a situation where few individuals in power turn privatization to family or personal affair and dispose of valuable investments either to themselves, their associate or the general public at a given away value. Worthy of note in this regard are the following: Nigerians reserve the right to seek information, explanation and enlightenment on any aspect of privatization from the government or its agencies because these establishments belong to all. Refusal to respond satisfactorily or outright denials unjust, unfair, undemocratic and seriously contradicts democratic tenets. If privatization is to achieve the stated objectives, execution should be in the best interest of the nation and well-being of the citizen. Greater commitment and dedication are also expected of the government, NCP, and BPE members and their actions must be devoid of corruption.

Anti-corruption crusade in all public offices must be pursued with a sense of purpose and sincerity without deceit, fear or favour. Appointments of public officers and senior managers must be devoid of all kinds of sentiments and corrupt practices but strictly on merit. This is the only way to make such officers accountable and punishable. Proceeds of sold investments should be re-invested or used to address pressing needs and problems like food, unemployment, education, health, water, shelter and other top priority projects.

Efforts should be geared towards ensuring a solid agreement with core investors to protect the interest of Nigerian workers and drive social ills like unemployment out of our society. There is the need to instill greater discipline in the entire public service; necessary rules and regulations should therefore be put in place to checkmate excesses of core investors. This is highly necessary to curb the possibility of private monopolies and prevent situations where some capitalists dominate an industry thereby hike prices of products and services indiscriminately.

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