Privatization Of Government Owned Enterprises, A Strategy For Better Performance (A Case Study Of Power Holding Port Harcourt)

Project and Seminar Material for Business Administration and Management (BAM)

Privatization Of Government Owned Enterprises, A Strategy For Better Performance (A Case Study Of Power Holding Port Harcourt)


Abstract


Privatization is not just denotiled in size of an inefficient and ineffective public sector is reduced by transferring some of its functions to relatively make efficient private sector. The performance of the private sector is measured in terms of profit ability; cost serving consumer satisfaction on the other hand, public sector performance is measured in terms of what was intended and its social benefits factor.

Privatization has increasingly significant element in structural adjustment programme (SAP), both the IMF and the World Bank instead on a significant reduction in public expenditure, selective withdrawal of subsidies and adoption of other policies.Finally, this project work has x-rays the privatization policies of government enterprises and recommendations were made to enhance service delivery and better performance.


Table Of Content


Preliminary Page(s)

  • Title Page
  • Approval Page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Contents

Chapter One

1.0 Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Study
  • 1.3 Objective of Study
  • 1.4 Research Questions
  • 1.5 Significance of the Study
  • 1.6 Scope of the Study
  • 1.7 Limitation of the Study
  • 1.8 Definition of Terms
  • 1.9 Brief History of the Study

Chapter Two

2.0 Literature Review

  • 2.1 Meaning of the Term Privatization
  • 2.2 Reasons for Privatization Public Enterprises or Government Owned Enterprises
  • 2.3 Argument for privatization
  • 2.4 Origin of state participation Business Enterprises in Nigeria.
  • 2.5 Problem of State Owned Enterprises
  • 2.6 Economic Benefit of Privatization

Chapter Three

3.0 Research Methodology

  • 3.1 Research Method Used
  • 3.2 Sources of Data
  • 3.3 Population and Sample Size Determination
  • 3.4 Method of Data
  • 3.5 Validity and Reliability of Measuring
  • 3.6 Method of Data Analysis

Chapter Four

4.0 Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Data Analysis

Chapter Five

5.0 Summary of Finding, Conclusion and Recommendation

  • 5.1 Summary of Finding
  • 5.2 Conclusion
  • 5.3 Recommendation
  • Bibliography
  • Appendix A
  • Appendix B

Chapter One


1.0 Introduction


1.1 Background Of The Study

Privatization has been defined in so many ways by so many people and scholars. Privatization enter proper usage in Nigeria only recently when people began to question the efficiency, effectiveness of public sector activities especially as demonstrated by the Nigeria Airways, Power Holding Corporation Nigeria (PHCN), Nigeria Railway Corporation (NRC) etc.

Privatization is not just denotiled in size of an inefficient and ineffective public sector is reduced by transferring some of its functions to relatively make efficient private sector. The performance of the private sector is measured in terms of profit ability; cost serving consumer satisfaction on the other hand, public sector performance is measured in terms of what was intended and its social benefits factor. Privatization has increasingly significant element in structural adjustment programme (SAP), both the IMF and the World Bank instead on a significant reduction in public expenditure, selective withdrawal of subsidies and adoption of other policies.

To foster the efficient use of resources so far there are about five hundred (500) companies and parastatals in which the federal government invested over N36 billion as equity loans and subvention from which she has been realizing less than N500 billion annually.

These enterprises also incurred huge debts which are being repaid and serviced by government.
About 2/3 of federal enterprises as commercial ventures. Estimates place the public enterprises, rector contribution GDP about 35% and nearly 22% of total employment in the formal sector of the economy. He goes on to say that enterprises make huge or large chain on government resources. The federal government recently estimated that about 40% non-salary recruitment expenditure and 30% of its capital budget have gone annually towards public enterprises.

These investments have provided mega yielding less than 1 billion in dividend and loan repayment from 1980 -1985.

Furthermore, it has been argued that economic efficiency results in higher profit maximization. Privatization improves the general economic environment of nature through “exchange rate” and this encourages capital inflows and arrests capital flight. When foreign investors are encouraged to acquit interest in privatized state owned enterprises. Incremental equity inflows improves the balance of payment position of country and enhances the value of its currency, yet restricting large capital intensive enterprises such as NITEL and NEPA will require foreign investment and infusion of the desired capital, local and foreign investors. most attraction to the privatization programme would most certainly be the allure of participating in the ownership of some of the biggest and potentially most profitable companies in the kind and playing in the vast Nigeria market.

Private investments were therefore law. Government with relative large capital based therefore face irresistible temptations of going into direct investment in economic ventures, thus, a formal commission of commerce and industries in the defunct Anambra state Iwobi has to say: “In the early days of our political independence government felt obliged to invest directly and to combine its mandatory role of promoting the industries.

Given the recently global economic distorting governments, revenues have continued to drop. Moreover, some of this government owned enterprises have turned to constitute a draw and government purse instead of self financing.


1.2 Statement Of Problems

The question of privatization came to limelight in Nigeria; not long ago following public outery against the apparent gross.

Inefficiently hand bottlenecks that seems to have made valid most public enterprises. Privatization remains an increase in significant element in the structural adjustment programme.

So far, there are about 500 companies and parastatals in which when the federal government has invested over N36 billion as equity loan and subventions from such establishments the government loan been realizing less than N500 million annually.

These enterprises have continued to remain huge debts which are being repaid and serviced by government. Ukiwe (1985) indicates that public enterprises make huge claim on government resources.


1.3 Objective Of The Study

This project is aimed at achieving the following objectives

  1. To identify the problems or factors militating against effective privatization of some government establishment with special reference to NEPA.
  2. To ascertain the extent to which government involvements had contributed to the poor performance of public enterprises.
  3. To evaluate how privatization has contributed in many ways to the enhancement of economic development in Nigeria.

1.4 Research Questions

  1. Is government involvement in public enterprises instrumental to their poor performance as well as the problems confronting them?
  2. Are there some factors that have tended to militate against privatization of most public enterprises with specific reference to NEPA?
  3. To what extent has the policy of privatization contributed to economic development in Nigeria? The research works therefore seeks to also or tackle the above mentioned problems.

1.5 Significance Of The Study

At the end of the day, the outcome of the research work will turn out to be great significance as indicated here under.

  1. The outcome of this research work could serve as a reference material for future researchers.
  2. My recommendation will go a long way in helping the affected organization to tackle the identified problems.
  3. The research will also be of help to technical committee for privatization and commercializing their objectives.

1.6 Scope Of The Study

Scope refers to the areas which the researcher covered while writing the project. Due to the nature of the study, I covered NEPA located in Port Harcourt, since I used it as my case study.


1.7 Limitations Of The Study

As study of this nature could have taken about one year uninterrupted, but this was not the case in this study. The study covered rather a period less than a year because of academic engagements.

  1. Initial unwillingness of the authority of the organization to allow the researcher to conduct the research for fear of revealing their secrets.
  2. The unwillingness of some employees to fill the questionnaire for fear of being victimized glared for sack.
  3. Financial constraints which limited the researcher from putting up more comprehensive approach to the study.
  4. Time constraints which also limited the researcher from adopting a more comprehensive approach to the study.
  5. Academic workload, which so much limited the researcher from doing a thorough and comprehensive work.

1.8 Definition Of Terms

Privatization:

It is the process of directing government ownership, control and management of enterprise services and agencies to the private sector consisting of private individuals of forms seeking their own profit. Privatization is not confined to any subject of any nation’s economic and social structure.
Privatization programme could be pursued in manufacturing, agriculture and transportation. Sub-sectors or excess in the provision of basic services such as water, power, education and health.

Public Sector:

This is an establishment owned, financed and managed by the government either state or federal. It is mainly for providing services to the people with little or no profit. Government normally subsidizes them.

Private Sector:

This refers to the part of the economy not directly under state control. They are owned, financed and managed by the owners usually individual or group of individuals.

Enterprise:

A business company or firm, local, large –scale or state owned. It is a business activity developed and managed by individual or state.


1.9 Brief History Of Your Case

The history of National Electrical Power Authority (NEPA) can be traced back to the end of the 19th century when the first generating power plant was first installed in Lagos in 1898. From then until 1950, the pattern of electricity development was in the form of individual electricity power undertaking scattered all over the towns.

Some of the few undertaking was federal government bodies under the public works department, some by native authorities. In January 6th, its first general manager was appointed. Despite the problem faced by NEPA, the authority has played an effective role in the nation’s social economic development thereby steering Nigeria into a greater industrial society.

The success story is as a result of hard work and careful planning. The statutory function of the authority is to develop and maintain an efficient coordinated and economical system of electricity supply through the federation.

The decree further states that the monopoly of all commercial electric supply shall be enjoyed by NEPA to the exclusion of all other organizations. This does not however prevent private individuals who wish to buy and run thermal plants for domestic use from doing so. NEPA has been granted partial autonomy.

The federal government has divided the National Electric Power Authority (NEPA) distribution sector into separate companies or entities that will be called (LCD) among the regions.


Chapter Five


5.0 Summary Of Findings, Conclusion And Recommendation

Below is a summary of the major finding and facts uncovered in the course of this research work.


5.1 Summary Of Findings

That inefficient performance (NEPA) is as a result of worn out equipment and constant breakdown of transformers. That privatization may be the best solution for this enterprise. That federal government only agrees in principles to privatize the company and that the present administration supports the restructure and carry out expansion work before finalizing the issue of privatization.


5.2 Conclusion

This research work has shown that there is significant need to privatize most of the public enterprise generally and NEPA particularly. This conclusion is predicted as major findings and facts unveiled by this study as indicated here under the government involvements have been affecting the activities and the efficient performance of NEPA. That management problem such as man power planning recruitment, problems of coping social and political environment will be a thing of the part if the executives are appointed on merit.


5.3 Recommendation

Considering above findings and problems facing NEPA and other government owner enterprises, the researcher has the following recommendation to put forward as a help in alleviating these problems.

The government should without wasting further time; privatization has been preferred because it will benefit NEPA in particular in the following ways/ area:

  1. Private investors which will attract more of finance and customer to the enterprise.
  2. Privatization will assist NEPA in obtaining the necessary materials and equipment that are essential for the generating and transmission of electricity for power supply.
  3. It is expected that when the company is privatized, its labor strength will increase compared to its present labor force or strength. With proper implementation of the above recommendations are neglected and over looked, then it will be a miracle if the government succeeds and in any case they cannot be held responsible for poor returns or outright failure of the enterprises.

Privatization Of Government Owned Enterprises, A Strategy For Better Performance (A Case Study Of Power Holding Port Harcourt)


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Privatization Of Government Owned Enterprises, A Strategy For Better Performance (A Case Study Of Power Holding Port Harcourt)


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Frequently Asked Questions


What percentage of GDP is controlled by state-owned enterprises?

Despite the wave of privatization across developing markets in the 1980s and ’90s, state-owned enterprises continue to control vast swaths of national GDP: more than 50 percent in some African countries and up to 15 percent in Asia, Eastern Europe, and Latin America.

Can state-owned enterprises match the private sector’s performance standards?

Despite the obstacles, state-owned enterprises can match the private sector’s performance standards and even become world-class players. A clear mandate, an intense focus, and a workable talent strategy can bring quick results. Chief executives at these companies don’t have to wait for governments to take the lead.

How can state-owned enterprises achieve their social and financial goals?

Leading state-owned enterprises can openly proclaim their objectives and clarify the trade-offs between their financial and social goals when they negotiate a transparent mandate with the government and other stakeholders.

Do public sector enterprises perform better in tough times?

Nonetheless, our research and experience show that notwithstanding the constraints of the public-sector model and the tough economic times, these enterprises can significantly improve their performance.

What percentage of companies are state owned?

Enterprises are identified as state-owned enterprises if the state owns, directly or indirectly, over 50.01% of shares at the national or sub-national level. Using this, we find that more than 10% of the world’s largest firms are state-owned (204 firms).

How many enterprises are state-owned?

Enterprises are identified as state-owned enterprises if the state owns, directly or indirectly, over 50.01% of shares at the national or sub-national level. Using this, we find that more than 10% of the world’s largest firms are state-owned (204 firms). They come from 37 different countries and their joint sales amount to $3.6 trillion in 2011.

Are state-owned enterprises an enduring force in the global economy?

The motivations for state ownership can wax and wane over time, but state-owned enterprises (SOEs)1appear to be an enduring feature of the economic landscape and will remain an influential force globally for some years to come. As such, it is important to ensure that – whether held

How do you identify state-owned enterprises among top global firms?

To identify state-owned enterprises among top global firms we use firm-level ownership data and take into account both direct and indirect ownership links. Enterprises are identified as state-owned enterprises if the state owns, directly or indirectly, over 50.01% of shares at the national or sub-national level.

Can public sector companies match the performance of private sector companies?

Public-sector companies can match the performance of their private-sector counterparts and even become world-class players.

Are state-owned enterprises closing the gap with private-sector competitors?

Some state-owned enterprises in emerging markets are closing the gap with their private-sector competitors. Petronas, the state-owned energy company in Malaysia, for example, began an operational-excellence campaign focusing on improved technical capabilities and a more effective working culture at its plants.

Why do countries have state owned enterprises?

There are some common motivations behind state ownership, such as developing strategic sectors and boosting the national economy, as well as fiscal, political and social considerations. But how different are SOEs from private sector enterprises?

What are state owned enterprises (SOEs)?

Defining State Owned Enterprises (SOEs) SOEs are known by many names – government corporations, government business enterprises, government-linked companies, parastatals, public enterprises, public sector units or enterprises and so on. As well as the name, the definition of SOEs also often varies across countries.

Why establish a state-owned enterprise?

Applications to Professional Practice In developing countries, the duty and responsibility of governments are to establish SOEs that are effective in the provision of services and infrastructural developments. The financial performance of SOEs has been an increasing concern for

Do state-owned enterprises benefit from government subsidies and additional capital?

The phenomenon of state-owned enterprises which are still obtaining funding assistance from the government in the form of subsidies or additional capital sounds rationale, since the firm with such a large-scale state-owned enterprise needs to operate efficiently and is able to obtain greater market share. This research provides

Are state-owned enterprises an enduring force in the global economy?

The motivations for state ownership can wax and wane over time, but state-owned enterprises (SOEs)1appear to be an enduring feature of the economic landscape and will remain an influential force globally for some years to come. As such, it is important to ensure that – whether held

How can countries improve the performance of state-owned enterprises?

We make four main recommendations for how countries can improve the performance of state-owned enterprises: Governments should regularly review if an enterprise is still necessary and whether it delivers value for taxpayers’ money. For example, Germany conducts biennial reviews.

Does the public sector perform better than the private sector?

To say that the public sector can perform just as well as, and often better than, the private sector is not to argue that it does not need reform in many instances. The public sector can be equally blighted with problems of corruption at the higher levels of management.

Why is the government so obsessed with private enterprise?

It’s an ideological position that suits governing elites and has led, among other things, to a fire sale of public assets and the increasing privatization of what were once public goods and services. The magic of the market and the vigour of private enterprise will make the cream of cost-effectiveness and efficiency rise to the top.

Can state-owned enterprises match the private sector’s performance standards?

Despite the obstacles, state-owned enterprises can match the private sector’s performance standards and even become world-class players. A clear mandate, an intense focus, and a workable talent strategy can bring quick results. Chief executives at these companies don’t have to wait for governments to take the lead.

What are the challenges faced by public sector enterprises in India?

Low Capacity Utilisation: Most public sector enterprises set up in India during the plan period could not utilise their entire capacity which was created at high cost. In 1999-00, nearly 20% of such enterprises succeeded in utilising 55 to 75% of their capacity and another 25% operated below 50% of their capacity. 

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