The Problems And Prospects Of Privatization In The Nigerian Economy

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The Problems And Prospects Of Privatization In The Nigerian Economy

Abstract

This research work is intended to x-ray some of the unexamined fact and the problem and prospect of privatization in the Nigerian economy. Privatization as a reformatory programme has come to rest in the Nigeria economy.

One could say that privatization is a child of circumstance but it could be a circumstance itself if not well implement. This programme has worked well in some other countries though with some problems. The Nigeria environment has considerably militated against its smooth implementation.

This study is intended to evaluate the privatization exercise already on in Nigeria by drawing inference form already privatized company such as NITEL, African petroleum, Niger dock but more emphasizing and detailed study was conducted in NITEL.

The study will also help the researchers and management students have a basic knowledge of Nigeria political economic situation and efforts being advanced by the federal government to revive the economy.

Table of Contents

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

Chapter One

Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objectives of the Study
  • 1.4 Research Questions
  • 1.5 Research Hypotheses
  • 1.6 Significance of the Study
  • 1.7 Scope/Limitations of the Study
  • 1.8 Definition of Terms

Chapter Two

Review of Related Literature

  • 2.1 Introduction
  • 2.2 Conceptual Framework
  • 2.3 Theoretical Framework
  • 2.4 Empirical Review

Chapter Three

Research Methodology

  • 3.1 Introduction
  • 3.2 Research Design
  • 3.3 Population of the Study
  • 3.4 Sample and Sampling Technique
  • 3.5 Research Instrument and Instrumentation
  • 3.6 Validity of Instrument
  • 3.7 Reliability of Instrument
  • 3.8 Method of Data Collection
  • 3.9 Method of Data Analysis

Chapter Four

Data Presentation and Analysis

  • 4.1 Introduction
  • 4.2 Analysis of Demographic Data of Respondents
  • 4.3 Analysis of Psychographic Data
  • 4.4 Test of Hypotheses

Chapter Five

Summary, Conclusion and Recommendation

  • 5.1 Summary of Findings
  • 5.2 Conclusion
  • 5.3 Recommendations
  • References
  • Appendix

Chapter One

1.0 Introduction

The needs of a society stimulate the design of a programmed. In the programme, the missions and the objectives are clearly stated and all other thing required for its achievement of the programme are mapped out. This therefore suggests to the implementation of the programme that certain procedures need to be followed for the achievement of the peoples’ desire it is designed for.

The issue of privatization as a programme is relatively new to Nigeria. It is an old issue in other countries like Britain, USA, and French etc.

The concept of privatization crept into our vocabulary simultaneously with the economy crisis. The combination of stringent trade and exchange controls on the trend and over devaluation of the Nigerians on the other hand resulted in misallocation of resources, high incidence of capital flight and other problems which tended to undermined government control of the economy.

Indeed, matters tended to get worse with the persistence and determination of balance of payment problems. The erosion of national credit, the inability of most holders of import licenses to effective by utilizing them owning to the death of confiding lines and acute shortage of raw materials as well as consumer goods pushed the country’s economy to a large of collapse.

Here, in Nigeria, the emergence of privatization as a major public issues owning to the inefficiencies outlined above which as resulted to poor management of resources and consequently, general economic down turn could be as a result of Nigeria political system.

“ECONOMY IS A FUNCTION OF POLITICS”

Immediately often her independence, Nigeria became a sovereign nation. Independent in political and economic considerations, coupled with the windfall gains from the Crude Oil and the emergence of political tissues among the various ethnic groups geared up by tribalism, nepotism, favouritism and other extinct vices lead to the various coup and counter coup in the political area.

Consequently, the constitution was abandoned decrees by various Military Government became the order of the day.

1.1 Background to the Study

In Nigerian, state participation in public enterprises dates back to the colonial era. During this period, the colonial government was faced with the task of providing infrastructural facilities such as railway, road, bridge, water, electricity and port partly because there were dearth of indigenous companies with the required resources as well as inadequate capacity of foreign trading companies to embark on those capital intensive projects (Iheme 1997) as cited in (Igbuzor 2003).

The trend of state participation continued such that in the 1960s and 1970s the Nigerian government established a large number of public enterprises in order to command strategic and accelerate the pace of development, (Atuma 2006). As Olisa (1983) puts it, “Beginning as a trickle in the period between the end of the second world war and Nigerian’s attainment of independency, the creation of public corporations has risen to flood level since independence and has maintained a steady growth.

A survey conducted by the technical committee on privatization and commercialization reveals that parastatals owned by the federal government totaled about 900 in 1990 with a total book value of investment worth about N36 billion (Sanusi, 2000). The investments were in the areas of banking and insurance, oil exploration refinery and marketing, cement, paper mills, steel mills, hotels and tourism. Others were fertilizer plants, motor assembly plants and sugar companies. Public enterprises are statutory bodies operating services of an economic or social character or both on behalf of government, (Ezeani, 2006). Their primary purpose is to stimulate and accelerate national economic development under conditions of capital scarcity and structural defects in private business organizations.

There are also basic considerations arising from the dangers of leaving vital sectors of the national economy to the whims of the private sector often under the direct and remote control of foreign large scale industrial combines, Nigerian second National Development Plan (1970 – 74:75).

Hanson (1965) noted that, the establishment of public enterprises is premised on what he considered as obstacles to economic development in the post independence states, similarly, Ugorji (1995:54) observes that public enterprises are also established for political reasons. Many government undertakings are used to provide jobs for constituents, political allies and friends. The location of public enterprises and distribution of government employment have further been defended on the need to maintain federal character and promote national integration.

However, after a long period of growing state interventions in the Nigerian economy through public enterprises. Their performance has become a subject of national debate and hence a matter of crucial policy agenda of the governments of this country for the past two decades.

According to Ezeani (1995:113), public enterprises in Nigerian have not been able to accomplish the objectives for which they were established rather, it can be argue that they have become a vehicle for corruption, nepotism, misappropriation of public funds and indeed an instrument for furthering political and material interests of those in government.

Similarly, Obadan (2008:8) attribute it to unbridled state expansion which had led to the ineffectiveness in the provision of goods and services such as failure to meet intended objectives and diversion of benefits to elite groups. Nnoli (1987:7) blames it on the corrupt practices of public officers.

The problems of performance of Nigerian public enterprises were further complicated down turn in socio-economic development in the country due to global economic recession. Thus, Nigerians precarious fiscal and monetary posture could no longer sustain the requirements of its public sector enterprises, particular, since they performed below expectations in their return on investments and quality of services, Nnoli (1987).

In this view, Nigerian was strongly advice by worldwide lending agencies, particularly the IMF, World Bank to divest their public enterprises as a condition for economic assistance. With the intensified push for economic liberalization, Nigeria was told that privatization as an economic reform would help cut public sector inefficiency, waste, provide greater scope to the private sector, attract more investments and bring in new technologies hence, revive economic growth. Based on the advice of the World Bank, IMF, which was welcomed by Nigerian government under the administration of former head of state, General Ibrahim Badamosi Babarigida the privatization option was initiated, (Federal Republic of Nigeria, 1986).

Despite the fact that the privatization option was initiated, Public enterprise in Nigeria has been a thing of National concern and debates.

It is on this backdrop that this paper examines the problems of privatization of public enterprises in Nigerian, with a specific regard to Nigerian Coal Corporation.

1.2 Statement of the Problem

Since the last two decades, Nigeria has embarked upon a policy of privatization of its public enterprises and government corporations. Both the framework and the processes of implementing this policy have been under public glare and criticisms quite of recent, (Ozor, 2004).

This wide public outcry has been jettisoned as privatization is seen as the available alternative to salvage the ailing economy, as the inefficiency, low productive, lack of management skills and dilapidated equipment experienced at the Nigerian Coal Corporation would be solved when privatized.

Despite the benefits of privatization some social critics see it as a sell out of our economy to some few rich and privileged members of the society. Thompson (1989) noted that if privatization contributes to improved efficiency and financial performance, it negatively affects the distribution of wealth, income and political power.

Opponents of privatization argued that it will lead to inevitable rise in unemployment levels due to lay-offs occasioned by down sizing, unrealistic pricing of the enterprises which are then sold to favoured bidders at ridiculously low prices, monopolization of choice enterprises by some rich men and domination of local economics by foreign interests. (Ayozie and Latimro, 2006). One of the serious problems of privatization of Nigerian Public enterprises is lack of transparency in implementing the programme. This has been a teething problem confronting the Nigerian Coal Corporation. In other situation, privatization of ailing public enterprises without regard to laid down policy and economic reality on ground is a frustration to the privatization programme in Nigeria.

Privatization has become an acceptable paradigm in political economy of states (Ugorji, 1995:543). However, advocates of privatization in Nigeria argue that the deplorable states of these public enterprises and their negative impacts on the health of national economy make privatization so critical and imperative (Atuma, 2006).
Basically, organized labour seeks to know what happens to workers when the government privatizes. The employment impacts of privatization have also triggered the fears of the workforce, including the managers of public sector enterprises being privatized, the government as well as the buyers of the state owned enterprises.

The fundamental questions raised by this study are;

  1. What are the circumstances that led to the problems of privatization of Nigerian Coal Corporation.
  2. Does privatization of Nigerian coal corporation affects it positively or negatively
  3. Are there measures or means that can help in solving the problems of privatization of Nigerian Coal Corporation.

1.3 Objectives of the Study

The broad objective of this study is to investigate the problems of privatization of Nigerian Coal Corporation. The specific objectives of the study include;

  1. To explain the circumstances that led to the privatization of Nigerian Coal Corporation.
  2. To find out whether privatization of Nigerian Coal Corporation affects it positively or negatively.
  3. To ascertain how the circumstances that led to privatization of Nigerian Coal Corporation can be solved.
  4. To make recommendation based on the findings.

1.4 Significance of the Study

The privatization programme has become a major policy instrument which in addition with other instruments was expected to contribute to the overall attainment of general macroeconomic goals, (Adeyemo, 2005). It is obvious that the privatization of Nigerian Coal Corporation would not be successful if it is not properly guided. The significance of this study is very high and has empirical, theoretical and practical significance.

The empirical significance of this research work is to look into how the Nigerian Coal Corporation was privatized. In addition, the study will elicit the problems encountered during the privatization and provide measures to embark or to ensure effective privatization in Nigerian Coal Corporation. The study is expected to expose the reasons why the privatization policy has not been fully implemented in Nigeria.

Theoretically, this work is expected to achieve the objective of answering the research questions as stated in the statement of problem which we believe it shall. This work will only synchronize with the existing literature but also serves as a convenient starting point for further inquiry in privatization programme in Nigeria.

The practical significance of the study is to adhere strictly to effective privatization programme in Nigerian especially in Nigerian Coal Corporation.

If privatization must of necessity 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 in order to increase the efficiency and contribution to development of both sectors. (Shirley, 1998).

The study will also enhance the knowledge of those responsible for the formulation and implementation of privatization programme/policy. It will equally add to the exiting literature on privatization.

1.5 Scope and Limitations of the Study

The study will specifically examine the problems of privatization of Nigerian public enterprises with particular reference to Nigerian Coal Corporation. The spatial and geographical coverage of the study shall be Nigerian Coal Corporation.

However, in carrying out this research, the researcher encountered problem such as the uncooperative attitude of the staff of the Nigerian Coal Corporation in responding as well as releasing data to the researcher due to strict adherence to oath of “secrecy”. This contributed to low returning of the questionnaires.

In view of the above, some efforts were made by the researcher to surmount these constraints they include the following; the guide by the supervisor in the drafting of the interview questions after the first time that the researcher was sent to the field, the researcher revisited some offices in the subsequent days and those respondents who disagreed initially, responded. The researcher also tried to convince the respondents that their responses will be treated with great deal of confidentiality.

Chapter Five

Conclusion and Recommendation

5.1 Conclusion

In order to accomplish any difficult tasks, recognition of the problem to be solves is one thing, providing a workable solution is quite another. However, a clear conception of the problem is a necessary pre-requisite. In Nigeria, the policy makers are yet to properly conceive the problems of public enterprises especially in view of their origin and purpose of their establishment. The confusion surrounding the meaning of privatization and commercialization in Nigeria is traceable to the confused objectives and expectations of the enterprises which resulted to low output in the measurement of their performance.

The policy on privatization does not have Nigerian background. It is a policy option forced down the threat of Nigeria by the international monetary fund, World Bank and United States agency for International Development (USAID). The alien nature of privatization and commercialization policy is seen in lack of proper conceptualization and the inability of Nigerian policy makers to carry out an enduring and properly defined programme. The public corporations only witnessed a reorganization of their management and a drastic reduction of government subventions to them without receiving the autonomy which would have permitted them to determine their policies within the scope of their objectives.

It was observed that the alleged causes of inefficiency were magnified while the fundamental causes were neglected. Based on this, the purpose of privatization of pubic corporations was merely to relieve the Nigerian government of its financial commitment to the corporations.

The problems of Nigerian Coal Corporation are a complex one. This complexity is traceable partly to the colonial origin and partly on the general infrastructural condition of the nation. The Nigerian coal corporation is a product of colonial government meant to serve colonial purposes. It depends on foreign firms for supply of machineries, spare parts, equipment and also depends on the foreign market for the exports of its products. A situation where the railways are not functioning and the general condition of Nigerian roads is deplorable, the corporation cannot transport its bulky products out of the mines to places where they may be needed.

It was observed that the main reason behind the privatization of public enterprises is embedded in self a group interest of the policy makers; while privatization as an economic concept only serves as an enabling factor. The pattern which the sale of public enterprises is taking contradicts the objectives of the policy. Rather than the general interest of the nation being the guiding factor, privatization is being undertaken to the interest of the few dominant class, while the rural dwellers, Academics and workers have little or no access to the shares of privatized companies.

5.2 Recommendations

One of the main problems facing any reform is the strong vested interest that is benefited from the pre-existing organizational structure. If one recommends a total withdrawal of the privatization process, it will lead to supporting the status quo in which public enterprises are used by politicians and the bureaucrats as instruments for personal aggrandizement. On the other hand, if one supports the wholesale privatization of all public enterprises, it is as good as mortgaging the future of the nation. In this regard, the following recommendations are suggested.

The federal government should try as much as possible to liberate the economy from neo-colonial domination and exploitation. And this could be done through a radical transformation of existing economic policy.

The performance of public enterprises should not be measured in terms of economic basis since the purpose of establishing them was not economically determined. They were specifically established to render essential services to the people at affordable prices. Therefore, their performance should be measured on the basis of effectiveness with which they render those services.

There is the need for government to take a second thought on the idea of wholesale privatization and continuously select those enterprises to be privatized according to the significance of their services to people’s life. In this regard, those enterprises that has no direct bearing on the lives of the people could be sold to the pubic through open bidding, while making sure that purchases are equally spread among the citizens irrespective of profession, state of origin or educational qualification. The interest of the people generally, should guide the implementation of the privatization policy and not the interest of a few. In this regard, a transparent public debates should be held before privatizing any particular enterprises to enable the people to fully participate and determine the merits and demerits of privatization to the nation.

There is the need to overhaul the political structures and institutions that alienate themselves from the people. This will go a long way to improve the political consciousness of the people.

Any enterprises or firm deemed necessary for privatization should be given a first lift in terms of equipment machines and infrastructure. It will go a long way in maintaining optimum capacity in terms of greater output and return on investment.

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Frequently Asked Questions

What is the primary goal of privatization in Nigeria?

The primary goal of the privatization in Nigeria is to reduce the dominance of the public sector in the economy and allow the private sector to play its proper role as the leading engine of growth. Nigeria established the Technical Committee on Privatization of Public Companies

What is Privatisation of Public Enterprises?

Although privatization is not defined in the Public Enterprises (Privatisation and Commercialisation) Act [ 2] , we can assume that it is deemed to have the same meaning. Privatization became the forefront as a major component of Nigeria’s economic reform process.

What happened to Nigeria’s economy?

The establishment of a private sector driven market became imperative to ensure the provision of efficient and quality services, improve infrastructure, improve local manpower development while reducing the amount of revenue the Government spends for public services

Does privatization work in developing countries?

Privatization is a key component of the reform process of structures and economies in the globalized world today. Developing countries have embarked on extensive development programmes some recorded as successful and some a failure. Despite the impressive level of privatization in Africa, the empirical knowledge of the program is limited. 

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