Problems And Prospects Of Privatized Public Corporations In Nigeria

Project and Seminar material for Public Administration

Problems And Prospects Of Privatized Public Corporations In Nigeria


Abstract


One of the problems of public enterprises the world over, but more particularly in developing countries is inefficiency leading to waste, slow growth and in ordinance dependence on government support even their activities are apparently profitable ones. As a way of improving performance of public enterprise through which profit orientation will be the motive of these enterprises. In this study, therefore, conscious attempts were made to look critically into problems and prospects of privatization of PHCN and the research work is divided into five chapters.

Chapter one is the introduction, background of the study, statement of the problems, objectives, significant of the study, research hypothesis and scope of the study and definition of terms.

Chapter two deals with review of related literature such as the concepts of privatization, origin of public enterprises and evolution of privatization in these problems of privatization PHCN.

The chapter three of the study places emphasis on the methodology used in carrying out the research such as the population, sample size and sampling procedure, research instrument as well as method of data collection and analysis.

Chapter four of the study delves into presentation, analysis and interpretation of data, descriptive and statistical methods such as Chi-square (X2) was employed on the causes of analyzing the data collected.

Conclusively, chapter five comprises of summary of finding, conclusion and recommendation where it was concluded that for effectiveness of privatization of NEPA, it needs to be handled by experts devoices of statements, as this would mean creating new capitalist or enriching the existing ones the more at the expense of large proportion of the public.


Table of Contents


  • Title page
  • Declaration
  • Approval page
  • 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 Hypothesis
  • 1.6 Significance of Study
  • 1.8 Scope and Limitation of the Study
  • 1.9 Definition of Terms

Chapter Two

Literature Review

  • 2.0 Introduction
  • 2.1 Historical Background of Privatization
  • 2.2 Objectives of Privatization in Nigeria
  • 2.3 Policies of Privatization and Commercialization in Nigeria
  • 2.4 Reasons for Privatization and Commercialization
  • 2.5 Problems of Privatization and Commercialization in Nigeria
  • 2.6 Theoretical Framework
  • 2.7 The Prospects of Privatization and Commercialization in Nigeria

Chapter Three

Research Methodology

  • 3.1 Research Design
  • 3.2 Research Population and Sample Size
  • 3.3 Instrument for Data Collection
  • 3.4 Justification of Method Used
  • 3.5 Method of Data Analysis
  • 3.6 Justification of Instrument Used

Chapter Four

Presentation and Data Analysis

  • 4.0 Introduction
  • 4.2 Data Presentation and Analysis
  • 4.3 Summary of Findings
  • 4.4 Proof of Hypothesis

Chapter Five

Summary, Conclusion and Recommendations

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendations
  • Bibliography
  • Appendix I
  • Appendix II

Chapter One


Introduction

1.1 Background of the Study

Privatization of state-owned enterprises (SOEs) has become a key component of the structural reform process and globalization strategy in many economies. Several developing and transition economies have embarked on extensive privatization and commercialization programmes in the last one and a half decades or so, as a means of fostering economic growth, attaining macroeconomic stability, and reducing public sector borrowing requirements arising from corruption, subsidies and subventions to unprofitable SOEs. By the end of 1996, all but five countries in Africa had divested some public enterprises within the framework of macroeconomic reform and liberalization (White and Bhatia, 1998).

In line with the trend worldwide, the spate of empirical works on privatization has also increased, albeit with a microeconomic orientation that emphasizes efficiency gains (La Porta and López-de-Silanes, 1997; D’Souza and Megginson, 1999; Boubakri and Cosset, 1998; Dewenter and Malatesta, 2001). Yet despite the upsurge in research, our empirical knowledge of the privatization programme in Africa is limited. Aside from theoretical predictions, not much is known about the process and outcome of privatization exercises in Africa in spite of the impressive level of activism in its implementation.

Current research is yet to provide useful insights into the peculiar circumstances of Africa, such as the presence of embryonic financial markets and weak regulatory institutions and the manner in which they influence the pace and outcome of privatization efforts. Most objective observers agree, however, that the high expectations of the 1980s about the “magical power” of privatization bailing Africa out of its quagmire remain unrealized (Adam et al., 1992; World Bank, 1995; Ariyo and Jerome, 1999; Jerome, 2005).

As in most developing countries, Nigeria until recently witnessed the growing involvement of the state in economic activities. The expansion of SOEs into diverse economic activities was viewed as an important strategy for fostering rapid economic growth and development. This view was reinforced by massive foreign exchange earnings from crude oil, which fuelled unbridled Federal Government of Nigeria (FGN) investment in public enterprises. Unfortunately, most of the enterprises were poorly conceived and economically inefficient. They accumulated huge financial losses and absorbed a disproportionate share of domestic credit. By l985, they had become an unsustainable burden on the budget.

With the adoption of the structural adjustment programme (SAP) in 1986, privatization of public enterprises came to the forefront as a major component of Nigeria’s economic reform process at the behest of the World Bank and other international organizations


1.2 Statement of the Problem

The first problem recorded with the privatization programme in Nigeria was lack of relevant fundamental economic environment needed before taking off. Some public enterprises that were not ripe enough in terms of competitiveness were privatized. Consideration was not given to capable buyers but to political cronies who could not successfully manage their new enterprises. This led to closure of some of these privatized firms. Lack of transparency in the entire sales has shown up its negative repercaution.

It is reported that privatized firms in Nigeria are refusing monitoring by Bureau of Public Enterprises. In this wise there has been no substantial studies on the operational activities of the privatized firms. The expected difference in the perception of efficiency after privatization could not be proved. In all, it is therefore difficult to identify the performing and non-performing privatized firms.

Among the pertinent issues to be addressed are: What is the extent and pattern of privatization and commercialization? What have been the results of privatization in Nigeria? Has privatization and commercialization improved enterprise performance as anticipated? Finally, what policy lessons are to be learned from the privatization experience so far? These are the issues that come into focus in the study.


1.3 Objectives of the Study

The objectives of the study are:

  1. To assess the effort of privatization in Nigeria, by examining the antecedent, pattern, volume and status of privatization undertaken so far.
  2. Find out the problems and prospects of the implementation of the privatization programme on public enterprises.
  3. Find out to what extend the programme can be able to get rid of ineffectiveness and inefficiency of public enterprises.
  4. Find out its possibilities of fostering development on the Nigeria economy.
  5. Find out if will improve the welfare and standard of public workers.

1.4 Research Questions

  1. What are the antecedent, pattern, volume and status of privatization in Nigeria?
  2. What are the problems and prospects of implementation of privatization programmes in Nigeria?
  3. To what extent can privatization programme help to get rid of ineffectiveness and inefficiency of public enterprises?
  4. What are the possibilities of fostering development in Nigerian economy?
  5. Can privatization improve the welfare and standard of public workers?

1.5 Research Hypothesis

The following hypotheses were made

Ho1: Privatization of Public Enterprises has no significant effect on Nigeria economy.

Hi1: Privatization of Public Enterprises has significant impact on Nigeria economy.


1.6 Significance of Study

Privatization has its expected benefits which prompted its emergence all over the world. The success level of the programme or failure level depends on the procedure employed and sincerity of purpose attached from country to country. Therefore the following are the reasons importance of this study.

When completed this study should be a good partner to the privatized enterprises that will be used for performance analysis. It will provide a mirror to the enterprises from where they can view themselves, the way we see them from outside.

The reports and recommendations in this study should serve as evidences of findings and suggestions to the government before privatizing and commercializing other public enterprises that are yet to be privatized or those partly privatized that will soon be fully privatized.

It is expected that BPE will be interested in this study as it can provide some guidelines into a better way of handling the programme. BPE is expected to borrow a leaf from those countries that successfully implemented the programme and got candid positive results.

Finally the project will be of immense importance to the general public either for research work or just to increase their knowledge and create more awareness on the concept of privatization and commercialization programme as well as the problems and solution to the problems of Nigeria public Nigeria.


1.7 Scope and Limitation of the Study

This study intends to cover assess the effort of privatization and commercialization exercise on public enterprises in Nigeria. Also the work will be limited to Power Holding Company of Nigeria Plc. It will also measure the effect of the privatization on the national income, government fiscal condition and capital market.

To undertake a study of this nature is not easy because it is a wide field of study and thus has various limitation/problem.

The first limitation is for the success of any research work depends on availability of fund. The fund is needed for buying of materials, browsing etc.

In the case of primary data, the respondent may not be granted the audience for interview another limitation is high cost place or more current information on the net. A long the line, the administrative bottleneck of the organization may jeopardize the effort of the researcher in union case the management would refuse to disclose vital information as a matter of policy.


1.8 Definition of Terms

Commercialization:

Transferring of Government control of an enterprise to a new management for the purpose of cost effectiveness.

Management Contract:

Contracting of a government firm to private firm for management purpose.

Globalization:

Cross boarder operations of economic activities, production, investment, financing, technology utilization and marketing.

Deregulation:

Elimination or substantially reducing the regulation/ control of price and entry into domestic business activities.

Liberalization:

Freeing the economic activities in order to provide a conducive economic and business climate necessary for continuous growth.

Shares:

Part as portion of target amount which is divided among general or among people or to which many people contribute.

Share Holders:

Owners of shares in Business Company.


Chapter Five


Summary, Conclusion and Recommendations

5.1 Summary

The project is in five chapters. Chapter one (1) is the general introduction on which includes the statement of the problem, scope, objectives and significance of the study, hypothesis, operational definition historical background of the study.

Chapter two (2) examines the related literatures. It looks into privatization and commercialization in Nigeria, Purpose of establishing public enterprises, privatization and commercialization as instrument for efficiency in public enterprises in Nigeria, also the assessment of for privatization and commercialization as an instrument for efficiency in public sector in Nigeria with conclusion.

Chapter three (3) summarizes the whole work conclusions where made from the deductions of the work. Some recommendations were given for the possible solutions to the problem of public enterprises in Nigeria.


5.2 Conclusion

The primary aim of this project is to assess the effort of privatization and commercialization the (journey so far) on the Nigerian economy.

It was discovered that privatization is not the solution to the problems of public enterprises in Nigeria. The imperialist advocate capitalist privatization because they work for the victory of capitalist ideology. From their point of view privatization will create a so called middle class, which is an ally of imperialism. Another aim of the imperialist is to acquire for themselves some of the enterprises to be sold or leased. One of the advantages of the imperialism is that it is easier to dictate imperialist policies to a country the more command imperialist investors have over economic policy.

Commercialization on the other hand will not automatically make public enterprises efficient and effective. This is simply because corporate corruption cannot be tackled by mere sanctimonious appeal to the conscience of executives or exhortation about ethics of business.

We can conclude in a few words. Even Michael Ani as minister of finance then, complained in one of his budget briefings that inspite of all the incentives given to the private sectors in Nigeria, capacity utilization in industry remained low while prices went over upward. The meaning of this, he rightly said, was that the private sector was merely squeezing consumers for profit. Inspite of privatization, deregulation and the rest of SAP, the economy is still in stagnation, inflation rages, export have refused to boom as was expected by false prophets, and indebtedness grows worse, however, the vultures of Nigeria see privatization as the panacea.


5.3 Recommendations

Arising from my conclusion, the researcher recommended the following;

  1. The federal government should try and understand the argument about efficiency. The efficiency argument uses the financial profitability criterion, but the enterprises were not established for profits. They were established for development purposes
  2. The federal government should go into the managerial details of these enterprises to (see) why they make losses. Some causes of loss may be inadequate capitalization, state intervention in price policy, undisciplined management and inefficient employment policy. Each such cause can be remedied without the enterprise being private.
  3. The state enterprise can be commercialized without being privatized. Evidence available is conclusive that enterprises in Nigeria that were even partially commercialized produced much more profit after a short time than was anticipated.
  4. The federal government should know that if a government enterprise is privatized, the worker become large slave in an enterprise they do not own. That is slavery, not freedom. If all workers work in an enterprise which they participate equally with other people in owning, this is freedom from slavery. The capitalist system is precisely one in which the master i.e. the owner’s of the enterprise, are free while the workers are slaves.
  5. An enterprise may be damaged by an operational setup, which is excessively bureaucratic. In that case, there are several managerial solutions, including some kinds of privatization in which I am recommending.
  6. One solution is to commercialize the enterprise and set up a managerial framework and managerial procedures that are less bureaucratic. The enterprise remains government owned.
  7. Another solution is to hire private managing firm to managed the enterprise. The managing firm shares in the profits, but the enterprise remains government owned.
  8. Yet another solution is to lease the enterprise to a private operator for long period. The enterprise in this case is not sold, it is only leased.
  9. Another solution is to adopt a joint public private ownership by admitting private capitalist investors who will be more interested in profits than government operators. This provision is made to prohibit the development of capitalist greed.

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