The Role Of Private Companies To The Development Of Nigeria Economy (A Case Study Of Nico Insurances Company)

Project and Seminar Material for Business Administration and Management BAM

Chapter One

1.0 Introduction of the Study

1.1 Background to the Study

In the recent years, privatizations of public enterprises have preoccupied policy analysis in the search for solution to improving the performance of state owned enterprises (SOES).

Several developing countries extensive most African countries have embarked upon extensive privatization programmed within the frame work of micro economic re-form and liberalization, this revising the earlier strategy using public private enterprises as the engine of economic development in Nigeria in consonance with the Keynes can theoretical exposition on large scale involvement of the public sector in economic development programmed by making extensive use of public enterprises (PE) for resources mobilization and allocation particularly with the social services and utilizes sector with the wide fall again from crude oil during the commodity boom of the 1970’s the economic activities in Nigeria expanded scientifically beyond the orthodox domakin of social services and utilities into agricultural banking and finance, manufacturing mining, commerce e.g.

Within this expansion by the 1980’s an increasing dominant public enterprises sector accounting for 50% of the gross domestic product (GDP) and 60% of the modern employment has emerged in Nigeria by this time also the number of public enterprises sector (P.E.S) as the federal level alone had research about 600 enterprises and some 900 smaller one at the state and the local government level. The total investment on this P.E. S at the federal level is about #36.456 billion as the technical committee on privatization of investment estimated these public utilities produces hard core infrastructures such as electricity, water, telecommunication e.g. accounting for about 3.4% in 1993. For the maintenance and sustenance of the economic activities of these public enterprises.

The Nigeria government has usually expanded about 40.7% and 30% of its fixed capital and recurrent expenditure respectively on the (S.A.P) period incidentally for as long as Nigeria wide fall gains from crude’s oil sale lasted, nobody complains about the inefficiencies and inadequacy of public enterprises with their associates financial waste even with the expansion of economic activities.

The first attempt to move towards a competitive market system was in 1986 with the introduction of structural adjustment progammmed and with the privatization decree no25 1988.

The federal government outlined the objectives of privatization to include improvement of the efficiency and reliability of the operation of the public companies reduction of their dependence on the national treasury for operation promotion of the share ownership by Nigeria citizen in productive investments which hither to were owned wholly or partially by the federal government and policy to broken and deepen the Nigeria capital market at the end of the programmed in 1992 a total of 89 companies were privatization.

Those privatized companies and financial institution include commercial bank, merchant bank, sea travel, motor assembly, cement hotels and transportation e.g. the proceed from their exercise amounted to 4.66 billion, various methods were used to privatized the enterprises for example some of the companies were sold through public shares using a scheme that sought to ensure equitable spread of ownership among various social classes an ethnical and regional groups. An elaborated formula restricted the amount of equity that any industrial; or regional could purchase and allocated a proportion of shares to all state of the federation as well as employee.

The government encouraged small investor to participate in the scheme by allocating the bulk of the share to people and institution the concept of guided privatization has been introduced as an approach to the second phrase of the privatization exercise guided privatization according to the government is a careful planned and systemically implemented programmed of government with draw all from the control of business enterprises which can be more effectively and efficiency ruin by private operation as such corporation. In the year 1998 by early October that year the bureau for public enterprises invited local and international investors to take part in about 37 state owned companies stated for privatization include the Nigeria airways, publishing firms, Nigeria television communication ltd (NITEL) national electric power authorities (NEPA) now power holding company (PHCN) the rolling mill news printing paper manufacturing company and Nigeria television authority (NTA) under the new programmed the government planned to sell 40% of it equity in the enterprises to foreign investors through international open tenders, another 20% would go to Nigeria investors through public share programmed of privatization is the anticipated improvement in the performance of affected enterprises.

It also lead to an increase in market competition. However there institutional constraints that may hinder the realization of fiscal benefit from privatization it is also has income redistribution effect.

1.2 Statement of the Problems

Despite the huge investment in public enterprises in Nigeria their services do not meet the demands and aspiration of the populace. It is estimated that successful Nigeria government have invested up to 800 billion naira in government owned enterprises annual returns on this huge investment have being well below 10%. These inefficiencies and in many case huge losses are charged against the public treasury with the dealing revenue and escalating demand for effective and affordable social service the general public has stepped up his yearning for state own enterprises to become more efficient.

Furthermore, state enterprises suffer from fundamental problem of defective capital structure resulting in heavy dependency or burden on national treasury most public enterprises are characterized with excessive bureaucratize control and bottlenecks. Finally, other problem includes mis-management of fund blatant corruption these short coming take a heavy toll on the national economy.

1.3 The Objectives of the Study

The main object of this study is to:-

Assert the cost implication and benefit of privatization programmer of the public enterprises on the economy.
Another objective is to know if through privatization, financial resources would be mobilized through sale and to reduce public debts.
Also to examine core investors and procedure for their identification and impact on the economy.
Lastly, to know if privatization would attract new investors, particularly, foreign investors including new technologies and management skill.

1.4 Significance of the Study

Privatization policy came into effect with the advent of democracy, NICON insurance company was therefore privatized withy the aim of enhancing efficiency and good service delivery to the general public.

The main significant of the study is to give full expression 8and details of privatizating insurance company (NICON in particular). The significant are numerous in number among which are:-

Bringing insurance services closer to the society with the extensive network of offices and agents across the country.
It enhances transparency and enable. The investing public to participate in the transaction of the company
The general public and other financial institution would be able to note that nicon remains the only insurance company in Nigeria today where the federal government has equity participation, thereby enhancing the much needed strength and credibility to handle any financial risk.

1.5 Scope of the Study

The area of the study will limited to the relevance of private companies to the development of Nigeria economy between the periods of 1987 to 2007. the importance of this period is due to the fact that the factors that influence infrastructural development characterized the period.

1.6 Limitations and Constraints of the Study

The study will be limited to the relevance of private companies to the development of Nigeria economy as a result of limited resources with respect to cost of researching and availability of data and time.

Another problem is as a result of poor response from the staff of the organization some staff will not give you a full detail about their company for security reasons. Financial constraint was another problems encountered in terms of cost of transportation to various point for data collection and keeping appointments.

1.7 Plan of the Study

The project work is arranged in the following order:-

Chapter one comprises the introduction of the study, background of the study, statement of the problem, objectives of the study, significance of the study, scope of the study, limitation and constraints of the study, definition of terms, plan of the study.
Chapter two reviews related literature on the topic privatization conception definition issue, objective of private company, performance of public enterprises since privatization or private company. achievement of privatization programme.
Chapter three contain research methodology, research design, nature and source of data, research instruments employed for data, population and sample size, sampling procedure employed.
Chapter four contains data presentation and analysis
While chapter five deals with summary of the findings, recommendation, conclusion references and questionnaire.

Chapter Five

5.o Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings

The objectives of this study as earlier stated are to examine the relevance of private companies is to the development of Nigeria economy. Thus, there is the need to develop our public enterprises in order to be able to complete favorable with the companies around the world findings move also revealed that privatization programmed.

It will bring efficiency and effectiveness to the service being revealed by privatized companies and there improves gradually and increased customers patronage. Also from the study, the public enterprises as a result of privatization will increase the individual pay-out to the shareholders, it will also result to increase in price of shares which in turn lead to optimization of capital market activities that is stock exchange market.

5.2 Conclusions

Privatization is essential and necessary in order to improve the quality of services in the public enterprises in Nigeria.

Privatization could lead to more efficient managements of the enterprises concerned provide alternative investments outlets for the individuals and make the government more liquid privatization of public enterprises as machine for economic growth is a conventional breakthrough because it has succeeded to some extent in transforming and giving enterprises a network in carrying out their activities.

5.3 Recommendations

Public enterprises are essential sources to the people as well as efficient mechanisms of administration. These enterprises provide a set of activities that touches millions of lives daily and this sector continued to be one of the word vest employers of labour. In order to improve effectiveness and productivity in the enterprises to meet up to the standard and complete with the foreign enterprises effectively to promote efficiency and profitability public enterprises should be allowed to act independently on their own in as long as government continues to interfere with the activities and administration of the enterprises efficiency and high productivity will continue to be unaccomplished.

For privatization to be achieved, government should be established a machinery for regulating the conduct of business properly and to monitor the activities of PES privatization has to be viewed as one of the process of economics reform and should be implemented with complementary macro economics policy achieve desire goals such policies relate to economy and financial liberation and competition. Furthermore, as policies of unrestricted privatization could end up being counter productive, the privatization of PES has to be carried out on a pragmatic, both enterprises by enterprises bases.

To tackle the problem of corruption which has always served as headache of public enterprises, attractive salary and remuneration structure should be giving attention. If well implemented workers would remain committed to the growth and progress of enterprises thereby enhance economic growth and development.

On a final note the success of the economy is as a result of several years of social upheaval, hard work and determination in restructuring our economy, government can only provides guideline directories as well as institution setting of the economy. The rest lie with us (Nigerian) in the effective implementation and executive of government policies and programmed.

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