EFFECTS OF PRIVATIZATION AND COMMERCIALIZATION ON NIGERIA ECONOMY

CHAPTER ONE

INTRODUCTION

1.0 BACKGROUND OF THE STUDY

The inefficient utilization of resources and financial mismanagement of most of the public enterprises over the years has resulted in a very weak balance sheet, excessive debt and in most cases negative network.

Furthermore, the fact that this indolent performance of the state in the administration of public business enterprises creates a solution in which national fund that would have been better spent to guarantee new economic activity and employment opportunities for the army of unemployed is being used to subsidize deadwood that would neither grow nor change.

Public enterprises are enterprises that are controlled by the state, they are non-profit oriented enterprise.

The history of state participation in business enterprises was not choice but by patrimony. To buttress this fact, origin of state participation business can be grouped under the following four categories:

The first category to those which is conscious with the practice in their country. The British administrators kept the colonial public sector activities that are traditionally held by the British government. To this category belongs the utility services industry, health, education, water, electricity, port oil, air and sea transportation as well as the marketing of agricultural product through marketing boards. In the wake of political independence, these state owned services are automatically remained by the indigenous public sector. The second category of business are that preciously controlled entrenched foreign, private sector which manifestly controlled by commanding heights. Three of the main factors of production via: management, entrepreneurship and capital. A situation which was compounded by the fact that the distributive trade was also very largely in the hand of the foreign-private sector. After independence it was felt that to allow the means of production and distribution to be controlled by the expatriates, community would not only make nonsense of the newly acquired independence but would also subjugate the sovereignty of the country to neo-colonialism.

The participation of the states in enterprises in Nigeria dates back to the colonial era. The task of providing infrastructural facilities such as railway, road, bridges, water, electricity and port facilities fell on the colonial government due to the absence of indigenous companies with the required capital as well as the inability or unwillingness of foreign trading companies to embark on this capital intensive projects. This involvement was expended and consolidated by the colonial welfare development plan (1946-1956) that was formulated when the labor party came to power in the United Kingdom. This trend continued after independence such that by 1999, it was estimated that successful Nigerian governments has invested up to 800 billion naira in public owned enterprises.

The Privatization and Commercialization net of the 1988 and the Bureau of Public Enterprises Net of 1993 defined privatization as the relinquishment of part or all of the equity and other interests held by the federal government or any of its agencies in enterprises whether wholly or partly owned by the federal government. Although privatization is not public enterprises (privatization and commercialization) act of 1999, we can assure that it is deemed to have the same meaning.

However the business enterprises came into participation in business enterprises such as control and ownership of such enterprises can be supported on the following grounds, these includes:

As a means of protecting the consumer against monopoly

1.        Where it was clear, as with airlines that the industry for many years might have to be subsidized by the state.

2.        Where an industry was clearly technology inefficient and where the private owners appearance to be unwilling or incapable of improving it.

3.        Where because of economics of scale, a service could be provided more efficiently nationally than locally as with electricity.

However, the aforementioned public enterprises have been subjected to criticisms, one to poor management and inefficient utilization of resources and mostly regard to a dead wood that will neither grow nor change. It was these construct criticism levied against them that leads to the idea of privatization and commercialization. It is necessary to highlight the main problem facing the public enterprises. Among them are:

ü  Lack of freedom

ü  Subjective considerations

ü  Easy access to capital

ü  Political interference

Supervisory ministries have been allowed enough freedom of action to the parastatals. For instance , the attempt to level down the remuneration of parastatals because only officers who could make do with civil service rates if pay supplements them with subjective earning are prepared to take up parastatals appointment.

1.1 SUBJECTIVE CONSIDERATIONS

The injection of ethnicity meant that chief executives and principal functionaries of parastatals institution are appointed not because of potentiality to deliver effective result but simply for reason of repetism.  This neglect the accountability to the background, thus undermining the hiring equation in the management of public institution. The result is that the manager of parastatals institution become co placement and inert.

Besides top management personnel and board members, became binds of passage only to be charged or removed by successive governments thus loosing the valuable factor of continuity in single and policy of management.

1.2 STATEMENT OF PROBLEM

Privatization takes an existing government asset or services, and replaces it with a private asset or service. We are all aware of the situation with black water and private military contractor. The common claim is that this will reduce costs of operation (making no claim as to whether this actually work or not- merely that is the claim).

Commercialization is a different beast. When we talk about commercializing space, what we are talking about is creating private customer (users of spaceflight). This involves developing business plans, customer surveys, business practices, financing strategies- all aimed at targeting a new market and new customers that are not only government based. This will be the astronaut taros, like Buzzle Aldrin. But they’ll be joined by the private user. Like Richard Garriott.

Privatization involves the sale of ownership and control of assets of an enterprise to the from government to the private sector. Such sale or transfer of equity ownership from government owned enterprises maybe to private individuals or corporate bodies, and in fact could take many forms.

This study therefore hopes to answer the following questions

1.        What is the history of public enterprises in Nigeria?

2.        What are the problems confronting these enterprises?

3.        Is there a need for privatization and commercialization?

4.        What are the problems and prospects of privatization and commercialization?

5.        What effect does privatization and commercialization have on the Nigeria economy?

1.3 OBJECTIVES OF THE STUDY

The objective of this study is to determine the effect of privatization and commercialization on the Nigerian economy. However, the specific objectives are;

1)          To trace the history of public enterprises in Nigeria.

2)          TO ascertain the problems confronting these enterprise in Nigeria.

3)          To evaluate the need for privatization and commercialization.

4)          To find out the problems and prospects of privatization and commercialization.

5)          To evaluate the effect of privatization and commercialization on the Nigeria economy.

1.4 SCOPE OF THE STUDY

This project work is intended to highlight the problem of privatization and commercialization to preempt the future prospect of public enterprises to be affected and its effects on the economy of the country. Since privatization and commercialization has been popular formed as the neglected to the study shall also suggest relent pre-requisites to a successive privatization and commercialization. During the course of the study, proper attention will be placed on people’s opinion and views regarding privatization and commercialization of public business enterprises through questionnaire formed.

1.5 LIMITATION OF THE STUDY

This project will not go beyond identification of problems confronting public enterprises, the need for privatization and commercialization.

This project will also suggest the form of privatization and privatization to take future prospect of public enterprises after the system must come into operation. This project is also highlighting the effect of privatization and commercialization of public business enterprises on the economy of the country.