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  • Name: EFFECTS OF PRIVATIZATION AND COMMERCIALIZATION OF GOVERNMENT OWNED
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CHAPTER ONE

INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Today, we are witnesses to sweeping changes that are taking place
in the economies of both developed and developing countries. These
changes relate to efforts to move away from government ownership,
control or participation in the economy towards free enterprise and
increased operation of market forces. On the whole, the changes
ar3e making for the reduction in the role of government in the
economy with a corresponding expansion in private sector
ownership control and participation.
Despite the numerous measures in form of economic policies
consisting of several incentives to promote industrial, agricultural,
and other activities, the Nigerian economy for example still exhibits
very prominent features of underdevelopment and such features
includes poor managerial skill, heavy reliance on a single
commodity oil, which has failed to provide the much needed capital
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in huge sums as expected for the conscious implementation of a
single strategy of development.
Public business enterprises creates a solution in which
national funds 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 enterprises.
The participation of the states in enterprises in Nigeria dated 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 expanded and consolidated by the
colonial welfare development plan (1946 – 1956) that was
formulated when the labour party came to power in the United
Kingdom. This trend continued after independence such that by
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1999, it was estimated that successful Nigerian governments has
invested up to 800 billion naira in public owned companies.
The privatization and commercialization net of the 1988 and the
Bureau of Public Enterprises Net of 1995 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 the public enterprises have been subjected to
criticisms, one to poor management and inefficient utilization of
resource and mostly regarded to a dead wood that will neither grow
nor change, it was these construct criticism levied against them
that led to the idea of privatization and commercialization in which
the exercise would enhance efficiency in the economy, rid firms of
the crude and undue governmental interference which have been
the bane of most public enterprise in Nigeria and other developing
countries and also limit the drain by the public enterprise on
government resources but the basic objective of the exercise is to
enhance efficiency and profitability in the government owned
industries.
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1.2 STATEMENT OF THE PROBLEM
Privatization takes an existing government services, and
replaces it with a private service. But over the years in Nigeria for
instance the sheer waste and inefficiency of government owned
industries became glaring from the early 1980s in with the onset of
economic crisis, by then, public companies had become heavily
dependent on the national treasury for the financial operation and
their activities were characterized by mismanagement of the funds
and operations, corruption, misuse of monopoly power and
bureaucratic suffocation from supervising ministries, Obadan
(2000; Olukeshi; 1993:16)
However, as noted by some writers, the actual performances of
many of the public enterprises have left much to be discussed.
Many of them were not responsive to the changing environment of
the growing and dynamic economy and they did not posses the
necessary tools for translating into reality the hopes of successful
commercial operations. It was obvious that the commission‟s report
of cost effectiveness and insufficient attention to financial records
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by parastatals. If recommended an increased role of the private
sector especially in non sensitive or non security related
parastatals Olukeshi (1993:1).
Therefore, the policy of privatization and commercialization of the
development of the nation‟s economy has been called to restructure
and reverse the economy in the country and make it a better place.

1.3 OBJECTIVE OF THE STUDY
1. To find out the effect of privatization and commercialization of
government owned industries in developing econmoy.
2. To know the reason why governmernt embark on privatization
and commercialization of their own industries in developing
economy.
3. To find out if privatization and commercialization of
government owned industries improved the efficiency of
service delivery on developing economy.
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4. To identify the problems militating against privatization and
commercialization of governmental owned industries on
developing economy.
5. To determine whether privatization and commercialization
help to solve the problems of government owned industries on
developing economy.

1.4 RESEARCH QUESTIONS
In other to identify the problems that are militating against their
performance, the following research questions were put forward.
1 Why did government embark on privatization and
commercialization of their own companies in developing
countries?
2 What impact does the privatization and commercialization have
on government owned companies or industries on developing
countries?
3 What are the problems militating against government owned
companies in developing economy?
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4 To what extent does privatization and commercialization proffer
solution to the problems associated with government owned
companies on developing economy?

1.5 SIGNIFICANCE OF THE STUDY
A research is carried out to find out solution to the various
problems that face mankind in the environment or society. This
study tends to create awareness to citizens of developing countries
and economic planners on the implications of the privatization and
commercialization of the public enterprises in developing
economies. The importance of this study has both theoretical,
practical and policy values and would help in the assessment of
government owned industries.
Also, the study will also stimulate further enquiry in the study
of policies particularly in the area of economic development.
Again, the study will be of immense academic importance as it
will give direction to students of political science and public
administration for further research into a new economic
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development. At the practical level, the study will help to keep
Nigerians and other developing countries abreast with the
challenges in an area of privatization and commercialization. This
will help to mobilize not only their intellectuals but also the policy
makers and administrators to rise to the challenges of analyzing
and integrating this new development in history.

1.6 SCOPE OF THE STUDY
The scope of this research is limited to Enugu state. Focus is also
on PHCN formally owned by the federal government. This company
is expected to make profit while charging competitive prices.
The scope of this study is also limited to the activities
concerned with privatization and commercialization of public
enterprises in Nigeria and other developing economies which was
facilitated as a result of the failure and inefficiency surrounding its
(PHCN) activities and program to the public.

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1.5 LIMITATION OF THE STUDY
The research work is limited by the time span within which the
researcher is required to complete this work.
Finance was another constraint to the study. The financial problem,
make the researcher not to travel far to get all necessary data for
the work.
Limited material was another constraint to the completion of the
work.
Another limitation problem of the study was the attitude of
respondents. Some of the respondents were reluctant to disclose
information to the researcher which would have led to more
accurate assessment of the situation.
The cost of newspapers, (journals, magazines and national
dailies also caused problems to the researcher.
Distance and exit also constitute constraint which hinders the
project work. The school authority restricts the movement of the
student which made it difficult for the researcher to easily travel out
and get the necessary material for the work.
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1.8 DEFINITION OF CONCEPTS
This study is made up of two important concepts the outright sale
of government owned companies to private individuals in terms of
privatization and the operation of government enterprises as profit
making ventures that changes market prices for their operations in
the commercialization.
 Privatization can be defined as narrowly as the transfer of
government owned shareholding in the designed enterprise to
private share holders, comprising of individuals and corporate
bodies.
 Commercialization on its own, means the re-organization of
enterprise wholly or partly owned by the government in which
such commercialized enterprises shall operate as profit
making commercialized enterprises shall operate as profit
making commercialized ventures without subvention from
government.
 Government owned companies are companied hold, directed
and controlled by the government.
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 Monopoly power: the excess of price over marginal cost is a
measure of monopoly power.
 Private sector according to giant paper back dictionary, private
sector is that part of a country‟s economy consisting of
privately owned businesses etc.

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