The Project File Details
- Name: THE IMPACT OF PRIVATIZATION AND COMMERCIALIZATION POLICIES ON THE NIGERIAN ECONOMY (CASE STUDY OF (IBEDC, NICON AND NITEL IN IBADAN)
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This research work was carried out to examine “The Impact Of Privation And Commercialization Policies On The Nigerian Economy “, Using some selected firms in Ibadan Metropolis as a case study e.g (NICON, IBEDC, and NITEL). This attempt was prompted to bring out economic value of privatization and commercialization policies in Nigeria, despite the wide range of criticism it has suffered over the years. The fact that transferring non-performing public enterprises to the private sector would eliminate inefficiency, mismanagement, improve efficiency and technology, under serves the significant of the study; as funds that would have been committed to maintenance of otherwise inefficient enterprises have been free into more productive sector of the economy. In the course of the study, hypothesis was tested using the likert scale rating point. A sample size of 50 respondents was used. Distribution of questionnaires to these sample sizes was by a simple random sampling.
It was discovered that privatization and commercialization of public enterprises will improve efficiency as a way of solving our economic problems. It was recommended among other things that government should device a means that would enable the poor ones to buy shares in the enterprises being privatized.
In view of what has been achieved by the study, it was concluded that if privatization and commercialization policies is accompanied by industrial restructuring it will lead to our economy recovery.
TABLE OF CONTENTS
Title page i
Table of contents viii
List of tables ix
List of figures x
CHAPTER ONE: INTRODUCTION 1
- Introduction 1
- Background 2
- Statement of the problem 4
- Objectives of the study 5
- Research questions 5
- Statement of the hypothesis 6
- Significance of the study 6
- Justification of the study 7
- Scope of the study 7
- Definition of terms 8
CHAPTER TWO: LITERATURE REVIEW 9
- Introduction 9
- Conceptual framework 9
- Theoretical framework 14
- Literature on the subject matter 16
2.2.1 Evolution of privatization and commercialization 20
2.2.2 Philosophical basis of privatization 20
2.3.1 Privatization and commercialization in Nigeria 20
2.3.2 Objectives of privatization and commercialization 21
2.3.3 To improve the efficiency and profitability of public enterprises 21
2.3.4 To reduce the dependency of public enterprises on the treasury 21
2.3.5 To increase the participation of Nigeria citizens 22
2.3.6 To avoid senseless duplication 22
2.3.7 To encourage cheaper borrowing 22
2.3.8 An overview of privatization in Nigeria 23
2.3.9 Opposing view of privatization and commercialization 23
2.3.10 Impact of privatization 25
2.3.11 Impact of privatization on the Nigeria economy growth in Nigeria 26
2.3.12 Impact of privatization on capital market development 27
2.3.13 Impact of privatization on output 27
2.3.14 Impact of privatization on foreign reserve 27
2.3.15 A way forward 28
CHAPTER THREE RESEARCH METHODOLOGY 29
- Area of study 29
- Research design and source of data 30
- Primary data 30
- Secondary data 30
- Study population and determination of sample size 31
- Sampling and sampling technique 31
- Research instrumentation 31
3.3.1 Validity and reliability of the instrument 32
3.4 Procedure for data collection and data analysis 33
3.5 Limitations of the study 34
CHAPTER FOUR 35
- Introduction 35
- Findings of the study 35
- Discussion of finding 39
- Testing of hypothesis 51
CHAPTER FIVE 55
- Summary of finding 55
- Conclusions 55
- Recommendations 57
- Proposal for further study 57
The economic structure of Nigeria since the mid 1970s was based mainly on the oil sector, which provided over 90 percent of total government revenue. Before the emergence and inception of crude oil into the Nigeria economy, emphasis was on the private sector, for instance, the policy package of the first National development plan was to stimulate the development of a vibrant private sector with marginal public participation in the productive activities Epko (2007). But in an effort to speed up development and to compensate for the lack of an active private sector, the government came to play a very active role in economic development.
The government did not only develop and finance necessary physical and human infrastructure, but also invested directly to unproductive activities through state owned public enterprises Igbuzor (2006). He went further to emphasis that by the beginning of the National Development plan; the public sector had a domineering economic role in Nigeria. The number and variety of these public enterprises steamed from the general thinking that it is the public enterprises that is assigned the greater part of the task of laying the basis upon which the structure of a dynamic and diversified economy is to arise.
According to the World Bank (2005) the growth of the public sector activity was not accompanied by sustainable economic growth rate anticipated by the planner or policy makers. Thus in the wake of the world economic recession of the early 1980s, due to the oil glut in the world market, prices of oil declined.
This decline in oil price led to a decline in oil revenue available to the government. Consequently, the country could no longer support the economy, so in that case, government was forced to introduce the structural Adjustment Programme (SAP) in 1986, which aimed at correcting the imbalance in the economic development of the country Obadan (2000).
The first categories official statement on privatization and commercialization was made by the former head of state “Ibrahim B. Babaginda” in his January 1986 Budget speech Official Gazette (1988).
In 1988, the government enacted the privatization and commercialization Decree No. 25 clearly emphasized the importance of a new economic development base on minimum involvement of government in public enterprises decisions and disengagement of government subvention in public enterprises (privatization and commercialization) Abdullahi .I. (2008).
To this, much attention has been given by way of proposal, debates seminar and even symposia all over the country. Many public enterprises in Nigeria, which suffer from inefficiency and political manipulations, are being privatized, commercialized to enhance efficiency and proper management. The problem has been whether to privatize or commercialize strategic public utilities. While many speak strongly in favour of privatization and commercialization, others dismissed the whole idea, they rather prefer government to continue supporting those public corporations utilities and in support of their argument; with series of examples as government being the greatest employer of labour and the most effective means of ensuring economic equality of the citizens Igbuzor (2006).
It is essential to note that privatization and commercialization has actually served as a penance for some ailing parastatals but continued use as the only recognized solution correcting inefficiency in the economy.
1.2 BACKGROUND TO THE STUDY
The ultimate goal of any credible and legitimate government is to ensure sustained improvement in the standard of living of the citizenry. Toward this end, the government usually evolves development plans that will facilitate effective mobilization, optimal allocation and efficient management of national resources.
Kuye .O. (2010) observed that, in such efforts, priority is usually given to the provision of development facilitators, such as transportation and communication as well as social overhead, such as education and health.
In recent times available evidence suggest that the public sector has not achieved the desired impact over time, This is because government enterprises require constant financial backing for the smooth running, due to inadequate capital and lack of financial autonomy public enterprises in Nigeria are confronted with a lot of problems by managers and employees, government interference, inadequate capital, technology limitation, and political interference in the affairs of public enterprises in Nigeria.
Jerome (2009) the then President Babaginda said that parastatals have constitute an unnecessary high burden on government resources. As from 1986, the volumes of non-statutory transfer of all economic and quasi-economic parastatals constitute no more than 50% of their present levels. In essence President Babaginda went further to expressed the position of government in relation or with respects to the public enterprises with regard to their performance and criticized them as follows:
- Been inefficient in their operations
- They are avenue for corruptions
- Financial burden on government
- They are not making return on respect to investment made on them Jerome (2009).
Drawing on the successful experience of most developed economy, all developing countries have also adopted a similar development. Since monoculture economy cannot meet the demand or generate large sum of revenue to run the economy or by public enterprises, the government seeking ways to reduce the rapid increase of bad economy by adopting policy to boost our economy hence the introduction of privatization and commercialization policy Udoka and Ayingang (2012).
Nwankwo (2006) stressed that reforms to public sector enterprises came at a time when not only is there a concern for their poor performance but a perceived change in approach towards development policy and process. In most developing countries, privatization is seen as a key policy instrument in the move towards a more market-oriented economy.
Privatization in Nigeria was formally introduced by the privatization and commercialization Decree of 1988 as part of the Structural Adjustment Program (SAP) by Ibrahim Bademosi Babaginda administration (1985-1993) Obadan (2000). Obadan went further to say that the issue of privatization has been a subject of intense global debate in recent years. In Africa, it has remained highly controversial and politically risky. Privatization in Nigeria has not been a popular reform; it has received so much criticism from labour, academia, and individuals. There have been numerous strikes against proposed sell-offs by unions fearing loss of jobs.
It is against this background, that this research work intend to assess whether privatization and commercialization policy has the prospect of improving performance in the public enterprises and to possibly reveal the areas of deficiency that has giving rise to wide spread criticism and to suggest ways for improvement.
1.3 STATEMENT OF THE PROBLEM
The major function that inform the establishment of the Public enterprises are to control resources and raise funds for the provision of certain infrastructural facilities particularly on services requiring heavy financial investment e.g., railway, electricity, telecommunication etc. Also generate revenue that will add to financial development program and projects as variable instrument for the creation of jobs and ultimately facilitate economic growth and development. In a developing country like Nigeria, Privatization and Commercialization of public enterprise is a vital tool for the upliftment of the country’s economy. Regrettably the problems facing privatization and commercialization programme is numerous to include:
- Lack of transparency
- Lack of accountability
- Inconsistency and
However it is based on these problems that have made successive government within the past 15 years, in Nigeria to take steps to boost the performance of public enterprises through provision of fund and organizing workshops for the management of these enterprises to enhance their performance.
The economic impact of privatization and commercialization on the Nigeria Economy has attained such a height that Nigerians find it handy discussion almost every time inefficiency occurs in the public enterprises.
The study therefore intend to find out whether privatization and commercialization of public enterprises has the prospects of improving performances in these public enterprises and to also look into these discrepancies and profer anyway forward towards a state of privatization and commercialization of public enterprises in Nigeria that will enhance economic growth and development this project work emanate.
1.4 OBJECTIVE OF THE STUDY
The objective of this study is as follows:
- To understand the concepts of Privatization and Commercialization
- To find out whether the Nigerian privatization and commercialization policies will enhance efficiency and effectiveness
- To investigate the attitude of Nigerians towards privatization and commercialization policies.
- To determine the extent to which the Nigeria privatization and commercialization policies will affect the Nigerian economy.
- To determine whether the Nigerian privatization and commercialization policies has a tendency of abdicating national security.
1.5 RESEARCH QUESTION
- How true is the assertion that Nigeria privatization and commercialization policies will enhance efficiency?
- What is the attitude of Nigerians towards privatization and commercialization policies?
- To what extent has the Nigeria privatization and commercialization policy affect the economy?
- How true is the assertion that the Nigeria privatization and commercialization policies have the tendency of abdicating national security?
1.6 STATEMENT OF THE HYPOTHESIS
The hypotheses are as stated below:
H0: = Null hypothesis.
H1: = Alternative hypothesis
H0: Privatization and Commercialization of public enterprises does not have economic impact on the economy.
H1: = Privatization and Commercialization do have economic impact on the Nigeria economy.
H0: Privatization and Commercialization will not make Public Enterprises more efficient thereby satisfying the general public
H1: Privatization will make Public Enterprises more efficient thereby satisfying the general public.
1.7SIGNIFICANCE OF THE STUDY
The study is essential to the fact that privatization and commercialization of public enterprises is being restored to as a solution for public enterprises unprofitability, inefficiency and unproductivity.
Public enterprises in some western countries were privatized for maximum efficiency and profitability such enterprises include the British Telephone Company, the US Poital Agency etc.
This study is very timely especially since privatization and commercialization of public owned enterprises is currently pursued in Nigeria with many potential investors still ignorant of the benefit derivable from such investment. Considering the fact that there is limited literature on the activities, this research work therefore seeks to enlighten the general public about the Impact of Privatization and Commercialization on the economy of Nigeria. Also on the side of the government it will allow them to return and work towards real implementation and thereby creating room for the rapid growth and development of this country. It is also hope that this research work will definitely create or stand as reference for further research on the issue.
The study will also be theoretically and practically significant to the general public and readers of this research work. It will also give technical assistance generally to policy makers and stakeholders for planning and development.
1.8 SCOPE OF THE STUDY
The scope of this research work focused strictly on the Impact of Privatization and Commercialization programme on the Nigeria Economy. Therefore the research represents an attempt to search for efficiency which privatization and commercialization of public enterprises had on the nation Nigeria, and also on the management of these enterprises, on the effectiveness of these enterprises, and on the productivity of these enterprises. Using some selected firms in Ibadan as a case study e.g. IBEDC, NICON, and NITEL.
1.9 JUSTIFICATION OF THE STUDY
Anyanwu (1993:10) argues that privatization will help public fund users to be efficient, create a self sustaining culture, and attract foreign investors and services that will reflect real views. However, many potential investors are still very ignorant of this fact. This is because available literature on the economy impact of privatization and commercialization on the economy of Nigeria does not give a precise and uniform picture either. Some of these privatized and commercialize organization appear to have been relatively successful while others have had some series of difficulties in fulfilling the objectives for which they were privatized and commercialized.
Therefore this study becomes necessary to identify the hindrances militating against good performance of privatized and commercialized enterprises and answers the Nigeria economy? It is envisaged that the policy recommendation from the study would assist the National Council on Privatization in correcting the pitfalls embedded in the previous endeavor.
- DEFINITION TERMS
Privatization: – Transfer from state to private ownership.
Commercialization: – To make money out of something.
Policy: – Plan of action, statement of aims and ideas e.g. One made by a government, political party, business company etc.
Efficiency: – Ability to avoid wasting materials, energy, efforts, money and time in doing things. The state or quality of being efficient or able to accomplish something with the least waste of time and efforts.
Impact: – The effect or impression of one person or thing on another
Prospect: – The possibility or likehood of some future event occurring.
Performance: – The accomplishment of a given task measured against preset known standard of accuracy, completeness, cost and speed.
Attitude: – A manner of thinking, feeling, or behaving that reflects a state of mind or disposition.
Economy: – The system of trade and industry by which the wealth of a country is made and used.