Effects Of Privatization On Nigeria’s Economy
Chapter One
OBJECTIVES OF THE STUDY
The main objective of the study is to assess the privatization of telecommunication industry in Nigeria and its effects on Nigerian economy. The specific objectives are;
- To examine the impacts of privatization on poverty reduction
- ‘ To investigate if privatization enhances job creation.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
This chapter gave the researcher the opportunity to launch herself into the world of experts through the review of relevant literatures that will allow the significance and the objectives of the research work to be sustained and achieved respectively.
The idea of privatizing public owned enterprises in Nigeria has not been a rewarding exercise which has for once eased the traumas Nigerians had been facing since the idea was conceived. Privatization in Nigeria has been an exercise in futility because there is no government will to ensure that the Nigerian economy is been stabilized through the transfer of public enterprises ownership to capable private hands who understand the dynamics of Nigerian business environment.
CONCEPTUAL FRAMEWORK
CONCEPT OF PUBLIC ENTERPRISE
There appears to be no generally accepted definition among all the scholars regarding the conceptual meaning of public enterprises. One reason according to Sosna(1983) for the inability to have a single standard definition of public enterprises was that public enterprises were established at different periods and each epoch naturally brought forth the types of public enterprises most clearly matching its own conditions. It is therefore believed that the variation in definition are informed by the ideological, values, interest, dispositions and circumstances that brought public enterprises into existence (Adeyemo and Salami.2008). In spite of the above, we shall examine and review a number of definitions as given by renowned scholars of public enterprises. Efange (1987), for instance, defines public enterprises as institution or an organization which are owned by state or in which the state holds a majority interest, whose activities are of business in nature and which provide services or produce goods and have their own distinct management.
Obadan and Ayodele(1998) define public enterprises as an organizations whose primary functions, are the production ,sale of goods and services and in which government or government controlled agencies have no ownership stake that have sufficient to ensure their control over the enterprises regardless of how actively that control is exercised.
The basic reason for establishing public enterprises in all economies has been to propel development. Hanson (1972) reflecting on Turkey, Mexico, India and Nigeria noted that the establishment of public enterprises is premised on what he considered as obstacles to economic development in the post independence states. It is also instructive to note that in Nigeria like many other developing countries, public enterprises are used as employers of last resort. Ugorji (1995) observes that public enterprises have also been established for political reasons and many government undertakings are used to provide jobs for constituent political allies and friends. But in Nigeria establishment of public enterprises and distribution of government employment have been defended on the need to maintain federal character and promote national integration. In Nigeria public enterprises suffer from
gross mismanagement and consequently resulted into inefficiency in the use of productive capital, corruption and nepotism, administrative bottleneck which in turn weaken the ability of government to carry out its function efficiently (World Bank, 1991). These undesirable physical and financial performance and other problems of the PEs have made Nigeria to embark on the public enterprises sector wide reforms via the privatization policy.
CONCEPT OF PRIVATIZATION
Privatization can be defined in several ways depending on the form it takes. The World Bank defines privatization as “a transaction or transactions utilizing one or more of the methods resulting in either the sale to private parties of controlling interest in the share capital of public enterprises or of a substantial part of enterprises or of a substantial part of its assets1“. Privatization has become an important instrument for streamlining the public sector and promoting economic development in countries all over the world. It is a strategy for reducing the size of government expenditure and transferring assets and service functions from public to private ownership and control (Ugorji, 1995).
Helad (1988) maintained that there is a very wide range of initiatives usually discussed under the term privatization. Such initiatives includes: the substitution of user charge for tax finance, the letting of management contracts while retaining ownership, and liberalization for the promoting of competition in markets previously reserved for statutory monopolies.
Cook and Kirkpatrick (1988) maintained that the drive towards privatization is merely a result of the confusion arising from the role of price mechanism and of the private sector in mixed economy. The shift from the ‘more – government1 attitude of the 1940s to the ‘more-market’ attitude in the 1980s is merely a shift in paradigm, rather than in ideology, Thus, all the initiatives that emphasize more use of the market or more use of ‘private- sector-culture’ is termed privatization. Hence the entry of more firms into the previously monopolistic field is privatization; and exposure of enterprises to bankruptcy and take-over is privatization. Cook and Kirkpatrick (1988) define privatization as the transfer of productive asset from public to private ownership and control.
Boachie-Danqush (1988) defines privatization as the transfer of ownership of public resources or asset to private individual and firm through various options:
- sale of state-owned enterprises to the private sector through privates placement, public
offerings or competitive bidding by strategic investors; - allowing private operators to compete in sectors that have been the exclusive domain of
PEs; - breaking up a monopoly into various branches of activities to stimulate competition;
- transferring the management of PEs from public to private through contracts0, leases or
CONCEPT OF POVERTY
Poverty often appears as an abstract concept, especially from the perspectives of researchers and policy makers in developing countries. The best definition of poverty remains a matter of considerable academic and political argument. Perhaps the only view on which there is consensus is that the standard of living of citizens falls below minimum acceptable levels. According to World Bank (2001 a) “Poverty is pronounced deprivation in well-being. It refers to hunger, lack of shelter, being sick and unhealthy, not knowing how to read, joblessness, and fear for future, lacking access to clean water and lack of opportunities representation, loss of freedom and social exclusion.
To classify poverty it is necessary to identify the poor. In order to identity the poor a poverty line has to be set. Rag ayah Haji M.Z (2004) stated that the poverty line is the level of income that is
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
Research methodology entails the techniques and procedures adopted for data collection and analysis. This chapter considers research design, population, sample size and sampling methods, research questions as well as the analytical tools employed in the analysis and interpretation of data obtained from this study.
Research Design
The design chosen for the study was a descriptive survey research design. It attempt to look at the effect of privatization on Nigerian economy, using Nigerian telecommunication industry as case study.
Population of the Study
The study population for this work comprised of selected number of people within Ado-Odo Ota Local Government of Ogun State which are about 300.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
Introduction
This chapter focuses on the empirical investigation of the data collected through the questionnaire that was used to gather relevant information from respondent. It presents each question on the questionnaire in a tabular form, by representing numerically the respondents’ opinion and also presenting the analysis under each table. Each table presents in brief, the view of the total number of one hundred and forty-eight (148) respondents who returned their questionnaire out of one hundred administered. After the presentation and analysis of each question on a table, the researcher was able to check the validity of the formulated hypothesis in order to ascertain the hypothesis that is related to respondents’ opinion.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Summary of Findings
To a reasonable extent, this study has investigated the effect of privatization on Nigerian economy. Based on the study above, there were evidences that privatization has an effect on poverty situation in Nigeria either negative or positive. From the result of the study, the following were found; at the beginning, the majority of the respondents were aware that government is selling their shares in the public enterprises to private individuals and supported that government should privatize some of our public enterprises. They supported their views with the corrupt practices that were going on in the public enterprises which made public enterprises in Nigeria inefficient and unable to meet people’s expectations.
The finding also showed that majority of the respondents are of divergent opinions that privatization of public enterprises in Nigeria has created more jobs to the citizens. According to Igbuzor (2003) government have privatized more than eighty-eight (88) public enterprises in Nigeria since 1993 with the aim of creating jobs and reducing poverty in the country, but up until today, the unemployment rate and poverty level are still on the increase. This is because most of the privatized enterprises are not in operation and they were sold to the people that have no technical knowledge of these industries which makes them to be idle after privatization and therefore no job for the old staff neither new jobs were created.
However, the findings also showed that majority of those interviewed supported that privatization of public enterprises in Nigeria has encouraged price increase of goods and services in Nigeria, they supported their views by stating that after privatization, government will withdraw subsidies from services they rendered thereby causing increase in the prices of goods and services.
The study also revealed that the greatest beneficiaries of privatization of public enterprises in Nigeria is the government not the masses because privatization reduces government expenditure and equally increases revenue to government to the detriment of the masses. The study equally revealed that privatization of public enterprises in Nigeria has encouraged competition using telecommunication sector as an example, which leads to emergence of MTN. GLOBACOM, AIRTEL and ETISALAT communication networks. In addition, the study indicates that majority of the respondents are of the opinion that GSM operations in Nigeria has improved the efficiency
and quality of telecommunication services in Nigeria and equally created more jobs in Nigeria than NITEL before privatization took place in 2001. Although the exact number of employment created were not determined because it is as difficult as calculating global mobile revenue, but economists use a “multiplier’ for a given industry to work-out the total employment of all its offshoots. However, privatization of telecommunication industry does not only create employment and encouraged competition, but it equally brought technology and skill transfer to our country.
Finally, this study has gone so far to finding out the major challenges to successful privatization of which majority of the respondents were of the opinion that corruption, lack of policy implementation, lack of infrastructures and awareness are the major factors that hindered privatization in Nigeria. The study equally advise government to be transparent, honest and sincere about the on-going privatization of public enterprises in Nigeria.
Conclusion
As already argued, privatization has a potentially high impact on Nigerian economy via poverty alleviation. In light of this potential link, privatization should be adequately integrated as a core part of any poverty alleviation strategy in order to manage the economy efficiently. Whatever the objective of the programme, it is important to take not of the concerns of the poor and where necessary, adequate measures be put in place to guarantee that in the end, the benefits of privatization will reach the poor. If privatization is carried out with sincerity of purpose, almost every group will come out and accept the result of divestiture. Workers will be shareholders, while consumers will be better off because of better services. New graduates and the unemployed will get jobs because of expansion and government will be relieved of the burden of subsidies. Similarly, investors will gain investment opportunities, and ultimately, the public will be free to pursue any private economic interest relating to the privatized industry. In conclusion, if privatization must be of necessity and bring forth the desired benefits, it has to be viewed not as an end itself, but as a means to get government interested in fostering a nev\ division of labour between the public and private sectors. Therefore, the success of privatization should be judged not in terms of the sales or contract itself, rather on the basis of whether there are net benefits to the economy (Shirely, 1998). Privatization must result in better services at lower prices as desired by consumers who, oftentimes are not bothered about economic philosophies. If
privatization does not bring tangible benefits in one form or another, the opponents of privatization who argue that the benefits are not worth the cost would feel justified.
Recommendation
For privatization programme in Nigeria to yield a desired impact on poverty reduction in the economy, then government should endeavor to adhere to the following recommendations:
Government through National Council for Privatization and Bureau for Public Enterprises should carefully and accurately evaluate assets and worth of intended privatized enterprises before privatization.
Government should be transparent enough; to allow equity distribution of shares to all geographical zones of Nigeria, and also ensure adequate participation of Nigerians as core investors. This objective can be achieved through proper and adequate enlightenment programmes.
Government should ensure honesty and sincerity of purpose in the side of government officials charged with the responsibility for privatizing public enterprise.
Adequate concern and provisions should be given to workers who could be displaced as a result of privatization exercise; government should absorb them in ministries where manpower is needed, and where there is none, newjobs should be create^.
Government through mutual agreement, with new owners of the privatized enterprises should demand for retention of affected staff of these corporations.
Furthermore, government should compel management of privatized corporations to adopt operational techniques that is relatively labour intensive, this would create more jobs and ensure job security: because it is only when job security is guaranteed, that labour and organized trade union would whole-heartedly support privatization programme in Nigeria.
The government should endeavour to create a level-playing field among all the stakeholders in the privatization exercise, improve the business environment through a continuous reform of the legal and regulatory framework, cleansing of the financial sector, taking enhanced measures to improve the cost and delivery of infrastructure services and adopting a strengthened approach to governance including corporate governance.
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