The Impact of Privatization on the Economy Development
Chapter One
OBJECTIVES OF THE STUDY
- To determine the impact of privatization on Nigerian Economy
- To determine the post privatization effect on Nigerian economy.
- To make a comparative analysis of what innovations the policy has brought into the economy.
- To assess the factors that led to the privatization and commercialization of these public co-operations and its origin. Thirdly, this work will also evaluate the various privatization and commercialization programs embarked by the Nigerian government from 1988 to 2010.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
This chapter deals extensively on what privatization is all about. Privatization may have several meanings which will be dealt with in this chapter also. However, privatization primarily, it is the process of transferring ownership of a business, enterprise, agency, public service, or public property from the public sector (a government) to the private sector, either to a business that operates for a profit or to a nonprofit organization. It may also mean government outsourcing of services or functions to private firms, e.g. revenue collection, law enforcement, and prison management.
THE CONCEPT OF PRIVATIZATION
There are various kinds of opinions by many scholars on activities of privatization of public enterprises. The federal government has restated its commitment to the privatization programme saying that it would not allow obstacles to make it change its focus.
Although the concept of privatization is an emotive, ideological and controversial one evoking sharp political reactions, it’s political origins, meaning and objectives are not ambiguous.
Ricky (1999) defines privatization as the process of converting government enterprises into privately owned companies. Various groups have also defined it differently. The privatization and commercialization Act of 1988 defined privatization as the relinquishment of part or all of the equity and other interest held by the federal government or any of its agencies, in enterprises whether wholly or partly owned by the federal government. But, however privatization is defined; it transfers ownership of production and management of enterprise from the public to the private sector.
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector (government) to the private sector (business). In a broader sense, privatization refers to transfer of any government function to the private sector including governmental functions like revenue collection and law enforcement. The term “privatization also has been used to describe two unrelated transactions. The first is a buy out, by the majority owner, of’ all shares of a pubic corporation or holding company’s stock, privatizing a publicly traded stock. The second is a demoralization of a mutual organization or cooperative to bum a joint stuck company.
Ugoo .E. Abba (2008) argued that some public enterprises whose establishments are hinged on regulatory philosophy have also not lived up to standard. Due to endemic corruption in these enterprises, officials collect bribes and truncate their primary reasons for establishment.
But in the words of Chief Olusegun Obasanjo (1999) in his assessment of the decline in Nigeria’s public enterprises asserts that these enterprises suffer from fundamental problems of defective capital structure, excessive bureaucratic control or intervention in appropriate technology, gross incompetence and mismanagement, blatant corruption and crippling complacency which monopoly engenders.
Nellis (1999) in Obadan 2000:19 agreed with above assertion by saying that in empirical terms, various assessment of privatization outcomes, particularly in the industrial and middle-income countries have concluded that privatization leads to improve performance of private companies and that privately owned firms outperforms “state owned firm”. He posits that increasing evidence also shows that privatization yields positive result in lower income and transition countries as well.
Guislain (1997) is of the view that the move for privatization is that most government find themselves facing deep budget deficits and public finances crisis”. The state no longer has the financial resource either to offset the losses of state-owned enterprise (SOEs) or to provide the capital increases necessary for their development. Thus, emphasizing that privatization is the answer as most of SOEs are deeply involved in corrupt practices that have depreciated its values, to achieve the basic requirement expected of it.
The Director General, Bureau of Public Enterprises (BPE), Dr. Christopher Anyanwu said that government would hinder it from meeting its privatization objectives.
He listed the objectives of the privatization among other things to include the restructuring and rationalization of the public sector in order to lesson the dominance of unproductive investments, beside, privatization was targeted at raising funds for financing social-economic development in areas such as health, education and infrastructure.
General Ibrahim Babangida’s administration was the first to take concrete steps towards privatization and commercialization of some public enterprises.
Having reviewed some books on administrative and management problems of public enterprises and possible ways of reformative measures and the cause of these problems that have engulfed these public enterprises especially from the external and internal factors and also having reviewed some books and articles on these privatization and commercialization policy has been detrimental to the poor in the society. Let us now attempt a review of some books and articles that see privatization and commercialization as an exploitative tool in the hands of ruling class and its foreign allies.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
Research methodology refers to different ways, methods, designs and system a researcher uses in administrating and collecting data in research work.
In this chapter, the researcher shall be looking into ways and methods of administering the questionnaires; the statistical tool that will be used in analyzing the research data and the techniques applies in testing the research hypothesis.
AREA OF THE STUDY
The study was conducted in Edo state using Benin Electricity Distribution Company (BEDC) as a case study. This comprises of the area in which the research study covered.
POPULATION OF THE STUDY
The population of this research work consists of 480 workers of the fully privatized company (Benin Electricity Distribution Company (BEDC).
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
In this chapter, the data generated from the field would be presented. Questionnaires were produced and taken to the field for completion. 100 questionnaires were administered but 52 were duly completed. In all, 52 questionnaires were returned.
The researcher decided to work with the returned questionnaire of the total number of 52.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
SUMMARY OF FINDINGS
The summary point is that if privatization and commercialization program is carried out with sincerity of purpose almost every group will come out ahead as a result of divestiture. The idea of privatization is that the state should ensure that essential goods and services are provided but not aimed to be the sole producer or deliverer. Whereas in the past government was seen as often squeezing out market supplies, it is now expected to support their development and promote competition. Meanwhile, in the three years since the implementation of the privatization program began, the Technical committee on privatization (TCPC) has been able to complete privatization work on 62 out of the 73 enterprises slated for full privatization, and 22 out of the 25 enterprises slated for partial privatization. On the commercialization aspect of the program, the number of public enterprises with whom performance Agreements have been entered into stood at 22 as of mid 1992. so far, the exercise has generated (for the Government) over N1, 6 billion as privatization revenue, created over 600,000 new share holders in the country, bridging both income and geo-political divides, radically changed the structure and depth of the Nigerian capital Market and created awareness of the virtue of share ownership as a form of savings. The program has relieved the Federal Government of what was the huge and growing burden of financing debts and deficits of public enterprises it has improved the allocative efficiency of the national economy, and enhanced the volume of corporate taxes accruing to the national treasury.
However, privatization is not a blanket solution for the problems of poorly performing state owned enterprises. It cannot in and of itself make up totally for lack of competition, for weak capital markets or for the absence of an inappropriate regulatory framework. But where the market is basically competitive, or when a modicum of regulatory capacity is present, private ownership yields substantial benefits.
CONCLUSION
The program of privatization and commercialization is a major opportunity for reform of Nigeria’s ailing public enterprises and to prepare them to save the needs of the Nigerian economy in the 21st century. Enterprises will be made more efficient more accountable and more responsible to the needs of the clientele it is meant to be serving the Nigerian public. The Nigerian private sector will also benefit tremendously in the creation of new investment opportunities and a better investment climate. A lot of new shareholders have been created and now have a say in the affairs of the organized private sector. The performance of the Nigerian Capital Market will be enhanced greatly, as well the growth potentials of the Nigerian economy. But, what lessons are there for Nigeria, Africa and the Third world countries undertaking similar programs? Our experience in Nigeria points to the fact that it is difficult, if not impossible, for the government in developing countries to divest its interest in enterprises completely. In many African countries, the institutional infrastructures for viable divestiture do not exist. Furthermore, local capital with which to facilitate implementation of divestiture is not available. Therefore it would seem that the viable option for most African countries is to subject a substantial part of the public enterprise sector to reforms that will help them achieve management and productive efficiency.
RECOMMENDATIONS
Haven gone this far gathering problems that have continued to pose a threat to full implementation of privatization programs in Nigeria, the following solution became necessary for real privatization objectives to be achieved:-
1) Capturing the confidence of labour: Government should endeavor to win over labour’s acceptance of privatization by giving them ownership of shares in the enterprises. Workers could be allocated a percentage of the shareholding at a special discounted price. There is need for good follow up on privatized enterprises, there is need to keep a record of accurate figures on pre- and post- privatization employment levels including statistics to show whether employment is declining or increasing to calm the fear of labour unions. Other statistics should includes how much of capable and qualified labour will be absorbed by the buyers, etc. labour on the other hand must also realize that many of the jobs also might have been cost anyway by retrenchment, since government could not keep subsidizing crises- ridden public enterprises indefinitely; the only exercise that could be guaranteed is constant lay off.
2) Inclusion of Labour: – Interaction with the unions as stakeholders is often a good strategy. One of the major mistakes that is common in privatization in Nigeria is taking the workers for granted. When the unions are not involved in the organized process, it may be difficult to gain their corporation. The stakeholders must be sensitized to the impending constraints that privatization is likely to bring about, especially in the short run.
3) Monitoring of privatization processes
4) Transparency and Accountability: This is one of the most important issues in privatization exercise in Nigeria. Suspicious of corruption that follow privatization deals require that separate auditing and House of Assembly oversight committee be established to help in the monitoring process. It is also my considered opinion that money realized from sale of public enterprises and saved through withdrawal of subsidies should be invested in the hinter land for provision of infrastructure. This will not only enhance development but also will check the drift of rural urban migration, especially among the youth, since the cities are getting over populated while the rural areas are quickly deteriorating .
5) Consistence and Credibility: The key to credibility is consistency and communication. Whenever government lacks credibility, people refuse to change, until the confrontation that that ensues imposes unavoidable cost on the warring parties at the expense of the economy.
6) Need to make strategic administrative re-engineering to enable BPE staff interact extensively with stakeholders in the exercise especially the staff and consultants of bidding firms.
7) The Nigerian economy will also require financial market expansion to include derivative, future and options, credit and debt swaps etc. several of these foreign investments funds are willing to invest in Nigeria on the condition that the country puts financial house in order.
However, it is quite instructive to note that successful structural reform cannot be recorded unless:
- a) The government trusts, respects, and most importantly, informs the public adequately every step of the way, as to why certain actions are being taken.
- b) Privatization is done properly with no special concessions or privileged when selling public enterprises; and
- c) The creditor countries consider Nigeria’s specific circumstances while mounting pressure on the speed of the privatization exercise because ours is a low- income country characterized by poverty.
Again, in reference to findings, the researcher recommends that public enterprises should be privatized in order to promote economic growth and development. Apart from that, it will also reduce misappropriation of funds, corruptions and embezzlement of public enterprises gains.
More so, it will create room for job opportunity and improve the standard of living of Nigeria citizens.
However, in developing country like Nigeria, privatization of public enterprise is not advice able because the Government has more recourse of managing enterprises than individuals.
REFERENCES
- Anyanwu, J.C. et-al (1997), The Structure of the Nigerian Economy (1960-1997), Joane Educational Publishers, Ltd Onitsha.
- Akpotor, A.S. et-al (2005), Deregulation and Globalization in Nigeria Issues and Perspectives, Ambrose Ali University Publishing House, Ekpoma.
- Aboyade, O. (1974). “Nigerian Public Enterprises an Organizational Dilemma” in Public Enterprises in Nigeria: Proceeding of the 1973 Annual Conference of the Nigerian Economic Society.
- Adoga Onjetu (2008) “A Critical Appraisal of Privatization inNigeria” hhp”//www.hg.org/article.asp?=5491.
- Amaefule, E. (2009: 18) Privatization: BPE records only one Deal under Yar’Adua. The Punch, pp 7.
- Arrow, Leenneth J. (1951,2nd ed., 1963). Social Choice and Individual Values
- Ayodele, S. (1988). “Privatization and Commercialization of Public Enterprises and their Implications in Adedotun p. (ed).Economic Policy and Development in Nigeria Ibadan, Nigeria, Nigeria Institute of Economic Research Ibadan.
