COMMERCIALIZATION OF PUBLIC ENTERPRISES AND THE NIGERIAN ECONOMY (A STUDY OF PHCN)

CHAPTER ONE

INTRODUCTION

1.9     Background of the Study

The issue of privatization has been a subject of intense global debate in recent years. In Africa, it has reminded highly controversial and political 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 sells, offs by unions fearing loss of jobs. While proponents of privatization see that aspect of economic reforms as an instrument of efficient resource management for rapid economic development and poverty reduction, the critics argue that privatization inflicts damage on the poor through loss of employment, reduction in income, and reduced access to basis social services or increase in prices. Whatever are the views of the two parties, the only group that has no voice in the matter is the poor. The author is of the view that privatization is not inherently good or bad, but the poor performance or effectiveness depends on implementation.

In the era of post colonialism, Nigeria has at one time or another, embarked upon creation policies that have political economic implication. For instance form 1960 to date Nigeria has introduced indigenization and nationalization, Austerity measure, structural adjustment program (SAP), Deregulation of oil sector, Resource control Privatization and commercialization of public enterprises to mention but a few. The critical question here remains: How many of these policies have been able to restructure the political economy of Nigeria to the time of alleviating the yearning and aspiration of the working class.

The World in no doubt is moving towards capitalization and any nation that is not moving towards this direction is seen either not developing or even retrogressing. A capitalist economy is a free market economy which allows most economy decision to be guided by the twin forces of demand and supply since capitalization discourages monopoly but encourages competitive market, it therefore enhances efficiency and high productivity which is very vital in any developing country’s economy. In Nigeria most government owned industries and establishment remains citadels of corruption, studies efficiency and consequently a heavy drain is on the economy.

As a means of curbing this menace the Bretton woods institution (IMF and World Bank) have advocated the twin policies of privatization and commercialization. Incidentally, Nigeria has fully adopted this policy and is embarking on it with frenzy.

1.10Statement of the Problem

The problems of performance of the public sector enterprises in Nigeria are further complicated by the down turn in the socio­­­economic development in the country due to the global economic recession and the collapse of the oil market. Thus Nigeria’s precarious fiscal and monetary posture could no longer sustain the requirement of its public sector enterprises, particularly since they performed below expectation in terms of their return on investment and quality of service. The public enterprise, which had grown too large began to suffer from fundamental problems of defective capital structures, excessive bureaucratic control and intervention, inappropriate technologies, gross incompetence, blatant corruption. With the deep internal crises that includes high rate of inflation and unemployment, external debt obligation and foreign exchange misalignment, Nigeria and many other Africa countries are strongly advised by the World Wide lending agencies, particularly IMF and the World bank to divert their public enterprise as one of the condition for economic assistance. With the intensified push for economic liberalization, Nigeria’s leaders were told that privatization as an economic reform would help cut public sector inefficiency and waste, provide greater scope to many countries, including Nigeria, embarked on privatization and other markets oriented reforms to pull them out of the structural imbalances.

Privatization and commercialization of public enterprise is a vital tool for the uplifting of a country’s economy more especially the developing countries like Nigeria. Regrettably the problem facing this privatization and commercialization program are numerous to include

1)          Corruption

2)          Mismanagement

3)          Inefficiency due to mediocrity

However, it is based on these problems that the basis propositions of this privatization and commercialization program are being hindered.

1.11Objectives of the Study

1)          To examine the relationship between corruption and the failure of the PHCN

2)          To examine the relationship between mismanagement and the performance of the PHCN

3)          To examine the relationship between mediocrity, inefficiency and the profit of PHCN

Also in the cause of this research work we intend to

i.            To examine how the commercialization of the public enterprise affect the economy.

ii.          To determine the effect of commercialization on the masses.

iii.        To ascertain if the introduction of commercialization has made a good impact on the country’s economy.

iv.         If commercialization has really, been of an advantage to the Power Holding Company of Nigeria.

1.12Research Questions

For the purpose of this study, the following set of research questions will be considered. This will tend to ask some relevant questions.

1)                Is there a relationship between corruption and the failure of PHCN?

2)                Is there a relationship between mismanagement and the performance of PHCN?

3)                Is there a relationship between mediocrity ineffceincy and the profit of PHCN?.

1.13Research Hypotheses

Hypothesis One

Ho:   There is no relationship between corruption and failure of the PHCN

Hi:   There is relationship between corruption and failure of the PHCN

Hypothesis Two

Ho:   There is no relationship between the mismanagement and the performance of the PHCN.

Hi:   There is relationship between the mismanagement and the performance of the PHCN.

Hypothesis Three

Ho:   There is no relationship between mediocrity, inefficiency and the profit of the PHCN

Hi:   There is relationship between mediocrity, inefficiency and the profit of the PHCN

1.14Significance of the Study

This research work helps the government and readers to understand those benefits that privatization and commercialization program embodied which we have neglected. In understanding this on the side of the government it will allow them to rethink and work towards real implementation of it, thereby creating a room for the rapid growth and development of this country.

1.15Scope and Limitations of the Study

This research seeks to look at the policy underpinning of privatization of Nigeria’s power sector and its implication on the nations development process within the Obasanjo’s regime (1999 – 2007).

Essentially the scope of this research work focuses strictly on those privatization and commercialization program that have been embarked upon by Nigerian government, this work will lead us to the evaluation of public enterprise in Nigeria and also examine why they later turned out to be sold or privatized partly.

To analyze how a country played by administration program have ridiculed this whole exercise.

1.16Definition of Terms

Privatization:

This can be defined as the transfer of ownership of property or business firm form a government to a privately owned entity. The transition form a publicly traded and owned company to a company which is privately owned and no longer trades publicly on a stock exchange. When a publicly traded company becomes private, investors can no longer purchase a stake in that company.

One of the main arguments for the privatization of publicly owned operation is the estimated increase in efficiency that can result form private ownership tend to place on profit maximization as compared to government, which tends to be less concerned about profits.

Commercialization:

This is an act of making government owned enterprise profit oriented. Commercialization can be full or partial according to the bureau of public enterprise act of 1993. In both full and partial commercialization no investment of the federal government shareholding will be involved and subject to the general regulatory power of the federal government.

REFERENCES

Givislan, P. (1997) The Privatization Challenge A strategic legal and Institution analysis of international experience.

Almond, G. (1980) Comparative

Nnoli, O. (1981) Path to Nigeria development

Nelli, J. (1986) Public Enterprise in Sub Washington D.C World Bank.