THE IMPACT OF PRIVATIZATION AND COMMERCIALIZATION ON THE NIGERIAN ECONOMY

CHAPTER ONE

1.1 BACKGROUND OF THE STUDY

To be able to transform into an industrialized economy an underdeveloped economy has to privately and commercially develop.

The importance of establishing public enterprises or corporations began during the 19th century with the British Telecom in 1884 under the telecommunication act and gained a worldwide support in Britain. Thereafter several nations particularly those in Africa, have come to embrace the principle as a way of eliminating low performance and inefficiency in the public sector.

Following the trend, the Nigerian economy has come to embrace privatization as a cardinal principle of the states economic policy. Over the years, the Nigerian government has encouraged the development of the public sector since independence in 1960 and particularly 1970s but has not been successful because government owned industries and establishments remain citadels of corruption, studies in

inefficiency and consequently a heavy drain on the economy. As a means of combating this menace, the IMF international monetary fund and World Bank have advocated the twin policies of privatization and commercialization. Incidentally, Nigerian has fully adopted this policy and is embarking on it with freazy, for example, Nigeria Brewery change from the most inefficient and less making company before privatization to one of the most profitable businesses in Nigeria. Nigeria has more than 1,800 public enterprises at federal and state level which can be categorized as follows:

1Strategic industries such as petroleum and petrochemical, fertilizer plant, ion steel.

Public utility providing infrastructural services.

Economic/commercial enterprises such as manufacturing of consumer goods, insurance, bank and hatotoic .

And Department / stationary boards designed to serve specific social or development roles as university and research institutes Ake 1981. The major purpose and reason for the introduction of the privatization and commercialization programs in the country was a result of the failure of public enterprise in

the economy the need to reduce dependency of public enterprise on government/public purse and the urge to increase efficiency in public enterprise whose inefficiency was causing the governmental considerable embarrassment are shown.

The purpose of improving national economic is to improve the quality of the life the people and not to create easy avenues for foreign exploitation. Nigeria believes fully in international trade and relations provided they make life of Nigerians better. Mainly IMF and world bank prescriptions have been fully tries Nigeria in SAP structural adjustment programin the last two decades but, they have made Nigeria much Poorer and miserable. No nation surrenders the bastions of its economy to foreigners without adequate control except in colonial rule. If government wants deregulation it must be in accordance with the deregulation as emaciated by the ordinary people, private sector, while the public is expected to create right environment for growth and set the policy frame works.

1.2 STATEMENT OF PROBLEM:

In a developing country like Nigeria, privatization and commercialization of public enterprise is considered by many as a vital tool for the growth and development of the

economy. In Nigeria some of the problems facing privatization and commercialization program include: Lack of accountability Corruption Lack of transparency Inconsistency

It is important to note that the major function that inform the establishment of these public enterprises are to control the resources and raise funds for the provision of certain infrastructural facilities particularly in services acquiring heavy financial investment e.g. railway, electricity, telecommunication etc, also generating 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.

However it is based on the problems, that the basic propositions of this privatization and commercialization program are being hindered. In trying to look into these discrepancies and proffer anyway forward towards a state of privatization and commercialization of public in Nigeria that enhance economic growth and development, this research work emanate. Before the

introduction of SAPStructural Adjustment Program in Nigeria Anyanwu 1993,251 reconciled that about 500 companies and parastatals in which the Federal government had invested over 36 million naira as equity and subventures from which she has been realizing less than 500 million only annually. These also incurred huge debts which are rapid and serviced by government. Also government spent about 40 of its capital investment budget on public enterprise, the provision of whose goods and services were often costly, inefficient and subject political manipulation and thus federal government decided to privatize and commercialize fully some of its public enterprise. This policy however, has been characterized by several problems like corruption, transfer of assets, siphoned of public funds, political manipulations etc. Ogbonna 2004 recently the senate invited the former heads of bureau for public enterprise Matlan ElRefai, Mrs. Ireme Chibue etc. to sat about 50 of the government companied, that have been privatized failed to operate properly due to lapses in the process and to give details of hour which was generated and which account monies will paid into Daily sun 20/06/2011;8. According to Nwosu 2007, privatization under mines growth, exacerbate perpetuates economic, social and

political injustice, between the healthy class and poor majority perpetuates foreign economic domination, jeopardizes social welfare and human conditions in the society. Therefore it is on this ground that the research focuses on the extent to which privatization and commercialization have affected the economy, examining the effects of the program on the Nigerian economy.

1.3 OBJECTIVE OF THE STUDY:

According to H.R Zayyad they are many objectives of the program privatization and commercialization:

To encourage share ownership by Nigerians in productive investment with or to owned wholly or partially by the government, and in the process to broaden the Nigeria capital market.

To reorientate the enterprises for privatization and commercialization towards a now horizon or performance improvement, viability and overall efficiency.

To ensure positive return or public sector investments in commercialized enterprise.

To check the present absolute dependence of commercially oriented parastatals on the treasury for funding and to encourage their approach to the Nigerian capital market.

To initiate the process of the gradual cession to the private sector of such public enterprises that by the nature of their operations and other socioeconomic factors is best performed by the private sector.

To create a favourable investments climate for both local and investors.

To provide institutional arrangements and operational guidelines that will ensure that by the nature of their operations and after that the gains of privatization and commercialization sustained in the future.

1.4 STATEMENT OF HYPOTHESIS:

Hypothesis is a reasonable guess or intellectual guess or suggestion based in facts and assumptions stand to be rendered valid or invalid. The following hypothesis has been drawn by the purpose of the study:

Ho: privatization and commercialization has no significant impact on the GDP in Nigeria economy.

Hi: privatization and commercialization has a significant on the GDP in Nigeria economy.

1.5 SIGNIFICANCE OF THE STUDY:

This research work will help the government and reader understand those benefits that privatization and commercialization program embodies which we have neglected and politicized within the past.

In understanding this on the side of the government, it will allow then to return and work towards real implementation of it and thereby creating a room for the rapid growth and development of this country.

On the other hand, it will go a long way to create an avenue for more academic research. The important of any research is to find out solutions that faces mankind and the environment of the society. The study creates awareness to every citizen of this country and commercialization of this privatization are

commercialization of public enterprise in Nigeria economic development.

1.6 SCOPE OF THE STUDY

The scope of this research work focused strictly on the impact of privatization and commercialization programmes on the Nigerian economy 1980 to 2010.

1.7 LIMITATION OF THE STUDY

This project will not go beyond identification of problems confronting public enterprises, the need for privatization and commercialization. This project will also suggest the form of privatization and commercialization to take future prospect of public enterprises after the system must come into operation. This project is also highlights the effects/impacts of privatization and commercialization of public business enterprises on the economy of the country.

1.8 DEFINITION OF TERMS

PRIVATIZATION AND COMMERCIALIZATION

Privatization can be defined as the transfer of ownership and control of enterprises from the state to the private sector.

This is the outright sale of public corporations to private individuals or investors. There is a transfer of ownership and control for government to the private individuals.

Privatization can be defined as any of the variety of measures adopted by the government to expose a public enterprises competition or public enterprises and according to reduces the right of public ownership or control or management IKEME, 1997.

The privatization and commercialization not of 1988 and B.P.E Bureau of public enterprises defined privatization as the relinquishment of part of all of the equity and other interest had by the federal government or any of its agencies whether wholly avoid federal government.

COMMERCIALIZATION: This is the act of making a public operation more profit oriented, as private individuals are employed into management for efficiency while the ownership and control of the company still remains with the government.

PUBLIC SECTOR: This is a sector in the economy that is dominated by the government, the private individuals and capitalists play a minor role. Here, government regulates and control the activities.