MANAGING PRIVATIZATION FOR ECONOMIC BENEFITS OF NIGERIA (SELECTED STUDIES FROM THE SOUTH EAST ZONE)

ABSTRACT

Organizations must keep pace with modern world of enterprises and industry. In the second world, state corporations still account for more than  half  of  the  industrial  output  and  in  far  advanced  third  world, societies   are   being   shaped   by   market   economies.   This   involves privatizing what was once nationalized industries and removing major obstacle  to  trade.  Privatization  when  well  conceived  is  the  process whereby state-owned enterprises are sold to entrepreneurs who will compete without any official projection. For it to benefits society, there must be  true  nationalism,  honesty of  purpose,  initiative  and  sense  of responsibility to the society. Therefore, enterprises and suggest ways through which privatization of these enterprise can be carried out. The procedures adopted in carrying out the research are mainly historical and analytical. The sources of the data collected are both primary and secondary. The hypothesis of this study will be tested on the basis of the data collected and these tests will be conducted through the use of Chi-

Square (x2) tests. The project state why public enterprises are inefficient, the need to privatize them and the implication of privatizing them, as can be interred from chapters I-iv. The Federal Government is embarking on

the  privatization  of  state  owned  enterprises  as  a  way  of  putting  the Nigeria economy on the path of sustainable development. The objective is to realign our economy with the global trend by restructuring the public sector in a manner that will effect a revitalized,  efficient and  service oriented sector. So far, privatization in Nigerian can be said to be a curse than a blessing. It has neither generated innovative entrepreneurial spirit among  the  few  who  bought  the  public  enterprises  with  an  unearned income nor  in  anyway  increased  the  general  productivity  of  Nigeria. Therefore, some recommendations to ensure the successful privatization and  efficiency  of  these enterprises were  advanced  and  the  researcher concluded accordingly.

CHAPTER ONE INTRODUCTION

1.1     BACKGROUND OF THE STUDY

It is common knowledge that the economic depression of the late 1980s with its severe consequences led to a situation where governments, that usually had no business in running enterprises, dabbled into business. Consequently governments all over the world especially those in developing   countries   embarked   on   the   establishment   of   public enterprises.  This trend  arguably  lends credence to the Keynesian,  the underdevelopment and the dependency theories.

When Nigeria attained political independence in  1960,  she  had  weak industrial  base,  near  absence  of  basic  infrastructures,  an  agricultural sector   producing   mainly   primary   products   for   export   and   gross inadequate capital and technological base. To say the least, the economy was very weak. Based on the three theories (the Keynesian, the underdevelopment and the dependency) and with the objective in mind to stimulate and accelerate national income development, coupled with the danger of leaving vital sector of the national economy to the whim and caprices of the private sector who often than not are under the direct and remote  control  of  foreign  large  scale  industrial  concerns,  made  the creation of public enterprises in Nigeria became a variable option.

In an attempt to pursue these objectives and prompt the economy, the government over the years has involved itself in the direct productive and other sundry activities that really ought to be left in the hands of the private sector. The government floated all sort of companies ranging from banking and insurance, oil producing and marketing, Hotel and Tourism, Mother Assembly Plants, paper and steel mills, Roads, Rail, sea and air transports, sugar, cement and fertilizer plants to mention just a few.

Today, the world is changing and with it our ideas about the role of the state in economic and social development. Therefore, the need for privatization varies from country to country and certainly from the developed   economies   to   the   developing   ones.   The   motives   for privatization  boils  down  to  either  economic  or  political  or  both.  In Nigeria, the federal government had introduced a twin policy of privatization and commercialization into its economy. Since the introduction of this policy, there had been hues and cry over the desirability, inevitability and workability. Not to worry, one of the basic thrust of government in implementing the various economic reforms was to empower the national economy for the challenges of globalization. The major plan of the federal government agenda to reform and structure her battered economy towards greater productivity and efficiency is through the privatization and commercialization programme.

In this programme, government owned enterprises were slated for privatization and commercialization. The main thrust of the programme is the transfer of ownership in public enterprises from the government to the private sector. According to the vice president Atiku Abubakar and chairman on privatization:

“the decision to dispose government of its share in some  companies  was  not  merely  to  get  rid  of them,  but  to diffuse  their  ownership  throughout the country and to ensure that the vacuum created by the withdrawal of the Federal Government was filed by selected long term investors, who are expected to provide leadership and add values to the companies.

Note must be taken of the fact that under the provisions in the enabling public  enterprises  (privatization  and  commercialization)  Act  of  1999, some enterprise slated for commercialization have already upgraded to full privatization based on the changing circumstances.  It is therefore obvious form the foregoing that a major objective of privatization and commercialization was to reduce the financial exposure of government in these enterprises and hence reduce the burden on the Federal Budget. This   is   best   approached   by   identifying   the   factors   that   can   be manipulated. The first of such factors is the enterprises performance.

This research therefore focused on this topical issue by studying the cause of the poor performance of public enterprises in Nigeria, the reasons for

privatization policy and process of privatization, the implication (positive and  negative)  ad  long-run  and  short  –run  effects  also  studies.  The problems envisaged were also studied.

1.2     STATEMENT OF THE PROBLEM

There is a thin line between the public and the private sectors in Nigeria. This is to the disadvantage of the private sector. Uzoaga and Okafor (1975) has this to say, “the increasing bureaucratization of economic life has made it difficult to perceive only but a thin line that separate the “real”  private  from  the  “operational”  public  sector  in  Nigeria”2.  The Udoji report 1975 paragraph 28 emphasized this increasing bureaucratization of economic life when he observed that:

Today the public services of Nigeria are involved in affairs that were beyond the imagination of our civil  servants  15years ago.  We  are  now  selling insurance and minting coins, we are sailing ships and refining all ……………. We are banking and building.

The danger of leaving vital sector of the national economy to the whim and caprices of the private sector who often than not are under the direct remote  control  of  foreign  large  scale  industries  concerns,  made  the creation of public enterprises in Nigeria became a variable option. In the years past when the economy was buoyant, government did not bordered about  the  performance  of  these  enterprises  in  terms  of  returns  on

investment. But with the economic recession and embarrassing dwindling revenue, the government accused the public enterprise of draining the resources of the nation. Consequently, many commissions of enquires and study group were set up to look into the problems of government parastatals. Based on the recommendations to the government, the Babangida’s government gave them a knock in his 1986 budget speech when he said that:

“Parastatals have generally come to constitute an unnecessary  high  burden  on  government resources. As from 1986, the volume of non- statutory transfers to all economic and quasi- economic  parastatals  would  constitute  no  more than 50% of their present levels”4

The fundamental questions we would concerned ourselves with are:

     Why are these public enterprises performing so poorly?

        Will privatization which is seen as a panacea run into problems of implementation?

        Will privatization compound our economic problems because of extreme high cost of goods and services?

        Is the problem really that of privatization rather than how to make these public enterprises efficient?

1.3     OBJECTIVE OF THE STUDY

Privatization is first and foremost a political process although carried out as an economic exercise. In its purest form, privatization is the transfer of total equality ownership and control of public enterprises to private sector by the sale of on going concerns or of the assets following liquidation. It is an asset divestiture process {IFC, 1995}. Privatization according to the government is a carefully planned and systematically implemented programme of government withdrawal from the control of business enterprises which can be more effectively and efficiently run by private operation.

This study will try to achieve the following objectives:

1.       Find  out  the  causes  of  poor  performance  of  the  public  sector enterprises.

2.       Look into the nature of private sector’s investment and assess their readiness to carryout the transferred responsibility.

3.       discover the positive and negative implications of privatization of public enterprise; and

4. Suggest possible ways of implementing the policy.

1.4     HYPOTHESIS FORMULATION

It is against the background of the problem identified and the objectives of this study that the following propositions were made:

(1)     Ho:     The public enterprise are efficiently managed

H1:   The public enterprises are not efficiently managed

(2)     Ho:    Privatization will not compound our economic problems in the short-run because of cost of goods and services.

H1:     Privatization will compound our economic problems in the short-run because of high cost of goods and services.

(3)     Ho:     Privatization will not bring about increased efficiently in the enterprise privatized.

H1:     Privatization will bring about increased efficiency in the enterprise privatized.

1.5     LIMITATIONS OF THE STUDY

This study witnessed some limitations from a lot of factors. These factors put a check to a hundred percent comprehensiveness of this research. Some of these constrains includes: finance was a militating factor against this study to enable the researcher carryout a comprehensive research. Difficulty in obtaining information – The researcher encounter a lot of difficulty in obtaining information through interviews and questionnaires due to the attitude problems of some of the staff of the enterprises to be

privatized. Some claimed time constraints to turn in the questionnaire, while majority of others were reluctant in offering information for fear of disclosing their view to the public, which they feel may cost them their jobs. This is rather surprising in spite of the assurance that their views will  be  treated  with  confidentiality.  Government  personnel  especially those  employed  in  the  ministries  to  be  privatized  were  the  greatest culprits. Most were unable or rather refused to render information on the efficiency and profitability of government enterprises.

However,  the  information  gathered from  interview and  questionnaires were supplemented by the gathered from secondary source: time was also a check on the comprehensiveness of this research as limited time was also needed for other obligations as a student cum worker. All these factors mentioned above made it difficult to bring this work to its present stage.

1.6     SIGNIFICANCE OF THE STUDY

As the study aims at managing privatization for economic benefits of Nigeria, it is the hope of this researcher that the result of my work would contribute in no small measure to the existing knowledge for a more purposeful management philosophy. It must also be borne in mind that learning institutions are established to find solutions to economic and other social cum political problems. As part of contributions of higher

learning institutions to the nations, researches are conducted to find solutions to these problems.

At the end of this study, this research must be in a position to state the course of the inefficiency of public enterprise in Nigeria. Why most of these enterprises should be privatized and how they should be privatized so as not to compound our economic problems. The effect of the state- owed enterprises now privatized, many argued is nothing to write home about. According to Imaga (2002:2), so far, privatization Nigeria has been a curse instead of a blessing to the society. It has neither generated innovative entrepreneurial spirit among the few who bought the public enterprises with an unearned income nor in anyway increase the general productivity of Nigeria.

1.7     SCOPE OF STUDY

The samples for this study were drawn from four (4) cities in four (4) of the five (5) states the research covers. These cities are Abakailiki, Awka, Enugu,   and   Owerri.   These   cities   were   chosen   because   of   their accessibility to the researcher considering the limited time for the study and the financial constraint of the researcher.

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