THE IMPACT OF PRIVATIZING PUBLIC ENTERPRISES AND ITS IMPLICATIONS ON THE NIGERIA ECONOMY

THE IMPACT OF PRIVATIZING PUBLIC ENTERPRISES AND ITS IMPLICATIONS ON THE NIGERIA ECONOMY

( A CASE STUDY OF FEDERAL REPUBLIC OF NIGERIA)

ABSTRACT

This study examines the impact of privatizing public enterprises and it’s implication on the Nigeria economy. It seeks to investigate the reason for privatizing public enterprises in the country in which the bureau for public enterprises is chosen as the case study of the study. In conducting the research primary and secondary sources of data collection were used to gather facts relating to the study. Infact, public enterprises are established by government in order to provide social goods and services for the member of the public at reasonable cost or prices and not with profit motive. But, the poor performance and the inability of public enterprises to spur the expected growth in the economy, informs the issue of privatization in Nigeria. This is because, privatization is therefore seen as a means of restructure the economy. But its implementation has been very poor and not satisfactory in Nigeria. Despite this, it is obvious here in this study that privatization will have a positive impact on the nation’s economy if it is well implemented. This is due to the finding the researcher has discovered so far.

CHAPTER ONE

1.0 INTRODUCTION

This work is concerned with the impact of privatizing public enterprises and its implication on the Nigeria Economy in which the Bureau for public enterprises is chosen as the case study.

Before now, there have been many years of exhaustive deliberations by stake holders on how to put the Nigeria economy on the path of sustainable growth and development. Presently a consensus has emerged on the imperative of privatization of state owned enterprises. It is estimated that successive Nigeria Government have invested up to N800 Billion in Public owned enterprise but, the annual return on this huge investment has been well below (10%) ten percent. These ineffectiveness and huge losses are charged against the public treasury. In the same vein, with the declining revenue and escalating demand for effective and affordable social services, the general public has stepped up it yearning for state owned enterprises to become efficient.

Not only that, there are other a lot of the problems that are being encountered by the state enterprises such as detective capital structure, excision bureaucratic control or the intervention, in appropriate technology, gross incompetence and mismanagement, blatant corruption etc these problems take a heavy toll on the Nigeria economy. And thus the quest for a well designed and single minded pursuit of privatization programme.

Having known this, the meaning of this privatization refers to the transfer of government ownership to private ownership. This is by the evidence that state is not the most capable of running this kind of enterprise that are commercial in nature. Private investor will however to be welcome in Nigeria as partners in progress led by the public sector. Through this process of privatization, the government would therefore surrender those potentially and the vitally profitable state industries. This means that, the state would forth will librate the creative force of the economy-usually buried in bureaucratic deep water, corruption and nepotism by not allowing the further laying of its hands on the activity of the firms concerned.

The bureau of public enterprise was established to among other function implement the policies of the national country on privatization, and to prepare public enterprise approved by the council for privatization.

Notwithstanding, the researcher has revealed that the privatization exercise will among other show the following positive impact.

1. Reduction the recurrent expenditure of government
2. Reduction in public sector borrowing

The negative impact includes:

1. Concentration of wealthy in the hands of few individual
2. Marginalization of the masses of the population through the denial of basic needs.

The method involved in privatization which involves public share, management buyout, deferred public offer etc would make the exercise more successful, if carefully and properly handled.

1.1     BACKGROUND OF THE STUDY

Privatization is a method that is aptly used by most government in Nigeria, most especially democratic setting by allowing private sector or individual to intervene into public enterprise so as to restructure the declining that has occurred to the enterprises economy.

Perhaps, there are many definitions of privatization. However, the 1988 Decree No, 25 defined privatization as the relinquishment of part of the equity and other interests held by the Federal Military Government or its agency in enterprises whether wholly or partly owned by the Federal Military Government.

Also, in the words of Olaniyan in Ozor (2004:168) privatization involves the government divesting itself of its controlling interest in various industrial and service sectors of the economy and allowing significant private participation in its place with the intention of creating a more competitive climate and profit orientation with the sector.

This privatization can not take place where there is no state with enterprises. This is because we say that public enterprises are those public organization that have emerged as a result of government acting in the capacity of an entrepreneur. It is also government owned, organized commercial or semi commercial undertaking which are established by law and are primarily economic, but posses social and political objectives and characteristics which distinguish them from other enterprises.

Unfortunately, it appears that despite huge financial commitment of government into these enterprises, the anticipated results is far from been realized owing to numerous problems or obstacles that I have earlier mentioned e.g blatant corruption. Therefore, government was left with one option of diverting her interest in this non-profitable venture and investing of public funds coupled with decline in government revenue. These are scenario formed the basis for the introduction and the implementation of the policy of privatization in Nigeria with both positive and the negative implication.

1.2 STATEMENT OF THE RESEARCH PROBLEM

Privatization is a political process, at the same time it has both economy and social implication affecting not only the performance of public enterprise, but also their social welfare and stability. There is a saying that when a whole lot have been said, a whole lot still need to be done. This is to say that there are problems that are encountered by this economic salvage exercise known as privatization.

Some of these problem are directed to the government, some to the capital market and others to regulatory agencies as they tackle problem relating to the macro-economic stability one problem facing the government and the privatization is the transference of their Nigeria economy from foreigner to few privileged Nigeria which is obviously difficult especially in a corrupt like ours.

There is also problem of pattern of generating human resources: it is nepotistic pattern that is based on favouritism and God fatherism syndrome, merit has no place, and some of staff are not qualified to be in the position they occupy especially those that are appointed by political leaders.

There is also problem of inadequate incentive and improper management and maintenance that will cause the staff for superior performance in order to bring out the best in them.

Another problem involves requiting. This is when government intervention influences the distribution of income and wealth in a desired fashion especially in the provision of goods and services as education and health etc in those area or instance, private provision will lead to inequality.

Finally, under privatization, distribution is highly unequal and some individuals are denied the opportunity and liberty to choose because of their lack of economic resources.

1.3 OBJECTIVE OF THE STUDY

Essentially, the objectives of this study are:

1. To examine the procedures that are involved in the process of privatization.
2. To identify a sound knowledge about privatization
3. To state clearly the positive and negative impact of privatization on the Nigerian economy.
4. To educate the general public and students for further research about privatization.

1.4 SIGNIFICANCE OF THE STUDY

1. It allows students to have sound knowledge about privatization.
2. The significance of this work lies in the fact that is benefiting both the academician and non academician and also the politician in Nigeria.
3. It makes the general public to evaluate the dysfunction of privatization and the method to curb those defects.
4. Finally, it makes government and individual to handle public enterprise properly.

1.5 SCOPE OF THE STUDY

This study tends to explain the impact of privatizing public enterprises and its implication on the Nigeria economy under review of year 2006 to 2010 with a case study of the Bureau of Public Enterprise. Also the area of the researcher on how to re-engineer our economy for the betterment of people in the society.

1.6 LIMITATION OF THE STUDY

1. FINANCE: As this topic requires traveling out to get information, the researcher was unable to reach the peak due to lack of finance.
2. TIME: This is another factor hat militates against timely completion of this work. The time allocated for the completion and the submission was short which made it quite difficult for the researcher to collect relevant data. Also, lectures have to be attended in the school etc.
3. UNCOOPERATIVE NATURE OF THE PUBLIC: Most of the general public are not helpful towards the research work due to their inaccessibility to records.

1.7 RESEARCH QUESTION

Despite the background of the project and the statement of the general problem that are associated with the study, the researcher wish to formulate these questions for proper conduct and investigation of the project.

1. Does privatization ready have any implication on the Nigeria economy?
2. Has privatization any impact on the Nigeria economy or to the general public?
3. Does this privatization can be effectively carried out by private body?

1.8 DEFINITION OF RELEVANT TERMS

1. Bureau: This means an office or government department.
2. Corruption: This is an immoral and dishonest act especially when someone is taking bribe.
3. Parastatals: These refer to co-operations board council commission, or other government agencies set up by specific act of the National assembly or military decree and companies in which government has controlling interest.
4. Private Enterprises: These are kind of enterprises that are owned, financed and managed by a single individual or group of the individual.
5. Enterprises: These are the business hat are set up for the purpose of providing goods and services for the group of people.
6. Public enterprise:- Adamalekun (2003:3) defined public enterprises as those public organization that have emerged as a result of government acting in the capacity of an entrepreneur. Public enterprises are those body that are set up by the government to carry out the public interest, different kinds of operations or renders various types of services. It normally owned and financed by the government.
7. Economy: This is the relationship between production trade and the supply of money in a state.
8. Impact: The positive effect that something is having
9. Implication: The negative effect on something
10. Denationalize: This is another word for privatization, that is, the act at transferring the nationalized industry from public to private ownership.
11. BFE: This means Bureau for public enterprises.