PROBLEMS AND PROSPECTS OF
PRIVATIZED PUBLIC CORPORATIONS IN NIGERIA
[A CASE STUDY OF
POWER HOLDING COMPANY OF NIGERIA PLC, KADUNA]
ABSTRACT
One of the problems of public
enterprises the world over, but more particularly in developing countries is
inefficiency leading to waste, slow growth and in ordinance dependence on government
support even their activities are apparently profitable ones. As a way of
improving performance of public enterprise through which profit orientation
will be the motive of these enterprises. In this study, therefore, conscious
attempts were made to look critically into problems and prospects of
privatization of PHCN and the research work is divided into five chapters.
Chapter one is the introduction, background of the study, statement of the
problems, objectives, significant of the study, research hypothesis and scope
of the study and definition of terms. Chapter two deals with review of related
literature such as the concepts of privatization, origin of public enterprises
and evolution of privatization in these problems of privatization PHCN. The chapter
three of the study places emphasis on the methodology used in carrying out the
research such as the population, sample size and sampling procedure, research
instrument as well as method of data collection and analysis. Chapter four of
the study delves into presentation, analysis and interpretation of data,
descriptive and statistical methods such as Chi-square (X2) was
employed on the causes of analyzing the data collected. Conclusively, chapter
five comprises of summary of finding, conclusion and recommendation where it
was concluded that for effectiveness of privatization of NEPA, it needs to be
handled by experts devoices of statements, as this would mean creating new
capitalist or enriching the existing ones the more at the expense of large proportion
of the public.
TABLE OF CONTENTS
Title page i
Declaration ii
Approval page iii
Dedication iv
Acknowledgement v
Abstract vi
Table of
Contents vii
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of
the Problem 3
1.3 Objectives of the Study 4
1.4 Research Questions 5
1.5 Research Hypothesis 5
1.6 Significance of Study 6
1.8 Scope and Limitation of the Study 7
1.9 Definition of Terms 8
CHAPTER TWO
LITERATURE
REVIEW
2.0 Introduction 9
2.1 Historical Background of Privatization 11
2.2 Objectives of Privatization in Nigeria 13
2.3 Policies of Privatization and Commercialization in Nigeria 15
2.4 Reasons
for Privatization and Commercialization 23
2.5 Problems of Privatization and Commercialization in Nigeria 25
2.6 Theoretical Framework 29
2.7 The Prospects of Privatization and Commercialization in Nigeria 34
CHAPTER
THREE
RESEARCH
METHODOLOGY
3.1 Research
Design – – – – – – – – 37
3.2 Research
Population and Sample Size – – – – – 37
3.3 Instrument
for Data Collection – – – – – – 38
3.4 Justification
of Method Used – – – – – – 39
3.5 Method
of Data Analysis – – – – – – – 40
3.6 Justification
of Instrument Used – – – – – 41
CHAPTER
FOUR
PRESENTATION
AND DATA ANALYSIS
4.0 Introduction – – – – – – – – 42
4.2 Data
Presentation and Analysis – – – – – – 42
4.3 Summary
of Findings – – – – – – – 51
4.4 Proof of Hypothesis – – – – – – – 52
CHAPTER FIVE
SUMMARY,
CONCLUSION AND RECOMMENDATIONS
5.1 Summary – – – – – – – – – 56
5.2 Conclusion – – – – – – – – – 56
5.3 Recommendations – – – – – – – – 58
Bibliography – – – – – – – – 61
Appendix
I – – – – – – – – – 62
Appendix II – – – – – – – – – 63
CHAPTER ONE
INTRODUCTION
1.1 Background
of the Study
Privatization of state-owned enterprises (SOEs) has become
a key component of the structural reform process and globalization strategy in
many economies. Several developing and transition economies have embarked on
extensive privatization and commercialization programmes in the last one and a
half decades or so, as a means of fostering economic growth, attaining
macroeconomic stability, and reducing public sector borrowing requirements
arising from corruption, subsidies and subventions to unprofitable SOEs. By the
end of 1996, all but five countries in Africa had divested some public enterprises
within the framework of macroeconomic reform and liberalization (White and
Bhatia, 1998).
In line with the trend worldwide, the spate of empirical
works on privatization has also increased, albeit with a microeconomic
orientation that emphasizes efficiency gains (La Porta and López-de-Silanes,
1997; D’Souza and Megginson, 1999; Boubakri and Cosset, 1998; Dewenter and
Malatesta, 2001). Yet despite the upsurge in research, our empirical knowledge
of the privatization programme in Africa is limited. Aside from theoretical
predictions, not much is known about the process and outcome of privatization
exercises in Africa in spite of the impressive level of activism in its
implementation.
Current research is yet to provide useful insights into the
peculiar circumstances of Africa, such as the presence of embryonic financial
markets and weak regulatory institutions and the manner in which they influence
the pace and outcome of privatization efforts. Most objective observers agree,
however, that the high expectations of the 1980s about the “magical power” of
privatization bailing Africa out of its quagmire remain unrealized (Adam et
al., 1992; World Bank, 1995; Ariyo and Jerome, 1999; Jerome, 2005).
As in most developing countries, Nigeria until recently
witnessed the growing involvement of the state in economic activities. The
expansion of SOEs into diverse economic activities was viewed as an important
strategy for fostering rapid economic growth and development. This view was
reinforced by massive foreign exchange earnings from crude oil, which fuelled
unbridled Federal Government of Nigeria (FGN) investment in public enterprises.
Unfortunately, most of the enterprises were poorly conceived and economically
inefficient. They accumulated huge financial losses and absorbed a
disproportionate share of domestic credit. By l985, they had become an
unsustainable burden on the budget.
With the adoption of the structural adjustment programme
(SAP) in 1986, privatization of public enterprises came to the forefront as a
major component of Nigeria’s economic reform process at the behest of the World
Bank and other international organizations
1.2 Statement
of the Problem
The
first problem recorded with the privatization programme in Nigeria was lack of
relevant fundamental economic environment needed before taking off. Some public
enterprises that were not ripe enough in terms of competitiveness were
privatized. Consideration was not given to capable buyers but to political
cronies who could not successfully manage their new enterprises. This led to
closure of some of these privatized firms. Lack of transparency in the entire
sales has shown up its negative repercaution.
It is reported that privatized firms in
Nigeria are refusing monitoring by Bureau of Public Enterprises. In this wise
there has been no substantial studies on the operational activities of the
privatized firms. The expected difference in the perception of efficiency after
privatization could not be proved. In all, it is therefore difficult to
identify the performing and non-performing privatized firms.
Among the pertinent issues to be addressed are: What is the
extent and pattern of privatization and commercialization? What have been the
results of privatization in Nigeria? Has privatization and commercialization
improved enterprise performance as anticipated? Finally, what policy lessons
are to be learned from the privatization experience so far? These are the
issues that come into focus in the study.
1.3 Objectives
of the Study
The objectives of the
study are:
i.
To assess the effort of privatization in
Nigeria, by examining the antecedent, pattern, volume and status of
privatization undertaken so far.
ii.
Find out the problems and prospects of the implementation of
the privatization programme on public enterprises.
iii.
Find out to what extend the programme can be able to get rid
of ineffectiveness and inefficiency of public enterprises.
iv.
Find out its possibilities of fostering development on the
Nigeria economy.
v.
Find out if will improve the welfare and standard of public
workers.
1.4
Research Questions
i.
What are the
antecedent, pattern, volume and status of privatization in Nigeria?
ii.
What are the problems
and prospects of implementation of privatization programmes in Nigeria?
iii.
To what extent can
privatization programme help to get rid of ineffectiveness and inefficiency of
public enterprises?
iv.
What are the
possibilities of fostering development in Nigerian economy?
v.
Can privatization
improve the welfare and standard of public workers?
1.5
Research Hypothesis
The following hypotheses were made
Ho1: Privatization of Public Enterprises has no
significant effect on Nigeria economy.
Hi1: Privatization of Public Enterprises has significant
impact on Nigeria economy.
1.6
Significance of Study
Privatization has its expected
benefits which prompted its emergence all over the world. The success level of the programme or failure
level depends on the procedure employed and sincerity of purpose attached from
country to country. Therefore the following
are the reasons importance of this study.
When completed this study should be a
good partner to the privatized enterprises that will be used for performance
analysis. It will provide a mirror to the enterprises from where they can view
themselves, the way we see them from outside.
The reports and recommendations in
this study should serve as evidences of findings and suggestions to the
government before privatizing and commercializing other public enterprises that are yet to be
privatized or those partly privatized that will soon be fully privatized.
It is expected that BPE will be
interested in this study as it can provide some guidelines into a better way of
handling the programme. BPE is expected to borrow a leaf from those countries
that successfully implemented the programme and got candid positive results.
Finally the project will be of
immense importance to the general public either for research work or just to
increase their knowledge and create more awareness on the concept of
privatization and commercialization programme as well as the problems and
solution to the problems of Nigeria public Nigeria.
1.7 Scope
and Limitation of the Study
This study intends to cover assess
the effort of privatization and commercialization exercise on public enterprises
in Nigeria. Also the work will be limited to Power Holding Company of Nigeria
Plc. It will also measure the effect of the privatization on the national
income, government fiscal condition and capital market.
To undertake a study of this nature
is not easy because it is a wide field of study and thus has various
limitation/problem.
The first limitation is for the
success of any research work depends on availability of fund. The fund is
needed for buying of materials, browsing etc.
In the case of primary data, the
respondent may not be granted the audience for interview another limitation is
high cost place or more current information on the net. A long the line, the
administrative bottleneck of the organization may jeopardize the effort of the
researcher in union case the management would refuse to disclose vital
information as a matter of policy.
1.8 Definition
of Terms
·
Commercialization:
Transferring of Government control of an enterprise to a new management for the
purpose of cost effectiveness.
·
Management
Contract: Contracting of a government firm to
private firm for management purpose.
·
Globalization:
Cross boarder operations of economic activities, production, investment,
financing, technology utilization and marketing.
·
Deregulation:
Elimination or substantially reducing the regulation/ control of price and
entry into domestic business activities.
·
Liberalization:
Freeing the economic activities in order to provide a conducive economic and
business climate necessary for continuous growth.
·
Shares:
Part as portion of target amount which
is divided among general or among people or to which many people contribute.
·
Share
Holders: Owners of shares in Business Company.