THE EFFECT OF PRIVATIZATION AND COMMERCIALIZATION ON THE NIGERIAN ECONOMY (1970-2010)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

To be able transform into an industrialize economy; an underdeveloped economy has to be privately and commercially developed.

The importance of establishing public enterprises or corporation 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 enterprise sector.

Following the trend the Nigerian economy has come to embrace privatization as a cardinal principle of the state’s 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 being commonly non successive because of government attitude towards public enterprises business management. In Nigeria, most government owned industries and establishments remain citadels of corruption, studies in inefficiently and consequently a heavy drain on the economy. As a means of combating this menace, the (IMF) an

(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. For example, Nigerian breweries changed from the most inefficient and loss-making company before privatization to one of the most profitable business in Nigeria. Nigeria has more than 1,800 public enterprises at federal and state levels which can be categorised as follows;-

1. Public utility providing infrastructural services.

1. Strategic industries such as petroleum and petrochemical, fertilizer plants, iron steel.

1. Economic /commercial enterprises such as manufacturing of consumer goods insurance ,banks and hotel ,and

1. Departmental / stationary boards designed to serve specific socials or

development roles as university and research institutes. Ake (1981).

It is important to note that the introduction of SAP in 1986 serves as a bench mark in economic policy-making in Nigeria with the resultant, liberalization, deregulation, privatization and commercialization measures.

The critical question here remains how many of these policies have been able to restructure the political economy of Nigeria and in turn alleviating the yearnings and aspiration of the working class.

The world no doubt is moving towards capitalism and liberalization and any nation that is not moving towards this direction is seen as either not developing or even retrogressing. A capitalist economy is a free market economy which allows most economic decisions to be guided by the twin forces of demand and supply. Since capitalism discourages monopoly but encourages competitive market, it therefore enhances efficiency and high productivity which is very vital in any developing economy.

1.2 STATEMENT OF THE PROBLEM.

In a developing country like Nigeria, privatization and commercialization of public enterprises 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;

1. lack of accountability

1. corruption

1. lack of transparency

1. inconsistency

it is important to note that the major function that informed the establishment of these public enterprises are to control the resources and raise funds for the

provision of certain infrastructural facilities particularly in services requiring heavy financial investment e.g. railway, electricity, telecommunication etc, also to perform the function of generating revenue that will add to financial development program and projects as veritable 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 a way forward towards a state of privatization and commercialization of public enterprises in Nigeria, that enhances economic growth and development, this research work emanated.

1.3    OBJECTIVE OF THE STUDY.

This study has the main objective of ascertaining the effect of privatization and commercialization of enterprises on the Nigerian economy.

Specifically we intend to compare the pre and post privatization and commercialization era, so as to determine the specific effect.

1.4    STATEMENT OF HYPOTHESIS.

The hypothesis tested in this study is stated in its null form as follows:

Ho: privatization and commercialization has no significant effect on the GDP in

Nigeria.

1. SIGNIFICANCE OF THE STUDY

This research work will help the government and readers to 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 them to rethink and work towards real implementation of it and thereby creating a room for the rapid growth and development of this country.

At the other hand, it will go a long way to create an avenue for more academic research. The importance of any research is to finding out solutions that faces mankind and the environment or society. The study creates awareness to every citizen of this country and economic planners on the implication of these privatization and commercialization of public enterprises in Nigeria economic development.

1.6 SCOPE OF THE STUDY

The scope of this research work focused strictly on the effect of privatization and commercialization programmes on the Nigerian economy 1970 to 2010.

1.7     DEFINATION 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.

IKEME,(1997) define privatization as any of the variety of measures adopted by the government to expose a public enterprises competition or to bring in private ownership , management or control in to public enterprises and accordingly to reduces the weight of public ownership or control or management.

The privatization and commercialization net of 1988 and Bureau of public enterprises defined privatization as the relinquishment of part or all of the equity and other interest had by the federal government or any of its agencies whether wholly owned by the federal government.

Although privatization is not defined in the public enterprises (privatization and commercialization) Net of 1999, we can assume that it deemed to have the

same meaning. From the definition three things are clear first for privatization to take place, there must be the existence of public enterprises which need to be converted into private enterprises; secondly there is the reasoning that private ownership control would be better that public o ownership.

Finally privatization is premised that there is problem with the public ownership of enterprises and privatization is part and parcel of the reform a gender to turn around. They are enterprises so they can deliver goods and services efficiently and effectively. As we shall show later, this is reasoning ideologically loaded and cannot be substantiated by the existential reality of Nigeria.

PUBLIC CORPORATIONS; - public corporation or enterprises as defined by Ademolekun (1983), are organization that engage as a result of government activity in the capacity of an entrepreneur. These can be seen as those enterprises or corporation built, owned and managed by the government. They are being financed by public funds especially through taxation and also operate on monopoly.