PROBLEMS AND PROSPECTS OF PRIVATIZATION AND COMMERCIALIZATION OF GOVERNMENT PARASTATALS IN NIGERIA
This topic, problems and prospect of
privatization and commercialization of government parastatals in Nigeria is the
attempt to help the general public to know about the privatization
commercialization of government parastatals in Nigerian. Moreover, to enable the public to contribute
their own quota in the privatization issue and find out the problems and
prospect associated with the porgammes. The chapter one deals with the
introduction, the historical background of the programmes, and statement of problems
objectives of study, significant of study, scope and limitation and lastly
definition of terms. In this project writing the chapter’s one from chapter one
to five which give the view of what privatization and commercialization of
government parastatals are all about.
Table of contents
CHAPTER ONE: INTRODUCTION
Background of study 1
Statement of problem 17
Objectives of the stud 17
Statement of Hypotheses 18
Research questions 19
Significance of the study 19
Scope of the study 20
Limitation of the study 21
Definition of terms 22
CHAPTER TWO: REVIEW OF RELATED LITERATURE
The concept of privatization and
Reasons for privatization and commercialization 59
Types of privatization and commercialization65
Objectives of privatization and commercialization in Nigeria 67
Functions of Technical common on privatization and
Benefits of privatization and commercialization 72
Advantages of privatization and commercialization in Nigeria
Problems of privatization and commercialization 80
CHAPTER THREE: RESEARCH METHODOLOGY
Area of the study 86
Population of the study 87
Sampling method 88
Research instrumentation 89
Validity and reliability of measuring instrument 90
Source of data 91
Method of investigation 94
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
Data presentation and analysis of results 96
Test of hypothesis 114
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION
BACKGROUND OF THE STUDY
The key component of the federal Government
Adjustment programme is the drive towards higher efficiency in the public
sector. This necessitated the
promulgation of privatization and commercialization Decree 25 in 1988 by the
federal Government in which was reflected that government will divest it
holdings in agricultural production, electrical appliances, hotels, foals and
non strategic industries. Government
will also reduce its holdings in banks insurance companies and other financial
enterprises without losing control.
Privatization is thus, process of divesting
government ownership control and management of enterprises and agencies to
private individuals and or groups of individual or business firms that are
seeking their profit. This is transfer
of government owned industries or parastatals to the private sector.
Hemmings aptly, described privatization as a
laudable policy to help moderate the quantity of securities available for
dealing on the stock exchange the described further as the transfer of
ownership and control of assets from the public to private sector.
Commercialization on the other hand means
that the signaled enterprise will be excepted to generate enough revenue to
cover their operation expenditure while government gives them capital grant to
finance their capital intensive projects.
As a matter of feet, commercialization under
the Decree 25 of 1988 on privatization and commercialization was defined as the
re – organization of enterprises wholly or partly owned by the federal Military
Government such that these enterprises shall operate as profit these making commercial
ventures and without subvention from the federal Government.
The Government involving itself in business
enterprises came as a result of predominance of state owned enterprises
reflected a desire to control the economy after the colonial rule in the
The 1983 presidential commission on
parastatals, examined the operating all the parastatals with a view to determine the basis for new funding
scheme appropriate capital structure as well as incentive measured to enhance
their productivity and general efficiency.
Following the commissioning, the year 1989
was earmarked was earmarked, the first year of implementation of the
privatization and commercialization programme of the federal government of
It was firs announced in 1986 as part of the
board efforts to reduce budgetary allocation to public sector efficiency and
support the aim of fiscal balance.
Divest holding will be taken care of to avoid it being
contra-concentrated in the hand of few individuals.
In order to enable all interested citizen own
shares in the private enterprises commercial banks were directed to grant
credit facilities for the purchase of shares under the programme central bank
of Nigeria programme 1989.
In the recent years, 2003 another step into
privatization and commercialization has been taken by His excellency, Chief Olusegun
Obasanjo, the president of the Federal Republic of Nigeria, as this has been a
dream in the mind of Nigeria government for the post years, to invest profile
an denounced political, social and economic development on a sustained basis. It is with this goals in minds, that it is
realinging its policies and programmes to create the enabling environment for
efficient government and put in place a viable private sectors. These public sectors include: NNPC, NITEL etc.
Consequently, there are reasons why
government embarks on privatization and commercialization of parastatals such
as: government desires to bring optimum
efficiency into the industrial sector of the economy. This shows
that government can work effectively achieve its social and development
goals by reducing the widespread administration over commitment of the public
sector and development relying on the managerial capacities of private
individuals and firms which can respond to local needs, particularly in small
Privatization is imperative for ramping over
economy that has been characterized by typical problems of a state or country
dominance over their economy which can be outlined as follows.
Decline in real gross Domestic product.
Deep seated corruption and political instability fueled by the
concentration of wealth and power of the centre.
Unfair shift of resources from the massive public to the government
causing widespread of poverty etc.
These problems which are connected in one –
way or the other showed that a grant proportion of economic activity is
controlled by inefficient government owned enterprises therefore accounting for
the decline in GDP and slow rate of growth in the economy.
Government involvement in business enterprises
in Nigeria and the predominance of state owned enterprises, reflected a desire
to control the economy after wrestling political control from the colonialists
enterprises and viable indigenous private sectors, the government had to move
into the large empty spare left by society to take over the budding economy.
Government played a very important role in
many areas of economic and industrial development. Moreover, provision of services is such areas
of business like, insurance, petroleum manufacturing, shipping and banking
where government acquired equity interests in twelve commercial and merchant
banks. In all these, Nigeria had a
rather bloated public sector with well over 1500 public enterprises at the federal
and state levels enterprises at the federal and state levels with a regulated
private enterprise. These enterprises
accounted for between 30 – 40% of fixed capital investments as stated in the
final report of the (TCPC) Technical committee on privatisation and
commercialisation. As the chase may be
wake of the economic recession which started in 1981 made it possible for
attention to be focused on the activities of these parastatals.
The 1983 presidential commission on
parastatals with a view to determining the basis for a new funding scheme,
appropriate capital structure, as well as incentive measures to enhance their
productivity and general efficiency. The
report of the commission showed the following:
MISUSE of monopoly power
Defective capital structures, resulting in heavy dependence loan the
treasury for funding
Bureaucratic bottlenecks in their relation with supervising ministries.
Mismanagement, corruption and nepotism
The federal Government could not fund the
monumental wastes and inefficiencies of the enterprises with problems such as
ill conscious investments, political interference in making decision etc.
The Federal Government Of Nigeria in the year
1985 for example, had invested a total sum of N23 billion in the public
sector. In addition to this, a total of
N11.5 billion was recorded as subventions to various parastatals and companies.
The government revealed that the total dividends
received from this investment, during the period of 1980 to October, 1985 was
N933.7 million, averaging approximately N155million per year.
The structural adjustment programme was first
announced in 1986 as part of the bread efforts to reduce budgetary allocation
to public sector efficiency and support the aim of fixed balance. Divested holding will be taken care of avoid
it being concentrated in the hands of a
In order to enable all interested citizens
own shares in the private enterprises, commercial banks were directed to grant
credit facilities for the purchase of shares under the programme (CBN 1989) i.e
the Central Bank of Nigeria Programme.
Another programme was introduced and it was then, that bank was first
privatised in Nigeria in 1992.
The federal government structural adjusted
programme is the drive towards higher efficiency in the promulgation of the
privatization and commercialization Decree No. 25 in 1988 by the Federal
Government which reflected that government will divest its holdings in
agricultural production. Electrical
appliances and non- strategic industries and reduction of its holdings in
banks, insurance companies and other financial enterprises without losing
The year 1989 was ear marked the first year
of implementation of the privatization and commercialization programme of the
Privatization as Ibie opined, it is a process
by which the size of an inefficient and ineffective public sector is reduced by
transferring some of its function to a relatively more efficient private
sector. The introduction of
privatization in Nigerian brought in the opinion of many intellectuals such as
professor Adebayo who was of the opinion that, privatization and
commercialization to succeed, there must be a resuffling in the economic
policies. He said that it was only as a
result of this, that public enterprise would be able to perform better.
Mallam sulleiman D. Umar was of the opinion
that the issue of the absorptive of the capital markets could be solved by the
following the procedure accepted during the indigeneization exercise of
1972. He observed that Nigerian capital
market now has more experienced financial experts than before and that they
could be put to work. He suggested that,
for the policy to achieve orderly implementation, this process should be phased
over a period of 2-3 years to enable a proper structuring of the company that
were to be privatized first and the subsequent ones of follow:
Expression of fears were raised by individual
and workers, in the sense that, it will bring unemployment as a result of
massive retrenchment of workers in the public enterprises.
Chief of General Staff, Commander Ebitu Ukiwe
gave a dismal picture of federal government investment in parastatals and
companies as at october 31, 1995. Total
dividends receipts by government amounted to N93.7 million on investment of N11
billion i.e 1.39% returns. This
reflected the more reason why the government felt the need to reduce the
financial burden with the belief that the private sector would be able to
record higher profits.
Given the inadequate accounting records of
the parastatals, they may never qualify for quotation. This fear was allayed by the recommendation of
the Second Tier Securities Market (SSM) with less stringent listing
requirements as a starting point for such parastatals to quote their shares.
In the light of these issues raised as
regards the privatization programme, the Federal Government of Nigeria, set up
a technical committee on privatization and commercialization implement the
porgramme. The technical committee
(TCPC) was inaugurated on July 1988 and its secretariat in Ikoyi, Lagos.
Commercialization under the Decree No 25 of
1988 on privatization and commercialization was defined as. The re-organization
of enterprises wholly or partly owned by the Federal Military Government such
that these enterprises shall operate as profit-making commercial ventures and
without subvention from Federal Military Government.
Privatization and commercialization of public
sectors has been a dream in the mind of Nigerian Government in the past
years. Now that its needs arise further
growing economy of Nation Nigeria His excellency, Chief Olusegun Obasenjo the president
of the Federal Republic of Nigeria has brought to focus in this recent year
2003 the programme again to privatize and commercialize public sectors to
invest profile and enhance political, social and economic development on a
The parastatals to be private commercialize
include: NNPC, NITEL, Nigeria Railway
Corporation, NEPA to mention but few. It
is with this goals in mind that, it is realigning its policies and programmes
to create the enabling environment for efficient governance and put in place a
viable private sectors.
In the above mentioned parastatals like
Nigeria Airwaus is going to be privatize and
commercialize because of its inefficiency caused by bureaucracy and
political considerations. Passengers
were not some of any flight Schedule as flights could be concelled any moment
without prior information.