The Impact of Privatization and Commercialization on the Nigerian Economy

The Impact of Privatization and Commercialization on the Nigerian Economy

CHAPTER ONE

INTRODUCTION

1.0 BACKGROUND OF THE STUDY

The ultimate goal of any credible and legitimate government is to ensure sustained improvement in the standard of living of the citizenry. Toward this end, the government usually evolves development plans that will facilitate effective mobilization, optimal allocation, and efficient management of national resources.

In such efforts, priority is usually given to the provision of development facilitators, such as transportation and communications as well as social overhead, such as education and health.

Drawing on the successful experience of most developed economies, all developing countries have also adopted a similar development process.

In addition for several reasons, such as the small size of the private sector, or for the so-called “security reasons”, the development process had been largely dominated by the public sector.

Available evidence suggests that this public sector-dominated process has not achieved the desired impact over time, prominent among which is the lack of an inclusive framework for the consequent alienation of the people from the public policy process. This, coupled with recent development in the globalizing world, has precipitated the clamor for comprehensive national economic reforms that will facilitate more efficient macroeconomic management and thereby steer the economy back on to the path of sustainable growth and development.

The major components of this reform are the deregulation that augurs well for the promotion of a private sector-led economy. This was informed by the assumption that the private sector is more efficient in the allocation of resources, and that this level of efficiency will be enhanced in a competitive environment emanating from the deregulation of the economy. This implies that the reliance on the market rather than the state is the accepted antidote against the problem of underdevelopment in affected economies. The privatization of state-owned enterprises (SOE), is the major strategy for obliterating the culture of public sector domination of the economy.

Nigeria is committed to following the footsteps of several countries that have embarked upon the privatization of the national economy. The scope of the nation’s privatization program covers several sectors, including banking and finance, oil and gas, telecommunication, manufacturing, hospitality, and tourism, among others.

The privatization train has now arrived in the utility sector and it is operating at varying degrees within the sub-sectors therein. Given the criticisms that have trailed the implementation of the privatization programs in other sectors, it appears timely to evaluate the privatization process of the nation’s utility sector. This is to ensure compatibility of the new policy orientation with the overall goal of poverty alleviation through wealth creation and sustainable development,  rather than focus on growth as an end by itself.

It will also facilitate a pro-active framework towards ensuring a pro-privatization of the utility sector in Nigeria, with special emphasis on power and telecommunication, which are necessities for economic growth and development.

1.2 STATEMENT OF PROBLEMS

Privatization and commercialization of public enterprises are vital tools for the upliftment of a country’s economy, especially the developing countries like Nigeria. The problem facing privatization and commercialization to the growth of Nigeria’s Economy will be looked into: problems like corruption, lack of transparency, lack of accountability, inconsistency, and incredibility.

However, it is this problem that hindered the government to seen the growth in commercialization and privatization the public sector would bring to Nigeria’s economy. In trying to look into the effect of privatization and commercialization effect to the growth of the economy and proffer a way forwards to a positive state of privatization and commercialization of public enterprises in Nigeria this research work emanated.

1.3 OBJECTIVES OF THE STUDY

The broad objective of this research work is to evaluate the effect of commercialization and privatization on issues of economic growth in many companies, Private companies are looking for profit and their objectives may diverge from the public interest. The orthodox approach assumes that the state and private sector are substitutable when it comes to the provision of goods and services, subject to appropriate regulation. While this may be the case in the majority of products, divergent objectives have been problematic when it comes to the delivery of essential services.

The specific objective is:

1. To evaluate the nature of the relationship that exists between the privatization of PHCN and the Telecommunication of Nigeria.

2. To examine the impact of privatization and commercialization sector on Nigeria’s Economy.

3. To offer some recommendations based on the finding of the study.

1.4 RESEARCH HYPOTHESIS

The following hypothesis has been formulated based on the objectives of the study and the statement of the problem is stated as follows:

H0: commercialization and privatization have a positive effect on the growth of Nigeria’s economy.

H1: commercialization and privatization do not affect the growth of Nigeria’s economy.

1.6 SIGNIFICANCE OF THE STUDY

Privatization of public sector enterprises is not new in Nigeria. Indeed, privatization was a key element of the structural adjustment program adopted by the Nigerian government in 1986 to stabilize the economy and position it, for sustainable growth. What is new in the ongoing privatization process is the courage and determination of the government to extend to the utilities (power), airways, petroleum refineries, and petrochemical plants.

The fact states that the private sector is profit-driven and this would undermine the rights of the populace to basic amenities in the absence of adequate protection.

1.7 DEFINITION OF TERMS

Some definitions of terms are used in the study were as below.

a. Authority: It means power or right to give order and make others be obeyed.

b. Commercialization: This is concerned with the reform of public enterprise to achieve high efficiency and productivity, without change of ownership.

c. Electric: This means all the phenomena associated with electrons (negative charge) and proton (positive charge) the study of these phenomena.

d. Privatization: This means the transfer of ownership of enterprise between the government and the private sector.

e. Problem: this stands for questions to be solved or decided.

f. Public: the citizens of people of a country.

g. Public Enterprises: this means any corporation, board, company, or parastatal, established by or under any enactment in which the government federation has ownership or equity interest.

h. Strategic Investor: it means a reputable core investor or group of investors having the requisite technical expertise, managerial experience, and financial capacity to effectively contribute to the management of the enterprises being privatized.