(a) What is Nationalization?
(b) Explain three reasons why government nationalizes some businesses.
(c) State four disadvantages of nationalization.
Explanation
(a) Nationalization is the act of taking over the control and management of businesses previously owned by individuals or companies by the Government.
(b) Reasons for Nationalization are:
(i) To increase the control of the government over the economy.
(ii) As a means of check in the case of a foreign-owned company. it prevents foreign domination.
(iii) To prevent monopoly.
(iv) As a security measure for companies that produce security-related equipment.
(v) To reduce the incidence of profit or salaries remittances abroad in the case of foreign companies.
(vii) To enhance the supply of essential commodities to the citizens.
(viii) To retaliate against foreign government policies.
(c) Disadvantages of nationalization are:
(i) It kills private initiative/Discourages competition.
(ii) It could sour relationships with foreign countries in the case of foreign companies.
(iii) It could create fear in the minds of foreign investors, as a result, discouraging them from bringing their money.
(iv) It could transfer a successful business into the hands of incompetent staff or poor management.
(v) Huge sums of money are paid in compensation for the nationalization of businesses.