The Effect Of Privatization On Nigerian Economy
CHAPTER ONE
- INTRODUCTION
- BACKGROUND OF THE STUDY
Privatization (the transfer of government owned share-holding in public enterprises to private shareholders) is one of the revolutionary innovation in economic policies of ooth developed and developing countries (Igbuzor 2003: Chambers 2008).The ultimate goal of any credible and legitimate government is to ensure sustained improvement in the standard of living of the citizenry. Towards this end, Nigerian government found it necessary to design a developmental plan that will facilitate effective mobilization, optimal allocation and efficient management of national resources. To achieve this aim, public enterprises were established across the country to carry out these obligations. Towards the end of 1980, the public enterprises which had grown too large began £o suffer from fundamental problems of defective capital structures, excessive bureaucratic control and intervention, inappropriate technologies, gross incompetence and blatant “corrupt! on (Aboyade, 1974). With the deep internal crises that included the high rate of inflation and unemployment, external debt obligation and foreign exchange misalignment, Nigeria and many other African countries were strongly advised by the World Bank and I.M.F to divest (privatize) their public enterprises as conditions for economic assistance (Nwoye,1997). This economic policy (Privatisation) is a product of neo-liberal economic reforms that became popularized and globalised through the World Bank and International Monetary Fund (I.M.F). As an innovative economic policy, Privatisation started in Chile under the Military Government of General Augusto Pinochet in 1974 and was adopted in Britain between 1986 and 1987 as a central part of economic policy shift (Hanke, 1987). Privatization in Nigeria started in 1986 as an integral part of Structural Adjustment Programme (SAP) (F.G.N, 1986: Ndebbio. 1991). Prior to this period, the Nigerian state has participated actively in public enterprises (Nwoye, 2003). This trend continued until 1988 when privatization programme was officially launched (Anya, 2000; Igbuzor, 2003). The Federal Government privatized 89 Public Enterprises (PEs) between, 1988 and 1993 in the first phase while 32 enterprises were privatized in the second phase which ran from 1999 to 2005 (Mkpuma, 2005). It was envisaged that privatisation would improve operational efficiency of our inefficient public enterprises (PEs). reduce government expenditure, increase investment and employment as well as ensure job security in Nigeria (Subair and Oke, 2008; Jerome, 2008).
Surprisingly, since the official introduction of privatisation in 1988, the policy has been a subject of intensive debate and has remained highly controversial in Nigeria (Nwoye, 2010). Most Nigerians hold divergent views on the contribution of the privatization programme to the Country’s economic development in its two decades of existence in Nigeria. Therefore this stud> attempts to convey the message that privatisation is in the interest of the masses both in terms of poverty alleviation and . enhancement of national development, through a careful study of Nigerian telecommunication sub-sector.
1.2 STATEMENT OF PROBLEM
The operational inefficiency of some privatized companies like Electric Meter Company of Nigeria Zaria and National Electric Power Authority (NEPA) now Power Holding Compan\ of Nigeria (PHCN) among others is even more worrisome. The supply and distribution of electricity to consumers is still grossly inadequate (Subari and Oke, 2008). These variables and others have provoked more arguments, some in favour of privatization and others against it. The position of the critics over privatization in Nigeria is that the economic reform is a plot by few elites to sell public enterprises to themselves at the expense of the masses and that privatization cannot rescue Nigeria from its precarious economic situation. Those in favour of privatization argue that it aids poverty reduction through efficient operation, increase in productivity, employment, and job security. They are also of the opinion that privatisation widens the distribution of wealth in our society (Jerome, 1999; 2005).
More than twenty years of privatization in Nigeria, there are still mixed feelings about the efficacy of the policy, especially as government is set to fully privatize the. Power Holding Company of Nigeria (PHCN) and to complete the second phase of the privatisationprogramme (Iba, 2010). Some have asked for total stoppage of the programme while others stil! see privatization as a revolutionary policy with the ability of addressing the inadequacies of our PEs. The last school of thought has argued that what the government needs to do is to reassess and rethink on the implementation of the programme.
1.3 OBJECTIVES OF THE STUDY
The main objective of the study is to assess the privatization of telecommunication industry in Nigeria and its effects on Nigerian economy. The specific objectives are;
- To examine the impacts of privatization on poverty reduction
- ‘ To investigate if privatization enhances job creation
2
1.4 RESEARCH QUESTIONS
- Does privatization has any significant relationship with poverty reduction in Nigeria?
- What are the greatest impacts on privatization to the Nigerian economy?
- Privatization does not enhance qualitative service delivery to the populace
1.5 RESEARCH HYPOTHESES
- -Ho: There is no significant relationship between privatization and Nigerian economy
Ha: There is no significant relationship between privatization and Nigerian economy
- Ho: There is no significant relationship between privatization and poverty reduction
Ha: There is a significant relationship between privatization and poverty reduction - Ho: There is no significant relationship between privatization and job creation
HI: There is a significant relationship between privatization and job creation
1.6 SIGNIFICANCE OF THE STUDY
- This study shall be of immense importance to a cross-section of people. Organization and
the government. - It will assist the government on the implementation of the on-going privatization exercise
and improve on the existing policy. - It will help to provide a clear assessment on some of the privatized enterprises.
- It will provide an avenue for the people to decide on whether to support the privatization
programme or to kick against it and equally assist students as a reference material in their
libraries and for future research work.
1.7 THE SCOPE OF THE STUDY
The scope of the study shall be limited to the effects of privatization on poverty reduction in Nigeria through a proper coverage of telecommunication sub sector of the economy only. The major constraint faced in trying to address privatization issues in Nigeria, is the lack of adequate data on the quantitative impact of privatization. Several studies have been conducted but most of
these covered developed countries in general with little emphasis on Nigeria. Despite this
shortcoming, however, an attempt has been made to conduct a thorough analysis based on the
limited information available. Secondly, time and money is required for transportation to meet
appointment with those to be interviewed, procurement of relevant research materials and the
preparation and administration of research instruments.
1.8 DEFINITION OF TERMS:
Efficiency; This is defined as the act of using the minimum cost optimally to achieve a particular
goal
Enterprise; This is defined as a public or privately owned business venture created to provide
essential services
Monopoly; This is defined as the state whereby economic power is being centralized in one
hand to avoid competition
Organization; This is defined as a group of people whose efforts are geared towards the
accomplishment of a particular goal
Poverty Reduction: Is the reduction of human suffering in a society or improving the well-being
of citizens in a particular society. It is increasing the standard of living of individuals in a
particular society.
Privatization; This is defined as the transfer of public enterprises to private investors to aid
efficiency.
Public Enterprises: These are capital-intensive business units established by government and
empowered by law to render certain crucial services which in the opinion of the government
cannot be effectively rendered by private entrepreneurs apparently because of their profit
maximization posture.
Telecommunication; These are devices and systems that transmit electronic or optical signals
across long distance, which enables people around the world to contact one another, to access
information instantly and to communicate from remote areas.
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