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PRIVATIZATION AS EFFECTIVE AND EFFICIENT TOOL FOR ECONOMIC DEVELOPMENT IN NIGERIA

ABSTRACT

This study examines privatization as effective and efficient tool for economic development in Nigeria; a study of Power Holding Company of Nigeria. It adopted a survey design to elicit data. 100 PHCN staff in the selected case study was used as sample using scientific sampling technique. Questionnaires were used as the instrument for data collection and the collected data were statistically analyzed with simple percentage and Chi - Square statistical tool. All the hypotheses tested were rejected. The findings revealed that there is a relationship between privatization as effective and efficient tool for economic development. The study also found out that there is a direct relationship between privatization and regularity in supply of good and services. In view of these findings, the study made the following recommendations: To achieve privatization of PHCN, policy should be made to would be buyers to retain the staff. Also the problem of the seller being the buyer, government should hand off in the buying of privatization because what is not managed well as seller cannot be managed well as buyer.

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Several reasons ere usually adduced for the unsatisfactory performance of most public enterprises, such as inability to fund their own programmes without seeking assistance elsewhere, total disregard for financial procedures e.g. non-auditing of accounts for year, poor debt recovery mechanism, failure to remit taxes collected to the relevant authorities, corruption, stealing of public funds and award of highly inflated contracts (Johnson 2004). Dissatisfied with the poor performance of state enterprises in the country, the government was determined to sell off all unprofitable government-owned companies so that the federal government could spend its dwindling resources on other vital sectors of the economy. In order to remedy the situation, there have been tendencies towards privatization in order to gained economic development (Johnson, 2004:95).

Privatization as a jtool5 for economic management came to the front burner when Chile became the first country to turn public assets/businesses Ito private operators in the early 1970s, since then over 140 countries both developed and developing have embraced privatization as a tool to economic development (Anger, 2008). But privatization became the major policy thrust of the former civilian government of Chief Olusegun Obasanya on assumption of office on May 29, 1999. There is no doubt about the fact that privatization is a very topical issue in Nigeria today and it means to make private and Includes the entire process by which government transfers its interest in a corporation or enterprise, by way of selling its investments to private individuals or groups (Johnson, 2004). It also involves the selling of state enterprises to the private sector (Ron, 1995).

Gusau (2000) noted that different countries have pursued different objectives using the privatization policy. Some have used it to address increasing budget deficit; some have used it to pursue the goal of national debt reduction; some have used it to fight inefficiency, etc. according to him, some of the goals that privatization has been used to pursue have direct bearing on development. Thus privatization in Nigeria cent on eh above objectives, ·has direct bearing on development. In the context of economic development, a look at the conceptualizatton of economic development will help us to appreciate privatization. The encyclopedia of Wikipedia argues that economic development includes the process and policies by which a nation improves the economic, political and social wellbeing of its people. It was also considered as a static theory that documents the state of economy at a certain time. According to Schumpeter (2003), the changes in this equilibrium state to document in economic theory can only be caused by intervening factor coming from outside. Now, privatization will be a working tool in this respect, for efficiency and effectiveness which will eventually result into economic development.

Power Holding Company of Nigeria (PHCN) embraced this idea as she took privatization as a priority and this is done for a number of reasons which among others includes: economic development, regular supply of services, improved standard of living and increase the performance of the company. It is important to note that in order to achieve privatization, there must be competition according to the Market Conditions Model and not ownership per se according to the Schumpeterian Model.

1.2    STATEMENT OF PROBLEM

One of the problems that have bedeviled public enterprises in Nigeria, especially those rendering essential services to the public such as Power Holding Company of Nigeria (PHCN), Nigeria Railway Corporation (NRC) etc, is inefficiency. One of the major roles of these enterprises is the promotion of national development through the creation of employment and reduction in the level of poverty, which will in turn increase standard of living of the people. Over the years, these government parastatals have performed below expectation 'due largely to a plethora of problems that have confronted them. A lot of reasons have been adduced as factors responsible for the abysm performance of these enterprises by different scholars who have researched extensively into the activities of these enterprises, ranging from under funding, corruption, mismanagement, political interference and other factors too numerous to mention. In order to save these enterprises from these problems that seem to be insurmountable, different groups have advocated a variety of strategies that can be adopted to rescue these enterprises from the mucky water of inefficiency.

One of the possible solutions that have been advanced is Privatization. In Johnson (2004), privatization is seen as gradual withdrawal of the state from economic activities for efficiency and effectiveness to enhance economic development. Different groups have risen for and against this move of making public enterprises effective through the instrument of privatization. While the protagonists u of the view that privatization will bring improve efficiency in the system, the antagonists view strongly rejected privatization as an option. To them, privatization brings about unemployment, and increase the level of poverty. This yet to be resolved problem, seems to have hampered government efforts to privatize the nation's public enterprises as all government efforts are always greeted with mass protest from different interest groups. The major problem this study intends to investigate is whether privatization can truly be used as an effective and efficient tool for economic development as advocated by the protagonist group.

1.3    OBJECTIVES OF THE STUDY

The main objective of this study is to validate the fact that privatization is an effective and efficient tool for economic development in Nigeria.

Other specific objectives include:

1.      To investigate how privatization can crease regularity in the supply of goods and services.

2.      To investigate how privatization can improve the standard of living of the people in Nigeria.

3.      To examine the effect of privatization on the performance of public enterprises in Nigeria.

1.4    RESEARCH QUESTIONS

The followings are tentative questions which this research work intends to provide answers to:

1. Is privatization an effective and efficient tool for economic development in Nigeria?

2. Can privatization create regularity in the supply of goods and service?

3. Is there any relationship between privatization of public enterprise and improvement in the standard of living of the people in Nigeria?

4. How can privatization improve the performance of the company or organization in view?

1.5    RESEARCH HYPOTHESES

This study will be geared towards testing the following hypothesis:

1. There is a positive relationship between privatization as effective and efficient tool and economic development.

2. There is a direct relationship between privatization and regularity in the supply of goods and services by public enterprises in Nigeria.

3. There is a relationship between privatization and standards of living of people in Nigeria.

4. Privatization tends to enhance the performance of public enterprises in Nigeria.

1.6    SIGNIFICANCE OF THE STUDY

This research project will be of major significance to the government. Government serves as the wheel of the state, the machine which runs the affairs of a state. To run the affairs of any state, one deserves a good knowledge of what goes on within the state, how to run the state, how the state can be improved, how economic development or activities in such state can be enhanced. For this purpose, this study can be of significance to the government. This study will also be of significance to policy makers who make potlces for implementation.  Policy is the bedrock of any organization and its effectiveness and efficiency determines an organization. Policy is what an organization does to do and what it chooses not to do, therefore, this study can provide knowledge to policy makers when making polity on the issue of privatization.

This study will also be of significance to scholars, students and other researchers who will also want to undertake similar topic and serve as secondary source of data to them and also give them insight into what the topic is about. This research study will be of significance to the organization under study that is Power Holding Company of Nigeria (PHCN). One of the objectives of any organization is to attain certain degree of productivity that would help in improving level of performance to achieve economic development. It is necessary for organization to be effective and efficient in achieving its goals, it is in the tight of this, that this study will provide more knowledge about privatization which serves as a tool for enhancing performances. The study will also be of significances to the general public by enlightening them on the essence or importance of privatization and how it affects their standard of living and their general wellbeing.

1.7    SCOPE AND LIMITATIONS OF THE STUDY

The unprecedented economic problems in Nigeria since 1980s which led to the accumulation of debts and advise from the international quarters to borrow and accept International Monetary Fund (I.M.F.) conditionality and the subsequent refusal of the loan by Nigeria ted to the structural Adjustment Programme (SAP). It was aimed at restructuring the economy and making it more com and efficient. The restructuring of public enterprises was an integral part of the Structural Adjustment Programme, in 1986. The actual implementation of commercialization and privatization started in 1988 with the inauguration of the technical committee on privatization and commercialization as contained in Decree No. 25 of 1988. Thus, in November 1989, the implementation process of full or partial commercialization and privatization began.

In Nigeria, however, the privatization and commercialization programme has become a major policy instrument, which in addition with other instruments was expected to contribute to the overall attainment of the generat macro-economic goals. However, some enterprises, were fully or partially privatized or commercialized and they includes: National Electricity Power Authority Nigerian Railway Corporation, Nigeria Airport Authority, Minting Company Limited, Federal Housing Authority, Oil Marketing Companies, Steel Rolling Mills, Paper Mills, Hotels and Tourism to mention but a few. But as a result of inadequacy in terms of resources, materials, time and energy, this study shall be limited within the confine of Power Holding Company of Nigerian (PHCN) this was formerly known as National Electricity Power Authority (NEPA).

1.8    DEFINITIONS OF TERMS

PRIVATIZATION

Privatization involves the selling of state enterprises to the private sector. Is an 'umbrella term' which encompasses, among others, direct sale of public assets into private bands, the transfer of functions previously carried out directly by the state into the private sector and the withdrawal of the state from responsibilities previously undertaken, leaving such matters to be faced by individual citizens.

COMMERCIALIZATION

Commercialization entails detaching the enterprises from government departments and ministries and making them to be a cost accountability centers as done in the private sector.  Commercialization on the other hand, can be defined as the re organization of enterprises, wholly and partially owned by the government, in which such commercialized enterprises shall, operates as profit making commercial ventures without subvention from the government.

ECONOMIC DEVELOPMENT

Economic development is the increase in the amount of people in a Nation's population with sustained growth from a simple, low income economy to a modern, high-income economy. Put in another way, is the analysis of the economic progress of nations.

POWER HOLDING COMPANY OF NIGERIA

The Power Holding Company of Nigeria abbreviation as PHC or PHCN), was formerly the National Electricity Power Authority abbreviated as (NEPA) is an organization governing the use of electricity in Nigeria.

PUBLIC ENTERPRISES

Public enterprises is defined as organizations whose primary function is the production and sale of goods and or/ services and in which government or other government controlled agencies have no ownership stake that is sufficient to ensure their control over the enterprises regardless of how activity that control is exercised.

PERFORMANCE

Performance is activities carried out to the benefit of any organization, members and the public. That is the, sum total of individuals and group effort to the benefit of the organization in particular and the public in general.

1.9    ORGANIZATION OF THE STUDY

This study is organized into five (5) sections or chapters and chapter one is on introduction which will include background to the study, statement of problem, objectives of the study, research questions, research hypothesis, significance of the study, scope and limitations of the study, definition of terms and organization of the study. Chapter two shall review the current relevant literature which will include introduction, review of relat4ed literature and other sub headings such as: criteria for privatization, objectives of privatization, methods of privatization, process of privatization, ages and disadvantages of privatization, and theoretical framework. Chapter three is on the methodology used in the study and shall include: re-statement of research questions and hypotheses, research design, population of the study, sample and sampling techniques, data collection instrument, administration of data collection instrument and limitations of the methodology. Chapter four is on data analysis and presentation which shall include: introduction, respondent characteristics and methodology used in the study and shall include: re-statement of research questions and hypotheses, research design, population of the study, sample and sampling techniques, data collection instrument, administration of data collection instrument and limitations of the methodology. Chapter four is no data analysis and presentation which shall ii introduction respondent, characteristics and. classification, presentation and analysis of data according to research questions, data analysis according to research hypothesis Chapter 'five shall include summary of findings, conclusion, recommendation and suggestions for further studies.

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