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CHAPTER ONE

INTRODUCTION

BACKROUND TO THE STUDY

Privatization means the relinquishing of part or all the equity and other interest held by the Government or its agencies or enterprises whether wholly or partly owned by the Federal Government. This means reduction of public sector intention in the economic activities divestiture of government activities.Privatization can also be defined as transforming of the government own enterprises from state to private ownership with a view of making profit.
One of the topical issue in our drive for enresructured economy is privatization. The government felt that some public sector business are performing below expectations, some incurred huge debt which are long repaid and serviced by the government. The government also because worried that substantial part of its capital roles were used to support public enterprises where provision of goods and services were often expensive, inefficient and subject to political manipulation. The federal government therefore decided and in stilling these enterprises as a way of saving costs and in stilling the spirits of efficiency in the affected enterprises.

According to a publication in the Daily Star News paper of August 28th, 2000, there have been many years in Nigeria of exhaustive deliberations to share holders on how to put the Nigerian economy on the part of sustainable growth and development. Now a consensus has emerged on the imperative of privatization of state owned enterprises. This quotation from the Daily star has gone a long way in explaining what privatization is all about.

According to a publication in the post express News paper of February 25th, 2003: by Tony Obiechina, “ in a bid to ensure that the privatization programme of the present administration does not suffer any set back the United Kingdom Department of International Development (UKAFD) has granted the Bureau of public enterprises (BPE) E8 million (about N 1.6 billion) to enable it continue with implementation of the programme” Infact business world will define the topic as the decision to free state founds from the encumbrances of its parastalas, for instance according to Business Guardian at the close of the year 1998, Government subvention and subsidies to its about 580 parastatals, agencies and extra-ministerial department on enormous. The paper added that government in these parastatals would force on equivalent of this amount for more government business that would impact on the life of the persistence the birth of privatization to achieve this aim. More so, privatization is a process where by the government sells its share in certain companies or parastatals where it has controlling interest to private individuals.

Interest of government on privatization is not unconnected with the reliance of the effectiveness of the market forces to determine a more meaningful allocation of scarce resources instead of completely regulated forces.
The arduous task of ensuring the smooth implementation of this lofty programme rests on the shoulders of the technical committee on privatization appointed by Babangida. It could be understood that privatization was one of the preconditions laid down by the international monetary fund (IMF), to assist financially the developing countries of which Nigerian is one.

According to His Excellency, the president of the Federal Republic of Nigeria, General Olusegun Obansanjo in a speech while inaugurating the National Council on privatization in July 1999, “we are privatizing for the benefit of our economic recovery and our social life, it is not meant and /or designed to share our national assets to a few rich people”. This programme was initiated by the Abdulsalam Abubakar Administration who put in place or ending enactment on the eve of her exist in power. This Administration also drew the guidance and modalities for implementation.

The present administration of the present president of the country, General Olusegun, Obasanjo also pursued the realization of the overall objective of this programme. Understandably, government intends to realize some money in the measure of its ownership in these companies and to block the drain on government revenue from operating the enterprises in efficiently, it is not worthy to observe that Government cannot carry out this task in isolation. More important is the role of financial institution in the programme. It is the intention of the writer to X-ray the role one of these financial institution commercial Banks will play in ensuring a smooth operation of privatization programme.

1.1 PROBLEM IDENTIFICATION

As far as privatization has been accepted as one of the economic reforms to restructure and stabilize our economy. It is necessary to study the role of commercial banks in the programme. The various roles of commercial banks have been identified to include, provision of credit to disadvantaged Nigeria like they did during the implementation oif the Nigerian enterprises promotion decree, 1979 acting as distribution centres for shares. Subscription Debt equity Campaign already mounted by technical committee on privatization. However, liquidity problems of commercial banks have rendered their role of providence credit to disadvantaged Nigerians very skeptical. The experiences in the implementation of the Nigerians enterprises promotion decree shows that majority of the loans grated for share purchases in the programme were covered by the few rich as well as the fact that the channel of distribution was inadequate.

1.2 STATEMENT OF PROBLEMS

The aim of this study is to:-

1. Investigate the liquidity problems of commercial banks with a view to ascertain whether or not it can permit them to provide credit to disadvantaged Nigeria in privatization programme.

2. Highlight possible ways commercial banks can avert the experience in the implementation of the Nigeria enterprises promotion decree 1972

3. Examine the economic viability of security credits by share certificate only on commercial bank portfolio risk.

4. Suggest ways of improving accessibility of terms to rural dwellers given their most commercial banks lack adequate rural branches to achieve a wide distribution of shares.

1.3  PURPOSE OF THE STUDY

Nigeria as a Country has always had sound policies and programmes but the problem has been that of implementation. The privatization programme may not be an exception. In view of this, objectives or purpose of this study are:-

1. To examine privatization as a way out for government owned companies.

2. To discover the roles played by commercial banks in the privatization programme.

3. To compare the extent these role of commercial banks will go in solving the oiling company’s problems vis-à-vis the other method they have tried.

4. To recommend or advise on the appropriate role the commercial banks will play to solve these problems once and for all.

1.4  RESEARCH QUESTIONS

Considering the various problems identified and having stated the objectives of this study, the author wishes to form the following research:-

1. Excess liquidity plaguing commercial banks shall have effect on their ability to create credit in privatization.

2. Privatization shall increase the proportion of loans granted to typical rural dwellers.

3. Privatization shall not erase subjectivity in the distribution of application forms.

4. Risk explosive of many commercial banks cannot be affected by using share – certificate only as collaterals in privatization.

1.5  SIGNIFICANCE OF THE STUDY

Management of commercial banks- it guides their action.

Managers of the privatized companies- it enables them to know what bank

manager will be doing in their company.

Students- students who will be writing project may use this as a reference material.

1.6  SCOPE AND LIMITATIONS OF THE STUDY

Scope – the work is limited to the commercial banks that are involved in the privatization programme only.

LIMITATION : The research is limited by the following factors:-

a. TIME:- There is no enough time to carry out an extensive research as supposed.

b. FINANCE: As a student, the research does not have the much needed fund to visit all the commercial banks which are involved in the privatization programme

c. SECRECY:- Managers of the commercial banks involved in this programme are not willing to give out the needed information.

1.7  DEFINIFION OF TERMS

Privatization:- Transfer from government to private ownership.

Arduous:- Needing and using up much energy.

Liquity:- State of being able are raise fund by selling assets.

Plaguing:- Cause of trouble, annoyance or disaster.

Share Certificate:- A document issued by a company to its shareholder claiming the number of share held, the amount paid up and the name in which the share are registered.

REFERENCES

September 1991, technical committee on privatization and

Commercialization, Lagos by Dr. Hamza Ratindadi; Zayyad Chairman p. 309.

The role of technology in the industrial development of Nigeria By Ehigie Osifo O. 2011p. 15.

Industrialization and technological innovation in African Economy by Dr. Akin Aju p. 157.

Babangida (I.B), “privatization and commercialization decree 1988 No. 25 vol 8.

Federal Republic of Nigeria Official Gazette, Lagos vol. 75 No. 42. 6th July, 2001.

Federal Government Press, vol. 75 No. 42. 6th July, 2001.
Essential of Commercialization of Public Enterprises by Dr. H.R. Aayyad p. 217.

The Post Express. Tuesday, February 25, 2003 p.5.
Financial Management vol. 11 by Dr. John Orjih p. 238.

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