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ASSESSING THE PERFORMANCE OF GOVERNMENT OWNED COMPANIES THROUGH PRIVATIZATION AND COMMERCIALIZATION

CHAPTER ONE

INTRODUCTION

BACKGROUND TO THE STUDY

Today we are witness to the sweeping and undeveloped countries. The changes relate to effort to move away from government ownership, control or participation in the economy towards free enterprise and increased operating of market forces. However, the changes are making for a reduction in the role of government in the economy, with corresponding explanation in a private sectors ownership, control and participation. We are thus observers of the new evolution or the new world economic order which is characterized by the liberalization or deregulation of economic activities with the aim of achieving efficiency and effectiveness in resource allocation and utilization. The economics reform of the new world economic order are being implemented in more than 70 countries around the world, including where such reforms were virtually unthinkable less than a decade ago.

THE DEVELOPMENT OF THE PUBLIC SECTOR AND PRIVATE ENTERPRISE REFORMS IN NIGERIA

Since independence in 1960 Nigeria, like most developing countries, developed a particularly large parastatals sector is composed of such economic activities as banking and insurance, oil prospecting, exploration, refining and marketing etc. A survey under by technical committee on privatization and commercialization (TCPS) shows that there are nearly 600 public enterprises at the federal (national) level alone, and estimated 900 at the state (regional) and local government level.  The estimated 1,500 public enterprises in Nigeria account for between 30 and 40 percent of fixed capital investments and the same proportion of formal sector employment. Table 1 gives the summary federal government as of 30s November, 2012. These investment, were value at over N36 billion at their historical book value field or exceeded two percent annum, which is less than 25 percent of the annual subventions form the government to the public enterprise sector.

While the boom in the world market for oil and petroleum products lasted, on one complained about the wastes and inefficiency of the public enterise sector in Nigeria. Since, Nigeria fall under the category of the third world country, a lot public enterprise of questionable commercial viability were established. It was the fall in the world market form oil, and the economic recessions which began in the early 1980s that seriously for cussed attention of the problems of the public enterprises. The report of a study group on public enterprise revealed that they were vested with problem such as:

Misuse of monopoly powers.

Defective capital structure resulting in heavy dependency on the government treasury.

Mis-management, Corruption and nepotism.

PRIVATIZATION AND COMMERCIALIZATION IN NIGERIA

As government could no longer continue the monumental an inefficiency of the public enterprise sector, the programme of Privatization and commercialization was developed to address the peculiar socio-economic and political conditions in Nigeria, being part of the structural adjustment programme. The legal framework for the Nigeria programme is the Privatization and commercialization decree No. 25 of 1988, and the implementation agency is the technical committee on Privatization and commercialization eleven (11) member body draw from both the public and private sector. It was vested with powers to monitor and supervise the implementation of the programme. The full function of the technical committee are to:

Advise on the capital restructuring needs of enterprises to be Privatized or commercialization under this decree in order to ensure a good reception in the stock exchange market for those to be privatized as well as to facilitate good management and independent access to the capital market. Carry out all activities required for the successful public issues of share of the enterprises to be privatized including the appointment of issuing houses, stockbrokers, solicitors etc. To provide institutional arrangement and operational guidelines that will ensure that the gains of Privatization and commercialization are sustained in the future. However, the terms “privatization”, narrowly defined, means transfer of government owned shareholding in designated enterprises to private describe shareholders comprising individuals and corporate bodies.

Broadly defined privatization is an umbrella to describe a variety of policies which encourage competition and emphasis the role of market forces in place of statutory restrictions and monopoly powers. The first definition relates to programmes of privatization without structural adjustment, such as has been the in must developed countries e.g. France, U.K etc. The second definition relates to a programme of privatization as an integral part of a structural adjustment programme, such as we have in Nigeria. 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 operate as profit making commercial ventures without subvention form the Government.

The main thrust of the Nigeria commercialization programme has been to:

Upgrade the management information system of the affected enterprises.

To improve efficiency performance of the enterprise and best workers effectiveness.

Strength financial/accounting controls at the enterprise level.

To the purpose of understanding the terms Privatization and commercialization to a lay man understanding, privatization is generally refers to the process where businesses or assets which were formally owned by the people (i.e. the government) are sold to private individuals profit-making enterprises but, it was not the ultimate aim to make profit but has to render pure service thereby increase efficiency of performance and effectiveness of job done and automatically increase the gross domestic products of a nation through economy growth. While commercialization generally refers to taking the products of research (whether private or public is immaterial) and building a business out of idea. Usually, the term “commercialization” is used when taking a research idea and building a business around that idea. Historically, the participation of the state in ate in enterprises in Nigeria dates back to the colonial era. The task of providing infrastructural facilities such as railway, road, bridges, water company, electricity and port facilities fell on the colonial government due to the absence of indigenous companies with the required capital as well as the inability or unwillingness of foreign trading companies to embark on these capital intensive projects. This involvement was expended and consolidated by the colonial welfare development plan (1946-56).

According to Act 1988 and Bureau of public enterprises defined privatization as the relinquishment of part or all of the equity and other interest held by the federal government or any of its agencies in enterprises whether wholly or partly owned by the federal government. In a similar vein, “star stip in as a shift from the public to the private sector, not shift within, sectors. To end my case, with own ideological sense privatization may seen as any variety of measurers adopted by government to expose a public enterprise to competition or to bring in private ownerships or control or manage into a public enterprise and accordingly to reduce the usual of public ownership or control. All the government reasoning for direct involvement in companies is applicable in the running of the power holding company of Nigeria (PHC) it serves as a “gauge” of a nation’s development status. The Nigeria electricity power authority (NEPA) now power holding company of Nigeria (PHCN) was established in January, 1951.

Power holding company of Nigeria which is to provide electricity services, this is not surprising as electricity has away of affecting every other aspects of the economy. The country was shocked over the alarming of non-performance of government owned companies and despite all the probe panel body set up, it is on records that the problems has still remained the same unchangeable situation, continue to generate bad record until when necessary fine this research work useful to their different parastatals and smooth runnial of an private enterprise sand efficiency and effectiveness.

1.2    STATEMENT OF THE PROBLEM

Undoubtedly, the problem are those negative symptom that cause inefficiency and reduce performance in the public enterprise. Example internal strife, corruption, nepotism low turnover, poor planning poor government policy and regulation. Through some unethical character of employees, personal managers has become so myopic in nature and thereby render the management ungovernable in nature because, a society where is no law, role and regulation, to guide the individuals activities there’s tendency that such would turn to Gayous Chros and anarchy and thereby restrict the smooth running of management. Furthermore, in a situation where government invests more than 12 billion naira in 1150 companies fielded less 1% by of dividends, bonds but let the problem of lack of clear objectives inadequate authority, inflexibility in decision making, appropriate capital structure, poor utilization of government assets, inefficiency, excessive wastage of economic resources, inadequate management to activities which could be used to measure their performance against success or failure above all unethical character of an-individuals. All these couple together contributed the problem of low productivity and poor performance of government owned companies.

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