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THE EFFECT OF GOVERNMENT POLICY ON PRIVATIZATION AND COMMERCIALIZATION ON NIGERIA ECONOMY (A CASE STUDY OF PHCN, EKWULOBIA)

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

The import substitution policy of the post independence Nigeria led to the establishment of industries. Apart from this prime motivation for import substitution, there was the need to create jobs for the growing educated youths, the need of industrialization and the ideological argument that the government should control, regulate and supervise the commending heights of the then nascent economy. Furthermore, there was the need to strive to catch up with the developed countries of the world and since the indigenous businessmen and managers were neither technically nor financially ready to assume the catalyst role which their counterparts in the developed countries were playing; government felt obliged to fill the investment gap.

The obvious imperfections in the market oriented economics in terms of resources allocation to the more profitable but less preferred sectors of the economy was yet another reason for government intervention in the economy. The sum total of these is that between 1960 and 1980 the various governments in Nigeria both at federal and state levels established numerous industries. The core characteristics of most of these industries were inefficiency in the utilization of resources and their consequent dependence on the public treasury for subvention. Therefore, these adverse operating conditions could not make for rational economic decisions. Consequently, these enterprises and their management lost their mission and became pipes for wastages, agencies for political patronage and generally parasites on the national and state treasuries. However, by the late 80’s, the glut in the world oil market set in and it suddenly devoured on policy makers that the revenue from oil was significantly below the requirement for the sustenance of these money-guzzling ventures. There then arose the need for reprioritization of economic policies and the need to release the energy in economy suppressed by bureaucracy and undue control.

Government both at the federal and state levels came to realize that goals of economic growth, full employment, rapid industrialization and high standard of living noble as they could not be actualized without the active participation and leadership of the private sector. It was further realized that excessive controls of government in the national economy encourage inefficiency, corruption and low capital formation. There was therefore need for invitation to private individuals and organizations to assume the role of activation and management of the national economy while the government lays the broad framework for the growth of industry and commerce. There was also the need for the infection of private sector enterprises for profitability and efficiency, hence the privatization and commercialization policy.

1.2  STATEMENT OF PROBLEMS.

Inefficient management and corruption have bedeviled the Power Holding Company of Nigeria since its inception. This is most evident in its power generation, transmission, and distribution as well as in the appointment of board members. This inefficiency has subsequently led to inadequate supply of electricity to consumers. There is also lack of dedication to duty on the part of the staff and management of the corporation. This mostly accounts for the poor financial returns it derives from its services. The staffs are rough in using the company’s equipment and tools in providing electricity to consumers at the expense of the authority. There were complaints of corruption in power distribution whereby the management seeks qualification first before approving of extension of electricity to consumers. This often robs the authority of huge revenue they would had should electricity is distributed without any form of restriction(s). PHCN ever since its inception in 2005 from former NEPA has undergone and is still undergoing stringent statutory and administrative control, which hinders the management from using their initiatives when necessary.

1.3  PURPOSE OF STUDY

The major purpose of this study was to determine the effect of privatization and commercialization on PHCN, Ekwulobia business unit (branch) in Anambra State. Specifically, the study was to:

1. To determine the durability of PHCN’s plant in the generation of electricity.

2. To determine an efficient method of appointing capable persons into the management level in the enterprise.

3. To investigate and ascertain if commercialization of PHCN was in line with the objectives of the government on privatization and commercialization.

4. To ascertain an easy mode of operation in PHCN towards ensuring self-sustenance and justification of investment.

5. To find out effective methods that would enhance the service rendered by PHCN to it customers. 

6. To suggest means or ways by which PHCN can restore public confidence in its service of electricity to consumers.

7. To identify better methods by which PHCN can effectively collect its services charges.

1.4  SIGNIFICANCE OF THE STUDY

Very little is known about the privatization and commercialization programme. Consequently, many people are yet to appreciate the reason and objectives of the programmes. This research is significant in the following ways:

i. It will provide a guide on how the authority can improve its service of electricity to the consumers.

ii. It will highlight means to improve PHCN customer relationship.

iii. The study will also suggest ways by which the staff can be positively motivated in order to increase their productivity.

iv. This study will recommend better method for recruiting the management staff that will be more dedicated to the service of the corporation.

1.5  SCOPE OF STUDY

This study was delimited to the effect of privatization and commercialization of Power Holding Company of Nigeria Ekwulobia Branch, Anambra State. No attempt was made to look into the effect of privatization and commercialization on other corporations and organizations. 

1.6     RESEARCH QUESTIONS

This study sought answers to the following research questions.

i. Is the partial commercialization of PHCN in line with the federal government policy of handling of the running of public enterprises?

ii. Is it possible for the enterprise to operate effectively on its own without federal government subvention?

iii. As a partially commercialized public enterprise, will PHCN be able to restore public confidence through improved services?

iv. Will the partial commercialization of PHCN lead to improvement in its operations?

v. As a partially commercialized enterprise, will PHCN be able to explore more avenues for revenue generation?

1.7  BRIEF HISTORY OF PHCN

PHCN means Power Holding Company of Nigeria. It is a body that is in responsible for the supply of light and power in the whole country. Power Holding Company of Nigeria was formed in 2005, which was formerly known as NEPA: meaning National Electric Power Authority. This body existed since 1972 following the amalgamation of Electricity Corporation of Nigeria and the Niger Dam Authority under Decree of 1972 and since then it was the only statutory provider of electricity to the whole public. PHCN has no competitor even up till now that the name had change from NEPA to PHCN. It has its power stations and offices in many parts of the country, there is also Hydro-stations at Kainji at Oji River in Enugu State, one in Nebba and other places. In Anambra state, there are PHCN offices like in places like Onitsha, Nnewi, Awka, Ekwulobia, Oko, Ajalli etc. 

1.8 DEFINITION OF TERMS.

i. PHCN – Power Holding Company of Nigeria. It is the only statutory provider of electricity throughout the whole country. It came existence in 2005.

ii. TCPC – Technical Committee on Privatization and Commercialization. It is the body set up by the federal government to implement the privatization and commercialization of some public enterprises in accordance with the privatization and commercialization decree No. 25 of 1988. It was established on 27 of July 1988.

iii. UNDP – United Nation Development Programme. It is an agent of the United Nation, which assists member nations with development programmes. It also advises nations on the path to their economic survival.

iv.  MOTIVATION – This is a method of stimulating people into action so as to achieve a desired goals or objectives.

v. PRIVATIZATION: According to Ugbo (2003:191) privatization is all about the transformation of public undertaking to a private enterprise organization.

vi. COMMERCIALIZATION: The privatization and commercialization decree of 1988 in Ugbo (2003:190) defined commercialization as the reorganization of enterprises wholly or partly owned by the federal government in which such commercialized enterprises shall operate as profit making venture without subventions from the federal government.     

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