1.0 INTRODUCTION

The study was informed and admitted that for decades Nigeria has

been an economic under-achiever. The agricultural sector stagnant

industrial capacity collapsed the commercial and service sectors fled to

the informal economy and basic infrastructure deteriorated.

To efficiently attract investment flows for the finance of economic

growth and developments Nigeria as a country will have to undertake

speedy policy and structural reforms which include among others

privatization towards the goal of building a more stable and strong

economic future.

After the devastating economic depression of the late 1920’s and early

1930’s the governments of Western Europe began to be seriously

involved in economic activities in order to ensure the stability of the

state especially with the collapse of the private sector enterprises during

the depression.

A little over a decade before the great depression a revolution had taken

place in the Soviet Union which jettisoned the private enterprises system

and in its place a new socialist economic system emerged thereafter

factors of production were taken over by the state and a system of state

capitalism evolved.

The need for public sector in the economy arises because there are some

areas where the market cannot function efficiently and as a result

government intervention is required.

In many third world countries the primary motivating forces behind the

establishment of public enterprises included among others to:

● Provide basic social services in order to promote rapid economic

development:

Government desirous of achieving rapid economic development

may go into business and set up a number of businesses or

enterprises.

● Take over the risk of capital intensive projects considered too

large for the private sector:

Government was in business so that it could take care of

capital-intensive projects considered too large for any business

concern in the private sector. The financial and other resources

required may not be there in the market economy. Hence

government would have to take on the responsibility.

● Prevent vital sectors of the national economy from being

dominated by foreign private capital:

The government may in the bid to ensure its sovereignty go into

business. When some vital sectors of the national economy are

under the threat of being dominated by foreign capital. Some of

these vital sectors may include critical services like AIRWAYS

NEPA (PHCN) NRC NITEL etc.

● Compensate for the lack of indigenous entrepreneurial capacity:

Where government is aware that the presence of indigenous

participants in the economy is very low or completely absent

government assumes heavy presence in the economy.

Government sets up business or enterprises.

In developing countries particularly Africa Asia and Latin America

since the end of the Second World War the public enterprises were seen

as the only means of achieving economic development.

Indeed in Nigeria the Government’s policy on the development of

public enterprises was clearly defined in the 1970-74 second national

development plan. Based on the broad policy and particularly in the oil

boom years the country developed a large public sector incorporating

economic activities such as banking and insurance prospecting

exploration refining and marketing cement paper and steel rolling

mills hotel and tourism fertilizer plants motor assembly plants rail

sea and air transportation etc.

The Federal government’s investment as at 30th November 1990 was

worth several billions at their historical book values. A survey indicated

there were six hundred (600) public enterprises at the federal level.

After a long period of growing state intervention in the Nigerian

economy through public enterprises the mid 1980’s onwards however

witnessed a reversal in policy.

Serious signs of depression were manifesting in the economy and for the

first time since 1975 the balance of payment was a deficit. Gross

Domestic Product (GDP) fell and began to take a negative turn inflation

worsened; unemployment problems could no longer be ignored.

Consequently it became necessary to look at alternative policy

strategies in order to achieve economic development.

The Buhari administration started to renegotiate for an International

Monetary Fund (IMF) loan facility in order to fine tune and revive the

economy from the depression. This negotiation was not completed

before that government was toppled in 1985.

The Babangida administration that followed rejected the International

Monetary Fund (IMF) loan because of the conditionality attached and

opted for an adjustment programme that was aimed at a complete

restructuring of the economy.

Thus in 1986 a Structural Adjustment Programme (SAP) was launched.

At this time privatization had become the dominant feature in the

structural adjustment reforms proscribed for African countries.

Structural adjustment imposes fiscal and monetary constraints and

preaches the reliance on market mechanisms through the private sector.

The immediate prospects of privatization as an economic policy will

include: savings; the reduction of government’s involvement through

subsidizing or hands-off maintenance of public enterprises will bring

about freeing of funds which could thus be saved Competition; where

the withdrawal of government from the scene will allow room for doing

business the way it is known. Business is carried on for profit thus

competition and profit making will be introduced into the economy.

The Government justified the new policy by affirming that the

enterprises had remained absolutely dependent on the treasury for

funding and that most enterprises had served as conduit pipes for

draining Government resources.

Privatization of publicly owned enterprises to convert to private

concerns became a major thrust of Nigeria’s structural adjustment

programme and by this policy Nigeria commenced the process of

changing the ownership of government companies.

1.1 Statement of the Problem

The circumstances surrounded the Nigeria public enterprises were

brought about by a number of factors such as:

i. Political Interference: The Board of Directors and Management

staff were given directives from above. The board members were

appointed on political consideration.

More often than not there were pressures to offer employment to

selected groups or individuals that were not qualified resulting

in lack of qualified manpower and more especially technically

skilled personnel thus resulting in poor accounting practices and

inefficient management.

The government interference at fixing prices of products was

very often unjustified thus creating problems for both consumers

and producers.

ii. The inherent contradictory objectives: Public enterprises

designed to provide social services were often directed to

break-even and generate profit. In essence public enterprises

created purely for socio-political considerations were often

interwoven with commercial and industrial purposes.

iii. Wide spread corruption and lack of transparency: In most

developing countries providing good governments had become a

problem due largely to widespread corruption and lack of

transparency which often led to poor project identification and

development and particularly in the management of public

enterprises. Nigeria was no exception.

iv. Underdeveloped infrastructure and unfavourable market

conditions: These proved a great constraint to the business

growth of the enterprises.

In spite of all the above experienced in Nigeria and what good

privatization symbolizes there had been much resistance against the

privatization programme introduced by Government. Indeed a greater

proportion of Nigerians were not convinced of the wisdom of a policy

which would entail the selling-off of state assets or giving foreigners

control of crucial utilities.

It was believed that the federal government was heading on a path of

unprecedented national calamity with the foreign ownership of National

Electric Power Authority (N.E.P.A.) Nigerian Telecommunication

Limited (NITEL) the Petroleum refineries and perhaps the Railways.

Nigerians fervently hoped that there was no international conspiracy

whose aim was to grab the central nervous system of Nigeria

particularly in the key sectors of the economy.

Trade unionists and nationalist politicians opposed the sale of

government equity holdings and pointed out the potentially negative

social consequences of privatizations which they said included job

losses and increased charges for essential services. In essence they saw

the sale of strategic national assets as absolutely wrong.

Some Nigerians argued that selling of these State enterprises would

result in a privileged few whose primary objective would be profit

making having control of important and crucial public utilities. They

added that the cost of enjoying these utilities may become prohibitive

and thus go out of the reach of the common man thus making the

people worse off.

Some people also recalled the failure of a somewhat similar policy – the

indigenization policy of 1976 to benefit Nigerians. That policy was

promised to enable Nigerian citizens and secure appreciable and

increased participation in the growing industrial and communal prospect

of their national economy but at the end of the day foreign private

investors were still holding much of the control of the industries.

The Government has continued to rationalize its embarking on the

Privatization policy on the fact that such will pave the way for

restructuring the public sector; in order to reduce the incidence of

unproductive investment which these enterprises have represented.

Thus faced with strong pressure from both advocates and opponents of

privatization the Government’s policy on reforming the ailing public

enterprises has been marked by uncertainty and hesitation. The country

cannot afford this state of mistrust on the part of the citizenry to

Government which in turn may be slowing down the privatization

program. If privatization must be then the country has to make a

success of it. What are the prospects to the economy of the privatization

policy?

It’s in view of this position that the paper attempts to analyze both data

collected and literature review for more classification.

1.2 Objectives of the Study

This study will be appraising the privatization programme started in

Nigeria in 1988 and seek to answer/address the following pertinent

questions/issues.

(1) To explain the concept features and process of privatization

(2) To examine if privatization has made any impact on the Nigerian

economy.

(3) To examine the merits and demerits of privatization in Nigeria’s

economic situation.

(4) To examine the future benefits of privatization

(5) To propose the way forward if privatization is to succeed in

Nigeria.

1.3 Significance of the Study

This study will be useful for:

1. Government which can use the research findings in strategizing

its policy on privatization

2. Students of Public and Business Administration Accounting and

Finance Economics and all such related courses who will get

basic details on the privatization programme in Nigeria and a bit

of the experience of other countries of the world.

3. The general public interested in knowing about the privatization

programme being employed by Government.

4. The study will be a contribution towards the continuing discourse

on the Nigerian privatization programme.

1.4 Scope of the Study

The scope of the research work covers the economic sector of Nigeria

economy but due to logistic and time frame for the work to be

completed the opinion sampling had to be restricted to Abuja the

capital city of the country.

1.5 Limitation of the Study

The constraint encountered majorly comes from non-professional body

who acted differently from the way they think when it comes to

government policy. The wrong notion perceived to the policy

implementation did not address the question at stake the researcher

therefore felt uncomfortable to the chosen words by the said respondents

in some cases.