CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Today we are witnesses to sweeping changes that are taking place

in the economies of both developed and developing countries. These

changes relate to efforts to move away from government ownership

control or participation in the economy towards free enterprise and

increased operation of market forces. On the whole the changes

ar3e making for the reduction in the role of government in the

economy with a corresponding expansion in private sector

ownership control and participation.

Despite the numerous measures in form of economic policies

consisting of several incentives to promote industrial agricultural

and other activities the Nigerian economy for example still exhibits

very prominent features of underdevelopment and such features

includes poor managerial skill heavy reliance on a single

commodity oil which has failed to provide the much needed capital

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in huge sums as expected for the conscious implementation of a

single strategy of development.

Public business enterprises creates a solution in which

national funds that would have been better spent to guarantee new

economic activity and employment opportunities for the army of

unemployed is being used to subsidize deadwood that would neither

grow nor change. Public enterprises are enterprises that are

controlled by the state they are non-profit oriented enterprises.

The participation of the states in enterprises in Nigeria dated back

to the colonial era. The task of providing infrastructural facilities

such as railway road bridges water 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 this

capital intensive projects.

This involvement was expanded and consolidated by the

colonial welfare development plan (1946 – 1956) that was

formulated when the labour party came to power in the United

Kingdom. This trend continued after independence such that by

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1999 it was estimated that successful Nigerian governments has

invested up to 800 billion naira in public owned companies.

The privatization and commercialization net of the 1988 and the

Bureau of Public Enterprises Net of 1995 defined privatization as

the relinquishment of part or all of the equity and other interests

held by the federal government or any of its agencies in enterprises

whether wholly or partly owned by the federal government.

Although the public enterprises have been subjected to

criticisms one to poor management and inefficient utilization of

resource and mostly regarded to a dead wood that will neither grow

nor change it was these construct criticism levied against them

that led to the idea of privatization and commercialization in which

the exercise would enhance efficiency in the economy rid firms of

the crude and undue governmental interference which have been

the bane of most public enterprise in Nigeria and other developing

countries and also limit the drain by the public enterprise on

government resources but the basic objective of the exercise is to

enhance efficiency and profitability in the government owned

industries.

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1.2 STATEMENT OF THE PROBLEM

Privatization takes an existing government services and

replaces it with a private service. But over the years in Nigeria for

instance the sheer waste and inefficiency of government owned

industries became glaring from the early 1980s in with the onset of

economic crisis by then public companies had become heavily

dependent on the national treasury for the financial operation and

their activities were characterized by mismanagement of the funds

and operations corruption misuse of monopoly power and

bureaucratic suffocation from supervising ministries Obadan

(2000; Olukeshi; 1993:16)

However as noted by some writers the actual performances of

many of the public enterprises have left much to be discussed.

Many of them were not responsive to the changing environment of

the growing and dynamic economy and they did not posses the

necessary tools for translating into reality the hopes of successful

commercial operations. It was obvious that the commission‟s report

of cost effectiveness and insufficient attention to financial records

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by parastatals. If recommended an increased role of the private

sector especially in non sensitive or non security related

parastatals Olukeshi (1993:1).

Therefore the policy of privatization and commercialization of the

development of the nation‟s economy has been called to restructure

and reverse the economy in the country and make it a better place.

1.3 OBJECTIVE OF THE STUDY

1. To find out the effect of privatization and commercialization of

government owned industries in developing econmoy.

2. To know the reason why governmernt embark on privatization

and commercialization of their own industries in developing

economy.

3. To find out if privatization and commercialization of

government owned industries improved the efficiency of

service delivery on developing economy.

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4. To identify the problems militating against privatization and

commercialization of governmental owned industries on

developing economy.

5. To determine whether privatization and commercialization

help to solve the problems of government owned industries on

developing economy.

1.4 RESEARCH QUESTIONS

In other to identify the problems that are militating against their

performance the following research questions were put forward.

1 Why did government embark on privatization and

commercialization of their own companies in developing

countries?

2 What impact does the privatization and commercialization have

on government owned companies or industries on developing

countries?

3 What are the problems militating against government owned

companies in developing economy?

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4 To what extent does privatization and commercialization proffer

solution to the problems associated with government owned

companies on developing economy?

1.5 SIGNIFICANCE OF THE STUDY

A research is carried out to find out solution to the various

problems that face mankind in the environment or society. This

study tends to create awareness to citizens of developing countries

and economic planners on the implications of the privatization and

commercialization of the public enterprises in developing

economies. The importance of this study has both theoretical

practical and policy values and would help in the assessment of

government owned industries.

Also the study will also stimulate further enquiry in the study

of policies particularly in the area of economic development.

Again the study will be of immense academic importance as it

will give direction to students of political science and public

administration for further research into a new economic

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development. At the practical level the study will help to keep

Nigerians and other developing countries abreast with the

challenges in an area of privatization and commercialization. This

will help to mobilize not only their intellectuals but also the policy

makers and administrators to rise to the challenges of analyzing

and integrating this new development in history.

1.6 SCOPE OF THE STUDY

The scope of this research is limited to Enugu state. Focus is also

on PHCN formally owned by the federal government. This company

is expected to make profit while charging competitive prices.

The scope of this study is also limited to the activities

concerned with privatization and commercialization of public

enterprises in Nigeria and other developing economies which was

facilitated as a result of the failure and inefficiency surrounding its

(PHCN) activities and program to the public.

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1.5 LIMITATION OF THE STUDY

The research work is limited by the time span within which the

researcher is required to complete this work.

Finance was another constraint to the study. The financial problem

make the researcher not to travel far to get all necessary data for

the work.

Limited material was another constraint to the completion of the

work.

Another limitation problem of the study was the attitude of

respondents. Some of the respondents were reluctant to disclose

information to the researcher which would have led to more

accurate assessment of the situation.

The cost of newspapers (journals magazines and national

dailies also caused problems to the researcher.

Distance and exit also constitute constraint which hinders the

project work. The school authority restricts the movement of the

student which made it difficult for the researcher to easily travel out

and get the necessary material for the work.

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1.8 DEFINITION OF CONCEPTS

This study is made up of two important concepts the outright sale

of government owned companies to private individuals in terms of

privatization and the operation of government enterprises as profit

making ventures that changes market prices for their operations in

the commercialization.

 Privatization can be defined as narrowly as the transfer of

government owned shareholding in the designed enterprise to

private share holders comprising of individuals and corporate

bodies.

 Commercialization on its own means the re-organization of

enterprise wholly or partly owned by the government in which

such commercialized enterprises shall operate as profit

making commercialized enterprises shall operate as profit

making commercialized ventures without subvention from

government.

 Government owned companies are companied hold directed

and controlled by the government.

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 Monopoly power: the excess of price over marginal cost is a

measure of monopoly power.

 Private sector according to giant paper back dictionary private

sector is that part of a country‟s economy consisting of

privately owned businesses etc.

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REFERENCE

ObietaU.E. (2000). Modern Public Administration. 0nisha;

Abbot Books Limited.

StephenL.(2005). Privatization Competition and Regulation of

The British Electronic Industry. London; 0xford University

Press.

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