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PROBLEMS AND PROSPECTS OF
PRIVATIZATION AND COMMERCIALIZATION OF GOVERNMENT PARASTATALS IN NIGERIA
ABSTACT
This topic,
problems and prospect of privatization and commercialization of government parastatals
in Nigeria is the attempt to help the general public to know about the
privatization commercialization of government parastatals in Nigerian. Moreover, to enable the public to contribute
their own quota in the privatization issue and find out the problems and
prospect associated with the porgammes. The chapter one deals with the
introduction, the historical background of the programmes, and statement of
problems objectives of study, significant of study, scope and limitation and
lastly definition of terms. In this project writing the chapter’s one from
chapter one to five which give the view of what privatization and
commercialization of government parastatals are all about.
CHAPTER ONE:
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The key
component of the federal Government Adjustment programme is the drive towards
higher efficiency in the public sector.
This necessitated the promulgation of privatization and
commercialization Decree 25 in 1988 by the federal Government in which was
reflected that government will divest it holdings in agricultural production,
electrical appliances, hotels, foals and non strategic industries. Government will also reduce its holdings in
banks insurance companies and other financial enterprises without losing
control.
Privatization is thus, process of
divesting government ownership control and management of enterprises and
agencies to private individuals and or groups of individual or business firms
that are seeking their profit. This is
transfer of government owned industries or parastatals to the private sector.
Hemmings aptly, described privatization
as a laudable policy to help moderate the quantity of securities available for
dealing on the stock exchange the described further as the transfer of
ownership and control of assets from the public to private sector.
Commercialization on the other hand
means that the signaled enterprise will be excepted to generate enough revenue
to cover their operation expenditure while government gives them capital grant
to finance their capital intensive projects.
As a matter of feet, commercialization
under the Decree 25 of 1988 on privatization and commercialization was defined
as the re – organization of enterprises wholly or partly owned by the federal
Military Government such that these enterprises shall operate as profit these
making commercial ventures and without subvention from the federal Government.
The Government involving itself in
business enterprises came as a result of predominance of state owned
enterprises reflected a desire to control the economy after the colonial rule
in the country.
The 1983 presidential commission on
parastatals, examined the operating all the parastatals with a view to determine the basis for new funding
scheme appropriate capital structure as well as incentive measured to enhance
their productivity and general efficiency.
Following the commissioning, the year
1989 was earmarked was earmarked, the first year of implementation of the
privatization and commercialization programme of the federal government of
Nigeria.
It was firs announced in 1986 as part of
the board efforts to reduce budgetary allocation to public sector efficiency
and support the aim of fiscal balance.
Divest holding will be taken care of to avoid it being
contra-concentrated in the hand of few individuals.
In order to enable all interested
citizen own shares in the private enterprises commercial banks were directed to
grant credit facilities for the purchase of shares under the programme central
bank of Nigeria programme 1989.
In the recent years, 2003 another step
into privatization and commercialization has been taken by His excellency,
Chief Olusegun Obasanjo, the president of the Federal Republic of Nigeria, as
this has been a dream in the mind of Nigeria government for the post years, to
invest profile an denounced political, social and economic development on a
sustained basis. It is with this goals
in minds, that it is realinging its policies and programmes to create the
enabling environment for efficient government and put in place a viable private
sectors. These public sectors
include: NNPC, NITEL etc.
Consequently, there are reasons why
government embarks on privatization and commercialization of parastatals such
as: government desires to bring optimum
efficiency into the industrial sector of the economy. This shows
that government can work effectively achieve its social and development
goals by reducing the widespread administration over commitment of the public
sector and development relying on the managerial capacities of private
individuals and firms which can respond to local needs, particularly in small
scale industries.
Privatization is imperative for ramping
over economy that has been characterized by typical problems of a state or
country dominance over their economy which can be outlined as follows.
1. Decline in real gross Domestic
product.
2. Deep seated corruption and political
instability fueled by the concentration of wealth and power of the centre.
3. Unfair shift of resources from the
massive public to the government causing widespread of poverty etc.
These
problems which are connected in one – way or the other showed that a grant
proportion of economic activity is controlled by inefficient government owned
enterprises therefore accounting for the decline in GDP and slow rate of growth
in the economy.
Government
involvement in business enterprises in Nigeria and the predominance of state
owned enterprises, reflected a desire to control the economy after wrestling
political control from the colonialists enterprises and viable indigenous
private sectors, the government had to move into the large empty spare left by
society to take over the budding economy.
Government played a very important role
in many areas of economic and industrial development. Moreover, provision of services is such areas
of business like, insurance, petroleum manufacturing, shipping and banking
where government acquired equity interests in twelve commercial and merchant
banks. In all these, Nigeria had a
rather bloated public sector with well over 1500 public enterprises at the
federal and state levels enterprises at the federal and state levels with a
regulated private enterprise. These
enterprises accounted for between 30 – 40% of fixed capital investments as
stated in the final report of the (TCPC) Technical committee on privatisation
and commercialisation. As the chase may
be wake of the economic recession which started in 1981 made it possible for
attention to be focused on the activities of these parastatals.
The 1983
presidential commission on parastatals with a view to determining the basis for
a new funding scheme, appropriate capital structure, as well as incentive
measures to enhance their productivity and general efficiency. The report of the commission showed the
following:
(1) MISUSE of monopoly power
(2) Defective capital structures, resulting
in heavy dependence loan the treasury for funding
(3) Bureaucratic bottlenecks in their
relation with supervising ministries.
(4) Mismanagement, corruption and nepotism
The federal
Government could not fund the monumental wastes and inefficiencies of the
enterprises with problems such as ill conscious investments, political
interference in making decision etc.
The Federal
Government Of Nigeria in the year 1985 for example, had invested a total sum of
N23 billion in the public sector. In
addition to this, a total of N11.5 billion was recorded as subventions to
various parastatals and companies.
The
government revealed that the total dividends received from this investment,
during the period of 1980 to October, 1985 was N933.7 million, averaging
approximately N155million per year.
The
structural adjustment programme was first announced in 1986 as part of the bread
efforts to reduce budgetary allocation to public sector efficiency and support
the aim of fixed balance. Divested
holding will be taken care of avoid it being concentrated in the hands of a few individual.
In order to
enable all interested citizens own shares in the private enterprises,
commercial banks were directed to grant credit facilities for the purchase of
shares under the programme (CBN 1989) i.e the Central Bank of Nigeria
Programme. Another programme was
introduced and it was then, that bank was first privatised in Nigeria in 1992.
The federal
government structural adjusted programme is the drive towards higher efficiency
in the promulgation of the privatization and commercialization Decree No. 25 in
1988 by the Federal Government which reflected that government will divest its
holdings in agricultural production.
Electrical appliances and non- strategic industries and reduction of its
holdings in banks, insurance companies and other financial enterprises without
losing control.
The year 1989
was ear marked the first year of implementation of the privatization and
commercialization programme of the Federal government.
Privatization
as Ibie opined, it is a process by which the size of an inefficient and
ineffective public sector is reduced by transferring some of its function to a
relatively more efficient private sector.
The introduction of privatization in Nigerian brought in the opinion of
many intellectuals such as professor Adebayo who was of the opinion that,
privatization and commercialization to succeed, there must be a resuffling in
the economic policies. He said that it
was only as a result of this, that public enterprise would be able to perform
better.
Mallam
sulleiman D. Umar was of the opinion that the issue of the absorptive of the
capital markets could be solved by the following the procedure accepted during
the indigeneization exercise of 1972.
He observed that Nigerian capital market now has more experienced
financial experts than before and that they could be put to work. He suggested that, for the policy to achieve
orderly implementation, this process should be phased over a period of 2-3
years to enable a proper structuring of the company that were to be privatized
first and the subsequent ones of follow:
Expression of
fears were raised by individual and workers, in the sense that, it will bring
unemployment as a result of massive retrenchment of workers in the public
enterprises.
Chief of
General Staff, Commander Ebitu Ukiwe gave a dismal picture of federal government
investment in parastatals and companies as at october 31, 1995. Total dividends receipts by government
amounted to N93.7 million on investment of N11 billion i.e 1.39% returns. This reflected the more reason why the
government felt the need to reduce the financial burden with the belief that
the private sector would be able to record higher profits.
Given the
inadequate accounting records of the parastatals, they may never qualify for
quotation. This fear was allayed by the
recommendation of the Second Tier Securities Market (SSM) with less stringent
listing requirements as a starting point for such parastatals to quote their
shares.
In the light
of these issues raised as regards the privatization programme, the Federal
Government of Nigeria, set up a technical committee on privatization and
commercialization implement the porgramme.
The technical committee (TCPC) was inaugurated on July 1988 and its
secretariat in Ikoyi, Lagos.
Commercialization
under the Decree No 25 of 1988 on privatization and commercialization was
defined as. The re-organization of enterprises wholly or partly owned by the
Federal Military Government such that these enterprises shall operate as
profit-making commercial ventures and without subvention from Federal Military
Government.
Privatization
and commercialization of public sectors has been a dream in the mind of
Nigerian Government in the past years.
Now that its needs arise further growing economy of Nation Nigeria His
excellency, Chief Olusegun Obasenjo the president of the Federal Republic of
Nigeria has brought to focus in this recent year 2003 the programme again to
privatize and commercialize public sectors to invest profile and enhance
political, social and economic development on a sustained basis.
The
parastatals to be private commercialize include: NNPC, NITEL, Nigeria Railway Corporation,
NEPA to mention but few. It is with this
goals in mind that, it is realigning its policies and programmes to create the
enabling environment for efficient governance and put in place a viable private
sectors.
In the above
mentioned parastatals like Nigeria Airwaus is going to be privatize and commercialize because of its inefficiency
caused by bureaucracy and political considerations. Passengers were not some of any flight
Schedule as flights could be concelled any moment without prior information.
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