CHAPTER ONE

1.0   INTRODUCTION

1.1   BACKGROUND OF THE STUDY

  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 privatization and commercialization.  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 privatized 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 opinioned,  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 reshuffling in the economic policies.  .

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.

1.2  STATEMENT OF PROBLEM

According to Wmer  Sombert, capitalism has its own spirit which is profit seeking spirit the motives to make profit from investment is considered a moving force which derives investors. Whenever the expected returns from investment is not fourth coming such investment may be considered as avenue of financial loose, such as the economic situation which contributed the Nigerian society when act of total of eleven billion #11 billion investment on parastatal and government owned industries realized a divided of 93.1 million i.e 39% return. This poor return portrays the fear that such investment is a waste of public following a global recessive in the oil revenue.

The first official public statement on privatization was in the 1986 Budget special by the Head of State. President Ibrahim Banangida, when he said “Government parastatal have for long been subject of the study and policy, review. They too have generally come to constitute an unnecessary high Burden on government resources.

They have been variously classified for purpose of reform government has now decided that as from 1986 the value of non statutory transfer to all economic and quest economic parastalals would constitute not more than 50% of their level. They are to find the balance from increase in the price of their services and products charges, tariffs and rate.

According to Mbarieto.C.I (2002) “Capital restricting for successful privatization. There is no doubt that excessive participation by the government of developing in their economic it is obvious that the under lying cause of privatization efficiency by making profit into such enterprises more productive well and to competitive pressures privatization and commercialization of public owned enterprises in expert to block the drain of government revenue by bringing spirit of profit into such enterprises as well as provided the much sought  revenue for the art in public program.

1.3  OBJECTIVES OF THE STUDY:

The primary purpose of this study is to determine the prospect of privatization and commercialization of public enterprise in Nigerian. In order to achieve this purpose the following objectives were pursued:

• To    identify how privatization and commercialization of government parastatals will help grow the Nigeria economy.
• To determine the effectiveness of privatization and commercialization of public-owned enterprises in Nigeria.
• To analyze the problems facing the management of public enterprises in Nigeria

1.4   RESEARCH QUESTIONS

• Will the privatization and commercialization of all sectors help Nigeria economy?
• How effective is the privatization and commercialization scheme in Nigeria?
• What are the problems facing the management of public enterprises in Nigeria?

1.5  SCOPE OF STUDY

The scope of this research work focused strictly on those privatization and commercialization programs that have been embarked upon by Nigerian government from 1988 to 2010. This work will enable us see the important of privatization and commercialization of government owned enterprise.

1.6  SIGNIFICANCE OF THE STUDY

This study is no doubt of great importance to the federal and state government of Nigeria in the sense that it will help to enhance their policy inputs to the public enterprises.

The outcome also helps the government to improve the public sector and examine the performance of the public sector. The study will serve as a base for solution to other economic problems confronting the various government to understand the implications of their unhealthy uncrouchement on the government parastatals.

The study will also recast students of business studies who may in their various research programmes as well as other authors who may wish to write on this important topic.  The outcome will enable the outcomes,  that is the general public and government to be more efficient to the large size of the population the information got from a sample size cannot apply one hundred percent to the population.

1.7  DEFINITION OF TERMS

This section will aim at defining some of the technical terms used in the course of this project writing. 

• Privatization – Changing something from state to private ownership or control
• Commercialization – The act of commercializing something; involving something in commerce
• Policy – A plan of action adopted by an individual or social group
• Establishment-The act of forming or establishing something