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The Effect Of Privatization And Commercialization Of Government Owned Companies In A Depressed Economy Like Nigeria

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This research work was carried out in a bid to examine the effect of privatization and commercialization of Government owned companies with case study as NNPC. Enugu, and with particular focus on the problems on a depressed economy like that of Nigeria. In an attempt to reach the nook and cranny of the said topic, this research work was done in five chapters (Subdivided into the chapters). With chapter one, dealing with the introduction, statement of the problem, significance of the study, hypothesis formulation, scope and limitations of the study, while chapter two deals with the review of related literatures and amongst. Other things treated on the historical objectives of privatization and commercialization with particular attention to Nigeria own case. It also trampled some arguments put forward by certain concerned citizens. And chapter three touched the angles of the methodologies used in carrying out the research work. Data was collected through primary method, questionnaires and personnel interviews. Through secondary data which comprises the management, subordinate staffs of selected company which constitute the sample size etc. Whereas, chapter four deals with presentation of data and analyses, with use of tables, percentages and the use of T. test approach and decision taken on the basis of the data collected, analyzed and tested. Chapter five was basically talking about the whole research work in a nut shell, by way of summary, conclusion and recommendations. It suffers me to say that since privatization and commercialization programme was embarked upon there are pervading sense of committal and dedication amongst the workers of the company. This goes to indicated that the programme is necessarily helpful to corporate health of the company and the country at large towards revamping the bastardized economy.



Title page       .      .      .      .      .      .      .      .      .      i

Approval Page.      .      .      .      .      .      .      .      .      ii

Dedication      .      .      .      .      .      .      .      .      .      iii

Acknowledgement .      .      .      .      .      .      .      .      iv

Abstract  .      .      .      .      .      .      .      .      .      .      v

Table of Contents   .      .      .      .      .      .      .      .      vi


1.0  INTRODUCTION      .      .      .      .      .      .      .      1

1.1  Background of the Study              .      .      .      .      .      4

1.2  Statement of the Problem     .      .      .      .      .      7

1.3  Objective of the study    .      .      .      .      .      .      8

1.4  Significance of the Study       .      .      .      .      .      .      13

1.5  Researches Hypothesis   .      .      .      .      .      .      14

1.6  Scope and Limitations of the Study      .      .      .      14

1.7  Definitions of Terms      .      .      .      .      .      .      .      16

       References      .      .      .      .      .      .      .      .      19



2.0  LITERATURE REVIEW     .      .      .      .      .      .      20

2.1  Meaning and Definition of privatization  .      .      .      21

2.2  OBJECTIVE of Commercialization ..      .      .      .      24

2.3  Objective privatization    .      .      .      .      .      .      25

2.4 OBJECTIVE and main provisions of the Decree       .      .      26

2.5  Arguments on the Problems of Privatization and   Commercialization .       .      .      .      .      .      .      27

2.6  Argument  of commercialization    .      .      .      .      29

2.7  Implication of privatization    .      .      .      .      .      31

2.8  Implication of commercialization   .      .      .      .      33

       References      .      .      .      .      .      .      .      .      37


3.0  RESEARCH METHODOLOGY    .      .      .      .      .      38

3.1 Research design       .      .      .      .      .      .      .      .      38

3.2 Area of study    .      .      .      .      .      .      .      .      39

3.3  Population of the Study .      .      .      .      .      .      39

3.4  Sample size    .      .      .      .      .      .      .      .      40

3.5  Sample method      .      .      .      .      .      .      .      42

3.6  Research Instrument      .      .      .      .      .      .      43

3.7  Validation of instrument.      .      .      .      .      .      44

Reference.      .      .      .      .      .      .      .      .      45


DATA PRESENTATION AND ANALYSIS ..      .      .      .      46

4.1  Data presentation and analysis      .      .      .      .      46

4.2 Test of Hypothesis   .      .      .      .      .      .      .      56



5.1  Summary of findings      .      .      .      .      .      .      61

5.2  Conclusions    .      .      .      .      .      .      .      .      63

5.3  Recommendations  .      .      .      .      .      .      .      64

       Bibliography    .      .      .      .      .      .      .      .      67

Appendices     .      .      .      .      .      .      .      .      70





       In Nigeria, the Decree No 25 was enacted in July 1988 to set up the privatization and commercialization programmes, as at this year 2001. The origin of privatization started with Milton Friedman of the monetary economist theory. He was of the opinion that if public enterprise were given over to private individuals it would improve the economy of the country.

       This he argued would give room for proper accountability and generate revenue for the upliftment of the economy and country at large.

       Milton Friedman’s monetarist idea was put to test in 1978 when Margaret Thatcher, British Prime Minister, came to power. She adopted Friedman’s approach to economic analysis and tried the idea of privatization and like a harmattan bust fire the idea has engulfed the whole world.

       Though the British Prime Ministers, Mrs. Thatcher did not find it easy with her political opponents. At the beginning of her fiesta of privatization in Britain, a fellow conservative and former prime Minister with an impeccable Tory pedigree, Lord Stockton (better know as Harold Macmillan) turned out to be the sharpest and most devastating critics of the Thatcher’s Policy of Privatization. According to Lord Stockton, privatization is akin to selling off the family heirloom” in order to raise spending money a folly of calamitous proportions. Lord Stockton’s perceptions was confirmed by the present perilous state of the British economy which is racked by colossal trade and budgetary deficits, rising inflation, unemployment, homelessness etc a few years after squandering billions of pound and steering from the public companies such as British Airways, British Telecommunication, inland water resources etc. Thatcher after her experience in 1986 swept the argument by improving the British economy through privatization exercise.

       In Nigeria, starting from 1987 when there was a crash in the crude oil prices nationalized industries in this country became the animous of trauma. Today, people actually expected the Power Holding company of Nigeria (PHCN) to breed darkness rather than light. The Nigeria Airways still grapples with things like schedules … with little success. The rail ways has been one long experience in how national institutions can thrive on merit ravaged by abuses of all types and descriptions, consistent not in services delving but in malignancy, Nigerian public enterprise fell in their fall long ago. The general feeling is that nothing short of a miracle can save their health. Is privatization this miracle? The Babangida administration thinks it is, plans were concluded and it was put in place into action.

       The fact is that where privatization can mean hope, it can also represent a source of concern because it might concentrate wealth in the hands of a few. Furthermore, it might give multinational corporations an access to our strategic industries or rather mean a retrenchment of millions of Nigeria in other words; privatization should be carried out and done with almost care.



       Privatization was one of the preconditions kid down by the international monetary, fund (IMF), to assist financially the development countries of which Nigeria is one. This was to enable their economics to open up to market forces. The collapse of oil prices in 1985 and the consequent Contraction in foreign exchange earnings, coupled with the surge in imports resulting mainly from an over valued naira led to serious balance of payment problems debt crises and by budget deficits

       Prior to the oil price collapse, the huge wind for all revenue occurring from oil exports prompted the government to assume a greater role in the economic life of the nation. By embracing the concept of an entrepreneurial state as the engine of growth, the government owned and maintained several industries which spread over agriculture, mining, manufacturing, transport, commercial and other services activities.

       With the coming into power of new military administration in 1985, the level of subsides to parastatals and government. Companies as part of the overall public expenditure policy assured a new dimension.

       In his broadest to nation, on the occasion of the silver jubilee independence anniversary in October, 1985, the then president, General Babangida made an important policy pronouncement on the future of parastals and government companies; he announced that, as parts of the process of mopping up liquidity in the Nigeria financial system, the government would direst equity holdings in the several potentially viable parastatals, and state owned company such as hotels, breweries and distilleries.

       In addition, the president declared that parastatals would be generally, encouraged to submit themselves to the discipline of the capital market. A few months later, the federal government statement of intent crystallized into a coherent and clear cut policy which was announced in the public Budget speech of 1985. On the occasion the president sait; “Government has now decided that as from 1986, the volume of no statutory transfers to all economic and quasi economic parastatals would constitute no more than 50 percent of their present levels”. They are to find the balance from increase in their price changes, tariffs and rates.

       A detailed articulation for the government’s policy on privatization emerged in the structural adjustment programme which was embarked upon in July 1986 time trying to raise some revenue through user charges.

Privatization in Nigeria will be referred as a success if it turns out to be a process of reducing the size of an efficient and inefficient public sector by transferring some of its functions to a relatively more efficient private sector.


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