PROBLEMS AND PROSPECTS OF PRIVATIZED PUBLIC CORPORATIONS IN NIGERIA [A CASE STUDY OF POWER HOLDING COMPANY OF NIGERIA PLC, KADUNA]
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ABSTRACT
One of the problems of public enterprises the world over, but more particularly in developing countries is inefficiency leading to waste, slow growth and in ordinance dependence on government support even their activities are apparently profitable ones. As a way of improving performance of public enterprise through which profit orientation will be the motive of these enterprises. In this study, therefore, conscious attempts were made to look critically into problems and prospects of privatization of PHCN and the research work is divided into five chapters. Chapter one is the introduction, background of the study, statement of the problems, objectives, significant of the study, research hypothesis and scope of the study and definition of terms. Chapter two deals with review of related literature such as the concepts of privatization, origin of public enterprises and evolution of privatization in these problems of privatization PHCN. The chapter three of the study places emphasis on the methodology used in carrying out the research such as the population, sample size and sampling procedure, research instrument as well as method of data collection and analysis. Chapter four of the study delves into presentation, analysis and interpretation of data, descriptive and statistical methods such as Chi-square (X2) was employed on the causes of analyzing the data collected. Conclusively, chapter five comprises of summary of finding, conclusion and recommendation where it was concluded that for effectiveness of privatization of NEPA, it needs to be handled by experts devoices of statements, as this would mean creating new capitalist or enriching the existing ones the more at the expense of large proportion of the public.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Privatization of state-owned enterprises (SOEs) has become a key component of the structural reform process and globalization strategy in many economies. Several developing and transition economies have embarked on extensive privatization and commercialization programmes in the last one and a half decades or so, as a means of fostering economic growth, attaining macroeconomic stability, and reducing public sector borrowing requirements arising from corruption, subsidies and subventions to unprofitable SOEs. By the end of 1996, all but five countries in Africa had divested some public enterprises within the framework of macroeconomic reform and liberalization (White and Bhatia, 1998).
In line with the trend worldwide, the spate of empirical works on privatization has also increased, albeit with a microeconomic orientation that emphasizes efficiency gains (La Porta and López-de-Silanes, 1997; D’Souza and Megginson, 1999; Boubakri and Cosset, 1998; Dewenter and Malatesta, 2001). Yet despite the upsurge in research, our empirical knowledge of the privatization programme in Africa is limited. Aside from theoretical predictions, not much is known about the process and outcome of privatization exercises in Africa in spite of the impressive level of activism in its implementation.
Current research is yet to provide useful insights into the peculiar circumstances of Africa, such as the presence of embryonic financial markets and weak regulatory institutions and the manner in which they influence the pace and outcome of privatization efforts. Most objective observers agree, however, that the high expectations of the 1980s about the “magical power” of privatization bailing Africa out of its quagmire remain unrealized (Adam et al., 1992; World Bank, 1995; Ariyo and Jerome, 1999; Jerome, 2005).
As in most developing countries, Nigeria until recently witnessed the growing involvement of the state in economic activities. The expansion of SOEs into diverse economic activities was viewed as an important strategy for fostering rapid economic growth and development. This view was reinforced by massive foreign exchange earnings from crude oil, which fuelled unbridled Federal Government of Nigeria (FGN) investment in public enterprises. Unfortunately, most of the enterprises were poorly conceived and economically inefficient. They accumulated huge financial losses and absorbed a disproportionate share of domestic credit. By l985, they had become an unsustainable burden on the budget.
With the adoption of the structural adjustment programme (SAP) in 1986, privatization of public enterprises came to the forefront as a major component of Nigeria’s economic reform process at the behest of the World Bank and other international organizations
1.2 Statement of the Problem
The first problem recorded with the privatization programme in Nigeria was lack of relevant fundamental economic environment needed before taking off. Some public enterprises that were not ripe enough in terms of competitiveness were privatized. Consideration was not given to capable buyers but to political cronies who could not successfully manage their new enterprises. This led to closure of some of these privatized firms. Lack of transparency in the entire sales has shown up its negative repercaution.
It is reported that privatized firms in Nigeria are refusing monitoring by Bureau of Public Enterprises. In this wise there has been no substantial studies on the operational activities of the privatized firms. The expected difference in the perception of efficiency after privatization could not be proved. In all, it is therefore difficult to identify the performing and non-performing privatized firms.
Among the pertinent issues to be addressed are: What is the extent and pattern of privatization and commercialization? What have been the results of privatization in Nigeria? Has privatization and commercialization improved enterprise performance as anticipated? Finally, what policy lessons are to be learned from the privatization experience so far? These are the issues that come into focus in the study.