EFFECT OF PRIVITALIZATION AND COMMERCIALIZATION OF GOVERNMENT OWNED INDUSTRIES IN A DEVELOPING ECONOMY

EFFECT OF PRIVITALIZATION AND COMMERCIALIZATION OF GOVERNMENT OWNED INDUSTRIES IN A DEVELOPING ECONOMY

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CHAPTER ONE

INTRODUCTION

1.1      Background of the study

 In the past the years, Nigeria has witnessed a tremendous growth in the telecommunication industries by this growth NITEL not only become one of the heading public company in the country but also placed the country on top of the telecommunication area in Africa. Thanks to NITEL that today, Nigeria can boast of about 600,000 telephone lines, which have equally been improved with the introduction of digital system.  Apart from making life comfortable for its works, NITEL has contributed to the economic and social advancement of Nigeria through its revenue generation. In terms of performance NITEL several associates and awards have gone a long way  to prove that NITEL  is really running the race fast. In 1992 for instance it was confirmed with the Herbert Macaelory Award for Engineering excellence and a certificate of co-operate excellence. Others are the merit award for cooperate leadership by the University of Nigeria Nzukka and a rotary club of Nigeria. It is however, distrusting that’s despite NITEL’s good inventions and social well being of the citizens are being subrogated by unscrupulous Nigerians.  These people of evil intentions instead of joining millions of Nigerians in extolling the achievements of Nitel have decided to purist the company vandalizing its installations all over the country costing millions of Niara. For instance in Enugu, Nitel plc lost about 10 million worth of cables were damaged.  However, the researcher followed with considerable interest on the controversy surrounding the deregulation of tile communications in Nigeria. The controversy started with aspiring entrants purported “I concede” by the Nigeria that Nitel was been frustrating their efforts at getting of the ground and reached its peale when Nitel disconnected its joint measure company, the mobile telecommunication service (MTS) fronts network. Millions of unsuspecting Nigerians have lost their land earned money through what was an unregulated deregulation of the banks industries while the village was going on, much fraud what banks and bankers were being hailed as the progressive and innovation banks and bankers. This same situation is being repeated in the telecommunication industry by uninformed communicators. The insiders in the industry renew this and many of the intending entrants only want to have their cut from the new national cake which they assumed been backed by the telecommunication deregulation decree and called Nitel.   Dispassionate analysis and a careful study of decree No 75 November 1993 will show that Nitel has been keeping to the letter of the decree while like any commercial organization. They are however strictly not for, public subscription. The only networks open for public transaction as per the second schedule are payphone telephone and mobile communication service. Private operator who have applied for hence from NCC need to make a careful strictly of the second schedule.  Especially why the operative word is private in terms (3) and public in terms  (2) and (4) There is also the misconception that decree 75 of 1992 precludes Nitel from engaging in certain services. a careful study of section (10) subsection (2) and (3) will definitely remove such misconceptions. Generally, the objective of decree 75 of 1992 is to continue Nitel to its existing role of providing conventional telecommunication mainly telephone  and telex services while making the ionconventional new technology in mobile communication information transfer, etc. free for all  in which Nitel too can seek a hence to participate. Already, certain aspects of the decree have been overtaken by technology. These controversies of the effect of privatization and commercialization on a developing on a developing are what this work is sit to remain with special references to Nitel Plc. Enugu.

1.2 STATEMENT OF THE PROBLEM

According to Werner Sombort if capitalism has its own spirit which is profit making spirit” the motive to make profit from investment is considered as a force which is moving that drives investors. People’s major aim of invested is to have return on the fund invested is to have return on the fund invested in the profit.Whenever the return on investment is considered not form coming such investment may be taken as avenue financial loss. There was this economic situation which confronted the Nigeria society when the return of 93.7 million (1.4%) was received do 11 Billion Nana invested on parastatals and private own companies. The poor returns portray the fear that such investment is a waste of public revenue which was then on a decline following a global recession on the Nitel’s revenue.The first official public statement on privatization was in the 1986 budget speech by the head of state, President Ibrahim Babangida when the said (government parastals have for long been subjects of study and policy review). They have too generally come to constitute on unnecessary high burden government resources. They have been variously classified for purposes of reforms. Government has now decided that as from 1986. The volume of non statutory transfers to all economic and quasi economic parastatals would constitute no more than so to it their levels. There are to fund the balance from increase in the price of their product and service charges tariff and rates”.According to another Mbamele, (yp) there is no doubt that excessive participation by government of developing countries like Nigeria in business ownership created great imbalance on their economy. It is obvious that under. Living cause of privatization exercise is the attempt to increase efficiency by making public owned enterprises more productive as well as more responsive in the market place and on competitive pressures.Privatization and commercialization of publicly owned enterprise is expected to block the drain on government revenue by bringing profit spirit into such needed for the execution of public programmes and this need for this study.

1.3 OBJECTIVE OF THE STUDY

The major objectives of the study are:

1.   To determine whether privatization and commercialization helps to solve the problem of poor masses.

2.   To identify the impact of privatization on the general masses

3.   To determine the impact of privatization on government funding.

4.   To proffer solution to problems associated with privatization and commercialization of government parastatals.

1.4 RESEARCH HYPOTHESES

For the successful completion of the study, the following research hypotheses were formulated by the researcher; 

H0: there is no impact of privatization on government funding

.H1: there is impact of privatization on government funding

H02:privatization and commercialization does not help to solve the problem of poor masses

H2:privatization and commercialization help to solve the problem of poor masses

1.5 SIGNIFICANCE OF THE STUDY

The study is of a great importance in the fact that privatization and commercialization at public enterprise was being resort to as a solution to their unpredictability; inefficiency and unproductively public companies in the western countries are privatized for maximum profitability and efficiency. Such companies include the British telephone company’s the British railway’s, the united state postal agency etc.The study is very timely since privatization and commercialization on public owned enterprise was pursued with many investors still ignorant of the benefit derivable from such investment considering the that there are limited literature on the effect of the activity this research therefore seeks to enlighten the general public about the effect of privatization and commercialization of our inefficient public enterprises. It is also hoped that this research will create or stand as a point of reference   for further research or this issue.

1.6 SCOPE AND LIMITATION OF THE STUDY

The scope of this research is limited to Enugu state. Focus is also on Nitel formally owned by this state government. This company is expected to make profit   while charging competitive prices. The researcher encounters some constrain which limited the scope of the study;

a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study

b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities. 

1.7 DEFINITION OF TERMS

PRIVATIZATION: Privatization is the sale of formerly public enterprises to private individuals and groups. Also this is a process whereby the government or its agency’s relinquishes port or whole of its equity and other interests in enterprises whether wholly or partially.

Full privatization:

This would imply that the government ownership and control would be renowned to permit such public enterprises to operate like their private sector counterparts.

Partial privatization:

This means that the part of the government’s equity holdings and interest will be sold out and following that, they would be expected to operate as private companies.

Commercialization:

This means that the enterprises will continue to be owned by the government that will have a financial structure that will enable the raise capital. They are expected to operate without any government operating subventions and without treasury support for future capital development.

Partial commercialization:

            It means that the enterprises will continue to be owned by the government but will necessarily have to generate a fair proportion of the financial requirements for their operations but right continue to need some government support towards the operating costs of future capital programme.

Enterprises:

This means any corporation, board, company or parastatals established by or under any enactment in which the government or any of its departments, ministries or agencies has ownership or equity interest and shall include a partnership, joint venture or any other form of business arrangement or organization.

Divesture:

This means the outright sale of state owned enterprises or industries to the private sector.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study


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