CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

In Nigerian, state participation in public enterprises dates back to the colonial era. During this period, the colonial government was faced with the task of providing infrastructural facilities such as railway, road, bridge, water, electricity and port partly because there were dearth of indigenous companies with the required resources as well as inadequate capacity of foreign trading companies to embark on those capital intensive projects (Iheme 1997) as cited in (Igbuzor 2003).

The trend of state participation continued such that in the 1960s and 1970s the Nigerian government established a large number of public enterprises in order to command strategic and accelerate the pace of development, (Atuma 2006). As Olisa (1983) puts it, “Beginning as a trickle in the period between the end of the second world war and Nigerian’s attainment of independency, the creation of public corporations has risen to flood level since independence and has maintained a steady growth.

A survey conducted by the technical committee on privatization and commercialization reveals that parastatals owned by the federal government totaled about 900 in 1990 with a total book value of investment worth about N36 billion (Sanusi, 2000). The investments were in the areas of banking and insurance, oil exploration refinery and marketing, cement, paper mills, steel mills, hotels and tourism. Others were fertilizer plants, motor assembly plants and sugar companies. Public enterprises are statutory bodies operating services of an economic or social character or both on behalf of government, (Ezeani, 2006). Their primary purpose is to stimulate and accelerate national

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economic development under conditions of capital scarcity and structural defects in private business organizations. There are also basic considerations arising from the dangers of leaving vital sectors of the national economy to the whims of the private sector often under the direct and remote control of foreign large scale industrial combines, Nigerian second National Development Plan (1970 – 74:75).

Hanson (1965) noted that, the establishment of public enterprises is premised on what he considered as obstacles to economic development in the post independence states, similarly, Ugorji (1995:54) observes that public enterprises are also established for political reasons. Many government undertakings are used to provide jobs for constituents, political allies and friends. The location of public enterprises and distribution of government employment have further been defended on the need to maintain federal character and promote national integration.

However, after a long period of growing state interventions in the Nigerian economy through public enterprises.Their performance has become a subject of national debate and hence a matter of crucial policy agenda of the governments of this country for the past two decades.

According to Ezeani (1995:113), public enterprises in Nigerian have not been able to accomplish the objectives for which they were established rather, it can be argue that they have become a vehicle for corruption, nepotism, misappropriation of public funds and indeed an instrument for furthering political and material interests of those in government.

Similarly, Obadan (2008:8) attribute it to unbridled state expansion which had led to the ineffectiveness in the provision of goods and services

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such as failure to meet intended objectives and diversion of benefits to elite groups. Nnoli (1987:7) blames it on the corrupt practices of public officers. The problems of performance of Nigerian public enterprises were further complicated down turn in socio-economic development in the country due to global economic recession. Thus, Nigerians precarious fiscal and monetary posture could no longer sustain the requirements of its public sector enterprises, particular, since they performed below expectations in their return on investments and quality of services, Nnoli (1987).

In this view, Nigerian was strongly advice by worldwide lending agencies, particularly the IMF, World Bank to divest their public enterprises as a condition for economic assistance. With the intensified push for economic liberalization, Nigeria was told that privatization as an economic reform would help cut public sector inefficiency, waste, provide greater scope to the private sector, attract more investments and bring in new technologies hence, revive economic growth. Based on the advice of the World Bank, IMF, which was welcomed by Nigerian government under the administration of former head of state, General Ibrahim Badamosi Babarigida the privatization option was initiated, (Federal Republic of Nigeria, 1986).

Despite the fact that the privatization option was initiated, Public enterprise in Nigeria has been a thing of National concern and debates.

It is on this backdrop that this paper examines the problems of privatization of public enterprises in Nigerian, with a specific regard to Nigerian Coal Corporation.

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1.2       STATEMENT OF THE PROBLEM

Since the last two decades, Nigeria has embarked upon a policy of privatization of its public enterprises and government corporations. Both the framework and the processes of implementing this policy have been under public glare and criticisms quite of recent, (Ozor, 2004).

This wide public outcry has been jettisoned as privatization is seen as the available alternative to salvage the ailing economy, as the inefficiency, low productive, lack of management skills and dilapidated equipment experienced at the Nigerian Coal Corporation would be solved when privatized.

Despite the benefits of privatization some social critics see it as a sell out of our economy to some few rich and privileged members of the society. Thompson (1989) noted that if privatization contributes to improved efficiency and financial performance, it negatively affects the distribution of wealth, income and political power.

Opponents of privatization argued that it will lead to inevitable rise in unemployment levels due to lay-offs occasioned by down sizing, unrealistic pricing of the enterprises which are then sold to favoured bidders at ridiculously low prices, monopolization of choice enterprises by some rich men and domination of local economics by foreign interests. (Ayozie and Latimro, 2006). One of the serious problems of privatization of Nigerian Public enterprises is lack of transparency in implementing the programme. This has been a teething problem confronting the Nigerian Coal Corporation. In other situation, privatization of ailing public enterprises without regard to laid down policy and economic reality on ground is a frustration to the privatization programme in Nigeria.

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Privatization has become an acceptable paradigm in political economy of states (Ugorji, 1995:543). However, advocates of privatization in Nigeria argue that the deplorable states of these public enterprises and their negative impacts on the health of national economy make privatization so critical and imperative (Atuma, 2006).

Basically, organized labour seeks to know what happens to workers when the government privatizes. The employment impacts of privatization have also triggered the fears of the workforce, including the managers of public sector enterprises being privatized, the government as well as the buyers of the state owned enterprises.

The fundamental questions raised by this study are;

1.     What are the circumstances that led to the problems of privatization of Nigerian Coal Corporation.

2.     Does privatization of Nigerian coal corporation affects it positively or negatively

3        Are there measures or means that can help in solving the problems of privatization of Nigerian Coal Corporation.

1.3 OBJECTIVES OF THE STUDY

The broad objective of this study is to investigate the problems of privatization of Nigerian Coal Corporation. The specific objectives of the study include;

1.     To explain the circumstances that led to the privatization of Nigerian Coal Corporation.

2.     To find out whether privatization of Nigerian Coal Corporation affects it positively or negatively.

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3.     To ascertain how the circumstances that led to privatization of Nigerian Coal Corporation can be solved.

4.     To make recommendation based on the findings.

1.4 SIGNIFICANCE OF THE STUDY

The privatization programme has become a major policy instrument which in addition with other instruments was expected to contribute to the overall attainment of general macroeconomic goals, (Adeyemo, 2005). It is obvious that the privatization of Nigerian Coal Corporation would not be successful if it is not properly guided. The significance of this study is very high and has empirical, theoretical and practical significance.

The empirical significance of this research work is to look into how the Nigerian Coal Corporation was privatized. In addition, the study will elicit the problems encountered during the privatization and provide measures to embark or to ensure effective privatization in Nigerian Coal Corporation. The study is expected to expose the reasons why the privatization policy has not been fully implemented in Nigeria.

Theoretically, this work is expected to achieve the objective of answering the research questions as stated in the statement of problem which we believe it shall. This work will only synchronize with the existing literature but also serves as a convenient starting point for further inquiry in privatization programme in Nigeria.

The practical significance of the study is to adhere strictly to effective privatization programme in Nigerian especially in Nigerian Coal Corporation.

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If privatization must of necessity bring forth the desired benefits it has to be viewed not as an end itself but as a means to get government interested in fostering a new division of labour between the public and private sectors in order to increase the efficiency and contribution to development of both sectors. (Shirley, 1998).

The study will also enhance the knowledge of those responsible for the formulation and implementation of privatization programme/policy. It will equally add to the exiting literature on privatization.

1.5 SCOPE AND LIMITATIONS OF THE STUDY

The study will specifically examine the problems of privatization of Nigerian public enterprises with particular reference to Nigerian Coal Corporation. The spatial and geographical coverage of the study shall be Nigerian Coal Corporation.

However, in carrying out this research, the researcher encountered problem such as the uncooperative attitude of the staff of the Nigerian Coal Corporation in responding as well as releasing data to the researcher due to strict adherence to oath of “secrecy”. This contributed to low returning of the questionnaires.

In view of the above, some efforts were made by the researcher to surmount these constraints they include the following; the guide by the supervisor in the drafting of the interview questions after the first time that the researcher was sent to the field, the researcher revisited some offices in the subsequent days and those respondents who disagreed initially, responded. The researcher also tried to convince the respondents that their responses will be treated with great deal of confidentiality.

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