Privatization in the Nigerian Economy

Privatization in the Nigerian Economy

Privatization involves the transfer of ownership from the public sector to the private sector. Therefore, it entails the allocation of shares which is meant to be done to have a fair geographical and income groups in the country. Also, there is the need for compromise between the government and the citizens due to certain misconceptions and fears about the privatization programme.

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The governments have taken some measures to make for effectiveness of the privatization exercise. They includes:

1.       Creation of Public Awareness.

Government have made the entire public aware of the privatization programme through the media such as radio newspapers, televisions, seminars, conferences and work shops. The awareness were made in such a way that there was a dignate explanations on the need to privatized and its benefits.

2.       Printing and Distribution of Application Forms.

          The federal government also employed channels and non-traditional outlets for the distribution of share application forms. Some of the channels and outlets including post offices heal government headquarter, state ministries of commerce and industry and chambers of commerce and industry (Obadan, 2000).

3.       Provision of Guidelines

          The government also provides guidelines on how shares are to be allocated. The minimum application for general allotment of shares was fixed at 100 shares for 50k each. Also, a multiple application will be disallowed and fictions names used will be rejected and only Nigerians aged 18 and above are eligible (Guidelines on Privatization 1999).

4.       Finding of Share Purchase

          The federal government have devised means to provide funding of share purchase. This is through the privatization share purchase loan scheme (PSPLS) forms that were recently made available so that individuals who are unable to save to purchase shares can do so through banks.

Recently, the chairman of national Council on privatization (NCP), vice President Atiku Abubakar approved the inclusion of ACB international Bank Plc to participate in the privatization share purchase loans scheme thereby joining the 26 banks on the privatization share purchase loan scheme. The banks were selected on the basis of branch network, regional presence and financial stability (Anyikwa, 2003).

5.       Issuing Directive

There was also issued directive from the government to commercial banks in the country to extend credit to their adjudged customers to prospective share holders to purchase shares of the privatized enterprises. Also employees of labour in both public and private sectors were urged to extend financial assistance to their employees to enable them purchase shares in the privatized enterprises (Guidelines on privatization 1999).

ADVANTAGES OF PRIVATIZATION.

Privatization really has numerous advantages to the government as well as the economic development of the nation. The gains are as follows:

1.       Revenue Generation:

          The privatization exercise will raise revenue for the government. The sales revenue from the, 55 privatized enterprises in the first phase was N3.6 billion with the original value of the investiment being N652 million. This means that the exercise yielded more than N2.6 billion as capital gains to the government.

Also, most of the enterprises average profit grew by about 400 per cent which will increase tax revenue, (Obadan, 2000).

2.       Relief on Federation Account

          Government will be relieved of the heavy financial burden it has been subjected to when the enterprises are privatization. It makes for lesser responsibility on the part of the government since attention will be directed to other social programme which can generate greater social benefits (Odike, 2001).

3.       Improve Performance

          Privatization will reduce wastage and make for efficiency in management and employment will be based on goals and objectives. This will reduce the over statting and mismanagement of funds that is being experienced in the public sector. (Odoh, 2003).

According to Odubiyi, (2000) in the write up of the U.K experience the U.K electricity privatization yielded some benefits and costs to the society including the doubling of industrial productivity and efficiency, increase industry wide plant availability to over 7%, more than 4% reduction in cost of generation, 20% in transmission and almost 39% reduction in consumer tariff ect.

4.       Management Capability

The privatization programme has greatly minimized the scope of political patronage in the board appointment. Under the first phase of the programme, the federal government have relinquished about 280 directorship positions in the privatized enterprises.

5.       Ownership Expansion

Privatization has massively change and expanded share ownership in Nigeria. Over hundred thousand (100,000) shareholders have been created which is bout twice what was obtainable in 1988. (Anyanwu, 1999).

6.       Enhances Debt Re-schedulment

          Privatization is one of the conditionalities for the international community to assist the ration in its debt burden. Privatization will help reduce cost on the port of the government and therefore create room for successful negotiations on external debt rescheduling, refinancing and restructuring.

7.       Efficient Allocation of Resources

          Privatization will help in the restructuring of the economy by re-allocation of public funds to efficient user, attract foregn investors and make goods and services available to the people.

8.       Encourages Price Market Economy.

          The programme encourages free market economy price it reduces government regulation of the economy making room for greater deregulation and operation of market forces.

DISADVANTAGES OF PRIVATIZATION

Privatization of public enterprises will as well result to certain fears and sacrifice which must be encountered in the course of the exercise, such disadvantages includes

1.       Unemployment

          According to Onwe (2002), unemployment is one major fear of people in the privatization of public enterprises. People would think that they may lose their jobs when a company is privatized. This was clarified by the report of Akinnifesi (1995) a former Chief Research Officer, Research Department CBN revealed that certain sectors such as banks, insurance and beverage companies, hotel and other companies lay off workers due to restructuring exercise which in variably affect employment of labour.

2.       Increase in Prices

Odike (2001) says private sector have the intension to maximize profit and will therefore achieve this by changing high prices on their products. Such increase is prices is often so high that people cannot afford to pay for the product which leads to inequality in the distribution of goods and services.

3.       Threats to the Economy

Privatization may lead to a threat to the economy since the economic activities are controlled by private individual. In that sense, both foreign and domestic business men dictate to the government on policies, to pursue.

4.       Inequality / Inequitable Wealth Distribution.

          Privatization may also result to greater wealth distribution since a few people might gain control and concentration of wealth. This creates a wider income gap between the rich and poor.

According to Ibie (1986), there is the fear of economic domination, the paroxysm of post – independence nationalism, lack of private capital and entrepreneurship and the need for balanced development.

PROBLEMS OF SUCCESSFUL IMPLEMENTATION OF PRIVATIZATION PROGRAMME IN NIGERIA.

           In Nigeria, privatization is new in the conceptual framework and thus encounters problems that militating to its successful implementation. Such problems includes:

1.       Misconception of the privatization programme.

According to Onwe (2003), the director of the institute of Entrepreneur studies of the ESUT Business School, many people do not understand the true meaning of privatization. Most people are of the view that once an organization is privatized, many people will be forced out of the labour market. He also said that people are also afraid that they might lose their job if an organization is privatized. According to him, privatization is a solution to strikes actions.

2.       Protection of Labour Unions and Workers.

          Often times, Labour Unions are seen protesting over undue treatment by their employers following poor and meager salaries. In the Vanguard of Thursday June 13, 2002, the President of Nigeria Labour congess (NLC), Comrade Adams Oshiomhok Kicked against the privatization of the Nigerian Ports Authority (NPA). He argued that the Authority generates money to meet up with its operational costs as well as contribute heavily to the freedom account. (Young, 2002).

Also, the privatization of Nigerian Telecommunication (NITEL) was criticized by the IT export. This was by Mr. Chima Onyekwere, the Chief Executive officers of Link-serve Limited an internet service provider. He sees the privatization of Nitel as being hurried up although he is not against the exercise. (Aginam, 2001)………………………………………….

 

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  This article was extracted from a Project Research Work Topic

FINANCIAL PROBLEMS AND PROSPECTS OF PRIVATIZATION IN THE NIGERIA ECONOMY, A CASE STUDY OF NIGERIAN BREWERIES PLC.

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Privatization in the Nigeria Economy

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Comments

  1. Apostle Arthur A Erhisenobe says:

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    Were is appropriate channel or office and website from which I can get the information. Thanks.

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