An Evaluation of Financial Problems and Prospects of Privatization in the Nigeria Economy

An Evaluation of Financial Problems and Prospects of Privatization in the Nigeria Economy

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Chapter one on An Evaluation of Financial Problems and Prospects of Privatization in the Nigeria Economy

INTRODUCTION

BACKGROUND TO THE STUDY

The privatization programme of the fist phase was said to benefit many Nigerians who were given the opportunity to purchase shares offered for sale by way of public offer. Subscription of shares during the phase one was largely successful with many public offers. However, there were a large number of Nigerian citizens who due to difficult economic realities in their present time were unable to put aside a few thousand naira required to purchase a small share holding in the enterprises which were offered for sale in the course of the privatization programme.

Recently, the federal government have come up with a means whereby the low-income earners and rural dwellers will participate in the on-going privatization programme. Today, banks have been instructed to give out loans without collaterals for the purchase of share up to N10,000 worth of shares within each five year period. This is being carried out by privatization share purchase loan scheme (PSPLS) which requires that one registers and later apply for share purchase and repayment on be through divided, cash, conversion of bonuses and right and sale of all or part of their allotments in the secondary market. This new development in the privatization programmer early motivated me to carry out a project research on the topic: “The problems and prospects of privatization in Nigeria” using Nigeria Breweries Plc as case study. In such direction I am of the opinion that at the end of the work, it will instigate the reader to participate in the on-going privatization programme.

 STATEMENT OF THE PROBLEM

This research work is embarked upon to escertain the financial problems and prospects of privatization in Nigeria using Nigeria Breweries Plc as case study. Nigeria Breweries Plc started operation in the precolonial days with limited share holding of the public recently became one among the public limited companies mapped out for privatization in the countries by the federal government under the commercialization and privatization Act.

To get the plan achieved, it was discovered that finance poses a great challenge to the successful implementation of privatization in many developing countries especially Nigeria; hence, federal government issued directives to bank to give out loan without stringent condition for the purchase of shares up to N10,000 worth of shares.

OBJECTIVE OF THE STUDY

The research work is meant to achieve the following objectives:

To find out if lack of funds for the purchase of shares a problem for successful privatization.

To determine if there is limiting problem in the privatization of government enterprises in Nigeria.

To ascertain if there are other financial  problems in on-going privatization  programme.

To ascertain if privatization of government interprises a good option for development in Nigeria.

To determine if privatization will help to improve the economic growth of the country.

To make recommendation based on the research finding.

RESEARCH QUESTION:

Is lack of funds for the purchase of share a problem for successful privatization?

Is there liquidity problems in the privatization of government enterprises in Nigeria?

Are there other financial problems in the on-going privatization programme?

Is privatization of government enterprises a good option for development in Nigeria? Will privatization help to improve the economic growth of the country?

RESEARCH HYPOTHESES:

 Ho: Funds for the purchase of shares is not a problem for  successful privatization.

 Hi: Funds for the purchase of shares is a problem for  successful privatization.

 Ho: Widespread illiteracy in the country is not a problem  for successful privatization

Hi: Widespread illiteracy in the country is problem for   successful privatization.

Ho: Statistical data is not a problem for successful  privatization programme.

 Hi: Lack of statistical data is a problem for successful privatization programme.

SIGNIFICATION OF THE STUDY

The study is significance as it tends to create awareness of privatization especially on the enterprises stated for privatization in the phase. Educate Nigeria on how to be part of the privatization programme.  Educate Nigerians on the benefits of privatization. Encourage them to buy shares from firms stated for privatization. Show how privatization would help improve the economic situations of the country and reduce the dependence of companies on the national treasuring as well as promote share ownership in companies instead of foreign ownership. Help those who will use the research project as one of their reference materials on issues concerning privatization in Nigeria such as students, government functionaries, as well as parties interested in privatizations in Nigeria. Encourage readers and interested parties to fully participate.

DEFINITION OF TERMS

In the course of this work, there are certain terms that will be used and there is the need to understand these words. They include:

1.  Privatization: Privatization is the taking over or acquisition of previously government owned business enterprises by private individuals or groups. It involves the sale of formerly public enterprises to private individuals or groups.

2. Commercialization: Commercialization is an economic concept in which government owned business are expected to pay their way. That is, they have to cover their costs of production from the revenue they derive after sales.

3. Nationalization: Nationalization means the taking over or acquisition of previously private owned business enterprises by the government for ownership and control.

4.  Shares: Shares means equitable part of the companies privatized. It is an interest in financial terms which one has in comparing.

5. Enterprises: This is a company or business that is stated for privatization.

6. Financial Problems: Financial problems, here are difficulties in monetary terms that is being encountered in the process of privatization which may cause a problem in the success of privatization programme. These may include, lack of funds for purchase of shares, mismanagement of funds, Prices of shares,

7. Finance: Finance is money, funds or revue available for the purpose of privatization. Here the problems of finance in privatization are on both the government as well as interested parties in the privatization process.

8. Loan: This is a source of funds that involves borrowing from banks for the purchases of shares of privatized firms.

9. Liquidity: This is the measure of an organizational qualification in monetary terms used to meet its financial obligations.

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