The Effect of Privatization and Commercialization of Government Owned Industries

The Effect of Privatization and Commercialization of Government Owned Industries

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Chapter one on The Effect of Privatization and Commercialization of Government Owned Industries

INTRODUCTION

BACKGROUND OF THE STUDY

There is no doubt that privation came in the hesitation of the policy of librization and the advancing for market based  reform..  It has also become an important  component Globalization. Privatization has since been  endorsed by multi  lateral financial institution as a major plank of adjustment policies , which are being , implemented in a number of developing country including Nigeria of course in development literature privatization as become the linchpin (things that is most important part of  an organization )  economic liberalism. The advocate of privatization  believe that it is very effective stage for improving operational efficiency,  broaden share  ownership ;, attracting foreign investment and reducing the role of the state in these areas where the private sector  process the capacity  to operate more efficiently and more productivity . (Jerome, 1999; 2) Several countries in the developed and developing world are increasing privatizing state owned   enterprises. (SOES)  indeed, between 1988 and 1994, developing country sold about 3300 state owned enterprises. The rush towards privatization in developing country most especially, has been attributed to the poor performance of publicly owned enterprises which has been largely managed by the staff. In the 70s, state enterprises where prominent in the extractive industries, utilities and infrastructure such as electricity railway, telecommunication etc. 
In Nigeria unfortunately this enterprises become  money guzzling  outfit, rely on regular subsidies  from government and   survived only on the monopoly status they enjoyed.  Many of them were over staffed and were bally managed All of this deficiency necessitated a rethinking on the roll and structure of publicly owned or state owned enterprises like  NEPA. The introduction of  SAP in 1986 set the tone for the process of privatization of public enterprises in Nigeria.  In spite of the foregoing justification for privatization,  it is important to point out ;that the private s sector in Nigeria as depended  largely on the state for; its survival studies have showed that in terms of investment of productivity activities. The private sector in Nigeria has hardly fared better than the government. The privatize sector according to Obadan has not been able to respond adequately  to the country desire for increased production an employment and stable prices  (Obadan, 1998 :89) It is a sad commentary on the  state  of the private sector that real investment and production have taken a back seat while service sector activities, speculative activities, distributive trade and foreign exchange deals remain the main focus of private sector. the private sector depends almost exclusively on government patronage and manipulation of government policies for survival. For a country to rely on such a private sector for its economic rejuvenation will amount to economic suicide.
An effective privatization programmed requires the existence of a single private sector, productivity oriented bourgeoisie and not a collection of compradors, speculators, and dealers in foreign currencies that dominate the private sector in Nigeria. The character of the Nigeria private sector and the imperfections that characterize the Nigerian business environment constitute the Achilles heel of the Nigerian privatization exercise. In sample terms: privatization may be defined as the “transfer of ownership and control tights over firms from the public to the private firms from the  public to the private sectors”(Jerome,1999). Privatization is however much more complex in practice than is in theory. In embanking on privatization, government ought to critically examine the specific cities of their situations in order to avoid situations where privatization becomes counter productive.
The period between 1971 to 1980 was a period described in the history of Nigerian brewery is the period of oil beam, within which tune in coherent application of generated revenue from sale of ;crude oil was made.  The various government both states and the federal established may seat industries in various parts of the country some of these industries are established import so much as such of its raw material imputes from overseas countries. 
The data turn of the Nigerian fortunes which resulted from global oil glut have a great negatives impact on the economic fortunes of the country.  Nigeria being a mass cultural economy and which depend on the revenue from crude oil to finance her then import oriented economy to as much as ask was effected. In 1986, the Nigeria government applied for a loan of 9.3billion from the international monetary funds (IMF) to finance her ceiling country economy. 
The IMF hence presented a set of   constitution which will qualify Nigerians for a loan.  One of theses conditionality will the reduction of government  expresses an public parastatals the proposal was exploited by the government as an avenue that will not only reduce government expenditure, portfolio but also made the much needed revenue available to finance other sectors of the economy. The Nigeria breweries in (NBC) 9th mile corner Enugu incorporated only precisely in the 1993 with (656) sixty five percent ownership by individuals and (356) thirty-five percentage government opened.  As it is now the Nigeria breweries is now and young wearing.  Strong at its peak- it has not made any loss but to forced with problems.  

STATEMENT OF THE PROBLEM

WILL CONSULTANT LIMITED Referred—a discussion on workers and privatization process from the legal perspective is bound to be futile, on less at the outset celebrate effort is made to appreciate the diverging of power and interests involved in the industrial establishment between  labour and capital, that is management and workers furthermore, this should furnish a cleaner insight into the relative strength of the stance of other side on the issue of privatization and or commercialization, presenting, while the sell of stores is going on the stand of the  labour has been in opposition to any such more since the ides was molted mid 1983. The senior staff association of statutory corporations and government owned companies issued on Dec, 23,1983 the following press statement.  *the result of the firming out can only the a social and economic development debasement of the means of this country an attempt to alienated the masses from ;the public wealth of the  country.  It is an attempt to  alienated the masses from the public wealth of this country.  It is an attempt while concentrating in the hands of fail capitalists who its not care if the rest of its and our urban children reason in reform practically.
The  Nigeria labour congress also had this to say the sales of public companies and corporations would inerasably lead to economic strong not pauperization of the nation to want reorganize under printed control is to pressure that accruing profit goes into printed pockets and this will lead to retrenchment in public sector and bring untold hardship to working people of this country. According to Warner sorbet capitalism has its own spirit, which is pert seeking the motive to ask profit from investment is considered a moving ford which drives investors whenever the expected returns from investment is not forthcoming, such investment may be considered on means of financial less such will the economic situation which confronted the Nigeria society when out of a total of eleven (N116) investment on parastatals and government owned industries realized a dividend of 93.7million, that is 1.39 return.  The poor return portrays the fear that such investment is a waste of public revenue, which was, then on a deciles following a global recession on the oil revenue. The first official publis settlement on privatization was in the 1980 budget speech by the then head of state president IBRAHAM BABANGADA, when he said government parastatals have for long been subject of study policy review.  They too have generally come to constitute on unnecessary high burden on government resources they have been variously classified for purpose of reform.  Government has not decided that as from 1980, the volume of un=statutory transfer to all economic and great=economic parastatals would constitute not more than 50% of their levels. to balance from increase in the price of their service and producing changes, transfer and rate..
According to author c.i. mbanefor, in his paper *capital restricting for successful privatization.  There is no doubt that excessive participation by government of the developing countries like Nigeria in business ownership created great imbalance in their economics.  It is obvious that the under lying cause of privatization ecossaise is the attempt to create efficiencies by asking public owned enterprise more productive well as not responsive in the market place and to competitive pressures.  Privatization and commercialization of public owned enterprises is expected to block the drain on government revenue by binging profit spirit into such enterprises as well as provide the needed revenue for the execution of public programs. SYNOISIS; a workshop hold by NECA on JAN 2003 ask is privatization the right approach they are of the believe that enterprises could transform from a state monopoly to private monopoly.  It is not certain that the enterprises will become viable and efficient after privatization. While many rating the council on privatization, president Obasanjo stated that *state enterprise suffer from fundamental problems of effective capital structure, excessive bureaucratic control or intervention, inappropriate technology, gross incompetence and mismanagement, blatant conception and crippling complacency which monopoly engenders *(privatization hand=book, 2000, 4).
He went further to state that. *we are privatizing for the benefit our economic recovery and serial life. We are not embarking on the exercise to posse the world bank And the IMF.  It is not abort to replace public monopoly with private monopoly. Rather, in our determination to be unyielding and uncompromising in the pursuit of the best interest of the country, we writ to remove the financial burden which these enterprises constitutes on the public and release resources for the functions of government (IBID) PRIVATIZATION IS NOT AN ECONOMIC BUT POLITICAL MATTER.  THERE IS NOTHING; ECONOMIC ABOUT WHAT GOVERNMENT IS CURRENTLY DURING UNDER THE ATTEMPT TO PRIVTISE.  IT IS MERELY TAKING A PARTIAL DECISSION, WHICH SUNTS.  THIS POLITICS, IDEOLOGY SILLIES AND FIONTSBOTH LOCAL AND INTERNATIONAL.  THIS IS BECAUSE NOT ALL ENTERPRISES CURRENTLY BEING PRIVITISED OPERATED AT A LOSS.  MANY OF THEM WERE/ARE VICTIONS OF POLITICISATION AND BUREUCRATISATION.  Government is  merely responding to the ideology of globalization, which is uncritically pursuing.  The federal government decree 28 states it all, that the goal of privatization and commercialization is to reintegrate  Nigeria back into the global economy, as a past form to attract foreign direct investment. (FDI) (Gulotel in ec. Rufei, 2001:5). This is the primary reason why government is privatizing every other reason is secondary if not unimportant.  

 OBJECTIVES OF THE STUDY

The major objective of this study is to economies the impact and extent privatization and commercialization has gone so far in Nigeria as reports the set objects.
1)      To help determines the effectiveness of privatization and commercialization.
2)      To determines the impact privatization and commercialization has created in Nigerian economy.
3)      To help differentiate the state monopoly and private monopoly as it affects privatization and commercialization.
4)      To prove that privatization and commercialization is  not a theory but a practical achievement.
5)      To help determine and analyses the critics of some individuals and the labour congress as regards commercialization and privatization and make necessary recommendations.
6)      To study the extent the privatization and commercialization act has really observed to regard its set motives.
7)      To determine the length of embracement and acceptance of individual in the buying of shares.
8)      To determines that rate of expansion of shares of government owned companies.
9)      To determine the idea of understanding of individual to regards privatization and commercialization.
10)    To help make a clearer ground for airing the grudges of unions and individuals on their misconception of privatization and commercialization.
11)    To help make or create an attempts for the argument that both privatization and non-privatization on the sales if not worse than.
12)    To create a solid ground for this question; is privatization the right approach.  

RESEARCH QUESTIONS

–        What is the implication of privatizing may social service sectors for a developing economy?
–         Will that sense a common good?
–         Is it not a fear individuals that are coming forward to bid for these enterprises?
–         Can Nigerians in whose names and interest these enterprises were required ear beings from such sale?
–         Why the research topic=commercialization and privatization?
–         Will it have any effect on individuals?
–         Does the enabling government exist?
–         Is the required legislation in place?
–         Can full privatization process be implemented?
–         Will it increase the economy of the country?
–         Is it geared towards the reforming of companies?
–         Will it bring about a increase in the commitments of workers?
–         Is it employment oriented?
–         Will it geared towards the relation of corruption of workers and managers of companies?
–         Will it have an impact in the cortile of government financial malpractice and general looking of government assets?
–         Is it really a way out for government wastages in embarking on loan held investment ventures.
–         Is privatization and commercialization a social and economy debasement of the masses of this country.  

SIGNIFICANCE OF THE STUDY  

This study is essential in the fact that privatization and commercialization of public enterprises is being resulted to as for public enterprise.  Unprofitability, inefficiency and unproductively.  Public; enterprises in same western countries were privatized for maximum efficiency and profitability Such enterprises include the British telephone company the British air ways the management of panama- canal the via postal agency etc. The study is very important especially since privatization and commercialization of publicly owned enterprises is currently-being pursed in derivable with many potential investors still garrant of the benefit derivable from such investment. 
Considering the fact that there are mixed literatures on the effect of the activities this research therefore seeks to enlightens the general public about the effect of privatization and commercialization to our inefficient public enterprise.  It will also help the researcher on privatization and commercialization to know more about it. The study is very essential as it reveals the experience of government in managing business both in Nigeria and round the world.  Governments expenses in running business, it the local and international level are depicted to follows:
–       Inefficient
–       Uncommitted.
Reliance on subvention Bureaucratic Loss of  earning. While experiences round the world are experiences else where different from Nigeria.  This does act appear to be the case. Government owned enterprises were notoriously ineffective in meeting demand for services that had become crucial to economic development, for instance.
Average waiting period for telephone installation in Indonesia was  nearly eight years seven years in Philippines and ten years in soviet union and Pakistan. State and enterprises were less makers rather than revenues generators.  World bank studies should that 50E, INDEVELOPING COUNTRIES ACCOUNTED FOR ONE=GUARTER TO ONE=HALF OF ALL OUR STANDING DOMESTIC DEBT AND FOR A SUBSTANTIAL PORTION OF FOREIGN BORROWNING. IN THRILLAND, BE PUBLIS ENTERPRISES ACCOUNTED FOR MORE THAN60% of government’s foreign debt in 1988. There were inefficiencies from lack of competition and the absence of the checks and balances that come with private organizations. In Poland, Hungary, formers soviet union and may Latin American countries, costs did not enter into business strategies and operational decisions. Most of the  joint slots, were overstaffed and had absent technology to compete with western multinationals in the global market.  Eg the state railway of trailed= the government controlled the taffies and nether below the cost, of carryings passengers and fright is the real costs increase Lesion incurred by SOE, in uk were nearly 6,million. In the light of these experiences, it has become glazing that the era of government involvement in which private sector could do so well is over.  It has also become imperative that where government wants the companies it containing to be competitive they have to head of the control of this enterprise.  

RESEARCH HYPOTHESIS

The following question? Statements constitute the research hypothesis
1.    Privatization and commercialization will enhance the performance of affected company.
2.    In what extent is the company coping with the apparent problem of privatization.
3.    What are the major implications of the privatization and commercialization programme as it affects the Nigerian  breweries ltd.
4.    Privatization and commercialization programmed will stop the drain o public revenue and I increase the number of shareholder.

  SCOPE AND LIMITATIONS OF THE STUDY

This research work is limited to a production oriented enterprise work by government which has been partially privatized and was classed as an industrial and commercial enterprise concerned with the development, production, sales and maintenance of wide range of products of public consumption and commercial bases. Hence, they are expected to make profit while change competitive prices. The delimitation to our case study Nigeria breweries LTD was prompted by the fact that it was newly privatized and has gotten deep into the programme. Hence, the research intends to asses efficiency in terms of monetary and financial goings and this can be done effectively with production and industrial based public enterprises which are by law expected to make profit while charging reasonable price.    

 DEFINITION OF TERMS

EFFECT: Extent or outcome of privatization and commercialization of government owned industries.  
PRIVATIZATION: Going by privatization and commercialization ACT 1999,…. Privatization is the relinquishment of part of  all of the equity and other interests hold by the federal government or its agency in enterprises weather wholly owned or partly owned by the federal government.  
COMMERCIALIZATION: defined in the ACT 1999 as the reorganization of enterprises wholly or partially owned by the federal government in which such commercialize enterprises shall operate its profit making commercial ventures and without subvention from the federal government.  
BAJOMO: Commercialization is seen as a reward system involving a more towards the pursuit of efficiency and effectiveness in attainment style that takes profit as one of its major goals.
GOVERNMENT OWNED INDUSTRIES: This is where the government has up to 30pencent of equity ownership of company. SOE – State – Owned Enterprises. IMF – International Monetary Funds. FDI – Foreign Direct Investment.

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