To what extent has privatization and commercialization policy impacted Nigeria’s economic development

The decades following World War II witnessed an enormous expansion of government intervention in national economies, particularly in the 1960s and early 1970s, when the public enterprise was seen as a major contributor to economic growth and socio-political stability (Hemming and Mansoor, 1988:31). The interventionist development policies of the period resulted in the creation of a number of public enterprises. After World War II most countries, particularly developing countries, have attempted to use public enterprises to achieve economic and social objectives. In most countries, public or collective goods and services, have always been made available by the state. Such goods which includes national defence, law and order, street lightening, amongst others are those which cannot be made available to one individual without also making them available to others (public/social goods principle). They must be supplied collectively, for if a private entrepreneur supplies them, they cannot drive the community as a whole to pay him, nor would he be able to prevent anyone who did not pay him from consuming his products (Paul, 1985:42).

In order to put socio-economic development in motion and also guard government finance under conditions of capital lack and basic imperfections in private business organizations, Nigeria and most other African countries, regardless of ideological dispositions, unavoidably made fairly extensive use of public enterprises for resource mobilization and allocation, particularly within utilities and social services sector in the 1950s through the 1960s. In both technical and economic perspectives, public enterprises are seen as; organizations whose primary function is the production and sale of goods/or services and in which government or other government controlled agencies have an ownership stake that is sufficient to ensure their control over the enterprises regardless of how actively that control isexercised (Tanzi,1984:7)

The public enterprise approach to resource mobilization and allocation for national socio-economic development is in consonance with the Keynesian approach which states that government through deficit financing should stimulate demand and the use of idle resources to reduce unemployment and spending (Galbraith 1978; Samuelson 1983). Public enterprise approach to resource mobilization and allocation has been in accord with the Keynesian approach to economic development, particularly since the post-1930 global economic depression (Bos, 1986).

Nigeria’s public enterprises are generally corporate entities other than ministerial departments, they derive their existence from special statutory instruments; and engage in business type of activities to provide goods and services for the overall social and economic improvement of the citizen. These include corporation, authorities, boards, companies and enterprises owned and operated by the government (Jerome, 1999).

Anyanwu (1999) concisely stated that despite the great expectations that brought about the establishment of public enterprises and the huge investments and subventions pumped to maintain them, they have remained a vast drain on the nation’s hard earned resources with little positive impact on the socio-economic development of the country. The Fourth National Development Plan (1975-1980) states that:

The actual performance of the public enterprises in Nigeria leaves much to be desired. It is clear that many of them are not responding to the changing and dynamic economy. Some do not possess the tools for translating into reality, the hope of successful commercial operations. The level and quality of Personnel are sometimes mediocre and reflect the Worst traditions and rigidities of the civil service. (Anyanwu, 1999: 32).

Even after so many years, the position of these enterprises did not improve despite government efforts to sustain their rapid development. Although, several factors accounted for the poor performance of public enterprises,Okereke (1983:10) adduced the following: party politics, lack of profit motive, over staffing, lack of accountability, civil service mentality, indiscipline of the society, trade unionism, and lack of coordination at staff level. Hayatu-Deen (1985:22) argued that over-extended and a cumbersome organizational structure, absence of concrete performance target, recruitment based on extraneous consideration instead of merit, faulty projects and implementation, heavy cost burden at commencement, high rate of turnover of directors are accountable for their poor performance and parastatals being used as vehicle of political patronage.

Therefore, in order to bring about solutions to the poor performance of public enterprises and also, an increase in economic development, Nigeria embraced and adopted the privatization and commercialization policy through the Privatization and Commercialization Decree of 1988 as part of the Structural Adjustment Policy (SAP) of the Babangida regime (1985-1993). The vision of a “global market civilization” has been reinforced by the policies of the major institutions of global economic government up to the mid-1990s. Underlying the Structural Adjustment Policy, has been a new-liberal development strategy referred to as the Washington consensus which prioritizes the opening up ofnational economies to global market forces and the requirement for limited government intervention in the management of the economy (Ayodele, 2002). One of the main objectives of SAP was to pursue deregulation and privatization leading to the removal of subsidies, reduction in the wage bills and the retrenchment of the public sector, ostensibly to trim the State down to size (Egwu, 1998).

The privatization and commercialization decree of 1988 set up the Technical Committee on Privatization and Commercialization (TCPC) under the chairmanship of Dr. Hamza Zayyad. The decree mandated TCPC to privatize three public enterprises andcommercialize thirty-four others, in 1993, the TCPC concluded its assignment and submitted a final report privatizing eighty-eight out of the three enterprises listed in the Decree. Based on the recommendations of the TCPC, the Federal Military Government promulgated the Bureau for Public Enterprises (BPE) to implement the privatization and commercialization policy in Nigeria. In 1999, the Federal Government enacted the public enterprises (Privatization and Commercialization) Act which created the National Council on privatization under the chairmanship of the Vice President AlhajiAtikuAbubakar (Igbuzor, 2003:15).

The Bureau of Public Enterprises (BPE) split the privatization and commercialization policy into three phases. Phases I and II, involved the privatization of commercial and merchant banks such as FSB International Bank and NAL Merchant Bank, quoted cement companies such as West African Portland Cement Co. and Benue Cement Company, downstream oil companies such as Unipetrol Nigeria Plc., National Oil and Chemical Marketing Co. (NOLCHEM) and African Petroleum, amongst others. Phase III is distinguished for the larger state-owned enterprises including the National Electric Power Authority (NEPA), now Power Holding Company of Nigeria (PHCN), Nigeria Telecommunications (NITEL), Nigeria Ports Authority (NPA), Nigeria Airways, the Nigerian Security Printing and Minting Company (NSPMC), Nigeria Railway Corporation (NRC) and petroleum refineries among others. (Akinrele, 2002:12).

The privatization and commercialization policy aimed at making the enterprise more efficient by raising funds for the state, relieving the state of the burden of supporting non performing organizations and additionally stimulating competition. Also significant are the normal advantages identifying with more prominent efficiency, recharged investment , budgetary reserve funds and the safeguarding of scarce resources for the change of a country’s monetary position.

Against the expectations of the government, there wasn’t much significant impact of the privatization and commercialization policy on economic growth. The problems facing Nigeria today are testimony of the inadequacy of past policies to achieve good result.Besides, Nigeria is believed to have experienced relatively high quotient of violence, which is anchored on the political and economic crisis emanating from the Niger-Delta region, and this has negative ripple effect on the economy of Nigeria(Ifionu and Ogbuagu, 2013:21).

In addition to this, the power sector has over the past 25 years witnessed a slow and steady decline, leading to near complete failure of the system in 1999. The federal government of Nigeria using National Council on Privatization (NCP) in 1998 had therefore, embarked on an electric power sector reform policy, which gave birth to 18 companies under the authority of Power Holding Company of Nigeria (PHCN). Still, Nigeria cannot boast of a steady and economically priced power that can meet the need of the people. (Ifionu and Ogbuagu,2013:21-22).

The purpose of this research is to investigate the extent to which the privatization and commercialization policy has impacted on Nigeria’s economic development, between 2010 and 2015.

1.2 Statement of the Problem

Nigeria at independence was the envy of many nations, particularly the Europeans, who believed that with its endowment, the nation, in a matter of time would be the economic giant of Africa and beyond. Though, oil was discovered in Olobiri in the present Bayelsa State in 1956 and modest production and export at about 5,000 barrels per day commenced in 1958, the nation’s economy was dominated at independence in 1960 by Agriculture, which contributed about 70 percent of the export. But with the oil exploration taking a commanding status after the civil war, a decline set in the agriculture sector in the 1970s which affected Nigeria’s economy(Anikeze and Ngwu 2009:6)

The 1980s witnessed steady economic deterioration and seemingly faulty economic policies. At the beginning of the 1980s, the country had entered difficult times. Scarcity of foreign exchange had set in. By the mid-1980s, reality had dawned on the nation’s economy. Retrenchment of workers was rampant in both private and public sectors. There was inflation, very high levels of unemployment affecting both skilled and unskilled workers, and low levels of plant capacity utilization.(Aboyade, 1974).

The origin of the socioeconomic difficulties was generally traced to the global economic recession which opened with the decade of the 1980s. Earlier, these socioeconomic problems had forced the Federal Government, under President ShehuShagari, to embark on an economic stabilization policy. The problems of performance of the public sector enterprises in Nigeria were further complicated by the downturn in socioeconomic development in the country due to the global economic recession and the collapse of the oil market. Thus, towards the end of 1980s, the public enterprises, which had grown too large, began to suffer from fundamental problems of defective capital structures, excessive bureaucratic control and intervention, inappropriate technologies, gross incompetence, and blatant corruption(Akinpelu, 2011:337).

Since the initial functions of the public enterprise were not performed, the privatization and commercialization policy was introduced by the Federal Government of Nigeria. The privatization and commercialization of public enterprise is considered by many as a vital tool for the growth and development of the economy as its objectives include: to improve management, efficiency and performance of affected enterprises; reduce governments financial burden; increase funding of infrastructure and other facilities; enhance economic growth and development; and provide popular criticism through widespread share ownership. Unfortunately, the policy is faced with a lot of challenges despite its expectation. Some of the problems include; lack of accountability, corruption, lack of transparency, inconsistency and so forth (TCPC, 1993).

There are concerns in civil society circles that the economic environment of Nigeria as presently constituted, as well as the way the privatization and commercialization policy has been implemented cannot lead to success. According to the World Bank (1993: 23):

Most privatization success stories come from high income and middle-income countries. Privatization is easier to launch and more likely to produce positive result when the company operates in a competitive market and when the country has a market- friendly policy environment and a good capacity to regulate. The poorer the country, the longer the odds against privatization producing its anticipated benefits, and the more difficult the process of preparing the terrain for sale.

However, it has been argued that the policy in Nigeria is not preceded by an articulated public sector reform and it will therefore not result in more efficient production of public goods, nor will it make any significant positive impact on fiscal balance (Amadi, 2003).

However, it is based on the contending issues of the policy thatits basic propositions are being hindered. The contending issues include: unemployment, increase in prices of goods, unfairness, income disparity, lack of economic and financial power by citizens, lack of developed capital markets, its multiplicity of objectives, and dominant and experienced shareholdership.

These are major problems demanding solutions as far as this study is concerned. It is in the light of the aforementioned that the research is focused, and geared towards the possibilities of enhancing power supply in other to improve economic development in Nigeria in the 21st century and beyond.

1.3 Research Questions

This study seeks to answer the following research questions:

1. What is the impact of Privatization and Commercialization Policy on Nigeria’s economic development with focus on PHCN, Ikeji, Lagos, between 2010 and 2015?

2. To what extent did the performance of public enterprises affect economic development in Nigeria?

3. Has the Privatization and Commercialization policy improved the service delivery of PHCN, Ikeja,Lagos, within the period under review?

4. Are there remedial measures to the problem of service delivery by PHCN, Ikeja,Lagos that can boost economic development?

1.4 Objectives of the Study

The general objective of this research is to examine the impact of privatization and commercialization policy on Nigeria’s economic development between 2010 and 2015, using the Power Holding Company of Nigeria as a focus. The specific objectives are to:

1. To identify the relationship between Privatization and Commercialization Policy and Nigeria’s economic development with focus on PHCN, Ikeja, Lagos, between 2010 and 2015.

2. To assess the extent to which the performance of public enterprises affected economic development in Nigeria.

3. To verify if Privatization and Commercialization policy has improved the service delivery of PHCN, Ikeja, Lagos, within the period under review.

4. To proffer remedial measures to the problem of service delivery by PHCN, Ikeja, Lagos, that can boost economic development.

1.5 Research Hypotheses

This study is guided by the following hypotheses:

1. There is no significant relationship between the impact of Privatization and Commercialization policy and Nigeria’s economic development on PHCN in Nigeria, Ikeja, Lagos, in the period under study.

2. There’s no significant relationship between the performance of public enterprises and the economic development in Nigeria.

3. Privatization and Commercialization policy could not significantly improve the service delivery of PHCN, Ikeja Lagos, within the period under review.

4. There are no remedial measures to the problems of service delivery by PHCN to boost economic development in Ikeja, Lagos.

1.6 Significance of the Study

Availability of constant power is very important for economic development, increased production and investment. Also, the absence of stable macroeconomic environment have affected the position of Foreign Direct Investment (FDI) in the country. Consequently, for any country to achieve and sustain economic growth and development, there must be a combination of well-designed and enforced economic policies, no one works in isolation of the other.(Ifionu and Ogbuagu 2013:21-22).For Nigeria to achieve the economic development it seeks, the role of the privatization and commercialization policy of the power sector is very significant, making this study and its recommendations very important to government officials and policy makers. The findings and recommendations of this study will help identify the major challenges to the privatization and commercialization policy and also its efficiency in the PHCN and necessary suggestions offered will help to promote professionalism as well as aiding policy makers to formulate necessary policies to reduce corruption, lack of accountability, transparency and inconsistency and improve management, efficiency and performance of enterprises in other to enhance growth and economic development of the power sector.

Through an analysis of the issues onthe privatization and commercialization policy and economic development, this study seeks to proffer possible solutions that will help the public enterprises in Nigeria to manage their various resources and act as an incentive for national development.

Theoretically, this study is deemed important in view of its contributions to knowledge based on the primary data generated which would serve as secondary sources of data to other researchers, policy analysts, scholars and students who might be interested in the area of privatization and commercialization policy in Nigeria, and public sector management in general. It therefore constitutes an addition to the body of knowledge in these areas. Structural functionalism which is the theoretical framework employed in this research also helps to broaden the understanding of the impact of privatization and commercialization in the economic development of Nigeria.

1.7 Scope of the study

This research is directed at the impact of privatization and commercialization policy on economic developmentusing the Power Holding Company of Nigeria (PHCN) of Ikeja District ofLagos state in Nigeria, between 2010 and 2015. It shows how the public enterprise has been able to grapple withcontending issues such as; internal strive, corrupt, nepotic and tribalistic practices, high cost of operation, all resulting in inefficiency and ineffectiveness. Power Holding Company of Nigeria (PHCN) was chosen as focus of study due to the proximity of various privatized companies and also due to the importantof electricity to the community. Ikeja District in Lagos, was chosen due to the location of the researcher and also for the purpose of convenience and for easy retrieval of data.The period of study, which is year 2010 to 2015 (five years) was chosen for the purpose of studying the recent policy and activities in this aspect

1.8 Limitations of the study

This research is limited to the impact of privatization and commercialization policyin just one district of Lagos in Nigeria. Considering that Nigeria is a heterogeneous state, the impact the policy has in Ikeja district, might not be the same in the other parts of the country. Another is the inability to completely retrieve all administered questionnaires; initial lack of cooperation by PHCN officials in releasing necessary information. However, information retrieved from interviews and administered questionnaires would be effectively analysed for the purpose of arriving at reliable results.

1.9 Methodology of the Study

Both secondary and primary sources of data were used in this study. Secondary data were derived from previous literature, internet sources and newspapers. Primary data was also derived using interviews and questionnaires, so as to retrieve information from clients of PHCN as well as community dwellers concerning the impact of privatization and commercialization policy on economic development.

1.9.1 Research Design

This research was conducted using thesurvey research design.This research was conducted using the cross sectional survey method. According to Asika (1991) cross sectional survey is used for the purpose of exploration, explanation and description of related variables.The reason for its use was to explore and explain the relationship between privatization and commercialization policy and economic developmentthrough the collation of data derived from field surveys.

1.9.2 Population of the Study

According to the National Population Commission, the Ikeja District of Lagos State has an estimated population of over 861,300 people residing in the existing eleven communities of the local government. These communities include; Oregun, Ojodu, Opebi, Akiode, Alausa, Agidingbi, Ogba, Anifowose, Maryland, Idu-Iroko, and Ipodo. These group of people make up the population which was studied through administered questionnaires and interviews, with the representation of each community. The justification for this range of population is based on the level of knowledge, involvement, experience and impact the privatization policyhas on Nigeria’s economic development in relation to the power sector.

1.9.3 Sample Size

The study area is Ikejalocal government area of Lagos state, Nigeria. Due to the fact that the entire population of approximately eight hundred and sixty-one thousand, three hundred (861,300) people could not be studied during the duration given for this research, a sample size of 440 respondents was taken and questionnaires were administered on this sample population and a sample size of 11respondents were accustomed interviewson this sample population which makes a total of 451 sample size. The sample size is represented with the cluster sampling technique in order to select members that make up each communities so as to have equal representation. The representation includes: Ojodu:41; Opebi:41; Akiode:41; Alausa:41; Agindingbi:41; Ogba:41; Anifowose:41; Maryland:41; Idi-Iroko:41; Ipodo: 41;Oregun: 41.

1.9.4 Sampling Technique

The cluster sampling technique was employed to select members of the population that make up the sample size as a result of its very large and widely dispersed population. Cluster sampling is a technique in which clusters of participants that represent the population are identified and included in the sample (Jackson, 2011). So therefore, the entire population is divided into clusters and the groups are randomly selected for the study.

1.9.5 Instrument of Data Collection

The instrument of data collection used for this study is the primary source of data which was retrieved using both questionnaires and interview The ‘5-point likert scale’ was used to elicit information from the respondents and the structured interview was also used as a medium to retrieve information from clients of PHCN. Secondary data was used for the study and derived from previous literature, internet sources and newspapers.

1.9.6 Validity and Reliability of Instrument

Validity and reliability are fundamental cornerstones of the scientific method. Together, they are at the core of what is accepted as scientific proof by scientist and philosophers alike.Validity refers to how well a test measures what it is purported to measure, while reliability is the degree to which an assessment tool produces stable and consistent results (Philen and Wren, 2005). The construct validity is used in this study to ensure that the measure is actually used to measure what it is intended to measure (i.e. the construct), and not other variables. It is also suitable, as the study makes use of a panel of “experts” familiar with the construct. The reliability instrument used is the inter- rater reliability which is used to assess the degree to which different raters give consistent estimates of the same phenomenon.

1.10 Organization of the Study

This study comprises of five chapters and the details are given below:

Chapter 1 presents a general introduction to the study, including the background to the study, statement of the problem, research questions, objectives of the study, research hypotheses, significance of the study, scope and limitations of the study, the research methodology and organization of the study.

Chapter 2 consists of the literature review and theoretical framework. The chapter contains a brief narrative on public enterprises in Nigeria with impact on Nigeria’s economic development, the concept of privatization and commercialization, history of thepolicy and the evolution of the Power Holding Company of Nigeria (PHCN) and its activities in Nigeria.

Chapter 3 comprises ofbackground information on the Power Holding Company of Nigeria (PHCN) and its various reforms, and the impact of the reforms on economic development in Nigeria.

Chapter 4 contains the data presentation, interpretation and analysis.It also covers the empirical testing of hypotheses.

Chapter 5 states the summary, recommendations, conclusions and suggestions for further studies.


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