Evaluation of Privatization Policy in Nigeria (1999 - 2004)

A Study of Bereau for Public Enterprise (BPE)


Master's Thesis, 2012
77 Pages, Grade: 2.1

Free online reading

ABSTRACT

This study evaluated the privatization policy in Nigeria (1999-2004): A study of Bureau for public enterprises (BPE), with its objectives being to examine and evaluate the ongoing privatization programme. The problem of the study focuses on ways of finding out the factors that promote the problems associated with public enterprise like improper management, waste of resources and the feeling that what belongs to the government belongs to nobody. It comes obvious there after that government could no longer continue to support the monumental waste and inefficiencies of the public enterprises. In addition, the researcher adopted the use of questionnaire and interview method in obtaining information in which the simple percentage method was adopted in the analysis and test of hypothesis respectively, based on this, the finding established was that considering the bad nature of public enterprises in Nigeria, there is the need for them to be transferred into competent hands of the private sector in order to ensure that the enterprises are saved from collapsing and revitalize them for more productivity and efficiency towards economic growth and development. Finally the study sought to make recommendation in the area of transparency, despite the huge success recorded in the telecommunication sector, the BPE should replicate such successes in other sectors of the economy by ensuring that the hiccups in some of the privatization transactions handled by the Bureau are handled with utmost transparency and in all its transaction.

CHAPTER ONE GENERAL INTRODUCTION

1.1 Introduction

Prior to the late 1970’s, the role of the private sector in the developmental process had long been called the question for a variety of reasons. In the socialist countries, public ownership of the means of production was an inherent part of the Marxist strategy for social justice and equity. The welfare system in the capitalist countries grew out of the great depression of the 1930’s, which created popular demand for governmental intervention in the economy. The theoretical contributions of the Keynesian school were also significant, as they demonstrated the need for governmental intervention to maintain adequate levels of employment. Expectedly, this confidence in the public sector spilled over to the developing countries especially after attaining independence (Kwanashie, 2002).

At independence, most African countries inherited an under developed indigenous private sector and capital markets. This weak base coupled with fear of possible domination by multi national companies, combined to further convince the governments to become investors in the economy. This prompted them to establish public enterprises as a strategy of leading the growth and development process. For instance, it has been reported that in countries like India, Mexico, Public enterprises accounted for about 80% or more of the added value in manufacturing.

Nigeria was no exception in holding the view that the state and public enterprises have a role to play in the country’s developmental process. Like most developing countries, Nigeria has since independence in 1960 embraced the strategy of employing public enterprises as the variable tool for economic growth and development. There is a fair amount of consensus among scholars that the oil boom of the 1970’s, encouraged government to increase its intervention in the development process. The new philosophy of the oil boom era was generally predicted on the fact that the indigenes were mostly capital – deficient and could not afford to invest in most industrial ventures. This inadequacy left the commercial sector largely in foreign hands, which made the indigenization programme of 1972 inevitable if Nigerians were to play a meaningful role in the economy. This led to the establishment of public enterprises that were funded from the public treasury. As at 1990, these public enterprises were worth over N36 billion at their historic book values. At today’s replacement cost, they are probably worth over N500 billion. In a nationwide survey, it was found that there were a total of 600 public enterprises at the Federal level alone and some 900 smaller ones at the state and local government level (Abimbola, 2002), With the government, these enterprises became major borrowers in the domestic and international financial markets. In the 1970s, the public enterprises had started to play an increasingly dominant in the Nigerian economy accounting for about 50% of the Gross National Production (GNP) and above 60% of the formal sector employment. However, in the early 1980s, public enterprises had become heavily dependent on the national treasury for financial operations.

In Nigeria, while the oil boom lasted, on one complained of the waste and deficiency of these enterprises rather more enterprises of questionable commercial and financial viability continued to be established. It was only on the wake of the economic recession, which started in 1981 that attention began to be focused on the activities of the public enterprises. The dilemma of the growing contrast between public waste and public thrifts tended to encourage the federal government to seek solution to the problems of the public enterprises through privatization and commercialization. Moreover, privatization has become conditionality for international monetary fund (IMF) and World Bank financial assistance.

1.2 STATEMENT OF THE PROBLEM

The global economy has been undergoing series of economic restructuring especially with the crumbling of the socialist economics of the eastern bloc, like Russia, etc (Weekly trust 2000), privatization is now blowing like wind of change, dismantling old economic structures and ideas thereby creating new foundations in the political economic gender of all economies of the world(Nigeria inclusive).

In Nigeria, the problems associated with public enterprise were improper management, waste of resources and the feeling that what belongs to the government belongs to nobody. It comes obvious there after that government could no longer continue to support the monumental waste and inefficiencies of the public enterprises. It is clear therefore, that the reason behind the inefficiencies of the public enterprises shows in a notion that “when the government owns, nobody owns and when nobody owns, nobody cares.” All these inefficiencies did not allow the public enterprises to grow and as such, they have been operating at a loss which is always charged against the public treasury.

1.3 RESEARCH QUESTIONS

Inevitably, the idea behind privatization presupposes the fact that private enterprises are more efficient than public enterprises. Thus, government ought to stay out of as many realm of the economy as possible and that even where government get involved, it should contract tasks to private firms or given people vouches, than provide them directly. Thus, privatization: less government, improved goods and services.

Based on the above, the following questions are evident:

i. Should the state- owned enterprise be sold?
ii. Why should they be sold?
iii. To whom should they be sold?
iv. Would privatization improve the operational efficiency of the state-owned enterprise?
v. What are the likely obstacles of privatization in Nigeria?
vi. Of what benefit is privatization to the common man?

1.4 OBJECTIVES OF THE STUDY

The objective of the study is:

i. To evaluate the ongoing privatization programme. To achieve this, effort and attention will be made to evaluate the success and pitfalls of the privatization programme and the role of the BPE in the implementation of the programme.
ii. The research will also seek to determine whether the implementation of the programme would enhance the performance of the privatized enterprises.
iii. The study will also discuss the enabling legislation of privatization policy and examine the most efficient way in which privatization policy would be applied so that the best would be extracted out of it.

1.5 HYPOTHESIS

For the purpose of this research, the following three hypotheses have been formulated and tested.

Hypothesis 1

H0: That privatization policy has not been successful in Nigeria during the period (1999-2004)

Hypothesis 2

H0: That the BPE has not contributed effectively in the implementation of privatization policy in Nigeria during the period (1999-2004)

Hypothesis 3

H0: That the BPE has not been transparent in executing its duties.

1.6 SIGNIFICANCE OF THE STUDY

This study has some inherent potential benefits;

First, it will enable us to understand the concept of privatization and its contribution to economic growth and development.

Secondly, the study will enable us to identify the relevance or otherwise of privatization policy to the Nigerian economy.

Third, the study will offer an insight into those areas where privatization tends to have effective role to play in a nation’s economy.

Moreover, the study will add to existing knowledge and the same time serve as a future reference material that will guide other researches who may venture into the same area of study.

1.7 SCOPE AND LIMITATION OF THE STUDY

In this research work, attention will be focused on the evaluation of the Federal Government’s policy on privatization. This study will attempt to discover the different reasons adduced for the policy implementation and the mode and manner in which the policy is being implemented by the BPE. The project is limited to the period 1999- 2004.

However, reflection will be made to the period when privatization policy was first implemented (1988).

Analysis and assessments will be made based on available data as relevant and important discoveries are made in the cause of the study. The discoveries will be carried out in order to test the authenticity of the project work and the viability of the effort contributed.

As some governmental and banking business requires great secrecy, it was difficult obtaining relevant information from the employees of the bank and BPE.

It was also difficult convincing them that the study could be used for academic purposes only. They backed up their argument with the fact that it is not possible to discuss governmental issues with the public, this was exhibited in the unwillingness and reluctance of some of the respondents to complete and return the questionnaires.

Finally, some limitations were also encountered in cost, in terms of time and money in carrying out the study.

Perhaps if the researcher had more resources to dispense within terms of time and money, the quality of the research and its presentation would have been better.

1.8 DEFINITION OF TERMS

i. Bureau: Means the Bureau of Public Enterprises established under section 2 of the decree No. 28 .1999.
ii. BPE is an acronym for Bureau for Public Enterprises. It is a body charged with the responsibility of implementing the policies and decisions of the council. It also prepares enterprise for privatization, advises the council on privatization and commercialization issue and makes necessary recommendations to the council as part of its secretarial support.
iii. Council; Means the National Council on Privatization established under section 8 of Decree No. 28. 1999.
iv. Commercialization: This refers to the reorganization of the enterprise wholly or partly owned by the state. The enterprises so designated will be oriented towards self suffciency, self- accounting and with minimum government intervention and control.
v. Efficiency: In normal parlance, it could be said to be doing the right things at the right time effectively. But in relation to privatization, it refers to the gains from real allocation of productive assets to new ownership and management.
vi. Evaluation: In the light of the study, evaluation refers to the calculation of value or degree of success achieved by the privatization policy.
vii. Partial Commercialization: Means that such enterprises so designated will be expected to generate enough revenue to cover their operating expenditure. The government may consider giving them capital grants to finance their capital intensive projects.
viii. Public corporation: This is united society of persons or legal entity authorized to act as a corporate body, created by charter or Act of the legislature. It is also an outfit established by the Government to provide goods and or services to the people.
ix. NCP: means National Council on Privatization

CHAPTER TWO LITERATURE REVIEW

2.1INTRODUCTION

Literature review is essential in any kind of research. The essence of literature review is to critically examine previous relevant studies or what other scholars have written or claims they have made as well as the findings they established.

Various views have been expressed by different authors and professionals about the concept of privatization. It is based on the acknowledgement of this fact and for better understanding of the basic principles of privatization that I set out to sieve such relevant views from numerous sources so as to give insight into the topic at hand.

Therefore this chapter will examine the concept of privatization in the first instance, role of the state, the origin of public enterprises in Nigeria, and also examining he history, objectives and challenges of privatization programme in Nigeria.

2.2 The Concept Of Privatization

In recent years, the idea of privatization has gained universal appeal in both developed and developing nations. Shortage of public funds and the growing contrast between public waste and private thrift together provided the domestic impetus to harness the energies of private entrepreneurs in the country after country. Even countries that were formally committed to socialism have begun to realize that individual energy is a more reliable engine of economic growth than government businesses, which lack the incentive to succeed in business.

According to Zayyad (1988), the public sector almost crowded out the private sector during the heady days of the “oil boom”, when money was no problem but how to spend it. The policies pursued particularly during the 1970s and the early 1980s led to structural changes, which made the economy vulnerable to external shocks. Rural- Urban migration which intensified in the wake of the “oil boom” as well as inappropriate pricing and exchange rate policies had taken their toll on the Agricultural sector with the result that the sector’s contribution to Gross Domestic Product (GDP) has shrank from about 40% in early 1970s to not more than 20% in 1984. Consequently, the economy became progressively dependent on crude oil accounting for over 22% of the GDP, 81% of government revenue and about 96% of export earnings at the beginning of the 1980s. Increased establishments of public enterprises led to the multiplicity of parastatals most of which depend on government subventions from the treasury and thus a burden on government finances which for the most part of the 1980s were in share with the federal budget deficit as high as 11.6% of the GDP.

Yusuf (2001) in tracing evolution of public enterprises in Nigeria noted emphatically that the economic potentials of the nation at any point in time determines to a very great extent, the degree of government involvement in her economic activities. He further argued that the establishments of public enterprises were highlighted by the buoyancy of the Nigerian economy and in the present context therefore, the decline in the fortunes of the nation’s economy calls for privatization.

Bode(2002) argued that the proponents of privatization based their arguments on the inefficiency of the public enterprises, capacity under- utilization, inadequate billing system, poor cost and credit control, low productivity, over staffing. A related argument is the failure of all attempts to bring about a higher level of efficiency in the public enterprises. He then concluded that if private enterprises are more efficient than public enterprises, even if public enterprises’ efficiency can be raised, greater efficiency is still possible through privatization. By the same logic, when public companies compete with private companies and make losses while the private ventures make profit, the public corporations should be privatized.

Moreover, it is argued that some of the original reasons for the establishment of public enterprises such as the private sectors’ lack of capital and entrepreneurship as well as the private sectors’ lack of capital and entrepreneurship as well as its unwillingness to wait for long gestation and accept low returns on investment, have become inapplicable. Hence, the public enterprises established on these grounds have lost their “raison deter” and should be privatized. Divestiture is also wanted where public enterprises that were previously regarded as strategic and constituting the commanding heights of the economy have ceased to be so (El- Rufai2000).

Similarly, public enterprises that were intended to raise revenue for the government should go private when they become loss makers. The growing shortage of government funds should also imply that subsidized losses cannot be maintained and so, unprofitable public enterprises should be sold. Just as some public corporations were established for raising revenue for the government, the privatization of such corporations is also intended to generate revenue for the government. (Kwanashie 2002). It is also argued by others that the number of public corporation tend to be too large, and that these ventures distract from governments main functions of maintaining law and order and providing a conducive environment for private investment through establishing an adequate infrastructural and regulatory framework for the economy. Even when such proponents of privatization grudgingly accept the Keynesian mixed economy, they insist on a dominant role for the private sector.

Vernan(1993), focus below on how economists, politicians, civil servants and a few others tend to view privatization. Economists have influenced the debate on privatization both through their writings on the subject and their participation in international agencies that advise developing countries. The economists’ case for privatization usually rests on the expectation that it will enhance efficiency in the supply of a product or service. Gains or losses of efficiency stemming from privatization can be the result of changes in technical efficiency, that is, the minimization of costs for a given level of output, or they can stem from changes in allocative efficiency, evidence by a clear alignment of prices to long-run marginal costs. Presumably, both kinds of efficiency will improve privatizations (Adhikiri and Kirk, 1990).

However, an improvement in efficiency is more likely to be the result of a strengthening of the influence of market forces than of a change in ownership. As such, competition can be introduced without privatization, and in many cases, privatization does not result in increased competition. Privatization alone without the introduction of competition may simply transform a public monopoly into a private monopoly. The privatized firm may pursue profit most vigorously, but that pursuit, if it takes the form of increased prices could worsen allocative efficiency (Bode 2002).

From a politician’s stand point, the success of privatization may be measured by which political group gains and which lost. Privatization, it has been observed, is substantially driven by attempts to capture and preserve rents, not by concern for the abstract concept of efficiency. Active debate on privatization will be concentrated where there is the largest potential for creating, dissipating or redistributing rents.

In the current wave of privatization, politicians have generally emphasized two different objectives. First, the promotion of popular capitalism through a wider ownership of shares and second, a domination of power of trade unions in the public sector. Politicians also think that minimizing the negative political repercussion of privatization is important. Selling shares of public enterprises to foreign investors is another example of a situation that economists may welcome if it facilitates privatization, but that politicians may frown upon. Partially, as a result of citizens’ growing resistance to increased tax burdens, privatization has become a politically attractive way to reduce a budget deficit.

On the other hand, civil servants may resist privatization because it threatens to shrink their power base by reducing the resources under their command. On the other hand, they may welcome it for several reasons. For one thing, privatization may make cutting subsidies or raising price for product like electricity, water or telephone services easier, thereby freeing fiscal resources for others uses. They may also welcome the fact that managerial discretion will be more tightly curbed under private ownership than under government ownership. Among other things, the firms’ financial discipline may improve after privatization. Civil servants may also weight the benefit stemming from a reduction in time spent monitoring the performance of state owned enterprises and in budgeting costs allocated to cover their losses. Management theorists point out that from the view point of the public, the degree of transparency of the relations between the government and the enterprises is likely to increase dramatically following privatization. Government often compels public enterprises to cross –subsidize services, to employers of last resort, or to hold price increase in check. When enterprises are public owned, such decisions may be made within the bureaucratic network, removed from public security. Once private shareholders own the firm, decisions such as these may become more exposed. However, such assumptions are highly vulnerable and depend on the regulatory style of the government concerned.

State owned enterprises managers are likely to be concerned with different set of issues associated with privatization. One issue of special interest to them is the likely impact of the programme on their autonomy. (Erastus, 2002). Managers may feel that operating under the watchful eyes of the ministry constraint them more than managing a firm owned by many share holders. Managers may also believe that the remuneration paid to them under public ownership is lower than what they would receive under private ownership. If that is their objective, they may judge privatization by whether it will change their ability to block new entry of foreign and domestic competitors.

Others may view privatization depending on whether privatization projects also affect the interest of other groups in the economy. On one hand, consumers who are subsidized by the government through public enterprises and who expect to lose those subsidies after privatization will see themselves as worse off. On the other hand, privatization may bring lower costs and better service particularly if it is accompanied by an increase in competition, and in such cases, consumers could benefit.

Labour usually sees itself as especially likely to be affected by privatization. Public enterprises often pay higher wages and maintained larger work forces than private sectors. Not surprisingly therefore, the employees of the state- owned enterprises and their trade unions often oppose privatization.

Privatization may also be assessed by its impact on the budget. The proceeds of privatization improves government budget in the short-run unless she find herself obliged to invest even more in the public enterprises before it can arrange a sale. Over the longer-term, however, the input on the budget may be clearly negative. The assets that the government gives up may command a price that is lower than the enterprises long-term contribution to the subject (Zayyad, 1992).

2.2.1 Historical Background of Privatization

Nigeria experienced a period of an oil boom on the outbreak of the civil war in 1973 when oil prices rose to a very high point, making it possible for us to accumulate a very high reserve. The resources so gotten from the oil boom were so mismanaged by the government of that period. These resources could have been enough to put Nigeria into economic efficiency, but the then government maintained that our problem was not how to get money but rather how to spend it.

Misallocation of funds and corruption-were responsible for the failure of Nigeria to properly utilize the oil boom. The country invested in too many white-elephant projects and statutory corporations, whose financial -and economic performance started deteriorating to the extent that annual return has been well below 10% in the early 1980s. These inefficiencies and huge losses we. .. Charged against the public treasury (Zayyad, 1999). With the declining revenue and escalating demand for effective and qualitative goods and services, the general public stepped up to its yearnings for public enterprises to become efficient. In order to half the decay in the way public enterprises to become efficient. In order to halt the decay in the way public enterprises were managed; government came up with a policy on privatization which it felt could squarely address the problem. The programme of privatization has come a long way and it is reported to be one of the cardinal policies of the present administration since its inception in 1999.

With the benefit of hindsight, it may be pertinent to note that the idea of privatization was started during the Shehu Shagari regime (second republic). That was. The time when the problem associated with the dismal performance of the public enterprises began to attract government's1 attention, which led to the establishment of the ONOSODE Commission of 1982. The commission submitted a report containing recommendations for the privatization and commercialization of some public enterprises which subsequently went into the agenda of the Shagari Administration. The government adopted the policy but was in the process of implementing it when it was overthrown by the military regime of General Muhammadu Buhari. The Al-hakin Committee of 1984 muted a separate recommendation for the privatization and commercialization of public enterprises’ to the military regime of the day. The Buhari regime itself could not implement the programme, even though it intended to, before it was toppled by General Ibrahim Badamosi Babangida, under whom the implementation of the programme started in accordance with the enabling legislation, Decree No. 25 of 1988. Subsequent administrations have either contributed in making privatization policy successful or more bound.

Barely a month after he came into office in May 1999, President Olusegun Obasanjo lunched a bold economic programme deigned to turn Nigeria into a land of opportunities for both local and international investors. On July 6th 1999, Obasanjo inaugurated the National Council on Privatization ably chaired by the vice President, Alhaji Attiku Abubakar to carry out/implement the privatization programme through the Bureau of Public Enterprises in accordance with the Public Enterprises (Privatization and Commercialization) Act 1999. 1999 therefore, marked the beginning of the on-going privatization programme, being Nigerian second privatization programme.

2.2.2 Objectives of Privatization and Commercialization

In the 1999 privatization act, the following have been advanced as some of the major objectives of adopting the programme of privatization and commercialization:

i. To send a clear message to the local and international community that a new transparent Nigeria is now open for business.
ii. To restructure and rationalize the 'public sector to substantially reduce the dominance of unproductive government investments.
iii. To change the orientation of all public enterprises engaged in economic activities towards a new horizon of performance improvement, viability and overall efficiency.
iv. To raise funds for financing socially oriented programmes such as poverty eradication, health, education and infrastructure.
v. To ensure positive return on public sector investments in commercialized enterprises through more efficient private-sector oriented management.
vi. To reduce the present absolute dependence on the treasury for funding by otherwise commercially oriented parastatals and so encourage them to approach the Nigerian and international capital markets to meet their funding needs.
vii. To create jobs, acquire new knowledge, skills and technology and expose Nigerian enterprises to international competitions.
viii. To restructure and diversify the production base of the economy in order to reduce dependence on the oil sector and imports.
ix. To achieve fiscal and balance of payment viability.
x. To lay the basis for a sustainable and non-inflationary growth.
xi. To lessen the dominance of unproductive investments in the public sector, improve the sector's efficiency and intensify the growth potentials of the private sector; etc.

2.2.3 Advantages Of Privatization

Kwanashie (2002) and Zayyad (1998) concurred that the following advantage derivable from the implementation of privatization policy:

i. Privatization will bring about improved efficiency and effectiveness in the operations of the privatized enterprises;
ii. It reduces dependence on the government, and therefore, lead to a reduction in public expenditure on grant, subvention and unproductive, in most cases, irrecoverable loans; -
iii. Improves management capabilities, as the private sector is believed to have better management capability than the public sector. Board appointment will be on the basis of competence and not political party patronage.
iv. The private sector will employ only resources needed. Over staffing and other forms of wastage will therefore, be avoided. Civil service bureaucracy will be avoided. Decision making will be fast and efficient.
v. The private sector is not guided by the general order or the bureaucracy that usually hinders flexibility in the public sector.
vi. Most government objectives are nebulous for a result appraisal. An objective like improvement in water supply is, for example, too imprecise. The private sector will have precise objectives with measurable standard and their operations will be result-oriented.
vii. Sale of such shares will improve the activities of the capital market in the manner as was witnessed in the first phase.
viii. The sale of public enterprises will have positive cash flow effect for the government and money realized could be employed on other socially desirable ventures; more especially infrastructures.
ix. Privatization will enable government to focus more on its role as sustainer of peace and orderliness and its supervisory roles in the economy.
x. Boards of public corporations, usually change anytime there is a change in government and this led to management instability and absence of long-term corporate planning. There will be management and board stability once the enterprises are privatized; and profits generated by public enterprises are usually transferred to the government.
xi. When privatized, most of these profits will be retained in the organization for development and expansion.

2.2.4 Disadvantages of Privatization

According to Kwanashie (2002) and Zayyad (1999); privatized public corporations may however have the following disadvantages:

i. Prices of services produced by such enterprises will rise and this has substantial real income effects. Some essential services such as electricity, telephones, may subsequently be outside the reach of low-income earners.
ii. When privatized, such enterprises would naturally trim down their staff and use the remaining employees more intensively. This will lead to unemployment.
iii. External influences may be difficult to control just as it is under government control.
iv. Problems may rise as to the people having money to buy. Sale of public enterprises may therefore, place the few rich in monopoly power. It may be difficult to ensure equitable distribution to the various income groups, occupational groups and the shares may be under subscribed for especially if large numbers of enterprises are involved.
v. Problems may also arise as to the actual prices at which the shares are to be transferred. On one hand, there are fears that they may be deliberately under-valued to favour the elitist group who will be in position to buy them, thus indirectly transferring national wealth to few hands. On the other hand, there are fears that the government may over-value the shares to earn more revenues; and
vi. Control of these enterprises may be difficult or may not be as easy as it need to be because instead of control through board appointments, etc, laws will have to be introduced and there may be problems associated with cost of enforcing compliance.

2.3 The Challenges of Privatization

According to Bode (2002), for any privatization programme to be successful, the

Following challenges are evident and must be carefully addressed:

i. The political will at the highest level most exist and must be sustained.
ii. Will short-terms gains be balanced against long-term growth and prosperity; high initial price or future tax/job benefits?
iii. Will there be rehabilitation before privatization, or rehabilitation should be side-by- side with privatization?
iv. How can the government resolve the unfounded pension liabilities?
v. Public enterprises gross debts in billions 'of Naira also have to be resolved?
vi. Treatment of surplus labour, salary arrears and severance pay must be fair, principled and equitable.
vii. There is also the issue of legal and constitutional challenges to economic reform.
viii. Government had to map out the strategies of dealing with issues of corruption and mismanagement.

2.3.1 Benefits of the Current Privatization Programme in Nigeria

Despite the challenges and all those criticisms leveled against the on-going privatization programme by Nigerians, the country has generated some benefits which cannot be overemphasized. (Zubairu, 2003). These benefits include:

i. The fiscal problems experienced in the 1980s as a result of financing large inefficient and unproductive public investments have considerably reduced.
ii. Government can now focus more on education, health, agriculture, infrastructural development etc.
iii. A favorable environment for both domestic and foreign private investment has been created. The strategy of core-investor involvement has attracted additional-direct foreign investments.
iv. The initial government involvement in economic activities ended up in suppressing potential local entrepreneurs who will be contribute to the development of the private sector.
v. Privatization has also facilitated new industrial technologies and training in the necessary operating skills through the transfer of technology from foreign investors more especially in the telecommunication sector.
vi. Higher efficiency due to competition introduced by private sector participation will enforce prices down to the benefit of the consumers.
vii. Another benefit of privatization is the establishment of the share purchase loan scheme. This gave the low-income earners the opportunity to become part owners of the privatized enterprises.

2.3.2 The Effects of Privatization Programme in Nigeria

Zayyad (1999) argues that the widespread adoption of privatization measure necessitates a system of impact evaluation which can be widely applied and which will provide a systematic and practical analytical framework to access the results of the programme. Performance can be defined in terms of success in achieving stated objectives. The basic question is whether the economy is better. Or worse off as a result of privatization. A comprehensive answer to this question would require knowing what changes occurred as a result of privatization, and how such changes can be prioritized and valued among other issues. However, the problem of an ambiguous broad statement of goals of privatization and the existence of conflicting objectives make such assessment difficult. Nonetheless, the effect of privatization on the whole economy can be assessed by:

i. An increased share of the private sector in the economy.
ii. A reduction in fiscal imbalance through increased revenue, and the reduction of the government's budget deficit.
iii. The development of domestic capital market.
iv. The improvement in the external trade balance.
v. At the micro level, the effect of privatization can be assessed using:
vi. Technical efficiency which is concerned with how inputs are used efficiently and effectively, by firms both before and after privatization.
vii. Change in the real price charged for the output of privatized enterprise.
viii. Cost efficiency which is concerned with whether or not there is a difference in cost efficiency per unit of output before and after privatization.
ix. Profitability which does not necessarily imply efficiency as an inefficient firm may be profitable due to market power or preferential arrangements, price control on output of an efficient firm as well as differences in accounting convention.

2.4 Conceptual Framework of Privatization Policy

According to Vernon (1993), depending on which part of the world one finds himself, privatization takes different forms. In the Western World and industrialized nations, it is mainly a divestiture of government economic activities. In the socialist or centrally controlled economics, it has taken the forms of industrialization of economic activities allowing individuals to own and control economic activities.

Jackson (1994) said that privatization is synonymous with the relinquishment of government equity and other interests in public enterprises. He further stated that as an economic policy, it is generally accepted as an inevitable instrument of reform that is necessary for the emerging world economy. All over the world, the focus is on reducing the role of government in areas of economic activities that are best handled by the private sector.

Privatization is an economic policy that seeks to affect the systematic transfer of appropriate functions, activities or property from the public to private sector, where senders can be regulated more efficiently by the market price mechanism (El-Rufal, 2000).

Privatization implies the permanent transfer of ownership, control and operation of certain key economic enterprises from public to private hands. It is aimed at attracting private" investment that could serve as a catalyst for economic growth and development of a country (BPE, 2002). The monetarist school of thought led by Milton Friedman, advanced the idea that macro-economic policy should be more concerned with stabilizing the growth of money supply through restrictive fiscal and monetary policies. An element of restrictive orientation is to allow the economy to be controlled by market forces and to reduce the role of government in running economic activities. It is expected that a reduction in the role of government in economic activities will elicit a corresponding increasing in private investment. (Veron, 1993). On the whole, this generally reflects the belief generally held that private enterprises are more conscious of market signals in terms of efficiency and productivity.

Nevertheless, there are several other motives for privatization, prominent among them being the widespread dissatisfaction with the performance of these enterprises. The numerous normative arguments that hitherto supported the establishment of the public enterprises have become less convincing to policy makers; meanwhile the unsatisfactory operational and financial performance of the public enterprises did not help matters. The claim became obvious that privatization will improve both allocative and productive efficiency thereby reduces the budgetary burden of the public enterprises. In this regard, privatization has been advocated as a means of improving the performance of the public sector (Zubairu 2003).

Another argument in favour of privatization derives from the property right theory which postulated that a change in ownership by altering the structure of property right will improve the incentives for productive efficiency. .This argument, however, presupposes that the private firm needs to perform effectively and efficiently to remain in business. If privatization merely converts public monopoly into a private monopoly, the enterprise will obviously not be compelled by competitive pressure to improve its productive efficiency. A change in ownership therefore, will impose the discipline of private capital on the enterprise (Olshore, 1996).

In Nigeria, where government's investment in public corporations was initially perceived as the only means of achieving rapid economic development, it has become obvious that far from promoting development, public enterprises have become impediments to progress. Privatization therefore, becomes imperative.

2.5 The Role Of The State

The role of the state is more difficult to define. There are three contrasting views on the role of the state. There are the liberal view, the reformist view and Marxist view. The liberal view evolves from the intellectual movement that went under the name of liberalism, which emphasizes freedom, goal and the individual as the ultimate entity in the society. It assumes that individuals are rational and free to choose from different causes of action. The role of the state here is "passive" (it only responds to pressure from individuals 'or groups pursuing their own interests). Secondly, the state is neutral, in that it acts impartially, drawing out of general interest from the competition between conflicting individual interests. The state has no view, no social content interest or character of its own. It merely recognizes the existence of competing interest groups and ensures that the competition is conducted fairly. It acts an umpire. Thirdly, the state should be limited because the individual knows what his interests are and does not require the state to tell him what they are (Holladn, 1987).

The reformist view sees the individual as one who follows his own interests but interests which are extensively constrained by social constitutions and processes. The individual is not really "free" to choose. Moreover, the individual lacks the necessary knowledge and information to make rational choices in all areas. Therefore, he needs help in identifying and articulating his interests. Here, the role of the state is firstly 'positive' because the state cannot always wait passively upon pressure of individuals and groups. It must take the initiative in reaching out to people in need. Secondly- it is "extensive" (of wide scope) and 'supportive.' Active intervention produces net social benefits. Thirdly, the state is politically neutral and separate from economic power in society. This later view is shared with the liberal view and is a subdivision power in society. This later view is shared with the liberal view and is a subdivision of what political scientists call the "pluralarists perspectives"(Zuvekar, 1992).

The Marxist view does not start with individual interest. Rather, it starts with the history and structure of the society. The history of capitalism, the conflict and struggling that accompanied it, have produced and reproduced the structure of the society. The structure or system in which the individual finds himself shapes the person's behaviour, his outlook on the world, what he thinks and what he wants. Human nature is not fixed, unchangeable characteristic. Individuals are essentially social brings and even their wants and preferences are largely shaped by social structure. Hence, if a particular social structure works against the needs and wants of individual which are socially produced; it can be in conflict with 'real' interests. Hence, if a particular social structure works against the needs and wants of individual which are socially produced; it can be in conflict, with 'real' interests. Marxists are of the view that state action can only be understood as a response to historical trends. Capital accumulation is a requirement imposed on firms by competition. To survive, firms must accumulate, to invest and reinvest in capital equipment is felt by each individual capitalist. Marx foretold that the process of capital accumulation will lead to a change in the structure (a restructured) of capital as large firms replace small ones. This is achieved into two ways. First by the concentration of capital as firms plough back their profits, second, by the concentration of capital by which Marx mean expansions through takeover, mergers, etc the state seems to restrict capitalism.

There are two different approaches to the Marxist theory of the state. The convention (classical) and instrumentalists approach sees the state as an instrument of ruling and manipulating capital owing class to serve its interests. Despite democratic elections, economic power of capital, combined with its control of dominant ideology and system of values in society, allows it to control politics and the state. In addition, the site's operation is staffed by people who came from that class or are allied to it. The other approach is the structurist approach. Hence, the state is not seen as instrument of capital but as being relatively autonomous. The state enjoys autonomy, it is not the passive tool of any private elite - and yet autonomy is relative, operating within definite constraints.

2.6 Ownership and Performance

The resurgence of the notion that transferring asserts from the public sector to private hands would raise both allocative and technical efficiency leading to greater economic well being is the intellectual argument that links ownership with performance (Adebayo, 1993). According to Hanson, (1987), the key issue in the privatization debate is whether private property as it exist in practice is more efficient than public ownership of means of production.

Is performance linked with ownership? Is private ownership superior to public ownership? Let us examine the theories that claim so and see the extent to which their arguments are convincing. The justification for the superiority of private ownership relies on the disposed knowledge theory.

2.6.1 The Dispersed Knowledge Theory

Based on the Austrian school's view, the nature of human knowledge including economic knowledge is such that it can never be fully codified and transmitted, given such transferability to private1', owners, as far as the latter’s own business is concerned (Eraslus, 2002). The failure of central planning according to this view is the ultimate proof of the difficulty of centralizing dispersed knowledge through a hierarchical system. Decision-making will therefore, be more efficient itself in the hands of private owners and their agents.

This argument has been criticized in several ways. Firstly, the difficulty of utilizing dispersed knowledge is ambiguous and is not just confined to public enterprises management or other types of state control or intervention. The same problem exists to a similar degree even in large private firms be it multinational or purely domestic in operation. Nevertheless, large private organizations do exist and often function well, partly because they have certain information advantage, advantages of scale and scope of production and distribution.

All these advantages arc equally available to large enterprises. The real question is what is the ideal mix of decentralized and centralized forms of knowledge utilization that is between spontaneous interaction among independent units through the market and hierarchical interaction within one organization. And this is primarily a matter of optimum size than ownership.

As the Austrians rightly emphasized, competition plays an important role in the generation of information necessary for effective co-ordination.

2.7 Public Corporations in Nigeria

It is important to observe that there was a time when it was considered a sound economic policy in Nigeria, for government to invest in statutory corporations and state-owned enterprises. Socialism existed side by side with capitalism. It was argued that public companies were better for stimulating economic growth and development than private capital. All sorts of companies were floated ranging from banking and insurance, oil producing and marketing, motor assembling plants, rail, sea and air transportation, paper mills and steel mills, hotels and tourism to cement, fertilizer plants and sugar. The oil wealth of the 1970s provided the anchor. As at 1991, the total number of public enterprises in Nigeria was put at 1,500 and 600 at the Federal level alone, (Obasanjo 2000).

Then, public enterprises were seen as important vehicles of fastening national development and integration. They were also regarded as institutional innovations that are likely to bring about rapid economic growth as well as economic independence" of the country. As instruments in the hands of the government, the public enterprises were expected to make the maximum contribution to the achievement of the highest Gross National Production (GNP) in order to raise the standard of living of Nigerians.

Against these expectations, public enterprises were later characterized by poor investment choices, inept management, huge operation and maintenance budget, defective capital structure, lack of managerial autonomy blatant corruption and above all, a big burden on the national treasury.

2.7.1 Justification for the Establishment of Public Enterprises

Most of the third world countries especially those that were former colonies of Britain and France, inherited public enterprises from their imperial powers. There is evidence that the maintenance and expansion of this form of governmental administrative structure is- due largely, to philosophical justification that is connected with the underdeveloped state of their economies. In Nigeria, the earliest example of public enterprise emerged under colonial rule in the form of Marketing Board (1936) and the conversion of certain government departments into corporations in the immediate years after the Second World War (Nigerian Railway Corporation and Nigeria Ports Authority).

However, it was not until the decade of decolonization (1950 - 1960) that emerging nationalists, led government to articulate a clear role for public enterprises as instruments for promoting national development. After independence, different national development plans and the oil boom of the mid 1970s had in one way or the other contributed to the establishment of more public enterprises. Currently, the developmental role of the-public enterprises is set out clearly in section 16 of the 1999 constitution (Zayyad, 1999).

According to Berg (2003), the following specific reasons are commonly stated as constituting the justification for the establishment of public enterprises in Nigeria:

i. There was no indigenous private sector that can undertake the control and operation of certain infrastructural utilities like ports, railway and road construction.
ii. There was need to float public enterprises that can generate revenue that will add to available national capital for financing developmental-projects and welfare programmes.
iii. State control of key profitable enterprises will enable the state to pursue the ' objective of preventing the concentration of wealth or means of production in the heads of few individuals or groups.
iv. Public enterprises are used to organize certain critical activities essential for national survival and economic stability like central banking, broadcasting, iron and steel, international air transport, shipping and petrochemicals.
v. The public enterprises provide employment. This is considered to be a very important contribution because the private sector of the economy as at then offers very limited employment.

2.7.2 Similarities between Public and Private Enterprises

According to Anya (2003), the management of private and public enterprise is similar in certain ways because entities in both the public and private sectors have predetermined objectives, which they aim at accomplishing and whether they achieve them or not is a different matter. The similarities stems from the fact that they are guided by some set of goals and objectives, and many large private companies tend to have multiple aims just like state-owned companies in addition is profit optimization and also growth in branches and structure.

The operations of both private and state-owned enterprises are geared towards the production of goods and better services for the satisfaction of the customers of these enterprises. Another area of similarity is the provision of social responsibilities. They all engage in more social as opposed to purely charitable donations, building houses, and even sinking boreholes, scholarship awards, donations to some universities identifying with state and federal development programmes, etc.

Another point to note about public and private enterprises is that they operate within (he same financial market laws and policies of the government to abide with. This is because government lay down the guideline on the financing policies of these enterprises through some organizations like the Central Bank.

The control of all business activities is geared towards overall economic well being of a nation in order to ensure political stability and cultural rejuvenation. The material utilizations of the two organizations are the same. Both utilize resources in terms of materials, man and money. They all utilize resources which are part of the total National Income.

2.7.3 Difference between Public and Private Enterprises

The main difference between state-owned and privately owned companies can be traced right from the perspective and objective of their operation.

The ownership and .management of these enterprises are another major area of difference. While the public enterprises are established by the government and controlled by a Board of Directors appointed by the government, private companies are owned by shareholders and' controlled by Board of Directors elected by the shareholders.

While tax-payers' money is used as the capital base of public corporations, privately owned companies use the capital contributed by the shareholders.

Privately owned companies are required by law and expected by shareholders and the general public to publish in any national daily newspaper, their audited .annual financial statements in the form of profit and loss account and balance sheets. This requirement is not binding on public corporations.

The government-owned enterprises arc largely isolated from the dynamic nature of our economic environment. They are allowed to escape most of the harsh government economic policies (Anya 2003).

2.7.4 Reasons for the Failure of Public Enterprises in Nigeria

According to Kwanashie (2002) many reasons have been given as the causes of failure of the public enterprises in Nigeria. Some people believe that some of these areas handled by the government could have been in the hands of private individuals. Some school of thought believed that the failure of public corporations is mainly as a result of ethnic politics in Nigeria which has made it impossible for all these enterprises to attract the required manpower needed for its efficient and effective functioning.

Other important factors on the failure of public enterprises were seen as:-

i. Poor and inefficient technical service.
ii. Recruitment and employment problems.
iii. Corporate abuse and blatant corruption.
iv. Inadequate funds needed for smooth operation.
v. Political interference-short tenure in board services.
vi. Inadequate accounting system and procedure.
vii. Lack of conscious management orientation.
viii. Inadequate skilled employees.
ix. Improper and inefficient management.
x. Over staffing, etc.

CHAPTER THREE RESEARCH METHODOLOGY

3.1 INTRODUCTION

Research methodology is the specification of the procedure of collecting and analyzing the data necessary to help solve the problems at hand, such that the difference between the cost of obtaining various level of accuracy is maximized. It could also be termed as investigation undertaken in order to discover new facts as to get additional information.

The main objective of this research is to evaluate the privatization policy in Nigeria (1994-2004); with particular reference to the BPE.

3.2 Research Design

In carrying out this study, a simple, flexible and appealing method to quick and encouraging response from various target groups is adopted. The techniques adopted in this study include the questionnaire method. The subject matter of the study is a very complex one requiring a high level of education from respondents and their knowledge of the subject vies- a-vies its advantages or otherwise. This informed the choice of the methods adopted.

3.3 Population and Sampling

Babio (1973: 79) defines population as a theoretically specified aggregation of the survey elements. In this definition the concept “element” refers to the variables such as workers and so on.

Population in this work refers to the total number of respondents designed to be covered by the researcher gaining information on the Evaluation of privatization policy in Nigeria (1994-2004): A study of BPE.

A very important factor to be put in cheek in a research, with the questionnaire instrument serving as a point of note is the sample size. Since the entire population cannot or will be difficult to study. This arises from the fact that the choice of respondents is a critical aspect of social research because it influences the reliability and validity of data that are ultimately collected.

According to Kothari (1979) as found in Agbure (2001:36) the term sample refers to that part of the universe that the researcher chooses to study. Also, the magnitude of such a portion of the population selected for study is referred to as sample size and the method used in selecting the sample size is called sample technique.

In the light of the above, a sample size of 60 respondents comprising of sex, age, ethnic group, educational qualification and place of work are put into consideration. This research will adopt the use of random sampling method which is a special type of probability in which every unit has a chance of being selected.

3.4 Sources and Methods of Data Collection

This sub chapter presents the data collected from the survey exercise.

In line with the need to generate data that will provide the basis for answering the research questions outlined in the previous chapter, questionnaires were designed.

The justification of this method is that it gives easy understanding of facts presented. This method is also considered suitable to the problems set in the questionnaire with the aim of collecting more information on the evaluation of privatization policy in Nigeria: A case study of BPE. It also helps to highlight problems and difficulties encountered in practice and suggested solution given where necessary.

3.5Methods Of Data Analysis

The researcher intends to use simple tabulation and simple percentage in analyzing data collected from respondents, so as to test the validity of the hypothesis and to put all data gotten into categories and in understanding manner.

CHAPTER FOUR PRESENTATION AND ANALYSIS OF DATA

4.1 Introduction

The critical issue under debate during the Abdulsalami Abubakar regime was the possibility of carrying out a privatization programme that is well designed, properly carried out and sequenced, credible and widely acceptable. As part of effort to ensure successful implementation of the privatization programme, the Federal Government made some institutional arrangements in that regard. This chapter will therefore discuss the background of the BPE.

This chapter presents the data collected from the survey exercise. The data collected are organized in tables with frequency and percentage distributions. This leads to the analysis and subsequently, the explanation interpretation of findings. This would equally enable the researcher to test the validity of the formulated hypotheses.

4.2 Background Of

The BPE is the secretariat of NCP and is charged with the overall responsibility of implementing the policies and decisions of the Council. The Bureau is headed by a Director General, who is also the secretary of the NCP. The BPE has five functional departments .with each department having its duties and terms of reference and ably headed by a Director.

4.2.1 History Of The Bureau

The Federal Government of Nigeria in July 1988 enacted the privatization and commercialization Decree No. 11, which served as the first enabling legislation of privatization and commercialization programme. The decree established the Technical Committee on-Privatization and Commercialization (TCPC) with Dr Hamza Zayyad as its chairman and Chief Omoiane Kuye as secretary. The TCPC was charged with the responsibility of ensuring effective implementation of the privatization and commercialization programme. In 1993, the Bureau of Public Enterprises Decree No. 78 was promulgated and entrusted unto the BPE, the responsibility of implementing the privatization and commercialization programme. The TCPC therefore, metamorphosed into the BPE in 1993.

On 10 th May, 1999, the Head of State and commander-in - Chief of the Armed Forces, General Abdulsalami Abubakar, signed into effect the Public Enterprises (privatization and commercialization) Act No. 28. The Act repealed the Decree No. 78 of 1993 and established a restructured Bureau of Public Enterprise which is to serve under the NCP as the Secretarial, and implement the policies and d ecisions of the Council. Therefore, the BPE we have today is the one established under section 12(i) of the 1999 privatization Act.

4.2.2 Functions of the Bureau

The statutory functions of the Bureau are divided into two: functions with respect to privatization and functions with respect to commercialization.

(a) Functions of the Bureau with Respect to Privatization

According to the provision of section 13 of the 1999 Privatization Act, the functions of the Bureau with respect of privatization are to:

i. Implement the Council's policy on privatization
ii. Prepare public enterprises approved by the Council for privatization
iii. Advice the Council on further public enterprise that may be privatized
iv. Advice the Council on the capital restructuring needs of the public enterprises to be privatized.
v. Carry out all activities required for the successful issue of shares and sale of assets of the public enterprises to be privatized.
vi. Make recommendations to the Council on the appointment of consultants, advisers, investment bankers, issuing houses, stock brokers, solicitors, trustees, accountants and other professionals required for the purposes of privatization.
vii. Advice the Council on the allotment pattern of sale of the shares of the public enterprises set out for privatization.
viii. Oversee the actual sale of shares of the public enterprises to be practiced, by the issuing houses, in accordance with the guidelines approved from time to time, by the council.
ix. Ensure the success of privatization exercise taking into account the need for balance and meaningful participation by Nigerians and foreigners in accordance with the relevant laws of Nigeria.
x. Perform such functions with respect to privatization as the Council may, from time to time, assign to it.

(b) Functions of the Bureau with Respect to Commercialization

Section 14 of the 1999 privatization Act states that the functions of the Bureau in respect of commercialization are to:

i. Implement the Council's policy on commercialization.
ii. Prepare public enterprises approved by the Council for commercialization.
iii. Advice the Council on further enterprises that may be commercialized.
iv. Ensure the updating of the accounts of all commercialized enterprises to ensure financial discipline.
v. Ensure the success of the commercialization exercise and monitor, on a continuous basis for such period as may be considered necessary, the operations of the public enterprises after commercialization.
vi. Review the objectives for which public enterprises were established in order to ensure that they adapt to the changing needs of the economy.
vii. Ensure that public enterprises are managed in accordance with sound commercial principles and prudent financial practices.
viii. Interface with the public enterprises, together with the supervising ministries, in order to ensure effective monitoring and safeguarding of the public enterprises managerial autonomy.
ix. Ensure that the Board and management of each commercialized enterprise and the Government of the Federation, keep to the terms and conditions of the performance agreements, if any, between the public enterprise concerned and the Federal Government.
x. Maintain and review on a continuous basis, any performance agreement between a public enterprise and the Government of the Federation.
xi. Evaluate and recommend to the council whether or not a public enterprise is eligible for funding through grants, loans, subventions or equity.
xii. Perform such functions with respect to commercialization as the council may, from time to time, assign to it.

(c) Other Functions of the Bureau

According to section 15 of the 1999 Privatization Act, the Bureau shall:

Provide secretarial support to the council.

Carry out such other duties and responsibilities as may be assigned to it, from time to time by the Council.

4.2.3 Powers of the Bureau

The bureau under section 16 of the Privatization Act 1999, shall, subject to the overall supervision of the council and have the power to:

i. Acquire, hold and manage moveable and immovable property.
ii. Enter into contracts or partnerships with any company, firm or person which in its opinion will facilitate the discharge of its functions.
iii. Liaise with relevant bodies or institutions locally or oversees for effective performance of its functions.
iv. Request for and obtain from any public enterprise, statistical and other information including reports, memoranda and audited accounts and other information relevant to its functions.

With all these activities carried out by the Bureau, therefore there is need to have an update on the current privatization of enterprises;

Update on privatization of PHCN

Transaction update

Abbildung in dieser Leseprobe nicht enthalten

Physical Data Room And Site Visits

i. The Physical Data Room commenced on October 24 2011
ii. The site visits commenced on November 14, 2011
iii. Despite the attempt by labor to interrupt process the site visits continued with zeal and vigor.

Labour Issues Of Phcn

i. To date, BPE and the FGN labor negotiating team have completed the following steps in resolving all power sector labor issues as presented during the first negotiating session in May, 2011
ii. Resolution of all outstanding monetization issues through PHCN management;
iii. Regularization of all Casual Workers hired before December 31, 2009 and subject to biometric verification;
iv. Implementation of a 50% salary increase for all Employees effective June 1;
v. Organized and hosted a power privatization workshop in September to solicit union input regarding the future of the Nigerian power sector;
vi. Engaged Alexander Forbes to complete an actuarial valuation of the NEPA/PHCN Superannuation Fund as of June 30, 2004;
vii. Engaged Creative HR to conduct human resources study on PHCN ( Biometric, Payroll and Rightsizing)
viii. The successor companies shall be handed over to investors without labor issues or liabilities
ix. All PHCN workers that are left after the rationalization are rehired by the successor companies for a guaranteed minimum period of 6 months.
x. FGN has set aside 2% of the shares to be allocated to the Workers
xi. The third and final round of negotiations with the workers of PHCN starts on November 30, 2011

Power Sector Reform and the Nigerian Electricity Market

i. The EPSR Act 2005 provides for restructuring of the NESI, creation of NERC, development of Electricity Market for Nigeria, and for private sector participation in the electricity business
ii. Market designed to move from one stage to the next, with increasing competition and diversification of trading arrangement, as investments and private participation grow
iii. To ensure efficient and transparent electricity market, two special entities were created: the MO for commercial stability and the SO for technical stability of the Market
iv. The MO and SO initiated the 1st stage of the electricity market – the Pre-Transitional market in Jan. 2005, with the Distribution zones and Power Stations of PHCN as the participants, buying and selling electricity at Transfer Prices

The Nigerian Electricity Market

Consists of two parts – the Retail and the Wholesale Market

The Retail Market:

i. Arrangement for the sale of electricity to the final consumers at the distribution voltage levels
ii. Governed by the Distribution Code and Retail Contracts (Consumer Tariffs & conditions of supply)
iii. Players are the Discos and the end-consumers

The Wholesale Market:

i. Arrangement for bulk sale and purchase of electricity at the transmission voltages
ii. Governed by the characterization of the Market, stage of its development and the Trading Arrangement
iii. Market Operation is the wholesale purchase and sale of electricity between the generators and distributors, including the Eligible Customers, at the transmission and sub-transmission voltages.
iv. Market Operation includes the sale of Ancillary Services for the maintenance of grid stability and power quality

Characterisation of the Nigerian Electricity Market – three elements

The Market structure

i. Refers to the physical system of the market (generation, transmission, distribution) and the concentration of ownership
ii. Poor market structure poses the greatest threat to the health of power markets
iii. Market structure has a decisive impact on market power and investments
iv. The more the participants, the more competition and investment inflow
v. The Wholesale Market Structure for the Nigerian Electricity Industry

Onigbolo Cement Company Ltd

Onigbolo Cement Company Limited (OSC) is a joint venture company between the Governments of the Republic of Nigeria and Republic of Benin. The company was established in 1982 and commenced activities in 1983. The shareholding structure of the company is as follows:

i. Republic of Nigeria - 43%
ii. Republic of Benin - 51%
iii. F L Smith - 6%

TOTAL - 100%

The Company is into production of Cement and currently operating with an installed capacity of 500,000 tons of cement per annum. The Company has mines of 3,000m 1,000m, limestone and clay quarry which is currently on lease on a renewable 30 years lease from the Republic of Benin. The Privatization of Onigbolo Cement Company commenced in April 2005 with the approval of the Council to divest the Federal Government’s shares in the company. Subsequently, the Secretariat engaged privatization advisers (Diamond Consortium) for the transaction. The Enterprises was advertised in February 2007 and three expressions of interests were received at the expiration of the advertisement. The investors duly carried out their data room/due diligence exercise and the Technical proposals were evaluated by an evaluation team of staff of the Secretariat. The Financial Bids opening was held on May 2007 in which Dangote Industries Limited emerged as the Core Investors with a purchase consideration of N1, 781,001,000.00. The purchase consideration was fully paid by the Core Investors in July, 2007. We need a convenient date with other stakeholders for official handover ceremony of the Company to the Core Investor.

Nigerian Inland Waterways Authority (NIWA)

Marketing Profile

PREAMBLE

The Federal Government of Nigeria (FGN) had under the World Bank (WB) obtained an International Development Agency Credit for Nigeria’s Privatization Support Project. The credit is being used primarily to support the National Council on Privatization (NCP) in funding the programme. The WB funding is being used to support transparent and effective implementation of Nigeria's privatization program and creates an enabling environment for private sector participation and competition in the sector. The NCP through its Secretariat, the Bureau of Public Enterprises, is responsible for the implementation of Sector Reforms, Restructuring and Privatization of state owned entities, including National Inland Waterways in the Inland Waterways Sub-Sector.

Enterprise Background

NIWA was formerly the Inland Waterways Department (IWD), which was the oldest Operational Department in the Ministry of Transport from 1956 up to late 1997. It is a statutory body and is 100% owned by the FGN as a Parastatal under the Federal Ministry of Transport. NIWA was established through Decree No. 13 of 1997 and operations commenced fully in 1998 under the supervision of a Managing Director and four (4) General Mangers. The head office is located at Adankolo New Layout, Lokoja, Kogi State. The Authority is responsible for approximately 3, 000 kilometers of navigable watercourse in its natural form. With this length, Nigerian inland waterways are considered to be some of the longest in the world, and include the River Niger, the third longest river in Africa, which is about 1,271.3km in length.

The Decree establishing NIWA clearly spells out the objectives, powers, functions and management structure of NIWA. It also has ten (10) Area Offices and a liaison office at Maritime House, Abuja. The Area Offices are: -

i. Lokoja Area Office;
ii. Lagos Area Office;
iii. Calabar Area Office
iv. Port-Harcourt Area Office;
v. Makurdi Area Office;
vi. Onitsha Area Office;
vii. Warri Area Office;
viii. Yelwa/Yauri Area Office;
ix. Igbokoda Area Office; and
x. Baga Area Office.

The Decree spells out the major business activities of NIWA are to: -

i. Improve & develop Inland Waterways for Navigation.
ii. Provide an alternative mode of transportation for evacuation of economic goods & persons.
iii. Execute the objectives of the National Transport Policy as they concern NIWA.
iv. Issue and control licenses for inland navigation, piers, jetties, dockyards etc.
v. Operate ferry services within the inland waterways system.
vi. Finance capital and maintenance dredging.
vii. Undertake hydrological and hydrographical survey.
viii. Approve and control all jetties and dockyards.
ix. Undertake acquisition, leasing and hiring of properties etc.

As at November 2004 it had staff strength of nine hundred and seventy six (976) employees. The Authority has the following physical assets: -

i. Three (3) standard functional dockyards at Warri, Port Harcourt & Lokoja.
ii. Jetties located at Lagos, Onitsha, Port Harcourt, Calabar & Warri.
iii. Two Hundred (200) housing units at Warri.
iv. One Hundred (100) housing units at Lagos.
v. Thirty - Five (35) Vessels, three (3) functional
vi. Passenger/vehicular ferries (19)
vii. Survey vessels (2)
viii. Voyage vessels (5)
ix. Survey dinghies (4)
x. Motor launchers (3)
xi. Tug Boats (2)
xii. River ports (1)

Future Prospects

According to the master plan for Integrated Transport Infrastructure, NIWA will promote development in areas adjacent the riverside by making the inland waterway mode of transport attractive. The FGN is currently ready to dredge the River Niger from Port Harcourt upstream to Baro and the River Benue from Lokoja upstream to Makurdi making the rivers more navigable during the whole year. Development of a sustainable all year-round waterway system will attract freight throughout the year. River ports will be established in Makurdi and Lokoja and Baro. Lokoja port will serve as the major river port for transshipment of imported goods to the Federal Capital Territory. These three river ports are best located to become agricultural collection/distribution centers for the agricultural goods expected to be produced in the surplus areas of the Middle Belt. All these routes are at the threshold of being concessioned to private operators. NIWA will merely occupy the position of a Landlord and a Technical Regulator.

Furthermore, if investments are made in freights, large volumes of bulk traffic like coal or iron ore could be moved cheaply through the waterways compared to other modes of transportation. The Inland Waterways Transport would provide alternative mode of transport for the raw materials needed for Ajaokuta Steel Company and the Aladja Steel Rolling Mill. Privatization of NIWA will enhance private sector participation in the activities of inland waterways transportation. NIWA has an immediate plan to ensure the sensitization of public awareness through organization of seminars, workshops, and conferences. NIWA will also enhance private sector participation and expose the various services available in NIWA and investment opportunities in the marine sector. NIWA will also establish institutions to train the needed manpower for the inland waterways operations, which would ensure adequacy of skilled personnel. The proposed dredging of River Niger from Warri to Baro through Ajaokuta, and River Benue up to Makurdi will open up swallow points and create channels that enhance all year round navigational activities on all the routes. Establishment of Marine Police Naval Bases and Patrol teams would ensure the enforcement of all laws governing NIWA’s activities.

Proposed Divestiture Plan

The proposed divestiture plan for NIWA is to concession the activities of the Authority according to international best practices to private operators while the Authority is left with regulatory functions such as issuing and controlling of licenses, carrying out hydrological surveys, and collecting taxes from private operators etc as enshrined in the Decree establishing it. An investor’s forum is scheduled to hold in Lagos in August. Presentations during the forum will include the following: Keynote speech by the Honorable Minister of Transport on Government policies, plans, commitments, subsidies and incentives for Inland Water Transport Presentation by the Director General of BPE on the Privatization Policy and Legislation for Inland Water Transportation and NIWA Presentation by NIWA on Inland Waterway Transportation issues, Problems and prospects Presentation by MTBS of Netherlands on International best practices of Inland Waterway Transport

Ughelli Power Plc

Ughelli Power Station Complex, P.M.B. 6, Ughelli, Delta State. Ughelli Power Plc operates a gas-fired thermal plant, located in Delta State, in the Niger Delta region, South-South Nigeria. Ughelli Power is one of the largest thermal generating power stations in Nigeria with a combination of Hydro and Thermal generation methods. The plant currently operates at peak, optimal capacity of 972MW, with a capacity of generating 2500GWh of electricity annually. Ughelli Power meets current world specifications for plants of its type, and includes an updated control room, a switchgear room, plus staff training school and recreational facilities. “Ughelli I” began operations in 1966 with two 36MW gas turbine units. In 1975, Ughelli Power added Ughelli II consisting six 24MW gas turbine units. In 1978, Ughelli III’s 20MW gas turbines units came on line. Finally, in 1989-90, Ughelli IV added another six 100MW gas turbine units, four of which have been refurbished. Ughelli Power has total staff strength of 444 employees made up of management and other staff cadres. Their Terms of Employment are same as applicable to PHCN (from which the company was unbundled in 2006, as part of EPSR Act) with terms and conditions based on government employment standards dating from 1998.

Privatization

Ughelli Power is one of the six power generation plants scheduled for privatization as part of the Federal Government of Nigeria’s (FGN) Reform of the Nation’s power sector. The Ughelli Power divestiture is expected to be by concessioning or core investor sale. This will be sequel to preparatory work by BPE Transaction Advisers, which will be in compliance with Work Bank standards and ratification by the NCP.

Corporate Structure

Before its incorporation as a public limited liability company on November 8, 2005, Ughelli Power operated as a semi-autonomous entity managed by a Chief Executive Officer (CEO) and supported by a management team who reports to the CEO, Power Holding Company of Nigeria (PHCN). Full unbundling and transfer of assets and liabilities were implemented on 1st July, 2006.

Financial Performance

Ughelli Power Plc audited accounts, part of PHCN and NEPA accounts for the last five years, and current management accounts for 2005 will be made available through the BPE. Current financial accounts of the company can be obtained from the enterprise office.

Egbin Power Plc

Egbin Power Station Complex, Egbin, P.M.B. 1013, Ikorodu – Lagos State, Nigeria. Egbin Power Plc is the largest power generating thermal plant in Nigeria and one of the largest in the West African sub-region. Egbin has an installed capacity of 1320MW generated by six fuel reheat steam electric units. Five of the six steam units are each rated at 220MW, while unit no. 4 rating was recently reduced from 220MW to 200MW, thereby reducing the available capacity to 1300MW. Egbin Power currently produces 2010MW primarily to serve commercial, residential and industrial customers in Lagos State, Nigeria’s most populous city and the nation’s commercial and industrial hub, with approximately 19 million consumers. The plant is situated in Ikorodu, one of the five provinces of Lagos State. The Escravos-Lagos Pipeline (ELPS) supplies natural gas to the plant and used as a primary feedstock. Egbin began operations in 1985, and meets current world specifications for plants of its type. Plant facilities include an updated control room and a switchgear room. Special, integrated protection devices isolate the plant from the rest of the system in event of severe disturbance in the national grid, and a fire-suppression system incorporating hydrants and sprinklers is supplied from a nearby lagoon. Support facilities include a staff training school, a medical clinic, a club house, recreation complex and a supermarket. The plant has staff quarters consisting of more than 200 housing units ranging from single rooms to one-to-four bedroom flats, to duplexes.

Recent employee agreements are based on terms and conditions of government employment standards dating from 1998. Egbin employs 577 staff, consisting mostly of engineers, other skilled personnel, including medical, administrative and maintenance staff. Egbin Power currently functions as a component of the Power Holding Company of Nigeria (PHCN) Plc. PHCN has an installed power generating capacity of approximately 6,000MW, half of which is thermal and located in the Niger Delta region. PHCN operates thermal plants of steam plants and open cycle gas turbine types, as well as hydro-electric plants located in Nigeria’s North Central states.

Privatization

Egbin Power is one of the six power generation plants scheduled for privatization as part of the Federal Government of Nigeria’s (FGN) restructuring of the power sector. In May 2007, 51% of the company was sold to a core-investor. The remaining 49% will be privatized based on a strategy to be determined by the National Council on Privatization (NCP).

Corporate Structure

Before its incorporation as a public limited liability company on November 8, 2005, Egbin Power operated as a semi-autonomous entity managed by a Chief Executive Officer (CEO) and supported by a management team who reports to the CEO, Power Holding Company of Nigeria (PHCN).

Financial Performance

Egbin Power Plc’s audited accounts, for the last five years, and current management accounts for 2005 will be made available to interested, potential investors through the BPE. FGN heavily subsidizes the fuel cost charged to natural gas; hence fuel cost is not fully represented in electricity tariffs.

Technical Facilities/Equipment

Hydrogen Generating Plant

Capacity: 2 x 13.5 stdm3/hr

Discharge Pressure: 15,000Kpa

HVAC System

Water Treatment Plant

Demineralization Plant

Auxiliary Boiler

Manufacturer: Babcock - Hitachi

HHV of Fuel Oil: 45,345 KJ/Kg

HHV of Fuel Gas: 39,300 KJ/Kg

3 x 600m3 1 day Desalination Plant

Compressed Air System

4 Nos Rotary Screw Air Compressors

Manufacturer: Atlas Copco

Model No.: ZR – 5A

Rated Capacity std m3/min: 56.6

Rated Discharge Air Pressure Kpa(g): 855

3Nos Atlas Copco Air Dryers

Model No.: FD-29W

Rated Capacity std m3/min: 26.6/unit x 2

Rated Pressure Kpa(g): 1,090

3Nos Atlas Copco Air Filters Type: PD-600 Capacity m3/min.: 54 Well Water System

6 No’s Centrifugal immerged Pumps – GRUNFOS-SP 70/5Type

Flow Rate: 75m3/hr

Total Head: 51m wcp

3 x 500m3 Demin Water Tanks

2 x 500m3 Light Fuel Oil Tanks

1.5MW Emergency Diesel Generator

Pump House

Auxiliary Cranes and Hoists

Workshop Crane C. W. Pump House Crane

Manufacturer Verlinde Hitachi

Model No. Gr2m sd OT-CH

Rated Load of Hoist (Kg) 15,000 25,000

Outdoor Gantry Crane (Pump House)

Manufacturer Hitachi

Model BT-HH

Rated Load of Hoist (Kg) 7,500

Tourism Investment Opportunities in Nigeria

Nigeria offers a wide variety of tourist attractions such as extended and roomy river and ocean beaches ideal for swimming and other water sports, unique wildlife, vast tracts of unspoiled nature ranging from tropical forest, magnificent waterfalls, some new rapidly growing cities and climatic conditions in some parts particularly conducive to holidaying. Other attractions include traditional ways of life preserved in local customs; rich and varied handicrafts and other colourful products depicting or illustrative of native arts and lifestyle, and the authentic unsophisticated but friendly attitude of many in the Nigerian population. However, many of these attractions are still largely untapped and even at their raw states; they are still being enjoyed by few outsiders, either very rich visitors in quest of exoticism or adventurous people in search of new challenges and experiences. The lack of required modern infrastructural facilities and in some parts of the country acute conditions of underdevelopment and poverty can be seen which many potential Nigeria bound tourist may not like to be confronted with. These are impediments to tourism, which the new administration has been tackling since assumption of office. Investors, both foreign and local are therefore called upon to come and invest in the abundant tourism potentials in the country. The richness and diversity of Nigeria's tourism resources coupled with economic liberalization policies will provide investment opportunities in various areas.

A Tourism policy was produced in 1990 with the basic objectives to make Nigeria the ultimate tourism destination in Africa. The main thrust of government policy on tourism, is to generate foreign exchange, encourage even development, promote tourism based rural enterprises, generate employment and accelerate rural urban integration and cultural exchange. Due to the importance the Nigerian government attaches to the tourism industry, the following strategies were adopted:

Infrastructure

Government would ensure that the provision of basic infrastructural facilities, namely, good roads, water, electricity, communications and hotels, to centers of attraction, in order to accelerate their development for the purpose of exploiting fully their touristic value. In furtherance of this goal, the appropriate government agency responsible for tourism promotion and development, shall establish and maintain close liaison with other government agencies responsible for the provision of the infrastructure.

Concession of Land

State governments will provide land without any hindrance for tourism development at concessional rates and conditions favourable to investment and the realization of investment thereon. This will necessarily include the abolition of annual ground rent within the period of construction and development of tourism. For orderly development of tourism and tourism product, it is mandatory for all state governments to demarcate potential Tourism Zones and their products from other usage, to avoid undue pollution. 100% equity ownership of companies in Nigeria and repatriation of profits and dividends etc. Fiscal and Other Incentives In order to boost the level of private sector investment in tourism, it is treated by government as a preferred sector, like agriculture. Government has also introduced such incentives as, tax holidays, tax rebate and soft loans, with long period of grace to potential investors in tourism.

Current transactions

There is no current transaction in the National parks. However there is a Steering Committee constituted by the NCP under the chairmanship of the Minister of Environment. The committee is saddled with the responsibility of drafting a policy for the National Parks. The Steering Committee is yet to commence its sitting, however, a Working Group comprising of professionals has been constituted by the Minister of Environment to do groundwork for the Steering Committee

4.3 Presentation Of Data

The following are the data or the various responses .collected from the field work Exercise:

Table 4.1: Sex Distribution of Respondents

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.1 shows that 65.0% of the respondents were male while 35.0% were female which shows that majority of the respondents were male.

Table 4.2 Age Distribution Of Respondents

Abbildung in dieser Leseprobe nicht enthalten

Source; Research Survey 2012

Table 4.2 shows that 13.0% of the respondents were between the ages of 18 and 25 years old, 40.0% were aged between 26 and 35,27% were aged between 36 and 45 while 20.0% were 46 years and above.

This distribution shows that majority of the respondents (87.0%) were aged 26 years and above.

Table 4.3: Distribution of Respondents by Educational Qualification

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

This distribution shows that majority of the respondents were Degree/HND holders.

Table 4.4: Distribution of Respondents According to Place of Work

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.4 shows that there is an equal distribution of respondents working in different institutions. The essence is to have average response on what individuals in these institutions/organizations think about the Nigerian privatization exercise. Indeed, all the respondents understood, or were conversant with the trend of events on Nigeria's privatization programme.

Table 4.5: Distribution on Respondents according to whether they agreed that private enterprises are more efficient than state-owned enterprise in Nigeria

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.5 shows that 68.0% of the respondents believed or agreed that private enterprises are more efficient than state-owned enterprises in Nigeria, 10.0% disagreed while 22.0% others, were undecided.

This distribution shows that majority of the respondents agreed that private enterprises are more efficient than state-owned enterprises in Nigeria. Some of their reasons were the absence of productivity bottlenecks in private enterprises, and the existence of good management policy, corporate discipline, capacity utilization, and so on and which they argue, arc lacking in the state-owned enterprises. This is in line with what Bode (2002:8) said ". If private enterprises are more efficient than state-owned enterprises, even if state-owned enterprises' efficiency can be raised, greater efficiency is still possible through privatization."

However, those who disagreed were not able to give substantive reason to back their argument. They reiterated that the way public enterprises are ran is the government's culture of doing things and if government can change its way of doing things, there could be no need for privatization.

Table 4.6 Distribution of Respondents according to whether they agreed that is need for the privatization of state-owned enterprises in Nigeria

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.6 shows that 63.0% of the respondents believed or agreed that there is need for the privatization of state-owned enterprises, 15.0% disagreed while 22.0 others, were undecided.

This distribution shows that majority of the respondents agreed that there is need for the privatization of state-owned enterprises in Nigeria. They gave various reasons such as the need to break monopoly powers, the need to improve the operational efficiency of such enterprises, increase customer satisfaction, reduce dependence on state subvention for funding, increase employment, in still management autonomy and discipline. This correlates with the statement Kwanashie (2002:2) made that "all the attempts made to bring about a higher level of efficiency and productivity in the public enterprises have failed." Writing on the same issue, Mohammad (1994:6) said "Public enterprises that were intended to raise revenue for the government should go private when they become loss makers."

However, those who disagreed argue that the government should not privatize in order to check the excesses of private enterprises and that most of the enterprises were not established for profit but for development purposes. They also argue that all causes of losses in the enterprises can be remedied without the enterprise being privatized. For the undecided ones, they argued that government should privatize where necessary while those enterprise that constitute the commanding heights of the economy should not go private.

Table 4.7 Distribution of Respondents according to whether they agreed that there have been significant constraints in operations of public enterprises in Nigeria

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.7 shows that 77.0% of the respondents agreed that there have been significant constraints in the operation of public enterprises, 10.0% disagreed while 13.0% others, were undecided.

This distribution shows that majority of the respondents agreed that there have been significant constraints in the operations of public enterprises in Nigeria.

Table 4.8 Distribution of Respondents according to whether they agreed that privatization will eliminate the constraints militating against the performance of state-owned enterprises in Nigeria

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.8 shows that 70.0% of the respondents agreed that privatization will eliminate the constraints militating against the performance of state-owned enterprises in Nigeria 27.0% disagreed while 3.0% others, were undecided.

This distribution shows that majority of the respondents agreed that privatization will improve the performance of public enterprises in Nigeria. This matches the statement made by Zayyad (1990:2) that "in order to halt the delay in the way-public enterprises are ran, the federal government came up with a national policy on privatization and commercialization, which it felt could squarely address the problem."

Table 4.9: Distribution of Respondents according to the benefit that the common man could derive from privatization

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.9 shows that 13.0% of the respondents claimed that share purchase, could be one of the benefits of privatization to the common man, 22.0% claimed that it is low prices, 20.0% claimed it to be efficiency, another 20.0% argued that it is competition. 8.0% agreed in favour of employment while 17.0% claimed it to be qualitative goods and services.

This distribution shows that majority of the respondents believe that the common man could enjoy qualitative goods and services as well as low prices as a result of competition and efficiency.

Table 4.10: Distribution of Respondents according to whether they agreed that privatization has reduced the burden of state-owned enterprises on the public treasury

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.10 shows that 67.0% of the respondents agreed that privatization has reduced the burden of state-owned enterprises on the public treasury, 20.0% disagreed while 13.0% others, were undecided.

This distribution shows mat majority of the respondents agreed that the government has been relieved from spending money on the public enterprises. This confirms the argument made by Anya (2003:3) that "by reducing the reliance of the public enterprises on public treasury for finance, privatization has encouraged new investments in the enterprises concerned”.

Table 4.11: Distribution of Respondents according to whether they agreed that privatization has generated revenue to the Federal Government

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.11 shows that 57.0% of the respondents agreed that privatization" has generated revenue to the Federal Government, 23.0% disagreed while 20.0% others, were undecided.

This distribution shows that majority of the respondents agreed that the Federal Government was able to generate some income as a result of privatization. This also confirms the statement that "the performance of the privatized enterprises so far has led to a considerable increase in the volume of corporate taxes accruing to the national treasury, alongside the proceeds of the privatization exercise."(Anya, 2003:2)

Table 4.12: Distribution of Respondents according to whether they agreed that foreign investments have increased in Nigeria as a result of privatization

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.12 shows that 53.0% of the respondents believed or, agreed that foreign investments have increased in Nigeria as a result of privatization, 32.0% disagreed while 15.0% others, were undecided.

This distribution shows that majority of the respondents agreed that Nigeria has witnesses/recorded more foreign investments as a result of privatization.

Table 4.13: Distribution of Respondents according to whether they agreed that Nigeria has gained more international acceptance as a result of privatization.

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.13 shows that 48.0% of the respondents believed or agreed that Nigeria has gained more international acceptance as a result of privatization 25.0% disagreed while 27.0% others, were undecided.

This distribution shows that majority of the respondents agreed mat Nigeria has gained more acceptances in the international .community as a result of implementing privatization policy.

Table 4.14: Distribution of Respondents according to whether they agreed that privatization policy has been successful between 1999 - 2004 in Nigeria

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.14 shows 63.3% of the respondents believed that the privatization programme has been successful between 1999-2004, 16.7% disagreed, while 20.0% others were undecided.

This distribution shows that majority of the respondents agreed that the privatization programme has been successful between 1999-2004 in Nigeria. They gave the reasons such as improvement in the price of share of some privatized enterprises listed on the stock exchange, as well as the profit earned by these enterprises, reduction in the burden of financing the enterprises by the government, operational autonomy, competition more especially in the telecommunication sector, and so on. This tally with the report of Yusuf(2001:6) that “the programme of privatization has greatly minimized the scope of political patronage in the form of board appointments and jobs for boys.” The finding also confirmed that “privatization has allowed management of privatized enterprises full freedom to realize their optimum, potentials which led to more productive employment and economic growth in general terms” (Anya 2002:3).

Those who disagreed gave reasons such as the inability of majority of masses to buy shares of some of the enterprises, and the inability of the Federal Government to justify the use of the proceeds of the privatization exercise.

Table 4.15: Distribution of Respondents according to whether they agreed that the BPE has contributed in the implementation of the privatization programme between 1999-2004

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.15 shows that 63.3% of the respondents agreed that the BPE has contributed effectively in the implementation of privatization programme between 1999 -2004,16.7% disagreed while 20.0% others were undecided.

This distribution shows that majority of the respondents agreed that the BPE has contributed effectively in the implementation process of privatization programme. The reasons advanced to this by the respondents was that the BPE was able exercise technical know-how, diligence and professionalism in the implementation process which enable it to achieve annually, over 85% of its expected annual targets. Another reason raised was that BPE was able to mobilize foreign technical experts involved in the exercise. Above all, as argued by some respondents, the core values of the BPE include result orientation, commitment and diligence accountability and team work. Therefore, there is no point saying that there is no effective performance on the part of the BPE in the implementation process.

Those who disagreed argued that the BPE has not lived up to expectation, forgetting that it is implementing the programme based on a planned time table of action.

Table 4.16: Distribution of Respondents according to whether they agreed that the BPE has been transparent in executing its duties

Abbildung in dieser Leseprobe nicht enthalten

Source: Research Survey 2012

Table 4.16 shows that 65.0% of the respondents agreed that the BPE has been transparent in executing its duties, 16.7% disagreed while 18.3% others were undecided.

This distribution shows that majority of the respondents agreed that in respect to privatization, the BPE has been transparent in executing it duties. They based their acceptance on the fact that transparency, accountability and integrity are some of the core values of the Bureau and it always ensures strategic and wide publicity, free and fair bidding process for prospective strategic investors, availability of application forms and so on. That in all matter relating to privatization, the Bureau has been transparent and if there are allegations at all, the council is to be blamed.

Those who disagreed argued" that there are some shady deals which the BPE is involved in, more especially if one considers the fact that the rich elites have taken over the ownership of most of the privatized enterprise, which is against the regulatory framework.

4.4 Test of Hypothesis

In this section, the hypotheses formulated to guide this study will be tested. To test the hypotheses descriptive statistics method has been adopted. The adoption of the descriptive analytical tool was informed by the fact that the formulated hypothesis involves the need to get the personal views and assessments of respondents from the four different samples.

Hypothesis 1

ho: That privatization policy has not been successful between 1999 – 2004.

hi: That privatization policy has been successful between 1999 – 2004

Chart 4.1: Distribution of respondents according to place of work and they agreed that the privatization policy has been successful between 1999-2004

Abbildung in dieser Leseprobe nicht enthalten

The bar chart above, shows that majority of the respondents (63.3%) agreed that privatization policy has been successful between 1999 - 2004, Therefore, the alternate hypothesis (Hi) is confirmed. Thus, we reject the null hypothesis (Ho). This finding is in line with that of Abimbola (2002:4) who said that "privatization have the potentials of injecting new business ideas and investments into the economy." Indeed, this is so because privatization engages in the redistribution of resources throughout the economy of a nation.

It may also foster a revolution of the domestic' economy and redirect the cause of industrialization, financial system and technological development.

Hypothesis 2

h0: That the BPE has not contributed effectively in the implementation of privatization programme (1999-2004).

hI: That the BPE has contributed effectively in the implementation of privatization programme (1999-2004).

Chart 4.2 Distribution of respondents according to place of work and whether they agreed that the BPE has contributed effectively in the implementation of privatization programme (1999-2004)

Abbildung in dieser Leseprobe nicht enthalten

The above chart shows that majority of the respondents (63.3%) agreed that the BPE has contributed effectively in the implementation of privatization programme between 1999-2004. Therefore, the alternative hypothesis (H1) is confirmed. Thus, we reject the null hypothesis (H0).

This finding tallies with that of Anya (2002:4) who examined the importance of privatization programme on the Nigerian economy and therefore, linked the success achieved so far to the political will and commitment of the NCP, BPE has made positive remarkable contribution in the implementation process.

Hypothesis 3

H0: That the BPE has not been transparent in executing its duties.

H1: That the BPE has been transparent in executing its duties.

Abbildung in dieser Leseprobe nicht enthalten

The above chart shows that majority of the respondents (68.3%) agreed that the BPE has been transparent in executing its duties, which confirms the alternate hypothesis (Hi). Thus, we reject the null hypothesis (Ho).

In essence, from the foregoing, the apparent conclusion is that there is a positive linkage between the BPE's transparency and effectiveness in discharging its duties.

4.5 Summary

From the responses gathered during the survey exercise, it became evident that majority of the respondents agreed that considering the bad nature of public enterprises in Nigeria, there is the need for them to be transferred into competent hands of the private sector in order to ensure that the enterprises are saved from collapsing and revitalize them for more productivity and efficiency towards economic growth and development. The survey exercise also reveals that the Federal Government has generated revenue from the privatization exercise and that foreign investments have increased in Nigeria.

The descriptive statistics as an analytical tool has been used to test the formulated hypothesis based on the gathered responses. The outcome is that the whole privatization exercise was a total success and that the BPE has been transparent and contributed effectively in the implementation process.

CHAPTER FIVE SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Summary

In the 1960s, up to the early 1970s, collectivism as represented by nationalization of public utilities held sway. The state was seen as the chief instrument for the promotion of economic growth and industrial advance. In the late 1970s, slowly at first, but then with increasing momentum, the whole climate began to change. The role and function of the state and the public sector began to be systematically and fiercely questioned thereby unveiling the retrenchment of the state activities especially in relation to public enterprises.

Consequently, because of one reason or the other, Nigeria has embraced restructuring and privatization as one of the economic policies of revitalizing the economy. The objective of the, study, among others, is to evaluate the current privatization programme and it covers the period, 1999 - 2004. The methodology adopted was the use of primary and secondary data, as well as the descriptive statistics as an instrument of data analysis and test of hypothesis.

In chapter two, the concept of privatization as advocated by different scholars, authors and professionals has been discussed. Privatization, which implies the transfer of ownership of securities and other assets from the public sector to the private sector of the country, includes all public-private partnership, concession/lease, restructuring, divestiture, auction sale, core-investor sale, liquidation and management contract. In tracing the history of public enterprises, it was advocated that they were established to promote economic growth and development, considering the capital adequacy of the local entrepreneur, and the need to reduce foreign domination of the local economy. However, political inference, budget constraint and corruption could not allow the enterprises to achieve their objectives. Based on these and other reasons, the works of Anya (2002), Abimbola (2002), Zayyad (1999) and Zubairu (2003) concurred that privatization became imperative.

The programme Was first introduced in 1988. Since 1988 to date, the programme has been implemented under three legislations. The most recent of these legislations is the public Enterprises ( Privatization and Commercialization) Act 1999, which empowers the NCP and BPE to jointly implement the programme. Since the commencement of the programme, there has been a remarkable improvement in the number of listed securities and new issues in the capital market. The post- privatization performances of some of the privatized enterprises have also been impressive.

The survey exercise conducted gives reasonable answers to the research questions raised in chapter one. The survey exercised also reveals that the majority of the respondents were in support of the privatization programme, though, some gave a valuable critique. The majority agreed that the programme could squarely address the problem of the country. Based on the responses, therefore, one can conveniently state that the success recorded so far was as a result of the effectiveness and transparency the BPE shows in executing its duties.

5.2 CONCLUSION

Public enterprises are usually seen as assets collectively owned. Therefore, their sale to private owners is viewed with suspicion. Some will argue that it raises moral issues. In this regard, transparency in the process is very vital. Besides, reform has becomes a global phenomenon. Thus, Nigeria cannot be left out.

Acknowledging the fact that public enterprises become impediments to growth and the Federal Government cannot resort to an alternative to privatization, privatizing such enterprises therefore, become imperative.

Since the inception of the programme in Nigeria, the process of valuation had been tied to regulatory approach currently being used which gives fall transparencies and hence fairness in the process.

The programme has had an unqualified success, more especially, if one takes into cognizance, the performance of some of the privatized enterprises. With over N36.12 billion gross earning, representing over 300% benefit over cost of establishment, the government can be said to have achieved its revenue derivation objective. The Federal Government has been relieved of the burden of financing public enterprises from the public treasury in forms of subventions and subsidy allocations. Also, greater customer’s choice and value for money has been enhanced. Nigeria has recorded more direct foreign investments in the last few years, which created more employment opportunities.

5.3 Recommendations

Since the Federal Government has adopted privatization programme in order to improve the state of the nation’s economy, there is still need for the government to ensure that each privatized enterprises continue to survive as a going concern. To ensure this, the following recommendations are very important:

1. One of the major reasons of corporate failure is the increase in the number of contravention of corporate rules and regulations. Since business is a game of rule, a firm's survival in any industry could be predicted on strict application and compliance with rules. The government should therefore, ensure that its rules and regulations are strictly adhered to by all privatized enterprises.
2. Management of the privatized enterprises should ensure that recruitments are based on competence. This will contribute tremendously in improving efficiency and effectiveness of the privatized enterprises thereby reduce the level of waste of resources on cost of quality (cost of training, rework cost, etc).
3. The government and the managements of privatized enterprises should work towards restoring high level" of ethical standards and professionalism in-the privatized enterprises. This is imperative because lack of respect for ethical Standards and professionalism could make investors to abandon a hitherto attractive/profitable investment.
4. The Federal Government should set up and finance a strong and 'formidable monitoring and evaluation committee to monitor the post privatization performance of the privatized enterprises and make appropriate recommendations to the enterprises concerned and the government at large.
5. Despite the huge success recorded in the telecommunication sector, the BPE should replicate such successes in other sectors of the economy by ensuring that the hiccups in some of the privatization transactions handled by the Bureau are handled with utmost transparency and in all its transaction.
6. The Federal Government should justify the use of the proceeds of privatization by providing basic infrastructures in order to improve the welfare of its citizens and make the business environment, a conducive one for profitable investments.
7. The political content of the exercise should be reduced significantly in favour of the potential economic gains. Adopting this approach will however require government to properly educate the rural dwellers, create co-operative societies, and access to credit facilities that will enable them to purchase the shares.
8. To avoid the pitfall of having to deal with unemployed persons that may result from the exercise, there is a need to create a social safety net to take care of this inevitable occurrence.

BIBLIOGRAPHY

TEXT BOOKS

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77 of 77 pages

Details

Title
Evaluation of Privatization Policy in Nigeria (1999 - 2004)
Subtitle
A Study of Bereau for Public Enterprise (BPE)
College
Ahmadu Bello University
Grade
2.1
Author
Year
2012
Pages
77
Catalog Number
V286782
ISBN (Book)
9783656870784
File size
735 KB
Language
English
Tags
evaluation, privatization, policy, nigeria, study, bereau, public, enterprise
Quote paper
Peter Ogwuche Iduh (Author), 2012, Evaluation of Privatization Policy in Nigeria (1999 - 2004), Munich, GRIN Verlag, https://www.grin.com/document/286782

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Title: Evaluation of Privatization Policy in Nigeria (1999 - 2004)


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