AN APPRAISAL OF THE PERFORMANCE OF PRIVATALIZATION AND COMMERCIALIZATION OF GOVERNMENT OWNED ENTERPRISES.
cHAPTER 1 INTRODUCTION
1.1 Background of the Study
The importance for the establishment of public enterprises or corporations was felt in 19th Centuryand thereafter. There were a lot of upheavals in European society because of industrialization andurbanization. Social issues like unemployment and economic inequalities necessitated stateintervention in economies. Britain is widely referred to as the father of public enterprises. A goodnumber of African Countries chose the public sector for economic and social development. Thisaccount for the reason why many more functions like industrial production, transport, socialservices, communication etc were assigned to the state in addition to its traditional functions likesecurity, justice etc.Despite the several exercises of Nigeria economic policies to promote agriculture, industries andother activities, government still depend on monoculture commodity (oil) which failed to providegood capital investment and development due to weak technological base, poor managerial skill etc.This promoted or enhanced the desire to establish various enterprises and massive establishment of government agencies and institutions. The Nigerian constitution of 1979 described the officialoperating of these enterprises and public servants that managed them as well as those of the privateenterprises. For example, after reviewing the performance of the Nigeria Railway Corporation in1967 the commission that carried out the exercise recommended that corporation should have anExecutive Board whose Chairman would also be the Chief Executive.The government enterprises require constant financial backing for the smooth running. Due toinadequate capital and lack of financial autonomy public enterprises in Nigeria are confronted witha lot of problems, by managers and employees, government interference, inadequate capital,technological limitation, and political interference in the affairs of public enterprises in Nigeria.Since mono-cultural economy cannot meet the demand or generate large sum of revenue to run theeconomy or by public enterprises, the government seeking ways to reduce the rapid increase of badeconomy by adopting policy to boost our economy. Electricity is the bedrock of socio-economicdevelopment of any nation hence priority must be set for its adequate budgetary funding,availability, accessibility, and in Akwa Ibom State in particular and in Nigeria in general.
3Incessant power failures have caused irregular production and low utilization of resources inindustries and educational institutions while the Nigerian government has also been embarrassedon several occasions when Power Holding Company of Nigeria (PHCN) switched off power during government official functions. The PHCN has thus become an object of ridicule andopprobrium for over two decades. The PHCN has to contend with internal and externalenvironmental hostilities and constraints such as poor funding of the enterprise, corruption,excessive control by the Federal Government, vandalisation of its equipment by hoodlums, fraud,shady dealings, poor maintenance of electricity infrastructure, bad weather and erosion menace anddebts owed itPrivatization and commercialization policies are adopted by Federal Government as a remedy to problems that emanated from public enterprises. There are economic policies which grant fullautonomy to public enterprises so that they can operate without government subvention, controland interference which ultimately resulted in efficient provision of service and high productivitythat contribute to national growth and development. Although, these two concepts have identicalgoals and purpose, that is provision of efficient services to the public, high productivity and profitability, yet, they are different in nature and character.The Federal Government of Nigeria in (1988) through Decree No. 25 set up the TechnicalCommittee on Privatization and Commercialization (TCPC). The TCPC was charged with theresponsibility of privatization and commercializing some selected government enterprises. Themain reason was to promote greater efficiency and productivity in the public enterprises.This research therefore sets out to examine and analyze the relationships among elements for effective performance of the Power Holding Company of Nigeria Limited, a public enterpriseestablished, financed and managed by the Federal Government of Nigeria. The paper utilized both primary and secondary data and data with a view to seeking answers to the broad question of thefactors within the perceived organizational environment of the PHCN, government intervention,role and constraints as they are related in a positive or negative manner to the effective performance f the privatization and commercialization of PHCN.
1.2 Statement of Problem
Public enterprises were established by the Federal Government especially in the 1960s and early1970s when the public sector was seen as a major contributor to economic growth and socio- political stability. Public enterprises in Nigeria are set up by government to perform definite socialand economic functions for the public. The reasons for these public enterprises are to control the resources and raise funds for the provision of certain infrastructure facilities particularly in servicerequiring heavy financial investment e.g. Railway, Electricity, Telecommunication etc. also, to perform the function of generating revenue that will add for financing development programmeand projects as veritable instrument for creation of jobs. Therefore, since those functions are not performed, creditable, or efficiently privatization and commercialization policy is introduced byFederal Government of Nigeria. In identifying the problems militating against their performance,the problems are stated clearly below:1. Is political interference and mismanagement of resources responsible for the poor performance of public enterprises in Nigeria?2. Could policy of privatization and commercialization enhance the efficiency of publicenterprises?3. Does the privatization and commercialization improve the potential, the efficiency andservice delivery in Nigeria telecommunication?
1.3 Objective of the Study
The main objective of the study is to determine the effect of privatization and commercialization of Government-owned enterprises in Nigeria with a particular reference to Power Holdings Companyof Nigeria (PHCN). The following specific objective will guide this study:1. To describe the socio-economic characteristics of the respondents;2. To identify the impact of privatization and commercialization of public enterprises on therespondents;3. To determine the effect of privatization and commercialization on Nigerians;4. To determine the impact of government influence on privatization and commercialization process of PHCN5. To identify the constraints to the PHCN privatization and commercialization process fromfulfilling their mandate
1.4 Significance of the Study
The importance of any research is tied to find out solutions to the various problems that facemankind in the environment or society. The study creates awareness to every citizen of this countryand economic planners on the implications of these privatization and commercialization of the public enterprises in Nigeria economic development. It will help policy makers to assess the performance of PHCN following the privatized and commercialization policy. It helps researcherson contemporary issues have first-hand knowledge of the performance of privatized andcommercialized public enterprises.
1.5 Scope of the Study
The scope of this study is limited to the activities of privatization and the commercialization of public enterprises in Nigeria which was enhanced as a result of the inadequacy and failuresurrounding its activities and programmes to the public which are the major benefactors of theservices been rendered by these public corporation. It is limited to the effect of Privatization andCommercialization of Power Holdings of Nigeria Limited (PHCN).
1.6 Definition of Concepts
This study is made up of important concepts on the outright sale of government owned companiesto private individuals in terms of privatization and the operation of government enterprises as profitmaking ventures that changes market prices for their operations in the commercialization process.These concepts are as follows:
Public Enterprises: P
ublic enterprises are enterprises set up by government to perform definitesocial and economic functions for the public.
Privatization:
Privatization can be defined as narrowly as the transfer of government ownedshareholding in the designed enterprise to private shareholders, comprising of individuals andcorporate bodies. It is the policy of selling off public enterprises to individuals, groups andorganizations; they should operate under the principle of profitability, effectiveness, efficiency andviability than in public interest.
Commercialization:
Commercialization on its own, means the re-organization of enterprisewholly or partly owned by the government in which such commercialized enterprises shall operateas profit making commercialized enterprises shall operate as profit making commercialized
6ventures without subvention from government it is a policy in which government grants fullcommercial status to corporations which enable them to operate strictly under business principlesand practices without government control or interference and exercising absolute financialautonomy.
Government owned companies:
these are companies hold, directed and controlled by thegovernment. e.g. NNPC
Political Interference:
It can be defined as a situation whereby the government or leaders are incontrol of the affairs or activities of the public for their own interest.
Monopoly power
: the excess of price over marginal cost is a measure of monopoly power.
Private sector
: this is that part of a country’s economy consisting of privately-owned businessesetc
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