A STUDY ON THE EFFECT OF PRIVATIZATION AND COMMERCIALIZATION ON THE NIGERIAN ECONOMY

          Abstract

This paper examined the activities/policies of privatization and commercialization of public enterprises in Nigeria and how they have affected the development of the Nation. Although, some of the problems facing public- owned enterprise were examined as well. It looked at the pressure on the International Monetary Fund (IMF) to fully implement the structural adjustment program that leads to massive deregulation, privatization, and commercialization of public owned enterprises. In addition, it looked at the merits if any, of privatization and commercialization through extensive theoretical review of the performance of the private enterprise in Nigeria. Theories, rationale, and challenges of privatization and commercialization were addressed. The conclusion was that privatization is a good policy measure, which must be pursued with vigor, truth, sincerity, and transparencies even though the government is using such policies to foster a new division of labor between the public and private sectors in a bid to order, increase the efficiency and contribution to the development of both sectors. Privatization and commercialization in Nigeria will be a mirage unless institutional reforms take place. The government should create an environment favorable for private economic activity. This can be done by showing zero tolerance for corruption, nepotism, and misuse of public funds and property by both government and non-government officials.

1. Introduction:

 Historically, the  concepts of  privatization and  commercialization were  first put to  practice during  the golden age of the Han Dynasty in China. In this era, the Mining Dynasty of China handover manufacturing industries  private  individuals in  the  society  to  managed.  Subsequently,  Winston  Churchill’s  government privatized the British  steel industry  in  the  1950s. This  was  followed by Western  Germany’s which  sold  its majority stake in Volkswagen to small investors in a public share offering in 1961. The success of these privatized enterprise and the perception that privatization would go a long way in addressing  market  deficits  and  capital  shortfalls,  promote  economic  development,  reduce  mass unemployment  made  leaderships  of  Margaret  Thatcher,  Ronald  Reagan,  World  Bank  and  International Monetary  Fund clamored  for large-scale  privatization in  the 1980s  through  the introduction  of structural adjustment  programme  (Oji,  Nwachukwu,  and  Eme,  2014).  Accordingly,  the  introduction  of  structural adjustment program propels  much government in different countries  to embark on  the massive transfer  of public owned companies to private individuals (Alabi, 2010). In Nigeria, structural adjustment program did kick start not until 1986 when the International Monetary Fund  (IMF)  insisted  that  one  of  the  conditions  the  foreign  loans  requested  by  the  then  Shagari’s Administration  can be  granted  was to  divest  ownership  in  the management  and control  of  some public enterprises (Adeyemo  & Adeleke, 2008).This debate resonated to Buhari/Idiagbon and General  Babangida government that finally announced an intention to divest its holdings in certain key sectors of the economy and  subsequently promulgated  the Privatization  and  Commercialization Act  No. 25  of  1988.Against  this backdrop, privatization has hitherto been described by some authors as neo-liberal policies and idea packaged and sold by the western metropolis through their agencies such as World Bank and International Monetary Fund (IMF)( Gberevbie, Oni,  Oyeyemi, Abasilim, 2015).  However, several other studies have noted that privatization of public enterprises would help to overcome the  misuse  of  monopoly  power,  defective  capital  structure,  mismanagement,  corruption  and  nepotism (Abdullahi, 2014; Dappa, & Omi, 2014). Indeed, a public enterprise in Nigeria tends to be characterized by incessant corruption, inefficiencies, ineffective to they’re bureaucratic in nature that is responsible for many government  failures.  These low  performances in  addition  to technological  shortcomings  of  many public enterprises appear  to have made many studies to suggest that privatization or  divesting inefficient public enterprises could save costs and generate more revenue to the government. Nwoye, 2011) specifically argued that privatization and commercialization of public enterprise will not only facilitate the provision of capital and technology  to strategic areas where  the private sector either  shy away from or  lacked the  capacity to invest, it  will also  increase capital formation, encourage  foreign direct investment, production of  essential goods  at  lower costs,  create  employment  and  generally contribute  to  the  economic development  of  the country. Several other evidence has revealed that because many of the public Enterprises in virtually all tiers of government in Nigeria were either equipped  with low or  second-grade machinery,  the performance  of these public enterprise has remained very dismal with no options but to privatized them (Obadan, 2000).  Statement of the Problem Some  of  the  problems  facing  public  owned  enterprise  were  high  corruption,  lack  of  transparency, inefficiency, ineffectiveness, inconsistency, and incredibility. The challenges appear to mark a caused drastic failure  of  some  public  enterprise  like  National  Electric  Power  Authority  (NEPA)  and  Nigerian Telecommunication (NITEL) and Nigeria Railway. In addition, the  low performance  of these enterprises, coupled  with  the  pressure  on  the  international  monetary  fund  to  fully  implement  structural  adjustment program saw massive deregulation or privatization of public owned enterprise.  Against this backdrop, this paper  looks at  whether  privatization and  commercialization  in  Nigeria  were desirable  through extensive theoretical review of the performance of privatized enterprises in Nigeria. The paper also looks at concept, theories, rationale and challenges in privatization and commercialization of Public Enterprises. It ends with suggestions that  may help  to further  enhance and sustain the performance of privatized enterprises  if they found to be desirable in Nigeria.  Objectives of the Study 1. To examine the concept, theories, rationale and challenges in privatization and commercialization of   Public Enterprises in Nigeria  2. To determine  whether privatization  and commercialization in Nigeria were  desirable      through the performance of some enterprises that were privatized and commercialized in Nigeria. Review of Related Literature In this  sections, the  study reviews  relevant literature  related to  privatization and commercialization of public enterprise. It specifically reviews the concept, theories, rationale, performance and challenges facing privatization and commercial of public enterprises.