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PROJECT TOPIC- EFFECT OF PRIVATIZATION ON ECONOMIC GROWTH OF NIGERIA

PROJECT TOPIC- EFFECT OF PRIVATIZATION ON ECONOMIC GROWTH OF NIGERIA

ABSTRACT

This research project investigates the effect of Privatization on economic growth of Nigeria Using recent evidence as a case study, choosing a time frame of 21 years (1980-2000 and employed ordinary least square (OLS). Regression of no significance relationship between privatization and public enterprises. The research project regresses the dependent variable GDP at 84 factor cost against the independent variable of two selected indicators of DPI and FPI.

It was found that privatization affects and influences these two indicators of Economic growth.

This project concludes that privatization plays a very big important role in Nigeria, that is to say, privatization can encourage increase in GDP through the contribution of DPI and FPI in the country.

This research project therefore recommended that government and its agencies should come up with better strategy for ensuring successful adoption of the policy (privatization) in Nigeria.

CHAPTER ONE

INTRODUCTION

  • BACKGROUND OF THE STUDY

Privatization is most commonly defined as the transfer of companies from the public sector to the private sector. It is also the transfer of the change of government owned industries to the private sector, implying that the predominant share in ownership of assets on transfer lies with private shareholders, viewed against the phenomenon of privatization is not a new concept in economic literature.

In most cases, such transfer is done through the stock exchange, so that every citizen is given an opportunity to buy into such companies. After the World War II, Britain embarked on a deliberate policy of nationalization of its basic industries with a view to enhancing efficient planning of the British economy and to guarantees an uninterrupted flow of essential goods and services to the populace. Britain is today in the lend for the privatization of public enterprises.

The wane of privatization has cut across the globe. Countries like USA, Italy, Brazil, Spain, Kenya, Holland and Turkey are in the race for privatization. It has worked successfully in many countries at comparable stage of development with Nigeria. Spain privatized 30 banks and 195 companies between 1972 and 1975 respectively. In March 1987 the Mexican government decided to sell 305 government owned companies to private sector.

Turkey has privatized more than 30 companies with more billed to go. In some countries like Kenya, Ivory coast, Liberia etc. privatization is at advanced stage. The extent to which privatization measures are considered does vary from county to country. The advent of privatization in Nigeria, emanates from the introduction of SAP, which is one of its objective. The introduction of SAP in Nigeria has one important objective which is to enhance efficiency in the allocation of resources both in the public and private sector of the economy.

PROJECT TOPIC- EFFECT OF PRIVATIZATION ON ECONOMIC GROWTH OF NIGERIA

  • STATEMENT OF THE PROBLEM

Having understood the meaning of privatization by Shamsudden (1997) he defined privatization “as shift in activity from the public to private sector”. This was necessitated because of the loopholes in the public sector. Privatization have spring up to reduce the burden on public expenditure by the government. This is as a result of large public enterprises and unwillingly become highly political, with a consequent heavy reliance on government subventions which led to the wide engagement of the government in entrepreneurial function that is understandable, the imperative of the changing circumstances called for a redefinition of the role in the direction of greater selectivity and efficiently in its engagement in such operations.

In comparing the performance of public and private enterprises, there also exists a general understanding that public enterprises, in both developed and developing countries have performed below expectation. It has been argued that excessive political interference and bureaucratic failure are responsible mainly for the inefficiency associated with public sector. The government has created a situation whereby financial indiscipline was rampant on public enterprise.

The position was that since public enterprises acquired their capital either directly from the government budgetary allocations, or from the capital market under government guarantee, they were immune to bankruptcy of public enterprise to pay back the huge capital invested in them. The problems that confronting privatization are numerous; we shall look into some of these problems as listed below:

  • Inefficiency of public enterprises
  • Excess of political intervention
  • Excess reliance in public subventions and grants
  • The unpredictability by the public sector
  • The government perform below expectation to do its traditional functions.
  • The management and under-utilization of capital.
  • Rigid bureaucratic structures and bottlenecks.
  • Lack of transparency and technical competence in the public sector.
  • Corruption and nepotism
  • Lack of adequate funding
  • Lack of competition

All these points mentioned above are the problems of privatization, but invariably this problem affects the study. If all the public enterprises can be handled by the private sector these problems will be eradicated – which will bring efficiency in those enterprises.

  • OBJECTIVE OF THE STUDY

The primary goal of the privatization programme is to make the private sector the leading engine of growth of the Nigeria economy. The government intends to use the privatization programme to reintegrate Nigeria back into the global economy, as a platform to attract foreign private investment in an open, fair and transparent manner.

We shall then look into the main objective of the study.

  • To inject efficiency and effectiveness in our public corporation and make them profit oriented.
  • To give the full effect of privatization.
  • To look at the reasons for the poor performance of public companies.
  • To restructure and rationalize the public sector in order to substantially reduce the dominance of unproductive government investment in the sector.
  • To set the tone for the establishment of proper legal and regulatory framework for the privatization exercise.
  • To improve on the operational efficiency and reliability of our public enterprises.
  • SIGNIFICANCE OF THE STUDY

This study have an intention to reduce unemployment in Nigeria and create efficiency in the public enterprise, through privatization programme. This will lead to economic growth in Nigeria by increasing the GDP per factor cost in the economy. This intention can be achieved through proper assessment and transparency in the private sectors.

Therefore, the study is important because of the following reasons:

  1. To create efficiency in the private sector which will bring about economic growth in Nigeria.
  2. To create an avenue to reduce unemployment in Nigeria.
  3. By unearthing the distortions in the public enterprises and revealing most of their causes, this will help policy makers design appropriate policies that will reduce this know distortions.
  4. To assess how the privatization have helped in bringing efficiency and profitability in the hither to public enterprises, since after being privatized and by extension of economic growth and stability in the economics of the adopting countries
  5. The study will identify some of the contradictions inherent in privatization thereby affording the opportunity to avoiding their consequences. Also, the recommendation will endeavor to reduce the shortcomings that have arise through privatization.
    • SOURCE OF DATA

The data for the study is basically secondary data. The study shall rely more on data from the central bank of Nigeria (CBN) publications, seminars, Articles, News paper, magazines and other related textbooks and also from federal office of statistics (F.O.S).

  • SCOPE AND LIMITATIONS OF THE STUDY

The study will focus on the performance of the internal and external sector of these economics. We shall also limit our scope from the first phase of privatization to the second phase of privatization period. The study shall start with the pre-privatization period.

This study might be constrained with the problem of data collection. Most institutions lack necessary data for analysis. Tim constraint and financial limitation also hinders one from carrying out a comprehensive study.

However, the aforementioned problems was not allowed to adversely effects the quality of the study. This study contains relevant and sufficient information for anyone interested to make a research and reference in privatization as an instrument for effective economic growth.

PROJECT TOPIC- EFFECT OF PRIVATIZATION ON ECONOMIC GROWTH OF NIGERIA

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