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PROJECT TOPIC- EFFECTS OF PRIVATIZATION ON NIGERCEM CEMENT COMPANY NKALAGU AND SUGGEST THE POSSIBLE SOLUTION TO THE PROBLEMS

PROJECT TOPIC- EFFECTS OF PRIVATIZATION ON NIGERCEM CEMENT COMPANY NKALAGU AND SUGGEST THE POSSIBLE SOLUTION TO THE PROBLEMS

CHAPTER ONE

INTRODUCTION

HISTORICAL PROCESS OF PRIVATIZATION

A world –wide era of privatization has been picking up momentum in recent decades, making it a fairly new trend in the Area of economic policy. The modern idea of privatization as an economic policy was pursued for the first time by the federal republic of Germany in 1957, when the government eventually sold majority stake of Volkswagen to private investors. Chile introduced privatization programme in 1974. The next big movement in privatization came in the 1980’s with Margaret Thatcher’s privatization of Britain telecommunication and Chirac’s privatization of large bank in France.

Privatization spread to other continents as Japan and Mexico privatized Government owned communication companies.  Another major contribution to the world wide process of privatization has been the fall of the communist regime in Eastern Europe and the former Soviet Union. In recent times, countries like china cube, as well as many developing countries have begun to implement privatization in the hope of stimulating economic growth.

OBJECTIVES OF PRIVATIZATION

It is possible that some of these popular and critical perceptions and assertions about privatization are accurate. There are doubt that mistakes have been made on the past and that promises have not been kept, for instance the incidence of interference from political office holders. However, it may turn out to be a mistake to judge privatization from a limited perspective. The set of objectives privatization programmes are meant to achieve is broad and involved, it has many fundamental components that can act together for the enhancement of microeconomic efficiency.

  1. Increasing productive efficiency
  2. Reducing corruption because interference by politicians will cease.
  3. Improving the financial health of public services with savings from suspended subsides.
  4. Strengthening the role of the private sector in the economy, which will guarantee employment and higher capacity utilization.
  5. Freeing more resources for allocation to other needy areas of governmental activities (for example finances that would have been applied for subsides should now be channeled to the development of rural communities).

BACKGROUND OF THE STUDY

According to International labour organization (2014) privatization is the transfer from the public to the private sector of assets in terms of ownership, management, finance or control. In its narrowest sense it is the sale of public assets to the private sector, but it has been linked to a reduced regulatory role of government, linked to policies of liberalization and deregulation. Privatization in Nigeria was formally introduced by the privatization act of 1988, which later set up the technical committee on privatization (TCPC) chaired by Dr. DR Hamza Zayyad with a mandate to privatize one hundred and deven (III) public companies and commercialize thirty four (34) others.

In 1993, having privatized eighty eight (88) out of the one hundred and eleven (111) companies listed in the decree, the Technical committee on privatization (TCPC) concluded its assignment and submitted a final report. Based on the recommendation of the TCPC, the federal military Government promulgated the Bureau for public. Act of 1993, which repealed the 1988 act and set up the Bureau for public enterprises (BPE) to implement the privatization programme in Nigeria.

In 1999, the federal Government enacted the public company (privatization) act, which created the National council on privatization chaired by the vice president, Alhaji Atiku Abubakar. The Nigercem since commissioning in 1957 did not keep pace with innovating in cement technology whilst other cement companies in Nigeria that are younger than  Nigercem were modernizing their factory and changing to move efficient methods of cement manufacture. Nigerian continued duplicating its old wet system instead of converting to the dry method of cement manufacture.

With sever cash flow problem encountered by Nigericem following the structural adjustment progamme (SAP) of the 1990’s and the resulting Deregulation and devaluation of the naira, coupled with the use of an old cement plant prone to frequent break downs and stoppages in cement production due to power outages and political interference, the company could not import spare parts and consumables needed to maintain continuity in production.

Efforts to secure loans from the African Development Bank to modernize the plant failed because of frequent changes in Board and management as a result of political interference. Nigercem could not guarantee stability in management and Board, given as one of many conditions by the Bank. Equally the company failed to secure a competent technical partner (with equity) specializing in cement technology.

The high turnover of chief executives and management in Nigercem resulted on inconsistencies in company policies, thereby making the implementation of long term plans for Nigercem’s continued survival difficult. Nigercem, therefore as a consequence could not lay the basic infrastructure in terms of operational equipments, raw material exploitation, stocky of production consumables and spares, required to ensure continuity in cement production.

The continuous meddling of the Board in the day today running of the company and the eventually withdrawal of credit facilities to Nigercem resulted in further dividing of the companies fortunes, low cement production and lack of working capital to maintain cement production. The multitude of problems experienced by Nigercem eventually culminated in the ill-fated privatization of the company on October 2002 to Eastern Bulkcem.

The core investor of Nigercem, upon taking over Nigercem conducted two separate staff  Audicts, only to discover that it had been tricked and that Nigercem has a much larger liability than it was made believe and that the financial demands of the company is beyond its capability. Eastern Bulkcem, instead    of reliability Nigercem, decided to dispose of all mobile equipment in the factory and quarry in 2007 and closed down the company’s source of raw material, the limestone quarry in order to fraudulently recoup the money used in Acquiring Nigercem, out of frustration with the Non-performance of Eastern Bulkcem, the core investor, Nigercem was invaded on 31st of July 2008 and security personnel under the payment of Ishielu local Government took over the security of the factory site.

Information has it that the factory has been extensively looted and installed equipments vandalized. The core investor, Eastern Bulkcem was unable to maintain payment of salaries to Nigercem workers and consequently, out of 807 permanent employees, over 35% have died since privatization with most of them out of object poverty. Those of them still living are but mere shadows of their former selves with most of them depending upon charity. Access Bank secured a wounding-up order from a port Harcourt High court for Eastern Bulkcem in December 2011 and the core investor of Nigercem, went into liquidation. Nigercem has one more been reprivatized.

PROJECT TOPIC- EFFECTS OF PRIVATIZATION ON NIGERCEM CEMENT COMPANY NKALAGU AND SUGGEST THE POSSIBLE SOLUTION TO THE PROBLEMS

STATEMENT OF THE PROBLEM

Despite compelling evidence from other developed and developing countries like Nigerian.

Privatization is viable and capable of injecting dynamism into an economy that the government previously exert greater influence on. Few countries in Africa have made appreciable impact in privatizing their state owned company. Although the timing extent, technique and motivations for privatization have varied considerably across countries. There is an unacceptable low level of success in the implementation of privatization programme in Nigeria especially after the privatization of Nigercem cement company Nkalagu which gone moribund since October 2002. The state of the company have necessitated questions which this study is set to unravel.

The existing body of research is yet to provide useful insights in to the peculiar circumstances of Africa and the manner in which they influence the out come of Privatization efforts. The case of Nigeria is even more puzzling, given the high potential for successful privatization. Nigeria stalled privatization programme was resuscitated recently and informed inputs are being sought from various sources to enhance success.

PURPOSE OF THE STUDY

The purpose of this study is to assess the effects of privatization on Nigercem cement company Nkalagu and suggest the possible solution to the problems.

SIGNIFANCANCE OF THE STUDY

This research work will help the Government, companies or factories managers to understand the benefits of privatization programmes. And also it will provide insights into the feasibility, desirability and sustainability of future researchers. The policy recommendations from the study would assist the national council on privatization in correcting the pit falls embedded in the previous endeaviour.

BROAD OBJECTIVE

To determine the effects encounter by Nigercem Cement Company Nkalagu since 2002 of its privatization.

SPECIFIC OBJECTIVES

  1. To know why Nigercem cement company was privatized?
  2. To identify those problem encountered by the companies since its privatization?
  3. To identify strategies that will be adopted in solving the problem encountered by the company since its privatization?
  4. To know how effective those strategies are utilized in solving those problems of the company?

RESEARCH QUESTION

  1. Are their reason why Nigercem cement company was privatized?
  2. Are their problems encountered by the company since its privatization?
  3. Are they strategies adopted in solving the problems encountered by the company since its privatization?
  4. Are these adopted strategies effective in solving those problems of the company?

OPERATIONAL DEFINITION

  1. Business dictionary 8th edition defines liberalization as the removal of or reduction in the trade practices that thwart free flow of goods and services from one nation to another. It includes dismantling of tariff (such as duties, surcharges, and export subsidies) as well as non tariff barriers (such as licensing, regulations, quotas, and arbitrary standards).
  2. Oxford learners dictionary 7th edition define decentralization as the distribution of administrative powers or functions of (a central authority) over a less concentrated area.
  3. Merrian – Webster dictionary 8th Edition define stabilization as to maintain at a given or unfluctuating level or quantity.
  4. Oxford Advance learners dictionary 6th Edition define rationalization. As to ascribe (ones acts, opinions, etc) to causes that superficially seen reasonable and valid but that actually are unrelated to the true, possible unconscious and often less creditable or agreeable causes.
  5. Macmillan dictionary 7th Edition define dynamism as energy and a strong desire to make something happen.
  6. Collins English Dictionary online 7th Edition define moribund as no longer active or effective, close to failure, very sick, close to death.
  7. Cambridge English Dictionary 6th Edition define complacency as a feeling of quiet pleasure or security, often while unaware of some potential danger.
  8. British timerican dictionary 7th Edition define Bureaucratic as a system for controlling or managing a country, company, or organization that is operated by a large number of officials employed to follow rules carefully.
  9. Oxford learners dictionary 6th Edition define Resuscitated as to revive, especially from apparent death or from unconsciousness.
  10. Merriam –Webster dictionary 8th Edition define devaluation as a planned or market forced reduction in the value of a currency’s exchange value or an official reduction in the exchange value of a currency by a lowering of its gold.
  11. Merriam –Webster dictionary 8th Edition define Deregulation as to remove government regulatory controls from an industry company, or a commodity etc.

PROJECT TOPIC- EFFECTS OF PRIVATIZATION ON NIGERCEM CEMENT COMPANY NKALAGU AND SUGGEST THE POSSIBLE SOLUTION TO THE PROBLEMS

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