Effect of Privatization of Government Owned Industries in Developing Economy (Nigeria)

Abstract

The study was on the effect of privatization on the economic growth and development of Nigeria: 1979-2007 in retrospect. Its aim was to ascertain the relationship between public and private sector spending and Gross Domestic Product (GDP). Ex-post facto research design was adopted for this study. Data gathered were analyzed and tested using the ordinary least square multiple regression statistical model. The results of the test showed that the combination of private and public sector capital spending significantly impacted on the GDP. It was also discovered that there existed a strong and positive relationship between GDP and public sector capital spending. The study consequently recommended that foreign investors should be encouraged to participate in the investment opportunities created by the privatization programme and should be allowed one hundred percent equity share holding in companies established in Nigeria.

CHAPTER ONE1.0 INTRODUCTION

Today, we are witnesses to sweeping changes that privatization are taking place in the economies of both developed and developing countries. These changes relate to efforts to move away from government ownership, control or participation in the economy towards free enterprise and increased operation of market forces. On the whole, the changes are making for the reduction in the role of government in the economy with a corresponding expansion in private sector ownership control and participation.

Despite the privatization measures in form of economic policies consisting of several incentives to promote industrial, agricultural, and other activities, the Nigerian economy for example still exhibits very prominent features of underdevelopment and such features includes poor managerial skill, heavy reliance on a single commodity oil, which has failed to provide the much needed capital in huge sums as expected for the conscious implementation of a single strategy of development.

RELATED PROJECT  HINDRANCE TO THE EFFECTIVE PERFORMANCE OF SECRETARIES IN THE LABOUR FORCE

1.1 BACKGROUND OF THE STUDY

Privatization of SOEs could be seen as a veritable mechanism through which private sector investment is encouraged. Individuals as well as corporate organizations would be aware of existing investment opportunities and may wish to diversify their assets. The study may
stimulate and expand the activities of capital market through information dissemination on potential good securities to be offered for subscription. Besides, the study could act as a stimulus to small income earners to pool their resources together in a unit trust scheme and
invest in the capital market, in order to reap huge benefits accrued to big investors. In order to realize the above objectives, the following null hypotheses were formulated to direct the study.
i. There is no significant relationship between public sector capital spending and gross domestic product of Nigeria.
ii. There is no significant relationship between private sector capital spending and

PRIVATIZATION AND ECONOMIC GROWTH IN NIGERIA

Many countries of the world have embarked on privatization programmes at different times. Chile introduced it in 1974. The United Kingdom implemented a rigorous privatization programmes during the regime of Margaret Thatcher in the 1980s (Iheme, 1997). The decision for Britain to embark on privatization programme was largely informed by the need to cut back on public spending rather than the need to promote efficiency and competition. Countries like Russia, Romania, Czechoslovakia among others witnessed the implementation of privatization in the 1990s. Privatization in Nigeria was introduced by the privatization and commercialization Decree of 1988 as part of the structural Adjustment
Programme (SAP) of the Babangida regime (1985-1993). The vision of a “global market civilization” has been reinforced by the policies of the major institutions of global economic government named up to the mid 1990s. Underlying the SAP, has been a new-liberal development strategy referred to as the washing on consensus which prioritizes the opening up of national economics to global market forces and the requirement for limited government intervention in the management of the economy (Ayodele, 2002).
One of the main objectives of SAP was therefore to pursue deregulation and privatization leading to removal of subsidies reduction in the wage bills and the retrenchment of the public sector ostensible to trim the State down to size (Egwu, 1998). The privatization and commercialization decree of 1988 set up the Technical Committee on Privatization and Commercialization (TCPC) under the chairmanship of Dr. Hamza Zayyad. He was mandated to privatize three public enterprises and commercialize 34 others, in 1993, the TCPC concluded its assignment and submitted a final report privatizing 88 out of the three enterprises listed in the Decree. Based on the recommendation of the TCPC, the Federal Military Government promulgated the Bureau for public enterprises Act of 1993 which repealed the 1988 Act and set up the Bureau of public enterprises (BPE) to implement the privatization programme in Nigeria. In 1999, the Federal government enacted the public

 

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