CHAPTER ONE
1. OINTRODUCTION OF THE STUDY
1.1 BACKGROUNG TO THE STUDY
In the
recent years, privatizations of public enterprises have preoccupied policy
analysis in the search for solution to improving the performance of state owned
enterprises (SOES).
Several
developing countries extensive most African countries have embarked upon
extensive privatization programmed within the frame work of micro economic
re-form and liberalization, this revising the earlier strategy using public private enterprises as the
engine of economic development in Nigeria in consonance with the Keynes can
theoretical exposition on large scale involvement of the public sector in
economic development programmed by making extensive use of public enterprises
(PE) for resources mobilization and allocation particularly with the social
services and utilizes sector with the wide fall again from crude oil during the
commodity boom of the 1970’s the economic activities in Nigeria expanded
scientifically beyond the orthodox domakin of social services and utilities
into agricultural banking and finance, manufacturing mining, commerce e.g.
Within
this expansion by the 1980’s an increasing dominant public enterprises sector
accounting for 50% of the gross domestic product (GDP) and 60% of the modern
employment has emerged in Nigeria by this time also the number of public
enterprises sector (P.E.S) as the federal level alone had research about 600
enterprises and some 900 smaller one at the state and the local government
level. The total investment on this P.E. S at the federal level is about
#36.456 billion as the technical committee on privatization of investment
estimated these public utilities produces hard core infrastructures such as electricity,
water, telecommunication e.g. accounting for about 3.4% in 1993. For the
maintenance and sustenance of the economic activities of these public
enterprises.
The
Nigeria government has usually expanded about 40.7% and 30% of its fixed
capital and recurrent expenditure respectively on the (S.A.P) period
incidentally for as long as Nigeria wide fall gains from crude’s oil sale
lasted, nobody complains about the inefficiencies and inadequacy of public
enterprises with their associates financial waste even with the expansion of
economic activities.
The first attempt to move
towards a competitive market system was in 1986 with the introduction of
structural adjustment progammmed and with the privatization decree no25 1988.
The
federal government outlined the objectives of privatization to include
improvement of the efficiency and reliability of the operation of the public
companies reduction of their dependence on the national treasury for operation
promotion of the share ownership by Nigeria citizen in productive investments
which hither to were owned wholly or partially by the federal government and
policy to broken and deepen the Nigeria capital market at the end of the
programmed in
total of 89 companies were privatization.
Those
privatized companies and financial institution include commercial bank, merchant
bank, sea travel, motor assembly, cement hotels and transportation e.g. the
proceed from their exercise amounted to 4.66 billion, various methods were used
to privatized the enterprises for example some of the companies were sold
through public shares using a scheme that sought to ensure equitable spread of
ownership among various social classes an ethnical and regional groups. An
elaborated formula restricted the amount of equity that any industrial; or
regional could purchase and allocated a proportion of shares to all state of
the federation as well as employee.
The
government encouraged small investor to participate in the scheme by allocating
the bulk of the share to people and institution the concept of guided
privatization has been introduced as an approach to the second phrase of the
privatization exercise guided privatization according to the government is a careful
planned and systemically implemented programmed of government with draw all
from the control of business enterprises which can be more effectively and
efficiency ruin by private operation as such corporation. In the year 1998 by
early October that year the bureau for public enterprises invited local and
international investors to take part in about 37 state owned companies stated
for privatization include the Nigeria airways, publishing firms, Nigeria
television communication ltd (NITEL) national electric power authorities (NEPA)
now power holding company (PHCN) the rolling mill news printing paper
manufacturing company and Nigeria television authority (NTA) under the new
programmed the government planned to sell 40% of it equity in the enterprises
to foreign investors through international open tenders, another 20% would go
to Nigeria investors through public share programmed of privatization is the
anticipated improvement in the performance of affected enterprises.
It
also lead to an increase in market competition. However there institutional
constraints that may hinder the realization of fiscal benefit from
privatization it is also has income redistribution effect.
1.2 STATEMENT OF THE PROBLEMS
Despite the huge investment in public
enterprises in
their services do not meet the demands and aspiration of the populace. It is estimated that successful Nigeria
government have invested up to 800 billion naire in government owned
enterprises annual returns on this huge investment have being well below 10%.
These inefficiencies and in many case huge losses are charged against the
public treasury with the dealing revenue and escalating demand for effective
and affordable social service the general public has stepped up his yearning
for state own enterprises to become more efficient.
Furthermore,
state enterprises suffer from fundamental problem of defective capital
structure resulting in heavy dependency or burden on national treasury most
public enterprises are characterized with excessive bureaucratize control and bottlenecks.
Finally, other problem includes mis-management of fund blatant corruption these
short coming take a heavy toll on the national economy.
1.3
THE OBJECTIVES OPF THE STUDY
The main object of this study is to:-
1a. Assert the cost implication and benefit of
privatization programmer of the public enterprises on the economy.
2b. Another objective is to know if through
privatization, financial resources would be mobilized through sale and to
reduce public debts.
3c. Also to examine core investors and procedure
for their identification and impact on the economy.
4d. Lastly, to know if privatization would
attract new investors, particularly, foreign investors including new
technologies and management skill.
1.4
SIGNIFICANCE OF THE STUDY
Privatization policy came
into effect with the advent of democracy, NICON insurance company was therefore
privatized withy the aim of enhancing efficiency and good service delivery to
the general public.
The main significant of
the study is to give full expression 8and details of privatizating insurance
company (NICON in particular). The significant are numerous in number among
which are:-
a bringing insurance services closer to the society with the
extensive network of offices and agents across the country.
b it enhances transparency and enable. The investing public to
participate in the transaction of the company
c The general public and other financial institution would be
able to note that nicon remains the only insurance company in Nigeria today
where the federal government has equity participation, thereby enhancing the
much needed strength and credibility to handle any financial risk.
1.5 SCOPE THE STUDY
The area of the study
will limited to the relevance of private companies to the development of economy
between the periods of 1987 to 2007. the importance of this period is due to
the fact that the factors that influence infrastructural development
characterized the period.
1.6 LIMITATIONS AND CONSTRAINTS
OF THE STUDY
The study will be limited
to the relevance of private companies to the development of economy
as a result of limited resources with respect to cost of researching and
availability of data and time.
Another problem is as a
result of poor response from the staff of the organization some staff will not
give you a full detail about their company for security reasons. Financial
constraint was another problems encountered in terms of cost of transportation
to various point for data collection and keeping appointments.
1.7 PLAN OF THE STUDY
The project work is arranged
in the following order:-
Chapter one comprises the
introduction of the study, background of the study, statement of the problem,
objectives of the study, significance of the study, scope of the study,
limitation and constraints of the study, definition of terms, plan of the
study.
Chapter two reviews
related literature on the topic privatization conception definition issue,
objective of private company, performance of public enterprises since
privatization or private company. achievement of privatization programme.
Chapter three contain
research methodology, research design, nature and source of data, research
instruments employed for data, population and sample size, sampling procedure
employed.
Chapter four contains
data presentation and analysis while chapter five deals with summary of the
findings, recommendation, conclusion references and questionnaire.