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Keywords:EFFECT OF PRIVITAZATION OF PUBLIC OWNED COMPANIES ON NIGERIA (A CASE STUDY OF PHCN)
The major purpose of this study is to ascertain the effect of privatization of public owned companies on Nigeria, using Power Holding Company of Nigeria, Ikeja Branch as a case study. The reason behind using the Power Holding Company of Nigeria is because it is one of the public enterprises that its product has the widest consumption. The population of the study consisted of 200 workers in PHCN Ikeja, Lagos State. The sample size was determined using YaroYameneformular. The sample of 133 out of 200 was drawn using simple random sampling. Seven research questions were formulated which guide the study. A structured questionnaire was developed and validated for use. Table and percentage were used to answer the research questions. The major findings of the study were: (1) there is general discontent by the public about PHCN’s service (2) there was serious fluctuating power supply from late 1992 to date and (3) Political instability has contributed to the problems of PHCN.
TABLE OF CONTENTS
1.1 Background of the study
1.2 Statement of the problem
1.3 Purpose of the study
1.4 Significance of the study
1.5 Scope of study
1.6 Research questions
1.7 Limitation of the study
1.8 Historical analysis of the organisation under review (PHCN)
1.9 Definition of concepts
2.0 Literature review
2.1 Review of related literature
2.2 Theoretical framework
2.2.1 The concept of privatization and commercialization
2.2.2 Effect of privatization and commercialization
2.2.3 Privatization and commercialization in other countries
2.2.4 Privatization and commercialization in Nigeria
2.2.5 Objectives of privatization and commercialization programmes
2.2.6 Problems of privatization
2.2.7 Necessary conditions for the success of privatization
2.2.8 Limitation of privatization and commercialization
2.2.9 Effect of sap on electricity supply problems
2.2.10 Electricity generation and transmission capacities
2.2.11 Distribution, sales and revenue collection in a commercialized PHCN
2.2.12 PHCN relationship with its customers
3.1 Research methodology
3.2 Source of data
3.2.1 Primary source of data
3.2.2. Secondary source of data
3.3 Location of the study
3.4 Population of the study
3.5 Sample technique
3.5.1 Sample size determination
3.5.2 Sampling size distribution
3.7 Reliability of the instrument
3.9 Data collection
3.10 Instrument return rate
Presentation, analysis and interpretation of data
4.1 Analysis of data
5.0 Summary of findings, Conclusion, Recommendation and Suggestions for further study
5.1 Summary of the findings
5.4 Limitations of the study
5.5 Suggestions for further research
1.1 BACKGROUND OF THE STUDY
Today, we are witnesses to sweeping changes that 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 (Abba, 2008).
The import substitution policy of the post-independence Nigeria led to the establishment of industries. Apart from this prime motivation for import substitution, there was the need to create jobs for the growing educated youths, the need of industrialization and the ideological argument that the government should control, regulate and supervise the commanding heights of the then nascent economy (Obasanjo, 1999).
Furthermore, there was the need to strive to catch up with the developed countries of the world and since the indigenous businessmen and managers were neither technically nor financially ready to assume the catalyst role which their counterparts in the developed countries were playing; government felt obliged to fill the investment gap (Obi, 2005).
The obvious imperfections in the market oriented economics in terms of resources allocation to the more profitable but less preferred sectors of the economy was yet another reason for government intervention in the economy.
The sum total of these is that between 1960 and 1980 the various governments in Nigeria both at federal and state levels established numerous industries. The core characteristics of most of these industries were inefficiency in the utilization of resources and their consequent dependence on the public treasury for subvention (Ukwu, 1982). Therefore, these adverse operating conditions could not make for rational economic decisions. Consequently, these enterprises and their management lost their mission and became pipes for wastages, agencies for political patronage and generally parasites on the national and state treasuries. However, by the late 80’s, the glut in the world oil market set in and it suddenly devoured on policy makers that the revenue from oil was significantly below the requirement for the sustenance of these money-guzzling ventures. There then arose the need for reprioritization of economic policies and the need to release the energy in economy suppressed by bureaucracy and undue control (Adeyemo, 2003).
Despite the numerous 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.
Public business enterprises creates a solution in which national funds that would have been better spent to guarantee new economic activity and employment opportunities for the army of unemployed is being used to subsidize deadwood that would neither grow nor change. Public enterprises are enterprises that are controlled by the state, they are non-profit oriented enterprises (Adeyemo, 2003).
The participation of the states in enterprises in Nigeria dated back to the colonial era. The task of providing infrastructural facilities such as railway, road, bridges, water, electricity and port facilities fell on the colonial government due to the absence of indigenous companies with the required capital as well as the inability or unwillingness of foreign trading companies to embark on this capital intensive projects.
This involvement was expanded and consolidated by the colonial welfare development plan (1946 – 1956) that was formulated when the labour party came to power in the United Kingdom. This trend continued after independence such that by 1999, it was estimated that successful Nigerian governments has invested up to 800 billion naira in public owned companies.
The privatization and commercialization net of the 1988 and the Bureau of Public Enterprises Net of 1995 defined privatization as the relinquishment of part or all of the equity and other interests held by the federal government or any of its agencies in enterprises whether wholly or partly owned by the federal government (Abba, 2008).
Although the public enterprises have been subjected to criticisms, one to poor management and inefficient utilization of resource and mostly regarded to a dead wood that will neither grow nor change, it was these construct criticism levied against them that led to the idea of privatization and commercialization in which the exercise would enhance efficiency in the economy, rid firms of the crude and undue governmental interference which have been the bane of most public enterprise in Nigeria and other developing countries and also limit the drain by the public enterprise on government resources but the basic objective of the exercise is to enhance efficiency and profitability in the government owned industries.
1.2 STATEMENT OF THE PROBLEM
Privatization takes an existing government services, and replaces it with a private service. But over the years in Nigeria for instance the sheer waste and inefficiency of government owned industries became glaring from the early 1980s in with the onset of economic crisis, by then, public companies had become heavily dependent on the national treasury for the financial operation and their activities were characterized by mismanagement of the funds and operations, corruption, misuse of monopoly power and bureaucratic suffocation from supervising ministries, Obadan (2000; Olukeshi; 1993:16)
However, as noted by some writers, the actual performances of many of the public enterprises have left much to be discussed. Many of them were not responsive to the changing environment of the growing and dynamic economy and they did not possess the necessary tools for translating into reality the hopes of successful commercial operations. It was obvious that the commission’s report of cost effectiveness and insufficient attention to financial records by parastatals. If recommended an increased role of the private sector especially in non-sensitive or non-security related parastatals Olukeshi (1993:1).
Inefficient management and corruption have bedeviled the Power Holding Company of Nigeria since its inception. This is most evident in its power generation, transmission, and distribution as well as in the appointment of board members. This inefficiency has subsequently led to inadequate supply of electricity to consumers.
There is also lack of dedication to duty on the part of the staff and management of the corporation. This mostly accounts for the poor financial returns it derives from its services. The staffs are rough in using the company’s equipment and tools in providing electricity to consumers at the expense of the authority. There were complaints of corruption in power distribution whereby the management seeks qualification first before approving of extension of electricity to consumers. This often robs the authority of huge revenue they would had should electricity is distributed without any form of restriction(s).
PHCN ever since its inception in 2005 from former NEPA has undergone and is still undergoing stringent statutory and administrative control, which hinders the management from using their initiatives when necessary.
1.3 PURPOSE OF THE STUDY
- To find out if privatization of government owned companies improved the efficiency of service delivery on developing economy.
- To know the reason why government embark on privatization of their own companies in developing economy.
- To identify the problems militating against privatization of governmental owned companies on developing economy.
- To determine whether privatization help to solve the problems of government owned companies on developing economy.
- To find out the effect of privatization of government owned companies in developing economy.
- To investigate and ascertain if privatization of government owned companies was in line with the objectives of the government on privatization and commercialization.
- To ascertain an easy mode of operation in government owned companies towards ensuring self-sustenance and justification of investment.
- To find out effective methods that would enhance the service rendered by government owned companies to customers.
1.4 SIGNIFICANCE OF THE STUDY
Very little is known about the privatization programme of Federal government of Nigeria. Consequently, many people are yet to appreciate the reason and objectives of the programmes. This research is significant in the following ways:
- It will provide a guide on how the authority can improve its service to the consumers.
- It will highlight means to improve customer relationship.
- The study will also suggest ways by which the staff can be positively motivated in order to increase their productivity.
- This study will recommend better method for recruiting the management staff that will be more dedicated to the service of the corporation.
1.5 SCOPE OF STUDY
The scope of this research is limited to Lagos state. Focus is also on PHCN formally owned by the federal government. This company is expected to make profit while charging competitive prices.
The scope of this study is also limited to the activities concerned with privatization of public enterprises in Nigeria and other developing economies which was facilitated as a result of the failure and inefficiency surrounding its (PHCN) activities and program to the public.
No attempt was made to look into the effect of privatization on other corporations and organizations.
- RESEARCH QUESTIONS
This study sought answers to the following research questions.
- Why did the Nigerian government embark on privatization of PHCN?
- Does PHCN privatization have direct impact on the economy?
- Is PHCN privatization in line with Federal government policy (TCPC)?
- What are the problems militating against government owned companies in developing economy?
- Do government interference affects the effective functioning of PHCN?
- Is it possible for the enterprise to operate effectively without federal government subvention?
- Has the output of PHCN improved since the privatization?
1.7 LIMITATION OF THE STUDY
The research work is limited by the time span within which the researcher is required to complete this work. Finance was another constraint to the study. The financial problem, make the researcher not to travel far to get all necessary data for the work. Limited material was another constraint to the completion of the work.
Another limitation problem of the study was the attitude of respondents. Some of the respondents were reluctant to disclose information to the researcher which would have led to more accurate assessment of the situation. The cost of newspapers, (journals, magazines and national dailies also caused problems to the researcher.
Keywords: EFFECT OF PRIVITAZATION OF PUBLIC OWNED COMPANIES ON NIGERIA (A CASE STUDY OF PHCN)
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