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IMPACT OF PRIVATIZATION ON ECONOMIC GROWTH IN NIGERIA (1986 – 2016)

Dept: ECONOMICS File: Word(doc) Chapters: 1-5 Views: 5

Abstract

The focus of this study was on the impact of privatization on the economic growth in Nigeria: 1986-2016 in retrospect. Its aim was to ascertain the relationship between public and private investment 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.

1.1 BACKGROUND OF THE STUDY

Over the past two decades, there is trend towards removing government from the business of doing business. Up till recently, there have been many year of exhaustive deliberations by stakeholders on how to put the Nigeria economy on the path of sustainable growth and development. Right now, a consensus has emerged on the imperative of privatization and commercialization of state owned enterprises (SOEs).

It was important to observed that there was a time when it was considered sound economic policy for government to establish and invest in statutory corporations and state owned companies. However, at recent time, this is not true based on the fact that many of them (Government owned enterprises) were not responsive to the changing requirements of a growing and dynamic economy and do not seem to possess the necessary tools for translating into reality the hope of successful commercial operations.

Thus, SOEs have steadily consumed a large share of public resources without corresponding beneficial results either in terms of physical output supply that match local demands. (Paul, 1985 and Samuel 1999). State enterprises suffers from fundamental problems of defective capital structure, excessive bureaucratic control or intervention, inappropriate technology, gross incompetence and mismanagement blatant corruption and crippling complacency which monopoly engenders.

It is from the foregoing, that Nigeria government resort to an alternative form of reforming the economy through privatization. Privatization is viewed as the only feasible means of saving the almost dead public utilities such as telecommunications, electricity generation distribution, mining and other activities that government fruitlessly engaged itself in. According to Obadan (2000), privatization is an economic policy which in a narrow perspective entails the transfer through the sale of public assets or enterprises to the private sector. It is an instrument of realizing productive and allocative efficiency and higher economic growth. In case of Kayode (1987), privatization is defined as the process by which government equity interest or ownership in business enterprise is transferred in whole or in part to private investors. He restricted privatization to “offer for sale” or share.

From the same source, a broad concept of privatization is given as the general reassignment of property right from the state to the individual contracting out the delivery or public services to the private sector or cut back in state activities to allow greater room for private initiatives. An improved focus on these issues should induce more strategic approach to the problem and generate an accelerated face of a more systemic recovery.

1.2       STATEMENT OF THE PROBLEM

Economic conditions are constantly changing and therefore any observed changes in enterprise performance could be drive by privatization. Therefore economic condition such as GDP, remain a challenge in Nigeria.

Privatization is envisaged to make the Nigerian economy attractive for foreign investors. Given the transparency and technical competence of the privatization programme, the attractiveness of the Nigeria economy for foreign investors could prove irresistible.Rapid expansion of the bureaucracy severely straining the public budget with huge deficit of public enterprises has become massive drain on government resources and poor financial performance of State Owned Enterprises (SOEs), reflecting a history of huge financial losses.

More so, another important factor to note here is the economic inefficiency in the production of goods and services by the public sector with high cost of production. This to a larger extent have a direct bearing with privatization.

Ineffectiveness in the provisions of goods and services such as failure to meet intended objectives serve as one of the challenges faced before the idea of privatization comes to play.

1.3       RESEARCH QUESTIONS

1. Does privatization affect the overall output level in Nigeria?
2. Does privatization affect the level of unemployment in Nigeria?

• Does privatization affect the general performance of firms in Nigeria?

1.4       OBJECTIVES OF THE STUDY

The overriding objectives of this study are to ascertain the impact of privatization on economic growth in Nigeria. The specific objectives are as follows:

1. To determine the various privatization efforts in Nigeria, by examining the antecedent, pattern, volume and status of privatization undertaken so far.
2. To ascertain how price variation in Nigeria affects its privatization programme.
3. To ascertain how privatization affects economic growth (GDP) in Nigeria.

1.5       RESEARCH HYPOTHESIS

HYPOTHESIS I

Ho       There is no significant relationship between privatization and economic growth in Nigeria.

HYPOTHESIS II

Ho       There is no significant relationship between privatization and general performance of firms in Nigeria.

HYPOTHESIS III

Ho       There is no significant relationship between privatization and the level of unemployment in Nigeria.

1.6       SCOPE OF THE STUDY

Firms erstwhile owned or partially owned, managed and controlled by the federal/state government of Nigeria are to be studied and analyzed within the purview of the privatization programme.

The analysis is therefore limited to these samples of organization, though a much more boarder use of other established studies will be employed to reflect general nature of final data analysis and interpretation. This work covers the period 1986-2016.

1.7       SIGNIFICANCE OF THE STUDY

The importance of this work cannot be overemphasized. It will be justified in that when completed it will be beneficial to the following people and organization.

First, it will be useful for future researches especially students of Economics department by serving as a reference material.

Secondly, it will serve as a guide to policy makers, shareholders so as to know the challenges and prospects inherent in privatizing a company.

Finally, to make recommendations based on findings.

1.8       ORGANIZATION AND LIMITATION OF THE STUDY

This research study is organized and arranged in five chapters. Chapter one is the introduction, chapter two is the view of related literature, chapter three discusses on the research methodology, chapter four dwell on the analysis and presentation of data, chapter five is the summary, conclusion and recommendation.

However, the privatization exercise is still in its infancy in Nigeria as such, detailed information on this study is lacking which makes the study difficult to adequately access the outcome of the exercise.

In addition, the researcher does not claim to have identified all parameters used in the privatization exercise. This is as a result of some limitations which includes; time constraints, financial constraints and data constraints.