1

OKAFOR MARIAM CHIKA

PG / MBA/00/31814

THE EFFECT OF COMMERCIALIZATION AND PRIVATIZATION

OF GOVERNMENT OWNED COMPANILES: A STUDY OF NEPA AND NITEL.

Management

A PROJECT SUBMITED TO THE DEPARTMENT OF

MANAGEMENT. FACULTY OF BUSINESS ADMINISTRATION,

UNIVERSITY OF NIGERIA ENUGU CAMPUS.

Webmaster

2002

UNIVERSITY OF NIGERIA

2

THE EFFECT OF COMMERCIALIZATION AND PRIVATIZATION

OF GOVERNMENT OWNED COMPANILES: A STUDY OF NEPA

AND NITEL.

BY

OKAFOR MARIAM CHIKA

PG / MBA/00/31814

A PROJECT SUBMITED TO THE DEPARTMENT OF

MANAGEMENT. FACULTY OF BUSINESS ADMINISTRATION,

UNIVERSITY OF NIGERIA ENUGU CAMPUS.

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE

AWARD OF MASTERS IN BUSINESS ADMINSTRATION

DEGREE IN MANAGEMENT.

AUGUST, 2002

3

CERTIFICATION

This is to approve that OKAFOR MARIAM CHIKA, a postgraduate in

the department of management with Registration Number

PG/MBA/00/31814 has satisfactorily completed the requirements for the

written course work and project for the award of masters of Business

Administration (MBA) in Management.

This project report is original and has not been submitted in part of

full for any other bachelor or postgraduate degree of this or any other

university.

_________________________

Mariam Chika Okafor

Student

_________________ ________________

Mr Chukwu C.O Mr Chukwu C.O

Head of Department Supervisor

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DEDICATION

To him that holds my family,

The Almighty

and most especially my Mr.

Right.

ACKNOWLEDGEMENT

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Every worthy endeavor carries with it the "investment" prices tag. For time

and effort invested in helping see this work to completion, I extend my

profound gratitude to my Supervisor Mr. C.O. Chukwu

My fondest appreciation goes to my Finance, Mr. Udeze Collins Ikechkwu

whose cooperation and financial support contributed immensely to the

success of this study.

I sincerely wish to express my profound gratitude to my parents Mr. and Mrs.

J. C. Okafor for their advise, prayers and support during the course of this

project.

I am also very grateful to my wonderful sibling, Chiemeka and my sister in-

law Doris Udeze and to all my friends.

Above all, my dearest appreciation and gratitude goes to God Almighty for a

healthy life throughout this academic session.

Okafor, Mariam Chika.

TABLE OF CONTENTS

Pages

6

TITLE PAGE i

CERTIFICATION ii

DEDICATION iii

ACKNOWLEDGEMENT iv

CHAPTER ONE

1.0 GENERAE INTRODUCTION 1

1.1 STATEMENT OF THE PROBLEM 2

1.2 OBJECTIVE OF THE STUDY 3

1.3 RESEARCH HYPOTHESIS 4

1.4 SIGNIFICANCE OF THE STUDY 5

1.5 SCOPE AND LIMITATIONS OF THE STUDY 6

1.6 HISTORICAL BACKGROUND OF CASE STUDIES 7

NEPA

NITEL

REFERENCES 16

CHAPTER TWO

2.0 LITERATURE REVIEW 17

2.1 PRIVATIZATION/COMMERCIALIZATION ... A GENERAL OVERVIEW 17

2.2 PRIVATIZATION/COMMERCIALIZATION PROGRAMME IN NIGERIA. 22

23 OBJECTIVES OF PRIVATIZATION/COMMERCIALIZATION -

PROGRAMMES IN NIGERIA. 28

2.4 IMPLEMENTATION ARRANGEMENT FOR THE PRIVATIZATION/

COMMERCIALIZATION PROGRAMMES. 33

7

2.5 IMPACT AND FUTURE PROSPECTS OF THE PRIVATIZATION/

COMMERCIALIZATION PROGRAMMES IN NIGERIA 37

2.6 APPRAISAL OF THE TECHNICAL COMMITTEE OF PRIVATIZATION

/COMMERCIALISA4TION SINCE INCEPTION 42

REFERENCES 47

CHAPTER THREE

3.0 RESEARCH METHOD AND DESIGN 51

3.1 INTRODUCTION 51

3.2 RESEARCH METHOD AND DESIGN 51

3.3 SOURCES OF DATA 52

3.4 POPULATION AND SAMPLE SIZE DETERMINATION. 53

REFERENCES 56

CHAPTER FOUR

4.0 PRESENTATION AND ANALYSIS OF DATA 57

4.1 PRESENTATION OF DATA 57

4.2 HYPOTHESIS TESTING AND DATA ANALYSIS 69

CHAPTER FIVE

5.0 FINDINGS, RECOMMENDATION AND CONCLUSION 81

5.1 SUMMARY OF FINDINGS 81

5.2 RECOMMENDATIONS 82

5.3 CONCLUSION 85

REFERENCES 86

BIBLIOGRAPHY 87

APPENDIX 102

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CHAPTER ONE

1.0 GENERAL INTRODUCTION

All over the world, the public service as a matter of experience has not been

known for their capacity to create wealth. Consequently, public enterprises have

usually been perceived as drain pipes, thus creating budgetary strains and

avoidable burden on the economy. It became a national policy imperative therefore

to disengage the public sector from those areas where the private sector has the

comparable advantage to perform, while letting the State concern itself with the

provision of infrastructure, security and the enabling environment for business to

thrive through enhanced wealth creation.

It is important to observe that for many developing countries like Nigeria, it

was perhaps unavoidable for the government, in an earlier epoch, to promote the

initial investments in the early phase of national development when the private

sector was almost non-existent. Unfortunately, the government got herself so

involved in business that could best be tackled by the private sector, that

government could no longer perform her traditional functions: the provision of

infrastructure and security through the maintenance of law and order as well as

the promotion of an enabling and conducive environment for investments and

wealth creation. (Any a, O. A., 2000 p4)

1). The import of this economic step is anchored on "the belief that entrepreneurs

can manage the industries and can operate services more efficiently and at a lower

cost than the public enterprise. (Onodugo,V.A. 1995 P3).

The introduction of privatization and commercialization fourteen (14) years ago

has provoked a lot of public attention and discussion. However, it is clear that as

opposed to the 1980s when there were two strong schools of thought on

privatization - one for and another against, dissenting voices are much fewer these

days. This perhaps, may be an indication of the widespread acknowledgement and

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acceptance that the merits of privatization and commercialization far outweigh its

demerits.

It is therefore the purpose of this study to critically analyze this government policy

of privatization and commercialization, with a view to finding out whether it has

the economic remedy, for which it is meant. In doing this, the researcher will carry

out investigation using two government parastatals namely - The Nigerian

Telecommunication Limited (NITEL) and National Electric Power Authority

(NEPA), both of which have been commercialized.

1.1 STATEMENT OF THE PROBLEM

The economic depression of the late 1930's with it's deep and severe

consequences coupled with the revolution in the Union of Soviet Socialist

Republic (USSR) led to a situation where governments, that hitherto had no

business in running enterprises, dabbled into business. This became possible when

private sector enterprise, especially in Western Europe collapsed due to the

recession.

Nigeria, like many African countries on attaining independence, embarked

on establishment of public enterprises. The oil boom of the 70's further accelerated

the growth of the public enterprises. Government presence was felt in virtually

every aspect of our economy such that "it became the largest producer, the largest

consumer, the biggest employer, the biggest owner of property, the biggest

investor, the biggest insurer and the biggest debtor' (Ubaigboma 1995 P. 8).

However, by the 1980s, it was clear that a nightmarish mistake has been

done indicated by the common features of the public enterprises, which are huge

annual losses, gross inefficiencies, low returns, mismanagement etc. All these

necessitated a move towards competitive market system by the use of economic

tools of domestic Deregulation, Privatization and Commercialization (Iromantu,

10

1999).

Privatization has become a major element of economic reform and an important

instrument for advancing the global competitiveness of nations. It is therefore, the

problem of this study succinctly examine and analyze the extent to which the

objectives of the privatization and commercialization programmes have been

achieved with special reference to the Nigeria Telecommunication Limited

(NITEL) and the Nigeria Electric Power Authority (NEPA).

The above problem brings to the fore the following sub-problems: -

1. What effect will the privatization and commercialization of public

enterprises have on the economy of Nigeria?

2. Whether the privatization and commercialization programmes has improved

management efficiency?

3. Whether the parastatals have achieved the much-needed economic

objectives for which it was set out to pursue?

4. Are the structures put in place for the proper implementation of the

privatization and commercialization programme adequate?

5. What do the general public stand to benefit from the privatization and

commercialization programme?

1.2 OBJECTIVE OF THE STUDY:

This Study is essentially a critical evaluation of the privatization and

commercialization exercise in Nigeria with a view to identifying the problems

associated with the implementation of the programmes and therefore come up with

solutions to them as related to NITEL and NEPA. Based on these and following

the problem statement above, it is therefore the specific objective of this research

work:

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1. To identify any organizational structure of NITEL and NEPA that is

interfering with the effective realization of the objectives of the privatization and

commercialization programmes.

2. To examine the incessant interference of government and their agencies on

these parastatals and establishing whether it contributes to their inefficiency.

3. To ascertain the public assessment of the economic policy, using their

perception of the services rendered by NITEL and NEPA.

4. To examine the reasons these public enterprises suffer from lack of purpose,

role conflict and misplaced objectives.

5. To determine the extent to which the privatization and commercialization

programme have had a positive impact on the operations of NITEL and

NEPA.

1.3 RESEARCH HYPOTHESIS:

For the purpose of achieving a reasonable degree of accuracy and relevance in this

research work, the following hypothesis have been posited and tested.

1. That NITEL and NEPA have not attained higher productivity levels since

implementation of privatization and commercialization.

2. That there has been no improvement in economic growth as indicated by

increases in government income, per capita income and GDP since the

implementation of the programme.

3. That there has not been marked improvement in the management

efficiencies of NITEL and NEPA since privatization and commercialization.

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4. That the services rendered by NITEL and NEPA have not improved

reasonably since the privatization and commercialization programme was

implemented.

1.4 SIGNIFICANCE OF THE STUDY

The services sector has enlarged to become a dynamic sector whose importance

has continued to rise in most economies in the late 1980s and the 1990s. The sector

currently represents over 60% of GNP in most of the developed economies. There

is no doubt that these public enterprises are growing in importance over the years.

In Nigeria, the number of public enterprises has increased tremendously and now

occupies a central position on the economy and has therefore become major

instrument of development (Project Work).

These have necessitated increasing investments in these enterprises by the

government but inspite of these investments, the returns have been extremely poor.

The public sector has thus gained the reputation of constituting sources of waste,

and being inefficient coupled with bad attitude to work, undue interference,

corruption and low morale.

It is therefore the objective of this study to determine the root cause of these

problems and to proffer probable solutions or directions to follow. In the view of

this, it is therefore hoped that the study of the effect of the privatization and

commercialization programmes in two parastatals NITEL and NEPA both in

Enugu, will help the management and indeed the government in the formulation of

effective policies to enable them continue the implementation of these

programmes.

It is also hoped that workers, the society and especially scholars who might wish to

conduct further research on the subject matter in the future will find it very

reliable.

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1.5 SCOPE AND LIMITATIONS OF THE STUDY:

This Study is aimed at investigating the government's economic policy of

Privatization and Commercialization with a view to determining the extent to

which the set objectives have been attained in these establishments - The Nigeria

Telecommunications Limited and the National Electric Authority both in Enugu.

Whenever a research of this nature is being conducted, there is bound to be

some constraints militating against the study.

A major area of limitation was the attitude of respondents most of which

were non-cooperative, nonchalant, illiterate and ignorant about the subject of study

and this heavily hindered the completion of the questionnaires.

Another major area of limitation was the unavailability of secondary sources

of data considering the fact that both parastatals are yet to be privatized.. This

constituted a major set back as there was basically nothing on which judgments

and inferences could be based on.

Finally, this study was also constrained in terms of time, money and logistics

and of which none came cheap.

1.6 HISTORICAL BACKGROUND OF CASE STUDY:

THE NIGERIAN TELECOMMUNICATION LIMITED (NITEL), ENUGU

The Nigerian Telecommunication Limited (NITEL) started as a postal branch of

the British Post Office in 1851 and in 1885 an internal telecommunications arm

with better system of telecommunications was established to serve the interest of

the colonial masters. In 1966, the Postal and Telecommunications (P&T) a quasi-

commercial department of the Ministry of Communications was formed and

backed by Decree 22 of the miscellaneous provisions. In 1985, the Nigeria

Telecommunications limited was formed.

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The external telecommunications concerned with the provision of direct

telegraph services between Nigeria and London, made possible hi 1886 by the

African District Telegraph (ADT) and the Cable and Wireless Company of

London. In 1997, the Federal Government acquired 51% equity ownership of the

Cable and Wireless Company and changed its name to Nigerian External

Telecommunications (NET) Limited. By 1972, the government acquired the

remaining 49% and made it a Federal Government wholly owned company which

was to provide external telecommunications services.

In 1984, P&T and NET were merged and incorporated as a Limited Liability

Company under the companies Decree of 1968.

This merger saw the birth of the Nigerian Telecommunications Limited (NITEL),

which officially kicked off on 1st January 1985. On 22

nd May 1992, there was a

contract agreement between the Federal Government, NITEL and the Technical

Committee on Privatization and Commercialization (TCPC), now known as the

Bureau of Public Enterprises (BPE). This agreement marked the beginning of the

era of Privatization and Commercialization of NITEL, which will now become

NITEL Plc.

On incorporation, the company had an authorized share capital of N

4,000,000 shares of N 1.00 each with N 2,000.000 fully paid up by Government.

This was reviewed in 1992 when the company was re-registered as a Public

Limited Company with an authorized share capital of N 5.5 billion all of which

was fully paid. In almost a century of providing telecommunications services,

Nigeria could boast only of 250,000 lines most of which were of the analogue

technology. The transmission link was also mainly of the analogue system while

the two gateways located at Oyo State and Kaduna State were aging and going out

of fashion.

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NITEL was also characterized with other problems such as undue

interference from the government, labor turnover, management inefficiency,

fraudulent practices by some staff, abandoned projects, uneconomic investment

decisions, low returns, inadequate network capacity, low tariff structure and

delayed dial tone. To overcome these problems and more, long term development

strategies were mapped out during the formative years, but these strategies hardly

saw the light of day because of the limited power of NITEL, as they relate to

decision making and policy implementation.

To overcome these, the Government decided to embark on

commercialization of the company, which took off in May 1992. This action

granted NITEL autonomy especially as regards business oriented and customer

oriented decisions. This enabled it embark on network expansion and to adequately

maintain existing facilities and modernize others. The effect of these developments

resulted in the provision of digital facilities in Abuja (20,000 lines), Lagos (45,000

lines), Kaduna (10, 000 lines), Enugu (30, 000 lines) and Ibadan (25, 000 lines).

NITEL also extended its services to the rural areas with the installation of

digital exchanges using the colophony technology. On the part of International

Connectivity, NITEL established dual antenna (digital) satellite earth stations in

Lagos and Enugu and a third to be finished in Kaduna. In addition to the

conventional services of telephone, telex and fax, NITEL also introduced value-

added services like Mobile Cellular Phone System, Voice mail, Paging Services

and Internet services.

FUTURE

NITEL has set itself challenging targets for the future in its effort to improve on its

services to the masses.

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These include:

i) To have a revision from the present 90% dependence on telephone to 70%

telephony and 30% data services.

ii) To extend the cellular mobile telephone services which at present covers

Enugu, Lagos and Abuja to the entire country.

iii) To include value-added services like fax and data packet switching into the

cellular network.

To achieve these and more, NITEL has a set of corporate objectives that are

guiding them and they include: -

a) To ensure the development of telecommunications technology as an

infrastructure facility for the economic development of the country.

b) To improve the efficiency and availability of telecommunications

services.

c) To carry on for profit, the business of internal and external or overseas

telecommunications common carriers and to that end, to conduct

telecommunications services of all kinds within Nigeria and to such points

outside Nigeria as the company shall see fit and to this end, to administer

plan, provide and operate all kinds of telecommunications services to all

parts of the Federation and beyond including ship to shore in an efficient,

co-ordinate, economical and profitable manner.

d) To generate, borrow or raise money for the purpose of the company's

business by the sale of services, issue of debenture, debenture stock

(perpetual or terminable), bonds, mortgages or any other securities founded

or based upon all or any of the property and rights of the company or

without any such security, and upon such terms as the company shall think

fit. (Omeata, E. C., 1995).

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CORPORATE MISSION

The corporate mission of NITEL is to maintain leadership position by

Continuously improving services to meet customer's needs and expectations,

thereby enhancing national development and adequate returns to Stakeholders.

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19

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HISTORICAL BACKGROUND OF NEPA

The 1st Power station of NEPA was built in 1896 under the then government of

Southern Nigeria, with preliminary investigation and planning carried out by the

Public works Department (P.W.D). It operated from 6pm - 11pm daily with a

maximum power demanded of 24 kilowatts.

However, with the increasing demand, the generating capacity of power stations

was increased to 324 kilowatts in 1916. In 1926, some initiatives were taken by

then Government, to improve electricity supply, some of them:

- The construction of additional power stations in Port Harcourt, Kaduna,

Enugu, Maiduguri etc.

- The establishment of a metre section to deal with the interning of various

consumers.

- The Introduction of the two part tariff system that replaced the flat rate being

changed previously etc.

By 1946 however, the rate of expansion of electricity had gone beyond the scope

of the Public Works Department, hence a separate establishment known as the

Nigeria Government Electricity Undertaking (NGEU) was established by the

Government to take over the electricity dept of PWD in 1950, in order to integrate

power development and make it effective, the Government passed the Electricity

Cooperation of Nigeria Ordinance No 15. This NGEU formed the platform on

which the incorporation of the Electricity by Corporation of Nigeria (ECN) was

conceived and carried out on July 6, 1950. The ECN then took over the

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Undertakings previously done by the NGEU and thus became the statutory body

responsible for generating, transmitting, distributing and selling of electricity to all

consumers nationwide.

But because of the large landmass of the Country coupled with lack of

communication equipment, the ECN decided to split itself into regional

Organization and these region were even late split into 3 districts each in order to

achieve close relationship and more efficient and effective organization. However,

when the power demand growth of the nation could no longer be met by the use of

stream and diesel generating plants, it was ECN that suggested to the government

that the power potentials of River Niger be exploited.

Specifically, it recommended that he Niger be dammed at a suitable position

near Jebba and then, the hydro power be developed and transmitted to all the load

centers in the Country. The establishment of the Kainji-Dam and the Power

Stations was seen as a major breakthrough of the ECN and subsequently in 1962 a

separate government establishment known as the Niger Dams Authority (NDA)

was established to manage this and other Dams. In a bid to avoid duplicity of

functions by the NDA and the ECN, the then Federal Military Government decided

to merge their activities. During a budget speech in March 1972, the then Military

Head of States Maj. Yakubu Gowon (Rtd) declared that in the interest of affording

the nation a well co-ordinate system of electricity generation and supply, the NDA

and the ECN are now merged into a new establishment to be known as the

National Electric Power Authority (NEPA). Thus by decree No. 24 of 1972, NEPA

were established.

By virtue of that Decree, NEPA was mandated to maintain an efficient

coordinated and economic system of electricity supply for all parts of the

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federation". Under a "partially commercial" status, NEPA operation now cover

broadly four major sectors, namely:

- Generation and Transmission

- Distribution and Sales

- Finance and Administration and

- Managing Director's office

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24

REFERENCES

Anya O.A. (2000) Privatization in Nigeria. A paper

presented at the Nigerian Economic

Summit at the Netherlands Congress

Centre (NCC). p.2.

Onudugo,.V.A. (1995). Effects of the Commercialization of

NITEL. A Project work submitted to

the Department of Management.

University of Nigeria, Enugu

Campus, P. 3.

Iromantu, 0. C. (1999). Planning and phasing the

Privatization of public Enterprises in

Nigeria. Bullion. Vol. 23,No3.p.10.

ObeIle,D.U. (1995). Privatization and Commercialization

of Public Owned Companies. A

Project work submitted to the

Department of Management.

University of Nigeria, Enugu

Campus. P.5.

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CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 PRIVATIZATION/COMMERCIALIZATION PROGRAMME: A

GENERAL OVERVIEW

Privatization is part of a process of structural adjustment. It involves redefining the

role of the state by disengaging the state from those activities, which are best done

by the private sector with the overall objective of achieving economic efficiency. It

is first and foremost a political process although it has to be carried out as an

economic exercise (Verr, B. A., 1999 p. 14).

Commercialization on the other hand does not involve the alienation of

government share holding to the private sector but involves changing the way

government owned companies operate to ensure that they run commercially and

that they make profit. (A Handbook of BPE.p7-9).

Notwithstanding the differences in their ownership structure,

Commercialization like privatization is aimed at improving efficiency in the

management of public sector / enterprises, resulting in less dependence on

government for funding. Poor performance by the public sector is one of the major

reasons for the heightened interest in Privatization and Commercialization. This

has further been propelled by recent deterioration in the global economic

environment. Privatization is therefore seen as an important step in reducing

imbalances and restoring acceptable rates of growth. (Adebusuyi,B.S.1999.p22).

This is underscored by the various studies, which revealed that, with few

exceptions, the public sector incurs substantial losses, contributes significantly to

budget deficits and has a negative impact on balance of payments.

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Most countries all over the world in their bid to attain macroeconomic

stabilization and trade and investment liberalization have been supported by

credible structural reform. These reforms have come in form of sound economic

policies, such as Fiscal Policy, Monetary and Exchange Rate Policy, Governance

and Institution Building, Domestic Deregulation, Commercialization, Privatization,

etc. of all these Commercialization and Privatization have been the most popular

with Privatization recording more success stories.

When the British Government under Mrs. Thatcher embarked in the 1980s

on one of the most extensive and successful Privatization programmes in history,

little was it known that Privatization would become a world wide phenomenon,

cutting across nations, developed and developing. In Africa, Asia, Europe, the

Americas, Australia and New Zealand, there has been one form of Privatization

programme or another. These programme have also transcended industrial lines

such as power, telecom, water, hydrocarbon, automobile, steel, banking, insurance,

airways, railways, hotels etc. In fact, there is hardly any sector, which has not been

touched by Privatization.

Privatization has become a major element of economic reform and an

important instrument for advancing the global competitiveness of nations. It has

become a familiar concept among economists, financial experts and policy makers

with several studies on it, and many success stories, which have added to the

appeal of Privatization. The success stories have shone that Privatization can be a

vital tool of turning around inefficient and poorly managed State-Owned-

Enterprises (SOEs) into well-managed, competitive and profitable outfits. Such

turn around could have positive impact on the large economy by way of output

growth, improved quality of goods and services, as well as easing pressure on the

labour market. (Ndanusa, M. S., 2000 p 1).

27

The success stories have also shown that Privatization can be an important

tool for downsizing the public sector, reducing its debt and borrowing while

enhancing revenue. Indeed revenue from Privatization are sometimes expended on

improving social and economic infrastructure such as roads, schools, and hospitals,

which in turn, improve societal well-being and strengthens the environment or

increased private sector involvement in an economy. Privatization could also serve

as a vehicle for attracting foreign capital, and acquiring skills and technology.

Through Privatization, particularly when opened to foreign participation, a

country may gain international visibility and increased interest of foreign investors

in its economy. Privatization also fosters the participation of the populace in the

ownership of the industrial sector, instilling in the process, a sense of belonging

and pride in the citizenry. With the failure of SOEs and heavy burden on

government finances, Privatization is today, widely considered as an inevitable

exercise if economic growth and development are to be engendered. Given its

benefits, one can clearly see why Privatization has become a must in many

countries. Sub-Saharan African countries according to a World Bank report had

completed a total of 3,166 Privatization sales worth US $6.4 billion as at mid 1999

with Mozambique leading, having Privatized 579 enterprises. Angola had

completed 331, Ghana 217, Kenya 189, Nigeria 81 (excluding state government

Privatization) and South Africa 7.

Africa has also witnessed some of the most successful enterprise

Privatization including the celebrated Ashanti Goldfields Company and Kenya

Airways. Ashanti Goldfield is today, listed on several stock exchanges including

the London, New York, Toronto, Ghana and Zimbabwe exchanges. One striking

feature of Sub-Saharan African Privatization is that sales value has remained

comparatively small relative to the impressive number of enterprises that has been

Privatized (Report presented at Accra).

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The reason for this may not be far fetched, as African Companies is by

international standard small. It will also be a fundamental error not to take account

of institutional weakness, notably the lack of skilled and highly trained manpower

to run an expanded state sector (Eze, J.A.I997 p 21). According to the same report

South Africa with only 7 seven transactions has as at mid 1999, generated US $ 2.3

billion, Zambia's 253 enterprises fetched US $ 700 million while Nigeria earned

US $ 207 million from the sale of 81 companies.

Privatization has been variously defined and has involved different methods

and procedures. But it could be simply defined as the divestment of government

holdings in an SOE or in an enterprise in which it has interest. In other words,

Privatization could affect an enterprise, which is wholly or partially owned by-go

government.

What is important is the transfer of ownership or control from the public to the

private sector, that is, from government to individuals and private concerns.

Transfer of ownership implies the shedding of control. Where divestment of

ownership is total, government control would be zero. But where government

holdings are still substantial the tendency would be to exercise some element of

control in the affected enterprises.

This does not have to be the case as even where government is left with majority

holdings the divestiture could be such that neutralizes government control and

interference in the enterprises considerably. It is important that the enterprises are

seen as profit making outfits, which should be run as such. (Ndanusa, M. S.,

2000.p2). Although Privatization objectives are essentially similar among

countries, the methods and procedures differ and have been identified to include

outright sale of assets, public flotation, management or employee buy out,

concessions, voucher sale, issuance of new securities to dilute existing government

holdings, liquidation and auction. For reasons of proper governance and to provide

29

requisite technical and possibly financial resources, core investors are seen as

important and sought after in Privatization of key SOEs. A few countries have

applied the golden share principle basically to protect enterprises considered

among other things, to be "national treasure" from being taken over by foreigners.

Golden Shares were most prominently used in the British Privatization but the fear

of the misuse of such shares in developing economies even when their powers are

well defined has created wariness about their use in these countries.

The experience of a number of countries with Privatization has shown that

the existence of a formal capital market evidenced by a stock exchange facilitates

Privatization of SOEs while the programme has served as an important impetus to j

capital market development. The absence of a stock market would by implication

limit the avenues available for the divestment of SOEs. In Nigeria, the existence of

a fairly developed capital market made it possible for government to divest its

interest in 34 enterprises during the first phase of the Privatization exercise in the

late 1980s -early 1990s (Ndanusa, M ,S. 2000.p3).

2.2 PRIVATIZATION/COMMERCIALIZATION PROGRAMME IN

NIGERIA.

The role of public sector and public owned enterprises in Nigeria's development

process in post 1970 era has been well documented. As at then it was considered

fashionable for the government to take hold of the commanding heights of the

economy, propelled by the economic inflow of oil revenues to the Federal

Government in the 1970s. Nigeria was in the forefront of establishing public

owned enterprises to engage in the production and supply of a broad spectrum of

goods and services spanning iron and steel, petroleum and petro-chemical

products, fertilizer, motor vehicle, electricity, paper, cement, agricultural

production and processing transport, mining, trading and banking and finance. If

30

these enterprises have functioned effectively over the years, the Nigerian economy

would have joined the league of newly industrializing economies such as Korea,

Taiwan, Hong Kong, Singapore, Malaysia, Thailand, Brazil, Indonesia and Mexico

(Iwayeni, A. 2002 pi).

However, in the post 1970 period, public investment in the over 1000 public

owned enterprises in Nigeria conservatively estimated at N 800 billion had no

significant impact on sustainable development. Adding other direct and indirect

costs associated with the dismal operating performance of these enterprises and

their poor-financial and economic return, the scale of the losses associated with

public enterprises in Nigeria are staggering. Public enterprises driven by import

substitution industrialization strategy constituted a major dung on the economic

performance in the past three decades. Without much exaggeration, the high level

of mismanagement, gross economic inefficiency evident in the poor returns on

public investment, excessive politicization and high level of corruption in most

public- owned enterprises have pauperized Nigerians. It has also served as a

catalyst for economic retrogression and the associated sharp decline in living

standards, persistent large scale unemployment and technological under-

development (Iwayeni, A., 2002.p2).

President Olusegun Obasanjo, in his speech stated that State enterprises

suffer 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. Inevitably, these shortcomings take a heavy toll on the

national economy.

It must be stated that the problem associated with State owned enterprises and

monopolies are not peculiar to Nigeria. It is true, however, that many developing

countries have overcome the problems through a well-designed and single-minded

31

pursuit of Privatization and Commercialization programmes. The rationale is that

these programmes permit governments to concentrate resources on their core

functions and responsibilities, while enforcing the "rules of the game". This enable

the markets can to efficiently, with provision of adequate security and basic

infrastructure, as well as ensuring access to key services like education, health and

environmental protection (Eke, E.2001.p 17). The objective is to assist in

restructuring the public sector in a manner that will affect a new synergy between a

leaner and more efficient government and a revitalized, efficient and service-

oriented private sector.

Up till recently, there have been many years of exhaustive deliberations by

stakeholders on how to put Nigerian economy on the path of sustainable growth

and development. There are over 1000 State-owned enterprises in Nigeria, many of

these enterprises gulped billions of Naira without yielding much positive result in

terms of customers satisfaction. It has been estimated that the nation may have lost

about 800 million US dollars due to unreliable power supply of NEPA and another

400 US dollars through inadequate and inefficient fuel distribution. Right now, a

consensus has emerged on the imperative of Privatization and Commercialization

of State-owned enterprises (Adeseri, A.2001. p 16).

Government defines guided Privatization as "a carefully planned and

systematically implemented programme of government withdrawal from the

control of business enterprises which can be more effectively and efficiently run by

private sector operators". Competitive Privatization will be encouraged in order to

stimulate new investment and give the consumer an opportunity for a choice. The

import of this policy is that sectors previously closed to private sector participation,

such as petroleum refining, are being removed from the negative list for private

sector investment. With respect to existing public sector investment, Government's

desire is to ensure effective and efficient management of the public enterprises so

32

that the nation can get maximum benefits from the resources so committed (WTO

Press Release, 1998).

At the moment, not all Nigerians are convinced of the wisdom of I selling

off State assets or giving foreigners control of crucial utilities. "The Federal

Government is headed on a [path] of unprecedented national calamity with the

foreign , ownership of any part of NEPA, NITEL, the refineries or the railways,"

wrote commentator Ogbuagu, Ken. He further stated that there is an

International Conspiracy whose aim is to grab the oriental nervous system of

Nigeria, hence Africa. The sale of strategic national assets is absolutely wrong.

Many people share the writer's concern that control of important public utilities by

private companies -whose prime objective is profit -making will halt the spread of

development to poor sectors of society, particularly the rural areas (Obadina, T.

1998 p4).

All these not withstanding, Privatization and Commercialization has been

found to be a catalyst for economic development in most other countries where

there has been transparency and commitment on the part of the government in

carrying out the programme (Iwayemi, A., 2002.p3).

In Nigeria, it has been seen that while economic activity may be |

constrained by tight monetary policy, the impetus for economic growth will come

from freeing the energy of the private sector through deregulation and

Privatization. (IMF Website). Preparation for Privatization of public enterprises

started some years ago, it has since progressed and very soon most public

institutions like NEPA, NITEL, among others will be sold to Private individuals.

(Ugwoke, F. 2002 .p2).

The structural adjustment programme adopted in 1986 began the onset of

comprehensive economic reforms to eliminate the distortions in the economy and

to improve productive and allocation efficiency. Privatization and deregulation of

33

key domestic markets were seen as strategic policy instruments in achieving the

objectives of greater efficiency through economic restructuring, and the broaden

goals of rapid economic recovery and sustained growth and development.

(Iwayemi, A. 2002. p2).

The first formal Privatization and Commercialization of the federal

government of Nigeria Commenced in 1988 under the Technical Committee on

Privatization and Commercialization (TCPC) Decree No. 25 of July 1988 (Obaji,

O. 1999.p41). During the first phase of the exercise, which spanned from July 1988

and June 1993, a number of companies were either privatized or Commercialized

using various programmes (this is summarised in the appendix).

Under the phase 1 programme, about 88 enterprises were either fully or

partially Privatized. These were enterprises in which the Nigerian Government |

invested jointly with foreign or private Nigerian investors. With the exception of

the Cement and the Oil marketing companies, the capitalization of most of them

was small. The huge capital-intensive and basic industries like the Fertiliser

Companies, Sugar companies, Vehicle Assembly Plants, Paper and the Steel Mills,

which hold vital positions in the economy could not be Privatized for various

reasons ranging from financial insolvency to negative networth (Anya, O. A. 2000

p 2).

Under the new programme, the government planned to sell 40% of its equity

in the enterprises to strategic investors through international open tenders. Another

20% would go to Nigerian investors through public share offers leaving the

government with a 40% Stake (Iromantu, O. C., 1999.pl0). :

The Privatization exercise may involve one of two things namely:

34

a) Non-divestiture options Commercialization (Co-poratization), the

Privatization of management (management contacts, leasing and

concessions) and the contracting out of public services and

b) Divestiture options on the Privatization of capital. A particular form of

Privatization is the private development of infrastructure. (Verr, B. A.,

1999,p43).

There was lack of clarity of Government's policy on some critical issues associated

with Implementation of the programme. The issues include: -

- Whether to Privatise as "is" or rehabilitate before Privatization.

- To relieve the Enterprises' managers of their duties before or after

Privatization

- The type of regulatory framework that will be in place.

- Whether the sales should be given to both foreigners and Nigerians.

- The valuation methods to be used.

- The role of foreign core investors in the ownership and management of the

national economy.

- Loss of jobs resulting from the Privatization.

- Income inequality arising from the ownership of Privatized assets.

- Whether to deregulate before or after Privatization

- Utilization of the Privatization proceeds

- Whether Government should go ahead and own any 'Golden Shares'

- The Level of transparency in the programme.

The exercise had an unqualified success. Unlike other countries, Nigerians for

Nigerians did the Privatization exercise in Nigeria without any foreign technical

assistance. The programme succeeded in relieving the government of the huge and

growing burden of financing public enterprises, minimised the overstretching of

government's managerial capacity through a redefinition of the role of the

35

supervising ministries, created a large body of shareholders and deepened and

broadened the Nigerian Capital Market to the position of being the most

development in black Africa The market capitalization of the Nigerian Stock

Exchange (NSE) through which the shares were sold has grown from N8.9 billion

in 1987 (before Privatization) toN65.5 billion in 19994 (after Privatization) and

currently stands at N428.9 billion as at the end of August 2000. The catalytic effect

of the volume of shares released into the market via the Privatization exercise

cannot be over emphasized. (Anya, O. A., 2000 p 2).

On the part of Commercialization, in carrying out the programme the TCPC

developed a framework for Commercialization common to all enterprises and

Reform Packages for 30 of the 34 Commercialized enterprises. One major

innovation introduced by the TCPC during the reform process was the

development of corporate plans by public enterprises and this formed the basis for

the Performance Agreement, which was signed by 24 Commercialized enterprises

in 1992. This agreement was expected to last for 3 years in the first instance. The

system of Performance Agreement is intended to:

i. Help in giving a positive orientation and ensure that affected enterprises can

efficiently fulfill their role in the national economy;

ii. Identify a number of performance and efficiency indices which the affected

enterprises should as a minimum, achieve annually taking one year with

another;

iii. Provide an independent monitoring process through the TCPC; (or its

successor) whereby the actual performance by both parties of their

obligation under the agreement can be efficiently monitored and evaluated

(Obaji, 0. 1999.p24).

36

Although, public outcry and opposition from politicians stopped the past

administration from Privatization, It indicates that the Privatization train is a course

and it is one of the priority issues that the new administration has to address

(Iromantu, O.C., 1999.pl1).

2.3 OBJECTIVES OF PRIVATIZATION / COMMERCIALIZATION

PROGRAMMES IN NIGERIA.

Objectives are performance index through which expectations are compared to

actual result. In the light of this, one of the objectives of the Privatization

programme was to promote efficiency in the affected enterprises in the overall

interest of the national economy (Ani, A. A. 1998, P. 1). Privatization would help

to inject commercial sense into these enterprises that have all along been bogged

down by government control and whose employees usually think the enterprise

exist for heir benefits rather than the customer's (Bamgbopa, N. A. 1985, P. 14).

Public institutions comprises Parastatals such as educational and cultural

institutions, research institutions, teaching hospitals and other service oriented

parastatals such as banks, insurance companies, investment companies, hotels,

cement companies, steel mills, motor assembly, plants, to mention but a few. These

enterprises cover a wide range of services for economic development and require

substantial funding from the government. The failure of government enterprises

was thought by many radical economist to stem from excessive monopoly which

resulted in the proliferation of a rambling bureaucratic decision making structure

which hampered their ability to respond to change (Health, 1987, P. 118,Akpala

1990, lyanda & Oludeji 1989).

In relation to this, a comprehensive objective of the Privatization Programme as

expressed by Muktar Ahmed was to include: -

37

i. Injecting market discipline at the Board level since the Board is expected to

reflect the shareholding interest of the private sector investors.

ii. Close monitoring of the performance of management.

iii. Greater accountability and evolution of better management practices.

iv. Acting as catalyst for the revitalization of the capital market by making

available in the capital market substantial volume of shares.

v. Fund raising revenue for the government.

vi. Encourage share ownership by members of the public leading to a more

efficient mobilization of savings within the unit.

Professor Anya 0. Anya, in his comments, further cited some objectives of the

Privatization programme to include: -

• To improve on the operational efficiency and reliability of our public

enterprises;

• To roll back the frontiers of State capitalism and emphasize private sector

initiative as the engine of growth.

• To encourage share ownership by Nigerian citizens in productive

investments hitherto owned wholly or partially by the Nigerian Government

and, in the process to broaden and deepen the Nigerian market.

The Decree establishing the Privatization Programme as enacted in 1988 had

broader objectives, which are as follows: -

i. To restructure and rationalize the public sector in order to lessen the

dominance of unproductive investment in that sector.

ii. To re-orientate the enterprise for Privatization towards a new horizon of

performance investment in that sector.

38

iii. To check the present obsolete dependence of commercially oriented

parastatals on the treasury for funding and to encourage their approach to the

Nigerian capital market.

iv. To initiate the process of gradual cession to the private sector of such public

enterprises that by the nature of their operations and other socio-economic

factors is best performed by the private sector.

v. Creating a favorable investment climate for both local and foreign investors.

vi. Reduction in the level of internal and external debt via the use of the debt

conversion programme in the Privatization of certain enterprises.

vii. To provide institutional arrangement and operational guidelines that would

ensure that the gains of Privatization are sustained in the future.

In summary therefore, the Privatization programme in Nigeria was targeted

to reduce the burden imposed by government enterprises on the resources of

government, enhance, its efficiency and improve the generally poor returns on

overall government investment in these enterprises (Usman, S .1999, P. 7).

The main thrusts of the Commercialization programme under Decree 25 of

1988 were as follows: -

i. Provide competitive remuneration system to be able to attract, recruit and

retain suitable qualified personnel;

ii. Strengthen financial/accounting controls at the enterprise level;

iii. Upgrading the management information system of the affected enterprises;

iv. Ensure financial solvency of the public enterprises through effective cost

recovery, cost control and financial management;

v. Remove bureaucratic bottlenecks and political interference through clear

role definitions between the supervising Ministry, the Board of Directors

and the Management of Public Enterprises.

39

The Commercial programme of the other hand has not been as successful as

the Privatization Programme. This could be because of so many things, of which

some of them are listed below:-

i. Failure to entrench operational autonomy of the enterprises i.e., defining the

relationship between the Commercialized enterprises and the supervisory

Ministries. Such areas as the authority limit, tariff department, procurement

policy and personnel policy constitutes the major areas of concern.

Managers of public enterprises have always quoted official interference as

the limiting factor to their effective performance.

ii. Failure to actualize recommended capital restructuring of commercial public

enterprises so that they are able to raise fund from the capital market..

Government has been tardy in the provision of working capital for those

public enterprises, which need it, or has it provided the frame for such

enterprises.

iii Failure to allow boards of directors to function properly. Indeed, since 1993

there have been no Boards for most public enterprises. As a result, the

supervisory Ministries had controlled such enterprises in both policy areas

and day-to-day business decisions.

iv. Resistance's by government to develop appropriate condition of service in

the public enterprises commensurate with responsibilities. This has led to

malpractice by the management in such areas as procurement. It also

engenders poor commitments by the generality of employees. Inability to

negotiate fresh Performance Agreement with the affected enterprises

because, there has been no Boards of Directors since 1993 (Obaji, O.

1999.p24).

40

2.4 IMPLEMENTATION ARRANGEMENTS FOR THE PRIVATIZATION

/ COMMERCIALIZATION PROGRAMMES

The greatest challenge for a successful organization is change (Eze, J A p 52), To

achieve this change the Nigerian government has set up a team of experts on

Privatization in order to ensure that the Privatization/Commercialization exercise

achieves its desired objectives of job creation, acquisition of new knowledge, skills

and technology and exposing the country to international competition (Oyejide.

T.A & Soyibo, A 2001 pl0).

The team of experts as listed below will be expected amongst other things to

examine and advise on all aspects of the programme:

Technical/Financial Advisers

World class advisers comprising investment banks, lawyers and other consulting

firms shall be engaged to undertake strategic review, restructuring and sale

preparation in respect of affected enterprises, based on an approved terms of

reference. However, only consultants that are registered by the Bureau of Public

Enterprises will be eligible for consideration.

(a) Committees and Sub Committees

The National Council on Privatization (NCP) in accordance with provisions of the

Public Enterprises (Privatization and Commercialization) Act of 1999 will from

time to time appoint committees and sub-committees comprising knowledgeable

individuals to tackle some of the preparatory works necessary at enterprise level in

order to ensure a speedy and smooth Privatization and Commercialization exercise.

(b) Flotation Advisers: -

Public officer of shares through the Stock Exchange will be the dominant method

of Privatization to be used in the sale of the 20% equity reserved for Nigerian

41

investors under the programme. In order to handle the floatation of the shares of

affected enterprises on the Stock Exchange, the National Council on Privatization

(NCP) shall appoint professional advisers, in accordance with powers conferred on

it to do so by Section - 13 (c) of the Public Enterprises (Privatization and

Commercialization) Act of 1999.

The most important professional advisers in each case are: -

i) The Issuing House

ii) The Solicitor to the Issue

iii) The Reporting Accountant

iv) The Stockbroker to the Issue

v) Asset Valuers

These professional advisers are responsible for the gathering, analyzing and

reporting on the operations of the affected enterprises, in such a way as to

enlighten the prospective investors on the activities of the enterprise to be

Privatized and whose shares are being sold. The responsibilities of these advisers

are described briefly hereunder.

i) Issuing House:

- Preparation of information memorandum, prospectus, application to the

Securities and Exchange Commission (SEC) for the offer price and the

Stock Exchange for listing.

- Sale of shares and receiving subscription funds;

- Preparation of the basis of allotment

- Representing the BPE and the company before SEC and the Stock

Exchange;

42

- Co-ordination of all-parties meeting culminating in the Completion Board

Meeting.

ii) Reporting Accountant: *

The Accountants are responsible for providing accounting data and

calculations for forecasts of the Company's future profits. In expressing his opinion

on forecasts, the Reporting Accountant must consider the following: -

- The general character and recent history of the company's business with

particular reference to its main products, markets, customers, suppliers,

labour force and trend of results.

- The Accounting policies normally adopted in preparing the Company's

Annual Accounts and the fact that those have been consistently applied in

the preparation of profit forecasts.

- Whether or not the preparation of the forecast was consistent with the

economic, commercial, marketing and financial assumptions, which the

Directors have stated to be the underlying bases.

- The Company's general procedures in the preparation of forecast. In

particular, the accountant would ascertain whether forecasts are regularly

prepared for management purposes and if so, the degree of' accuracy and

reliability normally achieved. He would also wish to discover the extent to

which the forecast results of the expired period are supported by reliable

interim accounts; and how the forecasts take account of any material

exceptional items;

- Matters of general interest including the adequacy of provisions made for

foreseeable losses and contingencies, and the adequacy of working capital as

indicated by properly prepared cash-flow forecasts.

43

All these are done to ensure that ultimately, the shareholders would be buying a

good product.

iii) Solicitors to the Issue:

The Solicitor is expected to primarily advise on compliance with the law at every

stage of the exercise. He is expected to: -

- Examine the Company's Memorandum and Articles of Association to ensure

that those provisions which are considered unnecessary in a public limited

liability company are deleted.

- Cause all the necessary resolutions for the different stages of the floatation

e.g., restructuring of capital, creation of new share etc., to be passed.

- Registration of all documents and resolutions with the Corporate Affairs

Commission and other Regulatory agencies.

- Following up verifications with the Land Registry etc. on the title deeds held

by the company.

- Preparation of Management Agreements, Sale and Purchase Agreements,

Shareholders Agreement etc., where necessary or reviewing same to ensure

that the interest of the company and country are safeguarded.

- Take such actions as are considered necessary in a public floatation in

accordance with the law.

iv) The Stock brokers to the Issue:

The principal role of the Stockbrokers is to introduce the Securities on the trading

floor of the Stock Exchange. Technically, shares of a publicly quoted Company

can only traded on the floor of the Stock Exchange.

44

v) Asset Valuers: -

Assets Valuers undertake the professional valuation of the assets of the affected

enterprises to provide a guide on the current replacement value of the Company.

2.5 IMPACT AND THE FUTURE PROSPECTS OF THE

PRIVATIZATION/ COMMERCIALIZATION PROGRAMMES IN

NIGERIA

The widespread adoption of Privatization and Commercialization measures

necessitates a system of impact evaluation which can be widely applied and which

will provide a systematic and practical analytical framework to assess the results of

Privatization and Commercialization. Performance can be defined in terms of

success in achieving stated objectives. The basic question is whether the economy

is better or worse off as a result of Privatization and Commercialization. A

comprehensive answer to this question would require knowing what changes

occurred as a result of Privatization and Commercialization, and how such changes

can be prioritised and valued among other issues. However, the problem of

ambiguous broad statement of goals of Privatization and Commercialization such

as fostering market development and the existence of conflicting objectives make

such assessment difficult. Nonetheless, the impact of Privatization and

Commercialization on the whole economy can be assessed by: -

i. An increased share of the private sector in the economy

ii. A reduction in fiscal imbalance through increased revenue and the

reduction of the government's budget deficit;

iii. The development of domestic capital markets;

iv. The improvement in the external trade balance and

v. Changes in the levels of employment.

45

At the micro level the impact of Privatization and Commercialization can be assessed using:

i Technical efficiency which is concerned with how efficiently inputs are used

by firms both before and after Privatization and Commercialization

ii. Cost efficiency, which is concerned with whether or not there is a difference

in cost efficiency per unit of output before and after Privatization and

Commercialization. Differences in cost may however, reflect differences in

input prices and or scale of activity.

iii. Profitability which does not necessarily imply efficiency as an inefficient

firm may be profitable due to market power or preferential arrangements,

price control on output of an efficient firm as well as differences in

accounting conventions, and

iv. Change in the real price charged for the output of the Privatized enterprise.

The World Bank has also proffered some measures of assessing the impact

of Privatization and Commercialization and they include: -

i. Financial assessment: Defined as ratio of operating surplus to sales in

current prices, which measures the returns to all investors, owners and creditors;

and before tax profits in current prices which measure the government's return on

its investment as it were a private owner.

ii. Productivity: Defines in terms of total productivity; and

iii Savings investment deficit: This is defined as the extent to which public

enterprises rely on outside sources to finance their operations, expansion and

debt service. (Adebusuyi, B. S, 1999 p.22 ).

46

Using these measures as a benchmark, the impact of the Privatization and

Commercialization programmes on the Nigerian economy cannot be over

emphasised The benefits of the phase 1 of the programme include: -

i Performance of the Privatized enterprises so far has led to a considerable

increase in the volume of corporate taxes accruing to the national treasury.

Thus not only has the drain on public finances been halted, it has become a

positive bonus, with subsidy soaking deficits - being replaced by tax-

yielding profits.

ii. The sale of shares and assets realised over N3.7 billion as gross Privatization

proceeds from the Privatization of 55 enterprises whose total original

investment according to the records of the Ministry of Financed

Incorporated (MOFI) was N652 million. This represents less than 2% of the

total value of the Federal Government's investments as at 30th November

1990, which stood at N36 billion.

iii. The programme of Privatization has greatly minimized the scope of political

patronage in the form of Board appointments and jobs for the boys. Under

the Phase-1 of the programme, the Federal Government relinquished about

280 Directorship positions in the Privatized enterprises. The operational

autonomy enjoyed by these enterprises has put a stop to their use as dumping

grounds for political appointees at management and board levels.

iv. Privatization has massively expanded personal share ownership in Nigeria.

Over 800,000 shareholders were created, almost twice as many as there were

in 1988 when the exercise started. The programme has also intensified the

operations of the Capital Market, created new awareness in the virtues of

shareholding as a form of savings rather than an elitist pastime, which it was

thought to be. This is a good development, which enhances capital formation

and economic growth.

47

v. By reducing the reliance of public enterprises on the government for finance,

the programme of Privatization has encouraged new-investments in the

enterprises concerned. The warm hands of the Capital Market have replaced

the cold hands of Treasury Control, which are as stimulating as they are

invisible. Many of them have discovered that it is easier to raise funds

through the capital market than it is to do so from the treasury, once the

necessary investor confidence has been developed.

vi. The new operational autonomy of these enterprises and their liberation from

political interference in day-to-day management has improved the internal

efficiency of these enterprises allowing them to liberalize their purchasing as

well as rationalize labor practices. This has increased massively their

profitability. The negative perception of public enterprises in the minds of

the general public as nobody's business has also changed.

vii. Floatation of shares of Privatized enterprises have greatly stimulated the

rapid growth of the Nigerian Capital Market and helped to deepen and

broaden it. As stated earlier, market capitalisation has grown from N8.9

billion in 1987 to over N65.5 billion by 1994 and N428.9 billion as at

August 2000.

viii Privatization has allowed the management of privatized enterprises full

freedom to realise their optimum potentials. This has led to more productive

employment and economic growth in general terms.

ix The programme has equally relieved the Government the burden of

financing the investment needs and operating deficit of the Privatized public

enterprises. Although it has not been quantified, it is reckoned it would run

into billions of Naira annually.

x. A number of our public utilities have already regained their solvency and

began to record substantial operating surpluses.

48

xi. The quality and reliability of the Privatized enterprise services have also

improved significantly because of Commercialization.

xii. The mechanism of the corporate plan developed by each Commercialized

enterprise provides the Government with the framework to measure the

performance of our public enterprise managers in a transparent and scientific

manner.

xiii. The introduction of Performance Agreements in our parastatal sector is a

revolutionary measure aimed at ensuring that our public enterprises

particularly the utilities perform their supportive roles to the rest of the

national economy (Obaji, O. & Verr, B., 1999.p23-24).

2.9 APPRAISAL OF THE TECHNICAL COMMITTEE ON

PRIVATIZATION AND COMMERCIALIZATION SINCE INCEPTION.

The Structural Adjustment programme adopted in 1986 began the onset of

comprehensive economic reforms to eliminate the distortions in the economy and

to improve productive and allocative efficiency. Privatization and deregulation of

key domestic markets were seen as strategic policy instruments in achieving the

objectives of greater efficiency through economic restructuring, and the broader

goals of rapid economic recovery and sustained growth and development. The

Technical Committee of Privatization and Commercialization (TCPC) was

established to pursue Nigeria's first major Privatization programme.

The Privatization Decree No. 25 of 1988 under which provided the legal

backing for TCPC' began the major paradigm shift in defining the boundary

between the poblic and private sector in the development process in Nigeria.

However, only a few largely successful enterprises FlourMills' African Petroleum.

National Oil and Chemical Marketing Company Limited (NOLCHEM) were

partially Privatized. The Commercialized enterprises, e.g., NEPA, NITEL and

49

NNPC hardly showed any significant improvement in their operational and

economic performance. This earlier Privatization exercise was alleged by some

critic as not being very transparent. Management and technical inefficiency still

rule NEPA and NITEL presently. (Iwayemi, A. 2000 p.2).

The TCPC identified a total of 111 enterprises to be Privatized fully or

partially and another 35 enterprises to be wholly or partially Commercialized. By

1995, a total of eighty-seven enterprises were successfully completed out of the

one hundred and eleven enterprises that were slated for full or partial Privatization.

In order to allow for the effectiveness of the Privatization exercise, the

committee on Privatization and Commercialization recommended that the exercise

should be carried out sectorally and in phases. In this respect, all exercises done

from 1988 to 1997 fell under the first phase of the programme. The phase three,

(2001-2002) of the Privatization programme was to witness the privatization of

spillovers from phase two and enterprises from the strategy industries like NNPC

Upstream, Cement and Fertilizer companies.

Apparently on the ground of the myriad of problems that characterized

Privatization policies and implementation in the country, there was a break in the

implementation of the programme especially between 1994 and 1997. These

problems range from ideological opposition, opposition from the managers and

staff of public enterprises, and absence of competition and other regulatory

framework to unanticipated delays and inaccessibility to credit facilities on the part

of potential buyers. Consequently, the government had to abandon the exercise

until 1995 when government in its budget presentation affirmed its commitment to

disengage itself from activities that could be more efficiently and effectively

carried out by the private

sector.

50

In view of the above, government in 1995 introduced a new policy of contract

leasing to replace the sale of shares in public enterprises. The arrangement was to

involve leasing enterprises to both local and foreign entrepreneurs on as-it-were

basis. Incidentally nothing has been achieved on the leasing arrangement since

1995 because the decree to back this arrangement was to be promulgated in 1996.

Consequently, even as at 1997 government could not achieve much in terms of

implementing the arrangements over the year (1995-1997). However, by 1998,

government announced its decision to commence the Privatization Programme as a

means of ensuring wider business ownership and stimulate the competition

necessary to ensure efficiency in the system. In this respect, government decided to

embark on the policy of guided Privatization. This is an approach where an

enterprise will be Privatized at a time so that the lessons of experience would be

used to improve upon subsequent exercise (Oyejide, A.T and Soyibo, A. 2001 p

11-12).

The Technical Committee on Privatization and Commercialization wound

up her activities and submitted a report to the President on June 05, 1993. The

TCPC also transformed to the Bureau for Public Enterprises (BPE). The Bureau

was to monitor the performance of the enterprises Privatized in the past exercise

and plan for the future phases.

Because of the success of the past exercise, the military government under

General Abdulsalam Abuakar promulgated the Public Enterprises (Privatization

and Commercialization) Decree No. 28 in early 1999 (before the hand-over to a

democratically elected government). The Decree kicked off the Phase-II of the

Privatization exercise under the Bureau for Public Enterprises (BPE). The Decree

allows BPE to alter, add, delete or amend the provisions in the document in the

best interest of the country.

51

Initially, sixty-one (61) enterprises were slated for Privatization (36 partial and 25

full Privatization) but because of the new powers granted BPE, it has increased the

list by 37 extra enterprises (some which were originally meant for

Commercialization). Some of the big government companies being Privatized now

include National Insurance company Corporation of Nigeria (NICON), Nigeria Re-

insurance Corporation, Nigerdock Plc., National Aviation Handling Company

(NAHCO), Nigeria Railway Corporation (NRC), Nigerian Ports Authority (NPA),

Nigerian Postal Services (NIPOST) and Savanna Sugar Company. This is an

indication of the enhanced interest in and success that privatization has achieved in

Nigeria.

In December 1999, the democratically elected government of President

Olusegun Obasanjo picked interest in the Privatization exercise and gave it a boost

by establishing the National Council on Privatization (NCP) with the Vice-

President, Alhaji Atiku Abubakar, as its Chairman. The Council is empowered

among other things to determine the political, economic and social objectives of

the Privatization and Commercialization programme, approve guidelines and

criteria for valuation of public enterprises marked out for Privatization-including

choice of strategic investors - identification of enterprises to be offered for sale.

The Privatization exercise is seemingly slow as a result of the desire of the

government to ensure maximum transparency in the process as well as introduce

measures that will sensitise the people to participate massively. Overall, this

second phase should help the government raise funds to:

- Narrow down the budget deficit;

- Payback public debt;

- Avoid new borrowings;

- Restructure other enterprises;

52

- Support social sectors as education, health, power and rural

development.

Since December 1999, about 9 enterprises more have been privatized, adding 2.5

billion shares to the capital market while the Federal government realized revenue

of N35.6 billion from the sales (a list of privatized and Commercialized companies

are as summarised in the appendix). Privatization is geared to transform the

Nigerian economy. Given the size of the population (120 million) and the potential

market, which includes the West African sub-region, the scope for foreign

investment is enormous. Given the relative transparency and technical competence

that has characterised the on-going programme, the attractions of the Nigerian

economy for foreign investors could prove irresistible. (Anya, O. A., 2000 p 5).

53

REFERENCES

Verr. B. A. (2000). Issues in Privatization of Public Enterprises.

Bullion Vol.23,No. 3. P. 14.

A Handbook of the Bureau of Public Enterprises. Guideline on Privatization

of Government Enterprises: p. 7-9

Adebusuyi., B. S., (1999). Restructuring Economies through Privatization:

A

Comparative Analysis. Bullion. Vol., 23,No.3p.22.

Ndanusa, M. S. (2000). Discourse. Abuja Mirror. P. 1

Privatization in Africa: Past, Present and Future: A Report presented at the

third African Privatization in Accra, Ghana.

September 1999.

Eze,J,A.(1997): Politics in Post Independence Africa. Management

and Politics of Africa. Glanic Ventures Press.

Enugu. P. 21.

Ndanusa, M. S. "Discourse" p. 2

Ibid. p. 3.

Iwayemi, A. (2002): Privatization as a catalyst for economic

Development Perspective .p. 1 ,

Ibid. p. 2.

Eke, E. (2001). NITEL staff reaps fruits of inefficiency. The

Guardian. Vol. 18, No. 8,399. p. 17.

Adeseri, A. (2001). NITEL: A battle won and lost. The Guardian. Vol.,

18, No. 8, 399. p. 16.

54

WTO (1998). Economic effects of Services Liberalization.

Background Note by the Secretariat, Geneva.

Obadina, T. (1998). Nigeria unveils new Privatization Plan. African -

Recovery. Vol. 12, No 3. p.4.

Iwayemi, A. (2000). Op Cit. p. 3

Ibid. p.2.

International Monetary Funds (1995). Balance of payment statistics year Book,

Washington D. C.

Ugwoke, F. (2000). Ports Privatization: The Battle between FG and

labour. Maritime Watch, p. 2.

Obaji, U. 0. (1999). Analysis of the Nigerian Privatization Programme:

1988-1993: Lessons of Experiences. Bullion. Vol.

23, No3.p. 41.

Anya O. A. (2000). Privatization in Nigeria. A paper presented at the

Nigerian Economic Summit at the Netherlands

Congress Centre (NCC). p.2.

Iromantu, 0. C. (1999). Planning and phasing the Privatization of

public Enterprises in Nigeria. Bullion. Vol. 23,

No3.p.10.

VerrB.A.(1999). Op Cit. p.43.

Ani, A. A. (1998). Guided Privatization in Nigeria. A keynote address

at the 1998 Director's Forum of the Institute of

Directors (IOD) at the Metropolitan Club, Lagos,

p. 1.

Akpala. A. M., (1990). Business Government Relations in Nigeria.

Department of Business and Public

55

Administration, Anambra State University of

Science and Technology.

lyanda, 0. & Oludeji, O. (1989). Commercialization of Public Enterprises. A paper

presented at the Nationa Seminar on

Commercialization of Public Enterprises at

NICON Hilton Hotel, Abuja.

Anya,O.A.(2000). OP Cit. p 1-2

Ibid. p. 2

Ibid. p. 3.

Obaji,U.O.(1999). OP Cit p. 24

Ibid, p. 44.

Eze, J. A. (2000). The Role of Strategic Management. Topics in

Business policy. An Unpublished Work.

Department of Management, University of

Nigeria, Enugu Campus, p. 52.

Oyejide, T. A. & Soyibo, A. (2001). Corporate Governance in Nigeria. Paper

presented at the Conference on Corporate

Governance, Accra, Ghana, p. 10.

Ibid. p. 11-12.

Obaji, U. O. & Verr. B. A. (1999). Planning and Phasing the Privatization of

Public Enterprises in Nigeria. Bullion. Vol. 23, No.

3 p 23-24.

President Olusegun, Obasanjo (1999). The imperative of Privatization. Speech by

President Olusegun Obasanjo, on the occasion of

the inauguration of the National council on

Privatization, p. 3.

56

CHAPTER THREE

3.0 RESEARCH METHOD AND DESIGN

3.1 INTRODUCTION

The chapter deals with the designing and specification of procedures used in the

gathering of information. This study was carried out with the aim of determining

the extent the government has gone in achieving the set objectives of Privatization

and Commercialization using NITEL and NEPA (both in Enugu urban area)

alongside the masses as my study samples.

In this study, the survey research according to Osuala (1987) studies both

large and small population by selecting and studying samples chosen from the

population, to discover the relative incidence, distribution and interrelations of

sociological and psychological variables. This design used was the cross sectional

survey. This according to Barley (1982), are surveys conducted at a single point in

time in which data collection is completed in time usually in a single week or

month but certainly in a single year.

3.2 RESEARCH METHOD AND DESIGN:

This section discusses the methods and procedures for carrying out the research. It

has been built in such a way as to enable users have a comprehensive objective of

the design of the research. In line with this approach, the design was treated under

the folio wing heading: -

i) Sources of Data

ii) Population and Sample size determination

iii) Method of data presentation and analysis.

iv) Tools for analysis.

57

3.3 SOURCES OF DATA:

The researcher relied on two major sources in gathering the data for the study.

These include - Primary and Secondary Sources.

a) PRIMARY SOURCE: The Primary Source involved the use of personal/oral

interviews with the management and staff of NITEL, NEPA and the general

populace. Questionnaires were also administered.

Interview:

An interview is necessary in a research of this type to actually elicit information

from selected top management officials that were considered capable of giving

relevant information, which have direct bearing on the objective of the study.

Questionnaire:

The use of questionnaire in this study is inevitable because of the type of data

required. Since questionnaire allows the respondent to express his opinion in

writing, the research maximized its use by asking different types of questions

relevant to the research objectives, using different types which' include: -

i) Structured Questionnaires: These are questionnaires containing close ended

multiple choice questions, from which respondents were required to select the

appropriate responses. They were used for testing of hypothesis.

ii) Un-Structured Questionnaires: They contained open-ended question that

required the respondent to supply subjective responses

iii)

b) SECONDARY DATA: - The researcher was able to lay hands on some

useful magazines, professional journals, newsletters, website listings etc. The

58

bodies of literature were of immense help to the researcher by providing her

with a start off-point and an in-depth knowledge of studies already carried out

with regards to related topics in question.

3.4 POPULATION AND SAMPLE SIZE DETERMINATION

The population of this study is made up of NITEL, NEPA and the entire citizenry,

but because of the size of the country, the large number of district offices of

NITEL and NEPA in the country, the high cost of time, effort and money the

researcher decided to narrow the study to Enugu urban area in Enugu State.

SAMPLE SIZE DETERMINA TION

To affect an equitable coverage the population of the study, considering the

number of area offices of both NITEL and NEPA in Enugu alongside the general

populace. The questionnaires were randomly distributed so as to ensure proper

ampling.

To get equitable distribution of the questionnaire:

120 questionnaire were distributed in this order

i) NITEL (40%)

40 X 120

100 1 = 48 Questionnaires

ii) NEPA (40%)

40 X 120

100 1 = 48 Questionnaires

iii) General Populace (20%)

20 X 120

100 1 = 24 Questionnaires

59

Distribution and collection Response Rate

CADRES

NUMBER

DISTRIBUTED

NUMBER

RETURNED

PERCENTAGE (%)

RETURNED

N1TEL

48

36

30.0

NEPA

48

40

33.3

GENERAL

POPULACE

24

24

20.0

TOTAL

120

100

83.4 %

METHOD OF DATA PRESENTATION AND ANALYSIS:

For data collected to be meaningful and serve useful purpose, the data has to be

treated and analyzed. It is for this reason that some models, methods and

approaches were adopted in treating the data.

Two broad-based treatments were however used. They are:

i) Mathematical Method: - Here, emphasis was placed on the used of absolute

numbers, percentages, graphics, and tables or schedules.

ii) Statistical Analysis: - Here, on the other hand, mean and chi-square

(X2) were used.

TOOLS FOR ANALYSIS

Chi-Square (X2) was used for testing the stated hypothesis. This is to confirm that

the results obtained were statistically reliable and valid and not per chance.

60

Formula for Chi-Square (X )

X2 = (

Fo – Ft)2

Ft

Where:F0 = Observed Frequency

Ft = Theoretical Frequency

X2

= Chi-Square

DF = Degree of Freedom

= (R – 1) (C – 1)

Where R = Row

C = Column

DECISION RULE

The null hypothesis will be accepted or rejected based on the calculated value

and tabulated value. If the calculated value is greater than the tabulated value, the

researcher will reject the null hypothesis (at a specified level of significance and a

determined degree of freedom) otherwise it will be accepted.

61

REFERENCES

Osuala, E.C. (1987). Introduction to Research Metrology.

African Fep. Onitsha.P.26.

Barley, K.O. (1982). Method of Social Research. (2nd

Edition) Free Press, New York p. 10.

62

CHAPTER FOUR

4.0 PRESENTATION AND ANALYSIS OF DATA

4.1 PRESENTATION OF DATA

This chapter deals mainly with the analysis of survey data and interpretation of the

major findings in this study. As was pointed out earlier, data collection was

through the use of questionnaire, interview and some literature on the subject.

This brings to focus the philosophy of management science or operations

research where decision is based on data facts, information and logic. Operations-

research has no place for guess work or rule of thumb rather decision criteria are

based on quantifiable data, which can be objectively measured, analyzed and tested

for rational, logical, systematic and reliable solution of decision problems.

RESPONSE RATE:

Out of a total of 120 questionnaires distributed to employees of National Electric

Power Authority (NEPA), Nigerian Telecommunications Limited (NITEL) and the

General Populace, only one hundred were filled, while twenty were either returned

unfilled or reported lost in the process.

It must be categorically stated here that the responses used for data analysis

in this- chapter was based more on the Commercialization experiences of NITEL

and NEPA. This is because, though NITEL and NEPA have both, been

Commercialized, they are yet to be Privatized. As a result there was no

privatization experience on which judgments could have been based.

63

RESEARCH QUESTION 1:

How would you generally assess the performance of public companies?

Table 4.1

RESPONSES NITEL STAFF

NEPA STAFF

GENERAL POPULACE

TOTAL PERCENTAGE (%)

Doing Very

Well

0 0

0

0

0

Doing Fairly

Well

22 21 13 56 56

Doing Well

10

12

4

20

26

Doing Badly

4

7

7

18

18

TOTAL

36

40

24

100

100

From the above table, 56% representing, 22 NITEL Staff, 21 NEPA Staff and 13 of

the masses felt that Government owned Companies were doing fairly well. 26%

representing, 10 NITEL Staff, 12 NEPA Staff and 4 of the general populace agreed

that public companies were doing well, while on the other 18% felt that the public

companies were doing badly.

There was a general belief (representing 0% of the respondents) that

government companies were not doing very well at all.

64

RESEARCH QUESTION 2:

What do you think are the basic problems facing these public companies to

necessitate their Privatization?

Table 4.2

RESPONSES NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL PERCENTAGE

(%)

Management

Inefficiency

18 14 6 38 38

Low

Productivity

13 0 0 13 13

Turnover

0

0

0

0

0

Low

Capitalization

0 5 4 9 9

All of the

Above

5 21 14 40 40

TOTAL

36

40

24

100

100

From the response to the question, it can be deduced that the majority opinion

(representing 40%), was that a whole lot of things were wrong with government

owned companies.

38% felt that the major problem could be pinpointed to management

inefficiency. 13% felt that the problems were more of low productivity while 9%

strongly believe that their problem stems from low capitalization and that a lot will

be achieved if the Government were to stop starving these parastatals of funds.

65

RESEARCH QUESTION 3:

Do you think Government took the best decision in opting for Privatization

and Commercialization as a way of restructuring public enterprises?

Table 4.3

RESPONSES

NTTEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE

Yes

6

5

16

27

27

No

24

28

5

57

57

I don't know

6

7

3

16

16

TOTAL

36

40

24

100

100

Majority of the respondents representing 57% of the total sample (24 of NITEL

Staff, 28 of NEPA Staff and 5 of the General Populace), felt that it wasn't the best

option open for the government. As the Privatization and Commercialization of

these parastatals will only end up putting more money and the companies

themselves in the hands of the same government people who are carrying out the

exercise, that is a situation of the "rich getting richer while the poor gets poorer".

27% on the other hand felt that this was the best option they could have

chosen, citing other countries (even African countries) where these programmes

have worked. Their only fear as to these programmes working, they say will bear

on our management culture.

16% said they don't know if it is the best option on not as they had no

yardstick to compare with.

66

RESEARCH QUESTION 4:

How has the Privatization and Commercialization of public owned companies like

NEPA and NITEL affected the economy of the Nigerian Government?

Table 4.4

RESPONSES

NTTEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE

(%)

Positively

22

24

14

60

60

Negatively

4

14

8

26

26

I don't Know

10

2

2

14

14

TOTAL

36

40

24

100

100

From the response to the question, it can be deduced that 60% representing 22 of

the NITEL Staff, 24 of NEPA Staff and 14 of the general populace felt that the

Privatization and Commercialization of public owned companies like NITEL and

NEPA has affected our economy positively, though most felt it has only done this

minimally.

26% felt that it had contributed nothing to our economic growth rather it has

contributed to our economic problems due to the gross misappropriation of funds

by those in authority.

14% on the other said that they don't know if it has contributed or not. This

is expected as this group consisted mostly of respondents of low educational

background, who are not always so well informed of the going on in the society.

67

RESEARCH QUESTION 5:

How do you think the Nigerian Populace stands to benefit from the Privatization

and Commercialization of these parastatals?

Table4.5

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE

To gain a Lot

27

26

14

67

67

To gain

Nothing

5 9 7 21 21

I don't Know

4

5

3

12

12

TOTAL

36

40

24

100

100

Majority of the respondents, representing 67% of the sample felt that the

Nigerian populace stands to gain a lot from the Privatization and

Commercialization of these parastatals. They felt that since the parastatals are

being burdened with a myriad of problems, that when handed over to private

companies, whose business is to run an efficient enterprise in order to maximize

profit. Then these parastatals will cease being dram-pipes of tax payers money, as

such more money will be available to government for developmental projects.

21% said that they stand to gain nothing rather they will be the ones to suffer

due to loss of jobs, inflation and other problems that will come as a result of this

exercise.12% said that they don't know if they will gain anything.

68

RESEARCH QUESTION 6:

Can you say that the Privatization and Commercialization of NITEL and NEPA are

achieving the desired objective?

Table 4.6

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE

(%)

Yes

27

10

18

55

55

No

9

30

6

45

45

TOTAL

36

40

24

100

100

From the above table, 55% representing 27 NITEL Staff, 10 NEPA Staff and 18 of

the General Populace, felt that the Privatization and Commercialization of NITEL

and NEPA are achieving the desired objectives, though it is not so very

pronounced yet. They felt that if the programme where to be judiciously

implemented that the objectives of implementing these programmes such as better

services, increase in employment, increased productivity, better technology and

skills to mention but a few will be realized.

45% on the other hand felt that the objectives of these programmes are not

being met; rather jobs are being lost, high cost of living due to inflationary trends

amongst others.

69

RESEARCH QUESTION 7:

Has the Privatization and Commercialization of NEPA and NITEL improved the

productivity of these parastatals?

Table 4. 7

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE (%)

Yes

27

15

14

56

56

No

0

23

6

29

29

I don't Know

9

2

4

15

15

TOTAL

36

40

24

100

100

56% of the respondents representing 27 of the NITEL Staff, 15 of the NEPA Staff

and 14 of the General Populace said Yes, that the Privatization and

Commercialization of NEPA and NITEL has improved the productivity of these

parastatals.

29% said that the exercise has not improved their productivity, majority

'here agreed that the productivity of these parastatals has improved in recent years

but said that it cannot be attributed to the Privatization and Commercialization

Programmes.

15% said that they don't know if these programmes have improved the

productivity of these parastatals.

70

RESEARCH QUESTION 8:

In your opinion, do you think that the Privatization and Commercialization

Programme of NTTEL and NEPA have gone a long way to improve on their

management efficiency?

Table 4.8

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE (%)

Yes

14

5

10

29

29

No

9

30

4

43

43

I don't Know

13

5

10

28

28

TOTAL

36

40

24

100

100

Majority of the respondents, which makes up 43% of the sampling population

vehemently said no to the question. Majority of this group was made up of 30 of

the NEPA Staff, who strongly felt that management inefficiencies seemed to have

gotten worse since the implementation of these programmes.

29% felt that management efficiency has greatly improved since the

implementation of these programmes. This group is made up of 14 of NITEL Staff,

5 of NEPA Staff and 10 of the General Populace.

28% on the other hand said they don't know if the implementation of these

programmes has gone a long way to improve on the management efficiency.

71

RESEARCH QUESTION 9:

What problems do you envisage from the implementation of the Privatization and

Commercialization programmes in NEPA and NITEL?

Table 4.9

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE

(%)

Unemployment

5

7

2

14

14

Inflation

9

10

2

21

21

Concentration of

wealth.

0

6

4

10

10

Managerial

Incompetence

4

5

3

12

12

All of the above

18

12

13

43

43

TOTAL

36

40

24

100

100

Table 4.9 shows that 18 of NITEL staff 12 of NEPA staff and 13 of the General

populace representing 43% of the respondents perceives a lot of problems for

NEPA and NITEL if the Privatization and Commercialization programmes were to

be fully implemented. 12% felt that the problem with the implementation of the

programmes will border on managerial incompetence. 10% were of the view that

concentration of wealth in the hands of few will be the order of the day if these

programmes are implemented.

21% on the other hand said that in their quest for profit maximization, prices

of goods would be hiked leading to inflationary trends. While 14% said that, there

will be massive unemployment if these programmes are implemented.

72

RESEARCH QUESTION 10:

Do you consider the services rendered by NITEL and NEPA better now than

before the implementation of these programmes?

Table 4.10

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE (%)

Yes

27

30

15

72

72

No

0

7

9

16

16

1 don't know

9

3

0

12

12

TOTAL

36

40

24

100

100

As can also be seen from table 4.10, 72% of the respondents made up of 27 of the

NITEL Staff, 30 of NEPA staff and 15 of the General Populace said that the

services rendered by NITEL and NEPA are better now than before. Though in the

summary comparison of both NITEL and NEPA, majority said that NITEL has

improved well and above NEPA. They said that the better services being rendered

now by NITEL is as a result of digitalization and not necessary the Privatization

and Commercialization programme.

16% felt that the services rendered by both parastatals still leaves a lot to be

desired. 12% on the other hand representing 9 of the NITEL staff and 3 of the

NEPA staff said that they don't know if the services are better or not.

73

RESEARCH QUESTION 11:

What do you think needs to be done to make these parastatals, Nigerians and the

National Economy benefit more from the Privatization and Commercialization?

Table 4.11

RESPONSES

NITEL

STAFF

TSEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE (%)

A lot

26

28

19

73

73

Nothing

2

4

2

8

8

I don't know

8

8

3

19

19

TOTAL

36

40

24

100

100

From the response to the question above, it can be deduced that the majority (73%

of the respondents) felt that a lot has to be done to make these parastatals,

Nigerians and the National Economy benefit more from the Privatization and

Commercialization exercise.

8% felt that nothing could be done as Nigerians are already set in their ways.

19% on the other and said that they don't know what could be done to make these

parastatals, Nigerians and the National Economy benefit more from the

Privatization and Commercialization exercise.

74

4.2 HYPOTHESIS TESTING AND DATA ANALYSIS

The hypothesis will be tested in a null form and it will involve the use of a

statistical technique called the "Chi-square" to decide whether to accept or reject

the hypothesis.

Test Statistic = Chi Square (X2)

(Formula) χ2 = (fo - ft)

2

ft

where: fo = Observed Frequency

ft = Theoretical Frequency

Degree of freedom (DF) = (R-l) (C- 1)

where: R = Row total

C = Column total

Level of significance = 5%

Sample size = 100

DECISION CRITERION:

Accept null hypothesis if calculated value is less than tabulated value (at a

specified level of significance and a determined degree of freedom) otherwise

reject.

HYPOTHESIS I

This hypothesis will be tested in a null form.

Ho: That NITEL and NEPA have not attained higher productivity levels since

implementation of Privatization and Commercialization.

Research question 7 was used to collect data for the test of the above hypothesis.

75

Table 4.7

Has the Privatization and Commercialization of NEPA and NITEL improved the

productivity of these parastatals.

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE

(%)

Yes

27

15

14

56

56

No

0

23

6

29

29

I don't Know

9

2

4

15

15

TOTAL

36

40

24

100

100

DF = (R-1)(C-1)

= (3-1) (3-1)

= 4

Level of significance = 0.5 (5%)

Sample size = 100

χ2

= (fo - ft)2

ft

Theoretical frequencies for the nine cells are:

ft = 56 (36) = 20.16 ft = 56 (40) 22.4 ft = 56 (24) = 13.44

100 100 100

ft = 29 (36) = 10.44 ft = 29 (40) = 11.6ft = 29 (24) = 6.96

100 100 100

ft = 15(36) = 5.4 ft = 15 (40) = 6.0 ft = 15(24) = 3.6

100 100 100

76

Table 4.12

Computation of the Chi-square test statistic.

fo

ft

(fo - ft)

(fo - ft)2

(fo - ft)2/

ft)

27

20.16

6.84

46.79

2.32

0

10.44

- 10.44

108.99

10.44

9

5.4

3.6

12.96

2.40

15

22.4

-7.4

54.76

2.44

23

11.6

11.4

129.96

11.20

2

6.0

-4.0

16.00

2.67

14

13.44

0.56

0.31

0.02

6

6.96

-0.96

0.92

0.13

4

3.6

0.4

0.16

0.04

TOTAL 31.64

Calculated value = 31.64

Critical (tabulated) value = 9.488 at 5% level of significance and 4 DF

DATA ANALYSIS

The result of the hypothesis test in tables 4.7 and 4.12 shows that the

productivity of these parastatals has greatly improved since the implementation of

the Privatization and Commercialization programmes. This fact is accepted

because the calculated X2 value of 31.64 is greater than the tabulated X

2 value of

9.488 at 5% confident level and 4 degrees of freedom. Thus, the null hypothesis is

rejected.

HYPOTHESIS II

The second null states that:

77

There has been no improvement in economic growth as indicated by increases in

government income, per capita income and GDP since the implementation of these

programmes.

Research question 4 was used to collect data for the test of this hypothesis.

Table 4.4

How has the Privatization and Commercialization of public owned companies like

NEPA and NITEL affected the economy of the Nigerian Government?

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE

(%)

Positively

22

24

14

60

60

Negatively

4

14

8

26

26

I don't Know

10

2

2

14

14

TOTAL

36

40

24

100

100

DF = 4 (using 3x3 contingency table)

Level of significance = 5%

Sample size =100

X2 =

(fo – ft)2

ft

Theoretical frequencies for the nine cells:

ft = 60(36) = 21.6 ft = 60 (40) = 24.0 ft = 60 (24) = 14.4

100 100 100

ft = 26 (36) = 9.36 ft = 26 (40) = 10.4 ft = 26 (24) = 6.24

100 100 100

ft = 34 (36) = 5.04 ft = 14 (40) = 5.6 ft = 14(24) = 3.6

100 100 100

78

Table 4.13 ;

Computation of Chi-Square test Statistic.

fo

ft

(fo -ft)

(fo - ft)2

(fo - ft)

2/ft)

22

21.6

0.4

0.16

0.01

4

936

-5.36

28.73

3.07

10

5.04

4.96

24.60

4.88

24

24.0

0

0

0

14

10.4

3.6

12.96

1.25

2

5.6

-3.6

12.96

2.31

14

14.4

-0.4

0.16

0.01

8

6.24

1.76

3.10

0.50

2

3.36

-1.36

1.85

0.53

TOTAL

12.56

Calculated value = 12.56

Critical value = 9.488 at 5% level of significance and 4DF.

DATA ANALYSIS

The result of the hypothesis test in tables 4.4 and 4.13 shows that there has been a

positive economic growth as indicated by the increases in government income, per-

capita income and GDP since the implementation of the Privatization and

Commercialization programmes. This hypothesis is rejected on the basis of the

decision criterion, which states that the null hypothesis should be accepted if the

calculated value is less than the critical value otherwise, it is rejected. Here we find

79

that the critical value of 9.488 at 5% level of significance and 4DF is less than the

calculated X2 value of 12.56. Therefore, the null hypothesis is rejected.

HYPOTHESIS III

The third hypothesis states that:

There has not been a marked improvement in the management efficiencies of

NITEL and NEPA since Privatization and Commercialization.

Research question 8 was used to collect responses for the test of this

hypothesis.

Table 4.8

In your opinion, do you think that the Privatization and Commercialization of

NITEL and NEPA have gone a long way to improve on their management

efficiencies?

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL PERCENTAGE

(%)

Yes

14

5

10

29

29

No

9

30

4

43

43

I don't Know

13

5

10

28

28

TOTAL 36 40 24 100 100

DF = 4

Level of significance = 5%

Sample size = 100

Test statistic = X2 = (fo – ft)

2

ft

80

theoretical frequencies fo - the nine cells

ft = 29 (36) = 10.44 ft = 29 (40) = 11.60ft = 29 (24) = 6.96

100 100 100

ft = 43 (36) = 15.48 ft = 43 (40) = 17.20 ft = 43 (24) = 10.32

100 100 100

ft = 28 (36) = 10.08 ft = 28 (40) = 11.20 ft = 28 (24) = 6.72

100 100 100

Table 4.14

Computation of Chi-Square test Statistic.

fo

Ft

(fo - ft)

(fo - ft)2

(fo - ft)2/

ft)

14

10.44

3.56

12.67

1.21

9

15.48

-6.48

41.99

2.71

13

10.08

2.92

8. 53

0.85

5

11.60

-6.56

43.03

3.71

30

17.20

12.80

163.84

9.52

5

11.2

-6.20

38.44

3.43

10

6.96

3.04

9.24

1.33

4

10.32

-6.32

39.94

3.87

10

6.72

3.28

10.76

1.60

TOTAL

28.21

Calculated value = 28.21

Critical value = 9.488 at 5% level of significance and 4DF.

81

DATA ANALYSIS

From the hypothesis test in tables 4.8 and 4.14, it can be seen that there has been a

marked improvement in the management efficiency of NITEL and NEPA since the

implementation of the Privatization and Commercialization programmes. This fact

is accepted because, the calculated Chi-square value of 28.21 is a lot greater than

the critical or tabulated value of 9.488 at 5% level of significance and 4 degrees of

freedom. Based on this, the null hypothesis is thus rejected.

HYPOTHESIS IV

The fourth hypothesis states that:

The service rendered by NITEL and NEPA has not improved reasonably since the

Privatization and Commercialization Programme was implemented. Research

Question 10 was used to gather information for the test of this hypothesis.

Table 4.10

Do you consider the services rendered by NITEL and NEPA better now than

before the implementation of the Privatization and Commercialization

programmes?

RESPONSES

NITEL

STAFF

NEPA

STAFF

GENERAL

POPULACE

TOTAL

PERCENTAGE

(%)

Yes

27

30

15

72

72

No

0

7

9

16

16

I don't know

9

3

0

12

12

TOTAL

36

40

24

100

100

82

DF = (R – 1) (C – 1)

= (3 – 1) (3 – 1)

= (2) (2)

= 4

Level of significance = 5%

Sample size = 100

Test statistic = X2 = (fo - ft)

2

Ft

Theoretical frequencies for the nine cells

ft = 72 (36) = 25.92 ft = 72 (40) = 28.8 ft - 72 (24) = 17.28

100 100 100

ft = 16(36) = 5.76 ft = 16 (40) = 6.4 ft = 16 (24) = 3.84

100 100 100

ft = 12 (36) = 4.32 ft = 12 (40) = 4.8 ft = 12 (24) = 2.88

100 100 100

83

Table 4.15

Computation of Chi-Square test Statistic.

fo

ft

(fo-ft)

(fo - ft)2

(fo - ft)2/

ft)

27

25.92

1.08

1.17

0.05

0

5.76

-5.76

33.18

5.76

9

4.32

4.68

21.90

5.07

30

28.80

1.20

1.44

0.05

7

6.40

0.60

0.36

0.06

3

4.80

- 1.80

3.24

0.68

15

17.28

-2.28

5.20

0.30

9

3.84

5.16

26.63

6.93

0

2.88

-2.88

8.29

2.88

TOTAL

21.78

Calculated value =12.56

Critical value =9.488 at 5% level of significance and 4 Degree of Freedom.

DATA ANALYSIS

The hypothesis test in tables 4.10 and 4.15 shows that the services rendered

by NITEL and NEPA are better now than before the implementation of the

Privatization and Commercialization programmes. This is supported by the

statistical evidence of the test statistic, which gives a calculated Chi-square value

of 21.78, which is greater than the tabulated value 9,488 at 5% level of significance

and 4 degrees of freedom. Thus the null hypothesis is thus rejected.

84

DISCUSSIONS

A research of this magnitude according to Dr Ikeagwu would be incomplete

without the discussion of the findings. This he said is aimed at harmonising the

various aspects and stages of the investigation, and explains the discoveries made

through interpretation, relating them to previous research works. From the various

literatures used for this research, it can be deduced that two major school of

thought has emerged on this topic. First the group that believes that these

progammes have worked tremendously and secondly the other group that believes

that it has done more harm than good.

It was therefore the sole aim of this work to determine the effect of these

programmes using two parastatals as case studies. Four- (4) hypotheses were

propounded with a view to determining just how far the objectives of these

programmes have been achieved. From the analysis it was discovered that the

results conforms to outcome of the majority of research that has been carried out in

this area. It was discovered that the objectives are being met and that is to say that

the programme is working.

The only major problem discovered was in the area of management inefficiency.

Infact Table 4.8 shows that it has not improved, on the other hand it was

statistically proven in Table 4.14 that it has improved significantly. This

discrepancy could be attributed to the fact that it was only a minority of the

respondents (made up of NEPA staff) who believed it has not improved. This

could be as a result of an internal management-staff problem rather than as an

outcome of the programmes. Yet on the other hand it could still be a big problem

that the government and management of these parastatals need to look into because

it has been proved times without number through various research works that the

major problem troubling our institutions and parastatals is that of management

inefficiency.

85

Nigerians as a whole has a terrible management culture and if this problem

could be resolved we will go a long way in achieving economic deliverance. One

major way of achieving this could be by effectively implementing these

programmes and making sure that only trained and skilled personnel's handles

appropriate posts.

86

CHAPTER FIVE

5.0 FINDINGS, RECOMMENDATION AND CONCLUSION.

5.1 SUMMARY OF FINDINGS:

The Privatization and Commercialization programme has dragged on since 1991,

when the Technical committee on Privatization and Commercialization (TCPC)

under (now late) Dr. Hamza Zayyad's leadership took the bull by the horns to

implement what, otherwise, had remained a mirage of an endless debate and talk

shows (Ezema, M. 2002 p. 33). Yet it has become obvious that the Privatization of

government owned parastatals and companies in Nigeria have not actually worked

out for some reasons.

In fact, some government enterprises scheduled for Privatization were not

financially viable to face the public required in the stock exchange market. Some

of these problems were because of poor performance of the enterprises concerned

in terms of profit marking, misappropriation of funds and inadequate funding from

the government.

As a result of all these and more, this research was carried out to determine the

effect of Privatization and Commercialization of government owned companies

using two parastatals, NEPA and NITEL as case studies.

Gathering data and carrying out the analysis did this. Summary of the findings

reveled that the productivity of NITEL and NEPA had improved over the years

since the implementation of Privatization and Commercialization most especially

Commercialization. There was also the general consensus that the productivity will

be greatly enhanced if the Privatization exercise were to be carefully and

effectively implemented.

87

It was equally discovered that the Privatization and Commercialization

programmes have boosted our economy. This was as indicated by increases in

government income, Per Capita income and GDP.

It was also statistically proven that the management efficiencies of these

parastatals have improved since the Privatization and Commercialization started.

Though, the general belief was that it has only improved minimally and as such a

lot needs to be done, as management inefficiency has become the bane of Public-

Owned Company.

It was finally revealed that the service rendered by NITEL and NEPA has

improved reasonably since the implementation of Privatization and

Commercialization programme. On the summary comparison of both parastatals, it

was generally accepted that NITEL services have improved over and above that of

NEPA though most respondents attributed this to digitalization.

5.2 RECOMMENDATION:

The Privatization and Commercialization programme is one of the most

controversial economic policies confronting Governments worldwide. It therefore

becomes imperative that the design and implementation of the programme to be

carried out meticulously. Some of these controversies usually arise from

government officials who have vested interest in the enterprise and the employees

of the affected enterprise whose fear augur imminent job loss. It is therefore

recommended that government must ensure that the regulatory environment and

competition policies must be part of the process of Privatization. Accordingly,

government must repeal all decrees/laws that inhibit competition and must pass

laws that protect investors.

88

Government should also be prepared to address any problem, which may

arise because of the Privatization and Commercialization programme. A proactive

programme of education of the labour union as a benefit of Privatization and the

protective safeguards against unmitigated loss of job should be embarked to avert

industrial crisis.

This trouble-shooting initiative is necessary because of incessant threats

from labour over sideling of labour issues in the Privatization and

Commercialization exercise. Take NITEL for example, it was stated by the union

that "the prevailing circumstances have eroded confidence and made the entire

workforce at NITEL very restive and agitated" (Ogidan, A. 2001 p.31). As a result

of this NEPA has taken the initiative to allay the far expressed by its workers over

the security of their jobs following formal takeover of it's marketing functions.

The enlightenment campaign on the other hand will help to solve the problem of

ignorance because it was discovered during the course of this research that one of

the greatest problems working against these programmes is that of illiteracy and

stark ignorance on the part of the workers.

Government sales option (of 40% to strategic partner, 20% Nigerian public

and 40% government) should be implemented accordingly or even at a reduced

equity holding by Government, however, it is recommended that Government

divests gradually it's remaining shares at a minimum rate of 55 per year to the

Nigerian Public. The advantage here is that the majority shares would be owned by

Nigerians, while government gets out of business. This was the same thing that

happened in the UK where 51% shares were sold while the government retained

49% shares, but progressively over 9 years the government sold off 48% of its

89

shares eventually retaining only 1% which enables it to enforce the provision that

no entity shall own more than 15-205 shares.

It is equally recommended that a second Telecommunication Network

Operator (Second carrier) be appointed immediately and be allowed to commerce

operation. It will also prepare the group to absorb good staff as may be displaced in

a Privatised NITEL and to offer real competition.

It is also recommended that the Privatization and Commercialization

exercise be complemented with other policies to promote competition and improve

efficiency of enterprises. This is because there are evidences to suggest that the

countries that have performed relatively well in Privatization and

Commercialization have been those that have also embraced comprehensive

economic reforms.

Government should ensure that there are no delays in implementing the

Privatization and Commercialization after deciding to Privatise because this

generally cause deterioration in performance and also lowers sale proceeds.

Government should always ensure that the Privatization and

Commercialization be transparent, competitive and fair.

Lastly, Government should ensure even spread among classes and regions of

Nigeria acquiring the 20% shares.

90

5.3 CONCLUSION:

Privatization has been embraced by most countries as one of the panacea within a

larger framework for redressing recurring economic problems. It is hoped that by

transferring ownership of government owned enterprises to the private sector,

economic growth would be enhanced because of these Privatised enterprises.

The approaches to Privatization have been varied while the outcome has

been generally diverse.

The economic implication of such programme depends largely on the

institutional administrative arrangement used in the implementation, the technique

of Privatization adopted and other policy reforms implemented along with the

Privatization and Commercialization. Survey of Privatization and

Commercialization experiences shows that different approaches to Privatization

and Commercialization produce different results.

In Nigeria, very strong legal and administrative machinery have been put in

place to guarantee the success of the programme.

The aims, objectives and scope have also been defined, more importantly,

the programme is not being carried out in a vacuum, it is being supported by

deregulation, stabilization and liberalization policies aimed at ensuring rapid turn

around of the economy.

The economic impact of the programme is unquestionably desirable. To

derive the maximum benefits from the programme, however, some of the current

policies and procedures should be reviewed to ensure improved efficiency of these

government enterprises after their Privatization and Commercialization, so that

such enterprises do not die under the yoke of unscrupulous investors.

91

REFERENCES

Ezema, M. (2000). Privatization: Fresh Perspectives to unanswered

questions. The Guardian. Vol.l8,No.8,584.P.33.

Ogidan, A. (2001). NITEL's Privatization: Government, Workers

Parley Over Labour issues. The Guardian

Vol.18, No.8,387.P.31.

92

BIBLIOGRAPHY

A Handbook of the Bureau of Public Enterprises. Guideline on Privatization of

Government Enterprises.

Adebusuyi., B. S., (1999). Restructuring Economies through Privatization: A

Comparative Analysis. Bullion. Vol., 23, No. 3.

Adeseri, A. (2001). NITEL: A battle won and lost. The Guardian. Vol.,

18, No. 8, 399.

Akpala, A. M, (1990). Business Government Relations in Nigeria.

Department of Business and Public

Administration, Anambra State University of

Science and Technology.

Ani, A. A. (1998). Guided Privatization in Nigeria. A keynote address

at the 1998 Director's Forum of the Institute of

Directors (IOD) at the Metropolitan Club, Lagos.

Anya O. A. (2000). Privatization in Nigeria. A paper presented at the

Nigerian Economic Summit at the Netherlands

Congress Centre (NCC).

Barley, K. O. (1982). Method of Social Research. (2nd

Edition) Free

Press, New York.

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Eke, E. (2001). NITEL staff reaps fruits of inefficiency. The

Guardian. Vol. 18. No. 8.399.

Eze, J. A. (1997). Politics in Post Independence Africa.

Management and Politics of Africa. Glanic

Ventures Press. Enugu.

Eze, J. A. (2000). The Role of Strategic Management. Topics in

Business policy. An Unpublished Work.

Department of Management, University of

Nigeria, Enugu Campus.

Ezema, M. (2000). Privatization: Fresh Perspectives to unanswered

questions. The Guardian. Vol. 18,No.8,584.

Ikeagwu, E. K. (1998). Groundwork of Research Methods and

Procedures; Institute for Development Studies,

International Monetary Funds (1995). Balance of payment statistics year Book,

Washington D. C.

Iromantu, O. C. (1999). Planning and phasing the Privatization of public

Enterprises in Nigeria. Bullion. Vol. 23, No3.

Iwayemi, A. (2002). Privatization as a catalyst for economic

Development Perspective .

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lyanda, O. & Oludeji, O. (1989). Commercialization of Public Enterprises. A

paper presented at the National Seminar on

Commercialization of Public Enterprises at

NICON Hilton Hotel, Abuja.

Ndanusa, M. S. (2000). Discourse. Abuia Mirror.

Obadina, T. (1998). Nigeria unveils new Privatization Plan.

African - Recovery. Vol. 12, No 3.

Obaji, U. O. & Verr. B. A. (1999). Planning and Phasing the Privatization of

Public Enterprises in Nigeria. Bullion. Vol.

23, No. 3.

Obaji, U. O. (1999). Analysis of the Nigerian Privatization

Programme: 1988-1993: Lessons of

Experiences. Bullion. Vol. 23, No 3.

Obelle, D. U. (1995). Privatization and Commercialization of

Public Owned Companies. A Project work

submitted to the Department of

Management. University of Nigeria, Enugu

Campus.

Ogidan, A. (2001). NITEL's Privatization: Government,

Workers Parley Over Labour issues. The

Guardian Vol.18, No.8,387.

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Onudugo, . V. A. (1995). Effects of the Commercialization of NITEL:

A Project work submitted to the Department

of Management. University of Nigeria,

Enugu Campus.

Osuala, E. C. (1987). Introduction to Research Metrology.

African Fep. Onitsha.

Oyejide, T. A. & Soyibo, A. (2001). Corporate Governance in Nigeria.

Paper presented at the Conference on

Corporate Governance, Accra, Ghana.

President Olusegun, Obasanjo (1999). The imperative of Privatization. Speech by

President Olusegun Obasanjo, on the

occasion of the inauguration of the National

council on Privatization.

Privatization in Africa.Past, Present and Future: A Report presented at the third

African Privatization in Accra,

Ghana. September 1999.

Ugwoke, F. (2000). Ports Privatization: The Battle between FG

and labour. Maritime Watch.

Verr, B. A. (1999). Issues in Privatization of Public Enterprises.

Bullion Vol. 23, No. 3.

WTO (1998). Economic effects of Services

Liberalization. Background Note by the

Secretariat, Geneva

96

Department of Management

Graduate School of

Business Administration

University of Nigeria Enugu

Campus.

May, 2002.

Dear Respondent,

THE EFFECT OF COMMERCIALIZATION AND PRIVATIZATION OF

GOVERNMENT OWNED COMPANIES: A STUDY OF NEPA AND

NTTEL

I am a postgraduate student of the above department and institution, carrying

out a research work on the above-mentioned topic. This study is in partial

fulfillment of the conditions for the award of post of Masters of Business

Administration in Management.

This work is purely for academic purpose and is expected to get the necessary-

responses that will enable the research test the validity of research work under

study.

The information supplied will be treated with strictest confidence.

Thanks for your maximum cooperation.

Yours faithfully,

OKAFOR MARIAM CHIKA

97

QUESTIONNAIRE TO NITEL STAFF

1. Has Your Company been? -

(a) Privatised; (b) Commercialised; (c) Both

2. What were the problems facing your Company before Privatization and

Commercialization?

(a) Management inefficiency (d) Undue interference

(b) Low-Productivity (e) All of the above

(c) Turn over

3). Do you think the Government took the best option in opting for

Privatization and Commercialization as a way of restructuring the

economy?

(a) Yes (b) No (c) I Don't Know

4. What problems are associated with the Privatization and

Commercialization exercise in NITEL ?

………………………………………………………………………………

………………………………………………………………………………

5. In your opinion, what do you think are the effects of Privatization and

Commercialization of Government owned Companies

…………….......................................................................................................

..........................................................................................................................

98

6. What do you think the Government stands to gain from the Privatization

and Commercialization of your Company?

………………………………………………………………………………

………………………………………………………………………………

7. What do you think are the effects of Privatization and Commercialization

exercise on the economy of Nigeria?

………………………………………………………………………………

………………………………………………………………………………..

8. What do you think the Nigerian populace stands to gain from the

Privatization and Commercialization of your Company and other

Government owned Company?

………………………………………………………………………………

……………………………………………………………………………….

9. Can you say that NITEL is keeping pace with its set objectives?

(a) Yes (b)No

10. If you answered 'YES' above, do you think it started since after the

Privatization and Commercialization exercise?

(a) Yes (b)No.

11. In your own opinion, do you think the Privatization and

Commercialization programmes have gone a long way to improve on

management efficiency:

(a) Yes (b) No (c) I don't Know

99

12. Has the Profit earnings of your Company increased since the Privatization

and Commercialization exercise?

(a) Yes (b) No (c) I don't Know

13. How do you view the future prospects of your establishment?

...........................................................................................................................

...........................................................................................................................

14. Do you think the services rendered by your institution are better now as

before its Commercialization?

(a) Yes (b) No (c) I don't know

15. What do you think needs to be done to make your parastatal, Nigerians

and the National economy benefit more from the Privatization and

Commercialization exercise?

(a) A Lot (b) Nothing (c) I don't know

100

QUESTIONNAIRE TO THE GENERAL POPULACE

1. Are you a Corporate or Private user of NITEL services?

(a)Corporate (b)Private

2. How long have you been a subscriber to NITEL?

(a) Over 20 years (c) 5 -10 year

(b) 10-20 years (d) Less than 5 years

5. In your opinion, how would you rate the performance of Public

enterprises in Nigeria?

(a) Doing very well (c) Doing fairly well

(b) Doing well (d) Doing badly

4. Do you think the Government took the best decision in opting for

Privatization and Commercialization as a way of restructuring Public

enterprises?

(a) Yes (b) No (c) I don't know

5. Do you consider the services rendered by NITEL to the General Public

quicker now than before?

(a) Yes (b) No (c) I don't know

6. Comparing the charges now and before in relation to the services

rendered, how would you describe the situation?

(a) Too costly (c) Cheap

(c) Reasonable (d) No significant change

101

7. In your opinion, how would you assess the services being rendered by

NEPA presently?

(a) Excellent (c) Fair

(b) Good (d) Poor

8. Considering the fact that NEPA is soon to be Privatised, in your opinion,

how do you think this will affect it's marketing functions?

(a) Adversely (b) Minimally (c) I don't know

9. How do you think Privatization and Commercialization programmes will

affect our economy?

………………………………………………………………………………

………………………………………………………………………………

10. Do you think these programmes have in anyway improved the

management efficiencies of these parastatals?

(a) Yes (b) No (c) I Don't Know

11. In your opinion, do you think these programmes have improved the

productivity of these parastatals?

(a) Yes (b) No (c) I Don't Know

12. What do you think the Nigerian populace stands to gain from

the implementation of Privatization and Commercialization in these

parastatals?

(a) A Lot (b) Nothing (c) I Don't Know

102

13. What problems do you envisage from the implementation of these

programmes?

………………………………………………………………………………

………………………………………………………………………………

14. What is you summary comparison of NITEL and NEPA services now as

before Privatization and Commercialization?

………………………………………………………………………………

……………………………………………………………………………....

103

QUESTIONNAIRE TO NEPA STAFF

1. How would you generally assess the performance of Public Companies in

Nigeria?

(a) Excellent (b) Fair

(c) Good (d) Poor

2. In your opinion why do you think Government Companies do not do well?

………………………………………………………………………………

……………………………………………………………………………….

3. What do you think is the basic problem that is necessitating the

Privatization of your Company?

(a) Inefficiency (c) Misappropriation of fund

(b)Low turn over (d) Low capitalization

(e) All of the above

4. In your own opinion, what do you think need to be done to make your

Company, Nigerians and the National economy benefit more from the

Privatization exercise?

………………………………………………………………………………

……………………………………………………………………………….

5. What in your opinion do you think are the problems associated with

Privatization and Commercialization of public owned companies?

….......................................................................................................................

..........................................................................................................................

104

6. Do you think your Company will be able to cope with these problems?

(a) Yes (b) No

7. What do you think the Government stands to benefit from the Privatization

of your Company?

………………………………………………………………………………

………………………………………………………………………………

8. What do you think the Nigerian populace stands to benefit from the

Privatization and Commercialization programmes?

…………………………………………………………………………………………

…....................................................................................................................

9. In your own opinion, do you think that the Privatization and

Commercialization of your Company will achieve the desired objectives?

(a) Yes (b) No (c) I Don't Know

10. How do you rate the morale of your workers concerning the Privatization

and Commercialization of your Company?

(a) High (b) Low (c) I don't know

11. Do your think that the Privatization of your marketing functions will

increase the profit earnings of your company?

(a)Yes (b) No (c) I don't know

105

12. Do you think these programmes have improved on the management

efficiency in your parastatal?

(a)Yes (b) No (c) I don't know

13. Do you think the Government is justified for opting for the Privatization

and Commercialization programmes ?

(a) Yes (b) No (c) I don't know

14. Do you think the Privatization of your company will go a long way in

increasing the productivity of the economy?

(a)Yes (b) No (c) I don't know

15. How do you view the feature prospects of your Company?

(a)Promising (b) Bleak (c) I don't know

106

APPENDIX I

PRIVATIZATION

SECTOR

NO OF

COMPANIES

TYPE

Development Banks

4

Partial Privatization

Commerce and Merchant Banks

12

“

Oil Marketing Companies

3

“

Steel Rolling Mills

3

“

Air and Sea Travels

2

“

Fertilizer Companies

2

“

Motor Vehicle Assembly Plants.

6

"

Paper Mills

3

“

Sugar Companies

3

“

Cement Companies

5

“

Hotel and Tourism

4

Full Privatization

Textile Companies

3

“

Transportation Companies

4

“

Food and Beverages Companies

6

“

Agric. And Livestock Production

18

“

Salt Companies

2

“

Wood and Furniture Companies

2

“

Insurance companies

14

“

Film Production and Distribution

2

“

107

Flour Milling

1 “

Cattle Ranches

2

“

Construction and Engineering Coy

4

“

Diary Companies

2

“

Others

2

“

Total Number of Affected Enterprises.

111

The deconsolidation of Durbar Hotel Limited into Durba Hotel Pic. Kaduna and

Festac 77 Hotel increased the number of affected Enterprises from 110 in the

Decree to 111 as above.

COMMERCIALIZATION

SECTOR

NO OF

COMPANI

ES

TYPE

1. River Basin Development

11

Partial Commercialization

2. Authorities

1

“

3. Nigerian Railway Corporation

1

“

4. Nigerian Airport Authority

1

“

5. National Electric Power Authority

1

“

6. Nigerian Security Printing and Minting

Company Ltd.

1

“

7 National Providence Fund

1

“

8 Delta Steel Company Ltd.

1

“

108

9 Nigeria Machine Tools Ltd. 1 “

10 Federal Housing Authority 1 “

11 Kainji Lake National Park 1 “

12 Federal Radio Corporation 1 “

13 News Agency of Nigeria 1 “

14 Nigerian National Petroleum Corporation 1 Full Commercialized

1 5 Nigerian Telecommunication Ltd.

1

“

16 Associated Ore Mining Company Ltd.

1

“

1 7 Nigerian Coal Corporation

1

“

18 Nigerian Insurance Corporation of

Nigeria.

1

“

19 Nigeria Re-insurance Corporation

1

“

20 National Properties Ltd.

1

“

21 Tafawa Belewa Square Management 22

Committee

1

“

23 Nigeria Ports Authority 1 “

24 Africa Pre-insurance Corporation 1 “

Total No of Enterprises to be Commercialised. 34

The African Re-insurance Corporation was inadvertently included in the Decree as a

multilateral Company. Nigeria could not take unilateral action to reform the organization.

This reduced the number to be Commercialised to 34.

109

APPENDIX II

A. PUBLIC OFFER OF SHARES THROUGH THE NIGERIAN STOCK

EXCHANGE: (35 No).

1. Floor Mills of Nigeria Plc.

2. African Petroleum Plc.

3. National Oil and Chemical Marketing Co. Plc.

4. Unic Plc.

5. American International Insurance Company Nig. Ltd.

6. Prestige Assurance Nig. Ltd.

7. Royal Exchange Assurance Nig. Ltd.

8. Sun Insurance Co. Plc.

9. Niger Insurance Co. Plc

10. Nem Insurance Co. Plc

11. West Africa Provincial Insurance Company Plc.

12. American Insurance 123 ov.

13. Crusader Insurance Co. Plc

14. Guinea Insurance Co. Plc.

15. Law Union and Rock Insurance Company Plc

16. United Nig. Life Insurance Company Plc.

17. Ashaka Cement Company

18. Nigerian Yeast and Alcohol Manufacturing Plc.

19. Okomu Oil Palm Co. Plc.

20. National Salt Company of Nigeria Plc.

21. Agip Eku Oil Palm Co. Plc.

22. Benue Cement Company Plc.

23. Unipetrol

110

24. Abatex Plc

25. Imprest Bakolori Plc.

26. Cement Co. of North Nigeria Plc.

27. FSB International Bank Plc.

28. NAL Merchant Bank Plc

29. First Bank of Nigeria Plc.

30. Savannah Bank of Nig. Plc.

31. Union Bank of Nigeria Plc

32. IMB Plc

33. Allied Bank of Nigerian Plc.

34. United Bank for Africa Plc

35. Afribank Nigeria Plc.

B. DIFFERED PUBLIC OFFER

1. Tourist Company of Nigeria Ltd. (Federal Palace Hotel)

2. Durbar Hotel Plc

.

C. SALE OF ASSETS BY PUBLIC TENDERS (7 No.)

1. National Root Crop Production Co. Ltd.

2. Nigerian Grains Production Co. Ltd

3. Nigerian National Shrimp Company Ltd.

4. Central Water Transport Co. Ltd.

5. Nigerian National Co. Ltd.

6. Motor Engr. Services Co. Ltd.

7. Sokoto Integrated/Stock.

111

D. PRIVATE PLACEMENT.

1. Nichemtex Industries Ltd.

2. Merchant Bank for Africa Ltd.

3. Electric Meter Co. Plc

4. North Brewery Ltd.

5. West African Distillers Ltd.

6. Necco Ltd.

E. MANAGEMENT BUY OUT

1. National Cargo Handling Co. Ltd.

The Balance of 59 schedules enterprises were dealt with as follows:

F. PRIVATISED BY THE FEDERAL MINISTRIES OF AGRICULTURE

AND TRANSPORT PRIOR TO THE ESTABLISHMENT OF THE

TECHNICAL COMMITTEE ON PRIVATIZATION AND

COMMERCIALIZATION (TCPC) IN 1988 (18 No).

i) By The Federal Ministry of Agriculture, Rural Development & Water

Resources.

1. Nigerian Diaries Company Limited, Kaduna.

2. National Poultry Production Company Limited.

3. National Animal Feed Company Limited, Port Harcourt

4. Mandare Diary Company Limited, Vom.

5. National Livestock Production Company Limited, Kaduna.

6. Manchock Cattle Ranch, Manchok.

112

7. Poultry Production Units in Jos, Ilorin and Kaduna.

8. Kano Abattoir Company Limited, Kano.

9. Nigeria Beverages Production Company Limited, Yola.

10. Mokwa Cattle Ranch, Mokwa.

11. Bauchi Meat Factory and Galambi Cattle Ranch

12. Minna Far, Minna.

13. Umuahia Pig Farm, Umuahia.

14. Giant Cold Store, Kano.

15. Nigeria Ranches Company, Kaduna.

16. Kaduna Abattoir and Kaduna Cold Meat Market.

17. Nigeria Food Company Limited, Maiduguri

ii) Federal Ministry of Transport

1. National Freight Company Limited.

G. STEPPED DOWN TO FULL COMMERCIALIZATION (5 No.)

1. Nigerian Industrial Development Bank Ltd.

2. Nigerian Bank for Commerce and \Industry Ltd.

3. Federal Mortgage Bank of Nigeria Ltd.

4. Federal Supper Phosphates Fertilizer Company Ltd.

5. National Fertilizer Company of Nigeria (NAFCON)

H. NO FURTHER PRIVATIZATION ACTION NECESSARY

In all, there were eleven (11) enterprises under this heading. The reason in

each case indicated against the particular enterprises. The full details are as

follows:

113

S/N ENTERPRISES REASON

1. Specomills Textile Ltd. Nigerian Army to retain its holding via

Defense Industries Corporation

2. Nigerian Yeast and Alcohol

Manufacturing Company Ltd

Duplicated in the Decree

3. Nigerian Film Distribution

Company Ltd.

Before the promulgation of decree 25 of

1988, this Company has merged with the

Nigerian Film Corporation (see 11 below)

4. Mercury Assurance Co. Ltd. Shares returned to the company by MOFI

because there were wrongly acquired under

NEPD 77.

5. Roads Construction Company of

Nigeria Ltd.

In liquidation by the Federal Ministry of

Works and Housing through sales of assets.

6. Sunti Sugar Company Ltd. Yet to be developed

7. Lafiaji Sugar Company Ltd. Yet to be developed

8. Nigerian Cement Co. Ltd.

Nkalagu

Federal Government’s interest diluted

below the approved threshold shareholding

of 10%

9. Nigeria National Paper

Manufacturer Co. Ltd., (Iwopin)

Still at project stage

10. Nigeria fruits Co. Ltd. Non Exist

11. Nigeria Film Corporation Nothing to Privatize because the operating

asset belongs to the Federal Ministry of

Information and Culture. No equity capital

operates on normal annual subvention from

the Government

114

i) YET TO BE PRIVATISED (25 No)

1. 3 Nos. Inland Steel Rolling at Jos, Oshogbo and Kadunna

2. Nigeria National Shipping Line Ltd. – Subsequently liquidated by the

Federal ministry of Transport.

3. Nigeria Paper Mill Jebba.

4. The Nigeria Newsprint Manufacturing Co. Ltd.

5. Savannah Sugar Company Ltd. Numan

6. Volkswagen of Nigeria Ltd. Lagos.

7. Peugeot Automobile Nigeria Ltd. Lagos.

8. Leyland Nigeria Ltd. Ibadan.

9. Anambra Motor Co. Ltd. Onitsha

10 Steyr Nigeria Ltd. Bauchi

11 Nigeria Truck Manufacturers Ltd. Kano

12 Calabar Cement Co. Ltd.

13 Nigerian Airways Limited.

14 Nigerian Newsprint Manufacturing Co. Ltd.

15 South-East Rumanian Wood Ind. Ltd. Calabar.

16 Nigeria-Romanian Wood Ind. Ltd., Calabar.

17 Ore-lrele Oil Palm Co. Ltd. Ondo.

18 Ihechiowe Oil Palm Co. Ltd.

19 Nigerian Arab Bank Plc.

20 Continental Merchant Bank Plc.

21 Nigeria Hotels Plc.

22 Festac 77 Hotel Plc.

(ADOPTED FROM THE WORK OF CHIEF OKPA OBAJI, 1999).