CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Public companies were created to boost Nigeria's socioeconomic growth, particularly following the country's independence in 1960. The primary objective in this respect had been to expedite economic development and self-sufficiency through "economic nationalism." Thus, public businesses represent one of the means through which the government intervenes in economic growth, rather than allowing market forces to control its pace. Up until the mid-1980s, Nigeria depended significantly on state corporations for the creation, administration, and distribution of utilities and social services, according to Ayodele (2022). They were viewed as crucial vehicles not only for the mobilization and allocation of public investment resources, employment production, and income redistribution, but also for the determination of government budgets and the acceleration of economic development as a whole.

Reflecting on Turkey, Mexico, India, and Nigeria, Adeyemo (2022) stated that the construction of public businesses in the post-independence governments was predicated on hurdles to economic development. Furthermore, it is crucial to remember that in Nigeria, like in many developing nations, the public sector is the employer of last resort. According to Mansor (2022), state-owned firms permit governments to achieve social fairness objectives that the market normally disregards. Similarly, Ugorji (2022) noted that the establishment of public enterprises was motivated by politics. Numerous government projects were utilized to employ constituents, political allies, and friends. The placement of public firms and the distribution of government employees have also been supported on the basis of the necessity to preserve.federal character and foster national cohesion.

The indigenization strategy of 1972, as established by the Nigerian Enterprises Promotion Decree, was another reason in the rapid expansion of Nigeria's public sector. It was aimed to dominate the economic commanding heights. In addition, the program provided the much-needed legal framework for widespread government ownership and control of important economic sectors. According to Adeyemo (2022), notwithstanding the incentive provided to them, Nigerian state enterprises have received severe criticism. Due to the magnitude of their challenges, a huge number of Nigerians felt disillusioned. These complaints range from a lack of profitability and efficiency to a dependency on substantial government subsidies. Ogundipe (2022) once stated that government capital investments in public firms totaled around 23 billion Naira between 1975 and 1985. In addition to equity investments, the government provided several government companies with N11.5 billion in subsidies. All of these expenditures significantly increased the government's spending and deficits.

Despite the substantial share of public budgetary investible money that were provided to these firms, public expectations were generally unfulfilled. In addition, state firms were grossly mismanaged, which led to inefficiencies in the utilization of productive capital, corruption, and nepotism, which hampered the government's capacity to carry out its duties effectively (World Bank, 2021). However, as a result of the global economic crisis's negative effects on the Nigerian economy, the public sector-led development model proved untenable. This in turn prompted significant economic adjustments and changes, one of which is the emphasis on less government involvement in Nigeria's production, administration, and distribution of resources. Thus, according to Nwoye (2022), the Privatization and Commercialization Act of 1988 established the Technical Committee on Privatization and Commercialization (TCPC), with the responsibility to privatize 111 public firms and commercialize 34 others. The 1993 Bureau for Public Enterprises Act, which replaced the 1988 Act and established the Bureau for Public Enterprises (BPE) to conduct the privatization program in Nigeria, was enacted by the Federal Military Government. In 1999, the government of the United States passed the Public Enterprise (Privatization and Commercialization) Act, which established the National Council on Privatization (NCP) under the direction of the Vice President.

1.2 STATEMENT OF THE PROBLEM

Privatization has its own unique issues. In this perspective, it is necessary to assess privatization's goals. In Guislain's view, setting privatization objectives is a crucial task that should be addressed as soon as feasible. Numerous privatization efforts have failed due to the absence of defined objectives or the pursuit of contradictory aims at the same time. Defining objectives is a difficult undertaking, made more difficult by the multitude of possible aims and individuals with varied, sometimes competing interests.

According to Adesanmi (2022), the government established the Bureau of State Enterprise (BPE) with the intention of privatizing and/or commercializing public firms in order to reduce or eliminate the drain on the public budget. It also seeks to eradicate corruption, modernize technology, develop local capital markets, promote efficiency and better management, reduce debt load and the budget deficit, tackle significant pension financing issues, and broaden company ownership. Other objectives include producing cash for the Treasury, enhancing governance, luring foreign participation, and luring back capital flight. It is debatable whether or not the BPE has attained and accomplished these aims. The purpose of this research was to evaluate the operation of the privatization program in Nigeria and to establish its degree of performance/productivity. In addition, it proposed objective strategies for the closure of gaps (Nwoye 2022).

Microeconomic theory predicts that incentive and contracting issues contribute to inefficiencies resulting from public ownership, given that managers of state-owned companies pursue different goals than those of private corporations and are subject to less oversight. Not only are the aims of the management twisted, but their budgetary limits are also loosened. In a number of nations, empirical data demonstrates a strong confirmation of this theoretical consequence. How applicable is this to Africa? The research will also evaluate the structure of the contracts between these companies and the government throughout the pre-reform and post-reform eras, demonstrating how the contracts handle three connected issues: information asymmetry, incentives, and commitment (Ogundipe 2022).

1.3 OBJECTIVES OF THE STUDY

The main aim of this study is to examine the consequences of privatization on the productivity of formerly state-owned businesses/firms. Specifically, this study seeks to:

i.          To determine the extent of privatization on state-owned businesses/firms.

ii.        To determine whether privatization of state-owned businesses/firms has improved enterprises.

iii.      To examine the factors that affects of privatization of state-owned businesses/firms.

iv.      To examine the results of privatization of state-owned businesses/firms has improved enterprises.

1.4 RESEARCH QUESTIONS

The following research questions will be answered in this study;

i.          What is the extent of privatization on state-owned businesses/firms?

ii.        Has privatization of state-owned businesses/firms has improved enterprises?

iii.      What are the factors that affects of privatization of state-owned businesses/firms?

iv.      What are the results of privatization of state-owned businesses/firms has improved enterprises?

1.5 SIGNIFICANCE OF THE STUDY

This study is greatly significant to the society and the government as the findings of this study will reveal the extent of privatization on state-owned businesses/firms, the factors that affects of privatization of state-owned businesses/firms and the results of privatization of state-owned businesses/firms has improved enterprises.

Selected staff of National Council on Privatization, Abuja will serve as enrolled participants for the survey of this study.

1.6 SCOPE OF THE STUDY

Generally, this study is focused on the consequences of privatization on the productivity of formerly state-owned businesses/firms. Precisely, this study is focused on determining the extent of privatization on state-owned businesses/firms, determining whether privatization of state-owned businesses/firms has improved enterprises, examining the factors that affects of privatization of state-owned businesses/firms and examining the results of privatization of state-owned businesses/firms has improved enterprises.

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