THE IMPACT OF PRIVATIZATION ON NIGERIA MONEY MARKET
The researcher looked into the impact of privatization on Nigeria money market with the Central Bank of Nigeria as the case study. For the purpose of clarity, this project has been divided into five chapters.Chapter one deals with the introductory part of the project, statement of problems, objective of the problems of the research.Chapter two discussed the literature review. It went into analysis of the relevant materials, which are directly related to the project and equally those that are not directly related to it.Chapter three went into the research design and methodology, source of data and the instruments in data collection.Chapter four, emphasized on the analysis and presentation of data based on the questionnaire.Chapter five which is the last chapter, discussed the summary of the work, finding and recommendation on the project work.
The topic of this research paper is the impact of privatization on Nigeria money market. We will concentrate on the effect of the privatization on Nigeria money market. Undoubtedly, there are many organization ranging from government to the hand of individual. In this report, the establishment of statutory corporations and state owned companies are tools of public intervention. There was also consideration arising from the dangers of leaving the care sector of the economy in the hands of government and large – foreign business organization considering these reasons and others, public enterprises was seen as crucial in Nigeria guest for the true national economic independence and reliance. The economic and financial analysis has never relented in the reminding of the worthy of the need to operate these government enterprises with reasonable efficiency. It was recognized as far back as 1950 which led to a situation where many of the public enterprises operated in some form of quasi commercial organization. Some of the reasons for this development include:
1. Government system of accounts is designed to facilitate close-expenditure control by the legislature and necessarily to promote operational efficiency.
2. The necessity to minimize political pressure and partisan influence in some sensitive social institutions in order to sustain confidence in their policies and programmes.
3. commercial undertakings lead to generate an atmosphere of initiative and release greater energy on the part of operational personnel.
4. It is being doubtful whether the private enterprises will sustain the magnitude of investment need in certain vital areas of development.
5. The normal government machines do not tend it to the speedy decisions so needed for commercial operations. However, the situation on ground was that the real performance of the public enterprises in Nigeria have left much to be desired, many were not responsive to the changing requirements of a growing and dynamic economy and they did not possess the necessary tools for translating into reality the hope of successful commercial operations in this difficult condition faced by the public enterprises in Nigeria. The Central Bank of Nigeria (CBN) and the Nigeria Stock Exchange has used privatization and commercialization policy to encourage the growth of our economy and create an avenue for individual investor. Privatization has gained much more prominence than commercialization in Nigeria recent time. Proprietor of privatization in Nigeria have argued against the continued existence of government in the public enterprises because of the economically inefficient and wasteful of resources as well as domestic and foreign credit.
1.1 BACKGROUND OF THE STUDY:
Privatization has contributed greatly to the growth of Nigeria economy by regulating inefficient and unaccountability in resources distribution and control. Furthermore, the criticism have being made against the background that as of today, inspite of the heavy public sector interaction and ownership of the enterprises, the vast majority of Nigerians are still going without access to the most basic infrastructure such as water, electricity, telephones etc. This has helped to bring the privatization policy as a notable option. Privatization has circulated into so many economic streamlets different degrees in different parts of the world, particularly in developing economics. The activities relating to the programme have been on the increase in recent times during early 1980’s for instance Structural Adjustment Programme (SAP) which was promoted by major international bilateral and multilateral agencies. During the administration of Babangida, it was heralded in the price decree of 1988 which the Abacha administration propagated and pursued and was restated to its commitment on October 1, 1998 by General Abubakar to the programme and government intention towards privatization on investments in telecommunication, electricity, petroleum refineries, petro-chemical and tourism and bitumen production. This is the first round of privatization during the past administration.
Secondly is the legal work of privatization which was put in place with promulgation of public enterprises (privatization and commercialization decree No. 28 of 1999 which provided for the full privatization of 25 or more public enterprises involved in oil, cement, banking, agro-allied, motor vehicles, assembly and hotel activities, and it also provide partial privatization of 37 enterprises in sectors ranging from telecommunication to sager manufacturing under full privatization, the government share holding would become zero, while at the partial privatization would be maximum of 35% to 40% in any case the core investors are expected to hold the maximum of 40% while a minimum of 20% would go to the Nigeria public allocated through the public offer, another good development of the offer decree, is that it provides full commercialization of nine enterprises and partial commercialization of 24 others, these are about commercialization and it was not disclosed in this work because our major concentration is on privatization.
1.2 RESEARCH QUESTIONS:
This research is set out to carry out investigation on the effects and impact of privatization on the Nigeria money market and the Nigerian economy as a whole and may be summarized as follows:
1. To rationalize public enterprises in order to increase efficiency.
2. To deregulate the economic system by reducing unnecessary administrative controls of government.
3. To minimize the volume of unproductive instruments in the public sector.
1.3 STATEMENT OF THE PROBLEMS:
In the money market, there has been an import and fall out on privatization programme due to the exercise in the money market. By this statue the privatization companies are to be quoted on the Central Bank right from 1988 when the exercise took effect and it expected that the money market would be appreciably developed and boosted in its operatives, the significant impact in such market devices as market capitalization numbers of instruments, value of operations and it has not being properly cleared whether or not these expectation are realized. There are at least few studies that have empirically demonstrated this, using Nigeria as evidence, the need therefore, arise for a study to menacingly determine the direction and magnitude of the effect of privatization on development of the Nigeria money market.
1.4 RESEARCH QUESTIONS:
In this study paper, we will attempt to answer questions that are incidental to this research topic, they are as follows:
1. What are the major problems confronting the privatization programme in its contribution to the Nigeria money market?
2. To what extent has privatization exercise which the Nigeria government has been carrying out over the years affected the money market?
3. In what ways has privatization significantly and specifically affected the market indicators at the market capitalization stock index, and volumes and value of transaction?
1.5 RESEARCH HYPOTHESIS:
The hypothesis follows guard the analysis of this study and is directly related to the objective and problems of this research paper. They have been selected to make findings and concentrate statements on the effects of the on-going privatization progamme in the money market. These hypothesis are stated in the null as follows:
Ho There is no significant difference in the stock.
Ho There is no significant difference in the market between the period prior to the privatization and period after.
Ho There is no significant difference in the value of transaction in the Central Bank between the period before and after privatization.
1.6 SIGNIFICANCE OF STUDY:
This research is significant in number of ways. This study would serve to provide a spring board towards amendments where it is necessary. Its finding and recommendation would be useful to a wide range of persons or groups who are interested in the operations of the money market among them are policy markets, money market operators, practitioners, investors and other authorities. Researcher and students would find the information contained therein very valuable in providing a good foundation for further research and relevant works.
1.7 SCOPE OF STUDY:
This researcher would have been involved in a more elaborate study of all the department in the organizations, but the researchers in this study are intended to study the impact of privatization on Nigeria money market. This research work examined the necessary market indices over a period covering ten years after privatization had been introduced which is
1.8 ORGANISATION OF STUDY:
This research report is classified into five chapters. The first chapter is the introduction to the study and it contains the overview and statement of the research problems, objectives and statement of the research problems, objectives and hypothesis. The research questions and the significance to the study are also part of this section, it is oriented up terms. The chapter two is about the literature and their review and theoretical framework and issues to the topic. The third chapter covers the research methodology of the works which contains the research designs, sampling procedure, research questionnaire and data collection and data analysis techniques. The fourth chapter is the presentation and analysis of data collected in the facts finding activity. The chapter five is the summary of the major findings, recommendation and conclusion are being carried out in this chapter.
1.9 DEFINITION OF TERMS:
The terms listed below are used in this and shall be defined below:
(a) PRIVATIZATION: This is a programme of divesting government interest, ownership and control of certain public enterprise and transferring same into the hands of private sector economic units which can be done in full or in part.
(b) FULL PRIVATIZATION: This means divestment by the federal government of all its ordinary shareholding in designated enterprise. Particularly affected are enterprises which produce goods that are not essential in nature.
(c) PARTIAL PRIVATIZATION: This means divestment by the federal government of part of its ordinary shareholding in designated enterprises.
(d) MONEY MARKET: This refer to an arrangement whereby short term borrowers (deficit economic unit) short-term lenders (surplus economic unit) are brought into contractual.
(e) COMMERCIALIZATION: This means the reorganization of enterprises wholly partly owned by the federal government in which the commercialization enterprise shall operate as profit making commercial ventures and without subvention from the governments.
(f) AUTOMATIC TELLER MACHINE (ATM): They are electronic devices employed to withdraw funds automatically without the need to complete withdrawal documents. ATM works through electronic systems share an account holder is assigned that ensures access to the account for withdrawal by the account holder. One of its advantage is that it can be installed at any safety location outside the bank office ensuring withdrawal of funds at any time for immediate use without recourse to the bank that hold the account, it is not common in Nigeria banking system relationship.
(g) SECURITIES: These are financial documents evidencing claims which some economic units are obligated to perform according to the state terms of the document and they are certificates of IOU which an economic units issues to another. They are called financial assets or instruments.
In this chapter, the research attempts to lay down the necessary foundation and direction for the study, it is clear from the chapters that the privatization policy was designed to promote major international bilateral and multilateral agencies in Nigeria as an integral part of the nations economic adjustment programme. The policy of privatization was introduced in order to discontinue with public enterprise as they were economically inefficient and wasteful of resources on our economy. Privatization polices are currently being pursed in different degrees and in different parts of the world particularly in developing countries like Nigeria. The research in furtherance of the study have an overview of general background for the study, the problem and purpose of the study, the research question and hypothesis were also stated. The chapter is comprised of the significant of the study and definition of terms.
FGN (1988) Privatization and Commercialization Decree No. 25 Lagos
Financial Management Vol. II by Dr. John Orji.
FGN (1998) Privatization and Commercialization Decree 1988 FRN official
Gazette No. 42 Vol. 75 FG Press Lagos.
Ajakaiye, D. O. (1984) “Impact of Public Enterprise performance in Nigeria,
Nigeria Journal of Economic and Social Studies, Vol. 26 No. 3.