PROBLEMS AND PROSPECTS OF PRIVATIZATION AND COMMERCIALIZATION OF GOVERNMENT PARASTATALS IN NIGERIA

CHAPTER ONE:

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The key component of the federal Government Adjustment programme is the drive towards higher efficiency in the public sector. This necessitated the promulgation of privatization and commercialization Decree 25 in 1988 by the federal Government in which was reflected that government will divest it holdings in agricultural production, electrical appliances, hotels, foals and non strategic industries. Government will also reduce its holdings in banks insurance companies and other financial enterprises without losing control. Privatization is thus, process of divesting government ownership control and management of enterprises and agencies to private individuals and or groups of individual or business firms that are seeking their profit. This is transfer of government owned industries or parastatals to the private sector. Hemmings aptly, described privatization as a laudable policy to help moderate the quantity of securities available for dealing on the stock exchange the described further as the transfer of ownership and control of assets from the public to private sector. Commercialization on the other hand means that the signaled enterprise will be excepted to generate enough revenue to cover their operation expenditure while government gives them capital grant to finance their capital intensive projects. As a matter of feet, commercialization under the Decree 25 of 1988 on privatization and commercialization was defined as the re – organization of enterprises wholly or partly owned by the federal Military Government such that these enterprises shall operate as profit these making commercial ventures and without subvention from the federal Government. The Government involving itself in business enterprises came as a result of predominance of state owned enterprises reflected a desire to control the economy after the colonial rule in the country.

The 1983 presidential commission on parastatals, examined the operating all the parastatals with a view to determine the basis for new funding scheme appropriate capital structure as well as incentive measured to enhance their productivity and general efficiency. Following the commissioning, the year 1989 was earmarked was earmarked, the first year of implementation of the privatization and commercialization programme of the federal government of Nigeria. It was firs announced in 1986 as part of the board efforts to reduce budgetary allocation to public sector efficiency and support the aim of fiscal balance. Divest holding will be taken care of to avoid it being contra-concentrated in the hand of few individuals. In order to enable all interested citizen own shares in the private enterprises commercial banks were directed to grant credit facilities for the purchase of shares under the programme central bank of Nigeria programme 1989. In the recent years, 2003 another step into privatization and commercialization has been taken by His excellency, Chief Olusegun Obasanjo, the president of the Federal Republic of Nigeria, as this has been a dream in the mind of Nigeria government for the post years, to invest profile an denounced political, social and economic development on a sustained basis. It is with this goals in minds, that it is realigning its policies and programmes to create the enabling environment for efficient government and put in place a viable private sectors. These public sectors include: NNPC, NITEL etc.