The Effects Of Privatization And Commercialization Policy On National Economic Development

THE EFFECTS OF PRIVATIZATION AND COMMERCIALIZATION POLICY ON

NATIONAL ECONOMIC DEVELOPMENT

(A CASE STUDY OF PHCN, EKWULOBIA)

 

A  RESEARCH PROJECT PRESENTED TO THE DEPARTMENT OF PUBLIC ADMINISTRATION SCHOOL OF BUSINESS STUDIES

FEDERAL POLYTECHNIC,

OKO.

 

IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD

OF HIGHER NATIONAL

DIPLOMA (HND)

ABSTRACT

THE MAJOR PURPOSE OF THIS STUDY IS TO ASCERTAIN THE EFFECTS OF PRIVATIZATION AND COMMERCIALIZATION POLICY ON ECONOMIC DEVELOPMENT USING POWER HOLDING COMPANY OF NIGERIA EKWULOBIA AS A CASE STUDY. THE REASON BEHIND USING THE POWER HOLDING COMPANY OF NIGERIA IS BECAUSE IT IS ONE OF THE PUBLIC ENTERPRISES THAT ITS PRODUCT HAS THE WIDEST CONSUMPTION. THE POPULATION OF THE STUDY CONSISTED OF 254 WORKERS IN PHCN EKWULOBIA ANAMBRA STATE. THE SAMPLE SIZE WAS DETERMINED USING YARO YAMENE FORMULAR. THE SAMPLE OF 155 OUT OF 254 WAS DRAWN USING SIMPLE RANDOM SAMPLING. FIVE RESEARCH QUESTIONS WERE FORMULATED WHICH GUIDE THE STUDY. A STRUCTURED QUESTIONNAIRE WAS DEVELOPED AND VALIDATED FOR USE. TABLE AND PERCENTAGE WERE USED TO ANSWER THE RESEARCH QUESTIONS. THE MAJOR FINDINGS OF THE STUDY WERE: (1) THERE IS GENERAL DISCONTENT BY THE PUBLIC ABOUT PHCN’S SERVICES (2) THERE WAS SERIOUS FLUCTUATING POWER SUPPLY FROM LATE 1992 TO DATE (3) POLITICAL INSTABILITY HAS CONTRIBUTED TO THE PROBLEMS OF PHCN (4) PHCN HAS NOT REGISTERED AS A PUBLIC LIMITED COMPANY. THEREAFTER, IT WAS CONCLUDED THAT: (1) THE GENERAL PUBLIC WERE DISSATISFIED WITH THE POOR SERVICES OF THE PHCN. (2) THE SERIOUS FLUCTUATIONS IN THE SUPPLY OF POWER WAS CAUSED BY BREAKDOWN OF THE POWER HOLDING COMPANY’S POWER STATIONS. (3) POLITICAL INSTABILITY IN OUR COUNTRY HAS MADE IT DIFFICULT FOR THE SUCCESSFUL PRIVATIZATION OF PHCN. THE FOLLOWING RECOMMENDATIONS WERE MADE: (1) PHCN SHOULD ESTABLISH A GOOD PUBLIC RELATION. (2) THERE SHOULD BE REHABILITATION AND MAINTENANCE OF THE POWER STATIONS. (3) EFFORTS SHOULD BE MADE BY GOVERNMENT AND STAKEHOLDERS FOR A SUCCESSFUL PRIVATIZATION AND COMMERCIALIZATION OF PHCN.

TABLE OF CONTENTS

TITLE PAGE                                                            i

 APPROVAL PAGE                                                   ii

DEDICATION                                                          iii

ACKNOWLEDGMENT                                             iv

ABSTRACT                                                              vi

TABLE OF CONTENTS                                           viii

 

CHAPTER ONE

1.0   Introduction                                                    1

1.1      Background of the study                                2

1.2      Statement of the problems                             5

1.3      Purpose of the study                                       7

1.4      Significance of study                                       8

1.5      Research questions                                                10

1.6      Scope/Delimitation of the study                    11

1.7      Limitations of the study                                 12

1.8      Definition of term                                           13

 

CHAPTER TWO

2.0   Introduction                                                    16

2.1   Effects of privatization and commercialization policy                                                            17

2.2      Privatization and  commercialization in other countries                                                         23

2.3   Privatization and commercialization

In Nigeria                                                                24

2.4   Objectives of privatization and commercializationprogramme.                                                   30

2.5      Effect of sap on electricity supply problems     32

2.6      Electricity generation and transmission capacities34

 

2.7     Sales and revenue collection in a commercialized

PHCN                                                               39

2.8      Summary in literature review                           42

 

CHAPTER THREE

3.0   Research methodology                                   45

3.1      Design of the study                                         45

3.2      Area of the study                                            46

3.3      Population of the study                                  46

3.4      Sample size/sampling techniques                 46

3.5      Instrument for data collection                       47

3.6      Reliability and validation of the instrument     48

3.7      Distribution and retrieval of the instrument    49

3.8      Method of data analysis                                 49

 

 

 

CHAPTER FOUR

4.0   Data presentation and analysis                     51

4.1   Presentation of findings                                  51

4.2   Discussion/Analysis of findings                     54

 

CHAPTER FIVE

5.0   Summary of findings, Conclusion and Recommendations                                               57

5.1   Summary                                                        57

5.2   Conclusion                                                      58

5.3   Recommendations                                          59

References                                                      60

Appendix                                                         62

Questionnaires                                               63

 

                          CHAPTER ONE

1.0                   INTRODUCTION       

The privatization and commercialization of public enterprises in Nigeria was an initiation of the country’s military leaders. The review of the economy in 1985 revealed that most government parastatals were running at great loses. This was attributed to the inefficiency and waste in resource use, as a result of lack of application of capital economic principles in the management of these parastatals.

In an attempt to stem this situation, the Babangida administration decided to privatize and/or commercialize some of these obviously ailing public wealth with the hope of reducing government wasteful expenditure and improve income generation through the commercialization principle.

 

1.1  BACKGROUND OF THE STUDY

       The import substitution policy of the post independence Nigeria led to the establishment of industries. Apart from this prime motivation for import substitution, there was the need to create jobs for the growing educated youths, the need of industrialization and the ideological argument that the government should control, regulate and supervise the commending heights of the then nascent economy.

Furthermore, there was the need to strive to catch up with the developed countries of the world and since the indigenous businessmen and managers were neither technically nor financially ready to assume the catalyst role which their counterparts in the developed countries were playing; government felt obliged to fill the investment gap. The obvious imperfections in the market oriented economics in terms of resources allocation to the more profitable but less preferred sectors of the economy was yet another reason for government intervention in the economy.

        The sum total of these is that between 1960 and 1980 the various governments in Nigeria both at federal and state levels established numerous industries. The core characteristics of most of these industries were inefficiency in the utilization of resources and their consequent dependence on the public treasury for subvention. Therefore, these adverse operating condition could not make for rational economic decisions. Consequently, these enterprises and their management lost their mission and became pipes for wastages, agencies for political patronage and generally parasites on the national and state treasuries. There then arose the need for reprioritization of economic policies and the need to release the energy in economy suppressed by bureaucracy and undue control.

        Government at various levels realized that goals of economic growth, full employment and high standard of living could not be actualized without the active participation and leadership of the private sector. There was therefore need for invitation to private individuals and organizations to assume the role of activation and management of the national economy. There was also the need for the infection of private sector enterprises for profitability and efficiency, hence the privatization and commercialization policy.

 

1.2  STATEMENT OF THE PROBLEMS.

Inefficient management and corruption have bedeviled the Power Holding Company of Nigeria (PHCN) since its inception. This is most evident in its power generation, transmission, and distribution as well as in its appointment of board members. This inefficiency has subsequently led to inadequate supply of electricity to consumers.

        There is also lack of dedication to duty on the part of the staff and management of the corporation. This mostly accounts for the poor financial returns it derives from its services. The staffs are rough in using the company’s equipment and tools in providing electricity to consumers at the expense of the authority. There were complaints of corruption in power distribution whereby the management seeks qualification first before approving of extension of electricity to consumers. This often robs the authority of huge revenue they would had if electricity is distributed without any form of restrictions.

        PHCN ever since its inception in 2005 from the former NEPA has undergone and is still undergoing stringent statutory and administrative control which hinders the management from using their initiatives when necessary.

 

1.3  PURPOSE OF STUDY

        The major purpose of this study is to determine the effects of privatization and commercialization policy on national economic development of PHCN, Ekwulobia business unit in Anambra State.

Specifically, the study was to:

1.          Determine the durability of PHCN’s plant in the generation of electricity.

2.          Determine an efficient method of appointing capable persons into the management level in the enterprise.

3.          Investigate and ascertain if commercialization and privatization of PHCN was in line with the objectives of the government on privatization and commercialization.

4.          Ascertain an easy mode of operation in PHCN towards ensuringself-sustenance and justification of investment.

5.          Find out effective methods that would enhance the service rendered by PHCN to its customers. 

6.      Identify better methods by which PHCN can effectively collect its services charges.

7.      Suggest means or ways by which PHCN can restore public confidence in its service of electricity to consumers.

 

1.4  SIGNIFICANCE OF THE STUDY

       Very little is known about the privatization and commercialization programme. Consequently, many people are yet to appreciate the reasons and objectives of the programme. This research is significant in the following ways:

i.            It will provide a guide on how the authority can improve its services of electricity to the consumers.

ii.           It will highlight means to improve PHCN customer relationship.

iii.        The study will also suggest ways by which the staff can be positively motivated in order to increase their productivity.

iv.         This study will recommend better methods for recruiting the management staff that will be more dedicated to the service of the corporation.

 

1.5  RESEARCH QUESTIONS

This study sought answers to the following research questions.

i.            Is the partial privatization and commercialization of PHCN in line with the federal government policy of handling of the running of public enterprises?

ii.          Is it possible for the enterprise to operate effectively on its own without federal government subvention?

iii.        As a partially privatization and commercialized public enterprise, will PHCN be able to restore public confidence through improved services?

iv.         Will the partial privatization and commercialization of PHCN lead to improvement in its operations?

v.           As a partially privatization and commercialized enterprise, will PHCN be able to explore more avenues for revenue generation?

 

1.6  SCOPE/DELIMITATION OF STUDY

       This study was delimited to the effects of privatization and commercialization on national economic development. This study will cover specifically, the effects of privatization and commercialization policy using PHCN Ekwulobia as an area of focus. 

 

 

 

1.7  LIMITATIONS OF THE STUDY

        The followings constitute problems in the process of this research work:

i.            The absenteeism of some PHCN staffs Ekwulobia business unit leading to poor response in the articulation of questionnaires.

ii.          The poor generation of data for an accurate analysis.

iii.        The attitude of some PHCN staffs on the aspect of providing sincere information about their operation.

iv.         The composition of the staffs which includes both permanent and part-time workers.

v.           The inability of the top management to response to interview.   

1.8  DEFINITION OF TERMS.

i.            PHCN – Power Holding Company of Nigeria. It is the only statutory provider of electricity throughout the whole country. It came into existence in 2005.

ii.          TCPC – Technical Committee on Privatization and Commercialization. It is the body set up by the Federal Government to implement the privatization and commercialization of some public enterprises in accordance with the privatization and commercialization decree No. 25 of 1988. It was established on 27 of July 1988.

iii.        PRIVATIZATION: According to Ugbo (2003:191) privatization is all about the transformation of public undertaking to a private enterprise organization.

iv.         COMMERCIALIZATION: The privatization and commercialization decree of 1988 in Ugbo (2003:190) defined commercialization as the reorganization of enterprises wholly or partly owned by the federal government in which such commercialized enterprises shall operate as profit making venture without subventions from the federal government.

v.           POLICY – This refers to a plan of action adopted by government or social group towards accomplishing some end for the actions and inactions of the state.

vi.         NATIONAL ECONOMIC DEVELOPMENT – This refers to measures put in place by government to develop the sectors of the economy simultaneously to bring in even and rapid development of the nation.