CHALLENGES OF PRIVATIZATION IN DEVELOPING ECONOMY (NIGERIAN EXPERIENCE)



Since the  beginning of the democratic administration  in  1999, the bureau of public enterprises has been  dynamic  with the sale of public firms to local and foreign   private interest 
The  policy  of  the government is to make Nigeria a private sector driven economy where  the government will regulate but leave business to those who cn run it. But privatization, which  transfers ownership of production and  control of enterprises  from the public to the private sector, has been  very  controversial. It has generated strong debates, everywhere especially  in developing countries, where it  is perceived to have  more negative impact.

1.           Unemployment: While proponents of privatization see it as an  efficient way  of promoting  competition and enhancing growth, critics   argue   that it makes the poor poorer  by increasing unemployment and  reducing access of the poor to basic goods and  services through   increase in prices . in  Nigeria,  there have been several protests  by unions that are opposed to the proposed sell off  because of  the fear of losing  their jobs.
The  most  recent were the auctions of the egbin power  plant to KEPCO, a Korean firm, Kaduna refinery to china national petroleum  company and  port Harcourt refinery to a local consortium.  Apart from the fear of job losses, many workers argue that the    sale of public enterprises to either foreign owners or domestic  investors is an infringement on their rights as Nigerians. The  privatization  journey in Nigeria may  be said to have really started in the  1980s  when the country witnessed   economic    deterioration
2.                   Global economic recession: the  socio-economic  difficulties of Nigeria were traceable to the global economic  of performance of the public sector enterprises in Nigeria were  complicated by the downturn in socio- economic development in the country due to the global   economic recession and  the collapse  of the oil market
thus,   Nigeria precarious fiscal and monetary posture could no longer sustain the requirements of  its public sector  enterprises particularly since  they perform below expectations in  terms  of their returns on investments and quality of services. “towards the end of  198s, The public  enterprises, which   had   grown too large, began to suffer from fundamental problems of defective capital structures, excessive capital  structures   excessive bureaucratic control and intervention,   inappropriate  technologies ,  gross incompetence and blatant corruption inflation  and unemployment, external debt obligations and  foreign exchange misalignment, nigieira and many  other  lending agencies, particularly the international monetary  fund  and the world bank, to divest their public enterprises as   one  of the conditions for economic assistance
“With the intensified push  for economic liberalization , Nigeria and other African leader were told that privatization  as an economic reform would  help cut public sector  inefficiency and waste,  attract more investments, bring in  new technologies, and   hence review economic  growth.
3.                   Economic  exploitation: many countries, including Nigeria , embarked on privatization and other market  oriented  reforms   to pull them out of the structural imbalances” . since  the  drive for privatization in developing countries   emanated  largely  from international creditors, many experts believed it could  be a form of economic exploitation. The  views of  critics may not be discarded as minority of the companies  being privatized are purchased by foreign companies. 
4.                 Not  human development oriented: the  accompanying   mass retrenchment has shown that privatization is not   human development –oriented. The sale of public enterprises  to few privileged Nigerian had only succeeded in making  a few people rich at the expense of the vast  majority. This  in  addition to other anti –poor polices,  . Ade  Adejugbe said, had made unemployment higher and   poverty deeper despite the recorded improvement in growth indicators. Other economists have also said that in developing countries, privatization must be pursued with utmost caution Paul cook and   Yuichiro Uchida, of the university of  Manchester, united kingdom, in  a study on privatization and  economic growth in developing countries, found that the  effects  of privatization on these counties, found that the effects of privatization on these counties might be negative/.  The claimed that  since theoretical literature argue that change in  ownership  alone  at the micro-economic level was not sufficient to  guarantee greater enterprise efficiency, then other  reforms  more directly related to enterprise development , might play a crucial   role. The world bank, which could be described as the  originator  of privatization, also has its reservations, particularly in  the poor developing  countries. Otive Igbuzor in his paper  on  privatization in Nigeria quoting  the world bank, said,  “most privatization success sorties come  from high income and  middle income counties. Privatization is EASIER TO launch and more  likely to produce positive results when the company operates in  a competitive   market friendly policy environment and a good  capacity to regulate
5.     “The poorer the country, the longer the odds against privatization producing its  anticipated benefits, and  the more difficult the  process of  preparing the terrain for sale". If this  assertion is a pointer,  then privatization in Nigeria  is bound to be controversial. Nigeria,  by international and domestic standard is a  poor country.  The  world  banks annual human development  index is a comparative  measure of  life expectancy, education, and standards of living  for countries  worldwide. It could also be measure of  the   impact of economic polices on quality of life  
6.             Inadequacy of the private sector to provide certain  goods and service:  economists say there  are  certain  reason why some major enterprises must be  publicly  controlled. These include the inadequacy of the  private  sector  to provide  certain goods and  services  that  require enormous investments, the fact that the financially incapable in the society must not be totally deprived  of  access to basic goods and services  and national security. The  indivisibility clause also requires   that   facilities such as roads, railwasys and streetlights  be provided by government and financed   through  taxation.

However,  experts have said that  privatization may not be inherently good or bad. It is the mode of  greed that had been displayed by past Nigerian leaders in  their  quest to a mass ridiculous  wealthy  has made the genuineness and ultimate efficiency of    the  ongoing privatization programme questionable” an  expert said. In  this regard, nwoye said,  “one  of the most important issues in privatization is the concern for transparency and accountability. “if there is transparency, citizens   may not be too suspicious of privatization moves  because it creates a perception of honesty and  accountability.  “ if  privatization is carried out with  sincerity of purpose, almost every group will  come  out ahead as a result of divestment. Workers will be  shareholders. Consumers will be better  off because of  better service.  New graduates and the unemployed  will get  jobs because of expansion and government will be relieved of the burden of subsidies  among  others Nwoye said.
REFERENCES
1.      Madueme I  S (2003)  privatization  of tertiary institutions in Nigeria
2.      E. okeke (ed) implication of privatization  for education  in  Nigeria
3.      B. iffih (ed)  modern  textbook of social  science, Nigeria joen associates
4.      Madueme (ed)  foreign policy  of a developing  nation 
5.      Madueme i.s  and  ude, s (2012)  consumer appraisal of the  implementation of electronic  banking system in Nigeria
6.      Nwosu c (2011)  private investment behaviour in Nigeria 
7.      Madueme,  i.s (2011)  government  and industrial securities and market  capitalization in Nigerian stock exchange market
8.      Madueme, i.s  (2010)  capacity utilization rates in Nigieran Economics  sectors: an analysis internatinaljournal  of economic and development issues  9 (1 &2)
9.      Madueme  (1997)  staategies for self sustaining naitoanl  development programs in less developed nations, journal  of liberal studies, UNN, 5 (2)  167-173
10. Olive  Igbuzor, (2010) paper  on privatization in  Nigeria
11. Paul cook and yuichiro uchida, university of Manchester united kingdom
12. Peter O Osalor, (2009)  Entrepreneurialism Africa confidential, (2011)  analysis facing Nigeria economics   reforms
13. Africa confidential, (2011) analysis facing Nigeria’s economic reforms.
14. Malam (Dr) Sanusis Lamido Sanusi, (2012)  welfare  effects of privatization and commercialization of public  enterprises
15. Prof. Ade Adejugbe,  anti –poor policies in Nigerian  economy   

ARTICLE SOURCE:

DEPT:  BANKING AND FINANCE
FACULTY: MANAGEMENT  SCIENCES
COURSE  CODE:  BAF  334
COURSE TITLE : PUBLIC  FINANCE
QUESTION: Discuss The Challenges Of Privatization In Developing Economy. (THE NIGERIAN  EXPERIENCE)
Share on Google Plus

Declaimer - Unknown

The publications and/or documents on this website are provided for general information purposes only. Your use of any of these sample documents is subjected to your own decision NB: Join our Social Media Network on Google Plus | Facebook | Twitter | Linkedin

READ RECENT UPDATES HERE