CHAPTER ONE

1.0      INTRODUCTION

1.1   BACKGROUND OF STUDY

Privatization, which now occupies the center stage in global economic liberalization, is regarded as an avenue for raising productivity and enhancing overall economic growth. This is achieved through increased involvement of the private sector in productive economic activities through the sale of public enterprises to the private sector, with a view to improving economic efficiency. With privatization, the role of government in direct productive activities diminishes as the private sector takes over such responsibilities.

Under such a setting, government is expected to provide essential infrastructure and an enabling environment for private enterprise to thrive. Privatization is predicated on the assumption of state inefficiency and “absolute” efficiency of the market. Over the years, many countries, especially developing ones, have witnessed increasing costs and poor performance of state-owned enterprises (SOEs), resulting in heavy financial losses. Since the 1970s, in particular, SOEs have become an unsustainable burden in some countries, absorbing large share of budgets of governments in form of subsidies and capital infusion. For instance, SOEs are adjudged to have contributed substantially to public sector deficits and have financed less than one fifth of their investments through internally generated resources (Nair and Filippines, 1988).

As some governments ran into severe fiscal problems such that loans became increasingly difficult to rise at home and abroad, they were forced to consider some radical methods for reviving the SOEs. Such reforms embarked upon by developing countries included privatization. Kikeri et a1 (1 994) noted that the high costs and poor performance of SOEs and the modest and fleeting results of reform efforts have turned many government towards privatization. Other reasons include the collapse of communism in Eastern Europe and the Soviet Union, and some successes of privatization undertaken earlier in countries such as the United Kingdom.

Fiscal crises have also led some governments to privatize as a way of raising revenues and stemming losses, especially in the face of increasing public debt. Also, many governments are believed to have opted for privatisation because of their inability to finance investment in their SOEs than expectations of efficiency gains. However, the objectives of governments for embarking on privatisation vary from country to country.

They include the expansion of the role of the private sector to improve mobilisation of savings for new investments, modernising the economy through increased private investment, new technology and efficient management to stimulate growth. Others are to facilitate the development of the competitive environment, prwide greater employment opportunities over time and reduce the cost of goods and services to consumers.

The need to improve government’s cash flow, enhance the efficiency of the SOEs, promote ‘popular capitalism’ and curb the power of labour unions in the public sector, redistribute incomes and rents within society and satisfy foreign donors who would like to see the government’s role in the economy reduced are generally fulgered as rationale for privatisation. Privatisation which connotes a reversal of state ownership of enterprises has many different forms. For example, government might sell some shares in SOEs through public offerings to passive investors without losing control over the enterprise. Another variant of privatization is leases and management contracts which entail no transfer of ownership. Partial privitisation mixes private and state ownership. Management contracts and leases combine private management with state ownership and control.

Other privatization arrangements mix private ownership with state regulation. However, -the motivation that drives government to privatise and the political will to see it through would determine, to a large extent, the success or failure of the programme.

1.2   STATEMENT OF THE PROBLEM

Privatisation implies full transfer of ownership from government to a private entity. Most of the challenges government faces which might lead to privatisation could be as a result of lack of technical expertise, absence of the commitment and entrepreneurial direction that private investors brings to business and low incentives for management, inadequate working capital and investment in new plant and machinery, laissez-faire attitudes towards state business. Finally, several researches has been carried out on the privitisation of state owned enterprise but not even a single research has been carried out on privatisation of government owned enterprise for better performance; a case study of Nigeria telecommunication sector.

1.3   AIMS AND OBJECTIVES OF STUDY

        The main aim of the study is to examine privatisation of government owned enterprise for better performance. Other specific objectives of the study include;

1.          to determine the factors affecting privatisation of government owned enterprise.

2.          to determine the extent to which privatisation of government owned enterprise enhance better performance.

3.          to determine the effect of better performance on the privatisation of government owned enterprise.

4.          to proffer possible solutions to the problems.

1.4   RESEARCH QUESTIONS               

1.          What are the factors affecting privatisation of government owned enterprise?

2.          What is the extent to which privatisation of government owned enterprise enhance better performance?

3.          What is the effect of better performance on the privatisation of government owned enterprise?

4.          What are the possible solutions to the problems?

1.5   STATEMENT OF RESEARCH HYPOTHESIS

H0:   Privatisation of government owned enterprise is significantly dependent on better performance.

H1:      Privatisation of government owned enterprise is significantly dependent on better performance.

1.6   SIGNIFICANCE OF STUDY

The study on privatisation of government owned enterprise for better performance will be of immense benefit to the entire Nigeria telecommunication sector in the sense that it will educate the government to understand that privatisation  removes political interference and reduces government wasteful spending on inefficient public enterprises, It also improves the financial health of public services with savings from suspended subsidies; further more it creates more resources for allocation to other sectors of the economy that need urgent attention. Finally, the study will contribute to the body of existing literature and knowledge to this field of studies and basis for further research.

1.7   SCOPE OF STUDY

The study on privatisation of government owned enterprise for better performance is limited to Nigeria telecommunication sector.

1.8   LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9   DEFINITION OF TERMS

PrivatisationThe transfer of a business, industry, or service from public to private ownership and control.

GovernmentA government is the system or group of people governing an organized community, often a state

PerformanceThe accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed

Telecommunication       Telecommunication is the transmission of signs, signals, messages, words, writings, images and sounds or information of any nature by wire, radio, optical or electromagnetic systems.

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