THE IMPACT OF PRIVATIZATION ON THE NIGERIAN ECONOMY AN ASSESSMENT OF POWER HOLDING COMPANY OF NIGERIA (PHCN) IN BENUE STATE FROM 1999-2015

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ABSTRACT

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND TO THE STUDY

Privatization occupies the center stage in global economic 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 of 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. As an innovative economic policy, Privatization started in Chile under the Military Government of General Augusto Pinochet in 1974 and was adopted in Britain between 1986 and 1987 as a central part of economic policy shift (Hanke, 1987).

Privatization (the transfer of government owned share-holding in public enterprises to private shareholders) is one of the revolutionary innovation in economic policies of both developed and developing countries (Igbuzor 2003). The ultimate goal of any credible and legitimate government is to ensure sustained improvement in the standard of living of the citizenry. Towards this end, Nigerian government found it necessary to design a developmental plan that will facilitate effective mobilization, optimal allocation and efficient management of national resources. To achieve this aim, public enterprises were established across the country to carry out these obligations. Towards the end of 1980, the public enterprises which had grown too large began to suffer from fundamental problems of defective capital structures, excessive bureaucratic control and intervention, inappropriate technologies, gross incompetence and blatant corruption (Aboyade, 1974). With the deep internal crises that included the high rate of inflation and unemployment, external debt obligation and foreign exchange misalignment, Nigeria and many other African countries were strongly advised by the World Bank and I.M.F to divest (privatize) their public enterprises as conditions for economic assistance (Nwoye: 2003).

Privatization in Nigeria started in 1986 as an integral part of Structural Adjustment Programme (SAP). Prior to this period, the Nigerian state has participated actively in public enterprises (Nwoye, 2003). This trend continued until 1988 when privatization programme was officially launched (Anya, 2000; Igbuzor, 2003). The Federal Government privatized 89 Public Enterprises (PEs) between 1988 and 1993 in the first phase while 32 enterprises were privatized in the second phase which ran from 1999 to 2005 (Mkpuma, 2005). It was envisaged that privatization would improve operational efficiency of our inefficient public enterprises (PEs), reduce government expenditure, increase investment and employment as well as ensure job security in Nigeria (Subair and Oke, 2008; Jerome, 2008).

Surprisingly, since the official introduction of privatization in 1988 and the policy has been a subject of intensive debate and has remained highly controversial in Nigeria. Most Nigerians hold divergent views on the contribution of the privatization programme to the Country’s economic development in its two decades of existence in Nigeria.

The position of the critics over privatization in Nigeria is that the economic reform is a plot by few elites to sell public enterprises to themselves at the expense of the masses and that privatization cannot rescue Nigeria from its precarious economic situation. Those in favour of privatization argue that it aids poverty reduction through efficient service delivery, increase in productivity, creates employment, and job security. They are also of the opinion that privatization widens the distribution of wealth in our society (Jerome, 1999; 2005).

Thus, for any nation economy to grow, various component of such nation must contribute to the GDP as an input to boost the nation income of such a nation. Benue state has assorted companies small and medium scale industries that function efficient enough to serve as a plus to the National Domestic Product (GDP). They generate internal revenue which turned to boost the national GDP. This include:- International Hotel-Makurdi,  Benue Cement Plc- Tse Kucha, Aper Aku Stadium, Nigeria Air force Base, Makurdi, The Makurdi Modern Market, the Federal Medical Centre, Nigeria Railway Station, Benue Printing and Publishing Company Limited, Radio Benue, Nigerian Television Authority (NTA), Benue State Teaching Hospital, Federal university of Agriculture Makurdi, university of Mkar, Willinka Hotel, Wisdom hotels, Banna Water, Benue Plaza hotel, Benue State University, Benue State Breweries, the Nigerian Army School of Military Engineering, 72 Airborne Battalion and the State Headquarters of the Department of Customs, Benue Bottling Company Ltd-Km. 5 Gboko Road Makurdi and Benue Brewery Ltd-Makurdi. Benue state ran a number of  commercial activities including the  commercial banking activities such as Skye Bank PLC, Diamond Bank Plc, Zenith,  Bank, GTBank, Keystone Bank, Fidelity Bank, United Bank For Africa. Some of these companies are been sold out during the privatization era. The aforementioned totally depend on PHCN for efficient operation and production. Only if there is efficient power supplied that, they will be able to meet up with their demands.

It is in this regard that the study seeks to assess the impact of privatization on the Nigerian Economy using PHCN as a case study.

1.2     STATEMENT OF PROBLEM

Privatization involved the shift of government ownership control of the public corporations to a private ownership and the private individuals take over these corporations, they are free to manage these companies in impressive manner that generate interest to them while providing good services to the public. (Ezeani, 2006).

The impact of privatization on the Nigerian economy over time has been unimpressive as the government embarked on various infrastructural rehabilitation and expansion of development programmes in key sectors of the economy. It is within these rehabilitation and expansion moves that involve the reforms in the power sector. The power sector is characterized by myriads of challenges even as it is now. These challenges include limited access to infrastructure, low connection rates, inadequate generation and usage of power capacity, ineffective regulation, high technical losses and vandalism, insufficient transmission and distribution facilities. In response to this alarming situation of Power generation between 1999 and 2000, the Federal Government of Nigeria (FGN) undertook an aggressive rehabilitation of power infrastructures to revitalize it by embarking   National Integrated Power Project (NIPP). The NIPPs were initiated in 2004 to boost electricity generation capacity by opening of gas power stations across the country. Okolobah,V. & Ismail, Z. (2013).

The primary used product of PHCN (electricity) is essential by the nature of the product in homes, offices, small scale businesses, schools, research institutions, military base. Approximately 25 percent of electricity consumers are used for appliances, lighting fixtures, air conditions. Nearly 35 percent of household electricity consumption in Beune state is mostly house-hood consumption while 65 percent is used by commercial sector. The house- hood and small scale business also consumed electricity powers for small lamps and items such as radios, refrigerator, televisions, microwaves and hairdryers at homes. Electricity  is a life channel of the people of the state, so much is been depend on it and for the state to harvest her natural resources, a maxima electricity is expected to boost the commercial sector, the common life, the house hood, and the private sector.

Beune state contributes in the area of industrialization, the state government spearheading the industrialization of the State by setting up several industries including Taraku Mills Limited, Benue Brewery Limited, Benue Burnt Bricks, Ago Millers Limited, Benue Cement (now Dagota cement), Vanapo Holiday Resort, Benue Hotel, Rail View Hotel, Pocer Guest Inn, Kings Railside Hotel, Golden Palms Resort, Ipoint Hotel etc.

Therefore, since the aforementioned functions and expectance were are not meet because of the dilapidated and dilemma in which the NEPA the former PHCN were, the study is under taken to assess the impact of privatization policy introduced by the Federal Government of Nigeria in order to boost the production of enterprise in Nigeria: an assessment of PHCN in Benue state far is the policy and the implementation.

1.3     OBJECTIVE OF THE STUDY

The general aim of the study is to assess the impact of privatization in Nigeria on the Nigerian Economy using PHCN as a case study. However, the specific objectives of the study include the followings:

1. To examine the nature of privatization of power sector on Nigeria Economy.

2.  To examine some of the efforts put in place by government in curbing the challenges of PHNC on Nigerian Economy.

4.  To identify factors militating against the effective performance of PHCN on Nigerian Economy.

5. To examine effective ways by which the power sector in Nigeria can boost Nigerian Economy.

1.4     HYPOTHESES

Isaac (1999:123) Hypotheses is simply a tentative statement which is open to confirmation or rejection when expose. It is also subject to empirical verification.  Lundgerg (1951) see it as a tentative generalization of statement whose validity remains to be tested, he further explained it as unsubstantial generalization of statement that is not yet validity

Therefore, based on the nature of the study, the study possesses the following hypotheses to guide it.

(1)     H1 = Privatization of PHCN has significantly positive impact on the             Nigerian Economy.

(2)     H0 = Privatization of PHCN has negative impact on the Nigerian                            Economy.                               

1.5     RESEARCH QUESTIONS

  1. What are the impact/ benefits of privatization to the Nigerian economy?
  2. What are the relationships between privatization and development of Nigeria economy?
  3. What are the challenges faced by privatization programme in Nigeria that will affect the Nigeria Economy?

1.6     SIGNIFICANCE OF THE STUDY

The significant of any study is to find out solutions to various problems that face mankind in the environment or society. The study creates awareness to every citizen of this country and policy planners on the implications of   privatization of Nigerian enterprises on the Nigeria economic.

It helps policy makers to access the performance of PHCN during the privatization   policy. It also provided information on contemporary issues having first-hand knowledge of the performance of privatized public enterprises. The study also exposed basic issues about privatization and enlist reasons while privatization became necessary for developing economy such as Nigerian economy.

The study will benefit the future researchers who will carry out research about the same topic the impact of privatization on Nigerian Economy to close the gap that is created elsewhere and is yet to close. The study is of great use to students of Political science both undergraduate and post-graduate.

1.7     SCOPE OF THE STUDY

The scope of the study focused strictly on the impact of privatization programs on Nigerian Economy that have been embarked upon by Nigerian government from 1999-2015. This work will lead to the evolution of privatization in Nigeria and also examine the impact of privatization on Nigerian economy using PHCN in Benue State as a case study.

1.8     LIMITATIONS O F THE STUDY

During the course of the study, the following problems were encountered, time frame, financing problem, scarcity of information /data etc. This is due to the complex nature of the case study with emphasizes on a complex institution like PHCN. Privatization program of public enterprises in Nigeria also contributed to the implication of the study. This posed a problem of assessing these programs as whole, but this did not under mind the authentication and quality of the work.

Again, finance has posed a great challenge in other to accomplish this work through the process of gathering information. The study needs enough money to gather them and it was done since the finance was available.

1.9     DEFINITION OF TERMS

          Privatization: Is a total shift of ownership of enterprises from the public       ownership to a private ownership.

1.10   ABBREVIATIONS

          PHCN                    –        Power Holding Company of Nigeria

PEs              –        Public Enterprises

NESI           –        Nigerian Electricity Supply Industry  

NDA           –        Niger Dams Authority

ECN            –        Electricity Corporation of Nigeria

NEPA                    –        National Electric Power Authority

NEPP          –        National Electric Power Policy

EPSR           –        Electric Power Sector Reform

NIPP           –        Integrated Power Project

TCPC           –        Technical Committee on Privatization and                                                   Commercialization

BPE             –        Bureau of Public Enterprises

TCPC          –        Technical Committee on Privatization and                                                    Commercialization

PACP          –        Presidential Action Committee on Power


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