CHAPTER
ONE
1.0 INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
Privatization
of state-owned enterprises has become an important phenomenon in both developed
and developing countries. Over the last decade, state-owned enterprises (SOEs)
have been privatized at an increasing rate, particularly in developing
countries (DCs). Privatization has become an important phenomenon in both
developed and developing countries. Over the past decade, privatization
attempts have been occurring at an increasing rate, especially in developing
countries. The compound annual average growth rate was around 10% between 1990
and 2000, with global privatization revenues jumping from $25 billion in 1990
to $200 billion in 2000. The number of countries that have implemented
privatization policies has exceeded 110, not to mention that privatization has
touched almost every aspect of economic activity (Shadeh, 2002).
Privatization
of state-owned enterprises (SOEs) has become a key component of the structural
reform process and globalization strategy in many economies. Several developing
and transition economies have embarked on extensive privatization programmes in
the last one and a half decades or so, as a means of fostering economic growth,
attaining macroeconomic stability, and reducing public sector borrowing
requirements arising from corruption, subsidies and subventions to unprofitable
SOEs. By the end of 1996, all but five countries in Africa had divested some
public enterprises within the framework of macroeconomic reform and
liberalization (White and Bhatia, 1998). In line with the trend worldwide, the
spate of empirical works on privatization has also increased, albeit with a
microeconomic orientation that emphasizes efficiency gains (La Porta and
López-de-Silanes, (1997); Boubakri and Cosset, (2001); Dewenter and Malatesta,
(2001) D'Souza and Megginson, (2007). Yet, despite the upsurge in research, our
empirical knowledge of the privatization programme in Africa is limited. Aside
from theoretical predictions, not much is known about the process and outcome
of privatization exercises in Africa in spite of the impressive level of
activism in its implementation.
Current
research is yet to provide useful insights into the peculiar circumstances of
Africa, such as the presence of embryonic financial markets and weak regulatory
institution efforts. Most objective observers agree, however, that the high
expectations of the 1980s about the "magical power" of privatization
bailing Africa out of its quagmire remain unrealized (Adam et al., (1992);
World Bank,(1995); Ariyo and Jerome, (1999); Jerome, (2005).
As
in most developing countries, Nigeria until recently witnessed the growing
involvement of the state in economic activities. The expansion of SOEs into
diverse economic activities was viewed as an important strategy for fostering
rapid economic growth and development. This view was reinforced by massive
foreign exchange earnings from crude oil, which fuelled unbridled Federal
Government of Nigeria (FGN) investment in public enterprises. Unfortunately,
most of the enterprises were poorly conceived and economically inefficient.
They accumulated huge financial losses and absorbed a disproportionate share of
domestic credit. By l985, they had become an unsustainable burden on the
budget. With the adoption of the structural adjustment programme (SAP) in 1986,
privatization of public enterprises came to the forefront as a major component
of Nigeria's economic reform process at the behest of the World Bank and other
international organizations.
1.2
STATEMENT OF PROBLEM
The
issue of cost performance and accountability of privatized public enterprise
have been a serious subject of the debate and different interest group that is
the “stakeholders”. The post privatization effect this enterprise have been the
subject of public scrutiny and criticism by the public and others alike.
Majority are of the view that their performance is not different from the way
it was when they were under public enterprise.
In
response to this in recent national assembly committee, that was set up to look
into this enterprise partially supported public concern on their performance.
It is against these background that this research is carried out to determine
or find out if these view are true as the research is intended to look at this
research is intended to look at this privatized firms cost performance and
accountability. Public enterprise before their recent privatization where
perceived to be bedeviled by numerous challenges ranging from political
interference, inefficiency in the management of resources, conflict of objectives,
overdependence on subvention for survival etc. these over the years have been
the main source of criticism of public enterprises and the reason why they are
poorly managed . is this issue the same after the privatization o these
enterprises? This study is intended to establish it.
1.3 RESEARCH QUESTION:
Based
on the problem statement and the objective of the study stated above the study
will answer the following questions;
i)
Has privatization improved the cost
performance and accountability of this firm as anticipated?
ii)
To what extent are privatized firms
accountable to shareholders and other relevant stake holders?
iii) To
what level has there been effective checks and balances in privatized
enterprises in Nigeria.
1.4
OBJECTIVES OF THE STUDY
The
overriding objective of this study is to evaluate the second wave of the
Nigerian privatization programme spanning 2008-2012. The specific objectives
are as follows:
(i)
To examine whether privatization has
improved the cost performance and accountability of privatized firm.
(ii)
To assess the extent to which
privatized firms are accountable to shareholders and other relevant
stakeholders.
(iii) To
determine if there are effective checks and balances in privatized enterprises
in Nigeria.
1.5
STATEMENT OF HYPOTHESIS
Ho:
Privatization has not
led to efficient and improved cost Performance.
Hi:
Privatization has led
to efficient and improved cost Performance.
Ho: There
have been no effective accountability to share holders and other relevant stake
holders.
HI: There
have been effective accountability to shareholders and other relevant
stakeholders.
Ho: Privatization
has not led to effective checks and balances in privatized enterprises in
Nigeria.
Hi: Privatization
has led to effective checks and balances in privatized enterprises in Nigeria.
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