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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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Oct 27, 2019 No Comments ›› OpenBook

CHAPTER ONE

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.

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