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The Role Of Private Companies To The Development Of Nigeria Economy
[A CASE STUDY OF NICO INSURANCES COMAPANY]
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CHAPTER ONE
1. O INTRODUCTION OF THE STUDY
1.1 BACKGROUNG TO THE STUDY
In the recent years, privatizations of public enterprises have preoccupied policy analysis in the search for solution to improving the performance of state owned enterprises (SOES).
Several developing countries extensive most African countries have embarked upon extensive privatization programmed within the frame work of micro economic re-form and liberalization, this revising the earlier strategy using public private enterprises as the engine of economic development in Nigeria in consonance with the Keynes can theoretical exposition on large scale involvement of the public sector in economic development programmed by making extensive use of public enterprises (PE) for resources mobilization and allocation particularly with the social services and utilizes sector with the wide fall again from crude oil during the commodity boom of the 1970’s the economic activities in Nigeria expanded scientifically beyond the orthodox domakin of social services and utilities into agricultural banking and finance, manufacturing mining, commerce e.g.
Within this expansion by the 1980’s an increasing dominant public enterprises sector accounting for 50% of the gross domestic product (GDP) and 60% of the modern employment has emerged in Nigeria by this time also the number of public enterprises sector (P.E.S) as the federal level alone had research about 600 enterprises and some 900 smaller one at the state and the local government level. The total investment on this P.E. S at the federal level is about #36.456 billion as the technical committee on privatization of investment estimated these public utilities produces hard core infrastructures such as electricity, water, telecommunication e.g. accounting for about 3.4% in 1993. For the maintenance and sustenance of the economic activities of these public enterprises.
The Nigeria government has usually expanded about 40.7% and 30% of its fixed capital and recurrent expenditure respectively on the (S.A.P) period incidentally for as long as Nigeria wide fall gains from crude’s oil sale lasted, nobody complains about the inefficiencies and inadequacy of public enterprises with their associates financial waste even with the expansion of economic activities.
The first attempt to move towards a competitive market system was in 1986 with the introduction of structural adjustment progammmed and with the privatization decree no25 1988.
The federal government outlined the objectives of privatization to include improvement of the efficiency and reliability of the operation of the public companies reduction of their dependence on the national treasury for operation promotion of the share ownership by Nigeria citizen in productive investments which hither to were owned wholly or partially by the federal government and policy to broken and deepen the Nigeria capital market at the end of the programmed in 1992 a total of 89 companies were privatization.
Those privatized companies and financial institution include commercial bank, merchant bank, sea travel, motor assembly, cement hotels and transportation e.g. the proceed from their exercise amounted to 4.66 billion, various methods were used to privatized the enterprises for example some of the companies were sold through public shares using a scheme that sought to ensure equitable spread of ownership among various social classes an ethnical and regional groups. An elaborated formula restricted the amount of equity that any industrial; or regional could purchase and allocated a proportion of shares to all state of the federation as well as employee.
The government encouraged small investor to participate in the scheme by allocating the bulk of the share to people and institution the concept of guided privatization has been introduced as an approach to the second phrase of the privatization exercise guided privatization according to the government is a careful planned and systemically implemented programmed of government with draw all from the control of business enterprises which can be more effectively and efficiency ruin by private operation as such corporation. In the year 1998 by early October that year the bureau for public enterprises invited local and international investors to take part in about 37 state owned companies stated for privatization include the Nigeria airways, publishing firms, Nigeria television communication ltd (NITEL) national electric power authorities (NEPA) now power holding company (PHCN) the rolling mill news printing paper manufacturing company and Nigeria television authority (NTA) under the new programmed the government planned to sell 40% of it equity in the enterprises to foreign investors through international open tenders, another 20% would go to Nigeria investors through public share programmed of privatization is the anticipated improvement in the performance of affected enterprises.
It also lead to an increase in market competition. However there institutional constraints that may hinder the realization of fiscal benefit from privatization it is also has income redistribution effect.
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