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THE ECONOMIC IMPLICATION OF PRIVATIZATION AND COMMERCIALIZATION OF AILING INDUSTRIES IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF STUDY     

Governments across the globe have come to reassess their ownership and involvement in enterprises that could otherwise be managed by the private sector.  In many developing countries where state ownership of public enterprises were regarded as a necessary social service aimed at providing employment for their citizens, privatization and commercialization of such public enterprises have been on the increase as a result of the short comings from government ownership of such enterprises.

                However, the problems of public enterprises which include ill-conceived investment, political interference in decision making, costly and inefficient use of public resources, increased budgetary burden, over-extension of government’s managerial capacity, diversion of credit and other resources meant for expansion to private pockets, abandonment of projects and the harsh economic realities have forced Nigeria government to embark on privatization and commercialization of her major enterprises like National Electric Power Authority (NEPA), Nigerian National Petroleum Corporation (NNPC) and others. More so, privatization and commercialization have helped to break up monopolies which hitherto have been enjoyed by some of the above named Nigerian enterprises.  Therefore, central planning and state ownership has become a thing of the past citizens are encouraged to participate in the privatization and commercialization scheme of the Federal government of Nigeria.

                Although method of privatization and commercialization may differ from country to country, the central objective has always been to increase revenue generation for the state, relieve the sate from the burden of supporting non-performing businesses or enterprises and also to encourage competition.

                Privatization and commercialization in Nigeria is not without problems.  Some of these problems are bottlenecks in the system, geopolitical spread, opposition from Ministry Officials, antagonism by labour unions and unco-operative attitude of workers in enterprises to be privatized and commercialized by Nigerian government.

1.1 STATEMENT OF THE PROBLEM

For sometimes now in Nigeria and in Akwa Ibom State, public companies have been badly managed and often times inefficiently run.
Based on data from various government departments, public enterprises consumed as much as N265 billion within one year. In Past years, the Adeso (1969), Udoji (1973), Onosode (1981) and ALhakim (1984) commissions assessed and determined that public enterprises are responsible for huge wastages in funds which create budgetary strains and avoidable burden on the economy.
From the above studies, failures of government owned enterprises are because agents within government have a tendency to pursue their own interest or the interest of special groups at the expense of the public.
Also, the lack of effective strategies characterized by political instability, poor technology, lack of basic infrastructure, over politicization of projects and widespread incompetence in the management of public enterprises, is a function of excessive government participation in the management process.
Thus a combination of inadequate and costly gas supplies for electricity, lack of transportational access for the transfer of raw materials and finished products and untimely release of funds by government also lead to the closure of the Aluminiun Smelter Company of Ikot Abasi in the year 2000.
From the fore goings above, it thus became a national policy imperative therefore to disengage the public sector from those areas where the private sector has the comparable advantage to perform by turning around poorly managed and cash strapped state enterprises, whose inefficiencies have hampered economic development, thereby stopping the monumental waste and inefficiency of the public enterprise sector. This necessitated the need for government to set up the programmes of privatization and commercialization so as to address peculiar socio-economic and political conditions in Nigeria as part of the country’s structural adjustment programme.
This concept by the government, in restructuring the economy has thus prompted this research in ascertaining the economic implications of privatization and commercialization of ailing industries in Akwa Ibom State with particular reference to the Aluminium Smelter Company of Ikot Abasi.

1.2 OBJECTIVES OF THE STUDY
This research is conducted generally to examine the economic implication of privatization and commercialization of ailing industries in Akwa Ibom State with particular reference to the Aluminium Smelter Company, now known as Rusal Aluminum Smelter Company, Ikot Abasi.
More so, the specific objectives of this research are as follows:-
(1)    To identify the problems and prospects of privatization of        ailing industries in Akwa Ibom State.
(2)    To find out the reasons for the effectiveness and ineffectiveness of service delivery in the public and private sector in Akwa Iborn State.
(3)    To identify the reasons behind the concepts of privatization and commercialization of ailing industries in Akwa Ibom State.

1.3 RESEARCH HYPOTHESIS
Ho       Privatization and commercialization of ailing industries has no impact on the Akwa Ibom State economy. 
H1     There is no relationship between the privatization and
commercialization of ailing industries and efficient resources management for economic development in Akwa Ibom State.
1.4   SCOPEOFTHESTUDY
This research is undertaken to study the economic implications of privatization and commercialization of ailing Industries in Akwa Ibom State with particular reference to the
Aluminium Smelter Company in Ikot Abasi now owned by Rusal Aluminium. This work will also seek the reasons for the poor performance of government owned enterprises.
In carrying out this research work effectively, attention in this study will focus on the past, present and future prospects of the Rusal Aluminum Smelter Company, Ikot Abasi as a result of its privatization and commercialization.

1.5   SIGNIFICANCE OF THE STUDY
It is hoped that this study would provide ideas and useful information to those who might conduct further research on this subject. The findings of this study will be useful to both Federal and State governments, core investors, business executives and the general public who have interest in this subject.1.6   LIMITATIONS OF THE STUDY
Some limitations of this study include:
1.     Time and financial constraints, which did not allow for a total coverage of all the proposed areas needed in this work. 
2.     The researcher could not gather enough information on the topic as a result of lack of access to text books and journals. This is because of the fact that privatization and commercialization concepts although long introduced into the Nigerian economy has only drawn more attention in recent times as such making these concepts sound as though they are new concepts in Nigeria.

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