Business Administration Project Topics

The Effect of Privatization and Commercialization on the Nigerian Economy (1970-2010)

The Effect of Privatization and Commercialization on the Nigerian Economy (1970-2010)

The Effect of Privatization and Commercialization on the Nigerian Economy (1970-2010)

Chapter One


This study has the main objective of ascertaining the effect of privatization and commercialization of enterprises on the Nigerian economy.

Specifically   we   intend  to   compare   the   pre   and   post   privatization and commercialization era, so as to determine the specific effect.




In understanding the concept of theory as a set of interrelated phenomena or variable, Ogban-Iyam (1999) sees it as a concept that is used to explain, describe, interpret and predict this phenomena’s or variables. Here structural functional theory is used as settable frame work of analysis for the policy of privatization and commercialization of public enterprises in Nigeria. Structural federalism as a theoretical framework is indented to explain the basis for maintaining order and stability in the society and relevant arrangement with the society.

This theory originated in the biological and medical science. It was adopted as a mode of analysis in economics and sociology as evidenced in the work of Emile Durkihim and Talcott parson. It was developed for political analysis by Gaberial Almondi S.P Verma who stressed that structural federalism is made up of two main concepts such as structural and functions. Structure refers to the arrangement within the system which perform the functions. Also structure is the way in which the part is connected together in order to be arranged or organised. Functions have been defined by Menton Robert as those observed consequences which make for the adoption or adjustment of a given system. According to Ovan Young, function is defined as objective consequences of a pattern of action for the system in which it occurs. The basic assumption of the structural functional framework is that all system has structures which can be identified and this structure performs functions within the system necessary for its persistence. It refers to the structures that are found in any system and functions performed by structures. Thus political system is defined as the various structure and institution in the society that perform political functions or that bear on the political decision making policy. Eme Awa (1976) clearly defined political system as “the peculiar structures in any particular system performing political functions”.

In analysis there are three branches or structures of government such as the legislative, executives and the judiciary. The structure can be analysed from three main levels as person, institution and subsystems. The whole of the structure is analyzed in parts each dealing with a particular sphere of activities for instance, political economic and social subsystem. There for structure of the government leads to substructure. It is government and their bureaucracy makes rules, administrating, adjudicating and formulating and formulated those economic policies through legislatures and implemented those policies by the executive for the economic growth of the country. A substructure is the basis of analysis of this research work. It studies the economic laws or policies governing the production and distribution of material benefits on human society at the various stages of its development.

It is by the means of productive activities that he is able to obtain the economic means that he needs to sustain life. Functions have their parallel in three branches of government performing important functions. If the economic structure such as industries, Nigeria Telecommunication limited, power holding company etc. which are established by the government are well organized and harmonized also their various function are performed smoothly there must be well stable economic development in the public enterprises.

This theory can achieve purpose of privatization and commercialization if the government makes use of it and apply it to the various structures of the government or substructure to perform effective functions for smooth running of government activities to enhance economic growth of Nigeria. Take for instance, the Telecommunication which was privatized brought about positive changes in telecommunication sector and contributed to the economic growth of the country.

In application all political systems are therefore proffer two basic functions such as input and output function privatization and commercialization of Tele communication of public enterprises (input) are demand from government. The legislature and other organs of the government help to process some of the demand that have reached the system in which certain functions should be performed and giving out or allocate values by the means of the” output” law or policy.

Structural – functionalism according to Marxist concept of substructure, superstructure is wholly determined by the substructure. The augment perhaps appears to be that the economic sphere is omnipotent and that the individual consciousness is prisoners of material forces. Also functions must be related to structure of the society. All other activities in the economic revolve around economics; both social and political activities are based on economic activities.





In this work certain methods were used, this chapter explains in details the procedure adopted in arriving at the inference of this research work. Research decision is the frame work of investigating a research problem, in other words it refers to the methods used in collecting data which are to be used in investigating and analysing a research problem. Data collection on its own involves a range of activities from the individuals in the library extracting information from volume of materials available as regards to this work. Taking into consideration the fact that two main forms of data collection exist (i.e. the primary and secondary sources). privatization and commercialization (pc) in Nigeria will be handled as a dummy variable.

Secondary data will be used in this research work and will be obtained from the central bank of Nigeria (CBN) statistical bulletin. The method adopted by the work is the multiple regression with OLS technique of estimation.


In this section we pursue our objective further by specifying our model. The model is to verify the performance and effect of privatization and commercialization on Nigerian economy. The approach is to modify the model by specifying a multiple regression equation made up of Gross domestic product (GDP) as a function of the independent variables’ (i.e. inflation rate (inf), investment rate (inv), privatization and commercialization (pc).

GDP =f (pc,inv,inf)

GDP = bo+b1pc+b2inv+b3inf+u





Summary of findings, conclusion and recommendations

This last chapter of the work presents the summary of the research findings, conclusion and recommendation.

Summary of finding

The programme of privatization and commercialization is a major opportunity for reform of Nigeria’s ailing public enterprises and to prepare them to serve the needs of the Nigerian economy in 21st century. Enterprises will be made more efficient more accountable and more responsible to the need of the clientele it is meant to be serving the Nigerian public.

The Nigerian private sector will also benefit tremendously in the creation of new investment opportunities and a better investment climate. The most of the lucrative companies to be privatized e.g. oil companies are to be partially privatized while others not so viable are to be fully privatized.

Majority of the firms to be privatized arrived at their share prices through the service o professionals, while a few arrived at theirs through stock exchange.


In conclusion, privatization has been seen as a means to government interested in fostering a new division of labour between the public and private sectors in order to increase the effectiveness and contribution to the development of both sectors. Therefore, the success of privatization should be judged not in terms of the sale, the price paid to the government or expansion of enterprises sold but rather, on the basis of wealth.

It is very clear that we cannot exclude economics from politics and it is well known that the basic problem facing public enterprises in Nigeria is control or management. This cannot be addressed through privatization. Honestly, the exercise reduces real income and encourages people in economic recovery.

As the Federal Government of Nigeria (FGN) 1993 also currently observed the primary agreement for privatization and commercialization is of course, that the efficiency and profitability of the investment would improve after the exercise.

Therefore, the National Telecommunication Policy presents the policy objectives of the Federal Government of Nigeria in promoting the development and utilization of telecommunication infrastructure and services, accelerating the socio-economic and political development of the nation and enhancing the quality of the life of Nigerians.


For the private and foreign sector to be re assumed of government’s good faith towards privatization and commercialization after declaration of its intention, it should go about it by gradual process and with root and branch rapidity.

The following areas would go a long way to demonstrate the validity of this intentions start with the profit making business.

  1. The government should make an open declaration that private sector autonomous investment would be allowed to establish electricity generating companies, water supply companies, telecommunication and postal services, additional private airlines, while at the same time take steps to introduce management of corresponding public sector
  2. The financial sector is a rough and ready candidate for initial steps in the field of privatization and commercialization. Government should sell to the local private sector 50% its existing holdings in commercial banks and insurance companies and their shares should be quoted on the stock
  3. All loss leading industrial establishment belonging to the public sector with a view to sell them
  4. In the auto mobile industry, the government should turn over 50% of its share in the motor vehicle assembly plant to the local sectors investors in order to make the foreign investor the largest single block of It would make them more efficient.
  5. The proportion of the income used for buying shares is deducted from taxable
  6. The privatized business can be allowed to pay tax, free dividends to new buyers, the potential of wealth to a few privileged.


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