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THE IMPACT OF COMMERCIALIZATION ON THE PERFORMANCE OF GOVERNMENT OWNED PARASTATALS IN NIGERIA

ABSTRACT

The study focused on the impact of commercialization on the performance of government owned parastatals in Nigeria with a case study of Power Holding Company of Nigeria Plc. This became necessary due to the efforts of government to turn around the fortunes of its parastatals which have being services of financial drain and poor service delivery in the country. The study adopted both primary and secondary sources of data collection. The main sources of data collected were from the primary sources using the questionnaire approach. This was used to collect personal and research data from respondents and the Chi-square statistics alongside percentages were used for the analysis and test of hypotheses. Thus, the findings are that government through its commercialization programme has brought a high degree of efficiency into their resource management and competitiveness that will surely lead to higher productivity. Commercialization of parastatals in Nigeria of ailing parastatals is a welcome development that has aided performances of public parastatals. However, it also suffices to say that commercialization of public parastatals should be innovative, proactive and continuous to enable public servants deliver efficient services always. It was also recommended that the new public management techniques should be embraced to step up the performance of parastatals. These include: transparency and accountability, performance management, god governance, among others.

CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND TO THE STUDY

Commercialization and privatization are programmes of the Federal Government of Nigeria in recent years to checkmate ailing and comatose economic and parastatals that perform below expectations Johnson (2004). Before the commencement of the implementation of the power sector reform in 1999, the National Electric Power Authority (NEPA) now known as Power Holding Company of Nigeria Plc (PHCN), was responsible for generation, transmission and distribution of power throughout Nigeria. However, Johnson (2004) opined that it is common knowledge that NEPA now PHCN Plc tailed manifestly to meet the aspiration of the government and people of Nigeria to provide adequate and reliable power supply. The main causes of inadequate performance of the sector include:

· Inefficient management of the national utility which was run as a monopoly;

· Inadequate and non-complementary investments in generation, distribution and transmission;

· Absence of clear delineation of roles and responsibilities of public institutions that took charge of the industry. This led to conflicting responsibilities; state of infrastructures, conflicting social and economic objectives; low and uneconomic tariffs; theft and vandalization of electricity equipment; poor payment/commercial discipline; and poor financial performance (Privatization Digest, 2007).

By and large, given the dismal performance of the Power Holding or PHCN Limited, the Olusegun Obasanjo administration in 1999, through the National Council on Privatization (NCP), undertook an extensive review of the policy, legal and regulatory framework for generating and distributing electively in Nigeria. The conclusion was reached that a number of critical structural, policy, legal and regulatory issues had to be addressed in order for the sector to be financially sustainable, thus a pre­requisite for improved and efficient provision of electricity services. This initiative led to the formulation of National Electric Power Policy 2001, the enactment of electricity power sector reform bill in 2005, the National Electric Power Policy (NEPA) and the Electricity Power Sector Reform (EPSR) Act of 2005 effectively gave way to commercialization of PHCN Plc activities (Privatization Digest, 2007).

Based on the reports of the Study Groups and Committees' promulgated, the Federal Government of Nigeria, in July 1988 promulgated the privatization and commercialization programme for Nigeria as an integral part of the ongoing restructuring of the Nigeria economy. The Act also established a Technical Committee on Privatization and Commercialization (TCPC) with membership drawn from both the public and private sectors and vested it with wide powers to monitor and supervise the implementation of the programme. This research proposal seeks to find the current state of commercialization of government owned parastatals by studying Power Holding Company of Nigeria (PHCN) Plc.

1.2    STATEMENT OF THE PROBLEM

The challenges and constraints faced by public enterprises (parastatals) on commercialization emanated from the environment, such as bureaucratic bottlenecks, public (bureaucracy interference); political interference/instability of government policies; economic and social instability; nepotism, bribery and corruption among others. All these problems are believed to hamper the implementation of the commercialization of parastatals, especially the PHCN Plc. These problems would be examined with the aim of proffering solutions to them.

1.3    OBJECTIVES OF THE STUDY

The main objective of this study is to examine the impact of commercialization on government parastatals.

Other specific objectives include:

a. To examine the nature of commercialization in Power Holding Company of Nigeria;

b. To find out whether commercialization of government parastatals has effectively enhanced performance of Power Holding Company of Nigeria;

c. To determine the extent to which political interference; bureaucratic bottleneck, nepotism, bribery and corruption affect commercialization of public: parastatals especially Power Holding Company of Nigeria;

d. To examine challenges facing the commercialization of parastatals in Nigeria; and

e. To proffer solution to the problems facing the commercialization of parastatals in Nigeria.

1.4    STATEMENT OF RESEARCH QUESTIONS

In carry out this study, the following questions are necessary:

1. What is the nature of commercialization of activities in Power Holding Company of Nigeria?

2. To what extent does commercialization of government parastatals effectively enhances performance of the Power Holding Company of Nigeria?

3. To what extent does political interference; bureaucracy, nepotism, bribery and corruption affect commercialization of public parastatals?

4. What are the challenges facing commercialization of parastatals in Nigeria?

1.5    STATEMENT OF RESEARCH HYPOTHESES

The following hypothesis was formulated to be tested in the course of the study

The hypotheses are stated in both null and alternative forms (Ho) and (H1).

Hypothesis One

H0: Commercialization of Power Holding Company of Nigeria does not enhance effective performance.

H1: Commercialization of Power Holding Company of Nigeria does enhance effective performance.

Hypothesis Two

H0: Corruption has no effect on commercialization in Power Holding Company of Nigeria.

Hl: Corruption has effect on commercialization in Power Holding Company of Nigeria.

1.6    SCOPE AND UMITATIONS OF THE STUDY

This study is concerned with commercialization in Power Holding Company of Nigeria (PHCN) Plc. The study is limited in scope since one parastatals was studied. This limits the degree of generalization from the study. The limitation for this study include: short time for the research completion, inadequate finance to study a much more larger proportion of the popularity, difficulty in assessing materials, data from PHCN offices and also PHCNs management/personnel non-cooperative attitude in attending to research students.

1.7    SIGNIFICANCE OF THE STUDY

This study is relevant to government public utility companies in Nigeria i.e. PHCN, NNPC etc. Government companies have the bad reputation of being inefficient and ineffective. This will change if the recommendations of this study are implemented. The study is also important to professionals, consultant in power sector, to individuals both in academic/professionals researching on power sector. It is also important for further academic research. The relevance of this study and its findings would enhance the operational activities to Power Holding Company of Nigeria (PHCN) Plc for efficiency and effectiveness. Members of the society will in the long run benefit from the findings of the study because there will be better service delivery that will enhance their living standard.

1.8    ORGANIZATION OF THE STUDY

The research study is in five chapters. Chapter one is the background and introduction of the study, Chapter two is the literature review and theoretical framework, chapter three consists of the research methodology and research design while, chapter four is on the data analysis and presentation of results, Chapter five is on the Summary of finding conclusion and recommendations.

1.9    DEFINITION OF TERMS

Public Enterprises: Public enterprises sometime referred to as parastatal or statutory corporation and State-Owned Enterprise (SOES) is a quasi government body established to do business, play the role of purveyor of economic development and growth in society and provide social goods and services to the people and elevate their social and material conditions.

Privatization: Is the means whereby state-owned property transferred into private hands either totally or partially. It could be done through the sale or other transfer of shares to a foreign or local investor(s).

Full Privatization: This refers to the enterprise(s) or firm(s) in which the Federal Government will give up 100% of its ordinary shareholding for sale to Individual(s) and groups.

Partial Privatization: This means divestment by Federal Government of part of its ordinary shareholding in the designated enterprise(s).

Commercialization: This refer to when the government still wishes to retain ownership of the business but withdraws from the daily activities and allows the enterprise(s) manager collect funds and spend without reference to the government agencies. In this case, the government agencies remain strictly in a regulatory capacity.

Full Commercialization: Full commercialization means that the affected enterprises should operate profitably on a commercial basis and raise funds from the capital market without government guaranteeing such funds. Full commercialized enterprises are expected to operate along the lines of private sector establishments but subject to Federal Government or State Government general regulatory controls such as fixing rates prices and charges for their goods and services, capitalized asset, and they can or be sued in their corporate names.

Partial Commercialization: These are situations where the affected enterprise(s) generate revenue to cover their operating expenditures and government may allocate capital intensive projects in this category.

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