THE RATIONALE OF PRIVATISATION OF PUBLIC ENTERPRISES IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

In Nigerian, state participation in public enterprises dates back to the colonial era. During this period, the colonial government was faced with the task of providing infrastructural facilities such as railway, road, bridge, water, electricity and port partly because there were dearth of indigenous companies with the required resources as well as inadequate capacity of foreign trading companies to embark on those capital intensive projects (Iheme 1997) as cited in (Igbuzor 2003).

The trend of state participation continued such that in the 1960s and 1970s the Nigerian government established a large number of public enterprises in order to command strategic and accelerate the pace of development, (Atuma 2006). As Olisa (1983) puts it, “Beginning as a trickle in the period between the end of the second world war and Nigerian’s attainment of independency, the creation of public corporations has risen to flood level since independence and has maintained a steady growth. 

A survey conducted by the technical committee on privatization and commercialization reveals that parastatals owned by the federal government totaled about 900 in 1990 with a total book value of investment worth about N36 billion (Sanusi, 2000). The investments were in the areas of banking and insurance, oil exploration refinery and marketing, cement, paper mills, steel

companies. Public enterprises are statutory bodies operating services of an economic or social character or both on behalf of government, (Ezeani, 2006). Their primary purpose is to stimulate and accelerate national economic development under conditions of capital scarcity and structural defects in private business organizations. There are also basic considerations arising from the dangers of leaving vital sectors of the national economy to the whims of the private sector often under the direct and remote control of foreign large scale industrial combines, Nigerian second National Development Plan (1970 – 74:75).

Hanson (1965) noted that, the establishment of public enterprises is premised on what he considered as obstacles to economic development in the post independence states, similarly, Ugorji (1995:54) observes that public enterprises are also established for political reasons. Many government undertakings are used to provide jobs for constituents, political allies and friends. The location of public enterprises and distribution of government employment have further been defended on the need to maintain federal character and promote national integration.

However, after a long period of growing state interventions in the Nigerian economy through public enterprises.Their performance has become a subject of national debate and hence a matter of crucial policy agenda of the governments of