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Evaluation Of Financial Problems And Prospects Of Privatization In The Economy

(A Case Study Of Nigeria Breweries Plc)

5 Chapters
|
98 Pages
|
11,892 Words

The financial problems and prospects of privatization in an economy are multifaceted. Privatization, the transfer of state-owned assets to private entities, can address fiscal challenges by generating revenue for the government and reducing the financial burden of managing state enterprises. However, the process is not without challenges. Poorly executed privatization can lead to corruption, concentration of wealth, and job losses. Furthermore, there may be resistance from various stakeholders, including employees and the public, who fear the loss of public services and assets. Success in privatization depends on careful planning, transparent processes, and effective regulation to ensure fair competition and prevent market abuse. If implemented strategically, privatization has the potential to enhance efficiency, stimulate economic growth, and attract private investment, contributing to the overall financial health and development of the economy.

ABSTRACT

This work is designed to find out the financial problems and prospects of privatization in Nigeria, a case study of Nigeria Breweries Plc.
The work therefore covers the background, significance and objectives of the study in chapter one. Which chapter two views issues dating to literature and tried to highlights it’s concepts and inceptions of privatization in Nigeria. Chapter three shows the research design and methodology and pointed out the area of the study, the population, determination of sample size and locations where the data was found.
A random sampling was used for selecting research sample and questionnaires administration. Primary and secondary sources of data were used. The primary sources is form the questionnaire administration which the secondary sources are from text-books, educational journals and magazine. The data is presented in tables and percentages, and figures were also used in the analysis.
In testing hypothesis, the chi-square test was conducted at an appropriate significant level and degree of freedom. Also, standard deviation was as well used.
From the data analyzed in chapter four, the following findings were made: Lack of findings for share/purchase is a problem for successful privatization in Nigeria, therefore, no other financial problems can also noted as a good option for improvement and development in Nigeria.
Lastly, the research work contains findings recommendations and conditions for further research.

TABLE OF CONTENT

i. Title Page
ii. Approval Page
iii. Dedication
iv. Acknowledgement
v. Abstract
vi. List of tables
vii List of figure
viii. List of abbreviations.

CHAPTER ONE
INTRODUCTION
1.1 Background of the study
1.2 Statement of the problems
1.3 Objective of the study
1.4 Research question
1.5 Research Hypothesis
1.6 Significance of the study
1.7 Scope and limitations of the study
1.8 Definition of terms
1.9 Organization/Plan for development of the study
References

CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 The concept of privatization
2.2 The inception of privatization in Nigeria
2.3 Rational for privatization
2.4 Regulation framework of privatization in Nigeria.
2.5 Methods of privatization of public enterprises in Nigeria
2.6 The role of government in privatization
2.7 Advantages of privatization
2.8 Disadvantages of privatization
2.9 Problems of successful implementation of privatization programs in Nigeria.
2.10 Conditions for effective privatization
2.11 Financial problems of privatization programmes in Nigeria.
2.12 Prospects of privatization.
References.

CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 Research design
3.2 Area of the study
3.3 Population
3.4 Determination of sample size
3.5 Sampling procedure/techniques
3.6 Types of data used.
3.7 Location of data
3.8 Instrument of data collection
3.9 Techniques of data presentation
3.10 Methods of data analysis
References

CHAPTER FOUR
DATA DESIGNATION AND ANALYSIS
4.1 Questionnaire presentation and analysis of data collection.
4.2 Test of Hypothesis
4.3 Findings.

CHAPTER FIVE
FINDINGS, RECOMMENDATIONS AND CONCLUSION
5.1 Findings
5.2 Recommendations
5.3 Conclusion
5.4 Suggestions for further research.
BIBLIOGRAPHY
APPENDIX

CHAPTER ONE

INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The privatization programme of the fist phase was said to benefit many Nigerians who were given the opportunity to purchase shares offered for sale by way of public offer. Subscription of shares during the phase one was largely successful with many public offers. However, there were a large number of Nigerian citizens who due to difficult economic realities in their present time were unable to put aside a few thousand naira required to purchase a small share holding in the enterprises which were offered for sale in the course of the privatization programme.
Recently, the federal government have come up with a means whereby the low-income earners and rural dwellers will participate in the on-going privatization programme. Today, banks have been instructed to give out loans without collaterals for the purchase of share up to N10,000 worth of shares within each five year period. This is being carried out by privatization share purchase loan scheme (PSPLS) which requires that one registers and later apply for share purchase and repayment on be through divided, cash, conversion of bonuses and right and sale of all or part of their allotments in the secondary market.
This new development in the privatization programmer early motivated me to carry out a project research on the topic: “The problems and prospects of privatization in Nigeria” using Nigeria Breweries Plc as case study.
In such direction I am of the opinion that at the end of the work, it will instigate the reader to participate in the on-going privatization programme.

1.2 STATEMENT OF THE PROBLEM
This research work is embarked upon to escertain the financial problems and prospects of privatization in Nigeria using Nigeria Breweries Plc as case study. Nigeria Breweries Plc started operation in the precolonial days with limited share holding of the public recently became one among the public limited companies mapped out for privatization in the countries by the federal government under the commercialization and privatization Act.
To get the plan achieved, it was discovered that finance poses a great challenge to the successful implementation of privatization in many developing countries especially Nigeria; hence, federal government issued directives to bank to give out loan without stringent condition for the purchase of shares up to N10,000 worth of shares.

1.3 OBJECTIVE OF THE STUDY
The research work is meant to achieve the following objectives:
To find out if lack of funds for the purchase of shares a problem for successful privatization.
To determine if there is limiting problem in the privatization of government enterprises in Nigeria.
To ascertain if there are other financial problems in on-going privatization programme.
To ascertain if privatization of government interprises a good option for development in Nigeria.
To determine if privatization will help to improve the economic growth of the country.
To make recommendation based on the research finding.

1.4 RESEARCH QUESTION
Is lack of funds for the purchase of share a problem for successful privatization?
Is there liquidity problems in the privatization of government enterprises in Nigeria?
Are there other financial problems in the on-going privatization programme?
Is privatization of government enterprises a good option for development in Nigeria?
Will privatization help to improve the economic growth of the country?

1.5 RESEARCH HYPOTHESES
Ho: Funds for the purchase of shares is not a problem for successful privatization.
Hi: Funds for the purchase of shares is a problem for successful privatization.
Ho: Widespread illiteracy in the country is not a problem for successful privatization.
Hi: Widespread illiteracy in the country is a problem for successful privatization.
Ho: Statistical data is not a problem for successful privatization programme.
Hi: Lack of statistical data is a problem for successful privatization programme.

1.6 SIGNIFICATION OF THE STUDY
The study is significance as it tends to create awareness of privatization especially on the enterprises stated for privatization in the phase. Educate Nigeria on how to be part of the privatization programme
Educate Nigerians on the benefits of privatization. Encourage them to buy shares from firms stated for privatization. Show how privatization would help improve the economic situations of the country and reduce the dependence of companies on the national treasuring as well as promote share ownership in companies instead of foreign ownership. Help those who will use the research project as one of their reference materials on issues concerning privatization in Nigeria such as students, government functionaries, as well as parties interested in privatizations in Nigeria. Encourage readers and interested parties to fully participate.

1.7 SCOPE AND LIMITATIONS OF THE STUDY
The scope covered in this research work is the privatization of Nigeria Breweries Plc. The study is basically designed to know the financial problems and prospects of privatization in Nigeria.
The major constraints encountered in the course of this work are time and finance. This is because lecture periods conflicts with the research periods.
Also the problem of getting sufficient materials, text books needed from libraries and the necessary parastals is another limitations.
However, the research believes that with the available data, the aim of the work will be achieved.

1.8 DEFINITION OF TERMS
In the course of this work, there are certain terms that will be used and there is the need to understand these words. They include:
1. Privatization:
Privatization is the taking over or acquisition of previously government owned business enterprises by private individuals or groups. It involves the sale of formerly public enterprises to private individuals or groups.
2. Commercialization:
Commercialization is an economic concept in which government owned business are expected to pay their way. That is, they have to cover their costs of production from the revenue they derive after sales.

3. Nationalization:
Nationalization means the taking over or acquisition of previously private owned business enterprises by the government for ownership and control.
4. Shares:
Shares means equitable part of the companies privatized. It is an interest in financial terms which one has in comparing.
5. Enterprises:
This is a company or business that is stated for privatization.
6. Financial Problems:
Financial problems, here are difficulties in monetary terms that is being encountered in the process of privatization which may cause a problem in the success of privatization programme. These may include, lack of funds for purchase of shares, mismanagement of funds, Prices of shares,
7. Finance:
Finance is money, funds or revue available for the purpose of privatization. Here the problems of finance in privatization are on both the government as well as interested parties in the privatization process.

8. Loan:
This is a source of funds that involves borrowing from banks for the purchases of shares of privatized firms.
9. Liquidity:
This is the measure of an organizational qualification in monetary terms used to meet its financial obligations.

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Financial Problems And Prospects Of Privatization In The Economy:

Evaluating the financial problems and prospects of privatization in an economy is a complex task that requires a comprehensive analysis of various economic, social, and political factors. Privatization refers to the process of transferring ownership and control of state-owned enterprises to the private sector. This can be done through various methods, such as selling shares to private investors, asset auctions, or public-private partnerships. To assess the financial implications and potential benefits of privatization, one must consider the following aspects:

Financial Problems of Privatization:

  1. Initial Costs: Privatization often involves significant transaction costs, including legal fees, administrative expenses, and financial advisory fees. These costs can put a strain on government budgets.
  2. Revenue Loss: Governments may experience a short-term loss of revenue when selling state-owned assets, particularly if these assets were profitable. This can lead to budgetary challenges, especially if the government relies heavily on the income generated by these enterprises.
  3. Unemployment: Privatization can lead to job losses if private owners seek to streamline operations and increase efficiency. This can result in social unrest and increased welfare costs for governments.
  4. Market Distortions: In some cases, privatization can lead to the creation of monopolies or oligopolies, which can harm consumers by limiting choice and potentially leading to higher prices.
  5. Asset Undervaluation: Governments may undervalue state-owned assets during the privatization process, leading to a loss of potential revenue.

Financial Prospects of Privatization:

  1. Efficiency Gains: Privatization often aims to improve the efficiency of state-owned enterprises. Private owners typically have stronger incentives to cut costs, improve operations, and enhance profitability.
  2. Increased Investment: Privatization can attract private capital and foreign investment into the economy, which can stimulate economic growth and development.
  3. Fiscal Relief: Privatization can help governments reduce the burden of subsidizing and maintaining state-owned enterprises, freeing up resources for other priorities such as infrastructure development or social programs.
  4. Technology Transfer: Private ownership can bring in new technologies and management practices, which can boost productivity and competitiveness.
  5. Market Competition: Privatization can introduce competition into sectors previously dominated by state-owned monopolies, leading to greater innovation and better services for consumers.
  6. Divestment Strategy: Governments can strategically use privatization to divest from non-core or underperforming assets, allowing them to focus on their core functions.

Evaluation Process:

  1. Financial Assessment: Analyze the financial health of the state-owned enterprises slated for privatization. This includes reviewing their assets, liabilities, profitability, and cash flow.
  2. Economic Impact: Assess the potential impact of privatization on the broader economy. Consider factors such as job creation, GDP growth, and foreign direct investment.
  3. Social Impact: Examine the potential social consequences of privatization, including its effect on employment, income distribution, and access to essential services.
  4. Political Feasibility: Consider the political climate and feasibility of privatization. Public resistance, political opposition, and legal constraints can hinder the process.
  5. Transparency and Governance: Ensure that the privatization process is transparent, well-governed, and free from corruption to maximize the benefits and minimize potential problems.
  6. Regulatory Framework: Establish a regulatory framework to oversee the privatized sectors and prevent anti-competitive behavior or exploitation of consumers.
  7. Monitoring and Evaluation: Implement mechanisms to monitor the performance of privatized enterprises over time and make necessary adjustments if problems arise.

In conclusion, the evaluation of financial problems and prospects of privatization in an economy is a multifaceted process that requires a careful analysis of economic, social, and political factors. While privatization can offer several potential benefits, it also presents challenges that need to be addressed through sound planning and governance. Each privatization effort should be tailored to the specific circumstances and goals of the economy in question.