Role Of Commercial Banks In Privatization Of Government Companies
Commercial banks play a crucial role in the privatization of government-owned companies through various financial services and mechanisms. As privatization involves the transfer of ownership and control from the public to the private sector, banks act as facilitators by providing advisory services, financing options, and investment banking expertise to both the government and potential buyers. They assist in structuring deals, conducting due diligence, and arranging financing packages tailored to the needs of buyers, which can include loans, underwriting, and issuance of securities. Additionally, banks help manage the financial aspects of the privatization process, such as escrow services, payment processing, and risk mitigation strategies. Through their extensive networks and market knowledge, banks contribute to the efficiency and success of privatization efforts, fostering competition, innovation, and economic growth in the process.
This research work was carried out determine the role of commercial Banks in privatization of government companies in Nigeria.
The topic was chosen to find out how the commercial banks play their roles in the privatization programme.
This research was carried out by using questionnaire and research questions to obtain the information, which is this primary data other information was gotten from secondary data.
Chapter one, will contain a general discussion an the background of the study, problem identification, statement of problems, purpose of the study, Research Questions, significance of the study, scope and limitation of the study and definition of terms.
In chapter two, we will discuss the meaning of privatization, objectives of privatization, overview of the role of commercial banks in privatization, historical development of government companies, privatization as means of relinquishment of equity hold by the government, commercial banks rules and regulations towards their roles in privatization of government owned companies, role of commercial banks to minimize the intending of foreigners in country’s privatization and basic problem in this privatization process.
Chapter three, deal with research design and methodology, which include methods of research used determine of sample size, selection of population etc.
In chapter four, it will contain collection and presentation of data it will also contain testing of hypothesis and decision-making.
Chapter five, will contain summary of finding’s conclusion on the research and recommendation which will be made by the researcher.
Title Page
Acknowledgement
Dedication
Proposal
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROND OF THE STUDY
1.2 STATEMENT OF PROBLEMS
1.3 PURPOSE OF THE STUDY
1.4 RESEARCH QUESTIONS
1.5 SIGNIFICANCE OF THE STUDY
1.6 SCOPE AND LIMITATIONS OF THE STUDY
1.7 DEFINIFION OF TERMS
REFERENCES
CHAPTER TWO
LITERATURE REVIEW
1.0 PRIVATIZATION: DEFINITION
OBJECTIVES OF PRIVATIZATION
2.2 OVERVIEW OF THE ROLE OF COMMERCIAL BANKS IN PRIVATIZATION.
2.3 HISTORICAL DEVELOPMENT OF GOVERNMENT COMPANIES.
2.4 REASONS FOR PRIVATISING GOVERNMENT COMPANIES
2.5 MILTON FRIEDAN’S MONETARIST IDEA TEST FOR PRIVATIZATION.
2.6 PRIVATIZATION AS MEANS OF DELINQUISHMENT OF EQUITY HOLD BY THE GOVERNMENT
2.7 COMMERICAL BANKS RULES AND REGULATIONS/AGREEMENT TOWARDS THEIR ROLES IN PRIVATIONZATION OF GOVERNMENT OWNED COMPANIES
2.8 ROLE OF THE COMMERCIAL BANKS MINIMISES THE INTRUDING OF FOREIGNERS TO COUNTRY’S PRIVATIZATION.
2.9 BASIC PROBLEM IN THE PRIVATIZATION PROCESS.
REFERENCES
CHAPTER THREE
DESEARCH DESIGN AND METHODOLOGY
3.1 METHODS OF RESEARCH USED
3.2 DETERMINATION OF SAMPLE SIZE
3.3 SELECTION OF POPULATION
3.4 SOURCES OF DATA
REFERENCES
CHAPTER FOUR
DATA COLLECTION AND PRESENTATION
DEFINITION OF DATA
2.1 TYPES OF DATA SOURCES
2.2 DATA GATHERING TECHNIQUE (PRIMARY DATA)
CHAPTER FIVE
FINDINGS, CONCLUSION AND RECOMMENDATION
A. SUMMARY OF FINDINGS:
B. CONCLUSION:
C. RECOMMENDATIONS
BIBLIOGRAPHY
INTRODUCTION
2.0 BACKROUND OF THE STUDY
Privatization means the relinquishing of part or all the equity and other interest held by the Government or its agencies or enterprises whether wholly or partly owned by the Federal Government. This means reduction of public sector intention in the economic activities divestiture of government activities.
Privatization can also be defined as transforming of the government own enterprises from state to private ownership with a view of making profit.
One of the topical issue in our drive for enresructured economy is privatization. The government felt that some public sector business are performing below expectations, some incurred huge debt which are long repaid and serviced by the government. The government also because worried that substantial part of its capital roles were used to support public enterprises where provision of goods and services were often expensive, inefficient and subject to political manipulation. The federal government therefore decided and in stilling these enterprises as a way of saving costs and in stilling the spirits of efficiency in the affected enterprises.
According to a publication in the Daily Star News paper of August 28th, 2000, there have been many years in Nigeria of exhaustive deliberations to share holders on how to put the Nigerian economy on the part of sustainable growth and development. Now a consensus has emerged on the imperative of privatization of state owned enterprises. This quotation from the Daily star has gone a long way in explaining what privatization is all about.
According to a publication in the post express News paper of February 25th, 2003: by Tony Obiechina, “ in a bid to ensure that the privatization programme of the present administration does not suffer any set back the United Kingdom Department of International Development (UKAFD) has granted the Bureau of public enterprises (BPE) E8 million (about N 1.6 billion) to enable it continue with implementation of the programme”
Infact business world will define the topic as the decision to free state founds from the encumbrances of its parastalas, for instance according to Business Guardian at the close of the year 1998, Government subvention and subsidies to its about 580 parastatals, agencies and extra-ministerial department on enormous. The paper added that government in these parastatals would force on equivalent of this amount for more government business that would impact on the life of the persistence the birth of privatization to achieve this aim.
More so, privatization is a process where by the government sells its share in certain companies or parastatals where it has controlling interest to private individuals.
Interest of government on privatization is not unconnected with the reliance of the effectiveness of the market forces to determine a more meaningful allocation of scarce resources instead of completely regulated forces.
The arduous task of ensuring the smooth implementation of this lofty programme rests on the shoulders of the technical committee on privatization appointed by Babangida.
It could be understood that privatization was one of the preconditions laid down by the international monetary fund (IMF), to assist financially the developing countries of which Nigerian is one.
According to His Excellency, the president of the Federal Republic of Nigeria, General Olusegun Obansanjo in a speech while inaugurating the National Council on privatization in July 1999, “we are privatizing for the benefit of our economic recovery and our social life, it is not meant and /or designed to share our national assets to a few rich people”.
This programme was initiated by the Abdulsalam Abubakar Administration who put in place or ending enactment on the eve of her exist in power. This Administration also drew the guidance and modalities for implementation.
The present administration of the present president of the country, General Olusegun, Obasanjo also pursued the realization of the overall objective of this programme.
Understandably, government intends to realize some money in the measure of its ownership in these companies and to block the drain on government revenue from operating the enterprises in efficiently, it is not worthy to observe that Government cannot carry out this task in isolation.
More important is the role of financial institution in the programme. It is the intention of the writer to X-ray the role one of these financial institution commercial Banks will play in ensuring a smooth operation of privatization programme.
1.1 PROBLEM IDENTIFICATION
As far as privatization has been accepted as one of the economic reforms to restructure and stabilize our economy. It is necessary to study the role of commercial banks in the programme.
The various roles of commercial banks have been identified to include, provision of credit to disadvantaged Nigeria like they did during the implementation oif the Nigerian enterprises promotion decree, 1979 acting as distribution centres for shares. Subscription Debt equity Campaign already mounted by technical committee on privatization.
However, liquidity problems of commercial banks have rendered their role of providence credit to disadvantaged Nigerians very skeptical.
The experiences in the implementation of the Nigerians enterprises promotion decree shows that majority of the loans grated for share purchases in the programme were covered by the few rich as well as the fact that the channel of distribution was inadequate.
1.2 STATEMENT OF PROBLEMS
The aim of this study is to:-
1. Investigate the liquidity problems of commercial banks with a view to ascertain whether or not it can permit them to provide credit to disadvantaged Nigeria in privatization programme.
2. Highlight possible ways commercial banks can avert the experience in the implementation of the Nigeria enterprises promotion decree 1972
3. Examine the economic viability of security credits by share certificate only on commercial bank portfolio risk.
4. Suggest ways of improving accessibility of terms to rural dwellers given their most commercial banks lack adequate rural branches to achieve a wide distribution of shares.
1.6 PURPOSE OF THE STUDY
Nigeria as a Country has always had sound policies and programmes but the problem has been that of implementation. The privatization programme may not be an exception. In view of this, objectives or purpose of this study are:-
1. To examine privatization as a way out for government owned companies.
2. To discover the roles played by commercial banks in the privatization programme.
3. To compare the extent these role of commercial banks will go in solving the oiling company’s problems vis-à-vis the other method they have tried.
4. To recommend or advise on the appropriate role the commercial banks will play to solve these problems once and for all.
1.7 RESEARCH QUESTIONS
Considering the various problems identified and having stated the objectives of this study, the author wishes to form the following research:-
1. Excess liquidity plaguing commercial banks shall have effect on their ability to create credit in privatization.
2. Privatization shall increase the proportion of loans granted to typical rural dwellers.
3. Privatization shall not erase subjectivity in the distribution of application forms.
4. Risk explosive of many commercial banks cannot be affected by using share – certificate only as collaterals in privatization.
1.8 SIGNIFICANCE OF THE STUDY
Management of commercial banks- it guides their action.
Managers of the privatized companies- it enables them to know what bank manager will be doing in their company.
Students- students who will be writing project may use this as a reference material.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
Scope – the work is limited to the commercial banks that are involved in the privatization programme only.
LIMITATION : The research is limited by the following factors:-
a. TIME:- There is no enough time to carry out an extensive research as supposed.
b. FINANCE: As a student, the research does not have the much needed fund to visit all the commercial banks which are involved in the privatization programme
c. SECRECY:- Managers of the commercial banks involved in this programme are not willing to give out the needed information.
1.7 DEFINIFION OF TERMS
Privatization:- Transfer from government to private ownership.
Arduous:- Needing and using up much energy.
Liquity:- State of being able are raise fund by selling assets.
Plaguing:- Cause of trouble, annoyance or disaster.
Share Certificate:- A document issued by a company to its shareholder claiming the number of share held, the amount paid up and the name in which the share are registered.
Role Of Commercial Banks In Privatization Of Government Companies:
Commercial banks can play several roles in the privatization of government-owned companies. Privatization is the process of transferring ownership and control of government assets to the private sector. This can involve selling off state-owned enterprises, assets, or shares in these entities to private investors or companies. Commercial banks, as financial intermediaries, can facilitate and support this process in various ways:
- Financing Privatization Transactions: Commercial banks can provide financing to both the government and private investors involved in privatization deals. They can offer loans, lines of credit, or other financial instruments to help bridge the gap between the government’s need for immediate cash inflow and the private investors’ ability to pay for the assets.
- Advisory Services: Banks often have dedicated advisory teams with expertise in mergers and acquisitions (M&A) and privatization. They can provide valuable advice on deal structuring, valuation, regulatory compliance, and negotiation strategies. This advisory support can help both the government and private investors make informed decisions.
- Underwriting and Syndication: In cases where privatization involves issuing shares to the public or private placement of bonds, commercial banks can act as underwriters. They help determine the offering price, purchase the securities from the government, and then sell them to investors. Banks can also form syndicates with other financial institutions to spread the risk associated with large privatization deals.
- Custodian and Escrow Services: Banks can serve as custodians of the assets being privatized or hold funds in escrow until the conditions of the privatization deal are met. This ensures transparency and security in the transaction.
- Market Research and Due Diligence: Commercial banks can conduct market research and due diligence on behalf of the government and potential investors. This involves assessing the market conditions, the financial health of the company being privatized, and identifying potential risks and opportunities.
- Facilitating Foreign Investment: If privatization involves attracting foreign investors, banks can assist with currency exchange, foreign exchange risk management, and compliance with international financial regulations.
- Risk Management: Banks can offer risk management products, such as derivatives, to hedge against market volatility or other risks associated with privatization transactions.
- Post-Privatization Services: After privatization, banks can continue to provide financial services to the newly privatized companies, including deposit accounts, credit facilities, and treasury management services.
- Retail Services: In cases where privatization involves the sale of shares to individual investors, banks can act as intermediaries by offering brokerage and advisory services to retail investors.
- Public Awareness and Marketing: Banks can assist in marketing privatization offerings to potential investors, especially in cases where the government aims to maximize public participation.
It’s important to note that the role of commercial banks in privatization can vary depending on the specific circumstances, including the type of assets being privatized, the regulatory environment, and the financial market conditions. Additionally, the government’s objectives and strategies for privatization may also influence the extent to which banks are involved in the process.