Project Materials

THE ROLE OF CAPITAL MARKET ON PRIVATIZATION PROCESS IN NIGERIA.

Chapter one

INTRODUCTION

1.1 Background of the Study

Privatisation Appeared in standard dictionaries only in the early 1980s [it appeared in Webster’s New Collegiate Dictionary is one of the radical methods for thinning the government-owned enterprises [which failed to maximise greater goods, he did so at a high cost and ran the government into severe fiscal problems in the 1980s, making loans difficult to raise both domestically and internationally.

The other way involved strengthening the mechanisms by which the government managed their firms. To attain these goals, a robust capital market must be established.

In Nigeria, the privatisation process has been heavily criticised by the media and civil society. The purpose of this paper is to educate the public on how the current privatisation process will help to redistribute income, create more jobs for the people, channel funds from the surplus to the deposit group, and increase the government’s revenue in the country.

The privatisation process is one of the recommendations of the structural adjustment [SAP]. For many years up to 1980, the Nigerian government made fairly extensive use of the public enterprise [PES] for resource mobilisation and allocation, particularly within the social service and utilities sector.

With the windfall from crude oil sales during the boom of the 1970s, the economic activities of PES in Nigeria expanded significantly beyond the traditional domain of social.

By the 1980s, an increasingly dominant PES sector had emerged in Nigeria, accounting for approximately 50% of GDP and 60% of modern sector employment [FRN 1986].

By this time, the number of PES at the federal level alone had reached approximately 600 enterprises, with another 900 smaller ones at the state and local government levels [Technical Committee of Privatisation and Commercialisation [TCPC, 1993]].

According to the 1985 estimate, total investment in these PES at the federal level is about N36,756.00 billion, which TCPC now Bureau for Public Enterprises [BPE] revalued using the 1993 estimates to be about N5000.00 billion of the investment estimates public utilities [PUS] public enterprises producing hard core infrastructure such as electricity, water, telecommunications, and transportation, accounted for about 37.4% [TCPC, 1993].

For the preservation and sustenance of the economic operations of this PES, the Nigerian government had traditionally expanded roughly 40% and 30% of its mandated capital and recurrent expenditures on them annually during the pre-structural adjustment program [SAP] period [FRN 1986].

Based on the foregoing, it can be concluded that the oil boom of the 1970s enabled the government to dabble in a variety of manufacturing trading activities in direct competition with well-established private enterprises. They also wanted a majority stake in the oil firms.