Project Materials

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

The last three decades have witnessed pervasive reforms in the electricity power sector across both developed and developing countries. A number of reasons are advanced by scholars to rationalize the cross-countries embrace of the sector transformation.

While Hartley (2012), posits that shared fundamental changes, such as, technology in the industry, is primarily responsible for the reforms permeation into many country, some attributed it to the sector overall poor performance as a result of its vertical monopolistic nature, inadequate power generation, poor transmission and distribution of electricity insufficient investment, ineffective regulation amongst others (Heddenhausen, 2007, REEP/UNIDO, 2008 Ajumogobia and Okeke 2015).

In addition, macroeconomic factors, outside the power sector, such as, government fiscal constrain and structural adjustment and monetary lending policy of World Bank and IMF also facilitate the wide spread of the reform (REEF/UNIDO, 2008).

Interestingly, World Bank (2014) asserts that power sector reform is meant to be of immense benefits for socio-economic and industrial growth in a mutually beneficial manner to both private and public sectors of the economy (cited in Soukana and Amal, 2014).

This is an attestation of external support for the reforms on multilateral platform with degree of influence capable of insuring a transcontinental acceptability. However, both internal and external factors to electricity sectors might be responsible for its cross-national implementations but the post-privatization performance appears to vary from one country to the other.

The diversity of country’s outcome may not be too far from national peculiarity arising from their level of social, economic and political development. As such, adhering to a hard and fast rule or wholesome replication of a model, without consideration for domestic characteristics by a country in the course of implementing the reforms, may yield different result.

In Nigeria, power sector privatization lingered for almost two and half decades (1989-2013) before it was concluded (Onoche, Egware and Eyakuvanor, 2015). To address the economic challenges in the country, the General Ibrahim Babangida’s military administration (1985-93) introduced the Structural Adjustment Programme (SAP). One of the main elements of SAP was the encouragement of rationalization and privatization of public sector enterprises.

The main goal of the strategy of privatization of PEs was to reduce the dominance of unproductive investments in the public sector; improve efficiency and effectiveness; and intensify the growth potential of the private sector in Nigeria (Nwokoma, 2016).

Researches in Nigeria support the argument that going by the poor performance of PEs in the country; the best option would be for the government to continue to pursue the policy of privatization of PEs as a way of achieving economic growth and development (Abdullahi, 2014; Ojo, 2014; Gberevbie, 2006; Jimoh, 2007; Onah, 2008).

However, disagreement becomes noticeable on the modalities to be adopted for the privatization of PEs and what implementing agency to be put in place in terms of structure and personnel to achieve the goals of the privatization policy of the Nigerian government. Privatisation was seen by many as the main solution to all the challenges encountered in the power sector. Previous attempts at making the electricity and power supply sector more efficient and effective had failed.

To remedy the situation, total divestiture of government from public enterprises involved in the generation, transmission and distribution of electricity will lead to proper utilization of resources and better performance was being argued.

The process of privatisation of the power sector began with the unbundling of National Electric Power Authority (NEPA) to Power Holding Company of Nigeria and to the Distribution agencies. The Power Holding Company of Nigeria was later unbundled into Transmission Company of Nigeria (TCN), six generating companies and eleven distribution companies.

The aim of this further unbundling was to improve the performance of these public enterprises and fast track the process of getting electricity across to more Nigerians. In the area of performance, not all privatised public enterprises have met the expectation the citizens.

Some of the factors adduced for this poor performance range from non-investment in necessary equipments and human resources to poor management. The assumption of technocrats and policy makers is that privatisation would ameliorate these issues and improve performance. However, available evidence has shown that this is not always the outcome.

(Villalonga, 2013, Willner, 2015) Confronted with this situation, what can one advance as the cause? Is it fitting to attribute it to either Nigeria poor implementation of electricity reforms, refusal to factor in local environmental distinctiveness? Or, possibly, both and any other unimaginable factors as been accountable for the poor performance?

Nevertheless, how can Nigeria draw out lessons from countries with tract records of successes and challenges appears as a sure path to stable electricity supply and predictable sector. And this would suggest where the reforms may require being tinkered or tweaked with in order to achieve the desirable goals.

1.2 STATEMENT OF PROBLEM

It is general knowledge that public–owned enterprises are not performing creditably in Nigeria. To ensure developmental growth in the organization, it would go as far as; determining how the Federal Government could not found the monumental and inefficiencies of these public enterprises with problems such as ill-conceived investments, political interferences in decision making ,costly and inefficient use of public resources, and lastly, growing budgetary burdens.

Similarly, the continuous system failures as the result of weakness and obsolete power transformers at all generating stations which has proven total collapsed in the entire electricity supply thereby affecting the most of the economic activities of the country.

In this regard, the questions that come to mind are: since the inception of privatization policy of government, what has been achieved in terms of preventing wastages of public funds in the area of subvention to PEs in Nigeria? Has privatization policy of PEs in Nigeria served the interest of the people or of those in government?

Is privatization of PEs really a good option or should the government rather direct its attention on reforms of PEs as way of realizing the purpose for their establishment? What measure should be adopted to make privatization of PEs achieve its goals in the country? Based on this, it will be the focus as to finding out how the research shall investigate the privatization and commercialization will bring out solutions as impact and development and growth in the national economy.

1. 1. AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to examine the impact of privatization policy on the performance of public sector organizations. Other specific objectives of the study include;

1. 1. To examine the impact of government influence on the privatization of Nigeria Electricity Power supply.

1. 1. To examine how privatization of power sector bring sustainable electricity supply.

1. 1. To examine the impact of privatization the performance of Nigerian electricity company.

1. 1. To investigate how privatization of power sector contributes and strengthened the capacity of the national economy.

1. 1. To examine the factors that could enhance or inhibit the success of the privatisation process in Nigeria.

1. 1. To examine the challenges of implementation of privatization in Nigeria Electricity Power supply.

1.4. RESEARCH QUESTIONS

1. 1. Does the impact of government influence the privatization of Nigeria Electricity Power supply?

1. 1. How does privatization of power sector bring sustainable electricity supply?

1. 1. What is the impact of privatization the performance of Nigerian Electricity Company?

1. 1. How does privatization of power sector contributes and strengthened the capacity of the national economy?

1. 1. What are the factors that could enhance or inhibit the success of the privatisation process in Nigeria?

1. 1. What are the challenges of implementation of privatization in Nigeria Electricity Power supply?
      1. 1. RESEARCH HYPOTHESIS

       

1. 1. There is no significant impact of privatization the performance of Nigerian Electricity Company.

H1: There is a significant impact of privatization the performance of Nigerian Electricity Company.

1. 1. SIGNIFICANCE OF THE STUDY

This study has some inherent potential benefits;

First, it will enable us to understand the concept of privatization and its contribution to economic growth and development.

Secondly, the study will enable us to identify the relevance or otherwise of privatization policy to the Nigerian economy.

Third, the study will offer an insight into those areas where privatization tends to have effective role to play in a nation’s economy.

Moreover, the study will add to existing knowledge and the same time serve as a future reference material that will guide other researches who may venture into the same area of study.

1. 1. SCOPE AND LIMITATION OF THE STUDY

The study is restricted to the impact of privatization policy on the performance of public sector organizations, a case study of Nigeria electricity power supply.

1. 1. LIMITATION OF THE STUDY

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1. 1. DEFINITION OF TERMS

Public Enterprises: Public enterprises are enterprises set up by government to perform definite social and economic functions for the public.

Privatization: Privatization can be defined as narrowly as the transfer of government owned shareholding in the designed enterprise to private shareholders, comprising of individuals and corporate bodies.

It is the policy of selling off public enterprises to individuals, groups and organizations; they should operate under the principle of profitability, effectiveness, efficiency and viability than in public interest.

Generating power Companies: These refers to the companies that has the capacity to produce (generate) bulk Kilowatts ampere electricity energy for consumers usage both industrially and household

Political Interference: It can be defined as a situation whereby the government or leaders are in control of the affairs or activities of the public for their own interest.

Private sector: this is that part of a country’s economy consisting of privately-owned businesses etc.

Economic Power sector Regulatory Agency: This is a body empowered to oversee the general activity involve in the course of cost of provision of supply of electricity, pricing and some observables and disagreeable practices such as abnormal charges or otherwise from customers or and non-payment