A FINANCIAL APPRAISAL OF THE OPERATIONAL PERFORMANCE OF PRIVATIZED NIGERIA COMPANY (A CASE STUDY OF NATIONAL OIL PLC, LAGOS STATE)
The topic for this project is A financial Aprraisal of the operational performance of privatized Nigeria company. The research study is done in order to get possible solution or recommendation to the problem of the company and to make the staff to be efficient and effective.
Privatization can be defined basically as the process of transferring the ownership of a public enterprise to the private sector. The method adopted in this paper work was purely primary sources i.e from the field an secondary sources i.e magazine, journal e.t.c. The ratio shall be used as a benchmark for evaluating the performance of the company while the data can be analyzed into two and these are pre-privatization and post privatization.
In this respect, my aspiration to go into this research work is the modern techniques of finance mobilization, privatization has grown to attain much popularly as it is how being embraced by many developed countries and developing countries.
TABLE OF CONTENT
TITLE PAGE PAGES
TABLE OF CONTENTVI
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 4
1.3 SIGNIFICANCE OF THE STUDY 7
1.4 AIMS AND OBJECTIVES OF THE STUDY 7
1.5 SCOPE AND LIMITATION OF THE STUDY 8
1.6 RESEARCH METHODOLOGY 9
1.7 ORGANIZATION OF THE STUDY 10
LITERATURE REVIEW AND THEORETICAL FRAMEWORK
2.1 LITERATURE REVIEW 12
2.1.1 MEANING OF PRIVATIZATION 13
2.2 PRIVATIZATION IN NIGERIA 16
2.3 THE PRIVATIZATION PROGRAMME 18
2.4 PRIVATIZATION AND LIBERALIZATION 20
2.5 HISTORICAL BACKGROUND AND REGULATORY FRAMEWORK OF PRIVATIZATION IN NIGERIA 24
2.6 THE PRIVATIZATION PROCESS 25
2.7 ESTABLISHMENT OF AN APPROPRIATE LEGAL AND REGULATORY FRAMEWORK 31
2.7.1 INSTITUTIONAL ARRANGEMENT 31
3.1 INTRODUCTION 45
3.2 DATA COLLECTION METHOD 45
4.0 PRESENTATION ANALYSIS AND INTERPRETATION VIA STATISTICAL AND ALLIED TECHNIQUES 49
4.1 ANALYSIS OF PRE-PRIVATIZATION AND POST PRIVATIZATION OPERATIONAL PERFORMANCE OF SELECTED COMPANIES 50
4.2 ANALYSIS OF RATIO MEAN VALUE 51
4.3.1 TAX FOR THREE COMPANIES 53
4.3.2 POST-PRIVATIZATION AND PRE-PRIVATIZATION MEAN DIVIDED 54
4.3.3 POST-PRIVATIZATION AND PRE-PRIVATIZATION MEAN RETURN ON CAPITAL EMPLOYED 55
4.3.4 POST-PRIVATIZATION AND PRE-PRIVATIZATION MEAN SHAREHOLDER’S FUND GROWTH 56
4.3.5 POST-PRIVATIZATION AND PRE-PRIVATIZATION MEAN EARNINGS PER SHARE 57
4.3.6 POST-PRIVATIZATION AND PRE-PRIVATIZATION MEAN DIVIDEND FOR SHARE AFTER TAX 58
SUMMARY CONCLUSION AND RECOMMENDATION
5.1 SUMMARY 59
5.2 CONCLUSION 60
5.3 RECOMMENDATION 62
1.1 BACKGROUND OF THE STUDY
Privation is basically the process of transferring the ownership of a public enterprise to the private sector. This can be said to be injection of private resources in order words, capital and man power (in the aspect of more qualitative management ) into public sector activities. In Nigeria, privation has led to the transfer of ownership of government establishment to the private sector
With the advent of the modern techniques of finance mobilization, privation has grown to attain much popularity as it is now being embraced by many countries both developed and developing countries which Nigeria happen to be part of them.
The need for an efficient mechanism finds mobilization need to deregulate the economy and a quest for the elimination of include political interference in the economy amongst other reason have led to recent international appeal for privation by many government.
This wide spread acceptance of privation could be accounted for by various factors these includes:
1. The failure of government to run their parastals efficiently and effectively due to prevalent factor like bureaucracy. These have hundred their responsiveness to government public policy: hence they have constituted a drain on the nation economics
2. The minimization of excesses of political interference and non-market oriented decision making
3. The need to restructure internal policy due to an international economic demand for deregulation, instance of this is the international monetary funds (IMF) demand for deregulation of some third world economic s as a condition for granting loan facilities to them
Privatization has proven to be a channel through which domestic and international investment get into and perhaps stay with in the country’s economy. Also fund tied down in state owned establishment. Also fund tied down in state owned establishment can be released and redirected towards more welfare oriented program like heath are delivery, funding of education national security e.t.c.
However, in the case of Nigeria and some developing countries privatization is taking a slow pace and this can be blamed on previous bad government greed on the part of policy makers, minimal awareness of the gains of privation on the part of the majority of the populace amongst other reasons.
Privatization has been adopted as a key mechanism for deregulation policy in developing counties like Nigeria is that of accelerated domestic participation in economic activities that will enhance economic independence.
The history of privation in Nigeria and it’s implication for economic independence of the private sector owned no part of establishment, but the government and foreigners own them.
Although, the whole process was not know as privatization then it was all the same as an attempt to transfer ownership of enterprise in Nigeria to the private sector. It was further modified in 1977.
Under the indigenization exercise, the government still retained its hold on many enterprise from the global perspective, the growth in the popularity of privatization then, especially in industrial nations like Britain etc. can partly be traced to the economic development of the mid 70’s because it was used as a very vibrant tool to salvage the economy from the repercussion of the failure of the widely expanded public sector activities (Ekpentony 1992 ). then, privatization brought a kind of relief by providing market system, which is being required to achieve some necessary macro economics adjustments. Countries that found themselves in this situation include Pakistan and Brazil
1.2 STATEMENT OF THE PROBLEM
In privatized companies, it is strongly believed that with very sound policies, their implementation and monitoring will bring about a lot of gains both structural and financial, and the economy of large especially in the area of deregulation that will be enhanced by qualitative backward and forward linkages.
There is no organization without it’s own share of problem. The success of any organization depends on it’s ability to make a good programme and excite it. For example of privatized companies have good plans and could not execute
Them for the following reasons
(i) Ability to finance :- some privatized companies find it difficult to fiancé programme that will bring success to their bring success to their out put either caused by the ignorance by the decision makers.
(ii) Practice competence :- some may be ready to finance, but the technical hands, they have on the floor of the organization may able to meet the requirement
(iii) Management consistency:- this also may pull back the hand of the organization clock as in accounting data on the determination of business efficiency
(iv) Excessive urge for profit:- this means the organization interest in making more of profit them it’s reasonable, there by having an adverse effect on the quality of it’s form the global perspective, the growth in the popularity of privatization them, especially in industrial nations like Britain e.t.c can partly be traced to the economic development of the mid 70’s because it was used as a very vibrant tool to salvage the economy from the repercussion of the failure of the widely expanded public sector activities (Ekpentony 1992) then, privatization brought a kind of relief by providing to achieve some necessary macro economic adjustments. Counties that fund them selves in this situation include Pakistan and brazil.
1.3 SIGNIFICANCE OF THE STUDY
The essence of this study is to reveal the Nigeria program of privatization on which was thus developed
(a) Improve the efficiency of public enterprises
(b) To minimize their dependence on the nation
(c) To encourage share –ownership by Nigeria capital market
(d) Also, it will limit the scope of political interference in decision making in order to increase managerial incentive by making mangers responsible to shareholders who monitor their performance letter than government and to impose the financial discipline into private capital market (including the market for corporate control)
1.4 AIMS AND OBJECTIVE OF THE STUDY
The main objective of the study is to investigate whether privatization has affected the financial performance of the privatized company. It is also to establish the degree of relationship between privatization of Nigeria companies and their positive post privatization performance.
The specific objective are to:
(a) Examine the performance of privatized companies financially before and after privatization
(b) Assess the cost and benefit of privatization to these companies and the nation at large
(c) Determine the major constraint (5) to privatization
1.5 SCOPE AND LIMITATION OF THE STUDY
The study is strictly focused of the effects of privatization on the performance of privatized companies in Nigeria. The selected companies which is divided into a 5 year post privatization and 5 year. This study is prone to certain constraint which includes:
(a) Inaccessibility to first hand primary data which would have reflected a precise state of the affairs of the selected companies
(b) Also that of data accuracy because the main source of data is the financial statement of these companies over the years haven been subjected to various adjustment and fine turning for corporate interest e.g taxation
The most suitable type of data for this type of study is that which reflects specific market values of the performance of the company in question. This is very expedient for an economic based study of this nature. Other limitation are the presence of qualitative factors, management composition and other externalities data whereas some of these qualitative aspect have serious impacts on performance e.g Trade dispute in the organization.
1.6 RESEARCH METHODOLOGY
In designing a reliable and ideal methodological work, it is of all things necessary to discuss on the statistical terms used in the making of this research work. The study examine the economic financial performance of 2 selected privatized companies in analyzing its operational performance before and after privatization.
I shall be making use of frequency table and graphs in describing the operational. The major source of this information for this study are through journals, textbooks, research work etc.
1.7 ORGANIZATION OF THE STUDY
The study is divided into six chapters.
Chapter one: It is the introductory chapter which provide an insight and over review as to what the study is all about and how the study was conducted.
Chapter two: It deals with the literature review and the theoretical framework which covers the views and opinions of experts in the field of privatization on issues such as: economic theory. Legal (provision guidelines constraints and environment) it focuses on the historical background and the regulatory framework which briefly but adequately touches on the past history of privatization in Nigeria this far and also the regulatory bodies that have been in-charge of the process up to data and also existing relevant information pertaining to the study.
Chapter three: deal with research methodology i.e the data presentation of the study. The sources through which data is being collected.
Chapter four: Deals with the actual empirical analyses of the study, where the generated data in intricately manipulated via statistical and allied techniques to arrive at the result of the whole study.
Chapter five: Round up of the whole essay with the summary conclusion and recommendation.
LITERATURE REVIEW AND THEORETICAL FRAMEWORK
2.1 LITERATURE REVIEW
Just as the 1960s and 1970s was characterized by the rapid expansion of the public sector in the developing worlds, the 1980’s have witnessed attempts by policy markers to curtail the state economic role. The privatization of public enterprises have featured prominently in these attempt, just as an earlier generation of policy makers have emphasized direct state intervention to redress perceive failure in the operation of private market. Privatization initially became prominent in Great Britain during the thatcher government and quickly spread to the developing world (Van De walle 1989). In the united state, the motion was set by the Reapan Administration and this appears to have started a global trend of restoring the free enterprise spirit (Red wood 1987)..