THE IMPACT OF THE DEREGULATION OF THE TELECOMMUNICATION INDUSTRY ON THE NIGERIAN ECONOMY


THE IMPACT OF THE DEREGULATION OF THE TELECOMMUNICATION INDUSTRY ON THE NIGERIAN ECONOMY

ABSTRACT:         

Deregulation occurs when there is a significant decrease or elimination of government regulation over an industry, market or economy.  It gives room for innovative works and the use of the creative skills of workers for the further development of the economy, the research work is carried out to investigate the impact of deregulation of the Nigerian economy. 

The major problem that led to this study is the general poor service delivery in the telecommunication industry and the inability and unwillingness of the government to continue to subsidize the public telecommunication Company.

In a bid to achieve the objectives of this study, the researcher used questionnaires and review of available related documents and literature.  Primary data was obtained from management and non-management staff (operatives) of MTN office in Enugu while secondary data was obtained from the review of available related documents. 

Data gotten were analyzed using simple percentage distribution and hypotheses were tested using the chi-square distribution.

The outcome of this research shows that there is a general preference for the telecom industry after deregulation than before; deregulation has brought about increase in efficiency and effectiveness of telephone services and that it has increased the development of the economy.

TABLE OF CONTENTS

Title page - - - - - - - - -i

Certification page - - - - - - -ii

Approval page - - - - - - - -iii

Dedication - - - - - - - -iv

Acknowledgement - - - - - - -v

List of tables - - - - - - - -vii

Table of content - - - - - - -viii

Abstract - - - - - - - - -x   

CHAPTER ONE:     INTRODUCTION

1.1 Background of the study - - - - -1

1.2 Statement of problem - - - - -8

1.3 Objectives of the study - - - - -9

1.4 Research questions - - - - -9

1.5 Statement of hypothesis - - - - -9

1.6 Significance of the study - - - - -11

1.7 Scope of the study - - - - -11

1.8 Limitation of the study - - - - -12

1.9 Definition of terms - - - - -12

CHAPTER TWO:     LITERATURE REVIEW

2.1 Meaning of Deregulation - - - - -14

2.2 Objectives of the deregulated programme - -18

2.3 Deregulation of the Nigerian Economy - -19

2.4 Challenges and prospects of Deregulation- -23

2.5 Deregulation of the Telecom industry - -27

2.6 The Telecom Industry and foreign Direct investment                - - - - - - - - - -28

2.7 Economic Theory and Deregulation - -29

2.8 Deregulation and the creation of employment -31

2.9 The impact of deregulation of the Telecom industry  - - - - - - - - - -33

CHAPTER THREE:     RESEARCH DESIGN AND METHODOLOGY

3.0 Introduction - - - - - - -36

3.1 Research Design - - - - - -36

3.2 Sources of Data collection- - - - -37

3.2.1 Primary Data - - - - - - -37

3.2.2 Secondary Data - - - - - -37 

3.3 Techniques for Data Collection- - - -38

3.4 Population of the study and sample size - -38

3.5 Statistical method used for Analysis of Data -40

CHAPTER FOUR:      DATA PRESENTATION AND ANALYSIS 

4.1 Presentation of Data - - - - -41

4.2 Test of hypotheses - - - - -50

CHAPTER FIVE:     SUMMARY OF MAJOR RESEARCH FINDINGS, RECOMMENDATIONS, AND CONCLUSIONS

5.1 Summary of major research findings - -59

5.2 Recommendations - - - - - -59

5.3 Conclusion - - - - - -60

Bibliography

Appendix

CHAPTER ONE

INTRODUCTION

⦁ BACKGROUND OF THE STUDY 

Deregulation as a matter of fact has been applauded for enhancing business efficiently in most parts of the developed countries of the world.  Sometimes, the contribution to public revenues was emphasized. Sometimes the widening of share ownership with a huge lobby group of advisers and consultants profiting from the transactions. “Deregulation” is used to describe liberalization or the introduction of competition, in a broader sense, it does not mean disengagement but it does involve the creation of a more arms – length relationship between government and industry, most often by interposing an autonomous regulatory agency.

Over the years, it does seem though that the success or failure of deregulation is left to public opinion with reference to the developed or under developed nature of certain countries.  Governments in most part of the world have extended their economic interests in providing goods and services, in response to market forces and sometimes in competition with private enterprises.   The Scope of government ownership of companies and enterprises has increased greatly over the years.

As a result, government likes an organization part- take in investment of capital into various sectors of the economy.  Government invests mostly on business activities where it feels could be uneconomical for the private investors to embark upon due to the unavailability of funds to their disposal and because of high risks associated in carrying out the venture.

Prior to the attainment of political independence in 1960, Nigeria had an economy that was based on output from agriculture and this was her major source of foreign earnings, employment and revenue.   

Industrialization was not part of the Colonial economic policy which was one that saw the Colonies as mere producers of materials for foreign industries and importers of manufactured products.  With the coming of the first indigenous administration after independence, transforming Nigeria into a modern industrial economy became one of its major tasks.  This idea was later embraced by successive governments. 

Before 1965, the nation relied heavily on imports to meet with its domestic needs and companies that existed within the nation were owned by foreigners.  The demands of the nation could not be met by these.  Thus, there was large market failures and inadequacy of essential goods and services, thereby necessitating government intervention.

Government then defined the use, ownership and condition of transfer of physical, financial and intellectual assets.  They also took over ownership of vital parastatals like PHCN, Railway, NITEL etc in order to boost the economy.

Before the introduction of SAP, the productivity price and income’s Board (PPIB) held a tight reign on price control, Producers were forced to sell below market price and this discouraged reinvestment and competition in the market.  The removal of price control of the implementation of the structural Adjustment programme brought hope to companies that were weighed down by the regime of price controls and this increased competition in the market.  The Abdusalam Abubakar Administration continued the trend of deregulation when it announced on July, 20th 1998 its intention to deregulate the telecommunication, electricity, Petroleum refineries, tourism and some other industries.

The democratic administration of Obasanjo had the deregulation of various sectors of the economy as top in its agenda with agencies like Bureau for Public Enterprises (BPE) as instruments to achieving this.  Previous stringent government rules have been removed to enable private sector of the economy like the telecommunication industry, banking, tourism, petroleum etc to participate in economic activity.

Banwo (2001) affirms that deregulation of the Nigerian telecommunications industry has witnessed a fundamental change in the structure over the past five years.  The liberalization of the sector is gradually bringing about structural evolution from a monopolistic to a competitive market. The successful invention of the global systems for mobile communications (GSM) network, couple with the privatization of NITEL has opened up the potentials of the full explanation of Nigerian space resources.  The telecommunication service sector has now fully emerged as a distinct sector of economic activity.  There has been influx of various private companies encouraging competition in the market and better service provision. The telecommunication industry has become a great contributor to GDP and the development of the national economy. 

Odimma (2002) states that the primary objective of privatizing a telecom industry monopoly is to encourage sustainable competition in the telecom industry.  Beyond that are other factors that must be taken into consideration, namely; rural integration, teledensity and cultural environment.  The impact of each of these factors would depend upon the social agenda which of necessity must be achieved along with the privatization.  One benefit that true telecom liberalization would bring into the industry is competition.

Competition would result in cheaper telephone services, incremental telephone services which would include improvement in the teledensity and the phone service must be of a very high quality.

With the deregulation, the sector has witnessed increased activities but deregulation is only a prelude to policing and monitoring for effective service to the consumers in particular and the economy in general.  Today, liberalization has opened up the telecom market and has given a diversity in products and services that has contributed to the economic growth of the country.

The country until the launch of the Global system for mobile telecommunication (GSM) had an extremely low teledensity with an estimated 430,000 fixed lines connected and only about a third Nigeria’s  cities and towns are connected to the public switching telephone Network (PSTN).  This was considered as too poor for a population of over 120million people.  In fact, the country had the third lowest teledensity in the world.  According to Haruna (2002), the country had the third lowest teledensity in the world. The underdeveloped nature of the telecommunications sector belittles the huge potential of the Nigerian market.  In a country with a population of over 120 million, less than 2% are served with the basic telephone services.  Then nearly over 100,000 registered business in the country have a reliable communications network and the buoyant financial and oil sectors have had to establish private networks in order to insulate themselves against mediocre services.  Nevertheless, with the deregulation of the Nigerian Telecommunications industry, the sector is rapidly becoming one of the most profitable and fastest growing industries with revenue expected to reach N9000 billion naira in the next five years.  In recognition of the latent demand of telecommunication services, Nigeria has witnessed an astronomical growth in mobile teledensity.  With the liberalization in the telecommunications sector, private telecommunications operators (PTOS) have sprouted up providing an array of services to subscribers. Private phone booths and business centers as they are popularly called are found in street corners and at short distance in most major cities across Nigeria in the day following the entry of the PTOS.  People who cannot afford owning telephone lines could easily stop by the nearest available centre to make calls.

Ifijeh (2002) asserts that in view of the fiercely competitive environment of the telecommunications industry following its liberalization and deregulation, maintaining a leadership position in the industry as well as proper positioning for potential growth opportunities and survival in the marked place will require the application of effective marketing strategies.

Ekong, (2002) posits that the growth in the telecommunications industry being experienced came as a result of the deregulation and this has brought about different telecommunication companies.  Furthermore, deregulation has introduced competition and new market dynamics to the previously bureaucratic organization like NITEL, that for the organization to survive and grow, there should be a concerted effect on marketing of its services.  

⦁ STATEMENT OF PROBLEM 

Nigerians have for long looked forward to the time when they will join the rest of the world in enjoying the benefits of improved telecommunications system which apart from power supply is about the most important requirement for the economic and social development of any nation, incidentally it is highly regulated in Nigeria.

The Nigerian government pays so much to the Multi National Companies to sustain this. However the Nigerian government intends to deregulate this sector, thus leaving it to the market forces of demand and supply. The transfer of this burden to individuals as against the sharing between the government and its citizens in the period of economic meltdown is worrisome.

It is the effect of this problem that motivates this research.

⦁ OBJECTIVES OF THE STUDY 

The following are the objectives of this study, thus: 

⦁ To bring to the fore the rationale for deregulating the telecommunication sector in Nigeria.

⦁ To find out the constraints associated with deregulation of the Nigerian economy

⦁ To identify the envisaged impact of deregulation on the development of the economy.

⦁ RESEARCH QUESTIONS

⦁ What are the rationales for deregulating the telecommunication industry in Nigeria?

⦁ What are the constraints that face the deregulation of the telecommunication Industry?

⦁ What is the impact of deregulation on the development of the economy?

⦁ STATEMENT OF HYPOTHESES

For the purpose of this research, the following hypotheses have been formulated:

HYPOTHESIS I:

Ho: Deregulation brings about efficient  and enhanced services. 

Hi: Deregulation does not bring about efficient and enhanced services. 

HYPOTHESIS II:

Ho: Knowledge about deregulation is an essential prerequisite for effective implementation of deregulation

Hi: Knowledge about deregulation is not an essential prerequisite for effective implementation of deregulation. 

HYPOTHESIS III:

Ho: Deregulation of the telecommunication industry has led to an increase in its contribution to national development.

Hi: Deregulation of the telecommunication industry has not led to an increase in its contribution to national development. 

⦁ SIGNIFICANCE OF THE STUDY 

This study is significant to the following people:

⦁ Telecommunication industry because it will be useful to them in attending to their customers well.

⦁ The Citizens because it will enable them know when and how to get the best treatment.

⦁ The researcher because it is a prerequisite for the award of MBA.

⦁ Other researchers who will use this research work as a secondary data in the case of a related research work.

⦁ SCOPE OF THE STUDY

The study is focused on the telecommunication industry in general and MTN in particular in Enugu State. Its theoretical coverage will include the telecommunication industry in Nigeria, the pros and cons from the year 2009-2012

⦁ LIMITATIONS OF THE STUDY 

In pursuance of a successful completion of this study, certain limitations were encountered by the researcher.  Among these include;

⦁ The dearth of research materials: The non-availability of books and journals on deregulation and the uncooperativeness of the staff in releasing relevant information on the study.

⦁ Time: The research was time bound, so it posed a very serious challenge as the researcher had to assemble all materials in a little space of time.

⦁ Finance: Again, some of the materials used in this research work cost a heavy sum of money to acquire and thus proving a challenge to the researcher.

However, these limitations were overcome by the researcher and subsequently the work was completed. 

⦁ DEFINITION OF TERMS

BPE: Bureau for public Enterprises.

Commercialization: Selling something with the aim of making profit especially something that is not meant to be sold. 

Deregulation: Removal of regulations or restrictions

GSM: Global system of Mobile Telecommunications

Liberalization: Removal of restrictions on economic or political affairs.

NITEL: Nigerian Telecommunications Limited

Privatization:  Sale of or transfer of part/whole ownership of state owned enterprises to private investors. 

Teledensity: Number of telephone lines per 100 populations. 

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THE IMPACT OF THE DEREGULATION OF THE TELECOMMUNICATION INDUSTRY ON THE NIGERIAN ECONOMY



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