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This study seeks to ascertain a solution for the current business stagnancy within Nigeria. The current social service system has a monopoly on business within the country, augmenting competition and output. There is historical and academic proof that the best course of action for Nigeria lies within the privatization of businesses and allowing for true enterprise performance to exist.
There is a natural cycle that takes place in a developing country. It begins with revolution and starts a journey through poverty. From there, the country rebuilds and redefines itself. Some countries make decisions that ultimately reroute the overall economic course to one of success while others make decisions that keep the country in poverty and allow others to prey on the resources and citizens. In Nigeria, a country with a history of religious and tribal tension, the steps are finally being taken to grow and expand business and offer the country some stability for the future. This case study will discuss the current status of privatization and enterprise performance within Nigeria and assert what must happen in order for the private sector of the company to grow.
Background of Study
This is a case study based on research from the last 15 years dealing with the growth and expansion of business in Nigeria. This study was conducted carefully, reviewing all applicable literature from both peer-reviewed sources and economic commissions dealing with Nigeria and its current course.
The Nigerian privatization programme
As an aftermath of size reduction and its importance due to privatization, Nigeria's public sector, is considered one of the largest in sub-Saharan Africa.
For the duration of the oil boom of the 1970s and 1980s the military regimes, was sustained by economic nationalism and a very big oil windfalls, which developed a large public enterprise sector and was surrounded by a broad spectrum of economic activities. These covered large basic industries (manufacturing, agriculture, services, public utilities and infrastructure). They included telecommunications, power, steel, petrochemicals, fertilizer, vehicle assembly, banks, insurance and hotels (Obadan and Ayodele, 1998).
According to Callaghy and Wilson, 1988, prior to the privatization, the estimated 1,500 enterprises reported for about 57% of a combined fixed capital investment and about 66% of formal sector employment. As regards to 40% of non-salary recurrent expenditure and 30% of capital expenditure was exhausted annually on these enterprises. Net outflows from the government integrated to the public enterprise sector have been estimated at US$2 billion annually. Public enterprise shortfall has been a major source of fiscal problems and a spillage on growth (World Bank, 1995).
In the rouse of the economic recession that began in 1981 adjoined to the fail of oil prices, the activities of public enterprises involved more attention and underwent closer inspection, much of it focused on their poor performance and the load they inflicted on government finance.
The underprivileged financial returns from these enterprises, against the background of severe macroeconomic imbalance and public sector crisis, precipitated the concern of government towards privatization (Shirley, 1999; Jerome, 1996).
Theoretical framework and review of related literature
Privatization and public sector reform gives a picture of what have been named "second generation" regulation policies, an attempt at characterizing them from "'first generation" policies, which center almost completely on economic stabilization. The immeasurable literature on privatization however, unfolds a lack of straightforward definition. Privatization has become a broad term often employed to describe a variety of policy program planned to alter the mix in ownership and organization of enterprises away from government in favour of the private sector. It wraps a range of possibilities, from decentralization to market discipline. Intently defined, privatization involves permanent transfer of regulation, as a result of transfer of ownership right, from the public to the private sector. While (Shirley, 1999 and Jerome, 1996), gave broader definition that involve any measure that results in short-term transfer to the private sector of activities exercised thus far by a public agency. This may be accompanied by a radical repositioning of obtainable productive resources, restructuring of the existing institutional setting in which production takes place, and the introduction of new forms of corporate governance devoid of political interference.
Nine published sources were reviewed during the course of this study to learn and identify the current course of private business in Nigeria. The following is a summary of each source regarding its application to private business within Nigeria.
"A Case for Performance Management in the Public Sector in Nigeria" discussed the need for Nigeria to move away from the once engrained public service model created by its original colonists and instead move toward a modern performance based management system. Simply put, the only businesses that succeed are those that successfully deliver, and the public service model has thus far failed to deliver any substantial results in Nigeria; rather, a goal setting model must be implemented within each privately-held business to ensure the business is successful (Esu, 2009)
"Gender issues in human resource management in Nigerian public service" presents the deficiency of current Nigerian businesses in hiring female workers for vital positions including human resources within the federal government. According to this study, 40.6 percent of women are selected for federal ministries as opposed to 59.4 percent of men. This is the greatest amount of women within the workforce as in most cases the percentages were within the 20's and 30's
In "Governance and Bureaucracy: Leadership in Nigeria's Public Service", a case report was created detailing how the State of Lagos' civil department has changed from 1967-2005. This study reveals that despite the government's attempts to stabilize the economy, the currency holds very little stable value regardless of the many natural resources within the country. The primary reason, according to this publication, is the authority given to the federal government of Nigeria to provide social services including their ability to tamper with private business and use public policy as a means of stifling what would be successful private endeavors (Oyelaran, 2006)
Motivation in Public Sector: The Nigerian Experience" further delves into the lacking motivation of the Nigerian workforce due to an absent motivational management system. Workers are paid regardless of their actual output and achievers are in no way motivated or rewarded for hard work. It is again emphasized that this derives directly from the social services techniques used throughout the country (Echu, 1998)
Privatization and Enterprise Performance in Nigeria: Case Study of Some Privatized Enterprises" again calls for the need to remove the government from business within Nigeria and instead hand over those businesses, including utilities and oil, to private business owners (Jerome, 2008)
Public Sector Reforms and E-Recruitment in Nigeria: Will Good Governance Count" reviews the ineffectiveness of the Nigerian government's attempts to recruit personnel through electronic recruiting instead of traditional means. This study once again emphasis that such techniques are ineffective due to the monopolistic control the government has on all businesses within Nigeria (Sanusi, 2011)
The article "Public Sector Roles in Strengthening Corporate Social Responsibility: Taking Stock" discusses the current model used by the Nigerian government of corporate social responsibility in ensuring that proper business structure is established. According to the article, the ultimate goal of this technique should be to eliminate the government's intrusion into business. This is where Nigeria has failed, as the government refuses to relinquish control of the businesses (Ward, 2004).
The article "Public Sector Management Reforms in Africa" states this case best when it argues: Privatization can contribute to fiscal stability in a number of ways. Gains can be made on the expenditure side by withdrawing subsidies to loss-making companies and imposing hard budget constraints on the economic decisions of managers. Also, the revenue derived from selling state enterprises to the public can help governments close their fiscal gaps (Public Sector Management Reforms in Africa, 2003).
The article "Goal setting and performance appraisal in public sector of Nigeria: An empirical investigation" concurs with the other publications in arguing that a goal-setting style of management is essential within Nigeria to ensure success of private business. This model currently does not exist, as there is no free market to drive goals (Agbolade, 2011).
In spite of the broad adoption of privatization, it has from the beginning been highly contentious and politically charged. These speak about the agency and credibility issues that are released by the exercise inclusive, its income distribution implications.
The question is why would officials who are in pursuit of group-interest, and under them bureaucrats with discretionary influence, be willing to entrust to a privatization policy that does not favour precise groups or agree to the enterprise of an impartial regulatory mechanism post-privatization? The answer from the helpful theory is that privatization only proceeds when politicians see in it clear-cut economic and political benefits. In their application of the model on Nigeria, Laffont and Meleu (1999) conclude that the rapidity of privatization is in a straight line associated to the shares that politicians or their associations can fetch in the privatized firms to give back to themselves for the failure of the rents previously enjoyed under state ownership. In a broad analysis of ownership and firm efficiency, Vickers and Yarrow (1988), for example, bring to a close that private ownership was a better-quality to public ownership only in firms where healthy competition is present. In markets without competitive forces, the introduction of competition via the removal of statutory monopolies or authoritarian measures that mimicked competitive forces provided higher competence gains than could be anticipated from the transfer of ownership to the private sector.
Statement of problem
As based upon the above publications, the problem in Nigeria is simple: the Nigerian governments, in their attempts to ensure an ideal corporate structure, have eliminated the ability of private business to grow and thrive, thus chocking out the country's private sector.
Is there an available model that will stabilize the Nigerian private sector and allow it to thrive?
The objectives for this research study were to discover the current state of business within Nigeria, review published suggestions for improvement, and consider those suggestions in light of historical relevance within other developing countries.
This research was conducted primarily to gain insight into the current conditions of business. The study reviewed all available publications on the topic.
Findings and analysis
The Nigerian government's current business system is unimpressive. More to the point is the fact that the social structure is detrimental to the growth and development of businesses. The Nigerian government has a monopoly on the natural resources of the country and consistently suppresses any attempts by private citizens to create a successful business. Within the publicly run businesses, there is no infrastructure which takes into account achievement, growth, or output resulting in further failure of businesses. The economy is stagnant and the system failed to effectively expand businesses within the nation. In the words of the World Bank's records, "The growth and performance of the Nigerian economy would have been much more impressive if much attention had been given to key managerial concepts such as motivation" (Echu,1998). Simply put, employees and owners must have a reason to work hard, without such a motivation output suffers. Below is a chart comparing the old structure used in Nigeria and other public service based nations with those of a performance based management system (Oyelaran, 2006).
Source: (Peters, 1996: The Future of Governing).
As it can be seen, under the current system Nigeria's businesses are run by the government who has the freedom to create rules and regulations that expand or limit business according to their "social" desires (Inyang, 2009). Issues such as work quality, work output, and overall employee effort are nonexistent, resulting in little profit and poor quality products being produced from the nation (Inyang, 2009). If the country were to transform this system into a performance-based system, the results would be private business that is contractually managed and that compares performance within various markets. It is this comparison that would drive the businesses to succeed.
Discussion of findings
Implementation of this form of business governance would not be easy for Nigeria. In fact, it would require input, most likely from outside businesses to establish a proper model for each area of business. Below is a chart of the cycle used to transform businesses from social works into performance management systems (Esu, 2009).
The Performance-by-design Framework Source: Watkins, R. (2007a).
As it can be seen, the transformation must begin by determining the necessary performance standards for a particular business. Design then shifts to outlining the goals needed to reach that performance and honing those goals until they are in an evaluative state. This is the key to performance based management. Businesses must be held accountable on a checklist-like standard. The final result is implementation of those goals and successful output for that business. Successful output equals economic growth.
Government and private business should never be mixed. The aims of both are too different to allow for success. In order for Nigeria to succeed as a country, there must be pure, competitive business without the interference of government. History has shown that where there is competition, there are natural reforms, work quality, and growth within the country. Contrary wise, where there is a government monopoly on business, business is stifled and unable to achieve.
Summary of findings
Simply put, Nigeria must follow the example of other developing countries and sell the resources to businesses and private citizens. By providing competition among private citizens, the market will remain uncorrupted and grow steadily.
Nigeria is on a precipice when it comes to growth and development. It is obvious from the case studies that its economy has been in a stalemate for the past decade due to the suppression of private business and the government's monopoly on private resources within the country. Additionally, Nigerian public enterprises have long been condemned for their incompetence, politicization, dishonesty and poor output.
Inclusive, the case studies denote that public enterprises in Nigeria are unsuccessful primarily as an outcome of government's intentional policy of relocating resources to cronies and followers and not just because managers have frail incentives. Should Nigeria desire to grow, succeed, and put poverty behind them, the government must let go of the businesses and transfer them into the hands of private citizens and allow the market to regulate itself.
Through this goal, businesses will begin competing and producing substantial enough resources to ensure healthy economic growth.