ABSTRACT
This
study examines public sector reform and its impact on organizational productivity,
a case study of NITEL. The study also examines the institutional details, of
the economic environment. The organization being the mostly rapidly growing and
technologically dynamic sector of the economy. Pressure to move the sector out
of its traditional public utility, monopolistic status is being exerted all
over the world and is ultimately irresistible.
Data
were elicited through the administration of research questionnaires among the
sample respondents that were selected for the study. A total of sixty
questionnaires were administered while forty (40) were retuned. The
single percentages and frequency distribution tables were adopted in the
analysis, while the Chi-Square statistical technique of hypothesis was employed
in confirming the proposed research hypotheses.
From
the findings of the study, it can be concluded
that public sector reform would significantly help in motivating the private
sector in achieving greater performance and growth. Also, resituating of the
public service influences to a greater extent the efficiency and effectiveness
of the private sector. Finally public reform programmes and job creation have
significant relationships between poverty reduction and job wealth creation respectively.
On
the basis of the findings, the study therefore recommends that constant reforms
of the public sector will enhance the private sector in achieving greater
performance and development of new cadre of professional procurement and
contracting officers in the public sector will guarantee the proper
implementations of the reforms.
TABLE OF CONTENT
CHAPTER ONE
1.1
Background of the Study
1.2
Statement of Research Questions
1.3 Objective
of the Study
1.4 Statement
of Research Problems
1.5 Statement of Research Hypotheses
1.6
Scope/Limitation of Study
1.7
Research Methodology
1.8
Operational Definition of Terms
CHAPTER TWO
2.0
Introduction
2.1
Review of Related Literature
2.2 Theoretical
Framework
2.3
Structure of the Nigerian
Telecommunications Industry
2.4
The Reforms Undertaken in NITEL
2.5
NITEL'S Performance since
Deregulation
2.6
The Empirical Evidence
2.7
Reasons behind Reform
2.8
Public Sector Procurement Reforms
CHAPTER THREE
3.1
Research Methodology
3.2
Method and Sources of Data
Collection
3.3
Criteria for Data Collection
3.4
Sampling Technique
3.5
Limitation of Analytical Procedure
3.6.
Limitations of Analytical Procedure
3.7
Restatement of Hypothesis
3.8
Analytical Procedure
CHAPTER FOUR
4.0
Presentation and Analysis of Data
4.1
Introduction
4.2
Methodology
4.3
Administration of Data
4.4
Data Analysis
4.5
Hypothesis Formulation
4.6 Testing of Hypotheses
CHAPTER FIVE
Summary
Conclusion and Recommendations
5.1 Conclusion
5.2
Recommendation
References
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In
recent years, many developing countries have embarked on the reform of public enterprises,
including privatization, within the framework of macroeconomic reform and
liberalization. More than 100 countries across the continent, most of them
developing have privatized some of their state-owned enterprises (SOEs).
Equally striking is the volume of transactions. Between 1988 and 1993, over
26,000 privatization transactions with sales values exceeding US$50,000 each
were recorded world-wide, generating a gross receipt of US$271 billion. Of
these transactions, about 900 were conducted in 1993 alone, against only about
60 in 1988. Developing and transition economies accounted for much of this
tremendous growth (Sader, 1995). Between 1988 and 1994, developing countries
around the world sold about 3,300 SOEs, with sales revenue rising from only
US$2.6 billion at the beginning of the period to a peak of US$29 billion in
1992 (Megyery and Sader, 1997).
The
resort to privatization/commercialization was informed by several
considerations.
First,
by 1985, the quantum of resources required to sustain the SOEs had become an
unbearable burden on the affected nations. Second, it was envisaged that a
carefully planned privatization program would be an effective strategy for
improving operational efficiency, broadening share ownership, attracting foreign
investment and reducing the role of the state where the private sector has the
capabilities to operate more efficiently. Finally, since the beginning of the
1980s, privatization of public enterprises has become a major policy tool in
both developed and developing countries following the apparently successful
privatization program in Britain. Privatization gained considerable momentum in
developing countries given its endorsement by the multilateral financial
institutions as a major plank of adjustment policies. The urge for
privatization was further reinforced by the need to reduce government
expenditure in the face of burgeoning fiscal deficits, and was also in conformity
with the resurgence of "economic liberalism” in the development
literature.
Yet
despite widespread privatization efforts, empirical evidence indicates that its
anticipated benefits are yet to be felt in African countries. Most studies have
documented the relatively pear performance of SOE reform efforts in Africa
compared with other areas of the world in both relative and absolute terms
(World Bank 1996; Kikeri et al., 1992; Adam et al., 1995). However, only
limited efforts have been made to identify the causes and determinants of the
uniquely unsatisfactory performance of SOE reform in Africa relative to other
environments. As in most developing countries, the Nigerian economy until
recently witnessed a growing involvement of the state in economic activities.
The expansion of state-owned enterprises (SOEs) into diverse economic
activities was viewed as an important strategy for fostering rapid economic
growth and development. Massive foreign exchange earnings from crude oil, which
exacerbated unbridled federal government investment in public enterprises, reinforced
this view. Thus, by 1990, there were over 1,500 public sector enterprises in
Nigeria, 600 of which were owned by the federal government and the rest by
state and local governments (Jerome, 1995). The public enterprise sector
excluding Petroleum accounted for about 15% of Nigeria's gross domestic product
in 1990.
Unfortunately,
most of the enterprises were poorly conceived and economically inefficient.
They accumulated huge financial losses and absorbed a disproportionate share of
domestic credit. By 1985, they had become an intolerable burden on the budget,
as they were being sustained through budgetary allocations from the treasury.
In the wake of the economic recession that began in 1981, following the
collapse of oil prices, the activities of public enterprises attracted more
attention and underwent closer scrutiny, much of it centering on their poor
performance and the burden they imposed on government finance. The poor
financial returns from these enterprises against the background of severe
macroeconomic imbalance and public sector crisis precipitated the concern of
government towards privatization.
With
the adoption of the structural adjustment program (SAP) in 1986, SOEs came into
the forefront as a major component of Nigeria's economic reform process.
Consequently, the Technical Committee on Privatization and Commercialization
was established in 1988 to implement the SOE reform component of SAP. In what
appears to be a uniquely comprehensive initiative, 101 enterprises in virtually
all sectors were slated for total or partial privatization and another 35 for
commercialization. Subsequently, public utilities such as Nigerian
Telecommunications Limited (NITEL), the Nigerian Postal Services, Nigerian
Airways and the Nigerian Electric Power Authority, among others, were
restructured and reoriented towards higher efficiency. Nigeria is probably the
only country in the world that carried out a hybrid program of privatization
and commercialization simultaneously. The decree defined commercialization as
the reorganization of enterprises, wholly or partly owned by the government,
into profit making commercial ventures without subvention from the government.
The process entails explicit performance-based contracts with managers of SOEs.
In return for managers' expanded power over pricing, procurement, production
and personnel, the enterprise is subjected to a hard budget, which entails
cutting subsidies and transfers.
The
telecommunications industry in Nigeria also witnessed the deregulation of
telecommunications services in 1992 through the promulgation of Nigerian
Communications Commission (NCC) Decree, No. 75 of 1992, introducing private
participation in the provision of telecommunications services in Nigeria, thus
ending the state-owned NITEL's monopoly of the sector and ushering in
competition. Deregulation is expected to enhance efficiency in two ways. First
is through the curtailment of the inefficiency that arises as a result of
regulation and isolation of firms from actual and potential competition.
Second, rents accruing to rent-seeking groups benefiting from regulation would
be dissipated by a more competitive market environment.
(Winston,
1993). W1nle much has been written about the experience of developed economies
with deregulation and privatization of public utilities (Oniki et al, 1992;
Imai, 1994; Wellenius and Stem, 1994), there have been few studies on the
experience of developing countries especially those in Africa, Yet, these economies
are more vulnerable to disruptions associated with grossly inadequate provision
of infrastructure services. What is the quantitative and qualitative evidence
concerning allocative and productive efficiency? To what extent have ex ante
expectations and results been realized? Have reforms induced more rational and
profitable investment? What lessons are to be learned?
1.2 STATEMENT OF RESEARCH
PROBLEMS
At
the inception of the Obasanjo administration in 1999, the morale of Nigerians
was at the lowest ebb as a result of problems encountered by the public sector
ranging from:
Ø Total
decay of infrastructure
Ø Malfunctioning
public utilities
Ø High
level of corruption
Ø General
waste
Ø Public
pension collapse
Ø Inefficient
State enterprises
Ø Soaring
inflation
Ø Unemployment
and a dissatisfied citizenry
Nigerians
had almost lost confidence in the government and faith in their country. Mr.
President, recognizing this basic fact, embarked on fundamental changes
otherwise tagged reforms, in the socio-economic and political spheres of our
national life, in order to give Nigerians a better future. After all, a chronic
ailment must require a drastic cure or surgery, to restore a patient to good
health.
The
Federal Government has therefore, identified and prioritized major areas
requiring reforms, such areas include:
Ø Privatization
of public enterprises;
Ø Liberalization
of key sectors of the economy;
Ø Restructuring
of the Public Service;
Ø Review
of government budgeting and taxation laws;
Ø Governance
and institutional strengthening;
Ø Debt
Management;
Ø Service
Delivery;
Ø Economic
empowerment programs; and
Ø Entrenchment
of fiscal discipline in public budgeting and expenditure;
Ø Due
Process.
1.3 OBJECTIVE OF THE STUDY.
In
the main, this study examines the impetus for reform, what happened in the wake
of commercialization and deregulation, and the changes in the regulatory
framework. The study also looks at the institutional details of the economic
environment. Our choice of the telecommunications sector arises because the
industry presents some of the most difficult issues currently confronting
microeconomic policy makers. Furthermore, it is the most rapidly growing and
technologically dynamic sector and the pressure to move the sector out of its
traditional public utility, monopoly status is being exerted allover the world
and is ultimately irresistible.
However,
the main objective of the study is to ascertain the quantitative and
qualitative evidence concerning the efficiency and welfare improving effects of
deregulation of the telecommunications sector in Nigeria. The specific
objectives of the study are:
Ø To
analyze the production structure of Nigerian telecommunications and estimate
the total factor productivity growth.
Ø To
decompose total factor productivity growth into scale economies and
deregulation effects with a view to estimating efficiency gains due to
deregulation.
Ø To
assess the regulatory changes m the sector m the wake of commercialization.
Ø To
analyze the options for evolving a viable telecommunications sector in Nigeria.
The study will also look into the structure of the Nigerian telecommunications
industry the essence and effectiveness of NITEL and finally the impact of
deregulation on NITEL.
1.4 RESEARCH QUESTIONS
In
carrying out this study, the following questions are necessary:
1. Would
privatization of the public enterprise help in the Reinvigoration of the
economy?
2. Would liberalization faster development
of infrastructure;
3. How well have public reforms programs
helped in Poverty reduction?
4. Is there any relationship between Jobs
creation and wealth creation?
5. Can
public sector reform help in the Motivation of private sector to achieve
greater performance and growth?
6. How
can the restructuring of the Public Service assist in greater efficiency and
effectiveness?
7. How
can the public confidence among the citizenry be restored towards their
government, its policies, programs and activities?
8. Would
public sector reforms help in the Restoration of confidence within the
international comity of nations in Nigeria's commitment to good governance and
sound economic programs?
9. Can
Greater stability and better understanding within the polity be achieved
through such reforms?
10. Would
Privatization of NTIEL help to achieve Efficient and effective service
delivery?
1.5 STATEMENT OF RESEARCH
HYPOTHESES
Hi1: Public Sector Reform would significantly help in the Motivation of
private sector to achieve greater performance and growth
Ho1: Public Sector Reform would not significantly help in the
Motivation of private sector to achieve greater performance and growth
Hi2: Restructuring of the Public Service would significantly assist in
greater efficiency and effectiveness
Ho2: Restructuring of the Public Service would not significantly assist
in greater efficiency and effectiveness?
Hi3: Public Reforms programs have significant effect towards Poverty
reduction
Ho3: Public Reforms programs have no significant effect towards Poverty
reduction
Hi4: There is a significant relationship between Jobs creation and
wealth creation?
Ho4: There is no significant relationship between Jobs creation and
wealth creation?
1.6 SCOPE/LIMITATION OF STUDY
In
the course of carrying out this research work, the researcher is faced with
lots of constraints, ranging from lack of cooperation from deferent people at
the sources of data collection, low return of research instrument, indifference
attitude from some staff in releasing information, epileptic power supply by
PHCN, cost and time management.
1.7 SIGNIFICATION OF STUDY
Telecommunications
infrastructure lies at the heart of the information economy. Countries lacking
modem telecommunications infrastructure cannot compete effectively in the
global economy. Until the early 1980s, the telecommunications sector was viewed
as the quintessential public utility. Economies of scale, combined with
political sensitivity, created large entry barriers and externalities. Beginning
from the 198Os, however, policy makers gradually began to recognize that
telecommunications systems are an essential infrastructure for economic
development. As the economy broadens and becomes critically dependent on vastly
expanded flows of information, telecommunications acquires strategic importance
for economic growth and development.
Rapid
innovations in telecommunications and information technology are lowering
costs, creating new services and changing the cost structure of many
industries. Driven by unrelenting technological and market forces,
telecommunications has become one of the world's most dynamic sectors
(Wellenius and Stern, 1994; Saunders et al., 1994).
In
response to the need to overcome persistent shortfalls in telecommunications
investments and performance, telecommunications restructuring bas assumed a
global dimension and the wave of telecommunication reforms that began in the
1980s in a few highly developed economies quickly spread to several developing
countries. By 1993, major reforms had been undertaken in at least 15 developing
countries and a comparable number were in preparation (Wellenius and Stern,
1994). The impact of these new policy initiatives has been profound, but if the
new pragmatism in telecommunications policy is to succeed, policy initiatives
will need to be broadened and deepened.
Even
though the International Telecommunications Union's Harare Declaration
contained a commitment by several sub-Saharan African countries to increase
private sector participation in telecommunications, most governments have been
reluctant to put this policy into practice. Six subSaharan4 countries have announced plans to privatize
their national carriers, but only Guinea has actually implemented such a
policy. Although several others are believed to be considering this move
(Mustafa et al, 1997). Thus, the telecommunications sector in Africa is still
predominantly state owned and has yet to show the benefits from the
transformation in pattern of ownership, market structure and provision of
service that is taking place world-wide. As a strategically important but
relatively neglected sector in sub-Saharan Africa,
telecommunications is largely characterized by poor performance manifested in
low profitability, large unmet demand for services, poor technical and
operational quality of service, and absence of new services. Economic studies
for the International Telecommunications Union indicate that each new telephone
line added in the region contributes approximately $4,500 to gross national
product, a far higher contribution than in developed economies. The future of
telecommunications lies with private commercial provision of services under liberal
regulatory environments. Against this
background, a pertinent question today is how can African countries begin to
move this new pragmatism from the periphery to the centre of the
telecommunications reform agenda? There is a renewed clamour for a proper
investigation of the underlying causes of this unacceptable scenario to enhance
the design or redesign of results-oriented telecommunications sector reform
programs in Africa.
This
study intends to examine how to promote this shift on the basis of the
experience of several countries reforming their telecommunications sector. It
recognizes, however, that there is no universally acceptable template for
implementing telecommunications restructuring. Although fairly universal policy
issues and options face governments attempting to reform their
telecommunications sectors, their relative importance, the sectoral solutions
adopted and especially the strategies to implement them are highly country
specific (Saunders et al., 1994).
1.8 OPERATIONAL DEFINITION OF
TERMS
Public Relations:
The
business of giving public information about a particular organization or person
in order to create a good impression
Publicity:
the
attention that is given to an organization by means of media e.g. Newspapers,
Television etc
Stability:
Maintenance
of a conducive environment for economic, social and political growth
Activism:
An
activist public is a group of two or more individuals who organize in order to
influence another public or publics through defined or specific action.
Employment: The
state of being engaged in business activities in return for payment
Unemployment: The
state of not being engaged in an activity that will yield monetary return
Acquisition:
This
refers to a situation whereby company takes a controlling ownership interest in
another firm.
Capital:
This
is the amount of money used to set up a business.
Customer: A
person who has or intends to have an account relation with a Small Business
Operator.
Design:
-
In designing labeling of the package and the addition of attention catching
slogan such as colour, boldly written. Attractive works etc are giving keen
attention.
Globalization: The
idea of the different countries and economies of the world being closely
connected together by modem communications and therefore economically,
politically, socially and environmentally dependent on each other.
Hypothesis: -
A conjectural statement, proposition or an assumption about the relationship
between two or more variables. This which is subject to testing may either be
true or false (Nun or alternative).
Internet:
The
large system of many connected computers around the world, which people use to
communicate with each other.
Liquidity:
State
of being able to raise funds easily by selling assets.
Market: The
set of all actual and potential buyer of a product.
Poverty
Eradication:
The
various efforts, which is channeled towards reducing the number of poor people
in the society
Poverty: The state of being very poor
Real sector:
The
sector of the economy that is involved extracting and turning raw materials to
finished goods e.g. mining industry and Manufacturing industry.
Strategy: The
determination of basic long-range goals objectives and the adoption of courses
of action with the allocation of necessary resources.
Subsidize: payment
of part of something for someone or group of individuals
Subsidy:
Money
paid or incentive given especially by the government or an organization to make
prices lower; make it cheaper to produce goods and service
Target'
Market:
The
act of selecting one or more segments of the market and developing a positioning
and mix strategy for each.
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