THE IMPACT OF PRIVATIZATION ON THE EFFICIENCY OF FIRMS IN NIGERIA
THE IMPACT OF PRIVATIZATION ON THE EFFICIENCY OF FIRMS IN NIGERIA
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Date
2011-06
Authors
ABDULMALIK, Saidu
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Abstract
ABSTRACT
The transfer of major public enterprises in Nigeria to private sector in the year 2000
marked the beginning of the Nigeria experiment on full privatization of governmentowned
entities. Unfortunately, little has been done to assess the efficiency impact of this
policy on enterprise performance. This study attempts to provide some empirical
evidence from the oil & gas and manufacturing sector on the efficiency impact of the
privatization policy in Nigeria. First, the study made use of micro and macro indicators
to examine the financial and operating performance of two fully privatized enterprises
in competitive sectors in Nigeria by comparing the pre and post-privatization
performance. The results albeit mixed, show a significant improvement in some of the
indicators, such as profitability in both Africa petrol and ASHAKA Cement Company of
Nigeria. Operating efficiency also witnessed an upsurge in the two indicators for both
firms. While both firms witnessed a slight increase in capital investment spending as
there was no evidence of capital investment spending before privatization in African
petroleum. In the case of output African petroleum shows a significant response
(positive) to the claim of increase in output than ASHAKA Cement. The evidence shows
that there have been significant employment losses in both African petroleum and
Ashaka Cement. In the case of leverage African petroleum show significant
accentuation to the leverage proposition while ASHAKA Cement is on the negative side.
In the two firms, dividend payments increased after divestiture. By exploiting
conflicting effects it was found that privatization enhance efficiency in enterprise
performance. Secondly, the study has used a mathematical non-parametric linear
programming model, called Data Envelopment Analysis (DEA), to measure the relative
efficiency and management performance in the presence of incomparable multiple
inputs or outputs. Results of subsequent (DEA) analysis appear to indicate that the
privatized enterprises are more technically efficient, thus providing some evidence in
support of the efficiency hypothesis. Such a finding has important implications on
privatization policy in general. These implications are that privatization policy should
be vigorously purshued. The lessons learned from this study can obviously be of great
help in managing and assessing the current strategies and methods of privatization in
Nigeria.
Description
A THESIS SUBMITTED TO THE SCHOOL OF POSTGRADUATE STUDIES
AHMADU BELLO UNIVERSITY ZARIA IN PARTIAL FULFILMENT OF THE
REQUIREMENTS FOR THE AWARD OF DEGREE OF MASTER OF
SCIENCE IN ECONOMICS.
Keywords
IMPACT,, PRIVATIZATION,, EFFICIENCY,, FIRMS,, NIGERIA, CASE STUDY,, AFRICAN,, PETROLEUM,, PLC,, ASHAKA,, CEMENT,, COMPANY,, NIGERIA