Write a Project Proposal on The Success of Privatization in Africa – The Case of Nigeria.

Rationale

Countries require both private and public sector to maintain their economic performance (Ahmad, Bhattacharya, Vinella, & Xiao, 2018).  A country has to undertake a reasonable choice to offer a specific good or service in any one of the sectors based on certain selection criteria.  Under such background, the provisioning for public sector is viable if there are expected market failures if provisioned in the private sector. Such market failures arise from information deficiency, lack benefits to the society as the cost of consumption is higher than their ability to pay and the presence of a monopoly which restricts competitive pricing (Pelletier, 2015). Apparently, enterprises in public and private sectors are subject to challenges and failures.  However, if a transition from public ownership to the private ownership is related to failure, it has severe implications on policy decisions, efficiency and robustness of the bureaucracy as well as the enterprises and delay in enhancing social welfare.

The results of previous studies have disputed the impact of privatization and some are abstruse (Guriev & Megginson, 2007). Several studies have found the link between privatization and improvements in operating and financial performance of enterprises. However, there are studies which have proven the existence of persisting lower service quality and delivery, an increase in prices and negative impacts on the labour force arising from downsizing, despite considerable private investments. Studies conducted in developing economies indicate that private ownership of public enterprises seldom produces economic profits. The success of privatisation depends on the regulatory framework which in turn depends on the institutional and political environment (Kessides, 2004). Further, the presence of an effective competitive environment is essential for generating performance improvements due to its interconnectedness with increased cost savings, lower prices and higher operating efficiency.

Apart from the impact of privatization, due consideration is to be given to the process of privatization. This includes the government intervention in the privatization process especially, whether the propaganda communication to the stakeholders, sequential implementation, set up of a regulatory body and creation of a corporate governance mechanism for the transitioned enterprises (Perotti & Bortolotti, 2005).  Such measures are important as privatization initiatives in developing countries are associated with corruption, negligible value for the taxpayer's money and a higher degree of inequality.

Hence, it becomes necessary to recognize the risks associated with privatisation and mitigation plans (Calabrese, 2008). Major risks associated with the process include the failure to secure government ownership and leadership of the privatisation program, inadequate regulations of the private sector, lack of correlation between fiscal savings and expenses associated with social development, corruption, lack of assessment related to compensation for affected stakeholders, lack of public communication about the process, lack of compensation for the affected labour force of the enterprises. However, with a robust planning and implementation, privatization is a boon for developing countries. Some of the positive effects of the success of privatization initiatives include legitimate government ownership of the process, structured reforms, the implementation of supporting policies, setting up of regulatory agencies and governance mechanisms, assessment of the impact on society and effective communication programs.  This research would assist in determining the perception over the importance given to the privatisation program and the enthusiasm among stakeholders for such an initiative where state owned enterprises are highly prevalent despite structural inabilities in administration.

(Some parts of the solution has been blurred due to privacy protection policy)