THE ROLE OF COMMERCIAL BANKS IN THE PRIVATIZATION OF GOVERNMENT COMPANIES IN NIGERIA

THE ROLE OF COMMERCIAL BANKS IN THE PRIVATIZATION OF GOVERNMENT COMPANIES IN NIGERIA

CHAPTER ONE:

INTRODUCTION

1.1     Background of the Study

1.2     Statement of Problem

1.3     Purpose of the Study

1.4     Research Question

1.5     Hypothesis

1.6     The Scope of the Study

1.7     Significance of the Study

1.8     Definition of Terms

 

CHAPTER THREE:

METHODOLOGY

3.1     The Design

3.2     Area of Study

3.3     Population of Study

3.4     Sample and Sampling Technique

3.5     Instrument for Data Collection

3.6     Validity of an Instrument

3.7     Administration of the Research Instrument (Method of Data Collection)

3.8     Method of Data Analysis

 

CHAPTER FOUR

4.1     Presentation and Analysis of Data or Result

4.2     Test of Hypothesis

 

CHAPTER FIVE

5.1     Discussion of Findings

5.2     Conclusion of the Study

5.3     Recommendation of the Findings

• Suggestion for Further Study / Research

5.5     Limitation of the Study

Reference

Appendix

 

 LIST OF TABLE

1. Are you aware of the Privatization Programme?


2. Do you understand the basic principles governing privatization?


3. Briefly, what role do you expect commercial banks to play in a privatization programme?


4. Commercial banks now have excess liquidity?


5. What factor is responsible for this liquidity problem?


6. Do you think that liquidity problem of commercial bank would affect their role in privatization?


7. Before privatization what has the degree of loan allocation to the rural dwellers?


8. Now, what is the degree of loan allocated to the rural dwellers?


9. What possible attitude do you think banks would exhibit, if allowed to distribute application form in privatization?


10. Is it possible to secure credit in pledging share certificate only as a collateral?


11. What is the effect of this, on the risk exposure of commercial banks portfolio assets?

ABSTRACT

This research work carried out to determine the role of commercial banks in privatization of government companies in Nigeria. The topic was chosen to find out how the banks play these roles in the privatization programme. The work was carried out using research question to obtain the information, which is the primary data. Other information was gotten from the secondary source, which include published journals, magazines, newspaper, textbooks and other materials.

The date so collected were subject to investigation using percentage to interpreter and analyze them. From the analysis and the interpretation of the research data the following were revealed.

1. Privatization programme introduced in 1986, is known in many quarters, given wild publicity is shown in table 91). Eventually, there are still people who appear not to be interested.


2. The principles of privatization programme are clearly understood by many as evidenced in table II.


3. Privatization shall not erase subjectivity in the distribution of application forms.


4. Poor branch network in the rural area will hinder participation by rural dwellers.

Based on the above findings, conclusion was drawn and the following recommendation were made.

1. Although, exception of loan granted for privatization from credit ceilings of these commercial banks have been announced, the incentive have not generated the necessary enthusiasm from the commercial banks. Therefore, there is need to increase the incentive packaged by introducing an annual award for the “Best behaved bank in privatization”. The commercial bank or banks that made the greater proportion of their loan on privatization to unprivileged Nigerians.


2. Alternatively, the commercial banks should b persuaded to provide credit to the unprivileged Nigerians in the programme by specifying the proportion of allocation of loans to various sets of individuals of which non-adherence shall attract a reasonable penalty. These would go a long way to encourage a lot of Nigerians in the participation of the programme so that the programme would not be centered on the hands of few.


3. Government should seek for a way of ensuring the success of the rural banking programme by promulgating a decree on rural banking progamme which shall mandate commercial banks to attain their number of branches allocated to them in every place with adequate incentive provided. This is because mere establishment of guidelines on the rural banking programme is not generating enough respond.


4. The privatization and commercialization Decree – Decree No 25 of 1980, did not prescribe any role to be performed by commercial banks and any attempt to impose any role on them would be fraud with disobedience. Therefore, there is a compelling need to amend the decree in other to spell out clearly, in a more concrete terms. The role of commercial banks in privatization, because these banks occupy a vital position in the success of the programme.

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

One of the most essential features of a mixed economy is the co-existence of both private and public sectors. In this case, the private sector benefits a lot of economy freedom to produce, manage and control the expenditure and income. Also the government on the other hand, in the public companies on behalf of its citizens. These companies are sometimes run for non profit oriented motives. They are most often established to provide social services to the general public. However, it is mainly the strategic importance of these companies and there services rendered to the public, that enhance the undertaking of the government. Rather than leaving them on the hands of the private individual, who primarily engage for their selfishness and profit oriented.

Consequently, most of these corporation that were left in the hand of the government tend to lack that motive force which  could have energized them to improve the working capacity and efficiency. The poor performance recorded in most of the government enterprises have shown their saddle and inefficiency. This is because most of these companies are not for profit making. As a result of this, the ultimate objectives of these enterprises have been jeopardized.

Moreso, government have helped monitored the performance of these public companies in terms of their contribution towards the growth and development of the economy. Also, it has been noticed that these corporation arte heavy burdens on the “mingling” resource of the government. At this time, it become so imperative to privatize some of these corporations as to reduce the heavy burden upon the scare resources of the government.

However, the interest of the government is not connected with the reliance of the effectiveness of the market forces to determine a more meaningful allocation of scarce resources. Also, government intended releasing some money in the sales of its holding or ownership in these companies and to block the drain on government revenuer resulting from these companies inefficiency. With reference to decree No. 25 privatization and commercialization decree 1988 recognizes privatization of Nigeria corporations as the relinquishment of part or all the equity and interest held by the federal military government. And government cannot carry these programmes in isolation, more importantly the role of commercial banks in privations programme.

 

• STATEMENT OF PROBLEM

Since the government alone cannot afford to carry out these economic reforms, to reconstruct and stabilize the economy, it is necessary to outline the various roles played by commercial banks and other financial institutions in the privatization programme.

These roles programme:

1. Provision of loan or credit facilities to Nigerians


2. Acting as distribution center for shares sub-scrimption.


3. Dissemination of shares information to the public.


4. Debt – equity complain

Meanwhile, there are factors which militate against these role of the commercial banks. Such factors include.

1. Liquidity problem of the commercial banks.


2. Publicity by the issuing house

iii.      Credit granted for shares being concerned by few Nigerian.

Having outlined the various roles played by the commercial banks and problems associated with them. It is equally important to outline the role played by their financial institution like merchant banks in privatization. These roles includes:-

1. Acting as an issuing house


2. Acting as an acceptance house


3. Dissemination of information to other financial house like commercial bank.

 

• PURPOSE OF THE STUDY

The purpose of this research works is to:-

1. Review the liquidity problem of commercial banks in order to know their ability in granting loans for privatization to the unprivileged Nigerians.


2. Suggest ways commercial banks can avert the problems encountered during the implementation of the Nigerian enterprises promotion decree 1972.


3. Highlight ways of improving poor participation in the programme.


4. Investigate the possibility of securing credit by pledging share certificate only as a collateral on the commercial banks portfolio risk.

 

• RESEARCH QUESTION

Nigeria as a country has always been with a sound policies and programme, but the problem has been that of the programme implementation. i.e

The privatization and commercialization. These programme may not be an exception. In view of this objectives or purpose of this study, the questions are:-

1. To examine privatization as a way out for government companies


2. To discover the role played by commercial banks in privatization programme.


3. To recommend or advice on the appropriate role these commercial bank may play


4. To compare the extend these role will go in solving the other problems of these companies.

• HYPOTHESIS

Considering the various problems pointed out and having stated the objective of the study.

The Author wants to form the following hypothesis

1. Risk exposure on the portfolio of the commercial bank cannot be affected by using share certificate only as collateral to obtain credit for shares in privatization.


2. Liquidity problem of the commercial banks will affect the ability to create on privatization.


3. Privatization shall increase the loan allocation of the rural dwellers.


4. Privatization shall not erase subjectivity in the distribution of shares application form.

 

1.6     THE SCOPE (DELIMITATION) OF THE STUDY

This work is limited to the commercial banks who are concerned and are involved in privatization programme. Only like union bank, first bank and united bank for Africa.

LIMITATIONS: This research is limited by the following factors:

1. Time: There is no enough time to carry out an existence research as supposed.


2. Finance: As a student, there is no enough money of fund available as supposed, so as to visit all the commercial bank which are involved in the programme.


3. Secrecy: Managers of these commercial banks involved in this programme are not willing to give out the needed information.

 

1.7      THE SIGNIFICANCE OF THE STUDY

This research work would be beneficial to the following:-

i.(a)   Managers of commercial banks. This study will certainly guide and enhance their actions as regard to their professional jobs.

(b)     Managers of the privatization companies. This study enable them know what bank managers will be doing in this companies as well as playing their own parts of the upgrading of companies concerned.

(c)      Students: it serves as reference book to the studies who will be writing their project as well as in the pursuit of their future academic endeavours.

1. The benefits form this study are:-

(a)     It creates employment to students, individual or group of people who may wish to engage in the project study.

(b)     It adds knowledge to those who carry or who had carried out this research study.

(c)      It is profitable to the government who owns the privatization companies and the public in general. This is due to the fact that this company concerned.

(d)     Owe the income of the company increases it leads to the acquisition of wealth.

iii.(a) People benefits directly from these privatized companies hence the products of the companies concerned are made more available unlike when it wasn’t privatized.

(b)     People benefits indirectly because the assured as shareholders now have opportunity to contribute in the decision-making. Also, more branches are anticipated.

• DEFINITION OF TERMS

1. Commercial Banks: These are banks owned by shareholders, which transact business with general public.


2. Merchant Bank: These are banks owned by shareholders that era meant to give long-term loans to people in business.


3. Privatization: this is a transfer from government owned to private owned.


4. Liquidity: State of being able to raise fund by selling assets.


5. Share Certificate: A document issued b a company to shareholders claiming the number of shares.

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