MATERIAL
THE EFFECT OF GOVERNMENT POLICY ON PRIVATIZATION AND
COMMERCIALIZATION ON NIGERIA ECONOMY (A CASE STUDY OF
PHCN, EKWULOBIA)
ABSTRACT
THE MAJOR PURPOSE OF THIS STUDY IS TO ASCERTAIN THE
EFFECT OF PRIVATIZATION AND COMMERCIALIZATION ON NIGERIA
ECONOMY USING POWER HOLDING COMPANY OF NIGERIA
EKWULOBIA AS A CASE STUDY. THE REASON BEHIND USING THE
POWER HOLDING COMPANY OF NIGERIA IS BECAUSE IT IS ONE OF
THE PUBLIC ENTERPRISES THAT ITS PRODUCT HAS THE WIDEST
CONSUMPTION. THE POPULATION OF THE STUDY CONSISTED OF
254 WORKERS IN PHCN EKWULOBIA ANAMBRA STATE. THE SAMPLE
SIZE WAS DETERMINED USING YARO YAMENE FORMULAR. THE
SAMPLE OF 155 OUT OF 254 WAS DRAWN USING SIMPLE RANDOM
SAMPLING. FIVE RESEARCH QUESTIONS WERE FORMULATED
WHICH GUIDE THE STUDY. A STRUCTURED QUESTIONNAIRE WAS
DEVELOPED AND VALIDATED FOR USE. TABLE AND PERCENTAGE
WERE USED TO ANSWER THE RESEARCH QUESTIONS. THE MAJOR
FINDINGS OF THE STUDY WERE: (1) THERE IS GENERAL
DISCONTENT BY THE PUBLIC ABOUT PHCN’S SERVICE (2) THERE
WAS SERIOUS FLUCTUATING POWER SUPPLY FROM LATE 1992 TO
DATE (3) POLITICAL INSTABILITY HAS CONTRIBUTED TO THE
PROBLEMS OF PHCN (4) PHCN HAS NOT REGISTERED AS A PUBLIC
LIMITED COMPANY. IT WAS CONCLUDED THAT: BASED ON THE
FINDINGS OF THE STUDY, THE FOLLOWING CONCLUSIONS WERE
MADE. (I) THE GENERAL PUBLIC WERE DISSATISFIED WITH THE
POOR SERVICES OF THE POWER HOLDING COMPANY. (II) THE
SERIOUS FLUCTUATION IN THE SUPPLY OF POWER BY THE POWER
HOLDING COMPANY WAS CAUSED BY BREAKDOWN OF THE POWER
HOLDING COMPANY’S POWER STATION AT EGBIN. (III) POLITICAL
INSTABILITY IN OUR COUNTRY HAS MADE IT DIFFICULT FOR THE
SUCCESSFUL PRIVATIZATION OF POWER HOLDING COMPANY’S.
BASED ON THE FINDINGS OF THIS STUDY AND THE CONCLUSIONS
DRAWN FROM IT, THE FOLLOWING RECOMMENDATIONS WERE
MADE. (I) COMPANY HOLDING COMPANY OF NIGERIA SHOULD
ESTABLISH A GOOD PUBLIC RELATION BY IMPROVING ON THEIR
QUALITY OF SERVICE. (II) THERE SHOULD BE TOTAL
REHABILITATION AND FREQUENT MAINTENANCE OF THE POWER
STATIONS AND OTHER ELECTRIC GENERATING EQUIPMENT SO AS
TO SOLVE PROBLEM OF FLUCTUATION. (III) THE FREQUENT
CHANGE IN THE GOVERNMENT SHOULD BE CURTAILED OR
MINIMIZED SO AS TO ENABLE EFFICIENCY AND EFFECTIVENESS IN
THE PERFORMANCES OF POWER HOLDING COMPANY OF
NIGERIA.   (IV) EFFORTS SHOULD BE MADE BY THE GOVERNMENT
AND STAKEHOLDERS FOR THE SUCCESSFUL COMMERCIALIZATION
OF POWER HOLDING COMPANY OF NIGERIA.
 
 
TABLE OF CONTENTS
TITLE PAGE                                                      i
APPROVAL PAGE                                               ii
DEDICATION                                                     iii
ACKNOWLEDGMENT                                         iv
ABSTRACT                                                        vii
TABLE OF CONTENTS                                       xi
CHAPTER ONE
1.1       BACKGROUND OF THE STUDY                  1
1.2       STATEMENT OF PROBLEMS                       5
1.3       PURPOSE OF STUDY                                 7
1.4       SIGNIFICANCE OF STUDY                          8
1.5       HYPOTHESIS                                             10
1.6       SCOPE AND LIMITATIONS OF STUDY         10
1.7       BRIEF HISTORY OF PHCN                          11
1.8       DEFINITION OF TERM                                13
CHAPTER TWO
2.0   LITERATURE REVIEW                                16
2.1   THE EFFECT OF PRIVATIZATION AND COMMERCIALIZATION
17
2.2       PRIVATIZATION AND  COMMERCIALIZATION
IN OTHER COUNTRIES                               22
2.3   PRIVATIZATION AND COMMERCIALIZATION
IN NIGERIA                                                24
2.4    OBJECTIVES OF THE PRIVATIZATION AND
COMMERCIALIZATION PROGRAMME.            30
2.5       EFFECT OF SAP ON ELECTRICITY SUPPLY
PROBLEMS                                                32
2.6       ELECTRICITY GENERATION AND TRANSMISSION
CAPACITIES                                                           33
2.7       DISTRIBUTION SALES AND REVENUE COLLECTION IN A
COMMERCIALIZED PHCN     41
2.8       PHCN RELATIONSHIP WITH ITS CUSTOMERS   47
CHAPTER THREE
3.1       RESEARCH METHODOLOGY                      50
3.2       RESEARCH DESIGN                                   50
3.3       METHODS OF STUDY                                51
3.4       SOURCES OF DATA                                   51
3.5       INSTRUMENT FOR DATA COLLECTION       52
3.6       VALIDATION OF THE INSTRUMENT            53
3.7       DISTRIBUTION AND RETRIEVAL                 53
3.8       METHOD OF DATA ANALYSIS                     54
CHAPTER FOUR
DATA ANALYSIS AND DISCUSSION                    56
 
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
AND SUGGESTIONS FOR FURTHER
STUDY                                                            62
5.1 SUMMARY OF THE FINDINGS                      62
5.2   CONCLUSION                                            63
5.3   RECOMMENDATIONS                                 63
5.4   LIMITATIONS OF THE STUDY                     65
5.5    SUGGESTIONS FOR FURTHER RESEARCH       65
REFERENCES                                            67
APPENDIX                                                 69
QUESTIONNAIRES                                     70

                          CHAPTER ONE

1.1        BACKGROUND OF THE STUDY
       The import substitution policy of the post independence Nigeria led to
the establishment of industries. Apart from this prime motivation for import
substitution, there was the need to create jobs for the growing educated
youths, the need of industrialization and the ideological argument that the
government should control, regulate and supervise the commending
heights of the then nascent economy.
Furthermore, there was the need to strive to catch up with the developed
countries of the world and since the indigenous businessmen and
managers were neither technically nor financially ready to assume the
catalyst role which their counterparts in the developed countries were
playing; government felt obliged to fill the investment gap.   
       The obvious imperfections in the market oriented economics in terms
of resources allocation to the more profitable but less preferred sectors of
the economy was yet another reason for government intervention in the
economy.
       The sum total of these is that between 1960 and 1980 the various
governments in Nigeria both at federal and state levels established
numerous industries. The core characteristics of most of these industries
were inefficiency in the utilization of resources and their consequent
dependence on the public treasury for subvention. Therefore, these
adverse operating conditions could not make for rational economic
decisions. Consequently, these enterprises and their management lost their
mission and became pipes for wastages, agencies for political patronage
and generally parasites on the national and state treasuries. However, by
the late 80’s, the glut in the world oil market set in and it suddenly devoured
on policy makers that the revenue from oil was significantly below the
requirement for the sustenance of these money-guzzling ventures. There
then arose the need for reprioritization of economic policies and the need to
release the energy in economy suppressed by bureaucracy and undue
control.
       Government both at the federal and state levels came to realize that
goals of economic growth, full employment, rapid industrialization and high
standard of living noble as they could not be actualized without the active
participation and leadership of the private sector. It was further realized that
excessive controls of government in the national economy encourage
inefficiency, corruption and low capital formation. There was therefore need
for invitation to private individuals and organizations to assume the role of
activation and management of the national economy while the government
lays the broad framework for the growth of industry and commerce. There
was also the need for the infection of private sector enterprises for
profitability and efficiency, hence the privatization and commercialization
policy.
 
1.2  STATEMENT OF PROBLEMS.
Inefficient management and corruption have bedeviled the Power Holding
Company of Nigeria since its inception. This is most evident in its power
generation, transmission, and distribution as well as in the appointment of
board members. This inefficiency has subsequently led to inadequate
supply of electricity to consumers.
       There is also lack of dedication to duty on the part of the staff and
management of the corporation. This mostly accounts for the poor financial
returns it derives from its services. The staffs are rough in using the
company’s equipment and tools in providing electricity to consumers at the
expense of the authority. There were complaints of corruption in power
distribution whereby the management seeks qualification first before
approving of extension of electricity to consumers. This often robs the
authority of huge revenue they would had should electricity is distributed
without any form of restriction(s).
       PHCN ever since its inception in 2005 from former NEPA has
undergone and is still undergoing stringent statutory and administrative
control, which hinders the management from using their initiatives when
necessary.
1.3  PURPOSE OF STUDY
       The major purpose of this study was to determine the effect of
privatization and commercialization on PHCN, Ekwulobia business unit
(branch) in Anambra State. Specifically, the study was to:
1. To determine the durability of PHCN’s plant in the generation of
electricity.
2. To determine an efficient method of appointing capable persons into
the management level in the enterprise.
 3. To investigate and ascertain if commercialization of PHCN was in line
with the objectives of the government on privatization and
commercialization.
4. To ascertain an easy mode of operation in PHCN towards ensuring
self-sustenance and justification of investment.
5. To find out effective methods that would enhance the service
rendered by PHCN to it customers. 
6. To suggest means or ways by which PHCN can restore public
confidence in its service of electricity to consumers.
7. To identify better methods by which PHCN can effectively collect its
services charges.
 
1.4  SIGNIFICANCE OF THE STUDY
       Very little is known about the privatization and commercialization
programme. Consequently, many people are yet to appreciate the reason
and objectives of the programmes. This research is significant in the
following ways:
1. It will provide a guide on how the authority can improve its service of
electricity to the consumers.
2.  It will highlight means to improve PHCN customer relationship.
3. The study will also suggest ways by which the staff can be positively
motivated in order to increase their productivity.
4. This study will recommend better method for recruiting the
management staff that will be more dedicated to the service of the
corporation.
 
 
1.5  SCOPE OF STUDY
       This study was delimited to the effect of privatization and
commercialization of Power Holding Company of Nigeria Ekwulobia
Branch, Anambra State. No attempt was made to look into the effect of
privatization and commercialization on other corporations and
organizations. 
 
1.6      RESEARCH QUESTIONS
This study sought answers to the following research questions.
1. Is the partial commercialization of PHCN in line with the federal
government policy of handling of the running of public enterprises?
2. Is it possible for the enterprise to operate effectively on its own
without federal government subvention?
3. As a partially commercialized public enterprise, will PHCN be able to
restore public confidence through improved services?
4. Will the partial commercialization of PHCN lead to improvement in its
operations?
5. As a partially commercialized enterprise, will PHCN be able to
explore more avenues for revenue generation?
 
1.7  BRIEF HISTORY OF PHCN
       PHCN means Power Holding Company of Nigeria. It is a body that is in
responsible for the supply of light and power in the whole country. Power
Holding Company of Nigeria was formed in 2005, which was formerly
known as NEPA: meaning National Electric Power Authority. This body
existed since 1972 following the amalgamation of Electricity Corporation of
Nigeria and the Niger Dam Authority under Decree of 1972 and since then
it was the only statutory provider of electricity to the whole public. PHCN
has no competitor even up till now that the name had change from NEPA to
PHCN. It has its power stations and offices in many parts of the country,
there is also Hydro-stations at Kainji at Oji River in Enugu State, one in
Nebba and other places. In Anambra state, there are PHCN offices like in
places like Onitsha, Nnewi, Awka, Ekwulobia, Oko, Ajalli etc. 
 
1.8 DEFINITION OF TERMS.
1. PHCN – Power Holding Company of Nigeria. It is the only statutory
provider of electricity throughout the whole country. It came existence
in 2005.
2. TCPC – Technical Committee on Privatization and
Commercialization. It is the body set up by the federal government to
 implement the privatization and commercialization of some public
enterprises in accordance with the privatization and
commercialization decree No. 25 of 1988. It was established on 27 of
July 1988.
3. UNDP – United Nation Development Programme. It is an agent of the
United Nation, which assists member nations with development
programmes. It also advises nations on the path to their economic
survival.
4. MOTIVATION – This is a method of stimulating people into action so
as to achieve a desired goals or objectives.
5. PRIVATIZATION: According to Ugbo (2003:191) privatization is all
about the transformation of public undertaking to a private enterprise
organization.
COMMERCIALIZATION: The privatization and commercialization decree
of 1988 in Ugbo (2003:190) defined commercialization as the
reorganization of enterprises wholly or partly owned by the federal
government in which such commercialized enterprises shall operate as
profit making venture without subventions from the federal government.