MARKETING COMMUNICATION TOOLS EMPLOYEDIN THE PRIVATIZATION AND COMMERCIALIZATION OF STATE-OWNED ENTERPRISES IN NIGERIA

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CHAPTER ONE INTRODUCTION 1.1 Background of the Study The basic reason for establishing public enterprises in all economies has been to enhance development. Government participation in enterprises in Nigeria dates back to the colonial era. The absence of indigenous and foreign companies with requisite capital to invest on railways, roads, bridges, water, telecommunications, electricity and ports facilities stimulated colonial government to embark on the provision of these capital?intensive infrastructural facilities (Igbuzor, 2003) while state involvement in enterprises continued significantly even after independence (Nwoye, 2010). Reasons for Nigerian government involvement in the creating and running of public enterprises include lack of adequate resources for the private sector to provide certain goods and services, political consideration, to guide against monopoly in the provision of basic facilities, and to ensure public access to basic social amenities. Other reasons as observed by Aboyade (1974) are to protect the consumer from exorbitant prices and ensure national security and accelerated development. The promulgation of Nigerian enterprises promotion decree 1972 (Nwoye, 2010) and Indigenization decree of 1973 (Chambers, 2008) enhanced the development of public enterprises in Nigeria. Consequently, by 1985, there were over 1500 public enterprises owned by the federal, states and local governments in the area of energy, mining, banking, manufacturing, agriculture, telecommunications, transportation, commerce, Insurance among others. Thus, between 1975 and 1995, the federal government invested over $200b in state-owned enterprises (S.O.Es) across the country (Anya, 2000; Nwoye, 2010). The Nigerian economic crisis of the mid 80s and subsequent global economic recession and collapse of oil market placed the federal government in a precarious fiscal monetary policy that could no longer sustain the multiple S.O.Es in the country. The quest to salvage the internal economic crisis, therefore, led government to seek for foreign loans from International Monetary Fund (IMF) and the World Bank. Divest of public enterprises was given by these world financial institutions as a condition for economic assistance. Consequently, structural adjustment programme (S.A.P) was adopted with fundamental objective of deregulation and privatization. S.O.Es are to be fully or partially privatized; fully or partially commercialized (FGN, 1986; Nwoye, 1997; Ibanga, 2005). The structural adjustment programme is expected to attract substantial investment, increase employment and reduce poverty (Iyoha, 2000; Ndebbio, 2000; Jao, 1996). This is because, according to Ndebbio (2000) labour demand is directly related to industrial investment, for example, in every 10% increase in capital investment in small and medium enterprises (S.M.E); labour demand (new jobs creation) would increase by 1.97%. Anya (2000) observed that the first phase of privatization indicated a rush and consequently relieved government of the huge and growing burden of financing S.O.Es. The programme created a large number of shareholders and broadened the Nigerian capital market from N8.9b in 1987 to N65.4b in 1994. The development increased corporate taxes significantly and considerably reduced the scope of political patronage in form of unnecessary enlargement of board appointments. In fact 280 directors relinquished their appointments after phase one privatization (Anya, 2000). Phase one also created 800,000 new shareholders raised N3.3b as proceeds and increased employment (Mahmoud, 2004; Elias, 2001; Boubakri and Cosset, 1998). During this period, marketing communication tools were not effectively employed to attract foreign investors who could provide market access, new technology, sufficient revenue and management expertise. Other countries where privatization and commercialization recorded huge successes employed marketing communication to attract foreign investment and consequently transfer technology. Most of these successfully privatized economies have laid emphasis on educating the public through consultations and integrated marketing communication. Hence, the use of marketing communication tools is not only essential, but also crucial to the success of privatization. In fact Welch and Fremond (1998) observed that special efforts to inform institutional investors have encouraged them to participate in many privatizations. Alt

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MARKETING COMMUNICATION TOOLS EMPLOYEDIN THE PRIVATIZATION AND COMMERCIALIZATION OF STATE-OWNED ENTERPRISES IN NIGERIA

3,000.00

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