Privatization and Commercialization as a Solution to the Problems of Public Enterprises

Privatization

Privatisation of a business is the process by which the government sells its shares in government-controlled enterprises to private individuals and institutions. It can be full privatization or partial privatization. Fully privatized business would be fully owned by private individuals and institutions. In a partly privatized business, the government would only be a shareholder. Eko hospital Ltd is an example.

Commercialization

This means the retention of ownership and control of an enterprise by the government but subvention will cease and the institution will be given freedom to charge its own prices in order to pursue their objectives having profit as the main target.

Advantages or Reasons or Arguments for Commercialization and Privatization

1. Both commercialization and privatization promote efficiency in production
2. The government stands to generate more revenue through privatization and commercialization
3. The existence of competition in the industry will help to bring about innovation
4. There will be great reduction in public expenditure on enterprises that are not viable
5. There will be increase in consumers’ range of choice
6. Decision making will be fast and efficient. Civil service bottleneck will thus be avoided
7. There would be precise objectives with measurable standards and resources wastage will be reduced since over-staffing will be avoided
8. To generate employment opportunity
9. To raise the general standard of living through sale of shares to small investors.

Disadvantages or Reasons or Arguments Against Commercialization and Privatization

1. Commercialization and privatization lead to uneven distribution of income
2. The consumers will not be well catered for by the government
3. There will be great reduction in the standard of living of an average citizen
4. They are likely to lead to reduction in employment
5. Both commercialization and privatization fuel inflation.
6. Privatisation of enterprise rendering services to the masses imposes economic hardship to them.
7. Privatisation of public corporations may be an avenue through which the greedy profit seekers exploit the people.
8. It may lead to political unrest as it was witnessed in the case of Benue Cement Industry.

EVALUATION (Post ANSWER BELOW FOR EVALUATION AND DISCUSSION)

1. (a) Define private limited liability company. (b) State three (3) features of private limited liability companies.
2. (a) Define public limited liability (b) State three (3) features of public limited liability companies.
3. State five (5) similarities and five (5) differences between private and public companies.
4. (a) Define co-operative societies. (b) Highlight five (5) features of co-operative societies.
5. (a) Define public enterprises. (b) State five (5) features of public enterprises. (c) Highlight five (5) reasons for government ownership of business enterprises.
6. What are joint ventures?
7. Write short notes on the following: (i) Privatization (ii) Commercialization