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Commerce Notes

Privatization And Commercialization

Meaning: Privatization can be defined as the sale transfer of ownership, control and management of business organizations owned by the government to private individuals.

4.2     COMMERCIALIZATION

          Meaning: This is the process, which involves the adoption of commercial and competitive profit objective in the management of government enterprises.

          Commercialization is a policy designed to ensure that public enterprises are more viable and competitive to maximize profit.

BENEFITS OF PRIVATIZATION

  1. Sources of revenue to the government.
  2. Improvement in operational efficiency.
  3. Improvement in decision making process.
  4. Reduction in government expenditure.
  5. Increase in competition.
  6. Encourages in flow of foreign capital.
  7. Increase in economies of scale.
  8. Profit maximization
  9. Reduction in government interference.

DISADVANTAGES OF PRIVATIZATION

  1. Lead to unemployment.
  2. Loss of government control.
  3. Loss of revenues.
  4. Concentration of shares in few hands.
  5. Adverse effect on the security of the country.

ASSIGNMENT

1.       State five (5) objectives of commercialization.

2.       Enumerate five (5) reasons for privatization.

4.3     NATIONALIZATION AND INDIGENIZATION

          Meaning of Nationalization

It can be defined as the policy designed to ensure the acquisition by the government of privately owned businesses.

ADVANTAGES OF NATIONALIZATION

  1. Ensures effective planning.
  2. Provision of social services at affordable price.
  3. Creation of job opportunities to citizens.
  4. Elimination of wasteful competition.
  5. Fund mobilization.
  6. Prevention of monopoly.
  7. Promotion of economic development.
  8. Prevention of foreign dominance.

DISADVANTAGES OF NATIONALIZATION

  1. Misallocation of resources.
  2. Diseconomies of scale.
  3. Discourages in flow of foreign capital.
  4. Excessive government interference.
  5. Operational inefficiency.
  6. Killing of private initiatives.
  7. Disharmony among nations.
  8. Discouragement of competition.
  9. It can lead to monopoly.

4.4     INDIGENIZATION

Meaning: This is the policy initiated by the government to ensure and accelerate the participation of Nigeria citizens in the ownership and management of business organizations owned by foreigners.

Indigenization transfers ownership of some foreign businesses operating in Nigeria to indigenous entrepreneurs.

Major objectives is to reduce the power of control of the economy by the foreigners.

ADVANTAGES OF INDIGENIZATION

  1. Reduction in capital flight.
  2. Self reliance and economic emancipation.
  3. Increase in pace of industrial development.
  4. Creation of employment opportunities.
  5. Development of local technology.
  6. Creates participation in ownership and management.
  7. Prevents exploitation by foreign businessmen.
  8. Development of capital market.
  9. Improvement in indigenous skills.

DISADVANTAGES OF INDIGENIZATION

  1. Mismanagement.
  2. Reduction of foreign investment.
  3. Discouragement of friendship.
  4. Reduction in output.
  5. Leads to inexperience and incompetent management.
  6. Insufficient local capital.
  7. Emergence of new breed of exploiters.
  8. Non-availability of technology.

4.5     DEREGULATION

According to Adegbemile 2007 deregulation can be described as an economic reform in which rules and laws of entry and exit into the market is weakened, relaxed or totally removed in order to enhance the competitiveness of economic actors. It is the simplification or dismantling of the legal and government restrictions in the operation of market force.

Simply put, it is an essential aspect of price and market reform which entails private sector development through removal of government restriction on private economic activities.

ADVANTAGES OF DEREGULATION

  1. Deregulation promotes healthy competition among competing firms.
  2. It creates several hundreds of jobs both skilled and unskilled.
  3. It encourages in flow of private and foreign direct investment into the deregulated sector.
  4. It will unlock the industrial sector of the economy as more investmewnt in the oil sector would see take off of new refineries.
  5. Tax proceeds from deregulation can be used to fund social welfare programme.
  6. The consumers are likely to enjoy lower price.
  7. Consumers have wide range of option to choose from thus promoting healthy rivalry.
  8. Government can generate saving by divesting in the sector.

DISADVANTAGES OF DEREGULATION

  1. Deregulation might lead to emergence of monopoly or oligopoly.
  2. There is possibility that weak organizations can be eliminated by stronger ones.
  3. It will lead to high prices of goods and services. For example, increase in price of petrol.
  4. It would lead to increase in prices of food and transportation.
  5. It can lead to massive unemployment.
  6. Production and workload are pushed to the limit often at the risk of life.

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