1

PRIVATIZATION OF NIGERIAN ENTERPRISES AND ECONOMIC GROWTH: A CASE

STUDY OF THE TELECOMMUNICATION INDUSTRY
BY
IGARIWEY IDUMA UGO
13AK015055
A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF INTERNATIONAL
RELATIONS, SCHOOL OF SOCIAL SCIENCE,COLLEGE OF LEADERSHIP
DEVELOPMENT STUDIES, COVENANT UNIVERSITY OTA, OGUN STATE. IN PARTIAL
FULIFILLMENT OF THE REQUIREMENT FOR THE AWARD OF BACHELOR OF
SCIENCE (BSC), DEGREE IN POLICY AND STRATEGIC STUDIES OCTOBER, 2015.
OCTOBER, 2015

DECLARATION

I hereby declare:
1. That this project is based on the study undertaken by me, IGARIWEY UGO IDUMA in the
Department of Political Science and International Relations, College of Leadership and
Development Studies, Covenant University, Ota, Ogun State.
2. Under the supervision of Professor Daniel Gberebvie.
3. This project work has not been submitted elsewhere for a degree award. Its ideas and review
are product of research conducted by me and where other ideas by authors or researcher were
expressed have been duly acknowledged.

Student researcher

Signature and Date

CERTIFICATION
1

It is hereby certified that this research project, conducted and written by IGARIWEY UGO
IDUMA, matriculation number 13AK 015055, was supervised by me and submitted to the
Department of Political Science and International Relations, College of Leadership Development
Studies, Covenant university, ota, Ogun state.

Prof.DanielGberevbie

Name of Project Supervisor

Signature and Date

Dr. Jide Ibietan

Name of H.O.D

signature and date

DEDICATION

This project is dedicated to God Almighty for his ever present help and support that has been
immeasurable, for seeing thus far and for being my source of wisdom and inspiration. To my
loving parents MR and MRS Idu Igariwey for their unending love, support and encouragement, I
love you. To my siblings and family udu, ogbnnie, igariwey, ejim for their constant love.
Finally, I deeply appreciate every individual who in one way or the other contributed to the
successful completion of my BSC Degree Programme in Covenant University

ACKNOWLEDEGEMENTS

I am eternally grateful to the Almighty God for His leading and the grace bestowed on me for
this academic journey. My sincere appreciation goes to the Chancellor of Covenant University,
Dr. David Oyedepo whose singular obedience to Gods call has opened this door for the
fulfilment of Gods agenda for me. Thanks also to the Vice Chancellor, Prof. C. K. Ayo, Deputy
Vice Chancellor, Prof. Taiwo Abioye , Registrar, Pastor Olamide Olusegun, Dean of CLDS, Prof.
Charles Ogbulogo, Sub-Dean of CLDS. Head of the PSIR department Dr. Jide Ibietan, who has
not stopped letting me know that he believes in my intellectual capacity. And I am also grateful
for his tireless efforts.
I am grateful to my supervisor, Professor Daniel Gberevbie , who out of no time created time to
reproduce another young scholar in Political Thought. His wealth of knowledge and constructive
criticisms has enhanced the quality of this research project
My profound gratitude also goes to my lecturer in the Department: Dr. M. Duruji, Dr. S. Joshua,
Dr. S. Oni, Dr. Mrs. F. Owolabi, Dr. (Mrs.) O. Fayomi, Mr. R. Olorunyomi, Mr. F. Chidozie, Mr.
I. Olanrewaju, Mr. K. Shodipo, Mr. T. Ajayi, Mrs. D. Udoh, Mrs L. Ajayi, Mrs ExcellenceOluye, Mrs. F. Olarenwaju, Miss R. Popoola, Miss T. Babatunde, Mr. Loremeke, Miss. Oyeyemi,
Mrs. Olubodun, Miss. Olufelo for their different contributions to my intellectual growth. Mr.
Enoch (Departmental Secretary)deserves recognition too.

Beyond our department are my

wonderful friends and families: Mr. and Mrs. Idu Igariwey and my siblings, cousins far and near.
Finally, I deeply appreciate every individual who in one way or the other contributed to the
successful completion of my BSC degree in Covenant University. May God shower His priceless
blessings upon them all, Amen.

Igariwey Ugo Iduma

ugoigariwey@gmaul.com
October, 2015

ABSTRACT
This project research examined empirically the privatization of the Nigerian enterprise and
economic growth in Nigeria, using the telecommunication industry as a case study. For the

purposes of this study, we shall limit our study of the privatization programme in Nigeria to the
fourth republic, under the leadership of Obasanjo (1999-2007). The data for the study is basically
secondary data from the central bank of Nigeria, publications, articles, journals, newspapers,
magazine, and other related textbooks and also from federal office of statistics. Project research
checked the impact of the privatization, on the economic growth. Through using questionnaire,
the systematic random sampling technique based of five options likert scale. My research
observed that the enterprises in Nigeria have found themselves in a state of low performance and
undoubted inefficiency. The then present administration was bent on revitalizing these
enterprises so as to achieve a developed and sustainable economy. One of the bold steps taken is
to privatize them so that their lost image can be redeemed. In Nigeria, privatization came as
integral parts of Adjustment credits and was aimed at enhancing the efficiency of resource
allocation of government. The core objectives are reducing fiscal deficits, building a broader tax
base, attracting more investment and growing the private sector. The study found that there exist
a positive relationship between economic growth, proxied by real GDP, and telecommunication
(GSM) variables in Nigeria. Having discovered that teledensity has a positive relationship with
economic growth, the study recommends that policies that could lead to continual expansion in
teledensity infrastructural base in the sector should be put in place. Hence faster returns on
investment and an opportunity to further expand telecoms services in Nigeria.
TABLE OF CONTENTS
CONTENTS

PAGES

Declaration

Certification

ii

Dedication

iii

Acknowledgments

iv

Abstract

vi Table

of Contents

vi - viii

List of abbreviations

ix

CHAPTER ONE: INTRODUCTION

1.1

Background to the Study

1.2

Statement of the Problem

1.3

Research Questions

1.4

Objectives of the Study

1.5

Research hypotheses

1.6

Significance of the Study

1.7

Scope and Limitations of the Study

1.8

Research methodology of the Study

1.8.1. Sample size

1.8.2. Return rate of questionnaires

1.8.3. Methods of Data Collection

1.8.4. source of secondary data

1.8.5. Techniques of Data Analysis

CHAPTER TWO: LITERATURE REVIEW AND THEORETICAL FRAMEWORK

2.1.1 Privatization

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2.1.2 Economic growth

14

2.1.3Telecommunication

16

2.2 Reference

19

LIST OF ABBREVIATIONS
PE

- Public enterprise

DCs

-Developing countries

EBRD

-European bank for development

NITEL

-Nigerian telecommunications limited

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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The importance of establishing public enterprises or corporation began during the 19th century
with the British telecom in 1884 under the telecommunication act and gained a worldwide
support in Britain thereafter. Several nations particularly those in Africa, have come to embrace
the principle as a way of eliminating low performance and inefficiency in the public enterprise
sector. Privatisation implies a change or reversal of the States involvement in certain economic
activities. Some of these activities had historically been delivered by the State, such as postal
services, telecoms, or public transportation (e.g. trains, airways) but in recent times the
ownership of these public enterprises have shifted to the private sector.At the time of Nigerias
political independence in 1960, agriculture was the main stay of the economy, accounting for
about 70 percent of the GDP and about 90 percent of foreign exchange earnings. Manufacturing,
which contributed 3.9 percent in 1960/61, reached a peak of about 10 percent in 1981 and
thereafter started to decline progressively to lowest level of 2.57 percent in 2006. Crude oil
became dominant in the Nigerian economy, starting from 1970s and presently accounts for about
40 percent of GDP, over 95 percent of foreign exchange earnings, and over 70 percent of Federal
Government revenue source (Chinedu, Titus and Thaddeu, 2010).Since her independence in
1960, Nigerias economy has been a mono-cultural one, moving from over dependence on
agriculture to over dependence on crude petroleum. Over dependence on a single primary
product (crude oil) has made the Nigerian economy to be volatile and susceptible to

vulnerabilities in the global market environment. This promoted or enhanced the desire to
constitution of Nigeria described the official operating of these enterprises and public servants
they managed as well as private enterprises. The variety and depth of Public Enterprises (PEs)
problems with their causal factors differ from one country to another, and also from one sector of
the economy to another, especially in the African region (Obadan and Ayodele, 1998). Following
the trend the Nigerian economy has come to embrace privatization as a cardinal principle of the
states economic policy. Over the years, the Nigerian government has encouraged the
development of the public sector, since independence in 1960 and particularly 1970s but has
being commonly non successive because of government attitude towards public enterprises
business management. In Nigeria, most government owned industries and establishments remain
citadels of corruption, studies in inefficiently and consequently a heavy drain on the economy. As
a means of combating this menace, the (IMF) and (World Bank) have advocated the twin policies
of privatization and commercialization incidentally Nigeria has fully adopted this policy and is
embarking on it with frenzy. For example, Nigerian breweries changed from the most inefficient
and loss-making company before privatization to one of the most profitable business in Nigeria.
It is important to note that with the adoption of the structural adjustment programme (SAP) in
1986, privatization of public enterprises came to the forefront as a major component of Nigerias
economic reform process at the behest of the World Bank and other international organizations.
Consequently, a Technical Committee on Privatization and Commercialization (TCPC) was set
up in 1988 to oversee the programme. In the course of its operations, the TCPC privatized 55
enterprises. Privatisation proceses have taken place in almost every continent and in every
country, developed or developing, at different periods in time. The pace of the privatization
process have been affected by either historical events such as; the decolonization process or post-

war reconstruction or motivated by political & ideological paradigms, such as the liberalization
process in the 80s or pushed by economic downturns (such as the 2008 financial/fiscal crises).
Even though privatization has been and continuous to be a largely used public policy resort, it
should not be considered as we will see further- as a miraculous and infallible remedy for every
countrys economic or social problems. We shall see how privatisation should not be seen as an
end in itself but just as a mean to achieve certain policy objectives, that may or may not be
feasible depending on the context (both economic and social), the industry targeted, and the
methods used to achieve it. Thus, as we shall explain, use privatisation for the purposes of
reducing income inequality or poverty and increasing economic growth shall only be possible
under certain conditions and depending on numerous factors.establish various enterprises and
massive establishment of government agencies and institutions. 1979. it is also important to note
that the major function that informed the establishment of these public enterprises are to control
the resources and raise funds for the provision of certain infrastructural facilities particularly in
services requiring heavy financial investment e.g. railway, electricity, telecommunication etc,
also to perform the function of generating revenue that will add to financial development
program and projects as veritable instrument for the creation of jobs; and ultimately facilitate
economic growth and development.
1.2 Statement of the Problem
Privatization and commercialization of public enterprises is considered by many as a vital tool
for the growth of the economy. The 1980s witnessed steady economic deterioration and
seemingly faulty economic policies. At the beginning of the 1980s, the country had entered

difficult times. In Nigeria some of the problems facing privatization and commercialization
program include;
a) Lack of accountability
b) Corruption
c) Lack of transparency
d) Inconsistency
However it is based on the problems, that the basic propositions of this privatization and
commercialization program are being hindered. In trying to look into these discrepancies and
proffer a way forward towards a state of privatization and commercialization of public
enterprises in Nigeria, that enhances economic growth and development, this research work
emanated.
1.3 Research Questions
1. Could the policy of privatization have a positive drive on the growth of the Nigerian
economy?
2. To what extent has the privatization of the telecommunication industry be able to enhance
growth of the Nigerian economy?
3. Will the policy of privatization impact still be felt in the long run?

4. Will the pre and post privatization era issues hinder the implementation of the privatization
policy?
1.4 Objective of the study
This study has the main objective of ascertaining the impact of privatization of Nigerian
enterprises on economic growth. They are as follows:
1. The goal of the research project is to evaluate and analyze the idea of privatization as a
possible factor for economic growth.
2. To identify the problems constraining the performance the privatization policy.
3. To examine the extent to which the privatization of the telecommunication industry will
enhance growth in the economy.
4. To suggest programmes and activities that would enhance the performance of the policy
in relation to their identified short comings and challenges
The primary goal of the privatisation programme is to make the private sector the leading
engine of growth and income inequality or of the Nigerian economy. My research intends
to use the privatization programme as a platform to attract private investment in an open,
fair and transparent way
1.5 Research hypotheses
To achieve the objectives of this study the following hypotheses stated in research form were
tested:
Hr 1: There is a significant relationship between the effects of privatization and economic
growth.

Hr2: There is a significant relationship that between the pre and post privatization era issues and
the effective implementation of the privatization programme.
1.6 Significance of study
This study is important in the present day Nigeria as issues of privatization is very import and
quite a quintessential yardstick for the attainment of economic growth.
The research will throw more light on privatization of the telecommunication industry in
promoting economic. The research would expose the backdrops and encourage the researcher to
better understand that privatization engenders development as it where and also for person who
would be carrying out a research on similar topic to be able to understand the impact of
privatization on the economic growth of a nation specially in the Nigerian context. This research
work will help the government and readers to understand those benefits that privatization and
commercialization program embodies which we have neglected and politicized within the past.
In understanding this on the side of the government, it will allow them to rethink and work
towards real implementation of it and thereby creating a room for the rapid growth and
development of this country. At the other hand, it will go a long way to create an avenue for
more academic research. The importance of any research is to finding out solutions that faces
mankind and the environment or society..

1.7 Scope and limitation of the study

This study takes a look at the Impact of privatization of Nigerian enterprises on economic growth
and poverty alleviation. Having a particular reference to the telecommunication industry. Our
study of privatization programme in Nigeria is to the fourth republic, under the leadership of
Obasanjo (1999-2007). This research would be limited to the fourth republic, under the
leadership of Obasanjo (1999-2007). This study also focuses on the privatization of the
telecommunication industry. It does not pay attention to other industries like power. For the
intentions of future studies, other sectors would be looked at. The study also looked at
privatization in the Nigerian context. For further studies the researcher could expand his study to
other nation to have a concrete and inclusive generalization of the topic. The impact of
privatization on growth mainly employed qualitative method of research explicated through
secondary sources of data.
1.8 Research methodology
This study employed qualitative method. Qualitative study refers to the method which relies on
text and image data, and draws on diverse strategies of inquiry (Creswell, 2003).
1.8.1 Sample size
The study is based on a sample size of 200 respondents. The study adopted the systematic
random sampling technique. The justification for this technique is based on the fact that it
enables every subject in the sampling frame to have equal opportunity to be selected without bias
in a systematic manner (Ogbeide, 1997).
1.8.2. Return Rate of Questionnaires

Out of the 200 copies of questionnaire administered to respondents at NITEL headquarters wuse,
150 were retrieved. Consequently, data analysis for this study is based on 150 of the total
administered copies of questionnaire.
1.8.3. Methods of Data Collection
The secondary data collection involves deep and concentrated library and online search for
relevant materials on privatization and materials on economic growth.
1.8.4 Source of secondary data
The study relied more on data from the central bank of Nigeria, publications, seminars, article,
newspapers, magazines and other related textbooks and also from federal office of statistics
1.8.5. Techniques of Data Analysis
The study adopts the five-point Likert-style rating scale method of questionnaire to elicit
information from the respondents. The Likert-style rating scale design helps researchers to ask
respondents on how strongly they agree or disagree with a statement or series of statements on a
five point scale, e.g. 5 Strongly Agree, 4 - Agree, 3 Undecided, 2 - Disagree, 1 Strongly
Disagree.
The techniques for analyzing these secondary data are textual analysis and explanatory method.
Textual analysis implies analyzing the content of books, journal articles, magazines, newspapers,
research projects and internet materials. It is defined as the study of recorded human
communications such as books, websites, paintings and laws (Babbie, 1990). Holsti (I969)
defines it as any technique for making inferences by objectively and systematically identifying
8

specified characteristics of messages. The technique of data analysis was utilized by Folarin
(2010) and Arowosegbe (2010). According to Folarin (2010), the textual approach is adopted to
discuss data in human communications such as speeches or public addresses, correspondences,
diplomatic notes, letters, and policy statements. It is called textual analysis, which is a standard
in Social Sciences for studying the content of communication. Explanatory method implies
interpretation of existing texts on a subject matter. It means drawing inferences, premises,
conclusions and implications from a scholars work. This explanatory method is germane to the
study of privatization.

CHAPTER TWO
LITERATURE REVIEW AND THEORETICAL FRAMEWORK
2.1.1 Privatization

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privatisation has become an important instrument for streamlining the public sector and
promoting economic development in countries all over world. It is a strategy for reducing the
size of government expenditure and transferring assets and service functions from public to
private ownership and control. The vast literature on privatization however, reveals a lack of
clear-cut definition. Privatization has become a generic term often employed to describe a range
of policy initiatives designed to alter the mix in ownership and management of enterprises away
from government in favor of the private sector. It covers a continuum of possibilities, from
decentralization to market discipline. Narrowly defined, Privatization is defined as a method of
allocating assets and functions from public sector to the private sector (Fillipovic, 2005). As
such privatization constitutes a fundamental structural change of ownership which is transferred
from public to private sector, leading to a drastic shift in the underlying incentives of the
respective owners and in the objectives of the firm (from political oriented to profit oriented) .
This definition is perhaps the most common usage of the term. A broader definition entails any
measure that results in temporary transfer to the private sector of activities exercised hitherto by
a public agency. This may be accompanied by a radical relocation of available productive
resources, restructuring of the existing institutional setting in which production takes place, and
the introduction of new forms of corporate governance devoid of political interference (Shirley,
1999; Jerome, 1996). Privatization can also entail a transfer of the provision of a good or service
from public to private sector, with the government retaining the ultimate responsibility for
providing the service. The prime examples of this type of privatization are subcontracting,
management contracts, leases and concessions, as well as build, operate and transfer schemes. It
is even possible to envisage privatization taking place without a transfer of ownership of assets.
For example, liberalization or deregulation is regarded as the abolition of restriction on entry,

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prices, output, market, profits, etc. The public enterprise remains in existence, but is required to
adopt a more commercial approach.
Privatization is based on four core beliefs according to Ugorji (1995):
1. Government is into more things than it should be. It is intruding into private enterprise and
lives.
2. Government is unable to provide services effectively or efficiently.
3. Public officials and public agencies are not adequately responsive to the public.
4. Government consumes too many resources and thereby threatens economic growth. However,
attempting to review the literature on privatisation the first hurdle one runs across is that of
terminology. Heald (1988) maintained that there is a very wide range of initiatives usually
discussed under the term privatisation. Such initiatives include: the substitution of user- charges
for tax finance, the letting of management contracts while retaining ownership, and liberalization
for the promotion of competition in markets previously reserved for statutory monopolies.
Discussing privatisation policy in Britain, Pirie (1988) lists twenty-one initiatives under
privatisation. Cook and Kirkpatrick (1988) maintained that the drive towards privatisation is
merely a result of the confusion arising from the role of the price mechanism and of the private
sector in a mixed economy. The shift from the more-government attitude of the 1940s to the
more-market attitude in the 1980s is merely a shift in paradigm, rather than in ideology. Thus,
all initiatives that emphasize more use of the market or more use of the private-sector- culture
are termed privatisation. Hence the entry of more firms into a previously monopolistic field is
privatisation; and exposure of enterprises to bankruptcy and take-over is privatisation. In short,
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Cook and Kirkpatrick (1988) define privatisation as the transfer of productive asset from public
to private ownership and control. Boachie-Danquah (1988) defines privatisation as the transfer of
ownership of public resources or assets to private individual and firms through various options:
sale of state-owned enterprises to the private sector through private placement, public
offerings or competitive bidding by strategic investors. Allowing private operators to compete
in sectors that have been the exclusive domain of PEs, breaking up a monopoly into various
branches of activities to stimulate competition, transferring the management of PEs from public
to private through contracts, leases or concessions. In a broad sense, privatisation involves not
only the sale or other form of transfer of state assets, but also the transfer of the management of
state enterprises to the private sector (Agada, 2002). This is accompanied by a radical
reallocation of available productive resources, restructuring of existing institutional setting in
which production takes place, and the introduction of new methods of corporate governance
devoid of political interference (Jerome, 1996). Yarrow (1986) indicated that privatization was
first argue by Adam Smith in the year 1776 about two centuries ago that: in every great
monarchy in Europe the sale of the crown lands would produce a very large sum of money,
which, if applied to the payment of the public debts, would deliver from mortgage a much
greater revenue than any which those lands have ever afforded to the crown. When crown lands
had become private property, they would, in the course of a few years, become well improved
and well cultivated. Privatization was not new in the world economics. A world-world era of
privatization has been picking up momentum in recent decades, making it a fairly new trend in
the areas of economic policy. The modern idea of privatization as an economic policy was pursed
for the first time by the Federal Republic of Germany in 1957, when the government eventually
sold its majority stake in Volkswagen to private investors. The first large-scale privatisation

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programme then termed denationalization programme was launched in the Federal Republic of
Germany by the government of Konrad Adenauer. The next big move in privatization came in
1980s with Margret Thatchers privatization of Britain Telecom and Chitracs privatization of
government owned communication companies (Magginson, Nash, and Randenborgh 1996), a
number of Latin American countries launched significant privatization programs following
decades of static economic policies, trade protection, heavy-headed regulation and even
nationalization. Another major contribution to the world wide process of privatization has
between the falls of the communist regime in Eastern Europe, the former Soviet Union. Recently,
countries like China, and Cuba, as well as many other developing countries have begun to
implement privatization in the hope of stimulating economic growth. This has spread to all over
the world. It has been one of the major economic phenomena in the world economic history. The
largest privatization in history took place in Russia between 1992 and 1995 when as many as
75,000 small and medium scale enterprises were auctioned, 14,000 medium to large scale firms
were sold (IFC, 1995). Then in Africa, privatization took place in 1983 in Ghana, and
subsequently in Nigeria in 1986 and to other African countries.
It is important to note that the objectives set for the British privatisation programme were
virtually the same as those listed by every government that has adopted privatisation more than
two decades ago. Waterhouse (1989) says these goals are to: (1) raise revenue for the state, (2)
promote economic efficiency, (3) reduce government interference in the economy, (4) promote
wider share ownership, (5) provide the opportunity to introduce composition, and (6) expose PEs
to market discipline. The other major objective is to develop the national capital market (Menyah
and Paudyal, 1996). Britain privatisation drive started in 1979. Between 1979 and 1988, Britain
developed more than twenty-one methods of privatisation (Pirie, 1988). Some of them are selling
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the whole enterprise by public share issue, selling parts to private buyers, selling the enterprise to
the workforce, using vouchers, contracting out the service to private business, etc. This enables
the British government to achieve a significant transfer of ownership of most PEs to its citizens.
In that process, the government cleverly shifted large areas of public concern to where they were
subjected to economic discipline, efficiency, accountability, and competition (Idahosa and
Mustapha, 2002). Other countries of the world follow Britains footsteps as regards privatisation.
In the United States privatisation at the federal level took a highly cautious approach. France and
other European countries also embrace privatisation.
2.1.2 Economic growth
Economic growth defined as a quantitative sustained increase in the countrys per-capita output
or income accompanied by expansion in its labor force, consumption, capital and volume of
trade. Development in this sense thus include economic growth plus quantitative change in
economic wants, goods, incentive, institutions, productivity ad knowledge or the upward
movement of the entire social system Thingan (2002). There are to our knowledge only few
studies that empirically assess the macro economic impacts of privatization for a relatively large
number of developing countries. The lack of empirical studies is due to data constraints related to
the time period elapsed since privatization, and to the difficulty to isolate the effect of
privatization from that of other concomitant contemporary policy changes. Indeed, privatization,
especially in developing countries (DCs) is often implement simultaneously with other structural
reforms such as price deregulation, external trade liberalization, financial liberalization and
financial sector reform. In the growth literature, very few studies incorporate a privatization
variable among policy variables that encompass monetary and fiscal discipline, price and trade

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liberalization and deregulation. There is a body of literature addressing this issue in a context of
transition to a market economy. Havrylyshyn, Izvorski and van Rooden (1998), analysing growth
performance for 25 transition countries between 1990 and 1997, use an index of structural
reforms with a subcomponent an index for private entry in markets that includes privatization,
enterprise reform and financial sector reform (indices for the year 1990-93 are due to de Melo,
Deninzer and Gelb, 1996, and are updated to 1997 using the transition indicators from the EBRD
transition reports. Bennett et al. (2004) analyse the role of the method of privatization in
economic growth for 23 transition countries over the period 1991-2001. However, the political
and economic backgrounds of transition countries are quite different from those of developing
markets economies. Recently there have been a few attempts to empirically investigate the
relation between privatization and economic growth in the context of developing countries. A
first study, by Plane (1997) uses data for 35 developing countries over the period 1984-1992.
Plane first analyses and tests the determinants of privatization by means of cross sectional probit
and tobit models. Then he examines the relationship between the average GDP growth rate and a
set of explanatory variables including the implementation of privatization programs. Plane finds
that privatization positively affected GDP growth and that the effect was more significant for
activities of a public goods type than for other sectors. He finds that on average, reform increased
economic growth from 0.8% to 1.5% between the sub periods 1984-1988 and 1988-92. Barnett
(2000) uses country level panel data of 18 countries including only 10 developing countries. The
rest are transition economies. This study explores the impact of privatization on fiscal variables,
growth, unemployment and investment. The empirical evidence indicates that privatization is
positively correlated with real GDP growth rates. The estimate suggests that privatization of 1%

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of GDP would be associated with an increase on the real GDP growth rate of 0.5% in the year of
privatization and 0.4% in the following year.
2.1.3 Telecommunication
According to Ndukwe (2005), the developed world had been able to transform not only their
domestic economies, but also increases their competitiveness in the world market, partly due to
economic development policies predicated on telecommunications as an essential component of
the economic infrastructure. A lot of empirical studies have been conducted on the influence of
telecommunication infrastructure and investment in economic growth. An earlier attempt to
examine a positive correlation between the level of telecommunication use and some index of
economic well being could be traced to Jipp (1963) who studied the relationship between the
income of a nation and telephone density, using data for different countries, he found a positive
correlation between the two. Also, Bee and Gilling (1967) studied the relationship between
telephone facilities and their use and economic performance using data from 29 countries at
different stages of development. Garbade and Sibler (1978) proved in their studies that there was
statistical evidence that the two innovations in communication technology (the telegraph and
trans-Atlantic cable) led to efficient market places worldwide through significant and rapid
narrowing on inter-market price differentials. As for Pohjola (2001), he concentrated on 39
countries using data from 1990 to 1995 and observed that IT investment shows 80% gross
returns for OECD countries, but developing countries did not experience significant returns.
Belaid (2002) pointed out that a few studies focus on specific telecommunications infrastructure
and their role in economic performance. The main ones emphasized on the contribution of
telecommunications in reducing transaction cost, increasing total factor productivity of the

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private sector and diffusion of new technologies, which will help to tackle the problem of
developing countries. Sridhar and Sridhar (2005) warned that telecommunication infrastructure
is also a little different from other infrastructure, as a dominant of economic growth because of
the existence of network externalities, phenomena that increases the value of a service with
increases in the number of users. As a result, the impact of telecommunication infrastructure on
economic development is more pronounced as compared to other traditional infrastructure. As
for Norton (1992), he demonstrated that convergence could occur if developing countries could
add to their stock of telephones rapidly, since they reduce transaction costs.
Rickets (2002) in his work saw telecommunications as facilitating the coordination of
information flow, provides opportunities for increasing the efficiency of interaction and
coordination, and in this manner influences the success of economic activities. Garbade and
Silber (1978) found out that there was statistical evidence that the two innovations in
communication technology (the telegraph and Trans-Atlantic cable) led to efficient market places
worldwide through significant and rapid narrowing on inter-market price differentials. Bayes, et.
al., (1999) found that half of all telephone calls involved economic purposes such as discussing
employment opportunities, prices of the commodities, land transactions, remittances and other
business items. They also reported that the average prices of agriculture commodities were
higher in villages with phones than in village without phones. Leff (1984) argues that firms can
also have more physically dispersed activity with increased telecom services (for instance,
encourage the use of telecommunication among the employees) and enjoy economy of scale and
scope while Sridhar and Sridhar (2003) studies the impact of telecommunication infrastructure
on spatial dispersion of population, using data from the United States. Their result shows that
technology is a compliment, not a substitute, for direct interaction.
17

Cronin, et. al, (1991) used

18

the Granger-Sims and modified Sims tests to confirm the existence of feedback process in which
economic activity and growth stimulates demands for telecommunication services. They opined
that as the economy grows, more telecommunications service. They pointed out that as the
economy grows, more telecommunications facilities are needed to conduct the increased
business transactions. In Nigeria, the entrance of Global System for Mobile Communications
(GSM) operators since 2001 has had a positive impact on the culture and life of Nigerians. It
generated employment for many unemployed able persons. The industry currently directly
employs about 10,000 professionals and is indirectly responsible for another 1,000,000 jobs
(Tella, Amaghionyeodiwe and Adesoye, 2007). The industry received global acclaim as one of
the fastest growing mobile markets in Africa (Ndukwe, 2006) and has therefore enhanced both
foreign direct investment (FDI) and private investment in Nigeria, which has accounted almost
18billion by December 2010. The contribution of the communications sector to GDP has
increased from an average of 0.4 percent between 1986 and 1989 to about an average of 5
percent between 2006 and 2010 (NCC, 2011). According to Soyinka (2008), the mobile phone
has empowered the poor by opening up veritable windows of wealth generation for them to get
out of the scourge of poverty. Soyinka (2008) and Ndukwe (2008) opined that the GSM business
has contributed to the economy in the area of GSM recharge card printing. This has had the
effect of saving Nigeria of about 150 million dollars monthly while providing employment and
new skills to the dealers. It has also improved entertainment and networking among Nigerians,
using short message service, SMS, and the signal calls. Ariyo and Jerome (2005) for instance,
argued that telephone penetration has a positive impact on gross domestic product (GDP)
because it provides a stimulant to economic growth and that as economies become more highly
developed, they need more communications. Okafor (2007) submits that telecommunications

18

19

infrastructure becomes a crucial ingredient in the process of economic development in both the
developing and the developed countries.
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