Nationalisation is a deliberate policy by which government takes over the control and ownership of private enterprises due to economic, political, social or strategic reasons. In other words, nationalisation is the process by which the government takes over the ownership and management of an industry from private control by bringing it under its exclusive control. Enterprises are brought under state control and ownership as a result of economic, political, social and strategic reasons. Nationalised industries exist to provide services; they are not profit oriented.
Reasons for Nationalisation
- For Strategic Reasons: Government can take over the ownership and control of an enterprise for strategic reasons like security, defence and political consideration.
- To Prevent Exploitation: Nationalisation of enterprises can take place in order to prevent monopolistic exploitation of the citizens.
- Political Reason: Break in diplomatic relations between two countries can necessitate nationalisation. Political differences can encourage retaliatory measures being taken by two countries against each other, e.g. America and Iraq at the instance of the Gulf war.
- To Avoid Foreign Dominance of the Economy: Government can also take over some companies in order to prevent dominance of the economy by foreigners.
- Need for Large Capital: For an industry to perform effectively and efficiently, it may need large capital which can only be provided by the government. Hence, government may decide to take over such enterprises, e.g. railway.
- To Prevent Wasteful Competition: In order to prevent wasteful competition among companies, government can come in and take over ownership and management.
- To Provide Uninterrupted Services: Government can take over an enterprise in order to ensure constant and uninterrupted supply of such products or services.
ADVANTAGES OF NATIONALISATION
- Helps to Check Exploitation: Nationalisation of industry helps to check exploitation by foreign businessmen.
- Ensures Steady Supply of Service: It ensures the provision and steady supply of essential services.
- Elimination of Wastes: Nationalisation helps to prevent and eliminate wasteful competition.
- Encouragement of Efficient Use of Resources: It encourages more efficient use of economic resources.
- Protection of Strategic Industries: It helps to protect and develop key strategic industries which cannot be left in private hands.
- Ensures Equitable Distribution of Resources: It also ensures equitable distribution of resources as well as correcting imbalances in the means of production.
- Elimination of Monopoly: Another advantage is to eliminate monopoly by private businessmen.
- Mobilisation of Capital: Large capital can be mobilised to ensure large scale investment.
- Helps for Planning Purposes: It helps the government to influence and control various economic activities for planning purposes.
- Employment Opportunities: It creates more employment opportunities.
Disadvantages of Nationalisation
- Prevention of Private Initiatives: Private initiatives can be destroyed when government takes over all industries.
- Low Productivity and Inefficiency: Lack of competition can encourage low productivity and inefficiency.
- Consumers Can be Exploited: By nationalising an enterprise, government may confer monopoly power which can be used to exploit the consumers, e.g. NEPA.
- Corruption and Mismanagement: Most nationalised industries are not efficiently managed because of corruption and mismanagement.
- Excessive Control may hinder Development: Excessive government control of the economy may hinder development.
- It can Lead to Retaliation: Nationalisation can lead to retaliation from other countries.
- Resources can be Misallocated: The resources of the country can be misallocated as a result of political interference.
DIFFERENCES BETWEEN NATIONALISED INDUSTRY AND PUBLIC LIABILITY COMPANY
Indigenization is the transfer of ownership and control of business enterprises from foreigners to the indigenes. It is a policy designed to ensure greater participation of indigenes in the ownership, control and management of business enterprises. The major aim is to reduce foreign domination of the economy and to ensure indigenous participation.
Indigenization tries to stimulate indigenous entrepreneurship.
Advantages of Indigenization
- Ensures Indigenous Participation: Indigenization ensures greater participation of indigenes in the control and running of business enterprises of their country.
- Development of Local Technology: It leads to the development of local skills and technology.
- Acceleration of Industrial Development: It leads to the promotion and acceleration of industrial development.
- Reduces Foreign Control of the Economy: Indigenization can reduce foreign control and domination of the nation’s economy.
- Leads to Local Retention of Profit: It leads to local retention of profits which otherwise would have been taken to other countries as capital flight.
- Ensures Self-reliance: Indigenization eliminates the problem of dependence on foreign goods by ensuring self-reliance.
- Provision of Employment Opportunities: It creates employment opportunities for the indigenes.
- Development of Private Initiatives: When indigenes are encouraged to participate in business enterprises, private initiatives will develop with indigenization.
- Industrial Development: Indigenization will bring about rapid industrialisation of the economy.
- Improves Standard of Living: The standard of living of the people will increase through participation in business enterprises.
Disadvantages of Indigenization
- Discouragement of Foreign Investment: Indigenization can discourage foreign investment in a country.
- It Can Lead to Disharmony between Countries: Indigenization can lead to disharmony among countries of the world as friendship will be discouraged.
- It can Lead to Capital Flight: Indigenization can lead to capital flight as foreign investors will be forced to relocate to other countries.
- Inexperience and Incompetence Can Destroy the Business: As a result of indigenization, business can be transferred to people who are not experienced and competent enough to handle such business. This will adversely affect the success of the business.
- Rich People Can Hijack the Economy: Few rich people can use their financial wealth to buy and take over all such businesses.
Differences between Indigenization and Nationalisation
- It transfers ownership of foreign business to citizens.
- It encourages indigenous participation.
- It transfers ownership to the government.
- It ensures state monopoly of industrial activities.
COMMERCIALISATION AND PRIVATISATION
Commercialisation is a policy geared towards making state-owned enterprises to become more efficient and profit-oriented. The policy makes it possible for public enterprises to become more viable and effective.
Privatisation on the other hand is a policy designed to enable individuals and private or corporate organisations take over the ownership and control of government businesses such as public companies and corporations.
Reasons for commercialisation and privatisation
- Efficient management: Commercialisation and privatisation help to develop a good and efficient management of enterprises.
- Participation of private individuals: They also assist individuals to participate in economic activities through ownership of enterprises.
- To generate more revenue: They assist the government to generate more revenue.
- Autonomy of enterprises: It helps to provide autonomy for the enterprises.
- Removal of unproductive enterprises: They also assist to remove or divest unproductive enterprises in the economy.
Advantages of commercialisation and privatisation
- Reduction in public expenditure: Commercialisation and privatisation help in reducing public expenditure on enterprises that are not viable.
- It promotes efficiency: Commercialisation and privatisation do help to promote efficiency in production.
- Generation of more revenue: Both policies equally help to boost the generation of revenue for the government.
- Emergence of innovations: The existence of competition in the industries assists in the emergence of innovations.
- Better choice by consumers: Both policies do assist the consumers to have a wide range of choice where there are abundant products.
Disadvantages of commercialisation and privatisation
- Poor standard of living: Commercialisation and privatisation lead to poor standard of living of the people due to a shift in interest from pure service delivery to profit maximisation.
- High cost of products: These policies are aimed at profit maximisation hence they are usually associated with high cost of products or goods.
- Reduction in employment: Many workers are usually laid off when industries are commercialised or privatised.
- Uneven distribution of income: Income is often unevenly distributed as few individuals are now in control of the industries.
- Loss of consumers’ welfare scheme: Under commercialisation and privatisation, consumers’ welfare are not catered for.
NIGERIAN ENTERPRISES PROMOTION DECREE
In 1972, the Federal Government of Nigeria promulgated the Nigerian Enterprises Promotion Decree. The decree reserves the right to own and participate in some enterprises exclusively or partially for the government and the people of Nigeria. The decree was divided into two schedules:
Schedule I: Under this schedule, some business enterprises that do not require much capital to set up are reserved exclusively for the indigenes. They are mainly small scale enterprises such as cinemas, pool betting, candle and block manufacturing, rice milling, garments, etc.
Schedule II: Under this schedule, foreigners can participate but must reserve 40% equity participation for Nigerians. Some of the businesses under this schedule include beer brewing, cement, soap and bicycle manufacturing, supermarket, shipping, furniture making etc. Because of the short comings of the decree, it was revised in 1977. The decree this time classified enterprises into three schedules:
- Schedule I: This schedule was increased by the inclusion of some businesses like clock and jewellery manufacturing etc. The decree reserves 100% equity participation for indigenes.
- Schedule II: Under this schedule, the equity participation of indigenes was increased to 60%.
- Schedule III: This schedule introduced the equity participation of indigenes which must not be less than 4%.
Reasons for the Nigerian Enterprises Promotion Decree
- To ensure that the means of production and distribution are controlled by Nigerians and not foreigners.
- To be able to control business enterprises in the country.
- To ensure that the country is self-reliant.
- For industrial development of our economy.
- So that the indigenes will have control over their resources.