Deregulation_and_Performance_of_State-Owned_Enterprises_in_Nigeria

DEREGULATION AND PEFORMACE OF SELECTED STATE-OWNED ENTERPRISES: EMPIRICAL EVIDENCE FROM NIGERIA Oladejo Abiodun Oyebamiji Department of Management & accounting Obafemi Awolowo University,ile-Ife. Osun State, Nigeria. oladejobiodun@yahoo.com oladejoabiodun@oauife.edu.ng Abstract The study examined the impacts of deregulation on State-owned enterprises and investigated the challenges arising from the ownership structure of these enterprises. Primary and secondary data were used for the study. Primary data were sourced through the administration of a questionnaire on 60 top executive officers of five purposively selected state-owned enterprises; four in Lagos State and one in Gombe State. Secondary data were collected from Nigeria Stock Exchange Fact Books and Annual Reports and Statement of Accounts of selected firms. Data collected were analysed using appropriate descriptive statistics and inferential statistics. The results showed that deregulation had negative but not significant impact on performance of state-owned enterprises. Furthermore, the results show that challenges arising from ownership structure and new ownership structure have positive and significant impact on enterprise performance.The study concluded that deregulation process, if properly implemented, was capable of transforming previously comatose state-owned enterprises into viable private-sector managed firms. Key words: deregulation, privatization, ownership structure, profitability, stock value 1. INTRODUCTION The participation of the state in enterprises in Nigeria dates back to the colonial era. The task of providing infrastructural facilities such as railway, roads, bridges, water, electricity and port facilities fell on the colonial government due to the absence of indigenous companies with the required capital as well as the inability or unwillingness of foreign trading companies to embark on these capital-intensive projects. This trend continued after independence in 1960. The emergence of the crude oil industry into the Nigerian economy, after the civil war in the 1970s with the associated boom intensified governmental involvement in production and in control of the Nigerian economy. One major aim of government at that time was to convert as much as possible of the growing oil revenue into social, physical and economical infrastructural investments (Nwoye, 1997). The Nigerian Enterprises Promotion Decree of 1972 which took effect on 1st April, 1974, with its subsequent amendment in 1976, provided a concrete basis for government’s extensive participation in the ownership and management of enterprises. Given these developments, public enterprises at the federal level were about 600 and 900 smaller PEs at the State and local levels (Afeikhena, 2008). These had spread over agriculture, energy, mining, banking, insurance, manufacturing, transport, commerce and other service activities. Before long, the range of Nigerian public enterprises had stretched from farm organisations to manufacturing, from municipal transport to mining, from housing to multipurpose power and from trading to banking and insurance. At the state and local government levels, the range of activities that had attracted public sector investment also had become quite large. Thus a variety of enterprises with public interest in terms of majority equity participation or fully owned by state and local government as well as other governmental entities became visible in various parts of Nigeria. It is estimated that successive Nigerian Government invested of about N800billion (approximately US $90billon equivalent) in the public enterprise over two decades which remains currently one of the largest in Africa. (Afeikhena, 2008) The implication of this was that Nigeria under-achieved its growth potential as a result of a huge public enterprise sector weighed down by inefficiency and massive corruption. In the wake of the abysmal performance, the activities of public enterprises attracted more attention and underwent closer scrutiny, with much emphasis on their poor performance and the burden they impose on government finance. The poor financial returns from these enterprises, against the background of severe macroeconomic imbalance and public sector crisis precipitated the concern of government towards deregulation. With the adoption of the structural adjustment programme (SAP) in 1986, deregulation and privatisation of public enterprises came to the forefront as a major component of Nigeria’s economic reform process at the behest of the World Bank and other international organisations. Deregulation connotes the freeing up of restrictive conditions through introduction of laws and regulations aimed at bringing about a more competitive market structure. Deregulation measures are established to remove many growth-retarding characteristics embedded in the structure of the economy such as heavy government intervention, restrictive entry and exit conditions in particular industries and ceiling on input and output price. The overriding objective of liberalisation is to create a market structure devoid of government induced distortions in resource allocation where the primacy of market forces is firmly established. In such a framework, the nature of government intervention assumes a facilitative character and becomes restricted to the establishment of rules and regulations that prevent or minimize incidence of market failure, secure property rights and ensure justice and equity among economic agents(Oyejide and Bankole, 2001) . This new wave of deregulation has significantly altered ownership structure and performance in many countries. While governments have reduced their ownership stakes, foreigner and to a lesser extent, large domestic block-holders, including local companies and individuals have taken over most of these enterprises. Given the importance of the sectors to economic development ( e.g. in terms of share of total output or employment, a potential engine of modernisation, a creator of skilled jobs and a generator of positive spillover effects). In the attempt to find the extent deregulation has influenced the performance of state-owned enterprise, this study therefore addressed the following questions: What are the impacts of deregulation on state-owned enterprises' What are the challenges arising from ownership structure of state-owned enterprises' In what ways has ownership concentration improved the enterprise performance' In the quest for the answers to these questions, the study was guided by the following objectives i. examine the impacts of deregulation on state-owned enterprises; ii. investigate the challenges arising from the ownership structure of state-owned enterprises; and iii. examine the effect of new ownership structure on the performance of public enterprises post deregulation. In order to guide the execution of the research study the following hypotheses was postulated: i. There is no significant relationship between deregulation and enterprise performance. ii. There is no significant relationship between challenges arising from the ownership structure and enterprise performance. iii. There is no significant relationship between new ownership structure and enterprise performance post deregulation. 2. THEORETICAL LITERATURE AND FRAMEWORK The wind of deregulation that has swept across many develop nations in recent times has not left Africa untouched. Nigeria, Africa’s most populous nation has also embarked on an aggressive and faced-paced deregulation programme. The country has gradually realized that deregulation appears to be the most viable and economically realistic means of guaranteeing the government desire for rapid and irreversible progress towards surmounting the myriad problems that have beset our public utilities over the last decades. To deregulate means to do away with the regulations concerning financial markets and trades. Basically, Ernest and young (1998) posit that deregulation and privatization are elements of economic reform programmes charged with the ultimate goal of improving the overall economy through properly spelt out ways. For example, freeing government from the bondage of continuous financing of extensive projects which are best suited for private investment by the sale of such enterprises; encouraging efficiency and effectiveness in resource utilization; reducing government borrowing while raising revenue; promoting health market competition in a free market environment; improving returns from investment and broadening enterprises share ownership this engendering capital market development. Put in its purest form, Johnson (1998) asserts that private sector is more efficient in terms of resources allocation than public sector investment. The explicit desire to rid government of huge non-performing assets which have become serious national liabilities assume that the private sector would generate positive returns with the assets. Positive investment results would have positive multiplier effect on economic growth and development. The policy programme objectives are laudable against the background that the public enterprises constituted a drain on the finances of the government. Johnson further asserts that government’s plan to deregulate the public sector was intended to: * Restructure and rationalize the public sector in order to lessen the dominance of unproductive investment in the sector. * Re-orientate the enterprises for privatization and Commercialization towards a new horizon of performance improvement, viability and overall efficiency. * Ensure positive returns on public sector investments in commercialized enterprises. * Check the present absolute dependence on the treasury for funding the otherwise commercially oriented parastatals and encourage their approach to the capital market. * Initiate the process of gradual release to the private sector of such public enterprises which by their nature and type of operations are best performed by the private sector. The above enumerated objectives were geared towards meeting some specific goals e.g. improved management efficiency and performance of affected enterprises; reduced government financial burden; increased funding of infrastructure and other facilities. Others are enhanced economic growth and development; installment of market discipline, capital market development and widespread ownership of corporate shares . The main economic justification for deregulation is that it promotes economic efficiency of privatized state owned enterprises. Several theories explain the superiority of private ownership over public ownership and the economic efficiency gains that are likely to emerge from the transfer of ownership and control of assets from the public to private investors. Generally these theories can be classified into five. Namely property rights, the principal-agent, public choice, organizational, hard and soft budget theories. 2.1 The Property rights theory The property rights theory explains differences in the performance of public and private enterprises in terms of marked differences in attenuation of property rights (Demsetz, 1996,1997; Furubton and Pejovich 1992; De Alessi 2000; Davies, 2001) property rights in public enterprises are attenuated partly because property rights cannot be easily transferable which implies that the cost and rewards of economic activities do not accrue more directly to individuals responsible for the property rights. The general conclusion from the property right theory is that the more attenuated property rights are, the less productively efficient will be the enterprise because attenuation weakens the rewards penalties systems that are necessary for cost minimizing behaviour. 2.2 The Principal-agent theory This focuses on differences in the monitoring mechanisms and incentives which public and private managers face as agents of shareholders given welfare maximization for the former and profit maximization for the latter (Bos and Peters, 1991; Bos, 1991; Vickers and Yarrow, 1998). The change in ownership from the public to the private sector has at least two effects; a change in the objective from a weighted welfare function to profit maximization and a change in the incentive structure by linking reward to the level of performance under the private ownership. This shift towards profit maximization may imply higher price; thus foregoing allocative efficiency, but there may be an increase in operational or productive efficiency. 2.3 The public choice theory The public choice theory takes the bureaucratic approach in which public enterprises are seen as an instrument of enhancing the utility functions of politicians such as maximization of votes and the budgets (Niskanen, 1992; Buchanan, 1992; Blankart, 1993; Boycko, Shleifer and Vishny, 1996). Proponents of the public choice theory hold that government departments pursue objectives that do not maximize profits and usually pursue goals such as maximizing budget, risk aversion, employment and investment. Boyco et al (1996) propose a model of privatization within the framework of public choice theory. The model shows that privatization will lead to effective restructuring of state-owned enterprises that are currently producing at inefficiently high levels to maximize employment, only if both cash flow rights and control rights pass from the government into private hands (particularly managers’ hands). This will make it difficult for the government to bribe managers to produce at inefficient levels by offering them operating subsidies. Therefore, cutting the ‘soft budget constraint’ is vital to improving performance. 2.4 Organizational theory This emphasizes the role of organizational characteristics in determining the performance of firms (Hartley and Parker, 1991; Dunsire, 1991; Bishop and Thompson 1994; Martin and Parker, 1997). Proponents of organizational theories argue that differences in the performance of public and private firms are influenced by differences in management, goals, labour, communication and reporting systems, organizational structure and the nature and location of business. They further assert that there is a consensus that ownership matters and does affect the internal efficiency of firms (cost minimizing behaviour) and the allocative efficiency in the market place. 2.5 The Hard and soft budget constraint theory Kornai (1993) suggests that state owned enterprises face a soft budget constraint such as through provision of subsides that imply that the firm can survive without necessarily covering its costs and this encourager inefficiency. Thus, if the credibility of the threat of termination or liquidation is weak, incentives to increase efficiency are also weaken (Kornai 1993; Berglof and Roland, 1998; Qian and Roland, 1996; Raiser 1994; Bertero and Rondi; 2000). 3. METHODOLOGY This study will therefore investigate deregulation process as implied by property right and principal agent theories. This will help to provide a systematic test of this theories and its application in Nigeria. Primary and secondary data were used for the study. Primary data were sourced through the administration of a questionnaire on 60 top executive officers of five purposively selected state-owned enterprises; four in Lagos State and one in Gombe State. The enterprises covered four sectors, namely, financial, cement, textile and oil marketing firms. The questionnaire solicited information on the impact of deregulation on state-owned enterprises, and the challenges arising from the new ownership structure of the selected firms post-deregulation. Secondary data were collected from Nigeria Stock Exchange Fact Books and Annual Reports and Statement of Accounts of selected firms. These were used to determine the effects of new ownership structure on the performance of the target public enterprises after deregulation. Data collected were analysed using appropriate descriptive statistics such as tables and percentages as well as inferential statistics such as Pearson correlation coefficient and ordinary least square (OLS) using the following model: a. Enterperf =o+1 EKB +α2ETA+3EEP +4ESV +5EDR+6T+i Where EKB = Enterprise Capital base ETA = Enterprise Total asset EEP = Enterprise earned profit ESV = Enterprise stock value EDR = Enterprise debt ratio T = tax μi = Error term b. EEP = f (EKB, ETA, EOC, ERR, EDR) Where EEP = Enterprise earned profit EKB = Enterprise Capital base ETA = Enterprise Total asset EOC = Enterprise Operating cost ERR = Enterprise reserve ratio EDR = Enterprise debt ratio ESV = f (EEP, ETA, EKB, ESK) Where ESV = Enterprise stock value EEP = Enterprise earned profit ETA = Enterprise Total asset ESK = Equity share capital EKB = Enterprise capital base The above equation was estimated twice for the firm profit and stock value of the firm 4. RESULTS AND DISCUSSION 4.1 Responses on the impact of deregulation on the enterprise performance Table 1 presents the responses as to the effect of deregulation on the organisation and as it can be obtained from the table, 20% of the respondents confirmed that deregulation facilitates the establishment of more branches, 5% of the respondents also confirmed that deregulation generate poor services to customers, 8.3% of the respondents confirmed that deregulation facilitates fraudulent and corrupt practices while 28.3% of the respondents believed that deregulation aids industry consolidation. However, 35% of the respondents believed that deregulation policy will reduces the levels of bureaucracy in the organisation while the remaining 3.3% believed that deregulation enhances efficiency, improved valued and competition. It can be inferred from this analysis that deregulation reduces the level of bureaucracy, aids industry consolidation and facilitates the establishment of more branches as confirmed by the majority of the respondents. However the results of Pearson correlation in table 2 show a negative correlation between deregulation and enterprise performance. The strength of the relationship is 1% which suggests weak relationship and the relationship is not significant because the P-value (0.94) is greater than 0.05 level of significant. It can be deduced that given the strength of the relationship and the p-value, there exists no strong relationship between deregulation and enterprise performance. Table 1: Percentage distribution of respondents by the effect of deregulation on the Organisation The effect of deregulation on the Organisation | Frequency | Percentage | Facilitates the establishment of more branches | 12 | 20 | Generate poor services to customers | 3 | 5.0 | Facilitates fraudulent and corrupt practices | 5 | 8.3 | Aids industry consolidation | 17 | 28.3 | Reduces levels of bureaucracy | 21 | 35.0 | Others(enhances efficiency, improved value and competition) | 2 | 3.3 | Total | 60 | 100.0 | Source: Field Survey, 2011 Table 2: Relationship between Deregulation and Enterprise Performance Relationship between deregulation and enterprise performance | Effect of deregulation on the organization | The role deregulation plays in solving Nigeria’s economic problem( enterprise performance) | Pearson correlation = -0.010p-value = 0.942p-value˃0.05N = 58 | Source: Field survey, 2011 4.2 Responses to the challenges arising from the ownership structure of State-owned Enterprise The challenges arising from changes in ownership structure of state owned enterprises in Nigeria is presented in Table 3 where 58.3% of the respondents confirmed fear of loss of employment and income during and post deregulation is the major challenge of changes in ownership structure of state owned enterprises in Nigeria, 13.3% of the respondents also confirmed the policy of dis-monopolisation to be pursued through deregulation and market opening as a challenge, weaknesses and deficiencies of state owned enterprises will be exposed ( confirmed by 11.7% of the respondents), strong resistant due to soft budget constraint (confirmed by 10% of the respondents ) as well as managerial moral hazard and agency problems as confirmed by 6.7% of the respondents. To test the implication of these challenges on the performance of the enterprises the results of Pearson correlation in table 4 show that there exists a positive relationship between challenges arising from ownership structure and enterprise performance. The strength of the relationship between the two variables is 23% but the relationship is not significant because the P-value (0.08) is greater than 0.05 level of significant. It can be deduced that given the strength of the relationship and the p-value, there exist no strong relationship between challenges arising from ownership structure and enterprise performance. Table 3: Percentage Distribution of Respondents as to the Challenges Arising from Changes in Ownership Structure of State-Owned Enterprises in Nigeria The challenges arising from changes in ownership structure of state-owned enterprises in Nigeria | Frequency | Percentage | Managerial moral hazard and agency problems | 4 | 6.7 | A policy of dis-monopolisation is to be pursued through deregulation and market opening | 8 | 13.3 | Strong resistant due to soft budget constraint | 6 | 10.0 | Fear of loss of employment and income during and post deregulation | 35 | 58.3 | Their weakness and deficiencies are to be exposed | 7 | 11.7 | Total | 60 | 100.0 | Source: Field Survey, 2011 Table 4: Relationship between challenges arising from ownership and enterprise Performance Relationship between challenges arising from ownership and enterprise performance | Challenges arising from ownership structure | The challenges of new ownership structure on the organization(enterprise performance) | Pearson correlation = 0.23p-value = 0.081p-value ˃0.05N = 60 | Source: Field survey, 2011 4.3.1 Comparison of Performance Changes in the Post Deregulation of the Sampled Firms: using the firm profit as dependent variable From the Table 5, holding other variables constant, a unit increase in taxation will lead to an increase of 0.362 in firm profit. Holding all other variables constant, a unit increase in capital base will lead to 0.606 increases in firm profit. If holding all other variables constant, a unit decrease in asset will lead to 0.489 reductions in firm profit. Whereas a unit increase in earned profit while holding other variables constant will lead to additional 0.041 increments in firm profit. Similarly, holding other variables constant, a unit increase in stock value will result in 2.084 increments in firm profit where as a unit reduction of total debt will lead to reduction of 0.900 in firm profit if all other variables are held constant. However, given the p-values for all the independent variables, only taxation and total debt are found to be significant. This means that these two variables (taxation and total debt) are more important to firm profit. A correlation matrix was also computed to test for the robustness of the model in table 5 and based on the correlation matrix calculated in table 6, there exists a positive relationship between the stock value and the taxation, capital base, assets; enterprise earned profit, enterprise stock value as well as total debt of the firm. Similarly, since 1.030 is less than down limit of 1.214 in the Durbin Watson table, the null hypothesis is therefore rejected and conclude that there is a positive first-order autocorrelation between the dependent variable ( firm profit) and the six explanatory variables ( taxation, capital base, assets, EEP, ESV, total debt) in the model. 4.3.2 Comparison of Performance Changes in the Post Deregulation of the Sampled Firms: using the stock value of the firm as dependent variable Based on the result of OLS table 7, holding other variables constant, a unit increase in taxation will lead to an increase of 0.26 in stock value. If capital base is reduced by a unit after holding other variables constant, it will lead to a 0.914 reduction in stock value. Also, if assets are increased by a unit while holding other variables constant, stock value will be increased by 0.238.An increment of a unit in EEP will bring up the stock value by 0.965 when holding other variables constant. However a reduction in ESV if other variables are held constant will lead to a reduction in stock value by 0.536.A unit increase in total debt will lead to 1.109 increments in stock value when all other variables are held constant. Given the p-values for all the independent variables therefore, only the capital base, EEP and the total debt are found to be significant. This means that these three variables (capital base, enterprise earned profit and total debt) are more important to stock value of the firms. To further confirm its robustness of the model, a correlation matrix was computed in table 8 and the results show that a positive correlation between the stock value of the firms and the taxation, capital base, assets, EEP, ESV and the total debt of the firms. Furthermore, since Durbin Watson of 0.933 is below the down lower of 1.214 and upper lower of 1.639, the null hypothesis is therefore rejected and conclude that the dependent variable (stock value) and the six independent variables (taxation, capital base, assets, EEP, ESV and total debt) in the model are auto-correlated. 4.3.3 Relationship between New Ownership Structure and Enterprise Performance Post Deregulation There exists a positive relationship between the new ownership changes (equity) and enterprise performance (firm profit). The strength of the relationship between the two variables is 65% and the relationship is significant because the P-value is less than 0.05 level of significance. The null hypothesis is therefore rejected and the study concluded that there is a significant relationship between new ownership structure and enterprise performance post deregulation. Similarly, there also exists a positive relationship between the equity and stock value of the firm. The strength of the relationship between the two variables is 28% and the relationship is significant because the P-value is less than 0.05 level of significance. It could be concluded that there is a strong relationship between the new ownership structure and enterprise performance post deregulation. Therefore, the null hypothesis is rejected and alternative hypothesis is there by accepted. Table 5: Comparison of Performance Changes in the Post Deregulation of the Sampled Firms Dependent Variable: Firm Profit Independent | Unstandardized Beta Coefficient | Standardized | P-value | Constant | -149872.287 | | 0.457 | Taxation | 1.585 | 0.362 | 0.000 | Capital base | 0.148 | 0.606 | 0.397 | Assets | -0.117 | -0.489 | 0.663 | EEP | 0.007 | 0.041 | 0.932 | ESV | 0.155 | 2.084 | 0.532 | Total debt | -0.263 | -0.900 | 0.002 | Source: Annual report and financial statement of the sampled firms (1998-2007) Firm profit = 0.362* taxation+0.606*capital base-0.489*assets+0.041*EEP+2.084*ESV-0.900*total dt (0.393) (0.174) (0.266) (0.077) (0.245) (0.082) Table 6: Analysis of Correlation Matrix on the Performance Changes in the Post Deregulation of Sampled Firms Dependent Variable: Firm profit Firm profit | Taxation | Capital base | Assets | EEP | ESV | Total debt | Firm profitP – value | 0.6710.000 | 0.5490.067 | 0.3630.590 | 0.5200.078 | 0.5300.087 | 0.0200.000 | TaxationP – value | | 0.5790.000 | 0.3990.002 | 0.5670.000 | 0.5650.000 | 0.2570.050 | Capital baseP – value | | | 0.6860.000 | 0.9980.000 | 0.9840.000 | 0.5510.000 | AssetsP – value | | | | 0.7240.000 | 0.7860.000 | 0.8890.000 | EEPP – value | | | | | 0.9910.000 | 0.6050.000 | ESVP – value | | | | | | 0.6490.000 | Durbin Watson - 1.030 | Source: Annual report and financial statement of the sampled firms (1998-2007) Table 7: Comparison of Performance Changes in the Post Deregulation of Sampled Firms Dependent variable: Stock value Independent | Unstadardized Beta Coefficient | Standardized | P-value | Constant | 652822.598 | | 0.288 | Taxation | 0.617 | 0.26 | 0.607 | Capital base | -1.194 | -0.914 | 0.028 | Assets | 0.100 | 0.238 | 0.902 | EEP | 0.837 | 0.965 | 0.001 | ESV | -0.213 | -0.536 | 0.777 | Total debt | 1.732 | 1.109 | 0.000 | Source: Annual report and financial statement of the sampled firms (1998-2007) Stock value = 0.26*taxation-0.914*capital base+0.238*assets+0.965*EEP-0.536*ESV+1.109*total dbt (1.193) (0.527) (0.808) (0.235) (0.748) (0.251) Table 8: Analysis of Correlation Matrix on the performance Changes in the Post Deregulation of Sampled Firms Dependent variable: Stock value Stock value | Taxation | Capital base | Assets | EEP | ESV | Total debt | Stock valueP – value | 0.2500.056 | 0.2210.002 | 0.7920.090 | 0.2660.040 | 0.3450.065 | 0.7490.000 | TaxationP – value | | 0.5790.000 | 0.3990.002 | 0.5670.000 | 0.5650.000 | 0.2570.050 | Capital baseP – value | | | 0.6860.000 | 0.9980.000 | 0.9840.000 | 0.5510.000 | AssetsP – value | | | | 0.7240.000 | 0.7860.000 | 0.8890.00 | EEPP – value | | | | | 0.9910.000 | 0.6050.000 | ESVP – value | | | | | | 0.6490.000 | Durbin Watson - 0.933 | Source: Annual report and financial statements of the sampled firms (1998-2007) Table 9: Relationship between New Ownership Structure and Enterprise Performance Post Deregulation Relationship between new ownership and enterprise performance post deregulation | New Ownership Changes (equity) | Firm profit(enterprise performance) | Pearson Coefficient (r) = 0.652P-value = 0.000N = 60 | Stock value ( enterprise performance) | Pearson Coefficient (r) = 0.275P – value = 0.032N = 60 | Source: Annual report and financial statements of the sampled firms 5. SUMMARY AND CONCLUSION The study objectively examined the effect of deregulation on the performance of state-owned enterprises in Nigeria. The study provides empirical support for the view that deregulation showed no significant relationship with enterprise performance. The result shows that deregulation was not properly implemented. The result of challenges arising from changes in ownership structure indicated positive relationship between the two variables. Although the relationship is not significant which perhaps supported the hypothesis one that Nigerian privatisation of public enterprises was not properly implemented. The post deregulation performance of the firms also showed positive correlation in the productivity and profitability of the firms due to the absence of monopoly and the introduction of market competition associated with the exercise. The above results supported some existing literature that Nigerian public enterprises have long been criticize for their inefficiency, polarization, corruption and poor output. The case studies indicate that public enterprises in Nigeria are inefficient primarily as a result of government’s deliberate policy of transferring resources to cronies and supporters (core investors) and not just because managers have weak incentives. Past political and military leaders have used these enterprises to favour their supporters through excessive employment, regionally targeted investments and deliberate under pricing of products or overpricing of inputs from politically connected suppliers. Therefore, reduction of politically motivated resource allocation has unquestionably been the principal benefit of deregulation in Nigeria. 6. RECOMMENDATIONS In view of the outcome of this study, the following recommendations are suggested A workable privatisation model: there are several models for privatisation of public enterprises. However, the core investor (auction) model is synonymous with transition from state to market economies, and not developing economies. Hence, it is the most susceptible to abuses. It was the model used in the Russian privatisation exercise involving the sale of Yukos oil, Sibneft and Transworld metal which ensured a wilder gap between rich billionaire oligarchs and the poorer masses. On the contrary, share issue privatisation involves the conversion of all forms of public enterprises into a public limited liability company and the subsequent offer of the shares of the public company to the public for sale through the capital market. Hence, it is usually more transparent and encourages minority share holding protection rights and better corporate governance. It also involves the inclusion of other institutional supervision agencies such as the Security and Exchange Commission and Stock Exchange. The latter model is better suited for Nigeria. Corruption: the fundamental component of corruption is that the very basics of privatisation laws and rules are often partially relegated or entirely discarded for expediency or self interest in the conduct of the exercise. In addition genuine privatisation consultants are ostracized from the exercise for professional spin doctors and wheeler dealers. The form of corruption is ever dynamic and all conquering. Superior technical bids most times do not decide the successful bid for a firm. Selected core investors are suddenly incapable of paying for firms after being certified as technically and financially sound. Companies with small asset turnover are concessioned to handle larger public agencies, bigger than their capacities. Certainly enforcement of stricter corporate regulations and ethics will enhance the quality of the Nigeria privatisation exercise. Enacting Nigeria’s Competition Laws: the full concept of deregulation involves privatisation of public sector monopolies, involvement of private enterprises, encouraging free competition within a regulated framework to improve quality and quantity of services at reduced prices. Once companies are deregulated, there is a high tendency for it to operate as a private monopoly except it is controlled by specific competition or anti-trust laws. The lack of competition laws remains one of the major banes of privatisation in Nigeria. The absence of a competition regulatory commission has inadvertently converted several privatised firms into private monopolies in Nigeria rendering expensive and spasmodic services. REFERENCES Afeikhena, J. 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