IMPACT OF CONCESSIONING IN THE DEVELOPMENT OF NIGERIA ECONOMY

1.1 Introduction

A concession is a practice whereby a public authority grants a franchisee the right to finance, build, own, improve, upgrade, maintain or operate a public infrastructure, and charge users for the cost of services, for a limited period of time (Bousquet and Fayard, 2001). According to neoliberal growth theory, the property rights conferred by way of privatization incentivizes the private sector to make a greater investment, intending to achieve higher efficiency gains, better services, increased productivity, and profitability (Tongzon and Heng, 2005).

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Limitations of the Study, research hypothesis and questions, and Definition of technical terms.

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1.2 Background of Study

Nigeria is the most populous country in Africa, with an estimated population of 177.5 million in 2014 (World Bank, 2015). The country lies between Benin Republic, Cameroon, and the Gulf of Guinea on the Atlantic coast of West Africa. Figure 1 shows the location of Nigeria on the world map.

The ancient Romans and Mesopotamians contracted out virtually all services in the state to private individuals and companies. Privatization as a policy has existed in one form or another since antiquity. In ancient Greece, the state retained ownership of land, forests, and mines but ceded the provision of services to the private sector. Nigeria is one of the SSA countries that embraced privatization, a policy instrument of the neoliberal growth theory of the early 1980s.

Until the country rebased its economy in 2011, its economy had grown at an average rate of about 7.4% annually over the decade between 2001 and 2010. In the decade before 2000, the country’s average growth rate was only 1.35%. Since the rebasing of Nigeria’s economy in 2011, the average growth rate has been fluctuating between 4.89% and 6.31% (African Development Bank [AfDB], Organization for Economic Co-operation and Development [OECD], & United Nations Development Program [UNDP], 2015; World Bank, 2015).

The oil sector contributes over 80% of government revenue, although it is the non-oil sectors that have been driving the country’s growth in recent times. The nonoil sectors responsible for the growth include agriculture, manufacturing, telecommunications, construction, and mining, among others (AfDB et al., 2015). Figure 2 depicts the GDP performance of Nigeria in comparison with the real GDP compound annual growth for other emerging and sub-saharan African countries (World Bank, 2015).

However, the remarkable economic growth has neither reduced poverty nor created necessary jobs. The African Economic Outlook (2015) ranked Nigeria as low (less than 0.5) in the Human Development Index (HDI). HDI scores are on a scale of 0 (lowest) to 10 (highest). The same report also ranked Nigeria at 0.6 on the Multidimensional Poverty Index (MPI). About 100 million of Nigeria's estimated population of 177 million lives below the poverty line of less than 1 U.S. dollar (USD) per day. Although Nigeria created over 1.6 million jobs in 2013, unemployment was 38% in the 15-24 age group and 22% in the 25-44 group. The estimate by the National Bureau of Statistics is that over 4 million people enter the job market each year.

In the next section, I present an overview of the privatization exercises leading to the concession of the 24 port terminals that were the subject of this inquiry.

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1.3 Statement of the Problem

Investigation reveals the following problem of the Impact of Concessioning in the Development of Nigeria Economy;

1. Difficulty in distinguishing the effects that are attributable to the privatization exercise directly from those associated with other intervening variables without controlling for the influence of the intervening variables,
2. No impact on economies not implementing deregulation and trade liberalization policies simultaneously,
3. Lack of proper investigation of the privatization of ports in Nigeria focused on the impact of privatization on productivity and other performance indicators, including cargo throughput, berth occupancy, berth capacity, ship waiting time, ship turnaround time, and port handling charges.

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1.4 Aim and Objectives of the Study

The aim of the study is to analyze the Impact of Concessioning in the Development of Nigeria Economy. The specific Objectives are to find out the following:

1. To investigate the effects that are attributable to the privatization exercise directly from those associated with other intervening variables,
2. To investigate the impact on economies not implementing deregulation and trade liberalization policies simultaneously,
3. To analyze the privatization of ports in Nigeria focused on the impact of privatization on productivity and other performance indicators.
4. To improve the overall operational efficiency and competitiveness of the ports
5. To reduce the dependence of the ports on the treasury for operations, in addition to fundamentally restructuring the economy.

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1.5 Research Questions

The following research questions were formulated to guide this study;

• What is the effect of port concession on economic growth?
• What is the effect of the post privatization investment on productive efficiency of the ports after privatization?
• To what extent does the post privatization productive efficiency of the ports predict changes in GDP, GDP growth, GDP per capita, and GDP per capita growth?

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1.6 Research Hypotheses

The following research hypotheses were formulated to guide this study;

Hypothesis 1

• H0: There is no significance relationship between the level of investments at the Nigerian ports that accompanied their privatization can accurately predict the ports’ efficiency.
• H1: There is a significance relationship between the level of investments at the Nigerian ports that accompanied their privatization can accurately predict the ports’ efficiency.

Hypothesis 2

• H0: There is no significant relationship between the linear combination of the ports’ total efficiency, institutional factors, trade openness, and cargo throughput and the level of the GDP in Nigeria.
• H1: There is a significant relationship between the linear combination of the ports’ total efficiency, institutional factors, trade openness, and cargo throughput and the level of the GDP in Nigeria.

Hypothesis 3

• H0: There is no relationship between linear combination of total efficiency, institutional factors, and cargo throughput could accurately predict the GDP growth in Nigeria.
• H1: There is a relationship between linear combination of total efficiency, institutional factors, and cargo throughput could accurately predict the GDP growth in Nigeria.

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1.7 Significance of the Study

The following are the importance of the research work;

1. Policymakers in Nigeria and critical stakeholders will be interested in knowing the extent to which the privatization program has achieved these objectives.
2. Privatization has not resulted in the expected outcomes, policymakers, and stakeholders also want to know the underlying reason.
3. The study may enable policymakers in Nigeria to determine the level of confidence they would place in a privatization program as a panacea for economic restructuring and growth.
4. The study may enable the World Bank and other development partners to assess their proposition that privatization engenders economic growth even in developing countries (Nellis, 2003).

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1.8 Scope of the Study

This study focuses on the macroeconomic impact of privatization, privatization output, profitability, investment, privatization methods, and efficiency gains of privatized firms in the investigation of the research topic which is an Assessment of the Impact of Concessioning in the Development of Nigeria.

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1.9 Limitation of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this institution to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
3. Research material: availability of research material is a major setback to the scope of the study.
4. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.

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1.10 Definition of Terms

• Implication: An implication is something that is suggested, or happens, indirectly.
• Port: A port is a virtual point where network connections start and end. Ports are software-based and managed by a computer's operating system.
• Concession: Concession is something that is allowed or given up, often in order to end a disagreement, or the act of allowing or giving this: Both sides involved in the conflict made some concessions in yesterday's talks.
• Economic: Economics is the study of how humans make decisions in the face of scarcity.
• Transportation: It is an act, process, or instance of transporting or being transported. Any device used to move an item from one location to another.
• Accessibility: accessibility refers to ease of reaching destinations. People in places that are highly accessible would reach many other activities or destinations quickly and people in inaccessible places can reach many fewer places in the same amount of time, so that nearer or less expensive places are weighted more than farther or more expensive places.
• Logistics: Logistics is generally the detailed organization and implementation of a complex operation.
• Logistics Management: Logistics management is the part of supply chain management that plans, implements, and controls the efficient, effective forward, and reverses flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer's requirements.