Economic Reform Programmes
Meaning of Economic Reform Programmes
Economic reform programmes may be defined as government’s conscious formation of economic policies and programmes aimed at strengthening the performance of the various sectors of the economy.
Examples of some of the economic reform programmes are the consolidation of financial institutions, privatisation and commercialisation, indigenisation, nationalisation and deregulation.
Other programmes include the roles performed by government agencies or commissions toward the operation and performance of the economy. Such agencies are EFCC, NAFDAC, ICPC and SON.
Consolidation of Financial Institutions
Consolidation of the financial institutions is one of the economic reforms programme initiated by the Central Bank of Nigeria. The programme was outlined at ensuring that the financial institutions like banks have a strong financial base in order to support the real sector of the economy.
The Central Bank of Nigeria, through its governor, Professor Charles Soludo on the 6th July, 2004 initiated Banks consolidation through mergers and acquisition and the N25billion recapitalisation exercise in his 13 point reform agenda in the banking industry. He stated that by 31st December2005, all banks must have a minimum capital base of N25billion.
Objectives of Bank Consolidation
The objectives of bank consolidation by the central bank are:
- To inject fresh capital into the industry to strengthen the banks recapitalisation in order to support the real sector of the economy.
- To achieve the consolidation of the banking institutions through mergers and acquisition.
- To create better platform for more effective banking regulation arid policy realisation.
4. To make Nigerian banks to become more internationally competitive especially in West Africa.
- To establish an Assets Management Company as an important element of distress resolution.
Indigenisation 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 ensure indigenous participation. In 1972, the Federal Government of Nigeria promulgated the Nigerian Enterprises Promotion Decree. The decree reserves the right to own and participate in some enterprise exclusively or partially for the government and the people on Nigeria.
Reasons for the promulgation of the Nigerian Enterprise Promotion Decree are as follows:
(1) To ensure that the means of production and distribution are controlled by Nigerian and not foreigners.
(2) To be able to control business enterprises in the country.
(3) To ensure that the country is self-reliant
(4) For industrial development of the country.
(5) So that the indigenes will have control over their resources.
Advantages of Indigenisation
(1) Ensures indigenous participation:
Indigenisation ensures greater participation of indigenes in the control and running of business enterprises in the country.
(2) Development of local technology: It leads to the development of local skills and technology.
(3) Acceleration of industrial development:
It leads to the promotion and acceleration of industrial development.
(4) Reduces foreign control of the economy: Indigenisation can reduce foreign control and domination of the nation’s economy.
(5) 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.
(6) Ensures self-reliance: Indigenisation eliminates the problem of dependence on foreign goods by ensuring self-reliance.
(7) Provision of employment Opportunities: It creates employment Opportunities for the indigenes.
(8) Development of private initiatives: When indigenes are encourage to participate in business enterprises, private initiatives will develop with indigenisation.
Disadvantages of indigenisation
(1) Discouragement of foreign investment: Indigenisation can discourage foreign investment in a country.
(2) It can lead to disharmony between countries: Indigenisation can lead to disharmony among countries of the world as friendship will be discouraged.
(3) It can lead to capital flight: It can lead to capital flight as foreign investors will be forced to relocate to other countries
(4) Inexperience and incompetence can destroy business: Due to indigenisation, business can be transferred to people who are not experienced and competent enough to handle such business.
(5) Rich people can hijack economy: Few rich people can use their financial wealth to buy and take over business enterprises.
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 exclusive control.
Reasons for Nationalisation
(1) For strategic reasons:
Govermnent can over the ownership and control of an enterprise for strategic reasons like security, defence and politics.
(2) To prevent exploitation:
Nationalisation of enterprise can take place in order to prevent monopolistic exploitation of the citizens
(3) Political reasons:
Break in diplomatic relations between two countries can necessitate nationalisation.
(4) To avoid foreign dominance of economy:
Government can also take over some companies in order to prevent dominance of the economy by foreigners.
(5) To prevent wasteful competition:
In order to prevent wasteful competition among companies, especially service companies, government can take over ownership and management of such companies.
Advantages of Nationalisation
(1) Helps to check exploitation: Nationalisation of an industry helps to check exploitation by foreign businessmen.
(2) Ensures steady supply of essential services: It ensures the provision and steady supply of essential services.
(3) Elimination of waste: Nationalisation helps to prevent and eliminate wasteful competition.
(4) Encourages efficient use of resources: It encourages more efficient use of economic resources
(5) Protection of strategic industries: It helps to protect and develop key strategic industries which cannot be left in private hands.
Disadvantages of Nationalisation
(1) Prevention of private initiatives: Private initiatives can be destroyed when government takes over all or some industries.
(2) Low productive and inefficiency: Lack of competition can encourage low productivity and inefficiency.
(3) Consumers can be exploited: By nationalising an enterprise, government may arrogate to itself monopolistic power which can be used to exploit the consumers, e.g. PHCN.
(4) Corruption and mismanagement: Most nationalised industries are not efficiently managed because of corruption and ineptitude, e.g. the Nigeria Refineries
(5) Resources can be mis-allocated: The resources of the country can be mis-allocated as a result of political interference.
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 enables individuals and private or corporate organisation to take over the ownership and control of government business such as public companies and corporations.
Reasons for commercialisation and privatisation
(1) Efficient management:
Commercialisation and privatisation help to develop a good and efficient management of enterprises.
(2) Participation of private individuals:
They also assist individuals to participate in economic activities though ownership of enterprises.
(3) To generate more revenue:
They assist the government to generate more revenue
(4) Autonomy of enterprises:
It helps to provide autonomy for the enterprises.
(5) Removal of unproductive enterprises:
They also assist to remove or disinvest from unproductive enterprises in the economy
(6) To attract foreign investment:
Privatisation also helps to attract foreigners to invest in the economy because of attractive profits expected.
(7) Attraction of foreign technology and expertise:
Privatisation assists in attracting foreign technology as well as expertise from developed economies.
(8) It fosters rapid economic development:
It also aids the rapid economic development of a country as all productive activities are geared towards efficient production.
Advantages of commercialisation and privatisation
(1) Reduction in public expenditure:
Commercialisation and privatisation help in reducing public expenditure on enterprises that are not viable.
(2) It promotes efficiency:
Commercialisation and privatisation helps to promote efficiency in production.
(3) Generation of more revenue:
Both policies equally help to boost the genention of revenue for the government
(4) Emergence of innovations:
The existence of competition in industries assists in the emergence of innovations.
Disadvantages of commercialisation and privatisation:
(1) 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.
(2) High cost of products:
These policies are aimed at profit maximisation; hence they are usually associated with high cost of products of goods.
Many workers are usually laid off when industries are commercialised or privatised.
Deregulation is the act or process of removing or reducing state regulations. It is the reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry.
Deregulation also means removing government control from the operation, production, storage and distribution of goods and handing them over to private sector.
Advantages of Deregulation
(1) Employment Opportunities: Deregulation encourages private individuals to set up industries thereby creating employment opportunities for job seekers.
(2) Cost Saving: Deregulated industries provide cost saving to customers by reducing cost of goods and services, lower prices more freebies
(3) Competition: Deregulation lowers barriers to entry in a given industry. When more firms enter a given industry, competition increases and consumers have more choices for products and services, e.g. the telecom industry.
(4) Reduced Bureaucracy: Deregulation offers reduced bureaucracy in service delivery in contrast to how it use to be when government is in control, e.g. in the banking industry, opening of bank account can be done online compare to the previous situations where customers will have to visit the bank physically to open accounts.
(5) Reduction in corruption: Deregulation reduces the practice of corruption since businesses are no longer in the hands of government officials
Disadvantages of Deregulation
(1) Decrease in prices: While a price decrease across the board is a positive effect of deregulation for customers, it can have a negative effect on the company that previously controlled the market or industries.
(2) Degrading of quality: If an industry is deregulated, it will bring competitors to the market. Since with deregulation, the government has less influence, there is no guarantee that the new competitors will offer a product with similar or comparable quality as the current offering. For example, the deregulation of the power sector from NEPA (Government Owned) to PHCN to DisCos and GenCos resulted in the degraded quality of power supply in Nigeria.
Economic and Financial Crime Commission
Meaning. The Economic and Financial Crimes Commission (EFCC) is a Nigerian law enforcement agency that investigates financial crimes such as advance fee fraud (419 fraud) and money laundering. The EFCC was established in 2003.
Roles of EFCC
- Sanitisation of banks: To check mate money laundry and ill gotten wealth
- Aggressive investigation and prosecution of cases of tax evasion:
Under section 47, of the Act establishing the Commission, tax evasion is an economic crime and there was the need to break any nexus it may have with money laundering.
- Fight Cybercrime and the scourge of Advance Fee Fraud: This has resulted in massive clamp down on online scammers popularly called Yahoo Boys.
Independent Corrupt Practices and Other Related Offences Commission (ICPC)
The Independent Corrupt Practices Commission (ICPC), (in full the Independent Corrupt Practices and Other Related Offences Commission) is a Nigerian agency that was inaugurated on 29 September 2000.
The ICPC Mandate
To prohibit and prescribe punishment for corrupt practices and other related offences.
Roles of ICPC
Section 6 (a-f) of the ICPC Act 2000 sets out the duties of the Commission as paraphrased in the following:
(i) To receive and investigate complaints from members of the public on allegations of corrupt practices and in appropriate cases, prosecute the offenders.
(ii) To examine the practices, systems and procedures of public bodies and where such systems aid corruption, to direct and supervise their review.
(iii) To instruct, advise and assist any officer, agency, or parastatals on ways by which fraud or corruption may be eliminated or minimized by them.
(iv) To advise heads of public bodies of any changes in practice, systems or procedures compatible with the effective discharge of the duties of public bodies to reduce the likelihood coincidence of bribery, corruption and related offences.
(v) To educate the public on and against bribery, corruption and related offences.
(vi) To enlist and foster public support in combating corruption.
With respect to the prosecution of cases, the ICPC Act provides that every prosecution for offences under it shall be deemed to be done with the consent of The Attorney-General.
Furthermore, it is provided that the Chief Judge of a State or the Federal Capital Territory shall designate a court or judge to hear and determine all cases arising under the Act. Presently, there are two such designated Judges in each State of the Federation and the Federal Capital Territory
National Agency For Food And Drug Administration And Control (NAFDAC)
The National Agency for Food and Drug Administration and Control (NAFDAC) is a federal agency under the Federal Ministry of Health that is responsible for regulating and controlling the manufacture, importation, exportation, advertisement, distribution, sale and use of food, drugs, cosmetics, medical devices, chemicals and packaged water in Nigeria.
NAFDAC was formed to checkmate illicit and counterfeit products in Nigeria in 1993 under the country’s health and safety law. Adulterated and counterfeit drugs are a problem in Nigeria. In one 1989 incident, over 150 children died as a result of paracetamol syrup containing diethylene glycol.
The problem of fake drugs was so severe that neighbouring countries such as Ghana and Sierra Leone officially banned the sale of drugs, foods and beverages products made in Nigeria.
Such problems led to the establishment of NAFDAC, with the goal of eliminating counterfeit pharmaceuticals, foods and beverages products that are not manufactured in Nigeria and ensuring that available medications are safe and effective.
The formation of NAFDAC was inspired by a 1988 World Health Assembly resolution requesting countries’ help in combating the global health threat posed by counterfeit pharmaceuticals.
In December 1992, NAFDAC’s first governing council was formed. The council was chaired by Tanimu Saulawa. In January 1993, supporting legislation was approved as legislative Decree No. 15 of 1993. On January 1, 1994 NAFDAC was officially established as a “parastatal of the Federal Ministry of Health”.
NAFDAC replaced an earlier Federal Ministry of Health body, the Directorate of Food and Drug Administration and Control, which had been deemed ineffective, partially because of lack of laws concerning fake drugs.
Roles of NAFDAC
NAFDAC has various basic functions. According to the requirements of its enabling decree, the Agency was authorized to:
(i) Regulate and control the importation, exportation, manufacture, advertisement, distribution, sale and use of drugs, cosmetics, medical devices, bottled water and chemicals
(ii) Conduct appropriate tests and ensure compliance with standard specifications designated and approved by the council for the effective control of quality of food, drugs, cosmetics, medical devices, bottled water, and chemicals.
(iii) Undertake appropriate investigation into the production premises and raw materials for food, drugs, cosmetics, medical devices, bottled water and chemicals and establish a relevant quality assurance system, including certification of the production sites and of the regulated products.
(iv) Undertake inspection of imported foods, drugs, cosmetics, medical devices, bottled water, and chemicals and establish a relevant quality assurance system, including certification of the production sites and of the regulated products.
(v) Compile standard specifications, regulations, and guidelines for the production, importation, exportation, sale and distribution of food, drugs, cosmetics, medical devices, bottled water, and chemicals
(vi) Undertake the registration of food, drugs, medical devices, bottled water and chemicals
(vii) Control the exportation and issue quality certification of food, drugs, medical devices, bottled water and chemicals intended for export
(viii) Establish and maintain relevant laboratories or other institutions in strategic areas of Nigeria as may be necessary for the performance of its functions.
Standard Organisation of Nigeria (SON)
The Standard Organisation of Nigeria (SON) is the sole statutory body that is vested with the responsibility of standardising and regulating the quality of all products in Nigeria. SON was established by the Act No. 56 of 1971. SON is a full member of the International Organization for Standardization (ISO).
Roles of SON
(i) To organize test and do everything necessary to ensure compliance with standards designated and approved by the Council.
(ii) To undertake investigations as necessary into the quality of facilities, materials and products in Nigeria, and establish a quality assurance system including certification of factories, products and laboratories
(iii) To ensure reference standards for calibration and verification of measures and measuring instrument
(iv) To compile an inventory of products requiring standardization;
(v) To compile Nigeria Industrial Standards etc
The statutory functions of the SON are as follows:
- To investigate the4uality of facilities, materials and products in Nigeria, and establish a quality assurance system, including certification of factories, products and laboratories
- To ensure reference standards for calibration and verification of measures and measuring instruments
- To compile an inventory of products requiring standardisation
- To foster interest in the recommendation and maintenance of acceptable standards by industry and the general public
- To develop methods for testing materials, supplies and equipment, including items purchased for use by State and Federal departments and private establishments
- To register and regulate standard marks and specifications
- To undertake preparation and distribution of standard samples
- To establish and maintain laboratories or other institutions, as may be necessary for the performance of its functions.
- To advise State and Federal departments of Government on specific problems relating to standards.
End of SS1 Economics 1st Term Lessons – Scroll down this page to select Page 10 for Evaluation Tests.
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