COMMERCIALIZATION, PRIVATIZATION, AND DEREGULATION
COMMERCE
SS 3 FIRST TERM
COMMERCIALIZATION, PRIVATIZATION, AND DEREGULATION
WEEK 5
TOPIC: Commercialization
CONTENT:
(a) Meaning of Commercialization and Privatization
(b) Reason for commercialization of Public Enterprises and privatization
(c) Advantages and disadvantages of commercialization.
(d) Meaning of deregulation
(e) Advantages and disadvantages of deregulation
SUB-TOPIC: 1
Meaning of commercialization
Commercialization can be defined as a policy geared towards making state-owned enterprises become more efficient and profit-oriented. It involves the process of transforming state-owned enterprises into private entities that are responsible for their own operations, profit and loss
There are several reasons why governments might choose to commercialize public enterprises. These include improving efficiency, raising revenue through increased sales or reducing government budget deficits by selling off publicly owned assets.
Meaning of Privatization
Privatization on the other hand can be defined as the transfer of management and control of property, business or industry from the government to the private sectors or individuals such as public companies and corporations. This is to allow for competition and efficiency.
Meaning of Deregulation.
Deregulation is the process of removing or reducing legal restrictions and controls on businesses, industry and commercial activities. This can be done through a number of different measures, such as cutting taxes or lowering regulatory barriers to entry.
Advantages of commercialization and privatization
There are several potential advantages of commercializing public enterprises and privatizing state-owned assets. These can include increased efficiency, greater competition, better service quality and access to capital investment
Some of the main advantages of deregulation include reduced costs for businesses, more flexibility in responding to market conditions, and lower barriers to entry for new players. However, there are also potential disadvantages that need to be considered, such as increased market uncertainty and instability.
Overall, the commercialization and privatization of public enterprises can be a complex process with both benefits and drawbacks depending on the specific circumstances. Ultimately, the decision to pursue these reforms will need to take into account a range of different factors such as political considerations, economic conditions, and social impacts.
SUB-TOPIC: 2
Advantages of Deregulation
There are several potential advantages of deregulation, including increased competition and innovation, greater efficiency and productivity, lower costs for consumers and businesses, and more flexibility in responding to changing market conditions. Another key advantage is the ability to avoid regulatory capture, where market interests unduly influence public policy and regulation.
Disadvantages of Deregulation
However, there are also some potential disadvantages associated with deregulation. For example, increased competition may result in firms becoming more risk-prone or aggressive in their business practices, which could lead to higher levels of uncertainty and instability. There may also be potential for collusion or unfair market practices, especially in concentrated industries. In addition, reduced regulation may lead to a lack of consumer protection and weaker standards in areas such as health, safety and the environment. As such, it is important to consider the full impact of deregulation before making any decisions about pursuing these reforms.
Evaluation
(1) Define commercialization
(2) What is privatization?
(3) What are the advantages of commercialization and privatization?
(4) Why is deregulation important?
SUB-TOPIC: 2 Reasons for commercialization and privatization of public enterprises
Below are the reasons:
1. Efficient management: Both help to develop a good and efficient management of enterprises.
2. Participation of private individuals: They assist people or individuals to participate in economic activities through ownership of enterprises.
3. Revenue generation: They assist the government to generate more revenue.
4. Removal of unproductive enterprise: They help to remove unproductive enterprises in the economy.
5. Autonomy of enterprises: It helps to provide autonomy for the enterprises.
EVALUATION
(1) Highlight five reasons for commercialization and privatization of enterprises
SUB-TOPIC: 3
Advantages and disadvantages of commercialization and privatization
Advantages are as follows:
1. Reduction in public expenditure: They help in reducing public expenditure on enterprises that are not viable.
2. Promote efficiency: They assist in promotion of efficiency in production.
3. Revenue generation: Both policies help to boost the revenue generation of the government.
4. Emergence of innovation: The existence of competition in the industries assists in the emergence of innovations.
5. Better choice by consumers: Both policies assist the consumers to have a wide range of choice where there are abundant products.
Disadvantages are as follows:
1. Poor standard of living: Commercialization and privatization lead to poor standard of living of the people due to a shift in interest from pure service delivery to profit maximization.
2. High cost of products: Both policies are aimed at profit maximization, hence they are usually associated with the high cost of products or goods.
3. Reduction in employment: Many workers are usually laid off when industries are commercialized and privatized.
4. Uneven distribution of income: Income is often unevenly distributed as few individuals are now in control of the industries.
5. Loss of consumers ‘welfare scheme: Here, the consumers’ welfare is neglected or not catered for.
SUB-TOPIC: 4
Difference between commercialization and privatization
Commercialization has to do with government re-enforcement of state-owned enterprises to make it more efficient and profit-oriented while privatization is the transfer of ownership and control of government owned enterprises into the hands of private individuals.
Evaluation
1. Describe five for each of the advantages and disadvantages of commercialization and privatization.
2. Differentiate between commercialization and privatization.
3. Provide examples of industries that have been commercialized or privatized in the past.
4. Discuss potential challenges and risks associated with commercialization and privatization, such as reduced regulatory oversight, higher costs for consumers, limited employment opportunities, and uneven distribution of income.
SUB-TOPIC 5: DEREGULATION
Meaning of Deregulation
Deregulation can simply be defined as the process of removing or reducing state regulations. It also means removing government control from the operation, production, storage and distribution of goods and handing them over to private sector. Besides, deregulation often refers to removing barriers to competition.
Evaluation
1. Explain deregulation in terms of the advantages and disadvantages it presents.
2. Discuss examples of industries that have undergone deregulation in the past, as well as industries that are currently undergoing deregulation.
3. What are some possible economic benefits (e.g., increased competition, lower prices, higher profits) from deregulating an industry?
SUB-TOPIC: 6
Advantages and disadvantages of deregulation
Below are the advantages:
1. Competition: Deregulation allows more firm to enter an industry which increases competition and as a result lower prices of goods.
2. Cost saving: Deregulation lower prices, increase company profit and provide cost saving to customers.
3. Generation of employment: It brings private individuals to set up industries which can generate employment.
4. Steady supply of goods: Deregulation ensures steady supply of goods to customers as against government control of industries.
5. Reduction in corruption: Corruption is eliminated since the industries are no longer in the hands of government officials.
6. Removal of cheats in the: It helps in removing cheats from the system.
7. Reduced Bureaucracy: When protocols are minimized, resources not spent are channeled back and the society benefit maximally.
Below are the disadvantages:
1. Decrease in prices: Price reduction favours the customers while it has a negative effect on the company that previously controlled the market or industries.
2. Degrading of quality: With more competitors, quality product may not be guaranteed since the government has less control and influence to the market.
3. Deregulation may create a private firm with monopoly power.
Evaluation
1. Enumerate five advantages of deregulation
2. State two disadvantages of deregulation
GENERAL EVALUATION
Objective Test
1. —— Policy is geared towards making state-owned enterprises to become more efficient and profit-oriented
(a) Deregulation (b) Privatization (c) Commercialization (d) Nationalization
2. The transfer of control and ownership of state-owned enterprises to private individuals is called ——-
(a) Indigenization (b) Commercialization (c) Privatization (d) Deregulation
3. This is not among the advantages of commercialization and privatization
(a) Reduction in public expenditure (b) Promote efficiency (c) Revenue generation (d) High cost of products
4. The process of removing or reducing state regulations on business activities is called ——-
(a) Embargo (b) Tariff (c) Privatization (d) Deregulation
5. —– allows more firm to enter an industry which increases competition and as result lower prices of goods
(a) Nationalization (b) Privatization (c) Deregulation (d) Commercialization
6. —— is the process of removing barriers to competition, such as price controls or limits on entry into a particular industry.
(a) Deregulation (b) Privatization (c) Commercialization (d) Nationalization
Essay Test
1. Explain deregulation
2. What is the difference between Privatization and Commercialization
3. Explain four reasons why a country may choose to privatize state-owned enterprises (WASSCE June, 2004).
4. Enumerate five advantages of deregulation
5. State two disadvantages of deregulation.
Weekend assignment
Read Essential Commerce for Senior Secondary Schools Book 3 by A O Longe pages 332-333 and 337-338
Pre – Reading Assignment
Read about history of the Nigerian capital market
Weekend Activity
Describe briefly the development of 1960 Lagos Stock Exchange Act. How have capital markets in Nigeria evolved over time?
The development of the Nigerian capital market can be traced back to 1960, when the Lagos Stock Exchange Act was enacted. This act, which established a legally regulated securities trading environment, paved the way for significant growth and expansion of the stock market over time. In addition to regulating securities trading, the act also set up the Lagos Stock Exchange as a self-regulating organization that was responsible for overseeing market operations and ensuring compliance with relevant regulations.
Over the years, various factors have contributed to the evolution of Nigeria’s capital market. These include changing economic conditions, new technologies, government policies and financial crises. Today, the Nigerian capital market is an active and vibrant marketplace for securities trading, with a wide range of participants including investors, brokers, stock exchanges and regulators. Despite the challenges it has faced in recent years due to factors such as economic downturns and political unrest, the Nigerian capital market continues to play an important role in the country’s economic development.
Reference Texts
Essential Commerce for Senior Secondary Schools Book 3 by A O Longe , pages 332-333 and 337-338
Weekend Assignment by Weekdone Team, 2016
Capital Markets in Nigeria: A History and Evolution by John Mbiti, 2014)
The Nigerian Capital Market: An Overview by Ifeanyi Onyia, 2015)
Investing in the Nigerian Capital Market: Opportunities, Risks, and Returns by Longe M. Oluwole, 2016)
Other relevant resources (online articles, scholarly papers, etc.)
