NATIONALIZATION

NATIONALIZATION

This is the taking over (or transfer of ownership) of privately owned business enterprises by the government for economic, social and political reasons.  Such industries involved are known as NATIONALISED INDUSTRIES and the individual owners of the affected industries are paid compensation by the government.

 

REASONS WHY GOVERNMENT NATIONALIZE INDUSTRY

1. To prevent the exploitation of the consumers.
2. For security, strategic and political considerations.
3. To provide employment for the citizens.
4. To generate revenue that will be used for development.
5. To ensure fair and equitable distribution of social and economic amenities.
6. To break private monopoly power.
7. To provide the large capital required to run some business which private owners may not be able to afford.

 

ADVANTAGES OF NATIONALIZATION

1. It eliminates wasteful competition.
2. It enables the government to provide essential goods and services to consumers at affordable prices.
3. It is used by the Government to control or prevent exploitation of consumers.
4. It provides employment opportunities.
5. It leads to the elimination of private monopolies.
6. It enhances Government control of the economy.

 

EVALUATION

1. State five reasons why government will nationalize an industry.
2. State five advantages of Nationalization.

 

DISADVANTAGES OF NATIONALIZATION

1. It destroys private initiatives.
2. It promotes state monopolies.
3. Nationalized businesses become inefficient.
4. Corruption and embezzlement is rampant in nationalized industries.
5. Bureaucracy and political interference in the operations/management of nationalized industries.

 

DIFFERENCES BETWEEN NATIONALISED INDUSTRY AND PUBLIC LIMITED COMPANY

S/N	AREAS OF DIFFERENCE	NATIONALIZED INDUSTRY	PUBLIC LIMITED COMPANY
1	Ownership	Owned by the government	Owned by shareholders
2	Aim	To provide essential services	To maximize profit
3	Capital	Provided by the government	Provided by shareholders
4	Control	Controlled by the Board of Directors appointed by the government.	Controlled by the Board of Directors elected by shareholders.
5	Formation	By decrees or Acts of Parliament	Incorporated under CAMA(1990)
6	Publication of Account	Account is not usually published	Account must be published

 

EVALUATION

1. What are the main objectives of nationalization?
2. State five differences between nationalized industry and public limited company.

 

WEEKEND ASSIGNMENT

1. Which of the following is an advantage of nationalization? (a) Checking exploitation of citizens(b) Business risks are shared        (c) Fosters self-reliance (d) leads to monopoly of power
2. The act of bringing a privately owned business under exclusive state ownership and control is referred to as ___ (a) commercialization(b) indigenization(c) nationalization(d) privatization
3. Which of the following is not a reason for nationalizing an industry? (a) Monopoly (b) Strategy (c) Inflation (d) Security
4. Abuse of monopoly power by industrialists could lead to ___ (a) privatization (b) commercialization (c) nationalization (d) indigenization
5. The transfer of ownership of a business from private individuals to the Government of a country is known as ___ (a) privatization (b) indigenization        (c) nationalization(d) commercialization

 

THEORY

1. Define the term nationalization.
2. State three disadvantages of nationalization.

 

See also

AUTHORITY: SPAN OF CONTROL

STRUCTURE OF A BUSINESS

DEPARTMENTS IN A BUSINESS ORGANISATION

MANAGEMENT OF BUSINESS

INTRODUCTION TO BUSINESS MANAGEMENT