NATIONALIZATION. Meaning of nationalization: Nationalization 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, nationalization 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. Enterprises are brought under state control and ownership as a result of economic, political, social and strategic reasons. Nationalized industries exist to provide serves; they are not profit oriented.
Reasons for nationalization
- For strategic reasons: Government can over the ownership and control of an enterprise for strategic reasons like security, defense and politics.
- To prevent exploitation: Nationalization of enterprise can take place in order to prevent monopolistic exploitation of the citizens
- Political reasons: Break in diplomatic relations between two countries can necessitate nationalization. Political differences can encourage retaliatory measures being taken against each other e.g. America and Iraq at the instance of the Gulf War.
- To avoid foreign dominance of economy: Government can also take over some companies in order to prevent dominance of the economy by foreigners
- Need for large capital: For an industry to perform effectively and efficiently, it may need large capital which can only be provided by the government
- To prevent wasteful competition:In order to prevent wasteful competition among companies, especially service companies, government can come in and take over ownership and management of such companies
- To provide uninterrupted services: Government can take over an enterprise in order to ensure constant and uninterrupted supply of its products or services– nationalization
ADVANTAGES OF NATIONALIZATION
- Helps to check exploitation: Nationalization of an industry helps to check exploitation by foreign businessmen.
- Ensures steady supply of essential services: It ensures the provision and steady supply of essential services
- Elimination of waste:Nationalization helps to prevent and eliminate wasteful competition
- Encourages efficient use of resources: It encourages more efficient use of economic resources
- Protection of strategic industries: It helps to protect and develop key strategic industries which cannot be left in private hands
- Ensures equitable distribution of resources: It also ensures equitable distribution of resources as well as corrects any imbalance in the means of production
- Elimination of monopoly: Another advantages is that it eliminates monopoly by businessmen
- Mobilization of capital: Large capital can be mobilized to ensure large scale investment
DISADVANTAGES OF NATIONALIZATION
- Prevention of private initiative: Private initiatives can destroyed when government takes over all or some industries
- Low productive and inefficiency: lack of competition can encourage low productivity and inefficiency
- Consumers can be exploited: By nationalizing an enterprise, government may arrogate to itself monopolistic power which can be used to exploit the consumers, e.g. PHCN
- Corruption and mismanagement: Most nationalizes industries are not efficiently managed because of corruption and ineptitude
- Resources can be misallocated: The resources of the country can be misallocated as a result of political interference
Differences between Nationalized Company and Public Liability Company
|Features||Nationalized Company||Public Liability Company|
|1.||Ownership||It is owned by the government||It is owned by shareholders|
|2.||Aim||To provide essential services||For profit making|
|3.||Capital||Provided by the government||provided by selling shares|
|4.||Control||Controlled by the board of directors appointed by the government||Controlled by the board of directors elected by the shareholders|
|5.||Publication of account||Does not usually publish accounts||Must publish its accounts|
Differences between Indigenization and Nationalization
|1.||It transfers ownership of foreign business of citizens||It transfer ownership to the government|
|2.||It encourages indigenous participation||It ensures state monopoly of industrial activities|