(a) Distinguish between nationalization and indigenization (b) State five advantages of nationalization and three disadvantages of indigenization

Answer Details

(a) Distinction between nationalization and indigenization

Nationalization is the act by which the government takes over the ownership and control of privately owned businesses or industries and runs them as public (state) enterprises. Ownership passes from private hands to the state, usually with compensation.

Indigenization is the government policy that requires that ownership, control and management of certain businesses be transferred to, or reserved for, the citizens (indigenes) of the country. Ownership passes from foreigners to private citizens of the country, not to the government.

(b) Five advantages of nationalization

1. It brings essential and strategic industries under government control for the benefit of the whole nation.
2. It prevents exploitation of the public by private monopolists through excessive pricing.
3. It ensures the provision of essential services that private investors may find unprofitable.
4. Profits made accrue to the government and are used for national development rather than enriching a few individuals.
5. It promotes even development and enables the government to plan the economy and control key sectors such as power and petroleum.

Three disadvantages of indigenization

1. Shortage of local capital may make it difficult for citizens to buy over and adequately finance the enterprises.
2. It may lead to a fall in foreign investment as foreigners are discouraged from investing.
3. Inadequate managerial and technical skills among indigenes may cause inefficiency and poor performance of the businesses.