How Public enterprises work

A public enterprise is a business set up and managed by government with the sole aim to provide essential services to the public. It is also known as public corporation. Examples of public enterprises are NITEL, PHCN, Nigerian Airways, Nigerian Railway Corporation etc.

Characteristics/Features of Public Enterprise

(i) They are owned by government of a state or country

(ii) The capital used to establish public enterprise is provided by the government

(iii) They are established by an act of parliament or a decree under the military government.

(iv) They are set to not to make profit but to provide essential services to the public

(v) Most of them operate as monopoly

(vi) They are managed by board of directors appointed by the government

(viii) They render essential services to the general public.

EVALUATION

1. Define Public Enterprise
2. State five features of a public enterprise

Formation and Management of Public Enterprises

Public Enterprise or Public corporations are set up by an act of parliament at the federal level and by an edict at the state level. The law establishing these corporations states the objectives, aims and the specific functions and powers of the corporations. The law also states how the corporations will be managed.

The management of public corporation is vested on the boards of the corporations that appointed by the government.

There is always a chairman and other members that constitute the board.

Also the management or executives’ management is team headed by a general manager.

The general manger reports directly to the boards of each corporation. The board under the supervision of a minister at the federal level and a commissioner at the state level.

EVALUATION

1. Distinguish between the formation of a cooperative society and a public enterprise.

Source of Capital for Public Enterprises

As stated before, public enterprises are not set-up to make privet but at the same time, they are to generate funds or money to be able to sustain the corporation. The corporation charges money or fees but not as much as what will enable them to make a profit. It is these fees that they charge that they use to manage the corporations. The money generated, however, is not always enough to sustain the corporations. Therefore, they source for money/funds from other sources. These are as follows:

(i) Government grants and aids

(ii) Internally generated revenue

(iii) Banks loans and grants etc.

(iv) Grants from international financial institutions

(v) Grants from foreign countries.

EVALUATION

1. Briefly outline the source of capital for public enterprises

Reasons for Government Ownership of Public Enterprises

Government set up public enterprises for the following reasons

(i) To provide essential services to the public

(ii) To prevent exploitation of the public by private investors

(iii) To provide employment

(iv) As the government requires the people to pay income tax, it is also the responsibility of the government to provide social services to the people.

(v) To avoid duplication and waste

(vi) Some industries require huge capital to be set up and only the government can provide such capital.

(vii) Industries which are of security importance like Nigerian Defence Industry, the Central Bank of Nigeria (CBN) are owned by the Federal Government

(viii) Control of natural monopolies.

(ix) To increase the living standard of the people

EVALUATION

1. Discuss five reasons why government set up public enterprises

Advantages and Disadvantages of Public Enterprises

Advantages of Public Corporation

The establishment of public corporations by the government has the following advantages to the people and to the country in general

1. They creates employment opportunities
2. Provision of essential services
3. They prevents exploitation
4. They enjoy continuity
5. They enjoy government funding
6. They enjoy monopoly position
7. They are accountable to the general public in areas of provision of service

Disadvantages of Public Enterprises/Corporations

Public corporations have the following disadvantage:

1. Mismanagement: Most public corporations are mismanaged in the country.
2. Government interference: Government has continued to interfere in the affairs and running of public corporations
3. Inefficiency: Most of the workers are not committed to their work.
4. Bureaucracy: Decision-making in public corporation are not straightforward.
5. Wastage: There are a lot of wastages in the form of human and material resources.
6. Fraud and Embezzlement: There are a lot of fraudulent practices and embezzlement of public funds in public corporation by the board of directors and management staff.
7. People do not pay the fees and tariffs regularly that the corporations charge despite using their services e.g. none-payment of NEPA bills.

EVALUATION

1. State the advantages and disadvantages of public corporation.
2. State the meaning of public enterprises.
3. Public corporations are not set-up to make profits. How then are they funded?
4. Discuss the formation and management of a public corporation.
5. State 5 advantages of public corporations.
6. Outline 5 disadvantages of public corporation.
7. Discuss five reasons for establishing public corporations.