PUBLIC ENTERPRISES

Public Enterprises are business organizations established, owned, managed and controlled by the government. They are also referred to as Public Corporations or Statutory Corporations. Examples of Public Enterprises in Nigeria are PHCN, NNPC, NRC, NPA e.t.c.

METHODS OF FORMATION OF PUBLIC ENTERPRISES

Creation by Act of Legislature or a Decree
Nationalization of private industries

Nationalization is the bringing of ownership and management of private industries under the control of the government. Nationalized industries are therefore industries taken over from private owners by the government.

FEATURES OF PUBLIC ENTERPRISES

They are owned and financed by the government
They render essential social services
Profit making is not the main motive of their establishment.
They are usually monopolies
They are established by Acts of Parliament or Decrees
They are managed by appointed Board of Directors
Their employees are public servants
Huge amount of capital is involved in their establishment.
They are separate legal entities
Their services are restricted
They enjoy perpetual existence

REASONS WHY GOVERNMENT OWN PUBLIC ENTERPRISES

The large capital requirement which is needed in some business cannot be provided by private interests
For price control and consumer protection purposes i.e. to prevent exploitation of consumers
To control or curtail private monopoly powers
For strategic and security reasons
To generate revenue for the government
To prevent foreign dominance of the economy
To provide essential services to the citizens at affordable prices.
To avoid wasteful duplication of facilities and services inherent in market competition.
To provide employment opportunities to the people
To ensure even distribution of income.
To ensure constant supply of goods and services and checkmate the activities of hoarders of goods
To control vital economic activities eg. NNPC, FAAN.
To promote rapid and even economic development of the whole country eg. Rural industrialization
To encourage research and development activities.
To provide a model of efficient management in some social and economic activities eg. State farms, universities, schools, hospitals etc.

EVALUATION

List and explain six reasons for government ownership of enterprises.
State and explain five feature which are common to public corporation and public limited companies

ADVANTAGES OF PUBLIC ENTERPRISES

They ensure steady supply of essential services
They prevent exploitation of consumers
They provide employment opportunities for people
They generate revenue for the government
They enhance the provision of infrastructural facilities
They check duplication of the facilities and wasteful competition
They ensure the development of critical capital intensive projects eg. Steel industry.
They provides essential services at reasonable costs
They check foreign domination of the economy
They uphold and strengthen national security
The are accountable to the public – they have to submit their annual reports/accounts to the Parliament
They ensure availability of enough capital for projects

DISADVANTAGES OF PUBLIC ENTERPRISES

Their operations involve very large capital requirements.
Very slow decision making process, bureaucracy and red tapism
Prevalence of large scale fraud, corruption and mismanagement.
Frequent government/political interference of its activities and management
Politicization of appointments.
Inefficiency of its operation e.g poor and irregular services.
Poor and epileptic funding by the government.
Diseconomies of large scale production
Non-challant attitude, lack of commitment, laziness, negligence on the part of workers.
Dependency on the public treasury for funds. Public enterprises are usually chronic loss-makers and as such constitute a drain on public funds.
It lacks privacy.

SOURCES OF CAPITAL/FINANCE FOR PUBLIC ENTERPRISES

Grants and subvention from the government.
Grants from foreign countries or international organizations.
Internally generated revenue/retained profits
Loans from banks or other financial institutions
Trade credits (i.e. credit purchases)
Hire purchase
Equipment leasing
Sale of Assets

EVALUATION

Explain five difference between public limited companies and public corporations
State six disadvantages of public corporation

GENERAL EVALUATION QUESTIONS

State three uses of capital as a factor of production
State four uses of land as a factor of production
State five features of a partnership business
Explain five reasons why government participate in business
State five advantages of a public limited company

WEEKEND ASSIGNMENT

The most common form of business unit in West Africa is (a) Co-operative society (b) Joint stock company (c) Sale proprietorship (d) Public corporation.
Which of the following would not affect the form of a business unit (a) Availability of raw materials (b) The type of business (c) Number of persons involved (d) The capital size.
The functions of public corporations include the following except (a) Providing even development (b) Providing employment opportunities (c) Providing essential services to the public (d) Maximizing profits for the board members
Which of the following is established to provide essential facilities to the citizens (a) Public limited company (b) Public corporation (c) Sole proprietorship (d) Co-operative society
Which of the following is a public monopoly (a) Lever Brother Nigeria Plc (b) PZ Nigeria Plc (c) National Electric Power Authority (d) United African Company Ltd

THEORY

List the Sources of finance available to a Public corporation.
State four advantages and two disadvantages of public corporations