Abridged Note on Administration of Public Enterprises and Extra-Governmental Agencies

 Department of Political Science and Public Administration

Adekunle Ajasin University, Akungba-Akoko

ADMINISTRATION OF PUBLIC ENTERPRISES AND EXRTRA-GOVERNMENTAL AGENCIES

Introduction

The aim of this course is to expose you to the concept of Public Enterprises, Organisation and Civil Service with its reforms. This is made easy by discussing Public Enterprises and Extra-Governmental Agencies in Nigeria, The Nigerian Civil Service and some of its Reforms, Public Enterprises Reforms (that is Privatisation and Commercialisation of Public Enterprises) as well as the Nigerian Civil Service and some of its Reforms.

Course Outline

1. Definition and Origin of Public Enterprises

2. Characteristics, Classification, and problems of Public Enterprises

3. Management and Control of Public Enterprises

4. Privatisation and Commercialisation of PE

5. The Civil Service and its Reforms in Nigeria

Texts

Adamolekun, L. (Ed.) (2002). Public Administration in Africa: Main Issues and Selected Country Studies. Ibadan: Spectrum Books Limited. 

Adamolekun, L. (Ed.). (2002). Public Administration in Africa: A Nigeria and Comparative Perspective. London: Longman.

Ekhater, V.E. (2002). Rudiments of Public Administration. Kaduna: Joyce Graphic Printers and Publishers Co. 

Obikeze, O.S. & Anthony, O.E. (2004). Public Administration in Nigeria: A Developmental Approach. Onitsha: Book Point Ltd.

Notes on Administration of Public Enterprises and Extra-Ministerial Agencies

Definition

Public enterprises as a form of business organisation has attained a great deal of significance in recent times. During 20th century various governments have taken active part in the industrial and commercial activities. The term public enterprise denotes a form of business organisation owned and managed by the state government or any other public authority. So, it is an undertaking owned and controlled by the local or state or central government. The whole or most of the investment is made by the government. According to A. H. Hansen, a public enterprise denotes “state ownership and operation of industrial, agricultural, financial and commercial undertakings”.

According to N. N. Malaya, “Public enterprises are autonomous or semi-autonomous corporations and companies established, owned and controlled by the state and engaged in industrial and commercial undertakings”.

State enterprise is an undertaking owned and controlled by the local or state or central government. Either whole or most of the investment is done by the government. The basic aim of a state enterprise is to provide goods and services to the public at a reasonable rate though profit earning is not excluded but their primary objective is social service. A.H. Hansen says, “Public Enterprise means state ownership and operation of industrial, agricultural, financial and commercial undertakings.”

S.S. Khera defines state enterprises as “the industrial, commercial and economic activities, carried on by the central or by a state government, and in each case either solely or in association with private enterprise, so long it is managed by self-contained management.”

What is the difference between a parastatal and Extra-Ministerial Department?

A Parastatal is a statutory body or corporation that is wholly owned or controlled by national or municipal government which chain of command passes through a cabinet member of the Executive Council of that government like a Minister, Commissioner, or Councilor. 

An extra-ministerial department, on the other hand, is a unit of government which function is independent of any ministerial oversight. In some cases, an extra-ministerial body performs a function that overlaps many ministries. For instance, the office of the Auditor-General and Accountant General which is sometimes not put under the Ministry of Finance. In some other cases, their function may relate directly to certain aspects of the functions of the President that he or she wants to delegate to an identifiable structure answerable to him directly without exposure to such checks and balances like congressional or parliamentary oversight. For instance, in some countries, the office of the Chief of Staff to the President and the Secretary to the Government Federation are extra-ministerial bodies which head take part in cabinet meetings, manage budgets but are only answerable to the President, not Congress or Parliament.

Origin of PE in Nigeria

1. Desire of national petite bougeosies that inherited power from the Colonialists to create an economic base for their political power.

2. Struggle for Nigerians to control the economy.

3. Means of promoting exports and to realise import substitution

4. Nationalisation of foreign private enterprises.

Characteristics

The chief characteristics of public enterprises are:

A public enterprise comes into existence as a result of an Act passed by the legislature or a decree under military rule. Public enterprise also defines its aims and objectives, powers and duties.

It is a legal person

Autonomous or semi-autonomous organisation: Public enterprise is an autonomous or semi-autonomous organisation because some enterprises work under the direct control of the government and some organisations are established under statutes and companies act.

State control: The public enterprises are financed, owned and managed by the government may be a central or state government.

Rendering service: The primary objective of the establishment of public enterprises is to serve the public at large by supplying the essential goods at a reasonable price and creating employment opportunities.

Useful to various sectors: The state enterprises serve all sectors of the people of the company. They do not serve a particular section of the people in the community.

Monopoly Enterprises: In some specific cases private sectors are not allowed and as such the public enterprises enjoy monopoly in operation. The state enterprises enjoy monopoly in Railways, Post and Telegraph and Energy production.

A direct channel for use of Foreign money: Sometimes the government receive foreign assistance from industrially advanced countries for the development of industries. These advances received are spent through public enterprises.

Public accountability: The state enterprises are liable to the general public for their performances because they are responsible for the nation.

Agent for implementing government plans: The public enterprises run as per the whims of the government and as such the economic policies and plans of the government are implemented through public enterprises.

Financial Independence: Though investment in government undertaking are done by the government, they become financially independent by arranging finance for day-to-day operation.

Financed by Government:

Public enterprises are financed by the government. They are either owned by the government or majority shares are held by the government. In some undertakings private investments are also allowed but the dominant role is played by the government only.

Government Management:

Public enterprises are managed by the government. In some cases government has started enterprises under its own departments. In other cases, government nominates persons to manage the undertakings. Even autonomous bodies are directly and indirectly controlled by the government departments.

Financial Independence:

Though investments in government undertakings are done by the government, they become financially independent. They are not dependent on the government for their day- to-day needs. These enterprises arrange and manage their own finances. An element of profitability is also considered while pricing their products. It has helped the enterprises to finance their growth themselves.

Public Services:

The primary aim of state enterprises is to provide service to the society. These enterprises are started with a service motive. A private entrepreneur will start a concern only if possibilities of earning profits exist but this is not the purpose of public enterprises.

Useful for Various Sectors:

State enterprises do not serve a particular section of the society but they are useful for everybody. They serve all sectors of the economy.

Direct Channels for Using Foreign Money:

Most of the government to government aid is utilised through public enterprises. Financial and technical assistance received from industrially advanced countries is used in public enterprises.

Helpful in Implementing Government Plans:

Economic policies and plans of the government are implemented through public enterprises

Autonomous or Semi-autonomous Bodies:

These enterprises are autonomous or semi-autonomous bodies. In some cases they work under the control of government departments and in other cases they are established under statutes and under Companies Act.

Classification

 

  

  

 

Purposes and Functions of Public Enterprises in Nigeria

• The main aim of establishing public corporations is the provision of essential services to citizens at a reduced price. These sorts of services usually involve a lot of capital to set up but they are usually subsidized by the government so as to knock down the price.

• They provide employment opportunities for a lot of citizens of the country.

• They are established to prevent discrimination against any section of citizens of the country and also prevent the exploitation of citizens of the country in the provision of basic needs like potable water and electricity which would have been the case if private individuals handle such services.

• Government through public enterprises prevent the concentration of huge amount of money in the hands of few citizens.

• Public enterprises generate funds for the government through the services they provide for citizens.

• They undertake strategic projects for security reasons and national interest. This is why the government mints currencies, control telecommunication facilities and control ports.

• They are used as machinery for providing rapid socio-economic development of the country.

Structure and Organization of Public Corporations In Nigeria

• The government is in charge of policymaking machinery of each establishment through the minister of the supervising ministry.

• The board of directors is appointed by the government through the supervising minister.

• The board of directors controls the enterprise and run it in line with government objectives.

• The minister does not take part in the daily administration of the enterprise but he is the link between the government and the corporation.

• The board of directors has the power to recruit and dismiss their staffs and also determine the conditions of service of their employees subject to government approval.

• The head of management of a public enterprise in Nigeria is usually the chief executive also called the managing director or the general manager. He is assisted by other staffs.

• The chief executive and his assistants translate policy objectives of the board of directors into actions to help attain government goals.

• These enterprises are usually divided into several departments, with supportive managers who coordinate the implementation of board policies by subordinate staffs.

Problems of Public Enterprises 

The fundamental problems of public enterprises are the: 

defective capital structures, 

excessive bureaucratic control or intervention, 

inappropriate technology, 

gross incompetence, 

mismanagement, 

corruption 

crippling complacency which monopoly engenders.

Public enterprises equally serve as platforms for patronage and promotion of political objectives and therefore even when their managements have the will and the capability to work honestly, they will still suffer from operational interference by political appointees.

                               

Management and Control of Public Corporations

Management

The management of public corporations is done through the management boards and the policy board. Each of them is briefly explained below: 

The Executive Board In the executive board, majority of members of the board are staff of the same organisation. They are usually the heads of the various departments of the organisation. However, a few outside representatives are brought in to represent some outside interest. For example, the Nigerian Railway Authority is an example of public utility that has an executive board. 

The Policy Board Majority of the members of the policy board are from outside the organisation with few members from within the organisation. The policy board is responsible for managing all the policy decisions of the organisation, but the implementation of policies and the day-to-day operation of the organisation are carried out by the managing director. This method is applied to most public corporations in Nigeria (Ujo, 1994: 82).

Control

Even though public corporations are created to enable them have some degree of freedom to manage their affairs, they are still subject to various levels of control. Ministerial Control The supervising minister controls the public corporations under his or her ministry in the following ways. By the Appointment of Board Members Since the minister is politically responsible for appointing members of the board, he can dissolve it if he is not satisfied with their performance. Through Direction The minister ensures that public corporations satisfy the public interest they are created to serve and this is done by giving occasional directives, which the corporation must obey.

Giving Specific Controls

Some form of specific controls may be exercised by the minister on public corporations under his ministry. These controls may include the appointment of external auditors to audit the account of public corporations, reorganisation of departments, and controls on borrowing. 

Parliamentary Control 

The parliamentary control is necessary to ensure that the operation of public corporations is in accordance with public policy. Such controls include the following: 

Through Annual Report 

Public corporations are expected to submit comprehensive annual reports of their activities to the parliament through the minister and such reports are to be tabled in the parliament.

Control of public corporations is necessary to compel them to provide the services they are created to provide in the public interest. These controls could be done through management mechanisms or outright control of public corporations in accordance with the laws establishing them.

Privatisation of Public Enterprises and Commercialisation of Public Enterprises

Privatisation is premised on the fact that business should be left for those who are better qualified to handle them, which is the private sector, while the government concentrates on its core duty of governance. Governance in this sense entails law making, law implementation and adjudication. Government involvement in business takes the form of regulation and it does this through its agencies. However, in a contest where the referee is grossly incompetent, biased or both, then a fair result will not be expected.

In the Nigerian context, privatisation involves the disposal of all part of shares held by the government directly or through any of its agencies in the concern under consideration to carry on business. In other words, privatisation involves the sale of government shareholdings in enterprises to non-governmental entities (institutions or individuals). The Nigerian economy is non-cultural – being dependent on petroleum for over 90% of its earnings from the rest of the world. This is like putting one’s eggs in one basket. Thus, the so-called structural adjustment programme of government aims at correcting this defect in the commercialisation of some of our public enterprises, had been put in place with the hope that they would bring about desired structural changes.

In July 1988, the Federal Military Government promulgated Decree No. 25, (Privatisation and Commercialisation Decree) which gave a legal backing to the execution of the privatisation and commercialisation programme in Nigeria. The objectives of the programme are: 

(i) To re-orientate the enterprises for privatisation and commercialisation towards a new horizon of performance improvement, viability and overall efficiency. 

(ii) To develop the capital market. 

(iii) To restructure the capital of affected enterprises in order to facilitate good management and access to capital market. 

(iv) To restructure and rationalised the public sector in order to lessen the dominance of unproductive investments in that sector. 

(v) To ensure positive returns on public sector investments in commercialise enterprises. 

(vi) To check the present absolute dependence on the treasury for the funding by otherwise commercially oriented parastatals, and encourage their approach to the capital market. 

(vii) To initiate the process of gradual cession to the private sector of such public enterprises which, by their nature and type of operations, are best performed by the capital market.

(viii) To promote wide share ownership. The decree provides for the establishment of the Technical Committee on Privatisation and Commercialisation (TCPC) which is vested with the responsibility of implementing the programme. 

Commercialisation

Commercialisation is the re-organisation of enterprises wholly or partly owned by the government in which such commercialised enterprises shall operate as profit making commercial ventures and without subvention from the government. 

Objectives of Commercialisation 

The objectives of commercialisation programme are: 

(i) To restructure and rationalise public enterprises to ensure an effective, cost conscious, and goal oriented management and staff whose future is linked with the fortunes of the organisation they operate. 

(ii) To undertake a comprehensive review of the accounting and management information system of the parastatals with a view to installing and maintaining modern and effective accounting systems which will produce promptly the necessary data for monitoring their financial and operational performance. 

(iii) To re-oriented the enterprises for commercialisation towards a new horizon of performance improvement, viability an overall efficiency: through the enforcement of strict commercial principles and practices. 

(iv) To check the present absolute dependence on the treasury for funding the otherwise commercially viable parastatals through a more realistic capital structure which will enable them approach the capital market to fund their operations without government guarantees. 

Problems of commercialisation include: 

(i) Policy environment (not being conducive) 

(ii) Special privileges to some groups (negating the objectives of the programmes) 

(iii) Capital markets (not being able to cope) social costs (labour unions objecting) 

(iv) Inadequacy of preparation (TCPC coping) 

(v) Administrative capacity (training may help) 

(vi) Transparency of the process (enlightenment campaign) 

(vii) Other forms of privatisation (e.g. contract) 

(viii) Measures for improving those that remain (important, may be neglected) 

(ix) Investment of proceeds. 

For the commercialisation programme in particular, success requires that more attention be paid to the issues of the rate of return, profit, the role of boards of debtors and management capacity.

Privatisation means government selling part or whole shares owned by it in public enterprises to individuals or institutions. Commercialisation, on the other hand, refocuses public enterprises for profit making.