6 Problems Of Public Enterprises In Nigeria And Solutions (2023)

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Public Enterprise literally means business enterprises that are owned and managed by the government which might be the state, federal, or the local government or its agencies. So, what are the problems of public enterprises in Nigeria? This enterprise is financed from the money raised by the government through taxation and other means.

Public Enterprise is quite different from a public company in the sense that a public company is owned and managed by private individuals who buy shares whenever there is an awareness of it for the general public to subscribe to.

PROBLEMS OF PUBLIC ENTERPRISES IN NIGERIA

When enterprises are set up and they begin to operate, certain problems may be encountered. Among these are;

Lack of Capital: Business enterprises are often faced with the problem of inadequate finance. They find it difficult, therefore, to expand up to a scale where they can enjoy economies of large-scale production.
Lack of Skilled Personnel: Some of the enterprises find it difficult to attract highly skilled workers and this leads to low productivity in such enterprises.
Insufficient Demand: Some enterprises discover that the demand for their products is low. This may be as a result of the general poverty in the country.
High Operating Cost: The operating cost of some enterprises is very high. This may be the result of a low level of efficiency of workers, or as a result of the fact that modern machines are not utilized.
Raw Material Supply: In Nigeria, many manufacturing enterprises have closed down due to they do not have sufficient supplies of their basic raw materials.
Low Level of Managerial Efficiency: Management is a very essential factor in the business.

POSSIBLE SOLUTIONS TO THE PROBLEMS OF PUBLIC ENTERPRISES IN NIGERIA

Provision of Capital Facility: In order for any business enterprises to function well thereby enjoy the economies of large-scale productions, there should be the availability of capital that they can easily source too.
Provision of Adequate Raw Material: For some of the manufacturing enterprises to still be in existence in Nigeria today, there should be a sufficient supply of raw materials needed for production.
Reduction in the Operational Cost: In order for the firms to sell their products in a perfectly competitive market, there should be an increment in workers’ efficiency and also utilization of modern machines.

Classification Of Public Enterprises In Nigeria

Government Departments.
Municipal Enterprises.
Government Companies, and then
Public Corporations.

Government Departments:

Some enterprises are run directly by government departments. Each of them has a Minister who is answerable for it in the parliament or national assembly, taking, for example, The Post Office (NIPOST) and the Nigeria Telecommunication Limited (NITEL).

Municipal Enterprises:

There are certain enterprises that are owned and run by the municipal council or what is now known as local governments. Some of them are run by committees set up by the local government, for instance, municipal transport services. The funds for such municipal enterprises come from the money collected as local rates paid by taxable adults, local property tax, water rates, and grants received from the Federal and State governments.

Government Companies:

Government companies are established as a limited liability company which are completely owned by the government or in which the government has the controlling share of 51% or more. Government companies are registered as a limited liability company, examples of such companies are The Nigeria National Petroleum Corporation (NNPC), The Nigerian National Shipping Lines, and the Federal Palace Hotels. The different state governments have equally established some government limited liability companies.

Public Corporations:

The most important type of public enterprises in Nigeria in terms of scope is the public corporation. It is created by a special act of parliament or the national assembly or by decrees promulgated by the military government.

The corporations are usually accountable to the national assembly or parliament through the relevant minister. The government appoints the members of the board of directors or their general managers. In this group, we have the Nigeria Railway Corporation (NRC), Federal Radio Corporation of Nigeria (FRCN), National Electric Power Authority (NEPA) though now it is privatized and managed base on the regions, and then the Nigeria Airways Corporation. These corporations are not run strictly on a profit basis. They are primarily established to provide certain essential services, and any profit earned belongs to the government.

REASONS FOR GOVERNMENT PARTICIPATION IN BUSINESS ENTERPRISES:

Government goes into economic ventures partly because of profit and partly due to the welfare of its citizens. The reasons for government participation in the business ventures can, therefore, be stated as follows;

To earn some revenue in the form of corporate profit.
To produce those goods or services that are considered very essential but which private entrepreneurs may consider unprofitable.
To ensure that the control of the national economy is in the hands of the indigenes.
To quicken the pace of development in the country.
To prevent the emergence of private monopolies which may exploit the citizens and other reasons.

DISADVANTAGES OF GOVERNMENT PARTICIPATION IN BUSINESS ENTERPRISES.

The taxpayers who finance such government ventures do not have any say in the running of the enterprises.
Bureaucracy often gave rise to a sluggish response to changes, because it generates acts of indecision and delay in policy implementation.
Government enterprises are often not run with a profit motive. This contributes to the nonchalant attitude of government employees. And other reasons.

SOURCES OF FUND FOR BUSINESS ENTERPRISES IN NIGERIA

The following are some of the possible ways of financing a business;

Bank loans: Business Enterprises can go to a commercial or industrial bank to seek a loan. The bank usually grants the request for a loan, provided that the applicant satisfies certain conditions.
Personal Savings: Sometimes people save some money out of their monthly or yearly incomes. The money can be used to finance a business venture or to buy shares in a public company.
Credit Purchase of Trade Items: A person can arrange for a credit purchase of the items his business needs. The creditor is paid after the goods purchased have been sold.
Retained Earnings: Firms do not distribute the entire profit earned within a period to the shareholder. Some of the profit is usually retained. This is called undistributed profit. It is retained primarily to enable the firm to finance its expansion. It is a major source of internal financing.
The issue of Shares: A firm can raise funds by offering its shares for sale to the general public or some specific individuals.

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CONCLUSION ON THE PROBLEMS OF PUBLIC ENTERPRISES IN NIGERIA

In summarizing this write-up, business enterprises that are controlled and financed by the government is very necessary in order to ensure an even distribution of goods and services without exploiting anyone. Also, it is necessary so that the government can earn some proceeds from it.