Problems of Public Enterprises in Nigeria

What are public enterprises?

Public enterprises are companies and establishments which are owned, operated, and financed by the government. These companies exist to render essential social and welfare services to the public at affordable prices. Examples of public enterprises in Nigeria are the Nigerian National Petroleum Corporation (NNPC), Nigerian Ports Authority (NPA), and many others. The primary purpose of public enterprises is to provide welfare services. However, they are also expected to make a profit so they can be self-sustaining. Public enterprises are managed by a board of directors who are appointed by the government for a specific period of time. Over the years, there have been many complaints and observations of inefficiency and stagnancy of public enterprises in Nigeria, this article is on the problems of Public enterprises in Nigeria.

Problems of Public Enterprises in Nigeria

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Inefficient Management

Public enterprises are usually run by a board of directors or administrative heads who may not have expert knowledge or experience in running an enterprise. This in turn affects the efficiency of the enterprise.

Losses due to the principle of non-profit making

Public enterprises by their very nature are not founded on or operated on commercial principles. Their primary purpose is social welfare, not profit earning. Therefore, when a public enterprise incurs losses, it is often overlooked. This is not the same in a private enterprise that is run for the sole purpose of making a profit. Although it can be argued that some of the public enterprises are earning profits, the amount is nothing compared to expenses or revenue expected. Public enterprises in Nigeria should take up a principle of totally wiping out losses and minimizing profits.

Delayed Decisions

Public enterprises are often criticized for slowness in decision-making processes. The delayed decisions are usually as a result of bureaucratic processes. Most times, a file may need to be approved by many officials before a decision can be taken. By the time a decision is made, the business environment might have changed. This often leads to losses in terms of project costs, due to prices and inflation.

Lack of Innovation

Public enterprises lack innovation due to monopoly and lack of competition. Since, public enterprises know they are the only ones providing an essential service, they find no reason to be on their toes. The lack of innovation however negatively affects national and economic development. For example, the private sector maximizes profit by innovating new methods of production and techniques. Public enterprises on the other hand often feel secure and are, therefore, lazy.

Political Interference

In Nigeria, Public enterprises are used to fulfill personal objectives and serve political interests. For example, most times, it is politicians that decide appointments, location of projects, etc. instead of basing these decisions on the needs of the people or qualifications respectively. This in turn leads to loss and waste of capital and human resources.

Lack of autonomy

Public enterprises in Nigeria lack freedom and flexibility. Most of their operations are determined by politicians and not even by the board of directors. This then affects their performance.

Lack of Audit and Inspection

Most public enterprises are not properly audited and inspected. It leads to mismanagement of public funds. Most times, even when auditing is about to take place, the staff of the enterprise is not cooperative. This problem can be solved if an expert committee is appointed to audit the accounts of each public enterprise.

Unplanned production

Many of the public sector enterprises in Nigeria do not do proper research and take into cognizance the needs of the consumers before production. Since they are not producing what the people really need, there is usually poor sales and many losses.

Instability of government

Since public enterprises are often controlled by politicians, projects embarked on are used to serve individual and party interests. When a new government comes into power, they then abandon a previous project and begin a new one. This is why it is very common to see many abandoned projects in Nigeria and new ones being announced.

Over-staffing

Most public enterprises are regarded as an employment scheme; hence these enterprises are overstaffed. The expenses of the enterprise, which includes salaries and pension costs are also high and cannot be matched by the losses incurred.

Poor productivity

Most public enterprises rely on traditional means of operations which leads to low productivity. Many employees have also not been introduced to new technologies, all these lead to very poor work culture and inefficiency.

Low capacity utilization

Capacity utilization is very low because of inefficiencies in management, inefficiencies in processes and procedures, and low employee efficiency.

Poor human resources management and relations

The work environment is most public enterprises are not healthy. In some cases, there is unhealthy respect for the heads of the enterprise, and the work environment is strained. Most junior workers have very little freedom to be innovative because their senior colleagues will feel threatened. Promotions are also not based on performance but on the basis of seniority. This also results in low productivity and poor quality of products and services are common.

Low incentive

In most public enterprises, employees are not motivated to work well because there is little or no incentive for work well done.

Nepotism and Corruption

Corruption in public enterprises can be seen in many ways such as mismanagement of public funds, selection of projects based on political bias, political interference in the appointment of leaders. All of these have hindered the efficiency of public enterprises.

Poor work ethic

Many times, employees in public enterprises do not see the need to work in a dedicated manner or seek the growth of the enterprise because they do not view it as a business. Poor work ethics is what leads to low productivity and poor quality of products and services as is often the complaint.

Delay in financial allocation

Public enterprises are reliant upon the government for funding. These funds are subject to various factors and can be delayed. Thus, public enterprises are not able to plan or make long term investments which affect their productivity and output.