Nwamarah Uche

(A STUDY OF SELECTED PARASTALS IN NIGERIA)

Digitally Signed by: Content manager’sDN : CN = Weabmaster’s nameO= University of Nigeria, Nsukka

OU = Innovation Centre

Nwamarah Uche

Faculty of Business Administration

Department of Accountancy

ANALYSIS OF MANAGEMENT OF REVENUE

GENERATION AND ACCOUNTABILITY

IN PUBLIC ENTERPRISES IN NIGERIA

(A STUDY OF SELECTED PARASTALS IN NIGERIA)

OGWO PAULINE UCHENNA

PG/MBA/10/54947

i

: Content manager’s Name Weabmaster’s name

a, Nsukka

Business Administration

ANALYSIS OF MANAGEMENT OF REVENUE

GENERATION AND ACCOUNTABILITY

IN PUBLIC ENTERPRISES IN NIGERIA

(A STUDY OF SELECTED PARASTALS IN NIGERIA)

OGWO PAULINE UCHENNA

ii

ANALYSIS OF MANAGEMENT OF REVENUE

GENERATION AND ACCOUNTABILITY

IN PUBLIC ENTERPRISES IN NIGERIA

(A STUDY OF SELECTED PARASTALS IN NIGERIA)

BY

OGWO PAULINE UCHENNA

PG/MBA/10/54947

SUBMITTED TO THE DEPARTMENT OF ACCOUNTANCY,

FACULTY OF BUSINESS ADMINISTRATION, UNVIERSITY OF

NIGERIA, ENUGU CAMPUS IN PARTIAL FULFILMENT FOR THE

AWARD OF MASTER OF BUSINESS ADMINISTRATION (MBA)

DEGREE IN ACCOUNTANCY

SUPERVISOR:

MR R.O UGWUOKE

MAY, 2012

iii

DECLARATION PAGE

I declare that this work titled Analysis of management of Revenue generation

and accountability in public enterprises in Nigeria.( A study of Selected

Parastatals in Nigeria) was carried out by me Ogwo Pauline Uchenna

PG/MBA/10/54947 under the supervision of my able Head of Department of

Accountancy Dr. R.O Ugwoke.

__________________________

Ogwo Pauline Uchenna

PG/MBA/10/54947

Date: ____________________

iv

APPROVAL PAGE

This work, titled Analysis of Management of Revenue Generation and

Accountability In Public Enterprises In Nigeria (A study Of Selected Parastatals

In Nigeria) by Ogwo Pauline Uchenna PG/MBA/10/54947 have been approved

for the award of Master of Business Administration (MBA) Degree in the

Department of Accountancy, Faculty of Business Administration University of

Nigeria, Enugu Campus.

__________________________ _______________________

Mr R.O. Ugwuoke Mr R.O. Ugwuoke

Project Supervisor Head of Department

v

DEDICATION

This piece of work is dedicated to Almighty God for His immeasurable mercy.

He breathe in me and I owe much to him

vi

ACKNOWLEDGMENT

I acknowledge the power of Almighty God who has and shall continue to

provide for all my needs according to his riches in glory through Christ Jesus.

My sincere appreciation is humbly directed to my supervisor Mr.

Ugwoke for all his useful criticisms, suggestions, advice and effort to get this

work done in spites of his tight schedules. My special thanks goes to my dear

lovely husband Amechi Ezim, whose encouragement, understanding and

support made my dreams a reality.

Special thanks also to my dear Parents Mr Felix Ogwo and Mrs. Patricia

Ogwo who brought me into this world and set the pace for me to emulate. Also

to mention are staff of NEPA and NITEL, all my lecturers, colleagues and

friends whose contributions and encouragements earned me success.

Finally, may the Almighty God bless you all Amen.

OGWO PAULINE UCHE

vii

ABSTRACT

The Management of revenue and accountability in Nigeria telecommunication

limited and power holding company of Nigeria came under focus in recent time.

The aim of this study is to investigate the effects, and problems of management

of revenue generation and accountability with the view of finding feasible

solutions to these recurrent problems. Both primary and secondary data were

used in the study of selected parastatals in Nigeria. Primary data were collected

through questionnaire and interview as an instrument of data collection. Chi-

square was used for the data analysis, which was needed to test the formulated

hypothesis, consequently the following findings were made from the research.

The researcher envisaged the misappropriation of funds/or diversion of funds

and inappropriate recording of financial statement. Administrative and

Bureaucratic bottle-neck constitute delays in payment of salaries and wages of

the staff of these parastatals and this leads to poor service delivery to their

customers. The researcher identified that non incorporation of GSM and

advanced technological innovation has drastically reduced the revenue profiles

of these parastatals and non prompt payments of bills by the customers. Based

on the above findings the following recommendations were made: proper

financial mechanism and routine auditing, checking of financial records and

budgetary process should be enhanced to ensure increase in revenue base and

accountability of these parastatals.

viii

TABLE OF CONTENTS

Declaration page - - - - - - - - i

Approval page - - - - - - - - ii

Dedication - - - - - - - - - iii Acknowledgment - - - - - - - - iv

Abstract - - - - - - - - - v

Table of Contents - - - - - - - - vi

List of tables - - - - - - - - ix

CHAPTER ONE

1.0 Introduction - - - - - - - - 1

1.1Statement of Problem - - - - - - - 3

1.2 Research Questions - - - - - - - 5

1.3 Objectives of the Study - - - - - - 6

1.4 Hypotheses - - - - - - - - 6

1.5 Significance of the Study - - - - - - 7

1.6 Scope of Study - - - - - - - - 9

1.7 Limitations of the Study - - - - - - 9

1.8 Definition of Terms Management - - - - - 10

References - - - - - - - - 12

ix

CHAPTER TWO

2.1 Overview of Public Enterprises in Nigeria - - - 13

2.2 Reasons for Government Participation in Public Enterprise/Business - - - - - - - 17

2.3 Objectives of Public Enterprises - - - - - 20

2.4 Appraisal of the Performance of Public Enterprises in Nigeria (A Case of NEPA and NITEL) - - - - - 28 2.5 Problems of Public Enterprises in Nigeria - - - 38

2.6 Science of modern Management: Factors Affecting the Poor Performance of Public Enterprises in NIGERIA - 55

References - - - - - - - - - 66

CHAPTER THREE

3.0 Research Design and Methodology - - - - 68

3.1 Research Design - - - - - - - 68

3.2 Sources of Data - - - - - - - 69

3.3 Population of the Study - - - - - - 69

3.4 Sampling Strategy - - - - - - - 67

3.5 Sample size Determinations - - - - - - 70

3.6 Questionnaire Design/Construction: - - - - 70

3.7 Validity of the Instrument Used - - - - - 71

3.8 Reliability of the Instrument Used - - - - - 71

3.9 Analysis of Data - - - - - - - 70

References - - - - - - - - - 73

x

CHAPTER FOUR

4.0 Data Presentation and Analysis - - - - - 74

4.1 Data Presentation - - - - - - - 74

4.2 Hypotheses Testing - - - - - - - 87

4.3 Data Analysis - - - - - - - - 91

CHAPTER FIVE

5.0 Summary of Findings, Conclusion

and Recommendation - - - - - - 95

5.1 Summary of Finding - - - - - - 95

5.2 Conclusion - - - - - - - - 96

5.3 Recommendations - - - - - - - 97

Bibliography - - - - - - - 103

Questionnaire - - - - - - - 107

xi

LIST OF TABLES

Table 4.1: Response on educational qualification - - - - 75

Table 4.2: Responses on how long respondents have been with the company 75

Table 4.3:Response on the position of the staff in your Parastatals - 76

Table 4.4. : Response on the category of workers - - - - 77

Table 4.5: Response on the sources of revenue generation to

these Parastatals. - - - - - - - - 77

Table 4.6: Response on the whether the Parastatals encounter problems 78

Table 4.7 : Responses on the type of problems the parasta tals encounter 79

Table 4.8: Response on whether these problems affects the parastatals 79

Table 4.9: Response on the use of financial mechanism - - - - 80

Table 4.10: Response on the application of financial mechanism - - 80

Table 4.11: Response on ways of motivating workers of the parastatals 81

Table 4.12: Response on whether GSM and e-mail services affects

revenue profile on your prastatals - - - - - 82

Table 4.13: Response on whether these parastatals gerate enough

fund to pay their salaries and wages. - - - - - 82

Table 4.14: Response on causes of low revenue generation of

these parastatals. - - - - - - - - 83

Table 4.15: Response on what other areas does these parastatals get funds for

payment and maintenance of equipment - - - - 84

xii

Table 4.16: Response on whether poor transport service affect that timely

delivery of service to customers. - - - - - 84

Table 4.17: Response on whether there is expansion of social infrastructure

at affordable rate by the revenue generated. - - - 85

Table 4.18: Response on whether your parastatals are adequately

equipped with working materials for discharge of their duties - 85

1

CHAPTER ONE

INTRODUCTION

Background to the Study

Public enterprises are government business enterprises set up primarily to

provide social and economic services to the general Public. Among the

enterprises, however there are those that produce mainly the core economic

infrastructure called utilities. Public utilities are of social and economic

significance because they have direct impact on the standard of living of the

populace and have a bearing on the international competitiveness of the

economy. They also have direct forward and backward linkages to other sectors

of the economy. Hedrick (2010) stated that inadequate services provided by

the dysfunctional public utilities have contributed immensely to the escalating

domestic production cost, which directly undermines the nation’s

competitiveness as an investment location .

In Nigeria, like most other developing countries, the ownership and

control of key public utilities have virtually been the responsibility of the

government since independence in 1960. The case for government control of

public utilities, such as electricity, tele-communication, gas, water supply and

air transportation is based on the argument that basic goods and services needs

to be provided to the citizenry at affordable prices and also that government

needs to control the utilities due to their relative significance in the national

2

economy. The other grounds for government policy in this area include the

capital intensive nature of public utilities and the alleged inability of the private

sector to generate enough resources to invest and exploit economies of scale

associated with these establishments.

Over the years, however, the inability of successive Nigerian

governments to provide the services in an efficient manner has led to persistent

calls for reform. In response, several policy initiatives have been undertaken,

including market regulation, deregulation, liberalization and privatization. For

example, regulation was an attempt to alter the socially undesirable behavior

which the monopoly status of public enterprises has tended ‘to encourage.

However, most of the public utilities have continued to be run inefficiently at

low rate of return and to operate sub-optimally, with outmoded and

dysfunctional machinery and equipment due to lack of exposure to competition

and mismanagement of giants and subventions.

According to Hendrick (2010) , Privatization involves the sale of equities

in public enterprises to private investors with or without the loss of government

control in these organizations. It may take the form of deregulation of state

monopolies by the abrogation of legislations restricting entry into certain

economic activities. The mechanism may be by sub-contracting (i.e, operational

and maintenance contracts or enterprises contracts) , work previously

undertaken by state employee to the private sector. In the view of Estache

3

(2011), privatization may operate in the form of divestiture, which is the actual

sale of public assets to the private sector through public offer of shares or

private sales of assets . Government usually embark on privatization as part of

restructuring the economic base of a country to promote efficiency and free

government of the burden of fiscal imbalance brought about by government

deep involvement in business enterprise.

As would be expected, the reform programmes adopted by Nigerian

governments since SAP have raised fundamental issues regarding the ownership

structure, economic efficiency, profitability and income distribution as well as

the appropriate balance between private and public sector roles in the provision

of utility services

1.1 STATEMENT OF PROBLEM

In most developing countries including Nigeria, government participation

in economic activity is usually significant. One of the various ways through

which the government has intervened in the Nigerian economy is through the

establishment of public enterprises. Public enterprises are statutory bodies

operating services of an economic or social character on behalf of the

government.

Ademolokun (2011), stated that the rationales behind the establishment of

public enterprises in Nigeria are many, some of the reasons includes,

4

generation of revenue that will add to available national capital for the support

of development and welfare programmes, making it impossible for important

profitable enterprises to be controlled by the few individuals or groups,

organizing certain critical activities for national survival and economic stability

and providing employment opportunities. In the view of Sanda (2007) the

national Electric Power Authority (NEPA) and the Nigeria telecommunications

Limited (NITEL) are among the critical and strategic organizations whose

‘activities are expected to contribute in no small measure in our national

development. This is so, more, in the present era of technology and proper

information management system. Conversely, the operations of public

enterprises in Nigeria have of recent turned to be a very better pill for the

government that set them up and the populace they were meant to serve. The

populace are complaining of shoddy services from these organizations while the

government has identified public enterprises in Nigeria as veritable drainage

pipes for the limited resources available for the government. Consequently, the

privatization and commercialization options became very attractive to the

government,

Report of boards of enquires on public enterprises in Nigeria including

those under this study had shown that the root cause of non-performance of

these public enterprises were poor funding and inept financial husbandry.

5

The main focus or problem of this study is to identify how sound

management of revenue generation and accountability in a public enterprises

can stave the collapse of our selected public enterprises -- NEPA and NITEL.

The study will also give attention on how the problem of poor financial

resources management like waste of fund, fraud and diversion of fund could be

curbed in our public enterprises. The study will explore how the future

prospects of these enterprises could be enhanced through the deployment of

well trained and skilled, well remunerated and motivated workers on revenue

generation and accountability duties.

1.2 RESEARCH QUESTIONS

Based on the foregoing, the study seeks to provide answers to the following

research questions

1. What are those factors that affect revenue generation in Nigeria?

2. What are the modes or strategies of revenue generation in Nigeria parastatals.

3. What are those measures to be adopted by parastatals to improve revenue

generation and accountability?

4. What are those factors that hinder revenue generation and accountability in

Nigeria parastatals?

5. To what extent has non disclosure of proper accounting information affects

revenue generation and accountability in Nigeria parastatals?

6

1.3 OBJECTIVES OF THE STUDY

The objective of this study includes,

1. To examine the sources of revenue generation of this parastatals in Nigeria.

2. To examines those problems that affect the management of revenue

generation of some of these selected parastatals in Nigeria.

3. To determine whether effective revenue management will improve the

profitability of the parastatals in Nigeria,

4. The effect of mode of disbursement of giants to parastatals.

5. To evaluate the financial control mechanism used by these selected

parastatals, in Nigeria.

1.4 HYPOTHESES

In view of the problem and the objectives it seeks to achieve the

following hypotheses are formulated for this study.

(i) : Effective revenue management and accountability is not dependent on

profitability.

(ii) Mode of disbursement of grants to parastatals is not significantly

affected by revenue generation and accountability in Nigeria.

(iii) Inadequate disclosure of financial information is not significantly affected

by revenue generation and accountability in Nigeria.

7

1.5 SIGNIFICANCE OF THE STUDY

The significance of this study lies on the vital roles the National Electric

Power Authority (NEPA) and the Nigerian Telecommunication Limited

(NITEL) are expected to play in our national life. The major agency responsible

for generating, transmitting and distributing electricity in Nigeria is the National

Electric Power Authority (NEPA), a parastatal of the federal government under

the federal ministry of power and steel which was established by Decree No: 24

of 29th June, 1972 and vested with the primary responsibility of developing and

maintaining an efficient electricity supply to all parts of the country. NEPA is

an offshoot of the Electricity Corporation of Nigeria (ECN) which was

established in 1950. Government’s interest and investment in the electric power

utility was informed by the awareness that electricity consumption constitutes a

major yardstick for measuring the standard of living of a people. It was

considered that once adequate electricity was available, many other aspects of

economic activity would fall in place. Government has, therefore, continued to

accord high priority to adequate supply of energy in all National Development

plans and other development initiatives.

The communications sub-sector of the national economy consists of the

means of sending and receiving messages, order amongst other uses.

Communications are vital to the smooth functioning of any economy. In the

fourth National Development plan it was noted that the provision of adequate

8

and reliable communication services is essential for efficient operation of any

modern economy.

Unfortunately, the National Electric Power Authority (NEPA) and the

Nigerian Telecommunication Limited (NITEL) like many other public

enterprises in Nigeria have poor reputation in terms of performance. Thus, as

for back as mid 1970s, the first progress report on the second national

Development plan lamented government’s hope in this area (Communications)

have not yet been realized. The sector has then lagged behind the development

in other sectors and is beginning to constitute a drag on overall development.

According to Anaynwu et al (1997) the services of the communications sub-

sector of our economy are obviously epileptic.

Readers of this research will clearly understand how to eliminate or

reduce the factor that affect the efficiency in the management and accountability

in public enterprises in Nigeria. It will enable the managers of these enterprises

to exercise proper management and accountability so as to boost the revenue

generating potential of theses enterprises

We believe that the poor performance of these public enterprises charged

with the provision of communication facilities in Nigeria stemmed from poor

management of their revenue generation and accountability. We also believe

that the study of this nature will be able to highlight the revenue management

9

and accountability problems in the enterprises which if resolved will put the

enterprises on a sound footing.

1.6 SCOPE OF STUDY

This research focuses on ascertaining the management of revenue

generation and accountability in selected Nigerian parastatals. The study was

conducted in Enugu state among the selected parastatals of NEPA and NITEL.

Enugu state was chosen for the study because the results of the study can be

generalized to other areas bearing in mind that the nature and characteristics of

the two parastatals chosen are the same all over the entire states of the

federation. Besides there are many other parastatals in Nigeria that are known in

Enugu and other places so the researcher has decided to ‘restrict the scope of the

study to that of Enugu.

It covers a period of 26 (Twenty-six years) from 1980 to 2007 and the

major objects of the study apart from the response from the respondents is the

information recorded in official data.

1.7 LIMITATIONS OF THE STUDY

Every human polity has it inherent weakness and strength. As a result,

every researcher uses to make inferences with caution. This study is not without

some inherent pit falls caused by some extraneous variables.

10

The limitations of the study stems from the fact that it is based on

recorded and historical information sourcing the relevant materials were not

very easy in this respect especially, records on how revenue was generated.

Also the complete response and some misleading information from the

respondents constituted another limitation of the study.

The above limitations have not affected the beauty and relevance of the

work in anyway.

1.7 DEFINITION OF TERMS MANAGEMENT

(1) Management:

The term management is conceptualized in this study as the process of

achieving desired results through efficient utilization of human and materials

resources in an organization. Management entails planning, organizing,

staffing, lending and interpersonal influence and controlling enterprise resources

Bediau (2004).

(ii) ACCOUNTABILITY

Accountability is defined as a complex rational choice and use of

resources which involves responsibility of functions Imaga (2007).

11

(iii) Accounting according to the American institute of certified public

Accountant, accounting is the art of recording, classifying and summarizing in

significant manner and in terms of money transactions and events which are, in

part at least of a financial nature.

The American Accounting association on the other hand says accounting

is “the process of identifying, measuring and communicating economic

information to permit informed judgment and decisions by users of the

information” (AAA 1966) cited by Kodjo (2004).

(iv) Public Enterprises Ademoikekun (2011), stated that public enterprises

are public organization that emerged as a result of a government acting in

the capacity of an entrepreneur .

(v) PHCN-Power Holding Company of Nigeria which was formally known

as National Electric Power Authority (NEPA)

(vi) N1TEL-Nigerian Telecommunication Limited GOBs - Government

Owned Businesses.

12

REFERENCES

Ademolekun, F. (2011), Public Enterprises and Management: Lagos, Afah Publisher.

Anyanwu 0. et al (1997), The structure of Nigeria Economy Onitsha, Joanee

Educational Publishers Limited. Bedian, S. (2004), The Practical Operation and Management Ibadan: Heinman

educational Book Limited. Estache A, (2011), Privatization and Regulation of Transport Infrastructure in

the 1990s Business journal 1&4 Hendricks G. (2010), Economic of public utilities: London, Mc Graw

Publishers. Kodjo, S. (2004), Decision Accounting for Managers:, Enugu, Oktek Nigeria

Publishers. Oshisam, K. (2007), Government Accounting and Control:, Owerri, Spectum

Book Limited. Sanda, L. (2007), Nigeria’s Financial System, Heineman publishers.

13

CHAPTR TWO

REVIEW OF LITERATURE

The review of related literature in this chapter will be centered on

overview of public enterprises in Nigeria reasons for government participation

in public enterprises/business, objectives of ‘public enterprise, Appraisal of the

performance of public enterprises in Nigeria, a case of NEPA and N1TEL,

problems of public enterprises in Nigeria and factors affecting the poor

performance of public enterprises in Nigeria.

2.1 OVERVIEW OF PUBLIC ENTERPRISES IN NIGERIA

The development of Nigeria’s public enterprises started in 1946 as part of

the colonial government policy to support the private sector, through the

provision of funds and infrastructura1 facilities, such as electricity railways,

telecommunications etc. Post colonial governments have also sustained the

policy of investing in public enterprises to promote private investment. Second

national Development plan (1970-1974], according to Iwayemi (1999),

government’s involvement in the provision of public utilities has always been

based on the strategic nature of the services in the economy, in addition to the

classical market failure arguments of economics of scales, externalities and

natural monopoly status.

14

However, the expectations of public utilities as the anchor of economic

growth has diminished considerably as they became drain pipes for ‘public

funds and instruments for exerting much pressure on government expenditure

and for exacerbating fiscal deficits. The flood of criticism attending to public

utilities in Nigeria has been due to their operational and pricing inefficiencies

and the dismal quality of their services to the people. The’ precarious: fiscal

position of the public sector, arising from the economic crisis of 1981 following

the crash in crude oil princes has aggravated the problems of the public utilities

sub-sectors as government found that it could no longer meet the huge resource

requirements of most of them. Moreover, the aggregation of problems of

inefficiency, in capacity utilization, obsolete equipment, lack of modern

production technique, weak and inept management, and a high debt burden

forced a rethink of government’s position on public utilities. Consequently,

liberalization and privatization were considered to ensure their operational

efficiency.

Given their ownership structure and’ strategic position in the market,

public utilities under state control, have typically imposed their will be

exploiting monopoly market power through restrictions on their output, to

increase price and profitability such behavior has caused distortions in the

economy, reduced economic efficiency, and reduced consumer welfare. Cost

elements have played a significant role in the pricing behavior of utilities as

15

regulated pricing designed to achieve consumer welfare has, instead, brought

about low returns on investment. The result was that public utilities without the

subventions provided by government were condemned in most case to operate

sub-optimally.

Experience has also shown the excessive regulation, especially in the less

developed countries, has tended to create its own problems apart from the fact

that it has not always achieved the intended objectives. For example, the report

of the Onosode presidential commission on Public enterprises (PES) of 1997

revealed that most of the PES were characterized by endemic problems, among

which where,

• Defective capital structures resulting in a heavy dependency burden on the

national treasury for subventions.

• Misuse of monopoly power culminating in corrupt practices.

• Mismanagement of funds and operational inefficiency; and

• Bureaucratic bottlenecks within the PES/supervisory ministerial linkages.

It was as a result of poor performance and failure to meet the desired

expectations for which the PES were established that the protagonists of

economic reform advocated the liberalization and privatization of public utilities

in order to address the perennial problems facing them.

As part of the economic reforms adopted in the 1980s, 1iberaliation was

introduced to foster competition and thereby reduce the huge inefficiencies

16

associated with the operation of public utilities. Additional objectives of policy

change includes, improvement in the quality of services, removal of regulatory

controls in the pricing system, minimizing structural distortions in operations,

reducing the growing budgetary burden, and promoting effective private sector

participation. In summary, the liberalization of the economy was designed to

maximize the factors of production and allocate available resources efficiently

in a competitive environment.

Conceptually, privatization and liberalization are regarded as

complementary measures for promoting effective competition between public

and private firms, in a manner that would be beneficial to both consumers and

the economy in the medium to long term. They are important elements of

promoting economic efficiency by curbing the monopoly of government over

the ownership and control of public enterprises.

In an effort to rationalize and commercial Nigeria’s public enterprise

there is a general consensus that enterprises that can be fully operational in

Nigeria on commercial basis should be privatized. To this end, four basic

criteria were established during the operationalization of SAP as follows;

Enterprise that can be fully operational on a commercial basis would be

privatized.

Those that can be partially privatized would no longer receive operating

subsidies.

17

• Those that can be partially or fully commercialized but can continue to be

owned by government would be required to operate without government

subvention, and

• Those that can operate fully as public entities would continue to receive public

support, with user fees implemented as appropriate.

The Federal Government opted for a combination of deregulation, partial or full

privatization and commercialization of government enterprises. Partial

privatization meant that government would hold minority equity stake of 40

percent or less while full privatization meant complete divestment by

government.

2.2 REASONS FOR GOVERNMENT PARTICIPATION IN PUBLIC

ENTERPRISE/BUSINESS

At the time government decided to engage directly in business activities

the reasons for doing so were as many as they were valid. Some of the reasons

were specific to the enterprises involved. The government, for instance, had to

have a security printing and minting company to have a place for printing its

currency and security documents. A Nigerian Airways had to be constituted to

handle the national share of what was left of the West African Airway

Corporation after independent. Ghana pulled out to set tip an airline of its own

in 1958. A Midwest line in Midwest state and Oriental lines in East central state

18

were necessary to revive road transport services virtually destroyed in the two

states by the 30 months civil war.

There are, however, more general and equally valid reasons for

government involvement in business.

The main ones are, ensuring that the national economy is not dominated

by foreigners. Governments saw a clear need to involve Nigerians more

generally in the nation’s economy but also to ensure that certain sensitive

investments were under the direct control of government itself. The first part of

that objective was achieved through the enterprises promotions Decree of 1972

and 1977 and the second part achieved by the government itself taking

controlling equity interest in foreign banks, insurance companies and some oil

marketing companies.

Okeke (2010) stated that the second motive lies in the need to create new

jobs during periods of relatively high unemployment. According to one expert,

the profit motive may be ignored when considering such projects.

Thirdly, to ensure the adequate supply of highly demanded products

which is in short supply and is yet very crucial for the nation’s economic

development. This is the argument for government direct investment in cement

companies.

Fourthly, to ensure full exploitation of the nation’s mineral resources to

the overall benefit of the economy. This is the reason for the federal

19

governments involvement in the nation’s petroleum industry at all levels. It is

also part of the argument for setting up steel plants although in the latter case,

the principal argument has been that steel is the bedrock of every nations

industrial development.

Fifthly, to help Nigerians overcome the most serious psychological

inhibition to industrialization and development especially the belief that

imported goods are superior to locally made ones. This is the argument put

forward, forcefully, by Ogbemudia, a one time Governor of Bendel state in

defending the decision of his government to engage extensively in business

ventures through the acquisition of some of the companies offer for sale in the

wake of the first indigenization exercise of 1972. The state government at that

time, bought enterprises that ranged from steel fabrication to cinema houses.

Practically all of the above arguments made sense at the time investments

by the government were made. Some of them particularly the ones relating to

employment and the availability of some raw materials still hold valid today.

Besides, a majority of the investments were made when only a few Nigerian had

the financial muscle to engage in such ventures individually or collectively. The

governments at that time had abundant revenues, thanks to the oil boom

We have since witnessed a dramatic turn-around of the situation. Nigerian

entrepreneurs have creatures to the point of owning banks, shipping and air-

lines, deep sea fishing trawlers and, of course, the almost ubiquitous breweries.

20

Except those whose arguments are highly doctrinaire and ideological, few

people will argue that the present situation is one in which there is no longer an

‘unwillingness of inability to invest’ in the economy for government to fill.

Besides, government’s fortunes, revenue wise have declined for the same reason

that propelled them in the First place, - the international price for crude oil,

which has been declining and uncertain.

2.3 OBJECTIVES OF PUBLIC ENTERPRISES

The intents and purposes for which government businesses have been

established vary considerably. They could be classified as regulatory,

promotional developmental, infrastructural, public service or

business/commercial. Some of these intents and purposes tend to overlap and

therefore not watertight. In most cases, they are multidimensional. Government

owned business (GOB) are generally under the business/commercial category of

the pubic enterprises. (Sicheri 2007) commended that the important

characteristics of the public dimension of a GOBs is its Public purpose. The

rationale for the creation of GOBs is presumab1y the desire to attain some

broader developmental goals and a range of economic objectives. In this sense

GOBs have been seen as instruments of national policy. It is this factor too that

appears to negate the application of business policy though developed from the

experience of private enterprises of U.K., U.S.A. and Europe. The meaning of

21

the objective of a GOB will therefore, vary from environment to environment

and from one economic sector to another. This is because the fundamental goals

of the state, government and society are determined by the government public

purpose for setting up a GOB. Most societies have not been able to differentiate

the distinct entrepreneurial behavior expected of GOBs. This is because the

tendency to view government as an entrepreneur and shareholder rather than as

a provider of welfare benefits is till fairly novel especially in developing

countries.

According to Naira (2009) some countries see GOBs merely as

instruments of government policy as in the case of India. The author equally

added that they use it to promote industries which are later sold to the private

sector as in Korea, Phiippines, Brazil, Pakistan and Singapore. Fubara (2010)

that in Nigeria’s position, that GOBs should exert privatization role as distinct

from the role of public enterprises. In effect GOBs are established as

instrument of government as well as profit generating ventures of raise funds of

financing infrastructural development of the economy. This dual objectives

makes the management of GOBs very difficult and the application of the

management principles based on profitability objective alone very unattainable.

Without much effort, stories about the corporate collapse of the various

GOBs in Nigeria are available from our newspapers. That presupposes that

management of these GOBs would not have the concept of managing GOBs for

22

growth. Yet in a recent study, Fubara (2010), stated that 28 GOBs chief

Executives out of 44, agreed that the most important objective of GOBs was to

make profit in order to remain in business. The remaining 16 thought it was to

provide employment alone. They did not see that earning of profit would ensure

continuous employment. There lies the confusion.

In view of Tony (2006) , the objectives of public enterprises includes the

following:

(a) Economics Development

Public enterprises were set up to accelerate the rate of economic growth

in a planned manner. These enterprises have created a sound industrial base for

rapid industrialization of the country.

They are expected to provide infrastructure facilities for promoting

balanced and diversified economic structure of development.

(b) Self-Reliance

Another aim of public enterprises is to promote self-reliance in strategic sector

of the national economy. For this purpose, public enterprise have been set up in

transportation communication energy, petro-chemicals, and other key and basic

industries.

23

(c) Development of Backward Areas:

Several public enterprises were established in backward areas to reduce regional

imbalances in development. Balanced development of different parts of the

country is necessary for social as well as strategic reasons.

(d) Employment Generation:

Unemployment has become a serious problem in India. Public enterprise seek to

offer gainful employment to millions. In order to protect jobs, several sick units

in the private sector have been nationalized.

(e) Economic Surplus:

Public enterprises seek to generate and mobilize surplus for reinvestment. These

enterprises earn money and mobilize public savings for industrial development.

(f) Egalitarian Society:

An important objective of public enterprises is to prevent concentration of

economic power and growth of private monopolies. Public sector helps the

Government to enforce social control on trade and industry for ensuring

equitable distribution of goods and services. Public enterprises protect and

promote small scale industrials.

24

(g) Consumer Welfare:

Public enterprises seek to protect consumers from exploitation and profiteering

by ensuring supply of essential commodities at cheaper prices. They aim at

stabilizing prices.

(h) Public Utilities

Private sector is guided by profit motive. Therefore, it is reluctant to invest

money in public utility services like water supply, gas, electricity, public

transport. Therefore, the Government has to assume responsibility for providing

such services.

(i) Defence:

Government has to set up public enterprises for production of defence

equipment. Supply of such equipment cannot be entrusted for private sector due

to the need or utmost secrecy.

(j) Labour Welfare:

Public enterprise serve as model employers. They ensure welfare and social

security of employees. Many public enterprises have developed townships,

schools, college and hospitals for their workers.

25

(k) Role and Rationale of Public Enterprises

The public sector has been playing a vital role in the economic

development of the country. In fact the public sector has come to occupy such

an important place in our economy that on its effective performance depends

largely the achievement of the country’s economic and social goals.

Public sector is considered a powerful engine of economic development

and an important instrument of self-reliance. The main contribution of public

enterprise to the country’s economy may be described as follows:

(1) Filling of Gaps:

At the time of independence, there existed serious gaps in the industrial

structure of the country, particularly in the field of heavy industries. Basic and

key industries require huge capital investment, involve considerable risk and

suffer from long gestation periods.

Private sector concerns do not come forward to establish such industries.

Public sector has helped to fill up these gaps. The basic infrastructure required

for rapid industrialization has been built up through the production of strategic

capital goods.

The public sector has considerably widened the industrial base of the

country and speeded up the pace of industrialization.

26

(2) Employment:

Public sector has created millions of jobs to tackle the unemployment

problem in the country. Public sector accounts for about two-third of the total

employment in the organized industrial sector in India.

By taking over many sick units the public sector ahs protected the

employment of millions. Public sector has also contributed a lot towards the

improvement of working and living conditions of workers by serving as a model

employer.

(3) Balanced Regional Development

Private industries tend to concentrate in certain regions while other

regions remain backward. Public sector undertaking have located their plants in

backward and untraded parts of the country.

These areas lacked basic industrial and civic facilities like electricity,

water supply, township and manpower. Public enterprises have developed these

facilities thereby bringing about complete transformation in the social-economic

life of the people in these regions.

Stell plants of Bhilai, Rourkela and Durgapur; Fertilizer facotyr at Sindri,

machine tool plants in Rajasthan, precision instrument plants in Kerala and

Rajasthan etc. are a few examples of the development of backward regions by

the public sector.

27

(4) Optimum Utilization of Resources:

Public enterprises make better utilization of scarce resources of the

country. They are big in size and able to enjoy the benefits of large scale

operations.

They help to eliminate wasteful completion and ensure full use of

installed capacity. Optimum utilization of resources results in better and cheaper

production.

(5) Mobilization of Surplus:

The profits earned by public enterprises are reinvested for expansion and

diversification. Moreover, public sector concerns like banks and financial

institutions mobilize scattered public savings thereby helping the process of

capital formation in the country. Public enterprises earn considerable foreign

exchange through exports.

(6) Self Reliance:

Public enterprises have reduced considerably the need for imports by producing

new and better products within the country. These enterprises are also earning

considerable amount of foreign exchange through exports.

28

(7) Socialistic Patter of Society:

Public sector is an instrument for realizing social objectives. Public enterprises

help to check concentration of wealth and private monopolies. These enterprise

can serve as powerful means of economic and social change.

(8) Public Welfare:

Public enterprises help in the establishment of a welfare state in the

country. These enterprises supply essential commodities at cheaper rates.

A proper balance between demand and supply is created to protect

consumers against exploitation by profit hungry businessmen. Public enterprises

also protect and promote the interests of workers.

2.4 APPRAISAL OF THE PERFORMANCE OF PUBLIC

ENTERPRISES IN NIGERIA (A CASE OF NEPA AND NITEL)

It is difficult to fully asses the impact of economic reform programmes in

the public utilities sub-sector in Nigeria because of the dearth of information on

government financial subsidies to public enterprise. However, an attempt will

be made here to assess the performance of each of the public utilities, based on

the criteria of efficiency of service delivery growth in output, the stage and

29

effect of economic reforms achieved, as well as the overall contribution of each

public utility to economic growth and development.

A. NATIONAL ELECTRIC POWER AUTHORITY (NEPA).

Despite Nigeria’s huge resource endowment in energy and enormous

investment in the provision of energy infrastructure, the performance of the

power sector has remained poor, in comparison with other developing

economies. This verdict was confirmed by a World Bank Assessment study

conducted in 2007 on energy development in Nigeria, which compared the

performance of Nigeria’s power sector with those of 20 others developing

countries. The study revealed that the sector had one of the worst records in

terms of: the highest percentage of system losses at 33.41 percent; the lowest

generating capacity factor at 20 percent; the lowest average revenue at Us $

1.56 kwh; the lowest rate of return at 8 per cent; and the longest average

accounts receivable period of 15 months. Perhaps, the worrisome picture

depicted by this assessment and other - negative consideration informed

governments decision to embark on the full privatization of the power sector

and the proposal for increased foreign participation in it. As noted earlier, the

privatization and commercialization decree of 1988 recognised the need for

NEPA to operate a tariff structure to facilitate increased revenue generation

30

reduce its dependence on government for funding, support its cost of operations

and funds its parts of annual investment plans.

The performance agreement signed between government, and NEPA also

recognized the need to remove the constraints imposed by NEPA’s

inappropriate tariff regimes over the years. Consequently, the agreement

allowed NEPA to set its tariffs, in collaboration, with the utilities charged

commission, subject to government approval.

Despite the slow growth in economic activities in recent years, the

demand for electricity in Nigeria has continued to increase. There is no doubt

that expensive and unreliable power remains a major concern to Nigeria’s

industrial sector and household consumers alike. Multiple and unpredictable

power cuts, which have become a daily occurrence in Nigeria, result in

equipment malfunctioning in all sectors of the economy and make it difficult to

produce goods and provide services efficiently. As a result of this fundamental

problem industrial enterprises have been compelled to install their own

electricity generation and transmission equipment, thereby adding considerably

to their operating and capital costs. Enweze, (2010) has estimated that about 25

per cent of the total investment in machinery and equipment by small firms, and

about 10 percent by large firms, were on private installed infrastructure. Despite

the attempt by some firms to supplement the power supply by NEPA, electricity

demand by consumers, particular1y domestic users and offices, has continued to

31

rise. Significantly, although NEPA has been converted into a commercial

enterprise, it still retains a monopoly on power generation and distribution and

has set tariffs way below the supply cost. Moreover NEPA’S metering and

billing operations have been inadequate thereby reducing revenue by about 25

per cent

Empirical evidence shows that electricity production in Nigeria has

increased steadily from 135,800 kwh in 1960 to an aggregate generating

capacity of 10,221.1 million kilowatts (kwh) in 1985. The generation capacity

improved further to 13, 462.9 to 15,8560 and 14.684.3 million kwh in 1990,

1995 and 2000 respectively. Aggregate electricity. generation was N18,009.6

million kwh in 2001, of which NEPA accouiited for 99.5 per cent, while

thermal enter purchased from private firms contributed a mere 0.5 percent.

Electricity consumption has increased to 8,893.8 million kwh by 2001,

following sustained efforts at boosting electricity generation and distribution in

the country, and production has been mainly from hydro and thermal sources

comprising 17 diesels plants, one gas turbine plant three gas fired steam plants,

and one hydro plant scattered all other the country. Similarly, total electricity

consumption has maintained an upward trend from 1,282.8 mi1lion kwh in 1970

to 7,780.0 million kwh in 1990, 9,435.9 million kwh in 1995 and 8,7688.3

million kwh in 2000. The rise in consumption was largely accounted for by

increase in residential and industrial consumption, reflecting NEPA’s deliberate

32

efforts at improving its funding requirement in order to boost electricity

distribution and reduce power outages.

In response to increasing demand for electricity, NEPA developed an

additional capacity for the generation and transmission of electricity in the

1980s with a heavy investment outlay in hydropower, gas and steam turbines.

Six thermal and three generating units, with a total installed capacity of about

5,984 m, became operational by 1992. The thermal stations were located at

Afram, Delta, Egbin, Sapele and Ijora with generating capacities of 100mw,

820mw, 1,320mw, 1,020mw and 66mw respectively. The hydropower stations

were located at Jebba (578mw), kainji (760mw) and Shiroro (600mw). For the

purpose of effective distribution of power supply, the country was divided into

five zones, namely Lagos, Western, Kaduna, Eastern and Jos Directorates, with

head offices at Lagos, Ibadan, Kaduna, Enugu and Jos respectively. The

distribution network is characterized by long redial lines emanating from the

various sub-stations. The network has been expanding rapidly as a result of

various rural electrification projects throughout the country being commissioned

to join the nation’s grid. In 1970, NEPA’s weighted average tariff was 3

kobo/kwh, which was increased to 3.5 and 7.0 kpbo/kwh in 1977 and 1979

respectively. There was no tariff increase between 1979 and 1989. In 1989,

government approved a tariff increase from 7.0 kobo/kwh to 32 kobo/kwh.

Evidently, the approval tariff was inadequate as the deficit on operating

33

expenses alone was higher than the revenue from the new tariff by N3.02

billion. However, the tariff was raised to 32 kobo in 1990 which at the time, was

considered to be cost-effective in terms of generation and transmission. But

when other costs were taken into consideration (such as provision for bad and

doubtful debts depreciation and amortization of development costs) it was found

that the break even tariff diverged significantly from the unit-selling price.

However, with the promulgation of the decree on privatization and

commercialization in 1991, government agencies, including NEPA, were

allowed to fix rates, prices and charges for their products and services. The

objective was to encourage the agencies to provide services at competitive and

market driven prices which, in turn, would ensure efficiency.

Unfortunately, NEPA has not been performing as efficiently as the

enabling decree envisaged. The authority has failed to rationalize its structure

and management and, consequently, has been unable to achieve cost-

effectiveness in the generation and distribution of electricity, forcing

government to pay huge subsidies to protect Nigeria electricity consumers,

despite taking advantage of government’s commercialization programme to

raise more revenue through increased tariffs.

Ironically, NEPA has also been confronted with a persistent problem of

low capacity utilization. Its power generating capacity is heavily under-utilized,

as approximately 50 per cent of the total installed capacity of the stations .is

34

unutilized. Furthermore, the percentage of total electricity consumtion has been

fluctuating over the -years with deterioration in both transmission and

distribution, resulting: in incessant power outages, fluctuations and constant

load shedding. Power supply is also constrained by transmission problems,

caused by broken down transformers and cables, vandalization of facilities and

poor maintenance.

Over the years, NEPA tariff structure has always been below the marginal

cost resulting in shortfall in revenue which has aggravated NEPA’s financial

requirement. Thus the serious limitations in Authority’s technical operations

have been traced mainly to funding constraints, arising from its revenue gaps.

Similarly, political considerations have prevented NEPA from forcing its

consumers (particularly government-owned institutions) to pay their bills,

thereby accumulating huge consumer debts which it may never recover. The

adverse implications of these constraints on NEPA’s performance are truly

daunting.

B. COMMUNICATION SERVICES-NIGERIA

TELECOMMUNICATIONS LIMITED (NITEL)

Prior to 1985, the Nigerian communications system, comprising

telecommunications, radio and television services, were regulated by

government through the Federal Ministry of Communications and the National

Broadcasting Corporation (NBC). The entire telecommunications system was

35

characterized by serious shortfalls between planned and realized targets clue,

largely, to poor management and the low level of executive capacity. The

quality of service was generally unsatisfactory, unreliable and expensive. The

installed switching capacity was about 200,000 lines as against planned target of

400,000. This translated to a tele density of one telephone line to 400 people,

instead of one telephone line to 100 people as recommended by international

telecommunication union (ITLU).

A modest improvement was achieved with the establishment of Nigeria

Telecommunications Limited (NITEL), as the sole national telecommunications

operator and service provider for both domestic and international consumers in

‘1985. About 700,000 lines were allocated o an estimated 100 million people,

out of which only 400,000 lines were connected a connectivity ratio that was

lower than he situation in many other African countries. The situation had

serious repercussions in terms of a high degree of inefficiency, high service

costs, and lake of universal access. The communications sub-sector in particular

had become very inefficient. Costs became prohibitive and telephone ownership

became a status symbol.

An analysis of Nigeria’s communications services indicates the

concentration on the provision of telephone lines which increased steadily from

4015 lines in 1981 to 492,204 and 604,252 lines in 1990 and 1998 respectively

The growth in telegraph, telex and postal facilities on the other hand, had been

36

sluggish during the period. The ‘poor performance of the telecommunications

industry is reflected in irregular, unreliable and customer-unfriendly services,

which accelerated the subsequent deregulation of the industry and the

emergence of the GSM in the Nigerian market.

Since the deregulation of Nigeria’s telecommunications industry, private

investors including transnational companies, have been attracted to the industry

and competition has thrived. Already in operation are seven fixed-line telephone

providers, with a customer base of about 17,000, nine pay-phone service

providers, with some 600 phones installed; and several VAST ‘ service

providers operating on line banking services. Other licenses companies have

installed and are operating switched telephone systems and public telephones,

mobile communication network links using cable or radio or satellite

communication within Nigeria, while other companies still are specializing in

the repair and maintenance of telecommunications facilities. To encourage

market based competition, and in line with the planned privatization of NITEL

and mobile telephony, multi- service access operator have been issued licences

by the National Communications commission (NCC) to offer international long

distance services provide non discriminatory and cost-oriented interconnection

to access providers an lower the cost of international services. The prospective

operators include cellular mobile service provider, national and international

long instance operators. Finally, in a determined bid to making the

37

telecommunications industry more functional government, in 2001, issued

licences for the operation of the GSM to successful bidders, including Econet,

MTN and Nitel.

Nigeria’s teledensity in 1960 was a mere 0.4 telephone to 1000 persons,

in 1985 and 1999, it improved to 1 telephone to 440 and 288 persons

respectively. Following the coming into operation of GSM operators in 2001,

Nigeria’ teledensity improved significantly and was estimated at 1 telephone to

50 people by the end of 2002. However, it is important to notice that the cost of

telecommunications in Nigeria is still one of the highest in the world. Access to

telephone services is limited to only approximately 25 percent of the country’s

land area. Nigeria’s teledensity (Including the cellular and mobile varieties)

remains at 0.61 direct exchange lines (DELs) per 100 inhabitants, which is

significantly lower than the average of 1.0 DELs per 100 inhabitants

recommended by the international Telecommunication Union (ITU) for sub-

Saharan Africa. Nonetheless, the prospect for the rapid development of

information and communalization technologies in the country could seem to

have improved considerably as a result of these recent developments.

The radio and television units, comprising the Nigeria Television

Authority, Federal Radio Corporation of Nigeria and External Radio services,

were owned by the government. The cost of services in this sub-sector was

regulated by the federal Government, rather than by market forces. The period

38

of regulation witnessed many problems, including capacity overload, a long

waiting time by subscribers, inadequate funding, and obsolete equipment.

Similarly, Mail deliveries remained grossly unreliable until the entry of courier

services which have given the public postal services a good competition.

2.5 PROBLEMS OF PUBLIC ENTERPRISES IN NIGERIA

In traditional business policy models, Andrew (2010), and Uyterhoeven

(2011), the chief Executive (usually a shareholder) is viewed as a rational-

emotional being, seeking to exploit opportunities in the environment consistent

with the needs of shareholders of the companies. Opportunities are sought

which would capitalize on the strength of the firm and minimize its weakness.

In order to spot the strength and weakness relative to other industry firms

management assesses the corporate environment in term of economic barriers

and social and political considerations. As soon as opportunity is perceived,

management compares its corporate strength and weaknesses relative to other

industry firms and defines a corporate venture and corporate strategy case

studies researched by businesses schools show that this should be the practice of

management. What is the position with GOBs?

Ugoo .E. Abba (2008:248) argued that some public enterprises whose

establishments are hinged on regulatory philosophy have also not lived up to

39

standard. Due to endemic corruption in these enterprises, officials collect bribes

and truncate their primary reasons for establishment.

But in the words of Chief Olusegun Obasanjo (1999) in his assessment of

the decline in Nigeria’s public enterprises asserts that these enterprises suffer

from fundamental problems of defective capital structure, excessive

bureaucratic control or intervention in appropriate technology, gross

incompetence and mismanagement, blatant corruption and crippling

complacency which monopoly engenders.

Excessive ministerial control and political interference according to

Ogunna (1999:246) defeat the primary objective of living-off public corporation

and therefore, are anti-thetical to effective performance.

Ryndima et al (1980:45-55) dealing on the political economy of surplus

argued that for there to be an increase on productivity or output commonly

known as “surplus value” there will be intensified exploitation of the workers in

the public corporations”. These measures can be lengthening the hours of work,

were these can measure up; there are other ways of getting their desired

objective, example by speeding up were (production) over time and

underpayment of workers.

In the words of Ogunna (1999), the poor performance of public

enterprises in Nigeria can be approached from the perspective of inadequate

40

financial and material resources, poor management, corruption and lack of

continuity of public corporation boards.

On the other hand, the civilian governments of first and second republic

appreciate the need for the policy of privatization and commercialization, which

was reflected in the various panesl to that effect which they established.

Ollor (1986:4) was in support when he said that given the economic

recovery objectives of government “privatization will relieve the financial

burden of government and release fund for it to use in other areas.

General Abdusalami Abubakar (rtd) came to power in June (1998), he

continued with the policy with much more vigor and planned to privatize or at

least commercialize all the public enterprises which he believed would not only

salvage the ailing public enterprises, make them more effective, but would in

addition, provide enormous funds of government for other public services.

Obadan hints that the enhancement of efficiency should be the primary

objective of a privatization programme. This is because maximum efficiency

will bring more sustained gains, which can then be distributed to a wider

segment of the society.

Lewis (1994:178) supports the view of efficiency, that the private sector

is to be more efficient, more productive and more profitable. In short,

privatization according to him would increase government revenues and cut

down or eliminate waste and unnecessary bureaucracy.

41

Nellis (1999) in Obadan 2000:19 agreed with above assertion by saying

that in empirical terms, various assessment of privatization outcomes,

particularly in the industrial and middle-income countries have concluded that

privatization leads to improve performance of private companies and that

privately owned firms outperforms “state owned firm”. He posits that increasing

evidence also shows that privatization yields positive results in lower income

and transition countries as well.

Guislain (1997:173) is of the view that the move for privatization is that

most government find themselves facing deep budget deficits and public

finances crisis”. The state no longer has the financial resources either to offset

the losses of state-owned enterprise (SOEs) or to provide the capital resources

necessary for their development. Thus, emphasizing that privatization is the

answer as most of SOEs are deeply involved in corrupt practices that have

depreciated its values, to achieve the basic requirement expected of it.

The Director General, Bureau of Public Enterprises (BPE), Dr.

Christopher Anyanwu said that government would hinder it from meeting its

privatization objectives.

He listed the objectives of the privatization among other things to include

the restructuring and rationalization of the public sector in order to lesson the

dominance of unproductive investment, beside, privatization was targeted at

42

raising funds for financing social-economic development in areas such as

health, education and infrastructure.

General Ibrahim Babangida’s administration was the first to take concrete

steps towards privatization and commercialization of some public enterprises.

Having reviewed some books on administrative and management problems of

public enterprises and possible ways of reformative measures and the cause of

these problems that have engulfed these public enterprises especially from the

external and internal factors and also having reviewed some books and articles

on these privatization and commercialization policy has been detrimental to the

poor in the society. Let us now attempts a review of some books and articles

that see privatization and commercialization as an exploitative tool in the hands

of ruling class and its foreign allies.

Nnoli O. (1981:4) historically, introduced the issues of initial rationale

why government involved in business activities, that those reasons should not

be sacrificed at alter of bourgeoisie inclined profit maximization. He contends

because public parastatals was only peripheral to the interest of the foreign

capitalist conditions of work in it particularly the wages were attractive than in

the private companies with a consequent lowering of workers moral and

productivity. That the public sector should not be blamed for its inefficiency

because at the dawn of independence, change has occurred in public sectors,

43

most of its activities were performed by private contractors and their failure is

the success of the private sector.

Another article assessed the different dimensions of which privatization

and commercialization have been viewed by various scholars. I think the

programme from the on set had non clear focus. The government was not really

sure what it wanted from the programme and consequently the TCPC itself did

not know where its true mission was. They never knew whether their mission

was raising money for the government or sharing of the national cake.

Furthermore, Bala (2004) found out that the privatization in Nigeria has

been able to replace the public monopoly with private monopoly. However, the

major impact of the reform has been in the area of increased competition and

efficiency. These were evident in the telecommunication, petroleum and

banking sectors.

According to Garba on Vanguard, Thursday, September 10, 2009, today,

the world has virtually become a global village in terms of communication and

doing business is gradually shifting from boardrooms to individual homes,

courtesy of teleconference. In view of these developments, two countries are

looking up to you the experts to ensure that their relation are boosted by the

content innovative trends in Telecommunications.

Mr. John Odey, the Minister of Environment (2009) said although the

telecommunications industry had impacted positively on the economy and lives,

44

it should not be allowed to hamper people’s health and environment. We must

balance the social, economic and environmental aspects of our development

areas.

Kalu (1990), contributed that as at the end of 2005, over 10 enterprises

have been privatized while over 30 enterprises have been commercialized. For

example, National Electric Power Authority (NEPA), now Power Holding

Company of Nigeria (PHCN), Nigeria Telecommunications Limited (NITEL),

now Nigeria Telecommunication Plc etc. according to Federal Government of

Nigeria (1993), the long term goal of a telecommunication enterprises is not

only to be self financing but also to generate a reasonable return on investment

and provision of digital exchanges; transmission links, gateways, and cellular

telephone system all over the country.

Amechi argues that with the Nigeria belief which holds that government

enterprises are nobody’s property every one inside and outside then strives to

loot them and no one preserves them. He augers that privatization is a step

fighting this ugly trend.

In government-owned-companies, so many variables militate against

positive corporate performance. This will be discussed under the following

subheads:

• Restriction of equity ownership to government

• Operational environment

45

• Organization and management structure

• Conflict of government’s objectives

• Absence of modern management process.

• Poor project planning

• Over capitalization

• High establishment cost

• Under-utilization of capacity

• Lack of a proper price policy

• Unsatisfactory industrial relations

• Lack of coordination

• Lack of motivation

• Political interference

1. RESTRICTION TO EQUITY OF GOVERNMENT:

Most government-owned businesses are 100% owned by the federal or

state government. Studies reveal that governments provide inadequate caita1

funding and working capital even from the inception of the business. The effect

is that right from the promotional stage, such business begin to suffer from lack

of capital and cash inflow. Since most have the reputation of poor performances

they are unable to borrow from foreign commercial banks except from state-

owned-bank with government backing. The time GOB starts real operations, it

46

shall have accumulated head costs which are difficult to wipe off because of the

poor productive performance in most of them.

Besides, most investments of GOBs are not based on the viability of the

business. For instance, government would invest in backward areas and on very

risky ventures (where private companies would not), for development reasons,

sometimes, government invests for prestige reasons and for national strata’.

Most of the time, because government fund is limited, it is not even able to

provide the amount of funds estimated it he federal or state budgets for the

operations of these companies. GOBs’ shares are distributed between the

ministry of finance (which holds 99% of the hares) and the controlling ministry

(which holds 1%). Therefore GOBs policies are made in the ministers even

though these companies usually have boards of director and chief executives.

These companies simply wait for government to provide capital funding to run

the business. This position reveals •a situation where policy making is separated

from strategic management.

2. OPERATIONAL/ENVIRONMENT OF GOVERNMENT

COMPANIES:

In a study carried out to underpin the environmental variables militating

against effective performance of GOBs,

47

The chief Executives of government owned companies in Nigeria were

requested to rank five variables in their order of negative contribution to

company’s performance. It was found that the greatest environmental variable

militating against the operation of GOBs was scarcity of technology. This

variable is very costly in most less developed countries (LDCS) and in Nigeria

in particular.

Since it is costly to provide adequate technology and technological

personnel in the country government companies embark on the purchase of

turkey technology which involves imported 1plant and machinery and the

employment of foreign technologists to operate them. In effect the industrial

sector of the country especially in government owned businesses depends on the

more developed countries for their operations. This has far reaching

implications of economic dependence. It is possible that the governments of

more developed counties could use the influence of their foreign personnel in

our midst to their Advantage.

3 ORGANIZATION AND MANAGEMENT STRUCTURE:

One of the major variables militating against the performance of GOBs is

their organizational and management structure. The establishment of

government business is always an action of the government. The idea of the

business may have been generated from outside the government; it may have

48

risen because of the action of a lobby group or a public outer or the vision of the

head of government or the ministry of trade and industry. When the idea is

properly conceived, it is usually sent to the executive council for approval. The

funds required are provided in the government budget and presented to the

House of Assembly or National Assembly for approval. At the inception of the

company general manager or chief executive is appointed, the secretary is also

appointed and aboard of directors appointed the head of government. Thus, it is

not difficult to find the organization and management of GOBs suffer from

influences of too many authorities.

In most government companies, government determines the financial,

pricing and distribution polices. And various competing extraneous authorities

like the Head of Government, Chairman of the ruling party, ministry of finance

and the controlling ministry, all influence decisions of the board, and therefore,

keep the chief Executive on his toes tying to manipulate their influences for his

convenience. In effect, because the Chief Executive has too many bosses whom

he must please, he has little time to give to the successful strategies of his

company. He resorts to power games to see where power is most powerful. Here

lie the problems of government companies and their inability to perform

efficiently.

49

4. CONFLICT OF OBJECTIVES:

Governments set up government companies to provide goods and

services for profit, the way private companies do yet, government attitude and

behavour in these companies run counter to-those objectives. For instance

government insists on keeping all staff no matter how unproductive.

Employment in government companies is based on so many non-competitive

influences. Government interests in risky ventures, in backward areas and fixes

the prices of government company products below market price — all for

welfare reasons. Government agencies buy the product/services of government

companies and do not pay for them promptly-so to stay as long as two or more

years. Directors of government iiiipu11es are generally politicians and have

neither financial nor professional stake in the companies they direct. Decisions

of the boards are at best recommendations to the ministries. Welfare objectives

seem more obligatory to Government owned business (GOBs) than business

objectives. All these are in conflict with the privatization intents of government

in floating these companies as companies limited by shares.

5. ABSENCE OF MODERN MANAGEMENT: Many studies Thune and

House, (2009) have shown that companies which practiced formal planning

produced better corporate performance measured in sales, earning ratio etc their

those which did not practice formal planning

50

Hussey (2008) has however, said that the fact that companies practice

corporate planning does not mean that they would do well. Nor does it mean

that corporate planning insulates a company from bad decisions. In Most

government businesses, there are no corporate plans. In a recent study where 35

companies indicated that they had instituted corporate planning, what existed

was annual Budgets assists in the co-ordination of current normally within a

year of current activities, normally within a year. On the other hand, corporate

plans look intensely into focus. This is one of the reasons why plans perform

poorly, the other major pertaining to government owned businesses has already

been given i.e. that poor operational environmental makes planning virtually

impossible in government-owned businesses. Charging government owned

businesses with responsibility for both welfare an1d profits seems to saddle

such businesses with functions that they are not suited to perform.

The restriction of ownership of government owned business to

government gives rise to insufficient capital funding and poor working capital

positions since that are many competing priority claims on government funds.

The organization and management of GOBs lend themselves to external

(government) controls and are therefore overtly politicized consequently;

company executives, directors and staff tend to have goals which are in conflict

with those of the companies they manage.

51

Government behavioral objectives are in conflict with their response

privatization intentions. The forces within these two divergent philosophies are

counter productive in the corporate performance of government businesses. The

operational planning is a modern management tool which might contribute to

the desired private corporate performance of government businesses.

6. POOR PROJECT PLANNING

Investment decisions in many public enterprises are not based upon

proper evaluation of demand and supply, cost-benefit analysis and technical

feasibility.

Lack of precise criterion and flaws in planning have caused undue delays

and inflated costs in the commissioning of projects. Sometimes, projects are

launched without clear-cut objectives and serious thought.

Many projects in the public sector have not been finished according to the

time schedule. Barauni Refinery was commissioned two years behind schedule

and the Trombay Fertilizer plant was delayed by three years thereby causing an

increase of Rs. 13 corers in the original cost estimates.

7. OVER- CAPITIALIZATION

Due to inefficient financial planning, lack of effective financial control and easy

availability of money from the Government several public enterprises suffer

from over-capitalization.

52

8 HIGH ESTABLISHEMENT COSTS:

Public enterprises incur heavy expenditure on social infrastructure such as

schools hospitals etc. location in backward regions and the desire to make the

undertaking a model employer lead to huge capital outlay on housing and other

amenities for labour.

9. OVERSTAFFING

Manpower planning is not effective due to which several state enterprises like

Bhilan Steel have excess manpower. Recrutiment is not based on sound labour

projections. On the other hand, posts of Chief Executive remain unfilled for

years despite the availability of required personnel.

10. UNDER-UTILIZATION OF CAPACITY

One serious problem of the public sector has been low utilization of

installed capacity. In the absence of definite targets of production, effective

production planning and control, proper assessment of future needs, adequate

supply of power and industrial peace, many undertakings have failed to make

full use of their fixed assets.

The average capacity utilization in more than 50 percent of the public

enterprises has been less than 75 percent. There is considerable idle capacity. In

53

some cases productivity is low on account of poor materials management or

ineffective inventory control.

11. LACK OF A PROPER PRICE POLICY

There is no clear-cut prices policy for State enterprises and the

Government has not laid down guidelines for the rate of return to be earned by

different undertakings.

State enterprises are expected to achieve various socio-economic

objectives and in the absence of a clear directive, pricing decisions are not

always based on rational analysis.

In addition to dogmatic price policy, there is lack of cost-consciousness,

quality consciousness and effective control on waste and efficiency.

12. UNSATISFACTORY INDUSTRIAL RELATIONS

In several state enterprises relations between management and labour are

far from cordial. There has been serious and frequent labour troble in Durgapur

Steel Plant. Bharat Heavy Electricals, Bhopal, and in Bangalore-based

undertakings.

Millions of days and output worth corers of rupees have been lost due to

strike and gheraos. Wage disparities have been the main cause of labour trouble

in the public sector.

54

The percentage increase in the per capital emoluments of public sector

employees has been higher than the percentage increase in consumer price

index.

13. LACK OF COORDINATION

Various state enterprises are dependent on one another as the output of

one enterprises is the input of another. For instance, the efficient functioning of

power and steel plants depends on the production and transportation of coal

which in turn is dependent upon supplies of heavy equipment and machinery.

Despite such interdependent, effective coordination between different

undertaking in the areas of personnel, finance, materials management and

research has not been achieved.

14. LACK OF MOTIVAITON

Directors and managers of public enterprises have little personal stake. There is

little incentive to work hard and improve efficiency. Centralization of authority

and rigid bureaucratic control hamper initiative, quick decisions and flexibility

of operations. Personal touch with employees and sensitivity to consumers

needs are lacking.

55

15. POLITICAL INTERFERENCE

There is excessive influence and interference by political leaders and civil

servants in the functioning of public enterprises. Parliamentary control reduces

the autonomy of these enterprises.

Finally, the government should be able to clearly define their objectives

in their companies and prepare the environment for them to be attained.

2.7 FACTORS AFFECTING THE POOR PERFORMANCE OF

PUBLIC ENTERPRISES IN NIGERIA

a. Integrity Factor: if Nigerians are unanimous in the view that

government owned enterprises have performed badly over the years, there is by

no means a consensus of opinions as to why this is so. One frequently cited

reason is that these enterprises and parastatals are run by corrupt officials. The

integrity factor, no doubt, worries quite a good number of knowledgeable and

public spirited Nigerians. This writer will certainly not hold the position that

there are no corrupt official in government owned enterprises. Such a position

will be untenable. Indeed such officials do exist and where and when they are

r1cecIecl, they should be made to feel the full weight of the law. There are

reasons, however, why one become suspicious of the corrupt official issue. In

view of Useni (2007) former federal minister of transport reported a massive

fraud, involving millions of naira by officials of the government coastal Agency

56

on demurrage charge such an act, was brazenly criminal one needs to know the

situation at the ports, however, before the fully blame can be put on the

officials. One did not get the benefit of this information in the minister’s press

conferences; the promise that these officials will face charges at the tribunal on

recovery of government property was never carried out. The courts later

quashed the order that the purported demurrage be repaid to government .

Finally, the report, classified as a secret government. These two instances

indicate that one has to be extremely cautious in accepting some of the official

pronouncements on misdeeds. The fear is that the public is presented as the

‘white paper’ on the findings of a panel. It m ay not truly reflect the findings

and conclusions of the panelists. Beside one understands out society well

enough to know that some panels, particularly administrative ones, are no more

than capricious and convenient creations intended to give in some instances, a

plausible excuse for replacing of given official or set of officials with preferred

standard(s). The one way these doubts can be removed is to make all panels

judicial and her findings public. This is what most of our government, civilian

or military, have consistently refused to do.

Whether state owned enterprises are all run by corrupt officials or not, thee are

clearly, other reasons for the general poor performance of these sate ventures.

57

B UNSTABLE MANAGEMENT AND BOARDS.

The first of these is the phenomenon of instability in the management and

boards of these enterprises. Every new administration, military or civilian

works by dissolving the boards of all parastatals and owned companies and

appointing new members to replace them. The civilian administration sees

these board appointments as patronage for those who supported them in the

elections. The appointments are hardly ever based on merit, the military, who

usually come into government on a corrective platform, sees an early necessity

to replace these civilian appointees as part of the programme to remove or

reduce corruption in public life.

The same instability of tenure extends to the top of these parastatals and

public ventures.

In view of Cramer (1989) post of chief executives of these enterprises had

virtually become political appointments. The effect of the instability can be

quite profound in the case of large public utilities. No general manager of

NEPA for instance has even held office for more than four years. The same is

true of its Board of Directors and of the positions of Chief Executive and board

members of state N1TEL Boards or corporations. In these circumstances,

planning become quite meaningless. Each new chief executive and board

member sets its own objectives and plans but is never in office long enough to

implement them. Yet, these are stakeholders whose planning ought to be

58

strategic with an outlook of 10-15 years. There are either reasons for the

inefficiency of the nations public utilities but, public ui1ities but, clearly,

instability of tenure for top management and boards which make planning and

plan implementation difficult must rank among the key ones.

C. POWER STRUGGLE WITHIN THESE GOVERNMENT

ESTABLISHEMNT: A related problem is the frequent wrangling and power

tus1e that exist among the numbers top management unit and other employees

of parastatals and public owned enterprises, what some People have referred to

as the triangle or power struggle.

Sometimes, chairmen and board members see their relationship with the

chief executives of these enterprises as a boss subordinate one. A board member

is one of the federal al steel companies during the second Republic flatly

declared that the “general manager is under us” even though the general

manager was, himself a member of the board. Perhaps the worst manifestation

of this problems occurred at the state level during the second Republic when in

some states, chairman were given full time appointments. In such cases, it was

difficult to know who the chief execution was – the general manager who

functioned as such before these appointment, or the new full time chairman and

boards were to concern themselves with planning and broad policy questions.

Execution was - the general manager who functioned as such before these

59

appointments, or the new full time chairman? In Bendel state, which was one of

the states involved, a clarification was made that the full time chairman and

boards were to concern themselves with planning and board policy questions.

The general managers, which the document asserted were still chief executives

were to handle the fray to day remaining of the parastatss and state owned

companies. The document merely confused issues further. What planning and

policy matters can be discussed without the general manager–chief executive of

the enterprises? In any case, some chairman extended their planning function to

include being signatories to company accounts and approving all payment even

though general managers were supposed to - have authority over expenditures

not exceeding some certain amount.

Some chairmen equally insisted that they must be involved ii the

appointments of very junior staff messengers, watchmen etc. as they were eager

to provide job for their ‘boys’. It is difficult to see how efficient and profitable

operation can be take place under these circumstance.

D LOCATION FACTOR

It is quite unrealistic to note that the sitting of government owned

industries will be based on economic factors alone. Surely in a federation, there

is a need to ensure that the sitting of major industries reflect the federal nature

of the country. Whether a Peugeot Assembly and a refinery should be sited in

60

Kaduna or an Anamco in Enugu or a steel plant in kwara and Bendel states must

be seen not only on the profitability of these ventures, but also on the socio-

political frame work under which the nation operates.

The problems, however, seems to be the reason why Nigerian accept the

above proposition as necessary and logical, completely, SC) it seems forget the

same factors and complain about the high cost of the projects and their relative

unprofitability. In 1981, for instance, Peugeot Automobile of Nigeria (PAN) in

justifying its request to hike car prices explained that, it was faster ‘and safer for

the company to fly in parts and components from France than (1w less

expensive but slower route of bringing in the items by sea to Lagos and sending

them to Kaduna by rail or road Business. If the company was located in any of

the port cities, Lagos, Port Harcourt, Warn or Calabar, this problem would

probably not have risen. Similarly, it is no secret that the Ajaokuta steel plant

would have cost much less many to build had either of the other two cities

selected by the Onitsha and port. Harcourt been chosen.

The location of the plant makes sense not only because it is near the

source of the Iron--Ore but also because there was no major federal project in

Kwara state at the time.

However, sitting it there has meant building a 70 kilometer dual carriage way

from Okenne to Ajaokuta, a bridge across the Niger to Itobe Itobe in Benue

61

state and the building of oil of brand new township in what was, hitherto, a

complete wilderness.

The same is true of many other federal projects. The inland Rolling steel

mills at Oshogbo, Katsina and Jos have to be supplied by road from the Aladja

steel plant, and expensive proposition that is telling on the high ways. The oil

refinery in Kaduna meant the building of oil pipelines from the Escarvous in

Bendel state across almost the full length of the country to supply crude oil to

the refinery. It is clear that the siting of some important federal industrial

ventures, occasioned by the federal nature of the country, has meant higher

overall project cost and a slim chance of the projects ever becoming profitable.

What is baffling is the fact that this crucial 1io1 is frequently complete1y

ignored when the public I bemoans that poor performance of these ventures.

C THE TECHNOLOGY FACTOR:

Some government owned enterprises have had technology problems from

the on-set. The Delta steel plant DSC is one of the most modern in the whole

world. It used the direct oxygen reduction process and only Japan west

Germany have such plants. The process required high quality Iron ore; - the ore

must not contain more than 10% impurities because the tolerance level of the

process will not permit iron-ore of the, lower grade. We do not have such iron-

ore in Nigeria, and, therefore, this basic raw material for DSC must be imported

62

from Guinea. The result is an off and on pattern in the company’s production

particularly during these lean years when the foreign exchange to import the ore

is often unavailable. DSC, as a result has never reached up to 30% of its

capacity. Would anyone seriously expect such a company to be profitable in the

foreseeable futures?. At the state level, similar problems have been observed.

The plants at the Bendel Textile Mills at Asaba and the Bendel Glass industry

have been obsolete for more than ten years. The government did not have the

money to buy new machinery and equipment and the two companies have

remained dormant for years or maintained skeleton operation. This exp1ains

why these two companies have not been profitable it will take the new Indian

partners bringing in new machinery and equipment to revive the textile mill at

Asaba, for more than four years the government is ye to find a suitable buyer for

the glass industry.

Finally, the Sokoto cement factory could not operate efficiently long after

it was commissioned. It took the research efforts of salihu to point out that the

technology installed for the plant was wrong The plant had a wet product

process whereas, for the basic raw material available a dry process was

required. The technical error has now corrected.

63

F. POOR CAPITALIZATION-AN IMPEDIMENT TO BORROWING:

One often wonder why government owned profit oriented enterprises are

unable to attract loan financing from the banks, whereas their private section

counterparts command lines of credit with relative ease from the same financial

institutions. Part of the explanation is of course, the fact that overall

performance of these companies does at inspire much confidence. In additions,

where such uses are to be made, the financial houses hedge against possible

losses by insisting that the respective government guarantee such loans.

A less factor there is the fact that most of these enterprises federal and

state, are set up with ridiculously low equity capital base. Neither the Ajaokuta

steel plant nor the Dealt steel company, in spite of the judge amounts spent on

them had an equity capital above one million (NI million by 1987). The magic

figure for similar enterprises in the state appeal-s to be five hundred thousand

naira (N500,000) equity capital for each venture. Sometimes the government”s

support their equity investment with soft loans. In the case of a particular

company in Delta state, the government, the sole owner, had a paid up capital of

six hundred and fifty-nine thousand naira (N659,000) and another N2. 8 million

loan bearing 5% assured interest by 1986.

The situation that is under capitalization poses a formidable problem for

these companies by way of getting loan financing from the banks. Financial

experts tell us that the debt/equity ratio in a healthy company should be charged

64

to This would imply that for the steel companies we mentioned earlier, the

maximum loan financing they all expect from banks, can be no more than two

million naira (N2million) each, This is a paltry sum for companies that require

working capital assistance in a typical year of nearly two hundred million naira

(N200 million).

The problem appears easy enough to solve, on the surface. But it is not

for government projects, particularly the federal ones. The argument as to what

should be charged to the project itself arid what should he regarded as general

social service or national infrastructure development remains unresolved. The

some people the cost of building a township, the cost of the 70 kilometer dual

carriage way, the cost of bringing electricity to Ajaokuta and the cost of the

bridge across Nigeria should not be capitalized into the Ajaokuta steel company

because there may be social service but the expenditure have been incurred at

this time only because a steel plant is being build there. To that extent, they

would argue, the expenditure should, appropriately be charged to the steel

complex.

The government position on this is ambivalent. The point is that in almost

all cases, governments deliberately fail to fully capitalize their investments in

their companies which are left with an extremely low equity base. This in turn

makes it hard for the companies to obtain regular loan financing from the banks.

The companies then rely on government subsidy. When such subsidy is not

65

forth coining, the company’s operations may be stifled to the point of

unprofitability.

66

REFERENCES

Iwayemi A (1999). , “Management and Accountability in Public Enterprises”. Enugu :Keez publishers.

Cramer, E. (1989) “Strategic Planning Nigeria” Business Times, P. 13 Lan S. (1980), Foreign invesment in Transnational and Developing Countries.

London, Macmillan. Made S. (2003), “Central Bank of Nigeria: Contemporary Economic Policy

Issue in Nigeria”, Abuja, Kas Art Services Publisher, P. 78. Naira L, (2009), “Managing Public Enterprises” in Nigeria. Onitsha, Noble

Publsihers. Njoku. S, (1988). Court Quashes FGN order on GCE Contractors National

Concord, JAugust P. 3. Nwabuzor M. (1990) Business Government, Relation in Nigerian. Benin City

Illupeju publishers. Okeke N., (2010). “Why some government owned companies Remain Sick

Babies Journal of Business, 4(3) Sicherl P., (1981). “Concept of public Enterprise” A paper presented in the

workshop on “management and accountability in Public enterprises Organized by Nnky Pt Joint Project.

Thune S., & House R. J. (2007). Where Long Range Planning pays off,

Business Times September 20 P 5. Tunji 0. (1981), pan AK for a price Hike Business Time Vol.3 No.32JulyP.3 Useni J., (1987). Ministerial Statement on commission of Inquiry into the

government coastal Agency. National Concord, 4 (5) Uyterhoeven H., (2002) “Strategy and Organization. Ibadan: Home wood

publishers. Word Bank, (1993). Review on Nigeria Public Expenditure, (1993) pp384390.

67

Bellorary, L. (2005) “Revenue Generation It is time to measure and report” Business Journal, 8(1).

Bowen D. (1987) “Incremental information content of Accrual versus cash

flow” The accounting review.

68

CHAPTER THREE

3.0 RESEARCH DESIGN AND METHODOLOGY

INTRODUCTION

This chapter describes the procedure adopted in carrying out the study.

The procedure is described under the following headings; research design,

sources of data, population of the study, sampling strategy, the sample size

determination, question design/construction, validity of the instrument used,

reliability of the instrument and method of data analysis.

3.1 RESEARCH DESIGN

This is an empirical survey which attempt to study the management of

revenue generation and accountability in selected Nigerian parastatals.

Both the survey and historical research design were adopted for this study. The

choice of these two methods of research design was informed by the fact that

extensive use was made of recorded or historical data while survey was

employed to get information form utility consumption and the parastatals

respondents. Survey research apart form having the advantage of flexibility is

also of value to decision makers.

69

3.2 SOURCES OF DATA

Data used in this study came mostly from two sources. These .are primary

and secondary data, Primary data are those first hand information sourced

purposely for the work at hand and was gotten with the use of questionnaire.

Secondary data are those that are already in entrance either in recorded or

published form, secondary data came from text books, journals, newspapers,

magazine and seminars.

As already stated above, primary data were sourced using two

instruments of questionnaire and oral interview.

3.3 POPULATION OF THE STUDY

According to Zikmund, (1982) when there is no definite population

figure, students should resort to validation. However, the population of this

study was made up of the junior, middle and high level staff of the two

parastatals cited as the selected parastatals in Nigeria

3.4 SAMPLING STRATEGY

Stratified sample techniques would be adopted for the study. This was

designed to give a fair representation to the various groups of the population

understudy.

70

3.5 SAMPLE SIZE DETERMINATIONS

To ensure that the sample is nearly as representative of the populations,

the sample size was determined using the formular, n = Z2 pq

e2

Where,

n = sample size

z = desired confidence level

p = Percentage of positive response as determined in the pilot survey

q = percentage of negative response

e = estimated standard error from our pilot study, where we have:

z =95% (1.96)

p = 85%

q = 15%

e =5%

n = (1.96)2 (0.85) (0.15)

0.052

Our sample size for the study is 195.

3.6 QUESTIONNAIRE DESIGN/CONSTRUCTION:

The questionnaire was made of both open and closed ended questions.

Closed ended questions are both multiple choice and dichotomous a, b, they

= 195

71

were all used, and, this study was to limit respondent choice from the options

given.

Respondents chose from the options given. Open ended questions were

also used to make interviewers to answer or respond in their own words.

3.7 VALIDITY OF THE INSTRUMENT USED

The instrument was validated by the project supervisor.

The supervisor went through the questionnaire items made corrections on them.

3.8 RELIABILITY OF THE INSTRUMENT USED

The researcher made use of test re test method to ascertain the reliability

of the data generated. The same set of questions were administered to the target

population and after two weeks the same set of questions were equally

administered to the same target population and the same results were equally

obtained.

3.9 ANALYSIS OF DATA

The data obtained from the study shall be tabulated and presented using

simple percentages. The percentage of the respondents to a particular question

was estimated at,

r% R x ‘ 100 were R = Number of respondents to particular question.

N is the total Number of respondents that returned the questionnaire.

72

Test statistics used for testing the hypothesis is chi-square and is calculated

mathematically thus X2 = ( fo -fe)2

Where X2 is chi square

fo = observed frequency

fe = expected frequency

This method was used to test the sample distribution and it confirms to some

theoretical distribution as well as to know if there is a significant difference in

the frequency with which several categories of observations in two or more

sample occur.

73

REFERENCES

Osuala E. (1982), Introduction to Research Methodology, Onitsha, African Feb

Publishing Company Limited P.

Ziknund W. (1982), “Exploring marketing Research”, Himsdale, Winton C B S

College publisher.

74

CHAPTER FOUR

4.0 DATA PRESENTATION AND ANALYSIS

In this chapter, the researcher presented and analysed the different types

of data generated for the study. The first is the historical data on the

management of revenue •generation and accountability in selected parastatals

with regards to Power Holding Company of Nigeria and Nigeria

Telecommunication Limited.

A total of 195 copies of the questionnaire were distributed to our

respondents within the area chosen for the study out of this number, a total of

150 copies were returned and this represented approximately 77 percent. After

careful sorting and editing, 28 questionnaire were rejected because they were

either wrongly filled manipulated or had some questionnaire altered. This left us

with a total of 122 copies of the questionnaire which were accepted as being

currently filled and free from any form of manipulation or alteration. This

represents approximate 81% of the number distributed.

4.1 DATA PRESENTATION

Information was sought on educational qualification of respondents and this is

shown in table 4. 1 below

75

TABLE 4.1

RESPONSE ON EDUCATIONAL QUALIFICATION OPTIONS FREQUENCY PERCENTAGES

FSCL 17 9.84

WAEC/SSCE/NECO 20 16.39

OND/NCE/HND 60 49.18

BSc. AND ABOVE 30 24.59

Total 122 100

Source: Field Survey 2012

As shown in the table 4.1, it shows that 9.84% of the respondents are

holders of first school leaving certificates and 16.39 percent are holders of

NECO, SSCE and WAEC, while 49.18 percent are holders of OND/NC/HND,

those with B.Sc and above constitute 24.59 percent of the respondents are

holders of B.Sc and above. Information was also sought on how long

respondents have stay with your parastatals.

TABLE 4.2

RESPONSES ON HOW LONG RESPONDENTS HAVE BEEN WITH

THE COMPANY

OPTIONS FREQUENCY PERCENTAGES

1 4 years 17 13.93

5 8 years 25 20.49

9 15 years 30 -. 24.59

16 and above 50 40.98

Total 122 100

Source: Field Survey 2012

76

The above table shows that 13.93 percent have served with the parastatals

between 1-4 years, 20.49 percent have stayed between 5-8 years, while 30 of the

respondents representing 24.59 percent maintained that they have worked with

the parastatals for a period of 9-15 years. 50 of the respondents, representing

40.98 percent shows that they have served with the parasatals for a period of 16

years and more.

Information was sought on the position the staff were holding on the parastatals

TABLE 4.3

RESPONSE ON THE POSITION OF THE STAFF IN YOUR

PARASTATALS

OPTIONS FREQUENCY PERCENTAG

E

Manager 30 24.59

Director 40 32.79

Casual worker 10 8.20

Messenger 17 13.93

Clerks 25 20.49

Total 122 100

Source: Field Survey 2012

The information displayed in the table above shows that 24.59 percent of

the respondents hold the positions of Manager, while 32.79 percent of the

respondents hold the positions of 8.20 percent of the respondents are casual

77

workers while 13.93 and 20.49 percent of the respondent represent the number

of staff holding the position of the messengers and clerks respectively.

TABLE 4.4.

RESPONSE ON THE CATEGORY OF WORKERS

OPTIONS FREQUENCY PERCENTAGE Strategic

7 5.74

Tactical 45 36.89

Operational

70 57.38

Total 122 100

Source: Field Survey 2012

From the above table it is observed that 5.74 percent of the respondents

occupied the strategic position, while 36.89 percent of the respondent occupied

the position of tactical level, 57.38 percent represent the number of staff who

occupied the position of operational level.

TABLE 4.5

RESPONSE ON THE SOURCES OF REVENUE GENERATION TO

THESE PARASTATALS.

OPTIONS FREQUENCY PERCENTAGE

Service rendition 12 10

Customer’s service 50 41

Payment of bills 60 49

Total 122 100

Source: Field Survey 2012

78

Information from above table show that 49 percent of the respondents

were of the opinion that the two parastatals derived their revenue from the

payment of bills from customers while 41 percent were of the opinion that it

was through customer of the respondent and 10 percent of the respondents were

of the view that the two parastatals source their revenue from the rendition

service.

TABLE 4.6

RESPONSE ON THE WHETHER THE PARASTATALS ENCOUNTER

PROBLEMS

OPTIONS FREQUENCY PERCENTAGE

Agreed 32 36.2

Disagreed 90 73.8

Total 122 100

Source: Field Survey 2012

From the above table 4.6, it can be observed that 73.8 percent of the

respondents agreed that these two parastatals encountered problem in the

process of revenue generation while 26.2 percent of the respondent were of the

negative view that the parastatals do not encounter problem in the process of

revenue generation.

79

TABLE 4.7

RESPONSES ON THE TYPE OF PROBLEMS THE PARASTA TALS

ENCOUNTER

OPTIONS FREQUENCY PERCENTAGE

Bureaucratic Problem 50 41

Government interference/ legislation 50 41

Transportation problems 22 18

Total 122 100

Source: Field Survey 2012

From the above table 4.7, it shows that 41 percent of the respondents

were of view that bureaucratic and 41 percent believed that government

legislation and interference contributed mainly to the problem of these

parastatals while 18 percent were of the view that transportation constitute very

minimal to the problem of these parastatals.

TABLE 4.8

RESPONSE ON WHETHER THESE PROBLEMS AFFECTS THE

PARASTATALS

OPTIONS FREQUENCY PERCENTAGE

Agreed 42 34.4

Disagreed 80 65.6

Total 122 100

Source: Field Survey 2012

From the above table, it indicated that 65.6 percent of the respondents

agreed that these problems affects the parastatals while 34.4 percent of the

respondents disagreed with the view.

80

TABLE 4.9

RESPONSE ON THE USE OF FINANCIAL MEHAMSM

OPTIONS FREQUENCY PERCENTAGE

Agreed 80 65.6

Disagreed 42 34.4

Total 122 100

Source: Field Survey 2012

From the above table 65.6% of the respondents make use of financial

mechanism control in their accounting systems, whi1e 34.4 percent of the

respondents disagreed.

TABLE 4.10

RESPONSE ON THE APPLICATION OF FINANCIAL MECHANISM

OPTIONS FREQUENVY PERCENTAGE

Once a month 40 32.8

Quarterly 20 16.4

Semi-annually 35 28.7

Annually 27 22.1

Total 122 100

Source: Field Survey 2012

From the above 4.10, it is indicated that 32.8 percent agreed that the two

parastatals prepare their accounting reports on monthly basis, 16.4 believe that

they prepare their accounting reports quarterly basis, 28.7 percent of the

respondents, agreed that NITEL & PHC prepare their accounting reporting

semi-annually respectively, while 22.1 of the respondents were of the opinions

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that the two parastatals NITEL and PHC prepare their financial statement

annually.

TABLE 4.11

RESPONSE ON WAYS OF MOTIVATING WORKERS OF THE

PARASTATALS

OPTIONS FREQUENCY PERCENTAGE

Once every three years 40 32.8

Once every five years 60 49.2

Rarely motivated 23 18.0

Not motivated / Nil Nil

Total 122 100

Source: Field Survey 2012

From the above table, it is indicated that 49.2 percent of the respondents

were of the opinion that the two parastatals give their staff motivational

incentives once in very five years, while 32.8 percent of the respondents were of

the view that the two parastatals give their personnel motivational incentives

once every three years, and 18 percent of the respondents were of the view that

they due give motivational incentive rarely.

82

TABLE 4.12

RESPONSE ON WHETHER GSM AND E-MAIL SERVICES AFFECTS

REVENUE PROFILE ON YOUR PRASTATALS

OPTIONS FREQUENCY PERCENTAGE

Agreed 80 65.6

Disagreed 20 34.4

Total 122 100

Source: Field Survey 2012

From the above table, it shows that 65.6 percent of the respondents

agreed that GSM and E-mail service providers have significantly affected the

revenue/profit profile of these parastatals while 34.4 percent of the respondents

disagreed with the view.

TABIE 4.13

RESPONSE ON WHETHER THESE PARASTATALS GERATE

ENOUGH FUND TO PAY THEIR SALARIES AND WAGES.

OPTIONS FREQUENY PERCENTAGE

Agreed 50 41

Disagreed 72 59

Total 122 100

Source: Field Survey 2012

From the above table, it shows that 72 of the respondents representing 59

percent disagreed that these parastatals do not generate enough fund to pay the

salaries and wages of their salaries promptly while 50 of the respondents

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representing 41 percent agreed that they two parastatals generate enough fund

for payment of salaries and wages.

TABLE 4.14

RESPONSE ON CAUSES OF LOW REVENUE GENERATION OF

THESE PARASTATALS.

OPTIONS FREQUENY PERCENTAGE

Non payment of bills by customers 35 28.7

Erratic power/service supply 35 28.7

Diversion of funds 17 13.9

Non satisfaction of customers service 35 28.7

Total 122 100

Source: Field Survey 2012

From the above table 4.14, it is indicated that 28.7 percent of the

respondents were of the view that non payment of bills by customers of these

parastatals contribute to low revenue generation, erratic supply of power or

rendering services to customers and non satisfaction of customers constitute a

serious problem to the low profile of revenue generation of these parastatals and

17 of the respondents representing 13.9 percent were of the opinion that

diversion of fund and non accountability constitute problem of low profile of

revenue generation.

84

TABLE 4.15

RESPONSE ON WHAT OTHER AREAS DOES THESE PARASTATALS

GET FUNDS FOR PAYMENT AND MAINTENANCE OF EQUIPMENT

Grants subvention from the government; while 18 percent of the

respondents were of the view that these parastatals borrowed loan to pay

salaries and maintain service equipment.

RESPONSE ON WRETHER POOR TRANSPORT SERVICE AFFECT

THAT TIMELY DELIVERY OF SERVICE TO CUSTOMERS.

OPTIONS FREQUENY PERCENTAGE

Subvention/grants 100 82

Loans 22 18

Total 122 100

Source: Field Survey 2012

From the above table 4.15, it is indicated that 82 percent of the

respondents were of the view that these parastatals received

OPTIONS FREQUENY PERCENTAGE

Agree 75 61.5

Disagree 47 38.5

Total 122 100

Source: Field Survey 2012

From the above table, it is indicated that 61.5 percent of the respondents

were of the view that poor transport service affect the timely delivery of service

85

to the customers, while 38 percent of the disagreed that poor transport service

does not affect the timely service delivery to customers.

TABLE 4.17

RESPONSE ON WHETHER THERE IS EXPANSION OF SOCIAL

INFRASTRUCTURE AT AFFORDABLE RATE BY THE REVENUE

GENERATED.

OPTIONS FREQUENY PERCENTAGE

Agree 52 42.6

Disagree 70 57.4

Total 122 100

Source: Field Survey 2012

From the above table, it shows that 57.4 percent of the respondents was

of the view that there is spread of social amenities to the masses at an affordable

rate, while 42.6 of the respondent agreed with the opinion.

TABLE 4.18

RESPONSE ON WHETHER YOUR PARASTATALS ARE

ADEQUATELY EQUIPPED WITH WORKING MATERIALS FOR

DISCHARGE OF THEIR DUTIES

OPTIONS FREQUENY PERCENTAGE

Agreed 30 24.6

Fairly 70 57.4

Poorly 22 18.0

No Nill Nill

Total 122 100

Source: Field Survey 2012

86

From the above table, it shows that 57.4 percent of the respondents were

of the view that these parastatals are fairly provided with working materials for

the discharge of the duties, while 24.6 percent of the respondents were of the

view that parastatals are provided with adequate working tools for discharge of

duties and 18 percent of the respondents were of the view that they are poorly

provided with the working materials for the discharge of duties.

4.2 DATA ANALYSIS AND TEST OF HYPOTHESES

Having so far presented an overview of all the questionnaires administered for

the study, the researcher will now select and analyze relevant question as they

relate to the three stated hypothesis. After the analysis, the result will be tested

to know the validity or otherwise of each of the three stated hypothesis, the

techniques to be adopted in the test are the percentage chi-square test.

The following symbols are employed in the analysis

Ho: Null hypotheses

HI: Alternate Hypothesis

X2: Chi square

X2C: Chi square calculated value

Df: Degree of freedom

Fe: Expected frequency

Fo: Observed frequency

87

DECISION RULE:

Accept Ho if X2C < X2 from the chi-square table

Reject Ho if X2C > X2 from the chi-square table

4.2.1: TESTING OFHYPOTHESES

Hypotheses One

HO: Effective revenue management and accountability is not dependent on

profitability of parastatals.

Hi: Effective revenue management and accountability is dependent on

profitability of parastatals.

The data collected as presented with tables and percentages will now he

used in analyzing and testing the hypotheses earlier stated for the study. This is

To substantiate the conclusion and recommendations drawn on them.

This hypotheses would be tested using the statistical tool of chi-square and the

formular is stated thus:

X2 = Σ(f0-fe) fe

Where f0 = observed frequency

fe = expected frequency

88

Decision Rule

Reject null hypothesis if the critical value of x2 at 5% level of significant

is greater than the calculated value, Test the validity of these hypothesis using

table 4.9 would be used to test the hypotheses.

Table Computation of Test Statistics for Hypothesis I

Variables F0 Fe F0-fe (fo-fe)2 Fo-fe)2

Fe

Agreed 80 61 21 441 7.250

Disagreed 42 61 19 361 5.918

Total 122 13.148

Source: Field Survey 2012

Fe = 122 = 61 2 Critical value o f sample

r = 2, c = 2

df = (r-1) (c-1) = (2-1) (2-1) = 1

x2 = (0.05,1) = 3.84

To compare the two values

x2 = computed 13.148

x2 = critical 3.84

89

DECISION

Rejection

Inference since the computed value of x2 is > than critical value at 0.05

value, that means we reject the null hypotheses (Ho) and accepted the

alternative hypotheses (H1) and the researcher conclude that government

interference/legislation affect the effective revenue management and

accountability of parastatals.

Hypotheses Two:

Using Chi-square (X2) Test

Ho: Mode of disbursement of grants to parastatals is not significantly effected

impact on revenue generations and accountability in Nigeria.

H1: Mode of disbursement of grants is significantly affected by revenue

generation and accountability in Nigeria.

Table Computation of Test Statistics for Hypothesis 2

Variables F0 Fe F0-fe (fo-fe)2 Fo-fe)2 Fe

Subvention 100 50 44 1936 34.57

Loan 22 56 -34 1156 20.64

Yes 52 56 -4 16 0.286

No 72 56 -12 144 2.571

Total 224 50.067

Critical Table of X2 (chi-square)

90

Fe = Σx = 100 + 22 + 52 + 72 n 4 224 = 56 4 Fe = 56

X2 value calculated = 50.067

The degree o f freedom df = (r-1_ (c-1)

df = (4-1) (4-1) = 3 x 3 = 9

From table of x2 9 at 0.05 level of significance is 16.6190.

Decision rule:

Since the computed value is higher than the critical value, we rejected the

null hypothesis and concluded that mode of disbursement of grants to

parastatals has significant impact on the revenue generation and accountability.

Hypotheses Three

HO: Inadequate disclosure of financial information is not significantly affected

by revenue generation and accountability in Nigeria.

H1: Inadequate disclosure of financial information is significantly affected by

revenue generation and accountability in Nigeria.

To test the validity of hypothesis three, table 4.10 would be used to test

the hypotheses.

Fe = Σx = 40 + 20 + 35 + 27 = 122 = 30.5 n 4 4

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Table Computation of Test Statistics for Hypothesis 3

Variables F0 Fe F0-fe (fo-fe)2 Fo-fe)2

Fe

Once a month 40 30.5 9.5 90.25 2.9590

Quarterly 20 30.5 -10.5 110.25 3.6148

Semi-annually 35 30.5 4.5 20.25 0.6639

Annually 27 30.5 -3.5 12.25 0.4016

Total 122 7.6393

X2 value calculated = 7.6393

The degree o f freedom df = (r-1) (c-1)

df = (4-1) (4-1) = 3 x 3 = 9

From table of x2 9 at 0.05 level of significance is 16.6190.

Decision rule

Hence the computed value 7.6493 < 16.6190 than the critical value, then

we rejected null hypotheses and accepted the alternative hypotheses that

untimely reporting of accounting statement result in inadequate disclosure of

finance information has a serious impact on the revenue generation and

accountability.

4.3 DATA ANALYSIS

This sub-section of this chapter deals with the analysis of data in tables

and the result of the test of hypotheses as it is associated with “management of

92

revenue generation and accountability of parastatals in Nigeria” the finding data

as presented in tables above are obtained from the literature review and

response from questionnaire administered to respondents.

Inference in table 4.5 shows sources of revenue to these two parastatals

and the researcher observed that they parastatals derived their major sources of

revenue from the payment of bills by customers and service delivery from

customer and invariable in table 4.15 the researcher disclosed that these

parastatals get subvention/grants from the government.

In the table 4.6 and 4.7 disclosed that these parastatals encountered

problems either internally, and the researcher observed that these problems

emanate from non-ability of customers to pay their bill and the administrative

bottle-neck inherent in these parastatals and diversion of fund from staff.

Moreover, the writer observed in table 4.8 that these problems have

affected the parastatals in one way or the other in smooth generation of revenue

and accountability.

The researcher observed in table 4.9 that the use of financial mechanism

control is not adequate because the principle of quarterly and annual financial

mechanism is not properly instituted and applied.

From the available evidence in table 4.11 the researcher discovered that

these parastatals does not motive their workers as when due the researcher

93

discovered that the introduction of G.SM and E-mail service has affected the

revenue profile of the parastatals.

Table 4.13 and 4.14 revealed that the researcher does not generate enough

fund for the payment of salaries, which is caused by erratic power supply and

non payment of bills by customer’s service traceable to non satisfaction of

customer’s service.

Inference in table 4.16 revealed that poor transport service and non

serviceable vehicle affects the timely delivery of service to the customers and

this equally affects fast provision of infrastructural do their customers at

affordable rate.

Information in table 4.18 revealed that they two parastatatals are fairly

equipped with working equipment or tools. From the test of hypotheses one, the

researcher concluded the validity of the rest with table 4.8 that government

administrative inference/legislation affect effective revenue generation and

accountability.

Moreover in testing hypothesis two that m ode of disbursement of

grants/or subvention has negatively affected revenue generation and

accountability and this has substantiate the validity of hypotheses two, which

the hypotheses was rejected and this show tat m ode of disbursement of fund

has caused delay in payment of salaries and procurement of equipment and

necessary working materials.

94

The test of hypotheses three, show that the alternative hypotheses was

accepted indicating that inadequate disclosure of financial information has a

serious impact on revenue generation and accountability.

95

CHAPTER FIVE

SUMMARY OF FIDINGS, CONCLUSION AND RECOMMENDATION

5.2 SUMMARY OF FINDING

The main concern of this chapter is to discuss the findings from the study,

summarizing the research work and making suggestions based on findings.

This study established the relative importance of the management of

revenue generation and accountability in NITEL and NEPA (PHCN). The study

revealed that these parastatals derived their revenue from payment of bills,

services delivery from customers and grant/subvention from the federal

government. It has been establish that these parastatal encounter internal

problems and the internal problem resulted/came from diversion of funds by the

staff and inadequate recording of financial records/statement and the external

problems emanates from the Bureaucratic bottle-neck of the parastatals.

The researcher evidence observed or showed that these parastatal fails to

recognize the quarterly and annual budgetary process, which has hindered the

proper implantation of financial mechanism.

The research identified that the introduction of G.S.M and E-mail

(technological innovation) in other similar parastatals has drastically affected

the revenue base of these parastatals or resources of revenue generation of these

parastatals.

96

The writer’s finding revealed that erratic power supply and non payment

of bills significantly affected the revenue.

Furthermore the researcher revealed that non provision of serviceable

vehicle has affected the generation of revenue by these parastatals. The

evidence from the result of testing hypothesis two revealed that the mode of

disbursement of fund has caused delay in the payment of salary and

procurement for the equipment and necessary action and for the researcher to

confirm the validity of hypothesis three, it was confirmed that inadequate

disclosure of financial information has seriously impacted on revenue

generation, and accountability.

5.1 CONCLUSION

The study transcend the realm of more academic exercise as the issue

discussed is not only topical and practical, but the result has intend to establish

valid points on the need for building a solid analysis on the impact of revenue

generation and accountability in both NITEL and NEPA (now known as power

Holding Company of Nigeria).

The reasons for establishing public enterprises like NITEL and NEPA are

not far-fetched and one or two cardinal objectives are to provide social

infrastructure to the masses/citizens at an affordable rates and generation of

revenue that would add to available national capital.

97

Despites, these primary objectives, they organized certain critical

activities for national survival and economic stability and providing

employment opportunities to the people. In addition to the grant or subvention

received from the government, both parastatals source their revenue externally

through payment of bills and other miscellaneous service rendered to their

customers.

However, due to increase in globalization and advance in technology,

most of the areas where the two parastatals sources their revenue been

hampered as a result of GSM and other networking system that embraced

management information system.

Furthermore, these parastatals have problems of poor funding, poor

condition of service, lack of motivation, stagnation and poor services rendered

by there parastatals to their customers.

5.3 RECOMMENDATIONS

In the light of the following discussions and findings, the following

suggestions/solutions are made toward solving the problems of revenue

generation and accountability as envisaged by the writer.

1. People and staff employed in the field/department of revenue generation

duties should be people with high moral integrity, transparency and

devotion.

98

2. Accounts staff should be well trained and remunerated as to avoid

temptation of fraud.

3. The accounting procedure of public enterprise should be properly stated and

leakage proof.

4. Proper financial control mechanism such as intermittent and surprise

checking should be rigorously pursued.

5. Public enterprises should be established and located in an environment

suitable for their economic survival.

6. Generally, promotions and advancement in the enterprises should be based

on merit.

7. Staff who embezzle or misappropriate the funds of their enterprise should be

sanctioned/punished in accordance with the law/legislation.

8. The legislators in Nigeria and other developing countries have the

constitutional responsibility to ensure that the executive are accountable to

the people for the management of public funds. But the revise is the case in

Nigeria, where the legislators are part and parcel of the collapse of the

system. However, for proper management and accountability to be achieved

in public enterprises, legislators at all levels of government must ensure that

appropriate laws and over-sight functions are properly performed by them.

9. Re-orientation of Value System will go a long way in enhancing proper

management and accountability among the staff of public enterprises. One

99

fundamental problem in public enterprises is the failure of the value system.

This failure has resulted to the high level of corruption and lack of

accountability by public officers. These corrupt tendencies pervade the

strate of Public enterprises much so that the managers, who are supposed to

be the leaders in the enterprise, are neck deep in corruption, embezzlement.

The researcher recommends that for Public enterprise to ensure proper

management of revenue and accountability the value system should be

strengthened through the reintroduction of civics and ethics into the curricula

of our educational system while a national orientation for the rebirth of our

value system should be urgently initiated.

10. Government should put in place a proper accountability framework by

providing guidelines for preparing and approving work plan, method of

monitoring plans, reporting performance, accumulation of portfolio of

evidence on performance reporting, system of validation and oversight of

performance reports, establishing and resourcing public accountability

institutions, training public managers and guidelines for dealing with

political institutions by public managers.

11. Protection of Whistleblowers is equally important in the maintenance of

proper management and accountability One fundamental means of achieving

this in Public enterprises is the protection of the whistle blowers. An

effective framework of management and accountability requires that those

100

who blow the whistle should be protected against any reprisal. The

government in Nigeria should establish appropriate laws to protect the

whistleblowers.

12. An effective framework of management and accountability rests, besides,

formal structures, on a proper environment. It requires such things as

existence of a proper code of conduct, training in ethics, appearance of equal

treatment by senior managers toward all employees, and unforgiving poor

management and non accountable senior officers of public enterprises. It

also means that the oversight bodies should adopt a reasonable attitude

toward public managers.

13. Adoption of International Public Sector Accounting Standards will help to

ensure the success of management and accountability in the public sector in

Nigeria. Public sector organization in Nigeria should use the cash basis of

accounting. It is very necessary that ministries, departments and agencies

should being to use the accrual basis of accounting. A complete accrual basis

of accounting would make public managers accountable for recording and

safeguarding of public assets, managing public cash flows, and disclosing

and discharging public liabilities. This when adopted will help to streghten

financial reporting processes in public enterprises in Nigeria.

14. Public managers are in a business that affects virtually every aspect of a

person’s life. People, therefore, have a right to know, how the public

101

managers are doing their business. The legislators need to take a lead in this

regard and enact necessary laws making it obligatory for all public entities to

report on their performance. Public reporting on performance of department

or programs should be made mandatory.

15. One major problem affecting the growth of public expenditure and

corruption in Nigeria is the high cost of doing government business. A large

number of costs in the form of use of existing assets and facilities are not

recorded in the year the assets are used. The government following cash-

basis of accounting does not have a system of charging depreciation to the

government assets and allocating them to various programs and projects.

Thus the true cost of doing government business remains hidden. A

propermanagement of revenue and accountability framework would require

that a detailed cost accounting system be introduced in government.

16. A very important problem facing public sector managers in Nigeria is the

clear absence of performance benchmark. Public performances reporting

requires that benchmarks of efficiency be devised for all ministries,

departments and agencies. This should be done in consultation with the

MDA’s themselves and should remain open for periodic review and

revisions.

17. Public accounts committees play a very significant role in enhancing proper

management and accountability of public officers in Nigeria. Public accounts

102

committee should be strengthened with a system of familiarizing the

members of the adult scope, approach and methods through workshops and

powers to take action if their recommendations are not implemented.

18. Change in the Structure of Government Accounting and Auditing:

Government accounting system in Nigeria is grossly deficient. Financial

reports are outdated and unreliable at all levels of government. Little

attention is paid to financial accountability the public service. There is an

urgent need to protect the commonwealth from poor performance and fraud,

and to protect individuals from lawless, arbitrary and capricious actions by

the state’s surrogate administrators. Therefore, there is an urgent need to

restructure the public sector management and accounting system taking into

consideration the frailties and flaws of governmental accounting in Nigeria.

It is urgently necessary that a comprehensive revision of the entire audit laws

of the country with a view of aligning them with current realties and

demands of globalization.

19. Adequate facilities and incentives should be provided to the relevant tax

officials to enhance their operation and motivate them for more desired

realization of public enterprises goals. Therefore the availability of adequate

accommodation, mobility, stationery office furniture and fittings etc will

enhance effective operation of the public enterprises in Nigeria.

103

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Department of Accountancy School of Post Graduate Studies University of Nigeria Enugu Campus

Dear Sir/Madam

I am currently carrying out a research on the management of

Revenue generation and Accountability in public enterprises in Nigeria.

A study of selected parastatals. This is part of the requirement for the

Award of Masters in business administration in accountancy department

This is purely on academic activity and any information supplied

will be treated in confidence.

Thanks for your corporation and assistance.

Yours faithfully,

Ogwo Pauline Uchenna

107

QUESTIONNAIRE

Please tick (√) as where appropriate

1. Name of your parastatals?...................................

what is your position in the parastatals?

a. manager ( )

b. director ( )

c. casual worker ( )

d. messenger ( )

e. clerk ( )

f. others specify………………………………….

2. How long have you served with your parastatals?

a. 1 – 4 years ( )

b. 5 – 8 years ( )

c. 9 – 15 years ( )

d. 16 and above ( )

4. What is your educational qualification?

a. FSLC ( )

b. WASC/SSEC/NECO ( )

c. NCE/OND/HND ( )

d. B.Sc and above ( )

108

5. What category of staff do you belong?

a. Low level ( )

b. middle level ( )

c. high level ( )

6. What category of staff participate in decision making of the two selected

Nigeria parastatals viz NEPA and NITEL………………………………

7. What are the sources of revenue generation in your parastatals?

a. service rendition ( )

b. customers service ( )

c. payment of bills ( )

d. other specify………………………………………………

8. Parastatals encounter problems in the process of revenue collection. a. Agreed ( )

b. Disagreed ( )

9. If agreed, what type of problem do they encounter in the process of revenue generation?

a. Bureaucratic problem ( )

b. government/interference/legislation ( )

c. transportation problem ( )

d. other specify…………………………………………….

10. These problems affect the running of the affairs of these parastatals a. Agreed ( )

b. Disagreed ( )

109

12. How often do they apply these financial control mechanism in their parastatals?

a. quarterly ( )

b. semi-annually ( )

c. annually ( )

d. once a month ( )

13. How often are workers of the two parastatal motivated?

a. once every three years ( )

b. once every five years ( )

c. rarely motivated ( )

d. not motivated ( )

14. What is the cause of low revenue generation of these parastatals?

a. non payment of bills by customers ( )

b Erratic power supply ( )

c. embezzlement/diversion of fund ( )

d. non satisfaction or customers services ( )

15. What other areas did they get fund to pay the salaries of their workers?

a. government subvention ( )

b. loans ( )

16. The use of GSM and E-mail service affect the revenue profile of yours

parastatals in any way.

a. Agreed ( )

b. Disgreed ( )

110

17. The parasatals are making efforts to tackle all these

problems......................................................................

a. Agreed b . Disagreed

18. Parastatals are sadequately equipped with working materials for the discharge of their duties

a. Agreed ( ) b. Disagreed ( )

19. What are of the course of public outery of the quality of the rendered

by your parastatals

a. poor funding and mismanagement ( )

b. poor attitude of staffs toward their work

c. other specify ……………………………..

20. Poor transport system affects the timely a very of service to customers?

a. Agreed ( )

b. Disagreed ( )