Managing public commercial enterprises in Nigeria: The case of Kwara State commercial parastatals

AuthorIfeyori I. Ihimodu
Date01 July 1986
Published date01 July 1986
DOIhttp://doi.org/10.1002/pad.4230060303
PUBLIC
ADMINISTRATION AND DEVELOPMENT,
Vol.
6,223-238 (1986)
Managing public commercial enterprises in Nigeria: the
case
of
Kwara State commercial parastatals
IFEYORI
I.
IHIMODU
University
of
Ilorin
SUMMARY
Employing the usual profit criterion to evaluate performance of the commercial parastatals in
Nigeria, as revealed in the case
of
Kwara State, the enterprises are a failure. The differences in
the management of the parastatals and similar but private enterprises may have accounted
for
differences in performance. Among the features of management
of
the parastatals are the role
of government in the appointment of chief executives without necessary regard to merit; the
relatively poor conditions of service as obtained in the civil service; and the huge debts owed
the parastatals by governments.
To
improve performance, the following measures should be
adopted. There is need to remove commercial parastatals from the civil service to attract
quality management staff while government control should be substantially relaxed.
Improved funding should be guaranteed through the financial houses while government
should settle their debts to the organizations. The issue
of
privatization is worth proper
consideration with a view to selling the companies to the private sector.
INTRODUCTION
The aim of this paper' is to examine the management strategy adopted by
government commercial enterprises in Nigeria, with a view to determining the
performance of the organizations. It is commonly alleged that public commercial
ventures in Nigeria cannot perform like commercial enterprises in the private sector.
It is expected that a study of the operations of these organizations would shed some
light into the factors that may be responsible for the observed performance.
Evidence from some public commercial enterprises in Kwara State provides the data
for the analysis.
By
1983 there were 26 parastatals including profit- and non-profit-oriented ones
in Kwara State. However, through dissolution and merger by the present military
administration, the number has been reduced to 20. Only eight of these
organizations can
be
classified strictly as profit-oriented ventures. Many of the
parastatals, including the non-profit-oriented, were established a few years after the
inception
of
the state administration in 1968. It is therefore clear that the state had
I
Dr.
Ihimodu is in the Department
of
Economics, Faculty
of
Business and Social Sciences, University
of
Ilorin,
PMB
1515,
Ilorin, Nigeria.
'The author is most grateful
for
the comments by the Journal's reviewer, which enabled improvements to
be made to the paper.
027
1-2076/86/030223-16$08.00
0
1986
by John Wiley
&
Sons, Ltd.
224
Ifeyori
I.
Ihimodu
had considerable experience in managing public commercial enterprises. An
examination
of
the performance of these ventures can therefore not be regarded as
premature.
The rest
of
the paper is divided into five sections, with the next section giving
some broad background to government parastatals in the state including the
structure and mode
of
appointment
of
board members. In the third section the
management
of
the commercial parastatals is discussed. The financing of the
enterprises is considered next. The fifth section evaluates the performance with a
view to determining whether the organizations had been able to achieve their basic
objectives. The final section contains some conclusions.
PARASTATAL ORGANIZATIONS
IN
KWARA STATE
Broadly, Kwara State government-owned parastatals can be classified into three
categories based on their objectives; namely, the profit-oriented, the social service-
oriented and the institutional parastatals. The profit-oriented parastatals are those
whose basic objective is to generate funds through accumulation of profits. They are
expected to be self-financing and therefore not dependent on the state government
after the take-off period. They are
in
fact established
to
generate revenue for the
government which, in most cases, is the only shareholder. In Nigeria, where most
of
the revenues of states comes from the Federal Government, profit-oriented
parastatals are potentially important sources of government finances. Kwara State,
which depends on Federal funds for about 80 per cent of its revenues on average,
certainly has a need
for
organizations through which supplementary funds can be
generated (Ihimodu, 1982). Thus, the state went into these commercial ventures
right from its inception in 1968.
The social service parastatals are organizations whose primary objective is to
provide social services which the private sector is not likely to provide, either
because they require huge capital outlays, long gestation periods, or are not
regarded as very profitable. In certain circumstances, organizations like the
ministries may provide such services. In those cases the parastatals supplement the
efforts
of
the parent ministries. Another reason for establishing parastatals is the
fact that they are capable of achieving the same objectives much faster than other
agencies by removing the organizations from the bureaucratic processes of the civil
service. Though profit-making may not constitute
a
major objective, some social
service organizations incorporate departments that can generate revenues. An
important way of reducing their financial dependence on government then becomes
the maximization of their internally generated funds.
The institutional parastatals are those whose main objective is the provision of
educational services. Until the introduction
of
fees in most schools, it was not
expected that these institutions would generate internal funds. Thus most of the
needed finances have
to
be provided by the government. In 1984 the
20
parastatals in
the state consisted
of
eight profit-oriented ventures, seven social service parastatals
and five institutional organizations.
The eight profit-oriented parastatals in the state can be classified broadly into
two, according to the services they render. There are those organizations which
engage in production such
as
furniture making, breweries, and agricultural

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