00:00 Hello and welcome to Class Mining with Ms. Lydia and in our Commerce class today we will

00:16 be treating the topic public enterprises.

00:19 Now by the end of this class I expect you to be able to explain the meaning of public

00:23 enterprises, you should be able to discuss the various types of public enterprises and

00:29 the respective methods of formation, then identify the sources of their capital and state

00:36 reasons for government ownership of public enterprise.

00:42 Now what are public enterprises now?

00:45 They can also be referred to as public operations or statutory corporations.

00:50 They may be defined as large-scale business organizations that is set up and financed

00:57 by the government of a country, mainly to provide services to the members of the public.

01:02 They are directly under the control of the government to cater for the welfare of the people.

01:08 Now these corporations are usually established by the government, they are run by the government

01:13 and they are also funded by the government.

01:15 That is the capital used in establishing these corporations is provided by the government.

01:21 Now the reason for government ownership of public enterprises is because it requires huge

01:26 capital outlet that private individuals would not be able to raise.

01:35 Now public corporations are run by the government through the tax taxes paid by the people.

01:41 They are established by an act of parliament or decree.

01:45 That is the major source of capital for establishing public enterprises are from taxes that have been

01:51 paid by citizens of a country.

01:54 Now the public corporation is controlled by both of the directors appointed by the government

01:59 and they are not set up to make profit but rather to provide special services to the people.

02:06 Now the corporation is controlled by both of the directors appointed by the government.

02:11 Now this is telling us that the fact that the government has set up these enterprises does

02:15 not mean the government themselves have to be there to see to the day-to-day running of

02:19 the enterprises of the business. So the government usually appoints people known as the

02:25 Board of Directors. He appoints the Board of Directors to see to the day-to-day running

02:31 of the business activities and public corporations.

02:35 Now they are not set up to make profit. That is the main aim of public corporations

02:39 is to make profit unlike sole proprietorship or private owned organizations.

02:44 Public corporations are not set up to make profit. They are set up to provide special services

02:52 to the public.

02:53 Now formation and engagement. Public enterprises are created by act of decree or parliament.

03:00 The estate is powers, its objectives, functions and relations with the ministry and the parliament

03:07 or state legislature. Public corporations are usually monopolistic

03:11 in nature. And employees of public corporations are referred to as public servants.

03:17 That is, the services usually provided by public corporations are so special in the aspects

03:23 that they cannot be easily found elsewhere. They cannot be easily provided by private

03:28 individual hands. They are monopolistic in nature. So people who work in public corporations

03:35 are referred to as public servants. Now, they are usually created by act of decree.

03:44 That is, an act of decree is usually passed to create public enterprises.

03:49 Now in this act, it states the powers of the enterprise. It states its objectives.

03:54 That is, the aim of the corporation. It states its functions to the public and relations

04:02 with the ministry and the parliament. Now the establishment of public corporations

04:07 require huge capital, which an individual or private body might not be able to afford.

04:13 Like we, like we earlier stated in while defining public corporations that the reason for government

04:19 ownership is because private individuals cannot raise enough capital to provide these services

04:27 to establish this corporation's hands, the reason for public ownership. Because the government

04:34 has access to funds, and to have enough access to loans, have access to grants from other

04:40 countries. So it is easier for the government to set up these organizations and provide these

04:46 services to the public themselves. Now the management of public corporations is vested

04:51 on selected members of the board of directors. They are usually appointed or nominated by

04:57 the government. Hence, the day-to-day running and the vaccine of the organization's activities

05:02 is tended to by the board of directors. We had earlier stated as well while explaining

05:08 that the fact that the government had established these organizations, these corporations doesn't

05:13 mean that the government themselves have to see to the day-to-day running of these enterprises.

05:19 So the government selects a group of people known as a board of directors, and these people

05:26 are burdened with the duty to see to the day-to-day running of these corporations to make sure that

05:32 everything goes as it should in business wise. Now let's see some examples of public corporations

05:41 in Nigeria, of course. So we have the Nigerian port authority. They see to port duty, they

05:47 see to all the activities of ports in Nigeria. Then we have the Nigerian railway corporation,

05:54 which is the NRC. We have the Federal Radio Corporation of Nigeria, that's the FRCN.

06:00 Then we have the Nigerian National Petroleum Corporation, so the Nigerian National Petroleum

06:06 Corporation, which is the NNPC. Now let's look at the sources of finance to public corporations.

06:13 Now we are really at this course while defining what public corporations are, that the major

06:20 source of capital for establishing public corporations by the government, which true taxes paid

06:25 by the citizens of the country. But sometimes these taxes are not enough to actually set this

06:31 business on a large scale. To place these businesses on a large scale house, there is need to get

06:37 capital from other sources. Now let's discuss these other sources. Now we have the internally

06:41 generated revenue. Now this is the profit made from already existing businesses owned by

06:47 the government. Now I don't want you to mix things up here. We said that the main aim of setting

06:52 up this organization is not to make profit, but to serve the public as a whole. But the fact

06:59 that it's not the main aim of the government to make profits doesn't mean they don't make

07:03 profits. So a lot of times sometimes they make profits from their activities. After taking

07:09 out their expenses and paying salary and wages of their employees, there's still something

07:14 left. Now what is left, which is called the profit, is what is known as the internally generated

07:20 revenue. Now this revenue is plunged back into the business, that is it is put back into the

07:25 business to grow the business. Now the fact that it's like I said the fact that it's not the main

07:30 aim to make profit doesn't mean they do not make profit. What it only means that they are not

07:35 profit focused. Now the second is grants from foreign countries. Now far developed countries

07:42 like the USA can help in granting loans or financial aid to set up public corporations. Now these

07:50 grants are gotten from developed countries who want the help that help developing countries

07:58 or under developed countries to help them establish corporations that are useful to the need

08:05 of the public that can't serve the public. Then we have grants from international financial

08:11 institutions. Now financial institutions like the International Monetary Fund that is the IMF

08:16 or the African Development Bank that is the ADB can raise financing for the creation of public

08:24 corporations. Now these financial institutions see to giving loans or grants to developing

08:32 countries or upcoming countries so as to be able to comfortably establish public corporations

08:39 and see to the need of the public. Now let's discuss in detail the reason for government ownership

08:46 of public corporations. We had also said earlier while we were discussing that the reason for public

08:52 ownership of public corporations is because the capital needed to establish these organizations

09:00 is so huge it's a lot such that in the private individuals cannot raise on their own but

09:06 aside from that there are other reasons why the government has to own public corporations

09:12 and here are some of the reasons. Now it is to create employment opportunities. Now government

09:19 ownership of public corporations helps in creating employment opportunities for the unemployed

09:23 persons in the society. It is another means by which the government uses in taking out

09:28 unemployed people from the reducing the rate of unemployment in the country. Now these

09:35 public corporations are usually established on a large scale. Now only private corporations

09:41 if a private organization would employ up to 50 people we can bet that a public corporation

09:52 can employ much more than that up to 200 employees to say the least. So public corporations

09:59 usually provide enough space to employ the members of the public and this is because

10:05 these corporations operate on a large scale and there are so many activities to be run. There are

10:10 so many things to be done. Now it contributes to economic growth. Now the involvement of the

10:17 government attracts both local and foreign investors to fastened economic development of a country.

10:26 Now unlike private organizations one setting or private organizations it is rare. It is very rare to

10:33 see foreign countries coming up to want to invest in their company but in case of where it is a

10:40 public corporations you see foreign investors foreign grants coming up to help to fastened the

10:48 economic growth of the country come to invest in the establishment of these public corporations.

10:54 Then we have capital like we had earlier discussed that the capital requirement for the establishment

10:58 of public corporations is usually huge hence such that private individuals cannot afford or would

11:05 not be easy for private individuals to manage even if they were able to afford it.

11:11 Now another reason is to protect the country sovereignty. Now state ownership of some public

11:18 corporations is sometimes meant to protect the integrity and sovereignty of a country. Now to prevent

11:26 exploitation. The aim of any private investor is to maximize profit but there are some social

11:32 responsibilities in which the government goes to its people. Now if private enterprises are allowed

11:38 to handle the provision of most of the essential goods and services there would be high level of

11:44 exploitation and discrimination in the provision of their services to the public. Now we were giving

11:51 instances like giving the difference between government owned enterprises and private owned

11:57 organizations that the main aim of a private organization is to make profit, profit, hence not to

12:04 satisfy the public but the main aim of the government is to satisfy the public but not to make

12:11 profit nonetheless the government still makes profit from these corporations. Now the thing is that

12:18 if the government gets focused on making profit from public corporations there would be discrimination

12:27 in the provision of these services to the government. So the reason for public ownership is to make

12:34 sure that there is enough, these services can be offered to the public at large but all like

12:44 private organizations if they are allowed to manage such corporations that provide such

12:50 special services they would not be efficient in the provision of these services that is there

12:56 would be discrimination in the provision of these services to the members of the public hence they

13:02 might even charge too much such that the average citizen, the average member of the public would not

13:09 be able to afford these services. Then we have distribution of resources. Now sometimes

13:15 government ownership of public corporations is to ensure equitable distribution of the

13:20 country's resources that is everyone is able to enjoy from the country's resources.

13:27 Then we have prevention of competition. Now there is the need for governments to prevent

13:33 unhealthy competition in some very important industries. Now the government has the role and duty

13:39 to ensure the success of such corporations in the interest of the public. You know when private

13:45 organizations exist, when private organizations exist in the particular industry when they

13:51 usually have competitors and a lot of times they are usually on healthy or competition between

13:58 these organizations hence the government has to step in and take ownership of such organizations

14:06 that says if these organizations are owned, are owned wholly by the government hence it prevents

14:14 this monopoly in the hands of private organizations. So there is the monopoly of these organizations

14:20 is in the hands of the government. Now let's discuss the advantages of public enterprises. Now there's

14:27 availability of large capital. Now since public enterprises are owned by the government there's always

14:32 availability of sufficient capital to ensure expect expansion of these enterprises. Now the government

14:39 has access to taxes of the citizens, they have access to grants, they have access to loans from

14:44 the central banks and other higher financial institutions. So there is enough, there is enough

14:50 there is enough sources to get this capital from there are enough sources to get the capital for

14:57 the establishment of these organizations. Now there's provision of structural facilities. Now public

15:04 corporations provide the structural facilities such as roads, schools, railways, electricity to

15:11 the public. Now the establishment of these corporations helps the government to provide the basic

15:17 amenities that are needed by the society. Now there's continuity. Now public operations can last

15:26 for a long period of time. That is their spectral existence. These corporations are going concern

15:32 irrespective of the changing governance. There is continuity of these corporations. Now accountability

15:40 to the public. Public corporations are accountable to the general public because they have to submit their

15:45 annual reports to the parliament. Now the accounts of these public corporations are usually published

15:52 for public consumption. So the public is able to go through the accounts of these public

16:01 corporations and know how they have been operating. Now there is provision of employment opportunities

16:08 like we have said before that there is enough space. There are a lot of things to do in this

16:12 organization's hands. There is need for a lot of hands and a lot of employees to work in this

16:18 organization's hands reducing the level of unemployment in a country. Now let's look at the disadvantages

16:25 of public corporations. Now governments interference that this government can interfere in the

16:31 activities of these public corporations which slows down their effectiveness. There is a lot of

16:37 process. There are a lot of times before any decision can be taken or set as final between the

16:44 Board of Directors. They have to take permission from the government and this a lot of time

16:50 slows down the decision making process. Then there is corruption and mismanagement. Many

16:55 public enterprises have become the major areas for embezzlement and mismanagement of the nation's

17:01 resources. Especially when the Board of Directors are very dishonest people. A lot of time they

17:06 tend to mismanage the public corporations from that is the fund that is meant to build the business

17:13 that is meant to expand the business. They take it for their personnel and selfish uses.

17:18 Then there is inefficiency in operation. That is the lack of competition in business

17:24 can bring about inefficiency in operation. Now these public corporations are usually monopolistic in

17:30 nature. There is no competition hands. There is no motivation for them to want to do better.

17:35 Then they are not profitable because the aim of these companies, the aim of these establishments

17:42 is not to make profits. A lot of time they run on loss. So they run at a loss because they are too

17:47 large and complex to manage as well. Then they are very hard to establish. Now this is because it takes

17:55 a long process before the law establishing them is passed into parliament. There are a lot of

18:01 processes. These processes are usually long and cumbersome. So it takes a lot of processes before

18:07 the law establishing them is passed into parliament. Now we have come to the end of this class and before

18:14 we go I would like you to look at the following evaluation questions. Maybe on the sheet of paper

18:19 or with someone you should discuss these questions. Identify and make a list of public enterprises

18:25 in your locality. Then list these reasons for government ownership of public enterprises.

18:33 Then explain the sources of capital for public enterprises. Name public enterprises and describe

18:41 their formation and management. That is how our public enterprises formed hard and managed.

18:46 Thank you for watching. My name is Miss Lydia. See you next time.