PUBLIC ENTERPRISE Lesson Note
This SS2 COMMERCE lesson note covers PUBLIC ENTERPRISE for First Term, Week 2.
Learning Objectives
- At the end of the lesson, students should be able to:
- 1. Define public enterprise.
- 2. Explain the meaning of public enterprise.
- 3. State and explain reasons for establishing public enterprises.
- 4. Identify the sources of capital of public enterprises.
- 5. State and explain the problems of public enterprises.
Lesson Note
A. Meaning of Public Enterprise
A public enterprise also known as public enterprise or statutory corporation may be defined as a large-scale business organisation established, owned and controlled by the government mainly to provide essential goods and services to the public
Examples of Public Enterprises in Nigeria Include:
1. Nigerian Railway Corporation (NRC)
2. Nigerian Ports Authority (NPA)
3. Federal Airports Authority of Nigeria (FAAN)
4. Nigerian National Petroleum Company Limited (NNPCL)
5. Power Holding Company of Nigeria (PHCN), before its privatization
6. Nigerian Television Authority (NTA)
B. Reasons for the Establishment of Public Enterprises
The following are major reasons why governments establish public enterprises:
1. Generation of revenue
The help to generate revenue for the government needed for other projects
2. Prevent foreign domination of the economy
Public enterprises can be established to prevent private individuals or companies from having complete control over important industries.
3. Provision of Employment
They create employment opportunities for citizens and help reduce unemployment.
4. provision of Infrastructural facilities
Public enterprises help provide and maintain infrastructure such as roads, railways, ports, airports and electricity facilities.
5. They promote l Economic Development
They contribute to the development of important sectors of the economy and promote economic growth.
C. Sources of Capital of Public Enterprises
Capital refers to the money and other resources required to establish and operate a business. Public enterprises obtain their capital from several sources. They include:
1. Government Grants
The government may provide money to establish or operate a public enterprise. Such funds are usually provided from government revenue.
2. loan and overdraft
A public enterprise may obtain loans and overdraft from commercial or development banks
3. Internally generated revenue
They can also raise capital from revenue generated internally
4. grants from international financial institution like ( IMF ) international monetary fund
5. Sale of Shares
Where applicable, government may raise capital by selling shares in a public enterprise to members of the public, especially when an enterprise is being commercialised or partially privatised.
D. Problems of Public Enterprises
1. Political instability
As a result of frequent changes in government there are also corresponding changes in the board of directors
2. Corruption
Mismanagement, embezzlement and other corrupt practices can result in the loss of public funds.
3. Poor Management
Some public enterprises may be managed by people who lack the necessary skills and experience.
4. Negative attitude to work
5. High level of embezzlement: public corporation are associated with high level of embezzlement on the part of board member.
Evaluation
OBJECTIVE QUESTIONS
1. A public enterprise is a business organisation that is mainly owned and controlled by
A. Individuals
B. Government
C. Foreign investors
D. Cooperative society
2. One major reason for establishing public enterprises is to
A. Increase private monopoly
B. Provide essential services
C. Avoid employment
D. Reduce production
3. Public enterprises can be established to prevent _____.
A. Competition
B. Private monopoly
C. Economic development
D. Employment
4. Which of the following is a source of capital for public enterprises?
A. Government grants
B. School fees
C. Personal pocket money
D. Gifts from customers
5. Money borrowed by a public enterprise from a commercial bank is known as _____.
A. Bank loan
B. Trade discount
C. Dividend
D. Commission
6. Which of the following can be used to finance the expansion of a public enterprise?
A. Retained profit
B. Consumer complaints
C. Business name
D. Price tag
7. One problem commonly associated with public enterprises is _____.
A. Political interference
B. Unlimited competition
C. Excessive private ownership
D. Lack of government control
8. Too many administrative procedures in public enterprises may result in _____.
A. Bureaucracy
B. Higher productivity
C. Faster decision-making
D. Increased competition
9. Which of the following may cause public enterprises to operate inefficiently?
A. Good management
B. Corruption
C. Adequate capital
D. Proper maintenance
10. Government may establish public enterprises to promote _____.
A. National economic development
B. Private monopoly
C. Unemployment
D. Business failure
Theory Questions
1a) What is a public enterprise?
1b) State five reasons for establishing public enterprises.
2a) Mention five sources of capital of public enterprises.
2b) Explain five problems of public enterprises.