S. N. NWAMBE
Department of Public Administration
Ebonyi State University, Abakaliki
Public enterprises in the development of Nigerian economy attracted much attention and public debate. The participation of government in the provision of infrastructural facilities such as water, railways, electricity, bridges, roads, ports and airports for the overall development of the economy dates back to the colonial era. The establishment of public enterprises was necessitated by the absence of indigenous companies, adequate capital and manpower. Most public enterprises have become drain pipes for public resources.
The Evolution Of Public Enterprises
The participation of federal, regional/state governments in enterprises dates back to Colonial era. The government had the sole responsibility of providing infrastructural facilities to the people. These include water, railways, bridges, electricity, roads, ports and airports. The provision of such facilities became the responsibility of the colonial government; owing to the absence of Nigerian indigenous companies, with required capital and manpower.
According to Igbuzor (2004), another important factor, was the inability and the unwillingness on the part of the foreign trading companies in Nigeria, to embark on such capital intensive projects at the period. The involvement of the colonial masters, in the provision of such facilities were expanded and consolidated by the colonial ten (10) year welfare development plan between 1946 1956. Igbuzor (2004) contributed further by saying that the successive governments in Nigeria, as at 1999 had invested as much as eight hundred billion Naira (NSOOb), in the provision of public enterprises in Nigeria. There was also the move, that the government should remove its interests in business ventures and that private ownership of the means of production, is the only viable approach to efficient production of goods and services, growth and economic development. Okpata (2004:361) equally defined public enterprise as:
non-profit oriented organizations that have their activities among others, the provision of social goods and services and which is either partly owned or fully owned by the government
Also, Ezeani (2005:211) referring to public enterprise as stated in the second National Development Plan 1974-1978 opined that:
their primary purpose is to stimulate and accelerate national economic development under conditions of capital scarcity and structural defects in private business organizations. There are basic considerations arising from the dangers of leaving vital sectors of the nation economy to the whims of the private sector often under the direct and remote controls of foreign large scale industrial combines.
He further stressed that public enterprises are engaged in whole spectrum of economic activities, including agriculture, mining, construction, manufacturing, utilities, commerce and other services. Okpata (2004) maintained that public- enterprises also include ventures such as electricity, marine, which later became ports, Railways Corporation, Nigeria Produce Board and Regional Produce Boards.
Drucker in Nwabuzor (1989) while contributing said that, public enterprises exist to serve three main publics, the stockholders, the employees and the customers. The stockholders are the owners of the enterprise; in this context, the government that puts up the venture capital, exerts their influence on the company, approves or rejects the resolutions of annual general meetings of the board, appoint the members of the board of directors who also set up the operating policies for the enterprise.
Also, in his own contribution, Olewe (1995:236) opines:
the idea of government’s involvement in business through the incorporation of its own enterprises, aimed at breaking the myth and ‘monopoly of
private sector in economic activities as well as providing the society, particularly the common people, social welfare facilities.
The employees of public enterprises are generally rewarded by regular payment of salaries and wages, they also become entitled to pension and gratuity after long service in the enterprise. Interaction and joint consultation between the management and the employees is a daily routine in ideal situation, irrespective whether or not the employees are unionized.
However, government influence in public enterprise is pervasive, not only on the Board of the enterprise but also on the employers and the customers.
The Role Of Public Enterprise In National Development
The role of public enterprises (PE) in the post-independence era can be seen as efforts to meet the developmental needs and to fulfill the economic objectives of the country; and a deliberate design to control the economy. In the early seventies, this single desire led to the nationalization of some foreign companies whose influence on national economy were considered substantial and strategic, such as the former Barclays Bank, now Union Bank of Nigeria (UBN) British Petroleum (BP) etc. Since then, successive governments have initiated new parastatals and companies to stimulate local productive activities. There is the need to create independent organizations responsible for activities that were previously handled by the civil service. It was assumed that public enterprises are less hampered by bureaucratic red tapism and thus more effective and efficient in serving the public. Odua (1979) opined that the contribution of public enterprises to Gross Domestic Product (GDP) is not substantial for the single reason that public enterprises in Nigeria are still dominated by small holder peasant agriculture.
The significance of public enterprises according to McGrew (2000) lies particularly in the fact that they are involved in those sectors of the economy, that are most strategic from the point of view of increase and control of the economy. They include the financial sector, key production areas and service fields. : They play critical roles such as in domestic capital formation by generating investment capital. The most common public enterprises in Nigeria are those established in the field of public utilities such as power, transportation and communication. Some are also in the manufacturing sector. Political ideology has often markedly determined the methods and the extent of government involvement in public enterprises. Sometimes, public enterprises take the shape of Marketing Boards for oversea’s sale of a limited range of primary products. They regulate the sales of such produce as groundnuts, cocoa, coffee, cashew nuts, palm produce, tea, etc. Public enterprises have played an important role in promoting more indigenous control of the national economy. The demarcation of the economy between the public and private sectors and between aliens and citizens varies from one country to another.
Government is not only interested in the acquisition of equity participation in the number of strategic industries but have gone further to widen her participation in the existing industrial enterprises. This, she does through joint ventures and complete ownership; also through the reservation of certain fields, requiring utilization of special skills and technology to its citizens.
Evolution Of Power Holding Company Of Nigeria (PHCN)
According to Okoro (2007), just like other public enterprises, the history of electricity in Nigeria dates back to 1896, when electricity was first produced in Lagos. That was precisely fifteen (15) years after the introduction of electricity in England. The total capacity of the generators used then, was 60kw. In 1946, the Nigerian electricity undertaking was under the jurisdiction of Public Works Department. Manafa (1995) also contributed by saying that in 1950, a central body known as Electricity Corporation of Nigeria (ECN) was established by the legislative council, to take over the responsibility of electricity supply in Lagos. The Electricity Corporation of Nigeria (ECN) and other bodies such as Nigerian Electrical Supply Company (NESCO) had licences to produce electricity, in some locations in Nigeria. Another body, known as Nigeria Dams Authority (NDA) was established by an Act of parliament, for the sole purpose of the construction and maintenance of Dams on the River Niger and to generate electricity by waterpower.
By 1 “April 1972, the operations of Electricity Cooperation of Nigeria (ECN) and the Niger Dam (NDA), were merged as National Electric Power Authority (NEPA). Also, by January 2004, the National Electric Power Authority (NEPA) was restructured and named Power Holding Company of Nigeria (PHCN). It is expected according to Ekwue (1989) that the restructuring will result in more efficient and effective utilization of the resources available for the electricity supply industry throughout the country in other to meet the ever- increasing demand of electricity by the consumer. Unfortunately, majority of Nigerians have no access to electricity and the supply to those provided is not regular,
It is against this backdrop that the federal government has embarked on aggressive power sector reforms, with the view to resuscitating Power Holding Company of Nigeria to make it more efficient, effective, and responsive to the teeming population. The reform of Power Holding Company of Nigeria (PHCN) or outright privatization as a utility enterprise is bound to pose some serious challenges to the establishment.
Government involvement in business, is in order to break the myth and monopoly of the private sector in economic activities and also to provide the society with welfare services.
Like other Public Enterprises, since the introduction of electricity in Nigeria in 1896 and the subsequent changes to National Electric Power Authority (NEPA) and Power Holding Company of Nigeria (PHCN) on 1st April 1972 and 1st January 2004 respectively, the electricity industry has not played the expected role in the economic development of Nigeria. The power sub sector as of now is dominated by Power Holding Company of Nigeria (PHCN); a government parastatal and supplemented with power generated from privately owned plants.
The electricity industry in Nigeria is characterized by inadequate supply, non-availability of spare parts and poor maintenance, poor motivated workforce, vandalization, theft of cables and other vital equipment, accidental destruction of distribution lines, illegal connections and the resultant overloading of distribution lines. This is also responsible for unannounced load shedding, prolonged and intermittent power outages. ‘-. Majority of Nigerians have no access to electricity supply and if at all provided, it is never regular. About ninety five percent (95%) of Nigerian coal is consumed locally, mainly for electricity supply. The Power Holding Company of Nigeria (PHCN) has failed to perform to the satisfaction of the electricity consumers (Obasanjo, 1999).
In spite of the total grid capacity of 5924.7MW, only 4586M Ware available for distribution. This is a mark of inefficiency, ineffectiveness and low productivity on the part of Power Holding Company of Nigeria (PHCN). According to Okoro, et al (2007) the short fall in the capacity utilization amounting to 1338IMW or 22% further portrays the inefficiency, poor performance, gross under utilization and the resultant low productivity by the establishment.
The problems of operational inadequacies are glaring and the inability of the various generating plants that is the grid stations (Afam, Delta, Egbin, Ijora, Sepele, Jebba, Kainji, Shiroko, Orji River) to operate in full capacity is clear. The various substations have failed to generate their respective percentage contributions to the total energy production requirement, for distribution which the resultant failure impacts negatively on the Power Holding Company of Nigeria (PHCN).
The Power Holding Company of Nigeria (PHCN) as a public enterprise dominating the electricity industry in opinion of Olewe (1995) has failed to assist the masses of this country in capital formation, industrialization and the general economic development.
Public enterprises, including the Power Holding Company of Nigeria (PHCN), suffer from unnecessary bureaucratic control from the supervising ministry and the Management Board. These go further to impact negatively on the establishment.
The ministerial control and over bearing influence of the government officials, have further compounded the problems of the unperforming Power Holding Company of Nigeria (PHCN). From a assessment, the Power Holding Company of Nigeria (PHCN) has not contributed meaningfully to social, economic, infrastructural and industrial change of the society. It has not justified its central position in the power sector. It has failed to provide the necessary assistance in the development of both infrastructure, economic, social and industrial sectors.
Adigun (1991) maintained that the constant public outcry for the reform of the power sector and electricity industry in particular is an indication that the situation is not healthy; adding that the Power Holding Company of Nigeria (PHCN) as a public enterprise ought to be self-sustaining and self reliant. The budgetary provisions are often diverted, embezzled and or out rightly misappropriated. The role expected from the Power Holding Company of Nigeria (PHCN) in terms of electricity supply for social, economic and industrial services are not forth coming.
Many people view the problems of Power Holding Company of Nigeria (PHCN) as man-made, while others perceive the problem as inherent in the system; judging from the trauma that the establishment has undergone since its inception.
The electricity sub-sector has not enhanced efficiency of the nation’s power sector nor has it made energy affordable to consumers. It is on record that no new power station has been constructed for years, by the Power Holding Company of Nigeria (PHCN) so as to improve power supply and make it available to the consumers.
There is also the need to tackle the incessant gas supply interruption to the thermal stations. The current 4000MW maximum transmission capacity is below national demand and will not solve the problems of electricity consumers of the country.
Some sections of the grid are without dated equipment. In spite of their state of disrepair, there are no genuine efforts to put them in order. Other problems of the Power Holding Company of Nigeria (PHCN) include regular vandalization of optic fibrecables.
The importance of the power sector and electricity industry in particular underscore the need to make them functional so as to realize the objectives, for which it is established. From practical experience, there is lack of modern required technologies for effective communication, the prevalence of inadequate working tools, spare parts and vehicles for operating and monitoring, poor technical staff recruitment, capacity-building and training programmes.
Evaluation Of Power Holding Company Of Nigeria
The Nigerian power supply comes from four main sources: hydro, thermal, heat and gas turbines.
The electricity demand in Nigeria within the next ten years according to Akinkuoiu (2009) is projected between 28,360 and 31,240 megawatts (mw). From the figure, between 3,000 and 5,000 megawatts (mw) are expected to come from hydro energy sources; while between 7,000 and 9,000mw are expected to be generated from other conventional sources. This will still leave a shortfall between Il,000andl7,000mw.
In the year 2005 according to Adekeye (2009) the federal government mandated the Nigeria Atomic Energy Commission to build a nuclear power plant to generate l,000mw by 2017; and to further increase to 4,000mw by the year 2027. The commission was further saddled with another responsibility to build nuclear energy plant of 4,000mw and deliver the same to the national grid by the year 2030; when it is expected that the total grid capacity will increase to 300,000mw,
Plan is underway to build two nuclear power plants to generate 3,840mw by the year 2030; seven new hydropower plants with 13,440mwand 11 coal power plants with 21, 120mw generating capacities.
In the opinion of Ezeani (2005), the performance of public enterprises including the PHCN have not been satisfactory. This has resulted in wide spread of doubts as to whether the benefits of public ownership is worth the investment.
Again, Ezeani in Odadan, (2005:222) on the performance of public enterprises contributed this way in his own words: economic inefficiency in the production of goods and services by the public sector, with high cost of production, inability to innovate, and costly delays in delivery of the goods produced; ineffectiveness in the provision of goods and services, such as failure to meet intended objectives, diversion of benefits to elite groups etc; rapid expansion of bureaucracy, severally straining the public budget with huge deficits of public enterprises becoming massive drain in government resources, inefficiency in government, poor financial performance of public enterprises, reflecting a history of huge financial loss
There is no doubt that the PHCN operate at a loss, which has resulted in budget deficits and subsidies in the organization. The performance of PHCN as a public enterprise has attracted much criticisms, especially since the 80s. Most of the public enterprises in the developing countries including PHCN were affected by the micro-economic policies arising from the global economic crises McGrew, (2000) asserted that Nigeria invested as much as one billion three hundred and fifty million, seven hundred thousand six hundred and forty seven naira (Nl,350,700,647) between 1980 and 1985; in the public enterprises. This does not include loans guaranteed in foreign currencies and subventions to the parastatals during the period.
To further buttress the ugly state of affairs in these public establishments Ezeani (2005) opined that the dividends which accrued to the federal government in the same period amounted only to nine hundred and thirty three million, seven hundred and one thousand one hundred and thirty four naira (N933,701,134.00). This translates to twenty six million one hundred and twenty four thousand four hundred and sixty three naira (N26,124,463.00) accruing to the federal government as interest within the same period. It is doubtful if the Power Holding Company of Nigeria (PHCN) even contributed in the meager sum that accrued to the federal government. Quoting Umezurike, Ezeani (2005) asserted that public enterprises in Nigeria enjoyed the following transfers in 1998 alone: Subsidized foreign exchange N156.5 billion Import duty waivers N12.5 billion
Tax exemption arrears N15.0billion
Unremitted revenues N29.5 billion
Loans and guarantees N16.5 billion
Grants and subventions N35.0billion
He summed up by saying that a total of $ 100 billion was spent by public enterprises between 1975 and; 1995 which the Power Holding Company of Nigeria had a greater percentage. Therefore, there is no doubt that such public establishments have become waste pipes as far as public funds are concerned. Ademitola, (2009:44) actually captured the situation of the Power Holding Company of Nigeria when he said;
The dwindling dream of realizing the December 2009 target of generating 6000mg watts of electricity is no doubt of the major worries of Nigeria.
The same Tell, edition continued to make adverse comments on the hopelessness of realizing the federal government’s dream in the Power Holding Company of Nigeria (PHCN) and contributed further thus:
This situation is grimmer judging by the United Nations rating of Nigeria as the 26th poorest nation in the world, with the World Bank saying that seventy five percent (75%) of Nigerians live below poverty line.
In summary, privatization is not a blanket solution for the problems of poorly performing state owned establishments including the PHCN. It cannot make for lack of competition, weak capital markets or for absence of regulatory framework. When the regulatory capacity is present, private ownership yields substantial benefits.
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