Government Owned Companies In Nigeria – Poor Management Performance

Government Owned Companies In Nigeria – Poor Management Performance

Government Owned Companies In Nigeria – Poor Management Performance

Nigeria government owned companies have grown rapidly in the past four decades.

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The federal government alone has a substantial number of such enterprises, at least one third of such are completely owned by the government. These companies provide one service or the other engage in industrial manufacturing unlike the private sector enterepreneur whose primary objectives is profit maximization or return on his investment, but government’s objectives is rarely mere profit maximization.

Apart from providing the basic infrastructures, government invests in these companies with the hope that they would be self-financing, and expand rapidly in such a way that they would create employment opportunities for the teeming unemployed.

It expects that they would contribute substantially to the cross national product, socio-economic development, modernization by developing abilities of the indigenous.

However, available records show that returns on investment have been extremely poor, according to big time federal government investments in 150 companies and corporation yielded less than one percent by way of dividends, bonus issues, loans payment and interest payments. They therefore constitute fiscal and financial burdens on the various governments.

Presently, most of the government owned companies do not pay taxes, most of their investment cost are covered by capital transfers. In most cases, their cash suprises is less than their depreciation, and in some instances, cash flow does not even cover running costs. At managerial and operative performance levels, the problem is also a general one. These companies generally have generated little and this had led to stunted growth, which have been limited by the extent of the availability of resources they receive from government. In worst situations, some of these companies have led various governments into huge losses of capital investment (capital depreciation) or government budgets and a substantial sources of external debts.

Inspite of all these, the most disturbing aspect of these dying and suffering companies are sold to the private entrepreneur, they will begin to turn out enviable profit.

To Pandy (1997) The major determining factor of the effectiveness and efficiency of an enterprises is not weather it is publicity or privately owned, but how it is managed.

Hence the study will look into the factors that led to poor performance of government owned companies, suggest solutions to the problem and make recommendations on the appropriate ways of improving their performance.


The Ebonyi hotel limited was at it inception on November 8th, 1988, known as Ebonyi limited formerly in Enugu State. The hotel was onwed by Dr. Alex Ekwueme former vice president of Nigeria. The hotel was under a private company then, it is answering Ebonyi hotel but it a branch of modotels Nigeria limited. Within that period the modotels hotel has many branches Ebonyi hotel limited, chalk valley hotel limited Oko, modotels hotel limited Owerri and modotel Nigeria limited Enugu.

Ebonyi hotel limited was runned as a private company till the creation of the Ebonyi State when the hotel was sold. The Ebonyi hotel limited was sold on 20th, May 2003, during the leadership of Dr. Sam Omeni Egwu, the first Governor of Ebonyi State.

Ebonyi hotel limited Abakaliki is wholly government owned company formed by the development of government of the State. As a result of political region, the Ebonyi hotel is wholly owned by the Ebonyi State government.


The company-Ebonyi hotel limited Abakaliki had operated at a loss for the past few years because it cannot generate sufficient cash from their operation due to lack of raw materials. This is attributed to unavailability of working capital. The present capacity utilization for the company are hardly up to 20%-result to losses in labour hour which are still on the payroll. Trade creditors are demanding the payback of their credit facilities. This company are forced to retrench some workers and if these problems persist much longer, they might be forced to close up.

The question now becomes “what should government do in circumstances to save the situation” should government refuse further financial aid and over look the company?” or should it oblige to further financial assistance for the resuscitation of this company whose future performance it is not yet sure? This is a financial decision problem which the study attempts possible solutions.


The objectives of the study are the following.

1. To examine the operation and performance of this company

2. To find out factors responsible for the company persistent poor performance.

3. To discover which factors played keyroll in affecting this company operational performance.

4. To evaluate factors that are most prominent and most responsible in running government owned company.


This study or research shall at the end try to give answers to the following questions.

1. What factors are responsible for the persistent poor performance of government owned companies in Ebonyi State?

2. What are the factors playing a key role in affecting these companies operational performance?

3. What are the general factors that one most prominent and most responsible in running government owned companies.


These government owned companies have acted as drain-pipes in the nations wealth both at federal and state levels. The study is therefore relevant first to various government agencies involved in making investment decisions with the public funds. It is equally relevant to policy-making bodies of government as far as participation in commercial enterprises is concerned. It is hoped that this study will benefit top management of these government owned companies whose operations are not steady, by providing a kind of check-up list for efficient business management. For the academic and the purpose of arousing deeper and genuine interest on the subject matter for further research aimed at eliminating these terrible situations from our system.


The study covered one company in Ebonyi State. Normally, the testing of hypothesis of this nature require a random sampling drawn from a small population to validate the initial postulation that most these government owned companies in Ebonyi State perform below expectation.

The study does not ignore this important research requirement, but sees the concentration of the Ebonyi State only as not neglecting because the validity of the generalization because it has become an accepted fact that most government owned companies perform badly. For this reason, the researcher believes that what is obtain in rat village is obtainable in the rabbit village also.

Therefore my findings in this company would be applicable to other government owned companies.


The actual limitation of this study was the difficulties and unwillingness of the management agencies of the company being studied to release need information records and some documents. These documents, they said are not for public consumption. Both the original book of accounts were not released, annual reports and financial statements were not available.


Employment: This involves work especially when it is done to earn money.

Development: It is the gradual growth of some thing so that it becomes more advanced and stronger.

Modernization: To make a system, method, etc, more modern and more suitable for use at the present time.

Companies: This is a business organization that makes money by producing goods and services.

Cash flow: This is the movement of money into and out of business as goods are bought and sold.

Entrepreneurs: This is a person who makes money by starting or running businesses, especially when this involves financial risks.



The problem of poor management performance of government owned companies, have existed for so many years on contributions of opinions of some eminent Nigerians, academic and writers on the issue. These are found in seminar papers publications, magazines and newspapers. Much reliance was also made on management principles and techniques since managing is a universal function in which principles are applicable to any form of organization.

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The literature review is discussed under the following headings:

1. The rationale for government investment.

2. An overview of the operations and characteristics of public companies in Nigeria.

3. Indicators of inefficient management.

4. Privatization and commercialization of government owned companies.

5. Management by objective (MBO)

6. Motivation in business enterprises.

7. The reward factors in business enterprises management.


The rationale for government direct involvement is ownership of business enterprises has been group into economic, social-development and political consideration. Economic benefits: Government believes and it is expected that when government engages in the economic production of goods and services along side with private entrepreneurs in the economy, they would be a larger and quicker formation of inevitable capital to the economy that if productive factor were left to the private investor alone. This means that the surplus funds realized by those government owned companies over operational expenses could be reinvested for other productive venture, and this has a multiplier effect in expanding the productive capacity of the entire economy.

Social development: Okeke (1999), Suggest “Government in periods of high unemployment,” labour intensive forms are advocated and retain production at home to provide job even if in the long run, it is economically sub-optimized. Not only would these companies provide employment opportunities to the unemployment, it will inculate entrepreneurial spirit in the business sector of the economy.

Ishrat (1983) in his own view said, “The establishment of government owned enterprises would not only generate surplus capital for additional investment but could also play an important role in modernization by developing skilled labour and enhancing managerial capacities.” Indeed social benefits to a developing economy such as Nigeria is unarguable and immense.

The rationale for government participation in business stress that “it was necessary for government to reduce the unearned and inequalities income, redistribution of national income to project the massed from the exploitation of the shylock entrepreneur who have enormous investment capital to accumulate more wealth in form of monopolistic profits and to produce goods and services for the common good of the masses than profit motives.” One can ignore what would have been the faith of the poor masses, it private enterprise was to supply electricity, water or telephone services, whose sole objective is to maximize profit even if it is through exploitation. Government is able to operate at a profit.

This does not mean that government operation is more efficient than enterprise but only that private enterprise cannot exist unless it makes a profit, whereas government activity does not have to meet this standard. Government has a social responsibility to protect the interest of the consumers in an economy dominated by unresponsive and profit propelling entrepreneurs.

Development consideration: Government in an effort to achieve development involve in some kind of productive and manufacturing outfit mostly in the sectors where the private sector investment is considered too slow or inadequate. After independence, most existing foreign- (Akpaceyi W. E, 1986) owned enterprises were nationalized and substantial share of government resources were invested in state-owned enterprises in transport, public utilities and in manufacturing Ishrat in his survey African industrial development trend, observed that the ration of public revenue and expenditure to Gross domestic product (GDP) has tender to grow in recent years. He further observed that state owned enterprises now have not been required to fall within a framework of overall economic policies and programmes. Many public enterprises, continued and established on an adhoc basis at the virtual of a minister or a door without due consideration of economic and financial viability. This reads to inefficient project selection and to the establishment to enterprises whose technical and economic feasibility remain questionable. He think that this is the major reason for substantial cost overrun, inappropriate project design, high capital and for the large amount of how capacity utilization in so many enterprises owned by government. (Problems and solutions of Government-owned Companies in Nigeria Business Times page 5, 1983).

i. Quoting Ishart, the study shows that investment in public enterprises have not emanated from integrated rational plans, therefore their priority ranking in an economically rationale programme would not have passed the test for induction.

ii. Public enterprises have been used not necessary because they were the right investments to achieve the objective sought.

iii. At the level of investment project, there has been following the virtual absence of pre-project evaluation, little planning.

iv. And while broad, global objectives are given, specific goals, target s and efficiency criteria at the level of the investment units are not stipulated.


In most African countries including Nigeria, the operations of most government owned companies are replace. Chinedum Nwoko (2001), recommends that “Aside from

the design, operation of a system is, perhaps, the major determinant of its success or failure, while the design calls for expertise, the operation and implementation call for dedication and commitment. To obtain expected results, there must be a code of adhere to. But this is not so in the operations of government owned companies. Their operations are characterized by under utilizational structure.


The check-up list: There are many factors or indicators that show that management are not performing well in any organization or business enterprise. These are signs that management should watch out for and guard against seriously desired objectives should be met. These factors are found in all functional area of business operation production, personnel, marketing, financial and administration. (Omorogiuwa, 1983)


i. Under-capacity utilization: An efficient management requires that capacity be fully utilized for cost benefit reason. Operating a company under installed capacity is a danger signal. Whether a company utilizes all its installed capacity, or not, the company must incure and pay certain bills like rentals, electricity, salaries of staff both busy and idle ones, depreciation and machines are not reduced for operating at half capacity some managers of public owned companies.

ii. Wastage materials: In some productive enterprises like furniture manufacture, waste materials are inevitable but it become serious and adversely affect output and profitability when there are excess wastage of material meant for production of the final product. This is very common in most government owned companies and some government owned companies and some management of those companies do not care about it. (Omoroguwa, 1983).

iii. Inability to meet production target: Every organization design its production target either on a daily, weekly, monthly etc basis. They consider all the factors that will necessitate the meeting of the set target, even before the set target. But due to lack of proper internal control system of both production staff and the labour requirement or even delayed delivery of production materials, this target is sometimes not met.


i. Lack of Honest Political And Bureaucratic Leadership: Public enterprises, like individuals and other institutions do not exist and operate in a vaccum. Thus, it must be emphatically stressed that Nigeria is not yet in the fortunate historical situation of being blessed with strong, dedication and honest leadership both at political and bureaucratic levels, which is sufficiently committed to economic and social advancement and whose style of living and ruling is able to attract the imagination of the population for the purpose of inculcating new and re-generative system of value. The history of politics in Nigeria since the disappearance of the colonial master is replete with clearly discernible indications that the governing elites live extravagantly and in a veiled under world of their own where tax collected, for present and future private utilization by themselves and their power through political and criminal black mail and dishonest maneuvers, line is affluence through corrupt wealth, force their relatives and friends down the throat of employers and tender boards becomes the mouth piece of vested interest, or muzzle constructive public criticism. (Olewe, B.N, 1987) Development Adaministration

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Nwosu, 1983),opines that “public enterprises are the creates of government and the ideology and style of living of government and functionaries, political bureaucratic.” This therefore is a correlation between what happened or are happening within the governing hierarchy in this country.

ii. Worker’s Dissatisfaction: Human factor is the most crucial of all factors of production. It must be treated and handled with special care. It determines what happened in the other factors of production.

In most cases, workers may turn antagonistic with managerial and become uncooperative. Hence care should be taken to avoid dissatisfaction of the labour group in the organization, knowing its effect on production, workers in most government aimed companies often accuse management of negligence in matters of affecting their welfare, even denial of some clear benefit due to them.

Whenever a trace of dissatisfaction is noticed within the labour group, a good management should seek worker cooperation and understanding.

iii. Unqualified, Fraudulent and Dishonest Personnel: Dishonest and negatively ingenious staff with dubious motives can beat any system, no matter how tight, while honest and discipline staff will be less inclined to commit-fraud. It is therefore a control weakness for an enterprises to have very strict and advanced control mechanism manned by cheap, unqualified staff with a history of fraud and incompetence behind at two for a kobo but the same ignorant staff, devoid of integrity can sell the system for a fortune or even for a pittance.

Chinedum Nwoko (2002), “Examples enforce disciplines is better than precepts”.

Therefore, management must show both by precepts and examples the premium it places on these qualities. Only then, can management seek honest and qualification above nepotism etc.

iv. Laxity in the workforce: In most government owned companies, workers usually exhibit acare free attitude towards their work. Stage come to work late, return from break period to resume work at their own time and other practices that work against high productivity. In some companies, there is no clear demarcation between one office and the other, this is a sign of internal weakness because it leads to un-seriousness of staff to duty and respect to senior staff when management over look these attitudes they become permanent features of that company


Motivation and objectives are complementary. Robbin. (1982), management by objectives is “setting targets goals for an individual worker, a group of workers or department, including the entire organization and plans and control devices in motion to achieve within specified period of time is called management. This implies that objective should be clearly defined and assigned to specific officials who initiate and participated in them. Its effective application can fairly eliminate one major problem in management of government institutions which is over stretched by scruting and inference by the higher management over the lower levels.

Lets operation calls for managers at any level to join their subordinate or their superiors to plan the objective of the respective levels of management. This contributes to total organization effectiveness and efficiency. The MBO operates on the principle of manager and lets manage and on the grounds that when one have shared in planning objectives and policies, one will have the best to seek to their implementation for achieving the organizational and personal goal (The Administration process, prentice Hall of India , New Delli 2nd Edition 1982. p.171)

The benefits of MBO to the subordinate is to provide knowledge of what is expected of him, and provides for performance measurement and clarified authority and increased job satisfaction. To the superior, it is a dependable way of motivating subordinates. It strengthens interpersonal relationship, provide a coaching frame work and eliminates weak appraisal methods. To the organizations, it induces managerial effectiveness as a central value, facilitates co-ordinate effort. It provide objective reward criteria, identifiest advancement potential and development needs, and facilitates changes. This approach has not been adopted by most of the government owned companies and this leads to inefficiency and poor performance of the companies.


Posit to Bernald N. Olewe, administrative problems emitted by public sector enterprises (PSE) in Nigeria over the years, necessitated the setting up of a study group by Mohammadu Buhari Administration in 1984, headed by Ali-Al-Hakein, the group reviewed the financing, profitability and performance of the PES and submitted its reports on November 29, 1984.

The major problems identifies are:

i. Vague and conflicting objectives

ii. Inadequate autonomy

iii. Inflexibility in decision-making process

iv. Inappropriate capital structure

v. Under utilization of assets

vi. Absence of good credit control system

vii. Inability to recover debts

viii. Lack of adequate cost control measure

ix. Inefficient and ineffective management

x. Absence of financial and operational performance target

Privatization: Privatization means “relinquishment of part of all the equity and other interests held by the federal government or its agency in enterprises whether wholly or partly owned by the federal government and privatize “shall be constrained accordingly.”


Motivation posit to Kreniter is a process, channel, sustained and gives people’s behaviour, purpose and direction it is concerned with the why’ of human behaviour, what it is that makes people do things or simply, it is the stimulation of people to action to accomplish desired goals. Motivation is a complex factor as every individual is unique. Motivation has faced a lot of the thought and research as how it operates in organization. Professor Aliauzu, (of Industrial Behaviour Management), describes man, as an embodiment of behaviour is motivated in or other words, man’s behaviour is activated or gingered or better propelled by a stimulus either externally or internally. A man, he say will behave because there is a motive for every person’s action. That is to say motivation is a deriver that directs action or start up the body. A person, he say therefore can be induced into any particular behaviour (action, activity, performance etc) when once the motivation is there. If workers are treated as human beings by management and if an environment is created at the works situation in which workers enjoy a sense of belonging with their productivity would improve. Once an individual is motivated with the right motivation, he sets sometimes without knowing it.


Reward is one of the most important factor that determines success in managing a business entrepreneur or a business enterprise invests his capital based and wishes to maximize that profit. It is reward in the form of salary, and non-monetary reward (increasing his skill while on the job, a means of belonging to an organization, recognition socializing etc) that motivates a worker to live his skill out. (Agwu Akpala.1990).

What motivates, a worker might not necessarily motivate s a managers. Hence the manager, worker in order to induce behaviour. Motivation could take many forms. It could be in monetary or non-monetary forms, promotion, increased responsibility of a worker or a manager improving the condition and environment of the job allowing worker to participate in decision making etc. such things like these are motivators. Likewise disciplinary action should be administered on both worker and managers in the form of queries, cuts in salary, loss of promotion, suspension and other punishment are also motivators. This will induce them to set up and work hard, which could be motivated by the board of directors if it should realize its objectives of setting up business, commercial and industrial venture both at the federal and state level. Managers must also do so for the working staff of their organizations.




The research findings, which came about as a result of the analysis of data, and personal observations, are.

Firstly, procurement of raw materials as a result of unavailability of working capital constitutes a problem to meeting production target. These companies poor performance were caused by poor management control. “Operational plan” resulting to higher cost of production over sales. This is attributed to under utilization of installed machinery and equipment due to non-functioning and non-use of this machinery.

Secondly, the needed control measure to keep management sufficiently committed was lacking. For example, ministry of commerce and industry, and agent to government, did not set any form of annual profit targets for performance targets not set any minimum returns for the invested capital of the company, neither was there any declared form of punishment (motivation in the form of job or demotion for persistent poor performance or merit awards elevation to higher responsibilities for acceptable performance. The effect of this is that management is at liberty and loses nothing for poor performance.

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Thirdly, this research study reveals that one of the causes of poor performance in most government owned companies is that management which is the main determinant of success or failure in any business enterprise lack a great of integrity and commitment. The cause of this lack of integrity and commitment and loss of responsibility for success of the organization entrusted to them, worsened by inadequate or total lack of control by government and acceptability to it. Management of various government enterprises is meticulous without cost of operation. Financial indiscipline of all kinds are rampant among management groups, coupled with the fact that there is no mechanism in force for motivating hard working manager nor anyone for discouraging poor performance. Managers are therefore not under any constraints to performance except conscience.

The research also found out that government had adequate personnel, expertise and the convenience to invested and established. There is no proper screening, analysis and appraisal of company’s operation and managers performance as in the case with private companies.


This research study was carried out to find out the causes of poor performance e of government owned companies in Ebonyi State. The cause of poor performance of these companies is not the form of ownership nor is it initial finding, nor is it that of government managers. While these factors cannot be ignored, it is evidently clear from the findings of this research that the major cause of poor performance of these companies is lack of integrity and commitment among government appointed managers. This has resulted in carefree attitude towards expenditure increment, utilization of available resources and assets, which are the sole determinants of profitability, in extreme cases. It leads to financial indiscipline among management groups.

When this happen without timely detection, intervention of government, the consequence is persistent loss in operation, marginal existence of such organization.

This poor performance trend in government companies has prolonged and is becoming institutionalized in Nigeria because of government poor control over their appointed managers, worsened by the non-accountability of management stewardship to government and to the public. It is therefore necessary that adequate control and proper accountability by public company managers and directors to be administered. It is not just enough to invest in these companies and sit and watch them fufil the objectives of setting it.


Government companies have failed to achieve the objective for which they were set up. Rather, they have been a drainpipe on the nation’s resources, and since the cause of this failure is inefficient control by government, the following recommendations were made:

Invest and contract out management:

Government should establish these enterprises by way of promoting and providing initial capital and immedicately contract out the management of such establishment to competent indigenous consultants who have the professional qualification, and capabilities for such job.

There should be no form of quota system in employment, control of both management and staff of companies should be the responsibility of the consulting firms.

Privatization and commercialization:

The establishment of (TCPC) Technical committee or privatization and commercialization led to the identification of some major problems like over staffing, ineffective and inefficient management, under-utilization of assets, absence of good credit control system, inappropriate capital structure etc.

Based one the findings, the government is advised to:

1. Commercialization some of the public enterprises.

2. Privatization the unviable public enterprises with the help of (TCPC) and commercialization, which was established in 1988 and is empowered to work out modalities for the autonomous operations of commercialized parastatals or organizations.



Agwu Akpala, (1990) Management: An Introduction on and Nigeria perspective.


Chinedum Nwoko (2001) Internal Control in Business. (Enugu: Web Publishing Company Ltd.


Edeani, O.O. (1989) “Scientific method” unpublished lecture paper to 1989 graduating students of the Department of mass communication, ASUTECH


Ejiofor, P.N.C (1980 p.3) The Integrity factor in Management of National Development (Enugu Government printers 1980 p.3


Hornby, A.S (1994) Oxford Advanced Learners Dictionary of current English. Third Edition, London. (Oxford University Press)


Nwosu, E.J (1992) Some factors Affecting the performance of public enterprise in Nigeria. (September 1983

Odo, O.M. Guide to proposal writing in Behavioural Sciences sharp Press, Enugu


Omorogiuwa,(1983) P.A The paradox Manpower surplus and shortage in Nigeria.


Pandy, I.M.F (1987) Financial management New Delhi,


Robbin, S. T. (1982) The Administrative process prentice Hall of India, New Delhi 2nd Edition.






Please tick for the correct responses in the boxes or specify where necessary)

1. Is your company 100% owned by the state company Yes No

2. Are there private individuals or companies holding and share in your company? Yes No

3. Since inception, has the initial capital of the company been increased either through new share or by grant or by borrowing overdraft? Yes No

4. What is the initial authorized and issue capital? Yes 5. What are the sources of fund for expansion of operation?

a. Issue of new share

b. Government fund

c. Borrowing earings from previous operations

d. All of the above

6. Who appoints top and middle management staff?

a. Government

Board of directors

By majority of votes

7. In recruiting staff generally, what are the requirements?

a. Qualification


c. A and B

d. None of the above

8. How often does the company hold its general meetings?

a. Monthly

b. Bi-monthly

c. Quarterly

d. Annually

9. How often does the board of directors hold their meetings?

10. Does the government interfere into the operations of the companies? Yes No

11. Can you describe the general atmosphere/relationship among staff as cordial?

Yes No

12, What is the source of your raw materials?

Local Foreign Both

13. Do you have problem in spare-part procurement? Yes No

14. If yes to number 13 is the problem

a. Foreign exchange

b. Delay in shipment

c. Obsolescence

15. Do you often have breakdown in machine? Yes No

16. Who determines the salaries/benefits of other non-management staff? Yes No

17. Is your salary structure modeled along the civil service structure yes No

18. Do you feel that your company’s salary is competitive with similar companies in the country?

Yes No

19. Do you always realized your targeted sales estimated annually Yes No

21. Do you consider the cost per unit of your product competitive with other producers of the same or similar products?

a. The same b. Nearly the same c. Higher than others

22. What factor (s) do you consider the bottleneck to your company achieving its annual profits estimated?

a. Production problem

b. Staffing problem

c. Financial problem

d. Government interference

e. Fluctuations in the market demand

f. High cost of production

g. others unspecified

23. Do you feel top management is committed to the affairs of the company? Yes No

24. How will you rate government control of the management of your control?

Adequate Inadequate

25. Do you consider changes in top management group by government very frequent?

Yes No

26. Is your company operating at full capacity at present? Yes No

Government Owned Companies In Nigeria – Poor Management Performance

To place an order for the Complete Project Material, pay N5,000 to

GTBank (Guaranty Trust Bank)
Account Name – Chudi-Oji Chukwuka
Account No – 0044157183

Then text the name of the Project topic, email address and your names to 08060565721.  

Enter your email address:

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  1. when ever a business is owned and manage by government it is called

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