ANALYSIS OF MANAGEMENT OF REVENUE GENERATION AND ACCOUNTABILITY IN PUBLIC ENTERPRISES IN NIGERIA (A STUDY OF SELECTED PARASTALS IN NIGERIA)
ABSTRACT
The Management of revenue and accountability in Nigeria telecommunication limited and power holding company of Nigeria came under focus in recent time. The aim of this study is to investigate the effects, and problems of management of revenue generation and accountability with the view of finding feasible solutions to these recurrent problems. Both primary and secondary data were used in the study of selected parastatals in Nigeria. Primary data were collected through questionnaire and interview as an instrument of data collection. Chi-square was used for the data analysis, which was needed to test the formulated hypothesis, consequently the following findings were made from the research. The researcher envisaged the misappropriation of funds/or diversion of funds and inappropriate recording of financial statement. Administrative and Bureaucratic bottle-neck constitute delays in payment of salaries and wages of the staff of these parastatals and this leads to poor service delivery to their customers. The researcher identified that non incorporation of GSM and advanced technological innovation has drastically reduced the revenue profiles of these parastatals and non prompt payments of bills by the customers. Based on the above findings the following recommendations were made: proper financial mechanism and routine auditing, checking of financial records and budgetary process should be enhanced to ensure increase in revenue base and accountability of these parastatals.
CHAPTER ONE
INTRODUCTION
Background to the Study
Public enterprises are government business enterprises set up primarily to provide social and economic services to the general Public. Among the enterprises, however there are those that produce mainly the core economic infrastructure called utilities. Public utilities are of social and economic significance because they have direct impact on the standard of living of the populace and have a bearing on the international competitiveness of the economy. They also have direct forward and backward linkages to other sectors of the economy. Hedrick (2010) stated that inadequate services provided by the dysfunctional public utilities have contributed immensely to the escalating domestic production cost, which directly undermines the nation’s competitiveness as an investment location .
In Nigeria, like most other developing countries, the ownership and control of key public utilities have virtually been the responsibility of the government since independence in 1960. The case for government control of public utilities, such as electricity, tele-communication, gas, water supply and air transportation is based on the argument that basic goods and services needs to be provided to the citizenry at affordable prices and also that government needs to control the utilities due to their relative significance in the national economy. The other grounds for government policy in this area include the capital intensive nature of public utilities and the alleged inability of the private sector to generate enough resources to invest and exploit economies of scale associated with these establishments.
Over the years, however, the inability of successive Nigerian governments to provide the services in an efficient manner has led to persistent calls for reform. In response, several policy initiatives have been undertaken, including market regulation, deregulation, liberalization and privatization. For example, regulation was an attempt to alter the socially undesirable behavior which the monopoly status of public enterprises has tended ‘to encourage. However, most of the public utilities have continued to be run inefficiently at low rate of return and to operate sub-optimally, with outmoded and dysfunctional machinery and equipment due to lack of exposure to competition and mismanagement of giants and subventions.
According to Hendrick (2010) , Privatization involves the sale of equities in public enterprises to private investors with or without the loss of government control in these organizations. It may take the form of deregulation of state monopolies by the abrogation of legislations restricting entry into certain economic activities. The mechanism may be by sub-contracting (i.e, operational and maintenance contracts or enterprises contracts) , work previously undertaken by state employee to the private sector. In the view of Estache (2011), privatization may operate in the form of divestiture, which is the actual sale of public assets to the private sector through public offer of shares or private sales of assets . Government usually embark on privatization as part of restructuring the economic base of a country to promote efficiency and free government of the burden of fiscal imbalance brought about by government deep involvement in business enterprise.
As would be expected, the reform programmes adopted by Nigerian governments since SAP have raised fundamental issues regarding the ownership structure, economic efficiency, profitability and income distribution as well as the appropriate balance between private and public sector roles in the provision of utility services
1.1 STATEMENT OF PROBLEM
In most developing countries including Nigeria, government participation in economic activity is usually significant. One of the various ways through which the government has intervened in the Nigerian economy is through the establishment of public enterprises. Public enterprises are statutory bodies operating services of an economic or social character on behalf of the government.
Ademolokun (2011), stated that the rationales behind the establishment of public enterprises in Nigeria are many, some of the reasons includes, generation of revenue that will add to available national capital for the support of development and welfare programmes, making it impossible for important profitable enterprises to be controlled by the few individuals or groups, organizing certain critical activities for national survival and economic stability and providing employment opportunities. In the view of Sanda (2007) the national Electric Power Authority (NEPA) and the Nigeria telecommunications Limited (NITEL) are among the critical and strategic organizations whose ‘activities are expected to contribute in no small measure in our national development. This is so, more, in the present era of technology and proper information management system. Conversely, the operations of public enterprises in Nigeria have of recent turned to be a very better pill for the government that set them up and the populace they were meant to serve. The populace are complaining of shoddy services from these organizations while the government has identified public enterprises in Nigeria as veritable drainage pipes for the limited resources available for the government. Consequently, the privatization and commercialization options became very attractive to the government,
Report of boards of enquires on public enterprises in Nigeria including those under this study had shown that the root cause of non-performance of these public enterprises were poor funding and inept financial husbandry.
The main focus or problem of this study is to identify how sound management of revenue generation and accountability in a public enterprises can stave the collapse of our selected public enterprises — NEPA and NITEL. The study will also give attention on how the problem of poor financial resources management like waste of fund, fraud and diversion of fund could be curbed in our public enterprises. The study will explore how the future prospects of these enterprises could be enhanced through the deployment of well trained and skilled, well remunerated and motivated workers on revenue generation and accountability duties.
1.2 RESEARCH QUESTIONS
Based on the foregoing, the study seeks to provide answers to the following research questions
- What are those factors that affect revenue generation in Nigeria?
- What are the modes or strategies of revenue generation in Nigeria parastatals.
- What are those measures to be adopted by parastatals to improve revenue generation and accountability?
- What are those factors that hinder revenue generation and accountability in Nigeria parastatals?
- To what extent has non disclosure of proper accounting information affects revenue generation and accountability in Nigeria parastatals?
1.3 OBJECTIVES OF THE STUDY
The objective of this study includes,
- To examine the sources of revenue generation of this parastatals in Nigeria.
- To examines those problems that affect the management of revenue generation of some of these selected parastatals in Nigeria.
- To determine whether effective revenue management will improve the profitability of the parastatals in Nigeria,
- The effect of mode of disbursement of giants to parastatals.
- To evaluate the financial control mechanism used by these selected parastatals, in Nigeria.
- HYPOTHESES
In view of the problem and the objectives it seeks to achieve the following hypotheses are formulated for this study.
- : Effective revenue management and accountability is not dependent on profitability.
- Mode of disbursement of grants to parastatals is not significantly affected by revenue generation and accountability in Nigeria.
- Inadequate disclosure of financial information is not significantly affected by revenue generation and accountability in Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
The significance of this study lies on the vital roles the National Electric Power Authority (NEPA) and the Nigerian Telecommunication Limited (NITEL) are expected to play in our national life. The major agency responsible for generating, transmitting and distributing electricity in Nigeria is the National Electric Power Authority (NEPA), a parastatal of the federal government under the federal ministry of power and steel which was established by Decree No: 24 of 29th June, 1972 and vested with the primary responsibility of developing and maintaining an efficient electricity supply to all parts of the country. NEPA is an offshoot of the Electricity Corporation of Nigeria (ECN) which was established in 1950. Government’s interest and investment in the electric power utility was informed by the awareness that electricity consumption constitutes a major yardstick for measuring the standard of living of a people. It was considered that once adequate electricity was available, many other aspects of economic activity would fall in place. Government has, therefore, continued to accord high priority to adequate supply of energy in all National Development plans and other development initiatives.
The communications sub-sector of the national economy consists of the means of sending and receiving messages, order amongst other uses. Communications are vital to the smooth functioning of any economy. In the fourth National Development plan it was noted that the provision of adequate and reliable communication services is essential for efficient operation of any modern economy.
Unfortunately, the National Electric Power Authority (NEPA) and the Nigerian Telecommunication Limited (NITEL) like many other public enterprises in Nigeria have poor reputation in terms of performance. Thus, as for back as mid 1970s, the first progress report on the second national Development plan lamented government’s hope in this area (Communications) have not yet been realized. The sector has then lagged behind the development in other sectors and is beginning to constitute a drag on overall development. According to Anaynwu et al (1997) the services of the communications sub-sector of our economy are obviously epileptic.
Readers of this research will clearly understand how to eliminate or reduce the factor that affect the efficiency in the management and accountability in public enterprises in Nigeria. It will enable the managers of these enterprises to exercise proper management and accountability so as to boost the revenue generating potential of theses enterprises
We believe that the poor performance of these public enterprises charged with the provision of communication facilities in Nigeria stemmed from poor management of their revenue generation and accountability. We also believe that the study of this nature will be able to highlight the revenue management and accountability problems in the enterprises which if resolved will put the enterprises on a sound footing.
1.6 SCOPE OF STUDY
This research focuses on ascertaining the management of revenue generation and accountability in selected Nigerian parastatals. The study was conducted in Enugu state among the selected parastatals of NEPA and NITEL. Enugu state was chosen for the study because the results of the study can be generalized to other areas bearing in mind that the nature and characteristics of the two parastatals chosen are the same all over the entire states of the federation. Besides there are many other parastatals in Nigeria that are known in Enugu and other places so the researcher has decided to ‘restrict the scope of the study to that of Enugu.
It covers a period of 26 (Twenty-six years) from 1980 to 2007 and the major objects of the study apart from the response from the respondents is the information recorded in official data.
1.7 LIMITATIONS OF THE STUDY
Every human polity has it inherent weakness and strength. As a result, every researcher uses to make inferences with caution. This study is not without some inherent pit falls caused by some extraneous variables.
The limitations of the study stems from the fact that it is based on recorded and historical information sourcing the relevant materials were not very easy in this respect especially, records on how revenue was generated. Also the complete response and some misleading information from the respondents constituted another limitation of the study.
The above limitations have not affected the beauty and relevance of the work in anyway.
1.7 DEFINITION OF TERMS MANAGEMENT
(1) Management:
The term management is conceptualized in this study as the process of achieving desired results through efficient utilization of human and materials resources in an organization. Management entails planning, organizing, staffing, lending and interpersonal influence and controlling enterprise resources Bediau (2004).
(ii) ACCOUNTABILITY
Accountability is defined as a complex rational choice and use of resources which involves responsibility of functions Imaga (2007).
(iii) Accounting according to the American institute of certified public Accountant, accounting is the art of recording, classifying and summarizing in significant manner and in terms of money transactions and events which are, in part at least of a financial nature.
The American Accounting association on the other hand says accounting is “the process of identifying, measuring and communicating economic information to permit informed judgment and decisions by users of the information” (AAA 1966) cited by Kodjo (2004).
- Public Enterprises Ademoikekun (2011), stated that public enterprises are public organization that emerged as a result of a government acting in the capacity of an entrepreneur .
- PHCN-Power Holding Company of Nigeria which was formally known as National Electric Power Authority (NEPA)
- N1TEL-Nigerian Telecommunication Limited GOBs – Government Owned Businesses.