THE PROBLEMS OF FINANCING GOVERNMENT CORPORATIONS A CASE STUDY OF ENTRACO

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Directorial improprieties in public corporations is expressed most frequently in terms of misrepresentations in financial statements of such corporations, manipulation in the stock exchange, commercial bribery, bribery of public officials directly or indirectly, in order to secure favourable contracts, embezzlement and misapplication of funds etc. These varied types of directorial criminality consist principally of violation of delegated or implied trust which can be reduced into two categories: misrepresentation of asset values and duplicity in the manipulation of power. The financial loss from directorial criminality high as it is, does not match the damage to social relations, resulting from misgovernance to social relations. Directorial criminality and mismanagement, thus violate trust and creates distrust. Directorial improprieties, though has civil implications is crime in real sense since it is a violation of criminal law. And again, because “corporate law is widely believed to be tilted against shareholders of corporations” and because, “it is no more anomalous that shareholders do not manage or control “their” corporations and because directorial improprieties leads to bankruptcy criminal law has responded by providing appropriate machinery for control of the income of the public corporations. This paper seeks to assess the effectiveness of the machinery put in place by law to ensure control of directors. Public corporations on enterprises involve state ownership and control of certain utilities. Usually, the form and characteristics of public enterprises are regulated by the appropriate legal and institutional system of the particular country. Public corporation are enterprises, which are partly or wholly owned by the government, which private enterprises have been unable to take care of due to lack of adequate capital. Government have generally started playing a major role in economic development and in starting large enterprises in public sector. Many parastatals come into being when it was believed that rapid economic development required the state to take on the role of an entrepreneur/should also be know that government involvement in running public sector help in shaping its economy. Government ownership of these enterprises is to help improve its social and economic well being of her people and those amenities that the entrepreneurs cannot provide. In any organization, there are so many components put together that make for an effective performance. One of the set components is fund. The problem that arises is the adequacy of the fund for effective oiling of the operations of an organisation, throughout its lifetime. Many organisations which started well at the initial stage have failed by the wayside die to shortage of available funds. Public enterprises could be classified into four categories, according to the degree of government participation in ownership and intervention in management. We have the governmental departments or ministries and agencies like INEC, NBTE.

Government invested enterprises where the government held at least 50% of the equity and appoint management. Subsidiary company of government invested enterprises which allow the government to invest indirectly through government invested enterprises and others. And also government back enterprises where the government hold less than 50% of the stock. In developing nation there is a general believe that government should own and control enterprises; and government gave majority control of them appoint top management. Over the past decades, the number and variety for public enterprises in developing country like Nigeria, the overall performance of these enterprises have been rather disappointing. They have suffered staggering loss thereby becoming a major drain on national budgets and the principal sources of heavy external borrowing. They have equally failed to generate the expected job opportunities. The public enterprises have been pioneers in strategic and technology intensive field and through the price of public sector product such as coal or electricity have also had a significant impact on overall price levels.