Critical Issues In Managing Nigerian Public Enterprise: A Case Study Of Federal Airport Authority Of Nigerian (FAAN)
Management in all ramifications has been noted as a critical and indispensable element in all organizations. Nevertheless, public enterprises are in dilemma of some management constraints, which tend to hinder their goals and objectives. Against, the background of the above explication, this research work empirically explored critical issues in managing Nigerian public enterprises using a case study of Federal Airport Authority of Nigeria (FAAN), Lagos state. The purpose of which is to investigate the management problems of FAAN Lagos state and as well proffer solution to such problems. However, in order to investigate this, relevant data were collected through both primary and secondary sources such as direct interviews of staff in various departments of the organization. Also other information was gathered from books, journals, newspapers, unpublished materials and internet to complement the primary data. From the analysis of the data, the findings shows that there are factors that constitutes management problems of the company. Among the critical factors are managerial inefficiency and government interference, bureaucratic corruption, poor staff relationship, lack of motivation, conflicting objectives, lack of training and development, excessive control nepotism. These were identified as impediments of operational efficiency of FAAN Lagos state. As a result of these problems the following recommendations were made. Management should accelerate the growth of the company through increase in skill and knowledge acquisition. Also training and motivation is important. Government should curtail its excessive interference and control on the affairs of this organization. It was also recommended that adequate measure should be in place to check the menace of corruption in the company.
Table of Content
- 1.1 Background of the Study
- 1.2 Statement of Problem
- 1.3 Research Objectives
- 1.4 Research Questions
- 1.5 Research Hypothesis
- 1.6 Significance of the Study
- 1.7 Scope of Study
- 1.8 Limitation of the Study
- 1.9 Definition of Terms
- 1.10 Organisation of the Study
2.0 Literature Review
- 2.1 Conceptual Framework
- 2.2 The Concept of Management
- 2.3 Styles of Leadership
- 2.3.1 Organizational Strategic Management
- 2.3.2 Policy Management
- 2.4 Overview of Public Enterprise
- 2.5 Justifications for Public Enterprises
- 2.6 Classification of Public Enterprises
- 2.7 Management of Public Enterprises
- 2.8 Control of Public Enterprise
- 2.8.1 Ministerial Control
- 2.8.2 Parliamentary Control
- 2.8.3 Judicial Control
- 2.9 Reasons for the Failure Of Public Enterprises
- 2.10 Factors Affecting Management of Public Enterprises in Nigeria
- 2.11 Theoretical Framework
3.0 Research Methodology
- 3.1 Design of the Study
- 3.2 Area of the Study
- 3.3 Sample and Sampling Technique
- 3.4 Instrument for Data Collection
- 3.5 Method of Data Collection
- 3.6 Method of Data Analysis
4.0 Results and Discussion
- 4.1 Results
- 4.2 Lack of Good Knowledge of Management and Operational Efficiency of FAAN Lagos State
- 4.3 Government Interference, Conflicting Objectives, Bureaucratic Corruption, Lack of Motivation and Lack of Training and Development are the Management Problems of FAAN Lagos State
- 4.4 Management Inefficiency and Poor Performance are the Effects of Management Problems on the Operational Efficiency of FAAN Lagos State
- 4.4.1 Institutional
- 4.4.2 Inadequate Training
- 4.4.3 Deterioration of Health
- 4.4.4 Incompetent Superior
- 4.4.5 Lack of Clear Objectives
5.0 Summary, Conclusion and Recommendations
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendations
1.1 Background of the Study
In most Countries of the world, particularly the developing ones, the decades following World War II (particularly, the 1960s and early 1970s) witnessed a massive intervention of the government in national economics. One of the ways through which the government intervened in the economies of these countries was by establishing public enterprise state-owned companies. According to Ezeani (2006:211) stated “that public enterprise was seen as veritable tools for achieving national socio-economic development”. Thus, since the 1950s, successive governments have used public intervention in the development process. This was eloquently stated in the Nigeria Second National Development plan (1970-74) thus:
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 also basic considerations arising from the dangers of leaving vital sector of the national economy to the whims of the private sector often under the direct and remote controls of foreign large scale industrial combines
Also according to Nwoye (2001:1) opined “that there are many reasons for establishment of public enterprises, which one of them is development emphasis, he further stated that in many developing countries, the resources available to the private sector are not adequate for the provision of certain goods and services for example, the investment required in the construction of a hydroelectricity-generating plant or a water scheme for large urban center are quite enormous and the returns on such investment will take a very long time to realize. Ozor (2004:10) stated that “like many other British-ex-colonial territories, Nigeria realized soon after political independence that she still had to battle for her economic independence. Her weak economic base limited infrastructural facilities, paucity of social service-providing inadequate local financial entrepreneurship etc.
Furthermore, Adeyemo (2005:224) stated that “other factors that accelerated the growth of Nigeria’s public sector was the indigenization policy of 1972 as enacted by the economy, the policy further provided much needed legal basis for extensive government participation in the ownership and control of significant sectors of the economy”. Ugorji (1995:541) also observed that “public enterprises have also been established for political reasons; many government undertakings are used to provide jobs for constituents, political allies, and friends, Public Enterprises and the distribution of government employment were further been defended in the need to maintain “federal character” and promote national integration.
Consequently, the Public Enterprises especially in developing countries became active in likely sectors such as manufacturing, construction, finance, services, utilities, transportation, agriculture, natural resources, etc.
According to Ezeani (2006:21) stated that “the colonial government established some public enterprises to provide essential services like electricity, railway, telecommunication and pipe borne water to mention but a few.”
Also according to Obadan and Ayodele (1998:1) they opined that “it is in order to put socio-economic development underway and also guard government finances under conditions of capital scarcity and structural detects in private business organizations, Nigeria and most other African countries, regardless of Ideological dispositions, unavoidably made fairly extensive use of public enterprises for resource mobilization and allocation, particularly within the utilities and social services sectors as (FAAN Lagos state) in the 1950s through the 1960s. In both technical and economic perspectives Public Enterprises are seen as:
Organizations whose primary function is the production and sale of goods and/or services and in which government on other government controlled agencies have an ownership stake that is sufficient to ensure their control over the enterprises regardless of how active that control is exercised.
The Public Enterprises approach to resource mobilization and allocation for national socio-economic development is in consonance with the Keynesian approach to economic approach reflected the problem of market failures and the growing demand for citizenship rights such as a decent living standard, adequate education and health care, and minimal social equality, he further stated that whereas in developing countries, this approach became the pivotal policy option to ensure national development, wealth redistribution, employment generation, and economic self-reliance.
In most developing countries like Nigeria, where ideology has not played any significant role in the shaping of their economic activities, the reason for the spread of public enterprises can be found mainly in the realm of political, social and economic considerations, but not ideological. Thinking in the direction, S.A. Sosna in Ozor (2004:110) asserted that:
The emergence of a fairly extensive public sector is a major regularity in the development of the young states. Although, the scope and pace of the change differ form country to country, the public sector and related problems are central to their economic polices. To a certain extent this is independent of what social forces that hold the reins of government; the reason being objective factors, which are not rooted in political and ideological motive alone but are associated with the processes occurring in the multi-structural economic patterns of these countries and with their economic and social situations.
Implicit in the above citations of eminent scholars in the subject matter, is the fact that public enterprises are established for various reasons which include not only ideological but also objective factors such as, the provision of essentials services. Ozor (2004:111) also maintained that public enterprises are established to provide certain essential services and public wants which if left in the private hands these services will be beyond the reach of the average man in the society. Even when the exclusion principle can apply in the satisfaction of these services, they are considered basic necessities of these services; they are considered basic necessities or merit goods.
Government must, therefore, step into provide such services and subsidies their consumption; otherwise the discretionary pricing policies of private monopolies will render their consumption too exorbitant for the average consumer/citizen. This is why government establishes social services like FAAN Lagos state in order to achieve its education and information objective. This explains the existence of state governments.
Some public enterprises are established for the purpose of mineral exploration and exploitation. The rationale is that the benefits of such minerals should accrue to their owners. i.e. The public; in the producing country. This is the reason for the establishment of the Nigeria Coal Corporation, Nigerian National petroleum Corporation (NNPC) etc. Indeed a prime reason for enterprises to undertake such major functions as transportation, communication and manufacturing.
Public enterprises may also arise as a result of governments desire to create an integrated national economy and to stimulate balanced regional development throughout the country. The establishment in Nigeria, of steel, rolling mills at Oshogbo, Jos, Katsina, and Ajaokuta are clear examples. Also, at times, public enterprises are set up by government in response to the complaints of its citizens regarding poor services, extortionate prices, uneven performance, and discrimination in private service delivery by private concerns. For example, the establishment of state transports companies by various state governments as well as the incorporation of the national freight and cargo handling company about the high fare charged by private transporters. In order, therefore to effect a fair distribution of service and national resource and thereby achieve economic integration, various governments in the federation had to address and redress some of these complaints.
Another reason for the blossoming of public enterprises is strategic. In most countries, national security has constrained the government to assume direct responsibility for certain activities such as the production of arms and ammunition including transport and fighter vehicles, military air fields and defense installations. For one thing, investments in them are quite exorbitant and sometimes prohibitive. For another, the security of the nation may be at stake if private investors handle and thus become acquainted with information regarding vital defense equipment and strategic military locations and installations etc. This is the rationale for the establishment of the defense industries Corporation (D.I.C) of Nigeria and the Government of the United States of America’s Intervention in providing some military establishments in America.
Public enterprises are expected to have their hallmark and watchword as efficiency and effectiveness. This is predicated on the rational behind their establishment by both the state and federal government, but unfortunately the reverse has been the case most contemporary public enterprises are associated with inefficiency and ineffectiveness, which have led to liquidation of some enterprises like the Nkalagu Cement Company, This is reason Adeyemo (2005:223) stated that “inspite of the impetus given to public enterprises especially in Nigeria criticisms are leveled against them. He further stated that their problems are so enormous that even left the Nigerian public in a state of great disillusionment. These criticisms vary from lack of profitability and reliance on large government subsidies. Also Ogundipe (1986:7) once argued that between 1975 and 1985, government capital investments in public enterprises totaled about 23 billion Naira, in addition to equity investments government gave subsidies of 11.5 billion to various state enterprises. All these expenditures contributed in no small measure to increase government expenditures and deficits.
Similarly, public enterprises suffer from gross mismanagement and consequently resulted to inefficiency in the use of productive capital, corruption and nepotism, which in turn weaken the ability of government to carry out its functions efficiently. FAAN Lagos state is not excluded from this problem. Still on the problems associated with public enterprises in Nigeria. Obadan (2000:8) argue that, “in country after country, unbridled state expansion has led to the following.
- Economic inefficiency in the production of goods and services by inadequate 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 the bureaucracy severally straining the public budget with huge deficits of public enterprises becoming massive drain on government renounces inefficiency in government etc.
- Poor financial performance of Public Enterprises reflecting a history of huge financial losses, overstaffing, and burden of excessive debts.
Also Ezeani (2006:223) opined that “most public enterprises operate at a loss, and therefore, constitute a massive drain on government resources through transfers and subsidies”. Obadan (2000:10) further maintains that:
In Africa, the poor performance of Public Enterprises attracted a great deal of criticisms, particularly, in the 1980s as the macro-economic policy environment, arising from the impact of the global economic crisis became less accommodation to the resulting inefficiency in resource allocation.
Generally, speaking the performance of these enterprises has been disappointing perhaps, these form the reason government embarked on restructuring and strengthening of public enterprises in the country via privatization and commercialization the purpose of which is to make them more viable result oriented and formidable. This is the reason Rondinelli and Lacono (1996:247) viewed that “Latin America countries such as Chile and Argentina had transferred large-state controlled telecommunication railways, power and energy, airline, mining and oil and petroleum industries to private ownership or management during the 1970s and 1980s.” Also Ostrum and Ostrum (1992:309) argued that in terms of improving state-owned enterprises performance. Market forces are only half the equation. After all, market are unforgiving. Even when carefully structured, they produce inequitable outcomes.
Quite a number of public sector enterprises are operated without respect to financial cost or returns. Not all such investment is expected to yield immediate financial return as some of the benefits are social rather than private in character that is, they accrue to particular or denominated individuals.
Okigbo (1998:16) suggested that the production method must be efficient and that the price change should at least cover the cost of operations, therefore commercialization which differ from privatization is one of the policy thrust of the reform of state-owned enterprises. Also Kuye (1990:7) once asserted “countries such as United Kingdom, France, Canada, Turkey, Nigeria etc. which adopted mixed economy, the government of these countries have now accepted the obvious truth that if all, or at least most of the public enterprises were turned over to the private sector they would be better managed and their economy would fair much better in terms of the set out goals.
1.2 Statement of Problem
In Africa, the poor performance of Public Enterprises attracted a great deal of criticism, particularly in the 1980s as the macroeconomic policy environment arising from the impacts of the global economic crisis became less accommodating to the resulting inefficiency in resources allocation. Also Ukwu (1985:80) he stated that “structure and management problems real enough and should be addressed directly.
According to Ozor (2004:155) opined that “the performance of public enterprises in Nigeria is nothing to write home about”, he also stated that public enterprises in Nigeria have failed to perfume the initial role for which they were established striking at this Augustine Otiji, in Ozor,(2004:156) maintained that “the bane of the Nigerian Public enterprises has been that of to underlined roles”, it is confusing to play a welfare role and at the same time run a profitable venture the image of the public enterprises is so bad that has come to symbolize inefficiency, red tapism, lack of initiative and corruption, this may not be totally justified but it reflects apparent dissatisfaction with public establishments. Implicit in Otiji’s assertion is the fact that public enterprises have failed to live up to expectations and have therefore become unviable.
Specifically looking at Federal Airport Authority Of Nigeria (FAAN) Lagos which is not excluded from the above problem, it can perhaps be posited that management problems of the company are multi-faceted such as operational inefficiency, poor employees relation, over staffing lack of coordination at staff level, poor motivation, conflicting objective and functional connection syndrome vis-a-vis underutilization of staff. Against this background the researcher sought to examine critical issues in managing Nigerian public enterprises using a case study of Federal Airport Authority of Nigeria (FAAN), Lagos state.
1.3 Research Objectives
The purpose of this study is to examine critical issues in managing Nigerian public enterprises using a case study of Federal Airport Authority of Nigeria (FAAN), Lagos state.
Specifically, the objectives include:
- To explain the meaning of management and public enterprises
- To find out the management problems of Federal Airport Authority of Nigeria (FAAN), Lagos state.
- To find out the effects of management problems on the operational efficiency of Federal Airport Authority of Nigeria (FAAN), Lagos stateand as well suggest possible panacea to these problems.
1.4 Research Questions
This project is designed to tackle the following reach questions;
- What is the meaning of management and public enterprises?
- What are the management problems of Federal Airport Authority of Nigeria (FAAN), Lagos state?
- What are the effects of management problems on the operational efficiency of Federal Airport Authority of Nigeria (FAAN), Lagos state and as well suggest possible panacea to these problems?
1.5 Research Hypothesis
The following null hypotheses were formulated to guide the study the hypothesis is to be tested at 0.5 alpha levels.
- HO1: There is no significant influence of management problems on the operational efficiency of Federal Airport Authority of Nigeria (FAAN), Lagos state
- HA1: There is a significant influence of management problems on the operational efficiency of Federal Airport Authority of Nigeria (FAAN), Lagos state
1.6 Significance of the Study
Theoretically, this research shall be a relevant material and a contribution to scholarship, constituting a reference material on the studies of management of public enterprises in Nigeria and related subject matter for further research. It will also expose the management of public enterprises in Nigeria including FAAN Lagos stateto the modern styles of management and leadership, as well as other strategies for improving public sector performance such as Total quality management, Capacity Building, Decentralization, Ethics, Accountability and Information and Communication Technologies.
Empirically, at the end of this study, it is hoped that it will create awareness and assistance on the need to improve the management of public enterprises in Nigeria especially the management staffs of FAAN Lagos state.
In addition to this, the study provides baseline data on the numerous management problems undermining operational efficiency of FAAN Lagos stateto the management of the enterprise, particularly the policy makers as making such information available will help to forestall future of the organization.
Apart from contributing to empirical research and increasing the quality and quantity of information available in the field of management, most often; poor performances or services of some of these enterprises have attracted criticisms without any devoted attempt to identifying causative factors of these anomalies. It is on this premise that an in-depth research becomes imperative to pin-point these variables and at the same time proffers solution.
This study at the end will enlighten the management of the company on the implication of employing mediocre instead of competent and skilled labour in the name of functional connection and ethnic consideration.
Finally, this study exposes us to the effects of management problems of FAAN Lagos stateon the operational efficiency and thus, it serves as correctional measure to the company and to other related enterprises that have similar problems, which erode and impair the productivity or rather performance of the company.
1.7 Scope of Study
This study is intended to examine critical issues in managing Nigerian public enterprises using a case study of Federal Airport Authority of Nigeria (FAAN), Lagos state.
1.8 Limitation of the Study
During the course of this study, the researcher was confronted with numerous constraints that pose difficulties to proper understanding of the subject matter.
The first constraint relates to the dearth of adequate literature on critical issues in managing Nigerian public enterprises. It was rather difficult and in most cases impossible to get hold of certain documents and records that would have been vital to this study, most especially as it concerns endogenous problems that tend to displace the objective of the company from time to time.
Also bureaucratic red-tapes and the hostility of the top level management could not help issues. There was misconception about this study to the extent the researcher was seen and treated as intruder. The human resources head refused answering most questions directed to him by the researcher.
Finally, the location of the company posed a little impediment because the researcher was obliged to permeate beyond the boundary of his school to his state in search of materials and information.
1.9 Definition of Terms
Refers to a business organization wholly or partly owned by the state and controlled through a public authority. Some public enterprises are placed under public ownership because, for social reasons, it is thought the service or product should be provided by a state monopoly.
Management is the administration of an organization, whether it is a business, a non-profit organization, or a government body. It is the art and science of managing resources.
Federal Airport Authority of Nigeria is a service organization statutorily charged to manage all Commercial Airports in Nigeria and provide service to both passenger and cargo airlines.
1.10 Organisation of the Study
This study is organized into five chapters.
- Chapter one included the background of the study, research problem, research objectives and questions as well as limitation of the study.
- Chapter two contains the literature review.
- Chapter three includes the methodology and study area.
- Chapter Four contains the results and discussion of key findings of the study.
- Chapter Five finally looks at the summary, conclusions, and recommendations based on the findings.
5.0 Summary, Conclusion and Recommendations
The performance of public enterprises in Nigeria has become a subject of national debate and hence a matter of crucial policy agenda of the government of this country for the past two decades. This is why many investigative and administrative study groups, commissions, committees, and bureau have been set up to resolve the problem of poor performance of these enterprises. Moreover, the manner of the implementation of the privatization and commercialization policy of these enterprises has, more than ever before brought this agenda to the fore. There have been serious allegation of frauds, unethical deals, and lack of public accountability surrounding the disposal of some of these public enterprises to the extent that members of the Nigerian senate committee on privatization have expressed concern on the matter. This unsatisfactory state of affairs on such a matter that touches on the welfare and economic well-being of every Nigerian cannot but attract serious research attention and study activity of scholars in the areas of economic, politics and policy matters.
On the other hand, the study noted that management is a cross-curtain concept that transcend in all facet of human endeavour. Thus, management is seen as an activity as well as a process of getting things done in an organization through people by planning, organizing, coordination, controlling, supervising and directing. This presupposes that management is geared towards achieving goals and objectives of organizations. Various intervening variables tend to impinge on the efficient management of public enterprises in Nigeria. Some of these problems are, conflicting objectives, poor management board, unstable management board, general incompetence, government interference, corruption and monopoly to mention but a few.
The performance of public enterprises in Nigeria including that of FAAN Lagos state has been regrettable inspite of huge sum of money invested on them. However, without an attempt to checkmate these management problems of public enterprises in Nigeria which include poor and unstable management board, incompetence, excessive government interference and control, conflicting objective, corruption and monopoly, achievement of efficiency, profitability and socio-economic growth and development in the country will be unwillingly dwelling in utopia. The current predicament of public enterprises the world over, notwithstanding, an active public sector presence is desirable so as to counterbalance the excesses and contradictions of the ubiquitous private sector.
Based on the findings from this study, the following recommendations were put forward:
- Effective training and development programme should be inculcated by the management of FAAN Lagos state. The essence of training is to equip staff with necessary skills and techniques needed for the particular job in the organization. In the case of change in technology and innovations, an employee needs to be educated and trained in relevant job. This significantly will help to boost efficiency and effectiveness of the company and ensure full capacity utilization.
- Since it is agreed that motivation induces employee to give their best, proper motivation cannot be de-emphasize in FAAN Lagos state. This could take the form of promotion, increasing the salaries of employees, allowing their initiative in some policy issues and remunerating them adequately so that their social obligation and responsibilities are attained with good working condition, employees of FAAN Lagos state no doubt will increase their elasticity to achieving desired result.
- Under government interference, there is a policy which will aim at making management board independent and autonomy in issues relating to employment and decision making. With this attempt, excessive politicization will be checked thereby creating a competing ground for skilled and qualified personnel to discharge their duties without fear and favour. In addition, regulating government interference through policy initiation will contribute positively to the performance of the organization.
- Conflicting objective is a very critical aspect of the problems. This is because depriving enterprises their original role of social provisioning will be to the detriment of the masses as exploitation will set in to reconcile this two Opposing variables. There should be an equilibrium between the loose and profit accruing to the masses and the government respectively. With this situation in government owned companies which FAAN Lagos state is one, each side will break down supposedly, the masses should not wait to be completely provided for rather, it should be a joint effort in which payment will be made for such social goods and services.
- Also in bureaucratic corruption, government should see corruption as a deadly cancer that has eaten deep into the fabric of our economy and social life. This phenomenon has posed a serious set-back to the achievement of the much desired socio-economic growth and development in Nigeria. On this note, an effective correctional measure should be ensured in the polity. Similarly any action of corrupt practice among employees should be accompanied with a heavy sanction. For example, such unethical issues as late coming, laissez fair attitude and unwillingness to work attract punishment.
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