The Public Corporation: Meaning, Examples, Features, Reasons And Disadvantages

Table Of Contents

1. Meaning Of Public Corporation
2. Examples Of Public Corporation
3. Features Of Public Corporation
4. Reasons Of Public Corporation
5. Disadvantages Of Public Corporation

Meaning Of Public Corporation

A corporation is a business organisation which the law recognises as existing separately from those who formed it and who manage it. It is an artificial, legal ‘person’ and in law owns it’s own asset in the same way as other people own personal possessions.

Examples Of Public Corporation In Nigeria

1. Nigeria Railway Corporation(NRC)

2. The Nigeria Port Authority(NPA)

3. The Nigerian Electronic Power Authority(NIPA)

4. The Federal Radio Corporation Of Nigeria(TFRCN)

5. The Nigeria Television Authority(NTA)

Features Of Public Corporation

1. It is a separate legal entity like the company.

2. It is owned by the government or behave of people. The government appoint members of the controlling board or the general manager.

3. The government provide the capital.

4. Some of the public corporation are very large than the largest domestic joint stick company.

5. Each public corporation is under a minister of the relevant ministry who reports to parliament.

6. The aim of public corporation to provide efficient public service at a reasonable price i.e the act in the public interest not to maximize profit.

Reasons For Establishment Of Public Corporation

1. To provide public utilities or essential service as a part of government responsibility sewage disposal.

2. To prevent private monopoly and expectation to the citizen in the provision of essential services like water, electricity, rail, transport etc.
These public utilities are called natural Monopolies because their capital costs are so great that competition among private firms would be economically wasteful nation wide.

3. Some services requires huge capital which private firms may not easily provide eg rail ways.

4. Public Corporation create employment opportunities for the citizens. The quicken the rate of economic development.

5. To ensure that resources are efficiently used and in the interest of the nation. There is wide scope for economic of scale leading to lower price.

READ ALSO: Co-operative Societies: Meaning, Types, Advantages And Disadvantages

Disadvantages/ Problems Of Public Corporation

1. Decision Are Often Influenced By Political Consideration: An economically sound policy may be avoided if it is dangerous to the interest of the political party in power.

2. Management Problem Arise Because Of The Large Size Of The Corporation :
( Borrow Cratic ) this is when something became too complicated a system which government will adopts and control lead to diseconomi of seal and rising cost.

3. Government often interferes with the employment of the workers especially to level management. Consequently incompetent people are appointed and this result in efficiency.

4. Ordinary Shares: The dividend an ordinary share in not fixed and depends on how much profit the company makes and how directors want to distributes. This the dividend may be very high or zero. The ordinary share holder are entitled to what remains after all other Clair’s have been met. They are the major risk bearers and therefore have the greatest say in the management and control of the business.

5. Debentures: A debentures is not a share, but a special types of loans. The debentures holder is therefore a creditor of the company rather than owner. A debenture attracts a fixed rate of interest which must be paid whether the company makes profits or loss. In the case of bank run of the company debentures holders are to be repaid their loans before any other obtains are paid. The loans may be secured against some of the company’s property.

6. Re-invested Or Ploughed Back Profit: The undistributed profits of the company which have accumulated over time may be ploughed back or re-invest in expanding the company.

7. Trade Credit: Many times obtain goods on credit from other firms and pay after some month and some time after selling the goods. This credit facility has the same effect as a financial loans.

8. Advance Deposits From Customers: Some companies requires their customer’s especially wholesaler’s and distributors to deposit some money in advance of the delivery of the goods to them. Such deposit may help to finance the production of the goods.

9. Government Grants And Subsides: Subsides are money paid by government organisation to reduce or make the price of goods and services to be low. Public Corporation are financed from specific grants from may also be subsidized by selling some inputs to them at less them the cost price e.g fertilizers by selling some inputs to them at less than the cost price e.g fertilizer sold to farmers.

10. Tax Exemption And Relates: A firm may enjoy a tax holiday which enables it to accumulates funds for investment relates may also be given for taxes already paid.

Suggested Posts: