Reasons for Government Establishing Public Corporation

Main Reasons Government Establishes Public Corporations

1. To Provide Essential Services

Government creates public corporations to ensure citizens get basic services they need to survive and thrive. Some services are so important that leaving them to private businesses might exclude poor people who cannot afford high prices.

For example, the Transmission Company of Nigeria (TCN) manages electricity transmission across the country. If a private company controlled this, they might only supply power to rich areas like Ikoyi or Victoria Island in Lagos. But government ensures electricity reaches even remote villages in Sokoto or Bayelsa.

State water boards provide clean water to millions of homes. Private companies might charge amounts ordinary Nigerians cannot pay. Public corporations keep water affordable while maintaining quality standards.

2. To Handle Large-Scale Projects

Some business projects require massive amounts of money and many years before showing profit. Private investors often avoid such projects because they want quick returns.

Building a railway network across Nigeria costs hundreds of billions of naira. The Nigerian Railway Corporation was established because no private company could afford this investment. The same applies to Federal Airports Authority of Nigeria (FAAN), which built and manages airports in Abuja, Lagos, Port Harcourt, and other cities.

These projects need long-term planning and huge capital that only government can provide. After many years, they benefit the entire nation through better transport and trade.

3. To Control Strategic Industries

Government keeps control of industries vital to national security and economic stability. If private companies or foreign investors controlled these sectors, they could threaten Nigeria’s independence.

The Nigerian National Petroleum Corporation (now NNPC Limited) was created to ensure Nigeria controls its own oil resources. Oil is Nigeria’s main source of foreign exchange and government revenue. Leaving it entirely to foreign companies like Shell or Chevron would be risky.

Similarly, the Nigerian Security Printing and Minting Company prints naira notes and security documents. Government must control this to prevent counterfeiting and protect the economy.

4. To Generate Revenue for Government

Public corporations earn money that supports government budgets. Unlike private companies that pay dividends to shareholders, public corporations send their profits to government treasuries.

NNPC Limited, despite its challenges, has generated trillions of naira for Nigeria over the decades. The Nigerian Ports Authority (NPA) collects billions yearly from ships using Lagos, Port Harcourt, and Calabar ports. This revenue funds schools, hospitals, and roads.

Even when public corporations struggle to make profit, they create employment and support other businesses, which increases government tax revenue.

5. To Create Employment Opportunities

Government establishes public corporations to reduce unemployment. These organizations hire thousands of Nigerians in various roles, from engineers to security guards.

NNPC Limited employs over 10,000 people directly and supports thousands more through contractors. Nigerian Railway Corporation provides jobs for drivers, mechanics, ticket sellers, and cleaners across the country.

When people have jobs, they earn money, pay taxes, and support their families. This reduces poverty and crime while growing the economy.

6. To Encourage Balanced Regional Development

Private companies usually locate their businesses in Lagos, Abuja, and Port Harcourt where they make more profit. Government uses public corporations to spread development across all states.

The Nigerian Postal Service (NIPOST) has offices in every local government area, even in remote places where private courier companies will not go. This ensures people in Maiduguri can send letters and packages just like people in Lagos.

State water corporations operate in areas private companies consider unprofitable. This balanced approach prevents all development from concentrating in few cities.

7. To Provide Subsidized Services

Some services are too expensive for ordinary citizens at market prices. Government uses public corporations to subsidize these services and make them affordable.

Before privatization, NEPA (now PHCN) provided electricity at subsidized rates. Many Nigerians could not afford electricity at full commercial prices. Similarly, Nigerian Railway Corporation charges lower fares than private transport companies.

This helps students, workers, and traders travel and conduct business without spending all their income on transport and utilities.

8. To Implement Government Economic Policies

Public corporations serve as tools for achieving government economic plans. When government wants to boost agriculture, it uses organizations like the Nigeria Agricultural Insurance Corporation to support farmers.

During COVID-19, government used NNPC to ensure petrol remained available even when private marketers hoarded products. Public corporations respond to national emergencies and economic goals faster than private companies focused only on profit.

9. To Prevent Monopoly and Exploitation

Without government involvement, private companies might form monopolies and charge unfair prices. Public corporations provide competition and keep prices reasonable.

If only private companies supplied water or electricity, they could charge whatever they wanted. Government-owned corporations ensure citizens have alternatives and force private companies to keep prices fair.

10. To Preserve National Heritage and Culture

Some public corporations protect Nigeria’s cultural assets and historical sites. The National Museum manages museums across the country, preserving artifacts and educating Nigerians about their history.

Private companies might sell historical items to foreign collectors or demolish heritage sites for commercial development. Public corporations protect these assets for future generations.

Comparison: Public Corporations vs. Private Companies

Aspect	Public Corporation	Private Company
Main Goal	Provide public service and meet social needs	Make profit for shareholders
Ownership	Government (federal or state)	Private individuals or investors
Funding Source	Government budget and internal revenue	Private investment and bank loans
Pricing	Often subsidized or regulated by government	Market-based pricing for maximum profit
Coverage Area	Nationwide, including unprofitable areas	Profitable urban areas mainly
Accountability	Answers to government and citizens	Answers to shareholders only
Example in Nigeria	NNPC Limited, TCN, NPA, NRC	Dangote Group, MTN, Shoprite

Common Exam Mistakes to Avoid

Practice Questions

Multiple Choice Questions

1. Which of the following is NOT a reason for establishing public corporations?
   
   a) To provide essential services to citizens
   
   b) To maximize profit for private shareholders ✓
   
   c) To control strategic industries
   
   d) To create employment opportunities
2. The Nigerian Railway Corporation was established mainly to:
   
   a) Compete with private transport companies
   
   b) Handle large-scale infrastructure projects requiring massive capital ✓
   
   c) Import locomotives from foreign countries
   
   d) Replace all road transport in Nigeria
3. NNPC Limited controls Nigeria’s oil industry primarily to:
   
   a) Prevent other countries from buying Nigerian oil
   
   b) Ensure government manages this strategic national resource ✓
   
   c) Compete with Shell and Chevron
   
   d) Provide employment for petroleum engineers only
4. Public corporations help achieve balanced regional development by:
   
   a) Building all their offices in Lagos and Abuja
   
   b) Focusing only on profitable urban areas
   
   c) Operating in both profitable and unprofitable areas across Nigeria ✓
   
   d) Avoiding remote areas where private companies refuse to go

Essay/Theory Questions

Question 1: Explain FIVE reasons why the Nigerian government establishes public corporations. (10 marks)

Examiner’s Tip: Allocate 2 marks per reason (1 mark for stating the reason, 1 mark for explanation). Use Nigerian examples like NNPC, NRC, or TCN. Write 3-4 sentences explaining each reason clearly.

Question 2: Distinguish between public corporations and private companies based on their objectives, ownership, and pricing policies. (8 marks)

Examiner’s Tip: “Distinguish” means show clear differences. Create a comparison with at least 4 differences. Give 2 marks for each well-explained difference. Mention specific examples for both types.

Question 3: State FOUR ways public corporations contribute to Nigeria’s economic development. (4 marks)

Examiner’s Tip: “State” requires brief, direct answers (1 mark each). Focus on economic contributions like revenue generation, employment creation, infrastructure development, and supporting other businesses.

Memory Aids

Related Topics You Should Know

• Types of Public Corporations – Statutory corporations vs. government companies
• Features of Public Corporations – Characteristics that make them unique
• Advantages and Disadvantages of Public Corporations – Strengths and weaknesses
• Privatization – Why government sells public corporations to private investors
• Examples of Nigerian Public Corporations – NNPC, NPA, TCN, NRC, FAAN