ANALYSIS OF THE NATURE, CAUSES AND CONSEQUENCES OF FAILED GOVERNMENT OWNED OIL PALM COMPANIES IN NIGERIA: THE CASE OF RISENPALM LIMITED.
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ANALYSIS OF THE NATURE, CAUSES
AND CONSEQUENCES OF FAILED GOVERNMENT OWNED OIL PALM COMPANIES IN NIGERIA: THE
CASE OF RISENPALM LIMITED.
ABSTRACT
This study
investigates the nature, causes and consequence of the failure of government
owned oil palm companies in Nigeria with a view to identifying the critical
problem affecting their operations and suggests the way forward. The research
methodology adopted for collection and analysis of data comprised of field
survey, structured questionnaire, frequency and percentage tables, Pearson and
spearmans (rank) correlation coefficients. The survey results showed that (a)
failure of government owned oil palm companies are caused by factors that are
both internal and external to these companies (b) failure is determined by
inability to meet their objectives of providing palm oil at affordable prices
and continued payment of returns on investment (c) there are indeed adequate
effective criteria to appraise government owned oil palm companies (d) there
has been a consistent and appreciable decline in both the average and total
productivity of the employees (e) government owned oil palm companies need to
be free from frequent government intervention (f) there is a direct
relationship between employee output and wages paid. The findings have promoted
useful suggestions on how best to preset pubic resources invested in these oil
palm companies to achieve appreciable returns.
TABLE OF CONTENTS
Acknowledgment i
Abstract ii
CHAPTER
ONE: INTRODUCTION
1.1 Background
of the study 1
1.2 Statement
of problem 2
1.3 Objectives
of study 4
1.4 Research
questions 4
1.5 Significance
of study 5
1.6 Scope
of study 6
1.7 Research
hypothesis 7
1.8 Operational
definition of terms 8
CHAPTER
TWO: THEORETICAL FRAMEWORK
2.1 Introduction 10
2.2 The
concept and origin of government enterprises 10
2.2.1 Pre historic era 11
2.2.2 The
industrial revolution era 13
2.2.3 The
pioneer theory 14
2.3 National
security hypothesis 14
2.3.1 Fiscal policy device thesis 15
2.3.2 Socialist philosophy 17
2.3.3 State as agent of econ dev. 19
2.3.4 Capital inadequacy argument 20
2.4 Comparative
analysis 21
2.4.1 State
enterprise in United Kingdom 22
2.4.2 State enterprise in India 22
2.4.3 Public
enterprise in Nigeria 25
2.5 Government
direct participation in oil palm companies 27
2.6 Problems
of government owned companies 29
2.7 New
trends in Nigeria 30
2.8 The
Altman and other studies 31
2.9 Government
owned oil palm companies 36
CHAPTER
THREE: METHODOLOGY
3.1 Introduction
43
3.2 Research
design 43
3.3 Sampling
procedure 44
3.4 Questionnaire
design 45
3.5 Methods
of data collection 46
3.6 Methods
of data analysis 47
CHAPTER
FOUR: DATA ANALYSIS AND FINDINGS
4.1 Introduction 49
4.2 Findings
of research 50
4.3 Tests
of hypothesis 58
CHAPTER FIVE: DISCUSSION, CONCLUSION AND
RECOMMENDATION
5.1 Introduction 65
5.2 Discussion 65
5.3 Conclusion 69
5.4 Recommendation 70
Bibliography 72
Appendix 79
References 80
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
In
recent times there has been the over increasing call for the reform of the
public enterprises. On the global scale, Britain under Margaret thatcher led
the world to undertake a reform of public enterprises. She privatized most of
the public owned companies to enhance efficiency. This was not without a
justifiable reason.
Prior
to the call for their reforms, they had performed in line with their objectives
even though in most cases through heavy government subsidy. The failure of
these government owned companies to make adequate returns on investment;
provide services for which they were established efficiently and justify
continuous government expenditure on them in the face of dwindling government
resources led many to call for this reform and enquiry into their performance.
In
Nigeria, the bid to reactive the overall economy after the recession of the
1980s led the Babangida administration to institute appraisal of the
performance of public owned companies, through the establishment of a technical
committee on privatization and commercialization of government owned companies
in 1988; government undertook a comprehensive appraisal of large public
companies like Nigeria external communications (NITEL); Nigeria ports authority
(NPA); national electric power authority (NEPA) etc.
Surprisingly,
the oil palm companies which were mostly owned by federal state government were
not of their scope. In 1991, there were about ten government owned oil palm
companies operating in the oil palm belt of the country. With well over N16
billion investment and with a total direct labour employment of well over fifty
thousand persons.
Today,
they have all stopped paying dividends to their owners, they have laid off over
sixty percent of their workforce, while most of them have either been sold off,
privatized or on lease/consultancy management.
It
would therefore not be out of place to conduct a study into that went wrong
with them; what hope do they have? What arte the common problems facing them?
Why and how did they fall and of course what are the socio economic
consequences of their failure? Accordingly this study attempts both an
exploration into the nature of problems faced by all government owned oil palm
companies in Nigeria and also the consequences of their current state on the
Nigeria economy.
1.2 STATEMENT OF PROBLEM
The
persistent call for public enterprises reforms since 1986 clearly indicates
that the public sector has been in crises or at best need some assistance to
ensure survival and efficiency.
Precisely
the oil palm industry has not been spared in the overall call for public
enterprises reform. Nearly all the ten government owned oil palm companies have
been posting losses or negligible profits for the past five years while
different forms of management and treatment have been administered to turn
their fortune around. Meanwhile the wells over N16 billion investments by the
federal and state government are at an unquantifiable risk.
This
has remained so since their cumulative milling capacity of over 200 tons of
fresh fruit bunches (FFB) has refused to be met. In short, capacity utilization
has remained at less than 28% since 1992. Also, the yield from well over 60,000
hectares of oil palm plantation spread across the ten government owned
companies have continued to experience declining yields since 1992. Equally,
they have continued to witness high level of distress and labour turnover
averaging at three thousands employees annually. Besides, their owners having
waited patiently for returns on investment have resorted to outright sale,
lease/contract management or dilution of shareholding.
From
the above, nearly all government owned oil palm companies are in one form of
distress or the other. Thus, there is the need to appraise their performance
with a view to finding out explanation for declining plantation yield; low
throughout of milling facilities as well as failure to make adequate returns on
investment.
1.3 OBJECTIVE OF STUDY
The
main objectives of this study are to;
1. Identify
internal and external factors that affect the performance of government owned
all palm companies.
2. Investigate
the nature of problem faced by government owned oil palm companies.
3. Identify
key economic signals, that would serve as guides to management of these
companies and;
4. Identify
the likely consequences of their current state.
5. Suggest
measure that would assist in avoiding their failure.
1.4 RESEARCH QUESTIONS
Considering
the critical problems of declining returns to investment of government owned
oil palm companies and the gross underutilization of installed capacities, this
study will attempt proffering solutions to the following question;
a. What determines
the success or failure of government owned oil palm companies?
b. Are the
causes of the failure of government owned oil palm companies internal or
external?
c. What parameters
indicate or suggest failure signals for these government owned oil palm companies?
d. How do
these government owned oil palm companies cope with these signals.
1.5 SIGNIFICANCE OF STUDY
In
1964, when Nigeria was the world largest palm producer, the government of
Malaysia through her institute of oil palm research imported and improved on
the tenera variety of oil palm seedling, yet today Malaysian economy is
sustained by oil palm products while Nigeria looks up to Malaysia for her oil
palm needs. A clear reverse of what happened in 1964.
Perhaps
to counter this, government supported the incorporation of over ten oil palm
companies between 1974 and 1990. What has been their impact and how have they
had performing? The estimation of the magnitude of problems and explanation to
these questions is one explanation for this attempt.
Secondly,
there has no doubt been a study on the review of problems of the oil palm
industry with an appraisal of the returns to specific oil palm development
projects in Nigeria as recorded by Abaelu (1971).
However,
this study not only provides the gap (1971-1997) but equally examines in
isolation the government owned oil palm companies and in particular Rismpalm
limited.
Thirdly,
given the general raise in domestic palm oil prices and the continuous
importation of oil palm products from countries that were hitherto not
importers from Nigeria, a study into the performance of the industry is quite
significant. Besides, there is the problem of the consistency of subsistent
palm oil producers on one hand, and on other hand increase demand for the
product on the national scene facing a declining supply. When these conditions
are combined with the general call for public sector reform. Clearly a gap
surely exists for which this study attempt to fill.
1.6 SCOPE OF STUDY
In
the main the study examines the operations of the ten government owned oil palm
companies by the federal and state government with resompalm limited (the
signals largest government owned company) as the case study.
It
examines their problems; prospects and options for improve performance. It equally
examines options on some management practice aimed at enhancing the performance
of management owned companies in general.
Essentially,
it also looked at the various parameters that could be sued to determine and
appraise the performance of government owned oil palm companies. Some of which
include throughout of million facilities, and efficiency of operations in terms
of input-output relationship.
It
also investigates the nature and consequences of the present state of these oil
palm companies on the socio economic development of Nigeria. Generally a time
frame of 1986-1995 is being investigated.
1.7 RESEARCH HYPOTHESES
In
a bid to propose realistic solution to the state of government owned companies
and their consequences on the overall economy, the following hypotheses would
be tested.
H01:
There is no positive significant relationship between the number of employees
and the output of government owned oil palm companies.
H02:
There is a positive and significant relationship between the number of
employees and the output of government owned oil palm companies.
H03:
There is no positive and significant relationship between employees’
remuneration and the output of government owned oil palm companies.
H04:
There is a positive and significant relationship between employee remuneration
and the output of government owned oil palm companies.
H05:
There is no positive and significant relationship between the failures of
government owned oil palm companies and the extent of direct government
intervention in the management of these companies.
H06:
There is a positive and significant relationship between the failures of
government owned oil palm companies and the extent of direct government
intervention in the management of these oil palm companies.
1.8 OPERATIONAL DEFINITION OF TERMS
For
the purpose of this work, most recurring words are defined as follow:
Palm Oil Companies
These
are limited liability companies established for the purpose of developing and
producing oil palm products.
Government Owned Companies
This
refers to incorporated business concerns for which are (government state or
federal holds all or majority shares).
Fresh Fruit Bunches FFB
These
are the bunches of palm fruits, mostly reddish in colour which is the main
source of raw materials for the production of special and technical palm oil.
Special Palm Oil (SPO)
This
refers to the red palm oil that is moisture free with an acidity content of
less than 5%.
Remuneration
This
refers to the wages paid per annum to employees in the oil palm industry.
Corporate Failure
A
corporate entity is expected to have failed when the company does not earn an
adequate return on risk capital and it can go on doing this for so many years before
closing down.
Insolvency
This
refers to when corporate entities cannot pay their bills when they fail due.
Insolvency could be technical (temporary) or permanent.
Government Intervention
Refers
to the inputs from government in the day to day management of these oil palm
companies. These inputs include government directives on sales, distribution,
employment etc, apart from broad policy guidelines.
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