Management of Public Funds in Industries ( A Case Study of Life Breweries Limited Aba)
INDUSTRIALIZATION IN NIGERIA
The multiple problem facing industrialization in Nigeria are certainly no news to the average Nigeria. Those problems which have occupied Nigeria call for immediate attention if the much needed industrial growth is to be hoped for.
The solution to them can not come or the government alone.
There is need for joint effort from both parties, Nigeria has it’s roots in agro-based economy. As such one would expect the bedrock of 1ys industrial development to be also agro-based. This does not suggest that there should be a neglect of offer industrial development.
But if the law of comparative advantage is anything to go by, we would not be far from being correct to advice that agriculture should form the attracts of industrialization in Nigeria.
THE INDUSTRIALIZATION
Labour market supply of labour demand for labour and paid employment are the terms that gained within the content of industrialization by the same token, specialization of labour production techniques involving an inter face between people and machines interdependence and exchange of goods and services and income in cash from the paid employment were it’s essence.
Industrialization everywhere has similar consequences of workers states example;
- Increased material abundance
- Greater insecurity from;
- A declining economic role and a more vulnerable stature for the young and old.
- The disappearance of a moral and legal claim on a share in society’s means of subsistence.
- The fluctuations of business cycle
- Assignment to others, employers the right to allocate available employment opportunities and to determine their nature.
- A concern among employers that works adopt themselves tot he requirement of the machine. There have been also everywhere, as responses, the emergence of;
- Some form of organization through which workers participate in making the rules which govern the working place.
- Employer practice directed towards developing a symbiosis between man and machine for maximum productivity.
- Public policies for protection of workers against economic insecurity and the physical hazards of employment.
- A system of mass education the purpose of which among others things is to prepare the labour force for industrial participation.
The nature of these development differs in the cultural
setting within which industrialization emerges, but they all were there in the industrial society, whether it be democratic or totalitarian socialistic or private enterprises.
INDUSTRIALIZATION: A PRIORITY
The priority of Nigeria at the present time is to launch itself into the industrial orbit. It has become exceedingly clear that in the present global economic set up industrialization tends to hold the key to rapid economic attachment in the long term, there is an apparent shift from the dependence on primary product which is fraught with great dangers to industrial activities.
The shift is due to the following factors:
- The primary product have faced severe price fluctuation in the world market which has negative effect on national income.
- The revenue from primary production are long or adequate for financing development plans.
- The wealth and standard of living of a department on the level of it’s industrialization.
- And what is more the oil boom.
The history of industrialization in Nigeria is a mitigated blessing. It is a mixed blessing in the sense that in the process of industrialization, we have made some progress and also sustained some loose. During the oil boom, untenable, gigantic plans were produced without facts. As a result, the industrials sector suffered some short coming, infrastructure development which is the bedrock of any industrial development was instead neglected and only to be realized when the oil boom turned into oil doom. Nevertheless, steel development need to be mentioned as one of the best industrial decisions ever made in Nigeria even though it’s impact is not fully felt yet.
Federal Government should become increasingly aware of probable short and long term effect of the total owners hip mix of entrepreneurship self-reliance, individual freedom and economic growth.
Federal government should place greater emphasis on improving management, social responsibility and efficiency of state enterprises and on exploring advantages of ownership transfer to the general public. Federal government should improve development planning concepts and procedures, entrusting the energy and resources of private enterprises.
Federal government should take initiative dealing with the shortage of capacity problems of private banking communities government controls of business should be aimed at strengthening, not weakening the operation of private decentralized economic decision making.
HOW THE STATE GOVERNMENT CAN HELP
In conclusion, we wold like to remind all of us that any state in federation is capable of performing industrial miracles if only bureaucratic bottlenecks with regard to decision taking on crucial issues like plan- location, purchases, salary structures working conditions, promotions, living and firing, awards of contracts are avoided.
It is therefore certain tat each of the Nigeria can effectively promote industrialization of each state should need to the following advice;
Avoid misplaced priorities, use the law comparative advantage in industrial establishment in terms of other states of the federation.
Industrialization should be more of economic rather than political decisions. Politicians regard their tenure of office as ephemeral hence tend to concern themselves with short term rather than long-term establishment of industrial ventures: This is an unhealthy practice and should be avoided. When such industrial ventures or projects the embarked upon, it is born with prenatal cancer spreading to self-enrichment, favoritism, apathy, neglect, poor shafting management bureaucracy, poor maintenance, illegal contract awards etc.
A comprehensive study of each project should be carried out to determine the viability in terms of revenue generation, needs of the state, development and utilization of indigenous manpower, long-term value, externality employment generation and potential market for the products.
Private industrialist – small, medium and large ones should be protected and helped to survive. There is need for competition industrial promotion among states. There is also need for inter and intra state co-operation in industrialization.
State laws should aim at encouraging business of all categories especially small business and entices large ones. It may be necessary to suggest the need to have an active agency to be known as small business administration (S.B>A) an off shoot of chambers of commerce to handle the affairs of small firms and business. Duplication of industries among states of the federation should be avoided.
Potential indigenous entrepreneurs should be avoided. Potential indigenous entrepreneurs should be granted financial assistance.
Prospective entrepreneur should be encouraged state industries should be solve basic need of the society in general and the state in particular. The management of state firms should be in the pattern of private sector rather than public service bureaucracy. There must be co-operation between the state and the federal government in infrastructure planning and development in such areas as rural electrification, pipe borne water, transportation
- BEER INDUSTRY: A BIG BOOST TO NIGERIA
ECONOMIC RECOVERY
The recent campaign for economic recovery and technological self reliance has focused so much attention on the brewery industry. The purpose of study is to discuss the circumstance of the brewery industry in Nigeria. Identify problems and prospects and highlight it’s economic and social contributions to the country and the same time project it’s future goals and aspirations.
This exercise is designed to create better understanding with government functions, and consumers research institutes and the general public.
With an annual financial contribution of N1 billion to the coffers of the federal government by way of import excise duties and other tapes. The BREWING INDUSTRY is definitely a strong pillar of support for the governments program for speedy economic recovery.
While agriculture ad other allied sectors recovered an average growth rate of less than 3% annual average growth of 15% between 1980 and 1995.
The brewing industry creates direct employment for 20,000 Nigerians for 10,000 in other establishment and individual who are solely depend on the brewing industry for their sources of livelihood. The multiplier effect of brewing operation big boost to the nation economy.
The gigantic backward integration programme embarked upon by the brewing will not only boost food production but it will also increase rural employment opportunities and at the same time provide the much needed industrial raw materials for the breweries.
In the process of milling sorghum and maize valuable co-products will be produce. These include quality flour, edible oil and feed protein which can be used by other food, industries and animal feed compounders.
In the guardians publication of February 8 1986 p.4 notes that the brewing industries will meet government expectation of 25% import substitution in 1986 and will gradually further increase the impact to 50% by 1990 or an earlier date, depending upon availability of materials. Government should therefore grant tot he brewing industry. Import licenses for procurement of agricultural equipment and processing plant in order that the industry may accomplish this programm within the dead line.
Current plans to sell Nigeria lagers overseas will firmly place Nigeria on the International map as a leading manufacturer of high quality lagers. It will also earn the much needed foreign exchange for the country and give Nigeria a strong foothold on the international market scene.
The linkage effect will be that produces of international foods will surely benefit from this favorable economic break though.
(Water, land and air) and communication network (telephone) to enable even location of industries in all the states of the federal republic of Nigeria.
FINANCIAL CONTRIBUTION
There is no gain saying that the financial contributions of the brewing industry tot he economy are quote significant. Apart from the substantial capital investment is perhaps unparalleled within the private sector of the economy.
Between 1981 and 1983 alone the brewing industry was committed to an investment in plant and machinery worth N600 million within the same period also the industry witnessed rapid expansion from under 8 breweries in 1977 to 21 in 1981 and rising to 31 in 1983, in response to consumer demand. Total investment in this section is approximately N1.5 billion. The return on these investment has been so impressive that others investors are being attracted to the industry. The brewing companies not only declare profits and pay dividends to their share holders; but also make substantial payment tot he government by way of corporate taxes and excise duties. In May, 1984, excise duty on beer was 41% of total excise duties collected from all sources. If all the breweries produce to their full capacities revenue accruing to government in one year would be in the region of N1 billion.
In fact, the federal government and many state government as well as individuals realize the financial profitability of the brewing industry hence their attraction to substantial equity holdings in a number of breweries even where the government do not hold equity shares, the brewing companies no doubt, boosted the economy of the state in which they are located and directly benefit the state government through employment of labour and payment rents, rates, taxes and other changes.
It should be noted that the foreign exchange element is a carton of beer is only 6%.
- FINANCIAL MANAGERS IN THE MANAGEMENT OF PUBLIC FUNDS
There is a difference between an accountant and a financial manager.
This is not simply a result of promotion and status but a qualitative difference in out-look, expertise and role. The accountant remain past of routine administration and is largely a means whereby management exercise control over the organization.
The financial manager on the other hand is a participates along with other manager in decision making and policy formulation of the entity. He advises on the financial implication of past or future decisions and ensures that the financial functions make a full contribution to achieving the aims sets for the organization.
The role of a financial manager can be more clearing understand by considering the nature of management itself. Many authors have looked or defined management in various ways Johnesen and page defined management as “Effective” Utilization and co-ordination of resources such as capital plant material and labour to achieve defined objective with maximum efficiency.
Bank looks at management as a collective term that refers tot he system function, process or office of planning, providing co-ordinating directing, evaluation and controlling all available efforts and resources of an organization for the accomplishment of the objectives and policies which are designated by and handle down from the top executive of the organization. The Oxford English Dictionary defined management as “The action or manner of managing. In senses of the manger, the application of skill or cause in the manipulation, use, treatment, or control of things or persons or in the conduct of an enterprise, operation e.t.c. from those definitions one can absence that they all centres on looking at management as that of using financial technique to measure if resources are being effective utilized (return on capital employed) and co-ordinated (budgetary control) to express organization plans to control activities to represent the organization to third parties and to evaluate performance.
The existence of such techniques, together with the fact that most activities have important financial objectives, the ability of the financial manger to express his findings in the convenient common denominator of money, and the fact that almost all decisions and actions have monetary implications, lead being represented a the highest management level shared defines financial management as “that part of management that is concerned with raising funds in the most economic and suitable manner, using these funds as profitably (for a given risk level) as possible planning future operations and controlling current performances and future development through financial accounting, cost accounting budgeting, statistical analysis and other mean’s chamber says, it is the forecasting planning organizing, directing, co-ordinating and controlling of all activities relating to the acquisition and application of the financial objectives. Lack of financial mangers in the public sector is therefore more damaging than lack of some other skills because it produces poor administration and therefore poor performance in the area where other skills are needed and used.
According to Chiaku 1989 in her effective management of financial resource of business in Nigeria, a necessary factor for business survival in a recession. Small and medium scale business are most vulnerable to negative economic development in a recession such as high rate of inflation high cost of factor imputs low demand resulting from high rate of unemployment and deduced income of citizens. She said, that in Nigeria they also have to contend with unstable political and investment environment characterized by constant unpredictable changes in economic policies that lack consistency, in the absence of a virile and alert financial management practice capable of souring funds at the cheapest rate without the threat of debt trap and loss of control and the timely effective and efficient utilization of such funds. A high rate of corporate mortality will result. This is because of the low capital base inexperience and generally under developed managerial skill that prevail in small scale business.
THE MEANING OF PUBLIC FUNDS
The Oxford advanced learner dictionary of current English defined public fund as the stock of national debt as a form of investment; the constitution of East Central State of Nigeria Section 56(1) state).
All revenue or other money payable under this constitution or any state law into some other public fund of the established for a specific purpose shall be paid into and from one consolidated revenue fund. E.O Okpalaeke, in his introduction lecture to newly recruited Auditor 1 and 11 H.E.O (Audit) said that Consolidated Revenue Fund “is a fund established under section112(1) of the constitution containing the general reserve of the government. All revenue and other money collected or received in the state are paid into this fund unless otherwise directed by any “Law”.
The second and the third definitions shows that public fund entails all receipts by government. It includes those generated by government or financial institution for investment in project of public character. This is made cleaner by the first definition which states that public funds is a stock of national debt which forms part of investment.
Financial instruction 2401 states that public funds shall include cash, fixed fine receipts, entertainment tax fixkets and stamped blank, promissory, notes, moneys properly collected by tax collectors agents: –
Since tax forms a very big portion of public fund. It follows that any person who contributes to it must be interested in it’s management. This must have been the reason why some industries in their articles on “prudent management of public funds said it is only pertinent and traditional that any person who pays tax contributed to public fund will like to know and should know how the money so contributed were utilized and it is the responsibility of management to do everything within it’s ready to see that public funds are judiciously and effectively managed and accounted for.
Prudence and economy in utilization of public funds are always very essential and management assumes responsibility for this. This responsibility is embraced by the definition given to management by the E.F.L. Eneh in his book. “The principles and proactive of management” Thus management is a process of responsibilities for deploying resources tot he accomplishment of a given objectives or purpose that is for obtaining and arranging the resources and regulating their application through the medium of personal employed to accomplish that objective. It follows that in first for responsibility for their stewardship.
ACCOUNTING FOR PUBLIC FUND (ACCOUNTABILITY)
According to Ibezue J. 1988 in his article “Accountability and Social objective in the business times issue of Monday 21, 1988. Accountability in my mind is not just stewardship of returning what is entrusted tot he manager but that associated with profitability and growth ten-fold or five-fold with a specified time.
In other wards, it implies prudent employment of scarce resources men, machinery, material, money and moments which have countervailing claims to obtain optimum rewards.
Accountability is the requirement of answerability for ones performance. For simplicity public accountability is the process by which person entrusted with public fund ensure that proper record of the receipt and disbursement of funds are kept.
Mr. C. O. Akuanyionwu (An Auditor) in his paper tilled (Accountability in Civil service) and delivered during supervisory management course mounted a the staff development centre Enugu distinguished accountability in the following terms “Accountability can be distinguished in terms of : –
- Expenditure of funds and procedures by which that expenditure is accounted for. This is seen a financial or fiduciary accountability.
- Capacity to achieve results for a given expenditure of resources and the degree of success in the achievement of
This is called efficiency/effectiveness accountability.
The first accountability classification implies how the citizen founds entrusted in the hands of civil servants are being safeguarded and expanded but considering the accounting practices and reporting procedures. The second distinction shows how production the civil servants and results derived from funds invested by government in this sense, accountability is not only “the giving of account by civil servants of their stewardship of government resources placed under their trust” but also includes punctuality to work honesty and devotion to duty during the hours of look.
The national concied Friday, October 30, 1987 in it’s additional comment on auditing government account defines accountability thus.
“In strict financial terms accountability means that public funds can only be expended in the manner and over those areas which promote the overall public interest.
It follows form this that any expenditure of public funds is any way other than that which promotes public interest in misappropriation.
In order to ensure that government funds are not misappropriated, regular audit should be carried out little wonder then why the national concords add “it’s may be necessary to remind public officers that carefully and regularly audited accounts remain the only instrument for determining whether public funds have been expended sorely on public purposes.
To conclude this issue of accounting for public funds (accountability) the suggestion of national concord of Friday October 30, 1987 in it’s comment on “Auditing Government account” is appropriate. The paper said “the government must now move to implement the laws which are already on our status books. Additional funds must not be distrusted to parastatals and to other arms of government unless their account for the previous fiscal period have been audited.
Where proper amount do not exist. There must be a strong presumption that funds have been misappropriated.
FINANCING PUBLIC ENTERPRISES
Public enterprises may be financed in different ways depending on their nature objectives, and the environment in which they operate.
Some are wholly dependent on government for finance and others are entirely self financing but most operate between these two extremes the task of government is to ensure that the method of finance is appropriate tot he characteristic of the public enterprises, consistent with the objectives set by a government for the parastatals and in accordance with the objectives and economic needs of the country as interpreted by those connectedly holding political powers. The latter point implies for instance that a parastatals treated by one political regime as necessarily dependent on government for funds may be treated by another regime as self-financing. Obviously limitation exist tot he making of abrupt changes in the method of financing parastatals; particularly moves towards self-sufficiency. The crucial limiting factor is the preparedness of users to pay for the goods and services supplied. Moves in the opposite direction, however, are easy to accomplish. If government supplies the money, expenditure will rise to absorb what is made available.
METHODS INCLUDE:
- By taking up short or long term loan capital
- By establishing the parastatals with non-interest yielding resources (equity financing).
- Issue of shares
- By government guaranteeing loan and overdrafts used
- Outright financing of the project by the government.
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