Economics · Lesson 10

Business organisations, public enterprises & privatisation

JAMBWAECNECO

What the syllabus asks

JAMB: Business organisations: types, features, merits and demerits; sources of finance; public enterprises: reasons, problems and control; privatisation and commercialisation; deregulation

WAEC: Business organisations: sole proprietorship, partnership, joint-stock companies (private and public), cooperative societies, public enterprises (public corporations and government companies); features, sources of capital, merits and demerits; privatisation and commercialisation; indigenisation; growth of firms and business combinations

NECO: Business organisations: sole proprietorship, partnership, joint-stock companies (private and public), cooperative societies, public enterprises (public corporations and government companies); features, sources of capital, merits and demerits; privatisation and commercialisation; indigenisation; growth of firms and business combinations

What you will learn

Distinguish the private sector from the public sector.
Describe the features, merits and demerits of sole proprietorships, partnerships, companies and cooperatives.
Explain sources of finance for business and calculate profit sharing and dividends.
Explain the reasons for, problems of and control of public enterprises.
Explain privatisation, commercialisation, deregulation and indigenisation with Nigerian examples.
Explain the growth of firms and types of business combination.

Key points

Private sector seeks profit; public sector seeks welfare.
Sole proprietorship: one owner, unlimited liability, easy formation, limited capital.
Partnership: generally 2–20; active, sleeping, limited and nominal partners; deed sets terms.
Companies: separate legal entity, limited liability, perpetual succession; registered with CAC under CAMA 2020.
Ltd: 1–50 members, ₦100,000 minimum capital, no public offer; Plc: ₦2m minimum, may sell shares to public.
Finance: retained profits, loans, shares, debentures; dividends vs interest.
Cooperatives: one member one vote; patronage dividend; producers’, consumers’, thrift and credit.
Public enterprises: essential services, capital, strategic reasons; problems of inefficiency, interference, corruption.
Privatisation changes ownership; commercialisation keeps government ownership; BPE under the 1999 Act.
Integration: horizontal, vertical (backward/forward), conglomerate.

Start here: Business units: private and public sectors

In any Nigerian town you will find a woman selling akara by the roadside, two friends running a barbing salon together, a big bank listed on the stock exchange, a farmers’ cooperative and a government-owned water board. These are all business organisations, but they differ in ownership, control, liability, capital and aims.

A business organisation is a unit set up to produce goods or services. The private sector consists of businesses owned by individuals and groups, mainly for profit. The public sector consists of enterprises owned and controlled by government, mainly to provide services and promote welfare.

Basis	Private sector	Public sector
Ownership	Individuals, partners, shareholders, members	Federal, state or local government
Main aim	Profit	Public welfare / service
Finance	Owners’ capital, loans, shares	Government grants, loans, charges
Control	Owners or directors	Board appointed by government

Worked example 10.1

Classify: (a) a privately owned pharmacy in Jos; (b) a state water corporation; (c) a cement Plc; (d) a federal teaching hospital.

(a) Private.
(b) Public.
(c) Private.
(d) Public.

Private; public; private; public

⚠️ Common mistake: thinking a "public limited company" is in the public sector. A Plc is privately owned; "public" only means its shares can be sold to the public.

Try it yourself. State one difference in aim between private and public enterprises.

Show solution

Private: profit; public: public welfare/service.

Continue this lesson in the free app →

Practice questions

1. A sole proprietor has

unlimited liability
limited liability
perpetual succession
shareholders

Show answer

A: unlimited liability
The owner's personal assets can be taken for debts.

2. The usual maximum number of partners in an ordinary partnership in Nigeria is

Show answer

D: 20
Generally 2–20 partners (professional firms may differ).

3. A partner who contributes capital but takes no part in management is a

active partner
general partner
sleeping (dormant) partner
nominal partner

Show answer

C: sleeping (dormant) partner
He shares profit but does not manage.

4. A company is a separate legal entity, which means it

has unlimited liability
can sue and be sued in its own name
cannot own property
dies with its owners

Show answer

B: can sue and be sued in its own name
Corporate personality.

5. Companies in Nigeria are registered by the

Corporate Affairs Commission
Central Bank of Nigeria
SEC
NDIC

Show answer

A: Corporate Affairs Commission
CAC under CAMA 2020.

Key words

Business organisation: A unit set up to produce goods or services, usually for profit.
Sole proprietorship: A business owned and controlled by one person who bears all risks and takes all profits.
Unlimited liability: Owners are personally liable for all debts of the business, even beyond their investment.
Limited liability: Owners’ liability for debts is limited to the amount they invested or agreed to pay for their shares.
Partnership: Association of two or more persons (generally not more than 20) carrying on business in common for profit.
Sleeping (dormant) partner: Partner who contributes capital but takes no part in management.
Limited partner: Partner whose liability is limited to his capital contribution; cannot take part in management.
Partnership deed: Written agreement setting out the terms of a partnership.
Joint-stock company: Business owned by shareholders, registered as a separate legal person.
Memorandum of Association: Document setting out the company’s name, objects, share capital and liability (external relations).
Articles of Association: Rules for the internal management of a company.
Certificate of Incorporation: Document issued by the Corporate Affairs Commission making the company a legal person.

Learn Business organisations, public enterprises & privatisation step by step, free.
The Cara's Tips app teaches every topic from the very basics, with quick checks, worked examples and exam practice. It works offline.
Open this lesson in the free app Download for Android