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The Role of Government in the Nigerian Environment

The government as we know it in modern times has a broad spectrum of functions and roles it plays in the society. It functions mainly in the form of providing coordination, organization, management and leadership to the affairs of both human and material resources in the society. Here, we will be looking at the role that the government plays in the business environment in Nigeria.

Nigeria has always operated a capitalist system of economy, but during the period of military interventions and administration there seemed to be a switch to a planned economic system, with the increased direct involvement of the government in business activities. However, in recent times the government has started playing more of a regulatory role in the economic activities of the country.

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The Role of Government in the Nigerian Environment

This is evidenced by the privatization of various government-run organizations and institutions. In a capitalist economy like Nigeria, the government performs two major roles which includes regulating the activities of businesses; and shoring up the economy by providing an enabling environment for businesses to grow, especially small and medium scale businesses. The government can also function as a planner in the business environment through monetary and fiscal policies.

Regulatory Role of Government

The capitalist system of economy allows and promotes individualistic ownership of means of production and distribution of goods and services. In the long-run this usually leads to a distortion of the market, this is because everything is driven by a motive to make profits.

This profit-driven mentality leads to an over-exploitation of resources in the society, both human and material; and underutilization of certain areas of the economy. This phenomena can lead to a market failure. This is the main reason for government intervention in the business environment to bring about an equilibrating and balancing effect in the economy.

The government adopts different measures and approaches in the regulations of business enterprises in Nigeria. This includes but not limited to the following measures:

Permission: The government mandates new businesses to be registered. The different kinds of businesses have different kinds of registration. This measure serves the purpose of letting the government know the number and kind of businesses that are in existence, for different purposes such as tax purposes, and to be able to call them to order should they overstep their boundaries. The function of this registration is usually to define the financial liability the owners of the company have. It limits their risk to the amount they have invested in that particular organization. Registration also allows the government to monitor companies to execute its other functions in the business world.

Consumer Protection: The government also tries to check the exploitative tendencies of businesses by creating laws that protects the rights of consumers. This is usually done through agencies that set minimum standards that businesses must abide by in the process of producing their goods or rendering services. When businesses go against these , or tries to undermine the rights of their consumers, the government, through these agencies place sanctions on such offending companies. Some of such agencies in Nigeria includes: NAFDAC, that regulates food and drug related products to protect the consumer from low quality food products and fake drugs; we also have NCC that regulates the activities if telecommunication companies. Labeling is another requirement the government imposes on marketers. Many foods, for example must display nutritional content on the packaging.

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Contract Enforcement: The government also functions as a kind of police to businesses especially in the area of contract enforcement. Businesses interact with each other, these interactions usually leads to the establishment of contracts and agreements with other business. These contracts may be complex, such as mergers, or they may be as simple as a warranty on supplies purchased.

So to maintain law and order in the business environment and among businesses the government enforces these contracts and agreements between companies. Companies bring one another to court just as individuals do. An oral agreement can constitution a contract, but usually only a written agreement is provable in court of law. If one party fails or refuses to meet its obligation under a contract, a company can turn to the legal system for enforcement.

Employee Protection: The government also regulates how employees are treated by businesses. Here, many state and federal agencies work to protect the rights of employees. In some countries, the occupational health and safety administration becomes an agency under the labour department.

Its mission is to ensure a safe and healthful work environment. There are laws that controls how workers are employed, and also protects workers from unfair treatment from their employers. While the equal opportunity commission protects employees from discrimination in the case of Nigeria we have the public complains commission otherwise known as (Ombudsman).

Taxation: One major and very important source of income to the government is from taxes. Governments at all levels tax businesses and the resulting revenue also forms part of government budgets. The government collects corporate taxes from businesses. Other forms of taxes that these businesses pay to the government includes tariffs, import duties, excise duties, and levies.

Some companies that produce a certain form of negative externality are made to pay a special kind of tax as a way of offsetting the negative externality. These kind of taxes are called Pigouvian taxes. This serves as a kind of balancing tool.

Environmental Protection: The government also plays a huge role in regulating the level of pollution that might be caused by the activities of businesses. In economic terms, the issue of pollution as a result of activities of industries can be described as a negative externality. An externality is a situation whereby a marketing transaction impacts a third party, that is others besides the marketer and purchaser the effect is called an externality. It could be positive or negative.

In some cases this third party that is affected could be the environment. Thus it is the role of government to regulate the activities of industries and thereby protect the public from environmental externalities such as different kinds of pollution. Whether the Nigerian government is effective in this role or not is a different issue for another day.

Investor Protection: Government also mandates that companies make certain financial information public, thereby protecting the rights of investors and facitating further investment. This is generally done through with the Securities and Exchange Commission.

Promotional Role of Government

The government also plays a very vital role of providing an enabling environment that will promote the growth of businesses. This promotional role of the government also serves to increase the social and economic overhead capital that will further drive the growth of an economy.

The economic overhead can be increased by building developmental structure, some of which includes: creation and development of adequate and functional transport and communication facilities to facilitate easy distribution if goods and services; construction of irrigation facilities, such as dams, canals, and tube wells to serve and promote agricultural businesses; production of, and appropriate distribution of electricity and various other resources of energy, such as coal and natural gas; expansion of businesses and industries having strategic importance; and also the development and implementation of advanced technology.

The building and development of infrastructure helps private businesses by producing overheads socially and economically, which, in turn, increases the production and economic growth. The growth of the economy automatically results in the expansion of private businesses. In addition economic growth increases the size of market, which further increases the total demand for goods and services.

This provides a major advantage to private businesses. Apart from this, economic and social overhead capital results in the creation of external economies and reduction in capital-output ratio and production cost. Another promotional role of the government in relation to industries can be seen as providing finance to industry, in granting various incentives and in creating infrastructure facilities for industrial growth and investment.

Government as an Entrepreneur

Like many developing countries of the world, Nigeria has become very involved in the acceleration of the economic and industrial development of her economy. The Nigerian government has also become actively involved in the establishment of public enterprises.

Although some scholars are against government ownership to some businesses because according to them the objective of government business is to subsidies services at the expense of profitability and despite that they do not achieve these objectives due to unprofessional management corruption and low output.

There are still justifications why government should involve in business. This is because public enterprise which is established by government according to one school of thought is an institution which have responsibility for either general or some specific areas of a countries economic development.

The responsibility includes industrial and agricultural development. The contributions of public enterprises to economic development prevision of cheap services and equitable distribution of product and services.

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Chibuzor Mbah

Chibuzor is a writer at InfoGuideNigeria.com. InfoGuide Nigeria is a team of Resource Persons and Consultants led by Ifiokobong Ibanga. Page maintained by Ifiokobong Ibanga. If you need a personal assistance on this topic, kindly contact us.

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