Government-owned enterprises (GOEs), also known as Federal Government-Owned Enterprises (FGOE), are organizations entirely controlled by the federal government or where the government possesses a dominant shareholding position. Such control can either be immediate or mediated via other governmental bodies. GOEs play an essential role in fostering national progress, typically spearheading advancements in key areas like economy, infrastructure, utilities, banking, and transport services. Nonetheless, even though these institutions hold significant strategic value, they commonly face hurdles related to management issues—such as operational inefficiency, insufficient transparency, and undue political influence—which compromise both their fiscal sustainability and credibility among citizens.
Corporate Governance encompasses a set of guidelines and standards that steer an organization toward meeting its targets and aims. As stated by The Corporate Governance Institute, this involves the distribution of authority, responsibility, and the mechanisms for making decisions within an entity. A 2023 research article from the Harvard Law School Forum on Corporate Governance revealed that businesses equipped with robust governance frameworks exhibited superior performance, surpassing less effectively managed enterprises by approximately 15-20% in terms of return on assets (ROA) and return on equity (ROE).
Throughout the years, corporate governance in Nigeria has developed through a mix of legal regulations and supervisory guidelines designed to improve corporate responsibility and efficiency. Even with these improvements, government-owned enterprises in Nigeria encounter difficulties including irregular implementation, insufficient compliance with governance standards, and problems linked to their ownership arrangements.
The World Bank cautions that inadequately managed FGOEs can undermine a country’s competitive edge and subject governments to financial upheavals. Strong governance is now mandatory—it is crucial.
The OECD Corporate Governance Guidelines for FGOEs: Global Best Practice in Action
Governance structures for Foreign-Grown Organizations differ from country to country, yet those that thrive often adhere to shared foundational principles enhancing their performance and efficacy.
In 2005, the Organisation for Economic Co-operation and Development (OECD) released its initial Guidelines on the Corporate Governance of State-Owned Enterprises (SOEs). The most recent revision was made in 2024, aimed at setting global standards for assessing and enhancing the corporate governance practices of government-owned enterprises in various nations.
FGOs play a crucial part in economic growth; however, lacking adequate management, they may turn into ineffective operations that squander public funds. To tackle these issues, the OECD Guidelines offer a structure aimed at boosting transparency, accountability, and effectiveness within FGOs.
The guidelines are organized based on multiple fundamental principles designed to promote effective corporate governance:
By implementing these principles, governments can promote sustainable and competitive economies, making sure that FGOEs have a positive impact on national development while maintaining ethical standards and adhering to international best practices. Initially intended for OECD member states, these guidelines have become universal standards. Organizations such as the World Bank and IMF utilize them to guide their reform initiatives, extending this approach even to countries like Nigeria, where the Ministry of Finance Incorporated (MOFI) has referenced them during its transformative process.
Main Elements of a Successful Governance Framework
For FGOEs to function effectively, their governance structures must rest on three mutually reinforcing pillars: performance monitoring, financial oversight, and stakeholder engagement.
Together, these elements form the backbone of an effective governance model that supports both operational excellence and public accountability.
Comparative Study of Worldwide Top Techniques (Case Studies)
When examining the governance structures of thriving FGOEs from various nations, certain trends and exemplary practices become apparent. Even though these organizations operate within differing political, economic, and cultural landscapes, they frequently adhere to shared governance tenets that resonate with global benchmarks, including the OECD’s guidelines for the corporate management of FGOEs.
Temasek Holdings - Singapore
Sector: Assets and Investments Management
Under its governance structure, Temasek Holdings maintains a delicate equilibrium between governmental ownership and business independence. Despite being fully owned by the Singapore Ministry of Finance, Temasek acts like a standalone commercial enterprise with complete management freedom. The government’s involvement is confined solely to that of a stakeholder, without interference in corporate investment choices. Board members possess significant international finance experience, providing impartial supervision and guiding strategy. Performance-driven rewards determine assessments for both the CEO and executives, promoting a mindset centered around responsibility, productivity, and creativity.
Temasek sustains an extensive international investment portfolio that encompasses various industries including technology, healthcare, and infrastructure. Their strategy emphasizes generating lasting value rather than pursuing immediate financial returns.
Equinor (previously known as Statoil) - Norway
Sector: Energy
Norway’s premier energy firm, Equinor, manages its affairs through a governance structure that adeptly merges governmental control with business freedom. With the Norwegian state owning a controlling 67% share, Equinor retains considerable self-governance over its day-to-day activities. While the government maintains an influential role as a principal owner, providing high-level guidance, it refrains from micromanaging the company’s routine functions.
The board comprises independent professionals with extensive industry knowledge, which ensures solid oversight and well-informed decisions. The management team works within a framework driven by performance-related rewards, promoting an environment marked by responsibility, effectiveness, and a significant emphasis on sustainability. Equinor sustains a varied energy mix, pouring investments into both conventional oil and gas operations as well as renewable initiatives. This firm’s dedication to advancing towards cleaner energies along with generating enduring value bolsters its position internationally.
Eskom - South Africa
Sector: Power Production and Delivery
Eskom, which supplies most of South Africa’s electricity, functions within a government-controlled framework characterized by significant governmental supervision and continuous improvements in operations. The entity is fully owned by the South African government, with the Department of Public Enterprises (DPE) offering strategic guidance.
Although the government maintains complete ownership and considerable authority over Eskom, the company has encountered difficulties because of political meddling and leadership changes. The board comprises both government-nominated representatives and non-executive experts skilled in areas such as energy, finance, and corporate oversight. Current restructuring initiatives focus on enhancing board autonomy, refining decision-making procedures, and minimizing governmental impact. Executives now face evaluations tied to key performance indicators emphasizing operational effectiveness, fiscal health, and dependable services. Eskom’s operations revolve around generating, transmitting, and distributing electricity, predominantly through coal-powered stations. Nonetheless, increasing demands call for transitioning towards green energy sources to aid South Africa’s shift toward sustainable practices. Unbundling efforts seek to divide Eskom into distinct units to boost clarity, productivity, and responsibility. These trials highlight how essential stringent regulatory systems are for achieving successful outcomes within the field of public utilities.
The governance structures of Temasek Holdings, MOFI, Equinor, and Eskom showcase various methods for reconciling governmental control with business independence. Notably, Eskom’s difficulties underscore the essential requirement for an open and meticulously designed system of governance. Crucial lessons from these entities highlight the significance of autonomous monitoring, outcome-driven administration, openness, as well as aligning strategies with broader national objectives.
MOFI as a Pioneer in FGOE Governance in Nigeria
In Nigeria, the Ministry of Finance Incorporated (MOFI) is establishing a new benchmark for exemplary governance within the public sector. Previously acting as an inactive stakeholder, MOFI was subject to a comprehensive overhaul in 2023, evolving into an active investment entity akin to international frontrunners such as Temasek Holdings. The organization now oversees a varied array of investments spanning critical areas such as energy, infrastructure, financial services, and burgeoning markets.
Currently, MOFI functions within a well-defined scope bolstered by a robust governance structure. The Governing Council, presided over by the President, offers comprehensive direction, whereas the Board of Directors, guided by experienced economist and banker Dr. Shamsudeen Usman, oversees strategy. Routine activities are managed by an executive committee headed by Managing Director/Chief Executive Officer Dr. Armstrong Ume Takang. With this updated mission, MOFI aims to reshape governmental asset management, promoting increased effectiveness, transparency, and enduring economic benefits.
To support its mandate and transformation, MOFI enhanced its governance structure, aligning with the best international practices. A landmark reform was the amendment of the MOFI Act (1959) by the Finance Act 2023, granting MOFI the authority to craft policies that promote strong governance, risk management, and operational efficiency. A comprehensive set of policies covering investment, treasury, risk management, audit, and ethics ensures accountability and transparency across all operations.
Risk management forms a key foundation of MOFI’s strategic approach. They utilize a specialized Risk Management Framework to identify and address potential risks effectively. Furthermore, they have established an Independent Audit and Risk Committee to ensure the preservation of fiscal honesty. To bolster their commitment to transparency and ethical conduct, MOFI also provides a confidential whistleblowing system designed for reporting instances of fraud and improper behavior.
MOFI recognizes that corporate governance is a dynamic area. Therefore, they emphasize ongoing education and teamwork. Their staff participates in frequent governance training sessions, and MOFI collaborates with prominent organizations such as the Chartered Institute of Directors (CIOD) and the Society for Corporate Governance Nigeria (SCGN), ensuring alignment with international standards and leading-edge methodologies.
This pledge encompasses Nigeria’s wider governance ecosystem. In July 2024, MOFI, alongside the Financial Reporting Council (FRC) and the Institute of Directors Centre for Corporate Governance (IoDCCG), presented a preliminary version of a Code of Corporate Governance tailored for Nigeria's public sector. The aim of this effort is to boost transparency, accountability, and effectiveness across governmental bodies, aligning them with international standards.
In collaboration with the World Bank, MOFI has created a Corporate Governance Scorecard specifically tailored for FGOEs. The development of this tool drew upon Nigeria’s prominent corporate governance guidelines along with international standards, such as the OECD framework for FGOE governance. Additionally, valuable input was gathered from important figures within the realm of corporate governance to enhance its efficacy.
MOFI plans to debut the scorecard at its first-ever Corporate Governance Forum (COGOF), scheduled for April. This tool will act as a standard for evaluating FGOEs’ adherence to optimal corporate governance principles, with annual publication of the findings.
Challenges and Obstacles to Efficient FGOE Management
Political intervention and conflicts of interest present major obstacles to crafting robust governance structures for FGOEs. These issues erode transparency, accountability, and effectiveness, which can harm the operational success and long-term viability of these organizations. Below are the ways in which they create difficulties:
Political Influence: The interference from politics frequently leads to poor management, inefficiency, and fluctuating strategies within Foreign Government-Owned Enterprises (FGOEs). Major concerns encompass appointing individuals based on political loyalty rather than competence, prioritizing immediate objectives at the expense of sustainable development, constant changes in policies, and utilizing these enterprises for personal favors and corrupt practices.
Conflicts of Interest: These occur when individuals prioritize their own, political, or commercial interests over those of FGOE and its stakeholders. Major issues encompass board members having competing interests, inadequate supervision, influence from regulated entities, opacity in purchasing processes, and reluctance towards implementing changes.
Insufficient Capability and Knowledge Within FGOE Committees: The absence of adequate skills among members of FGOE committees undermines effective management, resulting in operational inefficiencies, subpar decisions, and fiscal instability. Major issues encompass Inadequate Leadership and Planning, Deficient Fiscal Supervision, Insufficient Control Over Management, Restricted New Ideas and Improvements, and Diminished Openness and Responsibility.
Recommendations
Policy and Legal Overhauls to Bolster Governance Enhancements: Effective policy and legal changes are essential for bolstering the governance of FGOE entities, promoting openness, responsibility, and operational effectiveness. A robust regulatory structure aids in minimizing political meddling, upholding moral guidelines, and improving fiscal supervision.
Capacity-Building Initiatives for FGOE Leaders and Board Members: Capacity-building programs equip FGOE executives and board members with skills for ethical leadership and strategic decision-making. Training in governance, financial oversight, and compliance enhances accountability, while exposure to the private sector best practices drives innovation. Continuous development programs ensure leaders stay adaptable, fostering transparency and long-term success.
Incorporating Technology into Governance: Utilizing tech-powered instruments within FGOE governance boosts transparency, accountability, and operational effectiveness. These digital measures assist in tracking performance, identifying bottlenecks, and enhancing decision-making processes in real-time.
Provided by Syndigate Media Inc. ( Syndigate.info ).
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