The basic reason for establishing public enterprises in all economies has been to enhance development. Government participation in enterprises in Nigeria dates back to the colonial era. The absence of indigenous and foreign companies with requisite capital to invest on railways, roads, bridges, water, telecommunications, electricity and ports facilities stimulated colonial government to embark on the provision of these capital–intensive infrastructural facilities (Igbuzor, 2003) while state involvement in enterprises continued significantly even after independence (Nwoye, 2010). Reasons for Nigerian government involvement in the creating and running of public enterprises include lack of adequate resources for the private sector to provide certain goods and services, political consideration, to guide against monopoly in the provision of basic facilities, and to ensure public access to basic social amenities. Other reasons as observed by Aboyade (1974) are to protect the consumer from exorbitant prices and ensure national security and accelerated development.

The promulgation of Nigerian enterprises promotion decree 1972 (Nwoye, 2010) and Indigenization decree of 1973 (Chambers, 2008) enhanced the development of public enterprises in Nigeria. Consequently, by 1985, there were over 1500 public enterprises owned by the federal, states and local governments in the area of energy, mining, banking, manufacturing, agriculture, telecommunications, transportation, commerce, Insurance among others. Thus, between 1975 and 1995, the federal government invested over $200b in state-owned enterprises (S.O.Es) across the country (Anya, 2000; Nwoye, 2010).