ezema malachi .c. pg/mba/12/64242 small and medium …
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EZEMA MALACHI .C.
PG/MBA/12/64242
SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA: PROBLEMS AND PROSPECTS
FACULTY OF BUSINESS ADMINISTRATION
DEPARTMENT OF MANAGEMENT
Paul Okeke
Digitally Signed by: Content manager’s
DN : CN = Webmaster’s name
O= University of Nigeri
OU = Innovation Centre
SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA: PROBLEMS AND PROSPECTS
FACULTY OF BUSINESS ADMINISTRATION
RTMENT OF MANAGEMENT
: Content manager’s Name
Webmaster’s name
O= University of Nigeria, Nsukka
OU = Innovation Centre
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SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA: PROBLEMS AND PROSPECTS
BY
EZEMA MALACHI .C.
PG/MBA/12/64242
A PROJECT PRESENTED TO THE DEPARTMENT OF MANAGEMENT
FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA
ENUGU CAMPUS
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR
THE AWARD OF THE (MBA) DEGREE IN MANAGEMENT
SUPERVISOR: PROF U.J.F. EWURUM
SEPTEMBER, 2014
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DECLARATION
I, EZEMA MALACHI .C., a postgraduate student in the Department of
Management with registration number PG/MBA/12/64242 hereby declare that this
project work is written by me and that the work embodied in this project is original
and has not been submitted in part or full for any other Diploma or Degree of this
or in any other University. All liabilities arising from this study are entirely mine
and not of my supervision and for the university.
-------------------------------- PG/MBA/12/64242 Researcher
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CERTIFICATION
This is to certify that EZEMA MALACHI .C. a postgraduate student in the
Department of Management and with registration number PG/MBA/12/64242 has
satisfactorily completed the requirement for project research in partial fulfillment
for the Award of Masters Degree (MBA) in Management.
------------------------------ ---------------------------- Prof. U.J.F Ewurum Date (Supervisor)
------------------------------ ---------------------------- Dr. O. Ugbam Date (Head of Department)
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DEDICATION This research work is dedicated to the God Almighty, Jesus Christ the Son of God
and Holy Mary the Mother of Christ.
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ACKNOWLEDGEMENTS
I am very grateful to Almighty God for his unceasing guidance and protections and
also for his enabling grace and inspirations to make this work a successful one. My
humble gratitude goes to my supervisor, Prof. U.J.F Ewurum whose fatherly and
constructive guidance led to the success of this research work. My special thanks
go to all the post graduate lecturers in the Faculty of Business Administration, for
molding me academically and otherwise.
My indebtedness will not be fully acknowledged without expressing thanks to my
lecturer, Prof. Chuke Nwude who is like a father to me for his invaluable advice
towards my academic pursuit. I am also grateful to my brother, Ezema Anthony
for standing solidly behind me in my academic career.
My appreciation cannot be enough to Engr. Asadu Emmanuel, Geologist Ugwu
Johnson (Surgeon), Engr. Ezema Domnic (Domarc), Geologist Asadu Matthew
(Ome-ego), Engr. Ugwu Emmanuel and Ezema Jerome (Jerry) for their financial
assistance. My gratitude is also expressed to Ozioko Joseph (Krubo) for his moral
support to my academic pursuit.
I remain grateful to God for my loving mother who is a rare gem. “Mummy thank
you”. I am specially thankful to my siblings Ezema Dominic, Ezema Beatrice,
Chekwube, Hillary, Chidubem and Ogechukwu for your love and encouragement
have been my true source of energy. Thank you.
I also wish to thank my cousins, Ezema Jude, Nneka, Blessing, Nkechi, Chinenye
and Kosi for your care gives me strength. Finally, I will not forget to acknowledge
my good friends, mostly my room mate Ifeanyi James (OJ), class members and
those who supported me in one way or the other, May God bless you all.
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ABSTRACT
The main purpose of this study is to investigate small and medium scale enterprises in Nigeria in order to identify their problems and prospects in Enugu metropolis. Sample size of 270 was drawn from the population of 828 registered companies in Enugu State in which a total of two hundred and seventy (270) copies of the questionnaire were administered out of which two hundred and forty (240) copies representing (89%) of the questionnaire were properly completed and retrieved while thirty (30) copies representing (11%) were not retrieved. The instruments used to gather information for this study includes both primary and secondary sources. The main instrument of data collection was the questionnaire. The data were presented in tables as frequency distribution in the data analysis, the techniques of percentage frequencies were used. The hypothesis was tested with chi-square method at 5% significance level. Having analysed the data, the following were the major findings, that there is improper implementation of its policies towards small and medium scale enterprises in Nigeria; that small and medium scale enterprises provide effective means of stimulating indigenous entrepreneurship; that poor management practices, financial problems, lack of capital, lack of infrastructural facilities etc, hinder the performance of small and medium scale enterprises in Nigeria. The study concludes that the role played by the government towards promotion and development of small and medium scale enterprises in Nigeria is highly effective, in the sense that government supported small and medium scale enterprises through favourable investment policies, institutional and fiscal policy, protective business law and financial incentives; that small and medium scale enterprises had immensely contributed to the economic growth and development in Nigeria for they have been recognized as indispensable components of national development in both developed and developing economies; that there are various confronting constraints to the development of small and medium scale enterprises such as lack of planning, inimical government regulations, poor marketing strategies etc; that there is significant support given to small and medium scale enterprises in Nigeria by government and other individual bodies. Hence, it therefore recommends that government should ensure that there will be no improper implementation of its policies towards small and medium scale enterprises and should not in the area of incentive and infrastructural development neglect business activities to facilitate small and medium scale enterprises in Nigeria. That government should also adequately support small and medium scale enterprises financially to avoid lack of capital. Moreso, small and medium scale enterprises should ensure that they solve their internal problems which hinder the success of the small and medium scale enterprises. For instance, they should ensure that there is effective management practices or expertise, effective accounting standards, adequate manpower and avoid financial indiscipline and corruption in order to boost their performances.
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TABLE OF CONTENTS
Title i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Abstract vi
List of tables x
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study 1
1.2 Statement of the Problem 4
1.3 Objectives of the Study 5
1.4 Research Question 6
1.5 Research Hypotheses 7
1.6 Significance of the Study 8
1.7 Scope of the Study 8
1.8 Limitations of the Study 9
1.9 Definition of Terms 10
1.10 Profile of Selected Firms 12
References 15
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Introduction 16
2.2 Conceptual Framework 18
2.2.1 History of small and medium scale enterprises 23
2.2.2 Establishing Small and Medium Scale Enterprises in Nigeria 24
2.2.3 Neglect of Small and Medium Scale Enterprises in Nigeria 30
2.2.4 Small and Medium Scale Enterprises in Nigeria: Revisiting Government
Intervention 30
2.3 Theoretical Framework 35
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2.3.1 Problems Associated with Government Efforts towards Small and
Medium Scale Enterprises (SMES) 37
2.3.2 Promoting Small and Medium Scale Enterprises in Nigeria Oil and Gas Industry 40
2.3.3 Financing Small and Medium Scale Enterprises (SMEs) By Commercial Banks 47
2.3.4 Equity and Venture Financing in Small and Medium Scale Enterprises
(SMEs) Era 49
2.4 Empirical Review 52
2.4.1 Problems of Small and Medium Scale Enterprises (SMEs) in Nigeria 56
2.4.2 Prospects of Small and Medium Scale Enterprises (SMEs) in Nigeria 65
2.4.3 The Role/Importance of Small and Medium Scale Enterprises (SMEs) to
The Nigeria Economy 69
Summary of Review Literature 71
Highpoints 71
Gaps in Reviewed Literature 72
References 74
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction 78
3.2 Research Design 78
3.3 Area of Study 79
3.4 Sources of Data Collection 79
3.4.1 Primary Source of Data 79
3.4.2 Secondary Source of Data 80
3.5 Instruments for Data Collection 80
3.6 Determination of Population Size 82
3.7 Sampling Techniques and Sample Size Determination 82
3.8 Method of Data Analysis 84
References 85
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CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1 Data Presentation, Interpretation and Analyses 86
4.2 Respondents Characteristics and Classifications 87
4.3 Presentation and Analysis of Data According to Research Statement 91
4.4 Presentation and Analysis of Data According to Research Hypothesis 102
CHAPTER FIVE: FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings 111
5.2 Conclusion 113
5.3 Recommendations 115
Area for Further Study 115
Bibliography
Appendix
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List of tables
Table 4.1: Analysis of Response Rate 87
Table 4.2: Sex distribution of respondents 87
Table 4.3: Age distribution of respondents 88
Table 4.4: Marital distribution of respondents 89
Table 4.5: Educational qualification of respondents 89
Table 4.6: Years in service of respondents 90
Table 4.7-4.22: Analysis of responses to research questions 91-101
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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The role of small and medium scale enterprises in developing countries,
Nigeria in particular is progressively becoming significant. Significant in the
sense that all available resources in any given situation in the economic well-
being of a nation must be developed for industrialization and ultimately
consumption through the small and medium scale businesses. Hence, the
impact and potential contribution of small and medium scale businesses on a
broad and diverse base as well as their accelerated effect in achieving macro
economic objectives pertaining full employment, income distribution and the
development of local technology, make the existence most inevitable. Therefore,
the importance of small and medium scale enterprises in particular to the
general economic development of any nation especially a developing one like
Nigeria cannot be over emphasized.
Small and medium scale enterprises (SMES) have been recognized as
indispensable components of natural development in both developed and
developing economies. This subsector of the economy is globally acknowledged
to contribute substantially in enhancing employment creation or generation,
poverty alleviation, equitable distribution of resources, income redistribution,
technical and technological innovation, entrepreneurial skills development,
more uniform industrial and economic region- moreover, they have been touted
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strategic in ensuring food security and encouraging rapid industrialization and
reversal of rural-urban migration.
Although small and medium scale enterprises (SMES) are seen as
veritable engines of economic development, the growth and development of
small and medium scale enterprises in Nigeria have been slow and in some
cases even stunted, due to a number of problems and challenges confronting
this all-important sub-sector of the economy. Some of the problems highlighted
in the body of literature as being responsible for the slow growth and
development of the small and medium scale enterprises include: deplorable
infrastructural facilities funding and financing challenges; inadequate
managerial and entrepreneurial skills; corruption and lack of transparency
arising from government regulation and regulators etc.
It had been argued that the most disturbing among these challenging is
funding, but concedes that most new small business enterprises are not
attractive prospects for banks as they want to minimize their risk profile. Small
and medium scale enterprises (SMEs) in Africa have therefore been found to
rely largely on own savings, not only to grow, but also to innovate, whereas
firms often need real services support and formal finance assistance, failing
which under investment in long term capabilities (Training and R & D) may
result on the other hand, small and medium scale enterprises (SMEs) in
Nigeria had been blamed for poor performance on management practices, poor
access to finds, low equity participation from stakeholders, poor infrastructural
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facilities, shortage of skilled manpower, multiplicity of regulating agencies and
the over-bearing operating environment, societal and attitudinal problems,
little access to markets and lack of access to information.
In spite of these problems and challenges, Government and other
financial institutions had held out programmes for the prospects of small and
medium scale enterprises (SMEs) in Nigeria. The current economic reform
process ongoing in Nigeria aimed at reducing poverty, unemployment and
strengthening of basic institutions and sub-sector of the economy target at
improving and enhancing the capacity of small and medium scale enterprises
(SMEs) as instrument of economic growth and development.
A lot has been said and written about small and medium scale
enterprises (SMEs) the world over. It has also formed the subject of discussion
in so many seminars and workshops both locally and internationally. In the
same token, government at various level (Local, State and federal levels) have in
one way or the other focused on the small and medium scale enterprises
(SMEs). While some governments had formulated policies aimed at facilitating,
empowering the growth, development and performance of the small and
medium scale enterprises (SMEs) to grow through soft loans and other fiscal
incentives.
International agencies and organizations (World Bank), United Nations
Industrial Development Organisation (UNIDO), International Finance
Corporation (IFC), United Kingdom, Department for International Development
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(DFID), European Investment Bank (EIB) etc are not only keenly interested in
making small and medium scale enterprises (SMEs) robust and vibrant in
them. Locally, the several non governmental organizations such as fate
foundation, Support and Training Entrepreneurship Programme (STEP), the
Nigeria Investment Promotion Commission (NIPC), the Association of Nigeria
Development Finance Institution (ANDFI), as well as Individual Development
Finance Institution (IDFI) have been promoting the growth of small and
medium scale enterprises (SMEs) in Nigeria through advocacy and capacity
building imitative and have continued to canvass for better support structures
for operator in the small and medium scale enterprises (SMEs) sub-sector.
However, this project work examines the respective strengths and
drawbacks associated with the historical trends and efforts at developing small
and medium scale enterprises (SMEs) in Nigeria. It identifies and analyses the
opportunities provided for the promotion of small and medium scale
enterprises (SMEs) in Nigeria. Here, this study titled “small and medium scale
enterprises (SMEs) in Nigeria, the problems and prospects” cannot come at a
better time.
1.2 Statement of the Problem
The Nigerian National economy is characterized by mirage of problems
which has constituted a sleepless night to developmental oriented governance.
The most disturbing problems are that government has not played a favourable
role towards the promotion and development of small and medium scale
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enterprises, in the sense that government creats unfavourable fiscal policy
inconsistencies and lack of the infrastructural facilities by the government,
which have stunted and stagnated the growth of small and medium scale
enterprises in Nigeria. small and medium scale enterprises are seen as a
veritable engines of economic development, but the growth and development of
small and medium scale enterprises in Nigeria have been slow and in some
cases even stunted, due to a number of problems and challenges confronting
this all-important sub-sector of the economy. Some of these problems includes:
financial problems, poor management expertise, poor accounting system, lack
of materials etc, which the researcher tends to find solution to them. Moreso,
in Nigeria, most small and medium scale enterprises are folding up or lack
competitiveness because they lack the much required financial capacity to
prosecute their manufacturing concern.
1.3 Objectives of the Study
The main purpose of this study is to identify and consequently analyze
the most effective and efficient way through which small and medium scale
enterprises (SMEs) could be financed and promoted, thereby taking into
consideration of various conditions such as economic, political, social,
psychological etc. under which small and medium scale enterprises are
encouraged to operate. In so doing this the researcher intends giving and in-
depth information and analysis on the various strategies through which small
and medium scale enterprises can be developed and encouraged.
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In view of the above the researcher intends to:
(i) Assess the role played by government towards promotion and
development of small and medium scale enterprises in Nigeria.
(ii) To identify the economic potential of small and medium scale
enterprises in Nigeria.
(iii) To identify the constraints confronting the development of small and
medium scale enterprises in Nigeria.
(iv) To examine the financial support given to small and medium scale
enterprises by government and other individual bodies.
1.4 Research Questions
These are well structured questions designed to guide the researcher in
data collection and whose answers provide solutions to the problem(s) under
investigation. At the back of the mind of the investigator is the question: would
answers to those questions provide solutions to the perceived problem being
studied following our topic the researcher could raise the following research
questions.
(a) How do we assess the role played by the government towards promotion
and development of small and medium scale enterprises in Nigeria?
(b) What impacts do small and medium scale enterprises create to Nigeria’s
economic growth?
(c) What are the constraints confronting the development of small and
medium scale enterprises in Nigeria?
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(d) What is the trend of the financial support given to small and medium
scale enterprises in Nigeria?
1.5 Research Hypotheses
Like research questions, hypotheses help to provide direction and
facilitate the collection of data and its subsequent analysis and conclusion
inference. Unlike research questions, hypotheses are structured differently.
They are not posed as questions. Rather, they are stated as a possible
solution(s) to the observed problem.
Here, in the research work, the following hypotheses are formulated by
the researcher.
1) The role played by government towards promotion and development of
small and medium scale enterprises in Nigeria is highly effective.
2) Small and medium scale enterprises have immensely contributed to the
economic growth in Nigeria.
3) Financial problems, poor management practices or expertise, poor
accounting system, lack of materials, government unfavourable fiscal
policy and lack of infrastructural facilities are the major constraints to
the development of small and medium scale enterprises in Nigeria.
4) There is significant financial support given to small and medium scale
enterprises in Nigeria by government and other individual bodies in order
to thrive.
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1.6 Significance of the Study
This study when completed will be a valuable help to various
stakeholders for implementations with the concerned efforts of all and sundry
including: governments at all levels, SME promoters etc.
Policy makers: It guides them in making policies and regulations that will
create enabling environment for small and medium scale enterprises.
SMEs: This study will enable them to identify the problems confronting the
development of small and medium scale enterprises.
Investors/Entrepreneurs: It will enable them to know what they expected of
government in the promotion of small and medium scale enterprises. It will
also enable them to know the cost involvement in establishing the small and
medium scale enterprises.
Companies: They will also benefit from this study, since they are interested in
the overall success, operational and financial efficiency evaluation of the firm.
Student/Researchers: This study will also be a benefit to them, since they are
curious in studying or knowing more about the topic and in their research
work.
1.7 Scope of the Study
Because the researcher could not be able to cover the whole of Nigerian small
and medium scale enterprises (SMEs). The researcher narrowed it down to the
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number of registered small and medium scale enterprises in Enugu metropolis
where the sample size was determined. This study covered the problems and
prospects of some selected small and medium scale enterprises (SMEs) in
Nigeria.
1.8 Limitations of the Study
Certain limitations were encountered in the course of this study, key
among these includes:
Unavailability of Data
One of the greatest challenges the researcher encountered in this study
relates to access to and collection of hard data due to extreme data gaps and
pan city. This compelled the researcher to limit the study to small and medium
scale enterprises (SMEs) in Nigeria, thus excluding cottage and micro
enterprises whose challenges through comparable could be fundamentally
different from those of small and medium scale enterprises (SMEs).
Time and Funds
Another limitation of this study relates to time, funds and logistics
constraints, which limited the intensity of the spread or are of coverage of the
study.
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Resistance of Respondents
The researcher was also limited by the reluctance of some respondents to
complete them at all.
1.9 Definition of Terms
1. Medium Enterprise: Company with total cost including working capital
but excluding cost of land is above hundred million naira (300,000,000)
and a staff strength of between seventy-one (71) and two hundred (200)
full time workers and with an annual turnover of more than twenty
million naira (20,000,000).
2. Small Enterprise: An enterprise whose total cost including working
capital but excluding cost of land is between ten million naira
(10,000,000) and one hundred million naira (100,000,000) and workforce
between eleven (11) and seventy (70) full time staff and a turnover of not
more than ten million naira (10,000,000) in a year.
3. Large Enterprise: Any enterprise whose total cost including working
capital but excluding cost of land is above three hundred million naira
(300,000,000) and a labour force of over two hundred (200) workforce
and an annual turnover of more than twenty million naira (20,000,000).
4. Micro Enterprise: A firm, whose total cost including working capital but
excluding cost of land is not more than ten million naira (10,000,000)
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and/or with a labour size of not more than thirty (30) full time workers
and/or a turnover of less than two million naira (2,000,000).
5. Economic Growth: This means the enhancement of profit generated by
the designed economic resources of a nation or individual.
6. Entrepreneur: This means a person who organizes and manages a
commercial understanding.
7. Investor: This is a person who commits fund into business undertaken
with a view of financial return.
8. Management: This is seen as the process of getting things done through
other people who involves planning, controlling and decision making.
9. Government: This could mean the body of persons governing a state.
10. Business Firm: This means a business organization in which an
individual or group of individuals organizes and operates to have profit in
return.
11. Financial Institution: This could be a financial system of any country’s
set of institutional and other arrangements put in place for the transfer
of savings from those who generate them to those who ultimately use
them for investment or consumption.
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1.10 Profile of Selected Firms
Juhel Nigeria Limited Enugu Nigeria
The Company’s Profile:
Juhel Nigeria Limited is located at Emene in Enugu, capital of Enugu
State, Nigeria. Is a 100% indigenous company incorporated in 1987 with RC
No.104.648 as a wholesale pharmaceutical company. In answer to calls for
local provision of cost-effective generic products to fill the gap left by
multinational companies operating in the country; the founder, Dr. Ifeanyi
Okoye, Mni, with a focused vision, venture into production and the factory was
commissioned in 1989 as the first pharmaceutical tablet manufacturing
company in old Anambra State.
Juhel Nigeria Limited is committed to excellent of staff and
management, and support from numerous customers nationwide, the company
is ranked as one of the fastest growing pharmaceutical manufacturing
companies in Nigeria. Brand and product range of Juhel have since grow in
strength and include virtually all the pharmaceutics classes, such as,
antibiotics and anti-infective, cardiovascular, anti-diabetics, anti-malaria,
cough and cold, vitamins and mineral water IVY table water.
Juhel Nigeria Limited strong management team comprises of
accomplished professionals who excelled in both their academic and
professional career. The team leader is Dr. Ifeanyi Okoye, Managing Director
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and Chief Executive Officer, Ph.D holder in pharmaceutical technology, a
member of national institutes, mni, and a fellow of the pharmaceutical society
of Nigeria (EPSN).
Innoson Group of Company, Nigeria Ltd
The Company’s Profile
Mr. Innocent Chukwuma (Innoson) is a resourceful and accomplished
entrepreneur of international repute. His trading outfits which started in 1976
has successfully grown into a big trading giant of blue chip status. His
visionary attributes saw the company diversifying into manufacturing away
from distributive trade in support of the Federal Government industrialization
policy hence the group motorcycle manufacturing/assembly plants in Nnewi
and plastic manufacturing plant in Emene, Enugu with a trade name, Innoson,
which is fast becoming a household name in Nigeria.
Chief Innoson Chukwuma is an entrepreneur of high repute, born in
1961 at Umudim Nnewi, Anambra State. Through his ingenuity he transformed
the small trading business he started in 1981 after his education to a corporate
organization of international recognition. He is a man endowed with high
business acumen that dazed his contemporaries when he became the first
private Nigerian to locally assemble automobiles as well as motorcycles.
Undoubtedly Chief Chukwuma is a whiz kid with midas touch.
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Albertina Trading Company
The Company’s Profile
Albertina Company is renowned producer of filling, labeling and capping
machines. The company machinery finds its use in food, cosmetics, chemical
and pharmaceutical industries. Range of machine Albertina produces is very
wide, both in terms of capacity and in terms of package sizes. In addition to
various types of machines, the company also supply complete filling lines with
the capacity from 500 up 12,000 bottles per hour.
The lines include filling, capping, labeling machines, shrink tunnels,
conveyor belts, etc. Albertina Company is reliable partner not only in
production, but also in consultancy service and certification including
certification of lines for an environment with explosion hazard. We also provide
installment and operational qualifications in pharmaceutical industry.
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REFERENCES
Abrie, W, and Doussy, E. (2006), “Tax Compliance Obstacles Experienced by Small and Medium Scale Enterprises”: in South Africa Journal, Meditari Accountancy Research, vol.14 (1), pp 1-13.
Ihua, U. (2009), “Small and Medium Scale Enterprises key failure-factor: A Comparison between United Kingdom and Nigeria”, in Journal of Social Science 18-(3)199-207, Kent, University of Kent.
Lai, M.L., and Arifin, M.Z. (2011), “Small Business Enterprises and Taxation’: A Case Study of Corporate Clients of a Tax firm”, Academy of Accounting and Financial Service, vol.15(1), pg.11.
Osalor, P. (2012): Contributions of small and medium scale enterprises (SMEs) to the Nigerian Economy, in (http://www.sucessinyourbusiness.com/contribution of small and medium scale enterprises (SMEs) to the Nigerian Economy). Accessed 12/09/12.
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CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Introduction
According to Ihua (2009), the performance and effectiveness of small and
medium scale enterprises (SMEs) as an instrument of economic growth and
development in Nigeria has long been under scrutiny. This intense scrutiny has
been against the backdrop of the low performance and inefficiency that
characterized small and medium scale enterprises (SMEs). Small and medium
scale enterprise has fallen short of expectations. This has generated serious
concern and scientism on whether small and medium scale enterprise can
bring about economic growth and national developments in Nigeria. The
concern is even more disturbing when comparing small and medium scale
enterprise (SME) in Nigeria with other countries particularly where small and
medium scale enterprise has become harbinger of economic reconstruction and
transformation. Ireghah (2011) opines that in the case of Nigeria, that small
and medium scale enterprises (SMEs) had performed at very abysmal level.
This low performance has further exacerbated poverty, hunger unemployment
and low standard of living of people in a country whose economics is ailing.
The current problems of hunger, poverty and unemployment have
undermined the capacity of the economy and small and medium scale
enterprises (SMEs) are seen as mechanism for intervention to addressing these
long term problem of the economy. Unfortunately, small and medium scale
17
enterprises (SMEs) have not been able to propel economic growth and
development which are quintessence of mitigating the effect of poverty, hunger,
unemployment, and low standard of living on the economy. The challenge of
addressing the problem of hunger, poverty and unemployment is even more
worrisome when considering the actualization of the millennium development
goals by the country 2015. If Nigeria is to achieve the millennium development
goals by 2015, one of the sure ways is to enhance the capacity of its small and
medium scale enterprises (SMEs). The core issues identified by the millennium
development goal such as hunger, poverty, literacy, material and mortality rate
would not be achieved unless the problems of small and medium scale
enterprises are clearly tacked.
Omotola (2008) stipulates that the challenges and the problem of small
and medium scale enterprises are tied to some economic variables and the
challenges that generally characterized the nation’s economy. Some of the
challenges and problems include high level of unemployment, high poverty
incidence, and low industrialization capacity, lack of finance, inconsistent
government policies and inadequate infrastructure and insecurity of the
business climate among others. Nevertheless, the internal characteristics of
small and medium scale enterprises (SMEs) too have also interact with some
economic variables to undermine the capacity of the economy. Issues of low
level of entrepreneurial skills, poor management practice, inadequate equity
capital and lack of information among other problems.
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In spite of these problems and challenges, the current economic reform
process ongoing in Nigeria aimed at reducing poverty, unemployment and
strengthening of basic institutions and sub-sector of the economy target at
improving and enhancing the capacity of small and medium scale enterprises
(SMEs) is beginning to show a renew optimism on small and medium scale
enterprises as instrument of economic growth and development.
2.2 Conceptual Framework
According to Ayyagari (2007) and World Bank (2001), small and medium
scale enterprises have been long recognized as an instrument of economic
growth and development. This growing recognition has led to the commitment
of World Bank group on small and medium scale enterprises (SMEs) sector as
core element in its strategy to foster economic growth, employment and poverty
alleviation. In the year 2004 the World Bank group has approved roughly $2.4
billion in support of micro small and medium scale enterprises (SMEs). While
the importance of small and medium scale enterprises has not been in doubt,
unfortunately classifying businesses into large and medium scale is subjective
and premised on different value judgement. Such classification has followed
different criteria such as employment, sales or investment for defining small
and medium scale enterprises (SMEs). According to extant literature the
definition vary in different economies, but the underlying concept is the same.
Ayyagari et al (2003). Buckly (2004), contend that the definition of small and
medium scale enterprises varies according to context, author and countries”. In
19
country, such as USA, Britain and Canada small scale business is defined in
terms of annual turnover and the number of paid employees. Ekpeyong and
Nyang, (2002), in Britain for example small scale business is conceived is
conveived a that industry with annual turnover of 2 million pounds or less with
fewer than 200 paid employees (Ibid;4). In the case of Japan, it is
conceptualized as type of industry, paid up capital and number of employees.
Consequently, small and medium scale enterprises (SMEs) are defined as those
manufacturing with 100 million yen paid up capital with 300 employees. Those
in wholesale trade with 300 million paid up capital with 100 employees while
those in retail trade with 100 million paid up capital with 50 employees.
(Ibid;4).
In the case of Nigeria, hardly do you see a clear-cut definition that
distinguishes between small and medium scale enterprises. However, the
Central Bank of Nigeria in its monetary policies circular No.22 of 1988 view
small scale industry are those ding 500,000 naira (CBN;1988). Similarly in
1990 the Federal Government of Nigeria defined small scale enterprises for the
purpose of commercial Bank loans as those enterprises whose annual turnover
does not exceed 500,000 thousand naira and for merchant bank loan those
enterprises with (excluding the cost of land) or a minimum of 5 million naira.
Ogechukwu (2006) contends that in the wake of SFEM and SAP era in 1993,
this value has now been reviewed and subsequently increased to 5 million
naira. Since this happened, there may be a need to classify the small scale
industry into micro and super-micro business, with a view to providing
20
adequate incentives and protection for the former. In that context, any
business or enterprise below the upper limit of N250,000 and whose annual
turnover exceeds that of a cottage industry currently put at N5,000 per annum
is a small scale industry. (Ibid:5). The National Directorate for Employment
(NDE) concept of a small scale industry has been fixed to a maximum of
N35,000. (Ibid:5). In other words a business unit of not less than $240 dollar is
characterized as a small scale business in Nigeria, that may not be the same in
other countries, but that classification may be useful in developing countries,
because of the low capacity of its small scale industry. That is why Kozak
(2007) argues that we cannot explain small and medium scale enterprises
(SMEs) other than to say they are companies with metric (usually number of
employees or annual turnover that fall below certain threshold). It is these
indicators, number of employees and or rate of turnover that tend to define the
context within which different countries and economics situate their
understanding of small and medium scale enterprises. This is to say that, even
though small and medium scale enterprises (SMEs), is definable with much or
less the same indicator (No. of employees, rate of turnover etc) the indicators
are not the same in all countries all the time. In other words, while number of
employees and rate of turnover are the indicator, the number of employee and
total amount of turnover for defining small and medium scale enterprises
(SMEs) in different countries are certainly not the same. For instance, the
employee requirement Britain is 200, with 2million pound turnover, the same
cannot be said of Japan with 100 million Japanese yen as paid up capital and
21
300 paid employees. While in Nigeria, the paid employees are usually not
considered important, but more importantly is the turnover of 500,000
especially for the purpose of commercial and mortgage bank loans. Balunywa
(2010) however, affirms that the number of employee may not be a good
indicator, especially where the company is labour intensive. This is true in
country like India, where labour intensive is a policy approach to
industrialization. However, that is not to say that in some cases, trading
organization cannot transact big business, but yet employed few employees. In
that case, capital employed may be used as indicator for defining small and
medium scale enterprises (SMEs).
In countries where the number of employees is an indicator, the number
of employee required differs from country to another. In Uganda, the figure of
employees for small and medium scale enterprises (SMEs) is between 5-50, in
India, it is 30-100, while in the US, is less than 500. In Kenya, 10 or fewer
people are called micro business, while 11-50 are referred to small enterprises
and 51-100 are called medium enterprises. That is why in the United State of
America, small business administration is defined as one that is independently
owned and operated, is not dominant in its fields and meet up employment or
sales standard developed by thee agency. This shows the same trend with other
countries like Nigeria and Japan except that the exchange value differs in the
financial criteria.
22
In a more general and comprehensive term, Ogechukwu (2006)
chronicles a general criteria for defining small and medium scale enterprises in
different countries. These includes number of employees, annual turnover,
local operations, sales volumes, financial strength, managers and owners
autonomy, relatively small markets compared to their industries and capital
usually supplied by individual or shareholders etc. There are so many small
scale business units in Nigeria which qualifies within this context most of them
are in the commercial sector. However, a common trend in Nigeria today is the
gradual classification of service provider, hotels, fast food and restaurants as
small and medium scale enterprises. As a result of this definitional differences
and lack of universal definition, the European Union in 2003 adopted a
universally accepted definition of small and medium scale enterprises and
micro business as companies with less than 250 employees, with respect to
financial criteria, revenues must not exceed 50 million Euro (measure as turn
over) or 43 million Euro (measure as balance sheet). In addition, the European
commission specifies term of ownership stating small and medium scale
enterprises (SMEs) must be independent with less than 25 being owned by
outside interest, (European Commission, 2007). In a report of enterprises
association (Macqueen, 2004), conceive of small and medium scale enterprises
(SMEs) as enterprises employing 10-99 full time employees or with a fixed
capital investment of US $1000-500,000.
Small and medium scale enterprises are certainly not transnational
company, multinational cooperation, publicly owned enterprises or large
23
facility of any kind. However, they can depend on business and ownership
structure to become a large business unit (Macqueen, 2006). While it can be
argued that 80% of the financial of small and medium scale enterprises (SMEs)
come from owners, friends and families, business form can take different form
including private ownership, limited partnership, contract and sub-contracts,
cooperatives or associations Kozak (2007) small and medium scale enterprises
(SMEs) have a narrow context within which its operation is carried out.
However, where it is effectively operated it has capacity to sprout the economic
growth and national development.
2.2.1 History of Small and Medium Scale Enterprises
As the United States took the big jump from agriculture-dominated society to an industry
society, self-employment statistics also changed dramatically. By 1900, about 80 percent of the
work force was self employed, while about 20 percent worked for other firms. As the year 2000
approaches, the opposite is essentially true. 20 percent of workers today are self-employed, while
30 percent work for other firms and businesses.
One might conclude from this that there are fewer small firms in the Country, but that is not true.
In fact, small firms are as popular as ever. The decrease in self-employment came from a decline
in the number of Independent, farmers, which: was largely offset by an increase in large firm•
employment.
But the shift in the business economy from self-employment to large firm employment changed
how our economy functions and even governments attitude toward business. The ups and downs
of business cycles are far more hazardous to people dependent upon large firm payrolls. And this
24
has led to a greater dependence upon workers protection such as social security, Med iôare, and
mandatory worker’s compensation insurance, unemployment insurance, and other measures
designed to combat economic dimensions and unemployment. These changes have also made it
necessary for the small scale firm entrepreneurs to have a better grounding in management and
the ability to anticipate and deal with economic and business cycles when necessary.
2.2.2 Establishing Small and Medium Scale Enterprises in Nigeria
Establishing small and medium scale enterprises (SMEs) in Nigeria. The
following factors may make an individual decide to establish his/her own
enterprise.
(a) Job dissatisfaction: When an individual feels his skills, experience and
other attributes are not being properly utilized, he/she may become
dissatisfied with the job.
(b) Lack of challenges.
(c) Pay dissatisfaction.
(d) Unemployment.
(e) The desire to be independent.
(f) Security.
(g) Encouragement by friends and government policies.
In the Birley’s Work (2004), titled “start up in small business and
entrepreneurship cited in Izadomi (2006), outlined the following questions
which are relevant for a business start up.
25
i) How do I stand? The first thing to consider in starting a business is to
have a desire to do so. This is a commitment that only on individual
can decide on. On this decision made, the next steps are to:
• Know oneself
• Look for opportunities
• Consider available resources
• Plan to use these resources to take on the opportunities.
ii) What is the cost? The cost of starting a business will depend entirely
on the needs. However, it is important to pay attention to following:
• Keeping cost as low as possible
• Doing most of the work, which is free to you.
• Making available a detailed cost breaking before executing a
task.
iii) When is the best time to start? The best time for any business to
start is now, since there is no time like the present. This is because
hesitation in business start up may lead to losing out. Birley, further
outline a business start up plan using a flow chart as shown below.
iv) Izadomi (2006), other requirements for business start up includes:
• Stars a business with good people.
• Produce what customers actually want.
• Minimize your expenses as much as possible
• Environmental factors.
• Good road factors.
26
• Electricity supply.
• Closeness to the market and raw materials
Most start ups that fail to do so because they fail at one of the above
(Curran and Black, 2007). Therefore, a start-up that does all these will
probably success. Ikharehon (2004), is of the view that some people know
exactly what business they want to start. Others need to search for a business
that will be successful. The two basic research activities that have worked for
several people are listed below:
i) Read the following:
• Trade papers
• Business Journals
ii) Talk to the following people:
• Bankers
• Accountants
• Business consultants
• Lawyers etc
These professionals are able to help potential proprietors assess their
ability. They may also know of individuals who have a business to sell.
• Business broker
• Industrial developers
• Chamber of commerce
27
• Friends, relatives and prospective customers
Thee individuals are able to react to suggested needs that could be me by
a potential business. According to Iregheh (2011), there are three ways by
which a person can enter into:
(a) He may decide to buy a business that is already established. If he adopts
this option he must find out when the business was established, what is
the profit of the business over the years, why the owners want to sell it
amongst others.
(b) He may decide to start a new business: If he adopt this several options,
he must determine the viability of the chosen venture.
(c) He may buy a franchise: If he adopt this several options, he will need to
obtain a patent or brand market license entitling him to a particular
product or service under a trader frame or trade mark according to pre
arranged terms and condition.
Naming your Business
According to Banmach (2008), selecting a name for your business is
almost as important as the choice of business itself. The name of a business,
but also imply the degree of formality and set the tone before a customer enters
an establishment. In Nigerian, a business name must be registered with the
Corporate Affair Commission (CAC). This requirement is for the protection of
customer and creditor who have the legal right to know the identity of the
owners. Your Corporate Affair Commission (CAC) certificates of incorporation
28
offer you some protection from the abuse or duplication of your business name.
If you were the first to use the name in your area, you could probably prevent
others from using your name or at least collect royalties from them for the
privilege of using the name.
Estimating Stand Up Cost
This is a major requirement for effective financing. It should usually be
the starting point. However, there is no generic method for estimating start-up
costs since some business can be started at zero kobo, others require a few
naira while others may require considerable investment in inventory or
equipment. To determine a start-up costs, all the business expenses must be
identified. Some of these express will be one-time costs, such as the fee for
incorporation and the building costs. Ongoing cost also includes the cost of
utilities, inventory, and insurance etc (Timnons, 2003). These later classes of
costs also go for existing business. While identifying these costs, it is necessary
to decide whether they are essential or option. A realistic start-up budget
should only include those elements that are necessary to start the business
(Izedomi, 2006). These essential expenses can then be divided into two separate
categories. Fixed (overhead) expenses and variable (related to business sales)
expenses.
Other questions the small and medium scale enterprises (SMEs) owner
should address before commencement of business are;
29
- Personal factors: What personal qualities account for success in
business: has enough experience been obtained in this particular type of
business?
- Location: Where should the business be located? What factors should
considered in selecting a good location for the business.
- Regulation: What laws and regulations ordinary affect the business? Are
any special permits or licenses necessary?
- Records: What kinds of records should be kept and how? Can the record
keeping system be stanched? Who will keep these records and prepare
the records?
- Buying: Who will supply the business with the needed items for
operations? What goods or services are necessary, and in what qualities?
Where should they be purchased what favourable terms are available?
- Organization: Should the business be individually owned and operated or
would be partnership or corporate be more advantageous?
- Layout: Where should the different items of mechanise or equipment be
located in the business? Should a new structure be built?
- Building: Can an existing plant or building be rented, bought or leased
and then adopted for the business should a new structure be built?
- Personal: Where can qualified help be found? What training will the
employees need? What benefits should be offered to encourage good
workers to stay with the business? What other personnel problems might
arise and how will they be resolved.
30
- Expansion: What must be done to expand the business? When would be
the best time to expand? Addressing each of these questions is a matter
of foresight or indeed, more of planning.
2.2.3 Neglect of Small and Medium Enterprises in Nigeria
Attempts by developed and developing countries to eradicate poverty and unemployment
initially focuses on the development of large enterprises, based on the traditional economy of
scale. This theory is predicated on the assumption that, ‘big’ is ‘better’ while ‘small is bad’.
Small enterprises were seen as outdated and synonymous with technological and economic
backwardness. Ironically almost, all the businesses that were initially small eventually became
large business enterprises. Most of the Multinational Corporations like Philips international of
Netherland, Sony of Japan etc. started as family business ventures. In Nigeria, there are
indigenous enterprises such as Adebowale Electrical and JOAS Electrical Industry Limited that
started as small outfits, importing finished. The same thing is applicable to enterprises like Doyin
Investment, Eieganza Nigeria Limited, Dangote Group of companies and Dantata Group of
companies to mention just a few that commenced operations as prime movers of trades and
imports before they diversified into manufacturing business.
2.2.4 Small and Medium Scale Enterprises in Nigeria: Revisiting
Government Intervention
In every economies small and medium scale enterprises has been seen,
has a pivotal instrument of economic growth and development either in
developed or developing economies. Several studies have confirmed this.
31
Ogujiuba; et al (2004), Onugu (2005), Ihua (2009) Data from Federal
Office of Statistics in Nigeria affirmed this importance when it reveals that
about 97 percent of the entire enterprises in the country are small and medium
scale enterprises (SMEs) and they employed an average of 50% of the working
population as well as contributing to 50 percent of the country industrial
output. As Ariyo (2007) and Ihua (2009) averred, small and medium scale
enterprises (SMEs) in Nigeria are not only catalyst of economic growth and
development, but are also the bedrock of the nation. Although small business
activities had exited since the period of independence in Nigeria, however,
conscious effort on small and medium scale enterprise as instrument of
economic and national development started in 1970=1979 when Nigeria
adopted the policy of indigenization through its national development plan
programme. The development plan articulated the need for the Nigerian
economy to be self reliant through industrialization, entrepreneurial
development employment generation and development through increasing
export trade (NDP, 1970).
The Federal Government singled out small and medium scale enterprises
as the key area of intervention. This was premised on the government desire of
giving support to small scale industries in the country as a measure of meeting
up with its commitment to the development plan and the indigenization policy.
The intention was that it would be a reaction against the dominance of the
economy by the international capitalist entrepreneur and on the account that
revitalizing small and medium scale enterprises would enhance the capacity of
32
he indigenous capitalist class, as a potential player in economic growth and
national development.
In its intervention effort, government promulgates different regulation for
the basis of protecting the small scale industries. Some of the regulations
include Nigeria Enterprises Promotion No.3 of 1977, patent Right and Design
Act No.6 of 1979 customs duties (dumped and subsided goods Act No.9 of
1959, industrial promotions Act No.40 of 1979, industrial development Tax
Act No.2 of 1971 among others).
Alawe (2004), apart from the promulgated act government supported
small and medium scale enterprises (SMEs) through favourable investment
policies, institutional and fiscal policies, protective business law and financial
incentives to encourage the national development and indigenization policy
which small and medium scale are very central to. Several micro lending
institutions were established to enhance the capacity and development of small
and medium scale enterprises. Such micro-credit institutions include Nigeria
Bank for Commerce and Industry (NBCI) National Economic Reconstruction
Funds (NERF) People’s Bank of Nigeria (PBN) community Bank (CB) National
Export and Import Bank (NEIB) and the liberalization of the banking sector to
enhance the banking institutions for effective participation in the growth and
capacity building of small and medium scale enterprises (Ogujiuba; et al 2004).
Government also established Raw Materials and Research Development
Council (RMRDC) of finance and research institutions in 2001, the research
33
report of this institution is useful to small and medium scale enterprises
(SMEs) and business organization in their product choice decision, product
development delivery strategies to increase small and medium scale enterprises
(SMEs) business effectiveness and efficiency. To complement this effort,
government also created some polytechnics and universities to provide
manpower scheme and also set up some manpower training institutions. Such
as Centre for Management Studies (CMS) Administrative Staff College of Nigeria
(ASCON) Industrial Training Institute (ITI) etc. Ogechukwu (2006), opines that
a number of recommendations and findings of these institute and centre were
geared towards developing small and medium scale enterprises. In addition to
this, the government through the bankers’ forum at the initiative of CBN as an
interventionist strategy also established Small and Medium Industry Equity
Investment Scheme (SMIEIS) in 2001. This scheme required bank to set aside
10 percent of their profit before tax to fund small and medium scale enterprises
in an equity participation framework. In 2002, government further intervened
to enhance the capacity of small and medium scale enterprises (SMEs) through
direct policy as consisting of direct investment and the establishment of more
small and medium scale enterprises (SMEs), promotion, institution agencies
(technological development institutions, credit lending institutions, technical
and management institutions and the provisioning of infrastructures such as
industrial estate, nationalization of foreign firms and provision of incentives
and subsidies for the promotion of small and medium scale companies (Alawe,
2004).
34
The establishment of anti-corruption bodies such as Economic and
Financial Crime Commission (EFCC) and Independent Corruption Practices
Commission (ICPC), investing in power generation, road maintenance and
construction and enactment of pension funds were addition effort geared
towards improving the small and medium scale enterprises sector (Onugu,
2005).
In spite of the participation and effort of the government in developing
small and medium scale enterprises (SMEs), the contribution index of
manufacturing to GDP was 7% in 1970 (Odedokun, 2006). In 2004, a survey
conducted by manufacturer association of Nigeria revealed that only about 10
percent of industries run by its members are fully operational. Similarly,
Joshua (2008), contends that about 70percent of the small and medium scale
enterprises (SMEs) in Nigeria are between operational or on the verge of
folding-up, while the remaining 30percent operate on low level capacity are
vulnerable to folding up in the nearest future. In 2009, the constraint was
further compounded by sharp drop of manufacturing to GDP of 4.19 percent
while industrial capacity utilization dropped to 48.8 percent. National Bureuau
of statistics, 2009). This portents danger for the Nigeria economy given the
agent of real growth and development for the country. According to Mr. Jide
Mike the acting Director General of the Manufacturing Association “the debris
of dilapidated manufacturing concerns across the country is the outcome of
years of harsh operating conditions”. He averred that in spite of the small and
medium industries equity investment scheme (SMIEIS), funding as post a
35
serious threat to small and medium scale enterprises (SMEs). He therefore,
concluded by saying 30percent of small and medium scale enterprises (SMEs)
have closed down, about 60percent are ailing and only 10percent operate at a
sustainable level.
2.3 Theoretical Framework
Small and Medium business constitute the very foundation upon which the large businesses were
built, however, small and medium have been identified differently by various individuals and
organization such that an enterprise that is considered small and medium in one place is seen
differently in another. Even within a country, the definition changes over time. Some common
indicators employed in the various definitions include total assets, size of labour employed,
values of annual turnover and capital investment (Baenol, 1994).
The small scale industries of Federal Ministry of Industries defined small scale as” enterprises
having capital (investment in land, building, machinery and equipment and working capital) up
to N60,000.00 and employing not more than 50 person” as far back as 1979. The Central Bank’s
monetary and credit guidelines, small-scale industries were regarded as establishment whose
annual turnover is less than N6million and capital not exceeding NI0million. According to
Brwon, Medott and Ilamitton (1990), Many Small firms are created as a last resort rather than as
first choice and have therefore invited growth potential.
• Although, the pro-SME view argues that small firms are more innovative than large firms the
micro economic evidence is at best inconclusive. Examining US firms, Andretch (1987) find
small firms have higher innovation rates in high technology, capital intensive industries. For a
36
sample, Schiuardi (2001) study on European industries show a larger average firm size is
associated with faster innovation rates.
In developing countries, there is little R & D activity such that technology transfer from abroad
and initiative drive productivity, improvement Rosenberg (1976). Thus. rom a developing
countries perspective, the firm level evidence does not favour SME subsidization as a
mechanism for boosting innovation and productivity growth. Consistent with theoretical
argument outlined, emerging empirical evidence supports the view that firm size responds to
National characteristic.
Maksimonie (2002) find that financially, more developed countries tend to have larger firms.
This suggest that financial development ease financial constraints on successful firms and allow
them to grow. Kumar, Rajan and Zingales (2001) show that countries with better institutions as
measured by judicial system tend to have larger firms. Furthermore, Agbonifor (1998) noted that
SMEs is a crucial factor in economic development. They indicated that it is a means by which
productive activities indigenously owned and controlled and it is a means by which productive
resources and talents that might not otherwise be put into productive uses. This will at least
reduce the unemployment, menace which Nufakho (1998) said have reached an alarming
proportion.
Brian Levy (1993) explained that the study of entrepreneurship has relevance today, not only
because it helps small business or entrepreneurs better fulfill their personal needs, but also
because of the economic contribution of the new ventures. Brian Levy therefore sees SMEs as a
positive force in Economic growth and development. He stresses further by summarizing the
importance of SMEs to include ensuring rapid development, increased utilization of local
37
resources and provision of a training ground for indigenous managers and semiskilled workers,
reduction of the rural-urban drift, development of indigenous technology and raising the living
standard of rural dwellers and so on. In fact, SMEs accounts for the economic development in
most developed economies of the World today. It has helped in the balance of payment position
of countries; it reduces over dependence on inputs relative to their capital investment. Sequel to
the aforementioned benefits, the Federal Government of Nigeria has made several attempts via
the introduction of various policies at developing SMEs in Nigeria. Notable amongst these
policies are; Small and Medium Enterprises Development Agency of Nigeria (SMEDAN),
National Economic Reconstruction Funds (NERFUND), National Poverty Eradication
Programme (NAPEP). National Economic and Empowerment Development Strategy (NEEDS),
Small and Medium Industry Equities Investment Scheme (SMIEIS) and so on.
Despite the huge amounts spent on the development of these policies for SMEs growth, Sagagi
(2006) noted that not much changes and improvements have been achieved. The reason for this
as he indicated was attributed to limited financing and support, as well as inadequate
infrastructure, insecurity and lack of training and vocational facilities.
2.3.1 Problems Associated with Government Efforts towards
Small and Medium Scale Enterprises (SMES)
Although government made a substantial effort on the development of
small scale industries, nevertheless, part of the huge small and medium scale
enterprises (SMEs) problems could be traced to the government. This is mostly
in the area of improper implementation of its policies towards small and
medium scale enterprises (SMEs) and a serious neglect in the area of incentive
38
and infrastructural development to facilitate business activities of small and
medium scale enterprises (SMEs).
Government policies seem to have constituted a serious problem area for
small and medium scale enterprises (SMEs). The beginning of harsh
government policies toward small and medium scale enterprises (SMEs) can be
traced back to 1982 with the introduction of “stabilization measures” which
resulted in import controls and drastic budget cuts.
These, in turn, adversely affected the subvention to the financial
institutions established to provide financial assistance to the small and
medium scale enterprises (SMEs). For example, in 1983, out of a total of 8,380
applications for loans received from the small and medium scale enterprises
(SMEs) for a total of 46.66 million naira was disbursed (Alasan and Yakubu,
2011).
As the economic situation deteriorated, the government introduced the
Structural Adjustment Programme (SAP) in 1986. Since the strategy of
liberalization and deregulation of interest rates have continued to increase, the
small and medium scale enterprises (SMEs), which prior to the SAP had been
granted concessionary rate rates of interest (particularly for agricultural and
housing loans), have had great difficulties obtaining credit of a Stabilization
Securities Account (SSA) whereby the banks were debited with liquidity in their
accounts with the Central Bank.
39
The frequent changes, and sometimes conflicting government monetary
policies, have also tended to hurt the small and medium scale enterprises
(SMEs). For example, while the government increased total credit allocation to
small and medium scale enterprises (SMEs) from 16 to 20 percent, the same
government removed excess liquidity in the banking industry through increase
in the Minimum Rediscount Rate (MRR), transfer of government parastatal
accounts to the Central Bank and the creation of Stabilization Security
Account (SSA) whereby the banks were debited with excess liquidity in their
accounts with Central Bank.
Another area is misappropriation of funds and wrong channeling. Obi
(2002) pointed out was that the plan to provide, modest loan to small scale
business operations was a flop, because loans were granted in most cases on
political rather than on commercial or project viability considerations. What
was supposed to be revolving fund designed to benefit so many small and
medium scale enterprises (SMEs) owners ended up as a bonanza for a few and
it becomes virtually impossible to recover most of the loans. Another factor is
the government improper implementation of its policies. Its inability to recruit
trained manpower and adequate equipment to aid the extension services, it put
in place to support the small and medium scale enterprises (SMEs). According
to Obi (2002), the development centers were not endowed with adequate
manpower to carry out technical appraisal of applications for loans from
surging applicants.
40
In the same vain, Ireghah (2009), in an empirical study titled analysis of
the impact of government policies on small and medium scale enterprises
(SMEs) (entrepreneurial development) noted that government policy programme
on small and medium scale enterprises (SMEs) are concentrated in the cities
where there is strict competition between the small and medium scale
enterprises (SMEs) products and large scale business. While rural areas where
their activities will impact on the macro economy environment through
provision of employment rate, reduction in rural-urban migration and overall
contributions to the GDP were neglected.
2.3.2 Promoting Small and Medium Scale Enterprises in Nigeria Oil
and Gas Industry
Aigboduwa (2012) opines that small and medium scale enterprises
(SMEs) are generally acknowledged as having huge potential for employment
generation and wealth creation in any economy. Hence interest in their
development continues to be in the forefront of policy debates. In Nigeria
however, the sector remains relatively small in terms of its contribution to GDP
or to gainful employment. Though the Nigeria oil and Gas Industry has played
pivotal role in the economic development of the country since independence,
with over 95% of total export revenue currently accruing from this sector, the
participation of small and medium scale enterprises (SMEs) in the sector has
been largely insignificant. However, the enactment of the Nigerian Content
41
Development Act 2010 provides a number of opportunities for Nigerians to
participate in the oil and gas sector.
Implementation of the Enterprise Promotion Guidelines
Direct implementation of the NOGIC Act commenced with the
establishment of the Nigeria Content Development and Monitoring Board
(NCDMB) in 2010 for enforcement of the law. Failure to comply with Nigeria
content requirements is now a fatal flaw at any stage, in the tendering process
for contracts in the oil and gas industry. Sections 3(1), 3(2), 12 and 13 of the
Act stipulate that Nigeria companies be given first consideration in the award of
contracts, and the use of locally manufactured goods where companies
demonstrate competences in ownership of equipment and capacity of
personnel, and such goods meet the specifications of the industry (NOGIC Act,
2010).
Section 16 of the Act gives a 10% head start over the lowest bidder for a
contract by allowing that where a Nigeria indigenous company has capacity to
execute such job, the company shall not be disqualified exclusively on the
basis that it is not the lowest financial bidder, providing the value does not
exceed the lowest bid price by 10percent. Additionally, section 14 allows bids
with 5% higher Nigerian content to be given consideration over other bids that
are within 1% range of each other.
Section 104 of the Act establishes the Nigerian Content Development
Fund (NCDF) for the purposes of financing the implementation of Nigerian
42
content development, and stipulates that 1% of every contract awarded to any
company for all projects or transaction in the upstream sector shall be
deducted at source and paid into this fund. The fund is to be managed and
employed by the (NCDMB) for projects, programmes, and activities directed at
increasing Nigerian content through development and utilization of local
capacity and capabilities in the industry. The target of this fund is to enhance
capacity building, and it has been suggested that small and medium scale
enterprises (SMEs) should have access to soft loans from this fund in order to
boost capital base.
In order to clarify the NOGIC Act, NCDMB released several guidelines
and regulations which set out the procedures for its effective management. In
respect of the NCDF under section 104 for instance, it has been clarified that
where the operator, contractor, subcontractor, alliance partner or any other
entity involved in any project awarding a contract has deducted and paid 1% of
the total milestone payment, other subcontractors or suppliers in respect of
any goods or services which form part of the same contract will no longer be
required to make deductions. This is to avoid double taxation, and it is
particularly beneficial to small and medium scale enterprises (SMEs) who may
benefit from accessing the fund in form of loans, while being shielded from
paying back another 1% of the contract sum, since the projects to be executed
by small and medium scale enterprises (SMEs) would mostly be subcontracts
on which 1% was already deducted in the main contract.
43
Requirement for Entry into the Market (Oil and Gas)
Aigboduwa and Oisamoje (2013), state that every aspiring small and
medium scale enterprises (SMEs) entrepreneur in the oil and gas industry
should be acquainted with the competency requirements that would enable
entry into the market. The following are basic minimum requirements:
• Corporate Affairs Commission Registration as a Corporate Entity.
• Department of Petroleum resources Registration to obtain permit to enter
into contracts in the oil and gas industry.
• Nigeria Petroleum Exchange (NIPEX) registration for access to participate
in tendering activities on the e-market place hosted by the NNPC.
• Value Added Tax Registration to obtain a number and certificate.
• Established physical presence (office, staff, facilities etc).
Qualified small and medium scale enterprises (SMEs) must show that their
companies are sustainable entities and demonstrate that they have the
capability to get the job done to professional standards, preferably with
evidence showing a tract record of delivery results on schedule and at
agreed cost. There are technical requirements in some of the categories that
must be met, and small and medium scale enterprises (SMEs) must
demonstrated that they are able to meet these technical specifications by
ensuring they have the right certifications, personnel, and equipment. Most
opportunities in the industry are advertised in the Nigerian Petroleum
Exchange (NIPEX) Website, and prospective bidder must regularly check
44
this portal in order to have more time to respond to calls for bids and
prepare adequately complaint tenders.
The industry has positioned itself to take advantage of the Nigerian
Content Act by setting up associations such as the Petroleum Technology
Association of Nigeria (PETAN), a body made up of only Nigerian companies
prospecting in the oil and gas industry. The association is presented in the
council of Nigerian Content Development and Monitoring Board (NCDMB),
where they act as pressure group and have the advantage of ensuring that
Nigerian Content rules are complied by the operators. They also organize
regular seminars and workshops for enlightenment of members.
Opportunities Available to Small and Medium Scale Enterprises in the Oil
and Gas Industry
Though oil and gas production is mainly in rural communities in Nigeria
indigenes are increasingly forced migrating to cities in order to be able to enjoy
the benefits of these resources due to lack of amenities in these rural areas,
while multinational companies engage foreigners in actual execution of the
works on site. Momoh (2011), blamed the lack of local content for the high
unemployment and linked this to the emergence of militancy in the Niger Delta
region. The NOGIC Act has now provided the legal framework for stimulating
investment in the Nigerian oil industry. It strives to build local capacity by
defining minimum Nigerian Content value for particular goods and services,
and presents various opportunities within the schedule to the Act for small and
45
medium scale enterprises (SMEs) participation in both technical and non
technical categories. Most entrepreneurs are faced with the challenges of
accessing opportunities within the industry due to lack of good knowledge of
available resources in the sector.
In the schedule to the Act, 287 activities and services applicable in the
industry are listed under 17 sectors and the minimum level of Nigeria content
required for each activity and service is stipulated. The sectors range from
Engineering Design, Fabrication and Construction, Material and Procurement,
and well Drilling, to Research and Development, Exploration, Transportation,
and Health, Safety and Environment. Other listed sectors include information
and communication, finance and Insurance, Installation and Commissioning,
Inspection and Testing, project Management, Surviving, Modification and
Maintenance, and Shipping (NOGIC Act, 2010).
Activities and operations in some of these sectors are highly capital
intensive, with sophisticated equipment beyond the reach of the average small
and medium scale enterprises (SMEs). The NOGIC Act therefore recognizes
three categories of Nigerian companies as follows:
1. Nigerian Independent Operator: (an oil company having at least 51%
Nigerian equity participation, and the capacity to mange oil blocks, oil
field licences, oil lifting licences, and such other oil and gas prospecting,
exploration, and production operations).
46
2. Nigerian Company: (a company formed and registered in Nigeria in
accordance with the provision of companies and allied matters Act, with
not less than 51% equity shares by Nigerias, capable of executing
constructions and support contracts for operators).
3. Nigerian Indigenous Service Company: (a company registered under
the laws of Nigeria and is wholly owned or has al least 51% of its equity
and ownership structure held by Nigerians). This category caters for the
small and medium scale enterprises (SMEs).
Some of the Nigerian companies that have been able to take advantage of
the Nigerian content incentives include Lonestar (drilling), SCC mill
(manufacturing of line pipes), Nigerdock (construction of SBM Calm Buoys),
Starzs (building of offshore vessels), Nestoil, Baywood, and Oilserve (Pipeline
construction), among others.
Nevertheless, there are several sectors and activities that are specified for
requirement of high level of Nigerian Content (NC) while involving little
capital outlay. The most attractive sectors for small and medium scale
enterprises (SMEs) include materials and procurement where supply of steel
plates, flat sheets, steel sections, and steel pipes have 100% NC
requirement; transportation sector with 100% NC requirement for disposal,
distribution and waste transport services, and truck package and product
transportation services. Similarly under the Health, safety and Environment
Sector, affordable services exclusively reserved for Nigerian companies
47
include site clean-up, industrial cleaning, catering, and laundry, while
security services, pollution control, and supply of safety materials have very
high NC requirement of at least 90%.
Public Address system services attract 95% NC under the information
and communication sector, while Auditing Services, life Insurance Services,
Insurance Broking Services, Security Broking Services, and Fund
Management Services are exclusively reserved with 100% NC under the
Finance and Insurance Sector. The schedule to the Act further stipulates
that in the Installation and Commissioning Sector, pipe cutting and bending
services, trenching and excavation services, and rental of cranes and crane
barges are under exclusive reserve. Similarly, Geophysical and
Hydrographic Site Survey Service is exclusively reserved for Nigerian
companies under the survey sector.
2.3.3 Financing Small and Medium Scale Enterprises (SMEs) By Commercial Banks
UNCTAD (2004), opines that well functioning and sustainable
mechanisms for small and medium scale enterprises (SMEs) financing requires
institution building and a market approach. Lending institutions are then
required to improve their ability to provide financial services to small and
medium scale enterprises (SMEs) through commercial mechanisms that lower
cost and minimize their risk exposure. Only in this way will financial
institutions find small and medium scale enterprises (SMEs) lending to be more
48
profitable, and thus be encouraged to construct lending programmes targeted
as small and medium scale enterprises (SMEs). There are also a number of
trends in the financing services industry that are facing banks to have a closer
look at the small and medium scale enterprises (SMEs) markets.
Equally, Globalization trends are increasing competition especially for
the servicing large corporate customers and driving down margins nod fees.
The improving liquidity of securities markets in many countries is increasingly
providing large corporations direct access to the capital markets and allowing
them to buy-pass financial intermediaries. Therefore, banks are under
increasing pressure to expand their business towards small and medium scale
enterprises (SMEs) customers and to develop mechanisms to improve the
profitability of lending to small and medium scale enterprises (SMEs).
Aladekomo (2003), stipulates that in recent years, banks in developed
countries have launched a number of initiative that both improve the
profitability of lending to small and medium scale enterprises (SMEs) and also
provides small and medium scale enterprises (SMEs) with better access to
finance and to financial products that are better tailored to their needs. A
number leading bank has demonstrated that providing financial services to
small and medium scale enterprises (SMEs) can be turned into a highly
profitability business. Although, the business environment in developing
countries and developed countries differ in many respects, the problems of
servicing small and medium scale enterprises (SMEs) customers are similar
49
namely high perceived risk, problems with information and high administrative
costs. Therefore, recent innovations in developed countries to improve small
and medium scale enterprises (SMEs) access to credit can provide valuable
insights for developing country banks to become more small and medium scale
enterprises (SMEs) oriented and to increase the volume and the quality of their
services to this sector.
2.3.4 Equity and Venture Financing in Small and Medium Scale
Enterprises (SMEs) Era
Abereijo and Fayomi (2005) assert that venture capital involves the
provision of investment finance to private small or medium companies in the
form of equity or quasi-equity instruments not traded on recognized stock
exchange. It is long-term risk finance where the primary return to the investor
is derived from capital gains rather than dividend income. Venture capital
investors are actively involved in the management of the invest company with
the intention of helping to assure the success of the venture. While in their
view, private equity is generally clarified into stages. Venture capital is a subset
of private equity including seed and start-up investments. Venture capital
focuses on high growth businesses in early stages of development that promise
significant capital growth.
A distinction is usually made between venture capital and seed capital.
Seed capital refers to direct equity capital in start-up in the initial rounds of
finance. Venture capital on the other hand, refers to the next round of finance
50
in the companies that have achieved stability and have stability and have
strong growth potential. A venture capital fund would typically invest in the
small and medium scale enterprises (SMEs) in a high-growth sector, looking to
expand its operations. Venture capital can also play a role in buy-out of more
established companies. The involvement of a venture capitalist is usually from
two to four years, after which the venture capitalist will typically either all the
shares of the company on a stock exchange e.g. an Initial Public Offering (IPO)
or sell the whole stake in the company for example to a more established
competitor.
According to Iromala (2006), venture capital has the potential of offering
a valuable source of finance complementing the more traditional credit finance
provided by commercial banks. Some of the fundamental reasons hindering
small and medium scale enterprises from obtaining credit from commercial
banks and other credit institutions are less important in attracting venture
capital. The advantages of venture capital are therefore:
i) Venture capitalists are willing to accept higher risks than traditional
banks in exchange for potentially large gains from the sales of shares
in the company.
ii) Venture capitalists do not require collateral from borrowers.
iii) Operating costs are lower due to the absence of high interest rate
payment.
51
iv) Venture capital, by nature is long-term or at least medium-term
capital in contrast to short-term loans from banks.
v) The managerial known-how provided venture capitalists can in some
cases be more valuable to the start-ups of small and medium scale
enterprises (SMEs) than the actual financial received.
However, there are also a number of drawbacks:
i) As in traditional bank lending, operating costs associated with lending
a small amount may discourage investors.
ii) The need for highly liquid markets is not as pressing compared to
open-end funds or mutual funds, since venture capital funds have a
long-term involvement in the companies they invest in. nevertheless,
an exit mechanism is necessary for venture capitalists to attain
capital gains. This has been found to be difficult in almost developing
countries except those with emerging capital markets (Feldman,
2006). Other mechanisms such as guaranteed buy-backs do not seem
realistic for small and medium scale enterprises (SMEs).
iii) As the majority of companies that venture capitalists invest in either
fail or yield only large enough returns to cover loses incurred from the
less successful investments. The need for potentially very high profits
rules out the bulk of small and medium scale enterprises (SMEs) and
start-ups that do not have the potential to becoming a future mega-
52
company and is one reason venture capital is concentrated in certain
sectors such as high technology.
2.4 Empirical Review
The argument on the role of small and medium scale enterprises in
ameliorating the menace of unemployment in national economy has been in the
front burner for years and this has geared many scholars on the subject to
conduct researches that could beam light on the issue. It is in the same spirit
that reviewing past research studies on the subject becomes imperative.
Considering a study conducted by Lawal, (2011) which was basically a
survey of small and medium scale enterprises in local government in Lagos
State and the purpose was to assess the strategic role of participating SMEs in
economic development. Data for this study was generated from both primary
and secondary sources through the use of self administered questionnaires and
structured interview. Content analysis of records particularly financial record
of some participating SMEs were undertaken to obtain the secondary data. For
this particular study, a total population of 2,670 was used among which
stratified sampling techniques was employed to select 1,000 SMEs upon which
the research instruments were administered. The result of the analysis
conducted sequel to the study shows that international SMEs contributed more
than domestic SMEs in all dimension of strategic importance. In other words,
SMEs with international presence are stronger and perform better than those
53
without international presence therefore making the former to be more of
strategic importance to development than the latter.
In a similar study carried out by Okpetu (2002) in which key success
factor in SMEs were researched since success is a measure of effectiveness of
the sector and the impact of the sector on the overall development of
participating firms and by extension national economy at large. In that study,
the researcher adopted a cross sectional survey of small and medium
enterprises in Lagos. The primary data were gathered through a self-
administered questionnaire and complemented with content analysis of some
published reports on small and medium enterprises.
A sample of 200 entrepreneurs selected across different industries was
selected for the study. The choice of industries and selection of samples were
based on accidental sampling method. Participating respondents were
operators of small and medium enterprises who volunteered to respond to our
questionnaire. The sampling method was adopted due to lack of comprehensive
information on the population of small and medium enterprises operating in
Lagos.
The main instrument used was a self-administered questionnaire divided
into two main sections. Section A contained questions on success factors.
Respondents: were provided with following options: Critically important coded
5 points, very important coded 4 points, important coded 3 points, somewhat
important coded 2 points, and least important coded.
54
Section B of the questionnaire requested for the background information
of the entrepreneurs and the organization. To empirically answer the research
questions, descriptive statistics such as mean, mode median and standard
deviation were employed in analyzing the responses of participating
respondents. Out of the 2000 firms and entrepreneurs that participated usable
and complete data were obtained from 195. The findings of this study reveal
that considerable percentage of Nigerian working population (that id 20-49
years) is increasing seeking for self- employment. This age group constitutes
responsible men who have attended higher institutions. The survey of these
entrepreneurs also indicate that technology proper planning, financial survival
of Nigerian small and medium enterprises.
In the contemporary business environment technology is a vital factor
that must be reckoned with. Lack of technology will result from absence of
research and inability to adopt modem techniques, thereby resulting into low
productivity. Hence, there is no gainsaying in the fact technology is one of the
challenges in the growth of Nigerian small and medium enterprises. The
significance of finance in small, and medium, enterprises development is well
established and generally accepted, successive governments over the years
have implemented various financing arrangements at the micro level to assist
small and medium entrepreneurs. Nigerian is blessed with vast natural,
human and material, resources, which implies that she has great potential for
emergence of a vibrant industrial sector, particularly in small and medium
enterprises.
55
The role of small and medium enterprises in the technological and
industrial development of any nation justifies the need for greater attention to
this sector. The foundation of growth in developed countries of the world is
usually attributed to the contribution of the small and medium enterprises.
In Nigeria, the successive administrations have adopted various policy
measures aimed at stimulating, sustaining and supporting entrepreneurship,
development in small and medium enterprises. The success of these measures
will be dependent on the presence of some key factors such as technology,
financial control, proper planning and productivity of labour force. All these
factors attest to the fact that creation of enabling environment and effective
management will assist in the growth and development of small and medium
enterprises.
Relating the study conducted by Lawal (2011) to the one conducted by
Okpetu (2002) it therefore follows that for SMEs irrespective of the nature of
their business ideology, key success factors such as proper planning, good
financial control, technology, sustainable improved employee productivity are
germane to success of the organizations whether such SMEs are with
international presence or only domesticated in Nigeria.
In a similar study conducted by Ojodu (2005) on SMEs as a sustainable
development strategy in Nigeria in which random sampling techniques was
used to select 200 respondents out of a total population of 350 SMEs within
Mushin local council development area of Lagos State with the adoption of
56
questionnaire and interview as research instrument it was discovered that
majority of this respondents see their businesses (SMEs) as a way out of
endless unemployment meaning SMEs is a singular and unmatched strategy of
combating underdevelopment occasioned by the menace of unemployment with
attendant predicament associated with it. Considering the above reviewed
empirical studies, SMEs no doubt is an indispensable factor to ensure
sustainable growth and development in an economy characterized by incessant
kidnapping, political thougery, harm robbery and other socio vises brought
about by unemployment. However, SMEs will not record speedy development
even to going international if major success factors such as technology
application, proper planning, adequate finance, good infrastructures among
others are not provided as at when needed as supported by Okpetu (2002).
2.4.1 Problems of Small and Medium Scale Enterprises (SMEs) in Nigeria
It is worrisome that despite the incentives, favorable policies and
regulations and preferential support by government aimed at improving small
and medium scale enterprises (SMEs), has performed below expectation in
Nigeria. While the challenges associated to small and medium scale enterprises
and their failure has been widely acclaimed. Some of these include lack of
planning, inimical government regulations, poor marketing strategies, lack of
technical know-how, and lack of capital (Onugu 2005, Ogechukwu 2006). Yet
some of the challenges of the small and medium scale enterprises (SMEs) are
induced by the operating environment (government policy, globalization effects,
57
financial institutions etc) others are functions of he nature and character of
small and medium scale enterprises (SMEs) themselves, (Onugu 2005).
• Financial Problems: The association of Nigerian development finance
institutions in 2004 issued a statement in relation to the why small and
medium scale enterprises (SMEs) performed poorly in Nigeria. Truly,
finance is usually a constraint to small and medium scale enterprises
(SMEs), while this may be true empirical evidence shows that finance
contributes to only about 25 percent of the success of small and medium
scale enterprises (SMEs), (Ogujiuba et. al, 2004). Thus, the creation of
other appropriate support system and enabling environment are
indispensable for the success of small and medium scale enterprises
(SMEs) in Nigeria. In Nigeria, most small and medium scale enterprises
(SMEs) are folding up or lack competitiveness because they lack the
much require financial capacity to prosecute their manufacturing
concern. Most of these enterprises cannot access loan on a long ad short
term basis. In a World Bank report in 2001, it was reported that almost
50 percent of Micro, 39 and 37 percent of the small and medium scale
firm are financially constrained in Nigeria as oppose to 25 percent of the
very large firm (World Bank, 2001). The implication of this shows that
small and medium scale enterprises (SMEs) are either discriminated
against or cannot access funds at the credit market. In addition to this,
the financial stringent attached to loan and credit also discourage
industries from accessing credit from the bank. This factor has largely
58
undermined the capacity of small and medium scale enterprises (SMEs)
in Nigeria. Even where small and medium scale enterprises (SMEs) can
access the loan, it is usually a short term loan and what small and
medium scale enterprises (SMEs) required in building capacity is a long
term loan which can be rolled on investment overtime. This issue has
generated heated debate between the small and medium scale
enterprises (SMEs) operator and the Banks. While small and medium
scale enterprises (SMEs) operator have been claiming that Bank
requesting stringent conditions and terms of approval, the Bank on the
other hand had claimed that small and medium scale enterprises (SMEs)
operators don’t present bankable projects. Nevertheless, Ogujiuba et al
(2004), in a report on small and medium scale enterprises (SMEs)
claimed that 20 percent of small and medium scale enterprises have
reported being constrained in receiving long term loan. This has forced
small and medium scale enterprise to use their internal financing which
is usually unsustainable and vulnerability of small and medium scale
enterprise as a result of low capital base. Even at the establishment of
the second tier security market of the Nigerian Stock Exchange as a
palliative measures to solve the financial problem of small and medium
scale enterprises (SMEs), most small and medium scale enterprises
(SMEs) shunned it because of the tight procedure and administrative
bottleneck in the assessment of credit facilities.
59
• Lack of Infrastructural Facilities: The performance of small and
medium scale enterprises (SMEs) has also been hindered by the lack of
infrastructural facilities. Inadequate facilities like power supply,
telecommunication, access road network and water supply constitutes
one of the major constraints challenging small and medium scale
enterprises (SMEs) in Nigeria. A World Bank in 1989 estimated that “the
cost of providing infrastructural facilities by small and medium scale
enterprises (SMEs) in the absence of those facilities is estimated to be
about 15-20 percent of the cost of establishing manufacturing
enterprises in Nigeria”. Omotola (2008), contends that the percentage has
since increase to 30-35 percent of the cost of establishing manufacturing
concern in Nigeria. Of the infrastructural problem, the problem of power
has best the most critical of the infrastructural problem. The erratic
power supply has hindered the business environment. In Nigeria, most
businesses have fold-up or cannot operate as result of irregular and
epileptic power supply. The problem of power is so bad to the extent that
the large industries are now relocating to Ghana and other neighboring
countries, while majority of the small and medium scale business has
since gone into extinction in production activities. The cost of fueling
generator, machines and equipment has led to cut in employees and
running cost of the small and medium scale enterprises (SMEs). This has
eventually led to the folding up of most of these enterprises in Nigeria,
since they cannot compete in the market any more. Most Banks have
60
capitalized on this reason and blamed their inability to find small and
medium scale enterprise on the poor state of infrastructure, economic
climate and low performance of public utility (Olaremvaju, 2006).
However, Chris Onalu of the CMC International Bank in
contradistinction rejected Bank excuse on infrastructural facilities
claiming that huge profits declared by Bank shows that the operating
environment is not as bad as they think. Although the fact that most of
these Banks declared huge profit does not mean that the operating
environment is good, it is public knowledge that most of he banks in
Nigeria have been seen to doctored their account book on account of
claiming a clean health bill. The truth however is that the state of
infrastructural facilities in Nigeria is poor. Power supply is unstable and
inadequate, the states of the roads are terrible and water is not
sustainable, telecommunication services are not effective. Where
infrastructural facilities are neither present nor inadequate and
functional, the investment environment cannot stimulate improvement
for small and medium scale enterprises (SMEs). In these instances, bank
would not be willing to invest in small and medium scale enterprises
(SME) because of high risk and the uncertainty of the investment
climate.
• Government Unfavorable Fiscal Policy Inconsistencies: The inability
of government to execute favourable fiscal policies and policies
inconsistencies has undermined the capacity of small and medium scale
61
enterprises (SMEs). As Njoku (2002), identifies, inconsistencies in
government policies is a major problem affecting small and medium scale
enterprises (SMEs). Ogujiuba (2004), also factored in the problem to
inappropriate time or delay in budget implementation as factor
constraining investment and trade decision. In most cases, the process of
approving budget at the legislative level is usually delay due to executive
and legislative face-off most time and even when the budget is approved
the executive implementation of such is also very slow due to
administrative bottlenecks. Thus, delaying investing decision of small
and medium scale enterprises (SMEs), particularly on tariff and taxes
measures inn their trade decisions. Factors such as this have made the
investment environment to be unpredictable and uncertain for small and
medium scale enterprises (SMEs). In some cases, high incidence of
government regulatory agencies, taxes and levies by different levels of
government have resulted into high cost of running small and medium
scale enterprises (SMEs) and entrepreneurs are seems not be motivated
by this factors. As Onugu (2006) posits, this is due to the absence of
harmonized and gazette tax regime which would enable manufacturers to
build in a recognized and approved levies of tax payable.
• Internal Characteristics and problem of Small and Medium Scale
Enterprises (SMEs): Most small and medium scale enterprises (SMEs) in
Nigeria are battling with serious internal problem. These problems range
from poor management practice, poor accounting standards, shortage of
62
manpower, financial indiscipline and corruption. The reasons why most
small and medium scale enterprises (SMEs) have not been able to
improve are due to poor management knowledge and practices,
transparent organization set up, succession plan, entrepreneurial skills,
strategic business plan etc. The dearth of such skills in most small and
medium scale enterprises (SMEs) due to inadequate educational
professional and technical background on the part of the owners and
employees of small and medium scale enterprises (SMEs) has plunged
small and medium scale enterprises (SMEs) into further crises. It is the
characteristics of small and medium scale enterprises (SMEs) to ignore
basic management procedure and thus run business as a family affair by
undermining proper book keeping and accounting and managerial
practices. Because of the way the business management and
accountability measures are ignored, reckless financial administration,
wrong investment decision and corruption becomes the order of the day
(Omotola, 2008).
Akpokerere (2009), noted that small and medium scale business in
Nigeria faces a lot of problems which make the realization of the benefits of
small and medium scale enterprises (SMEs) difficult in the Nigeria economy.
Bacdom (2004) and Iromala (2006), stated that the most important problems of
small and medium scale enterprises (SMEs) include the following.
63
• Constrained Access to Money and Capital Market: Most small and
medium scale enterprises (SMEs) are restricted to funds from family
members and friends and are therefore unable to respond timely to
unanticipated challenges. More worrisome is the small and medium scale
enterprises (SMEs) inability to adequately tap available finance from the
capital market. This has been attributed to their aversion to disclosure
and ownership dilution.
• Poor Management Expertise: Management has always been a
problem in this sector as most entrepreneurs do not have the required
management expertise to carry them through once the business starts
growing. The situation gets compounded as training is not usually
accorded priority in such establishments.
• Lack of Continuity: Most of small-scale establishment are sole
proprietorships and such establishments often cease to function as soon
as the owner loses interest or dies. This raises the risk of financing such
establishment.
• Inadequate Information Base: small scale industries are usually
characterized by poor records keeping and this usually starves them of
necessary information required for planning and management purpose.
This usually affects the project realization in this sector.
• Poor Accounting System: The accounting system of most small scale
industries lack standards and does not make room for the assessment of
64
their performances. This creates opportunity for mismanagement, which
subsequently may lead to enterprises failure.
• Restricted Market Access: Insufficient demand for the products of the
small and medium scale enterprises (SMEs) also imposes constraint on
their growth. Although many small and medium scale enterprises (SMEs)
produce some inputs for the large enterprises, the non-standardization of
their products, the problem of quality assurance as well generally low
purchasing power, arising from consumers’ dwindling real incomes,
effectively restrict their markets. This is further compounded by the
absence of knowledge about the existence fringe markets by the small
and medium scale enterprises (SMEs).
• Lack of Raw Materials: In some small and medium scale enterprises
(SMEs), raw materials are source externally such enterprises are fixed to
sourcing of exchanging to get these needed raw materials foreign. The
fluctuation of foreign exchange may therefore make it difficult to plan
and that may precipitate some stock and things will destabilize the set
up. These problems can be categorized as finance, managerial/technical,
commercial and infrastructure or appropriately can be categorized as
micro and macro problems. While the micro problems are those that are
inherent in nature and operations of he small and medium scale
enterprises (SMEs), those macro problems are those that are inherent in
the economy thereby making the business environment difficult for the
small and medium scale enterprises (SMEs) to strive or operate.
65
2.4.2 Prospects of Small and Medium Scale Enterprises (SMEs) in
Nigeria
In spite of the challenges confronting small and medium scale
enterprises (SMEs) in Nigeria, government realized the role of small and
medium scale enterprises (SMEs) as the catalyst for economic growth and
development through employment and their contribution to macro-economic
development. It is therefore only proper to say government is making
tremendous effort in ensuring that these challenges are tacked. This explains
why, a part from the past effort by government, the emergence of democracy
has also increase government effort since democracy is tied with economic
development, (Omotola, 2008). Government in the past has established various
support institutions and reliefs measures aimed at enhancing and improving
the capacity of small and medium scale enterprises (SMEs). Example of such
includes specialized banks meant to offer investment credits and loans to
improve the investment capacity of small and medium scale enterprises
(SMEs). In addition, government also initiates regulatory and preferential laws
as a measure of protection and offers preferential treatment to small and
medium scale enterprises (SMEs) for the purpose of its improvement and
development.
However and despite government effort in the past there is a renew
support for small and medium scale enterprises since 1999; the government
has since commence economic reform which small and medium scale
66
enterprises (SMEs) are central to its objectives. The opportunity on the future
of small and medium scale enterprises (SMEs) has started yielding result,
because the economic reforms had shown evidence of improvement in the legal
and regulatory environment, particularly regarding company registration,
taxation, infrastructural improvement (especially telecommunication). The
establishment of bank of industry (BOI), small and medium scale enterprises
(SMEs) development agencies of Nigeria, the facilitation of small and medium
scale enterprises equity investment scheme (SMIEIS) and other employment
generation and poverty alleviation scheme at various levels of government.
Such as National Economic Empowerment and Development Strategies
(NEEDS – at national level), (SEED- at state level) and ( LEEDS – at Local
Government level).
As Onugu (2005), put it the economic reform programme would aid the
creating and consolidation of existing small and medium scale enterprises
(SMEs) because of its focus on income generating opportunities for the people
(Onugu, 2005). Similarly, Omotola (2008), views the current effort of
government since 1999 towards revamping small and medium scale enterprises
(SMEs) as a sustainable process capable of building the prospect of small and
medium scale enterprises and a path to national recovery of the Nigeria railing
economy.
While landing government effort, the organized private sector is also
making a vital contribution in this direction. As Onugu (2005), observed the
67
capital market driven by the Nigeria Stock Exchange (NSE) have not only been
expanding its facilities, but also for cost effectiveness for small and medium
scale enterprises (SMEs to access funds from the market. In 2005, during the
commissioning of small and medium scale enterprises development agency of
Nigeria (SMEDAN), the former president of Nigeria, Olusegun Obasanjo urged
the Central Bank of Nigeria (CBN) to realize the objective of small and medium
scale enterprise equity investment scheme (SMIEIS) which is expected to
complement the development effort of financial institution in terms of loan
assessment on a short and long-term basis for investment purposes. The
current thrusts of the establishment SMESAN give some measure of optimism
as it portrays government serious engagement and cultivation of small and
medium scale enterprises. Currently the agency has completed a nation-wide
survey on small and medium scale enterprises (SMEs) as basis of articulating
ideas for micro, small and medium scale enterprises policy thrust. This policy
thrust would aid in facilitating improvement and capacity building programme,
support service and intervention for the small and medium scale enterprises
(SMEs) in Nigeria.
At the international front, the globalization and current economic
reforms which has liberalization, commercialization and privatization has its
main component has also open up vista for the small and medium scale
enterprises (SMEs) and entrepreneurs. The liberalization of trade through world
trade agreement has open-up opportunity to small and medium scale
enterprises (SMEs) to access international market and the African growth
68
opportunity act which offer incentives to exporter from African Countries to the
United State of America (Onugu, 2005, Omotola, 2008). This international
effort is further enhanced by Tony Blair Commission for Africa. In February
2005, the President of the Institutes of Directors Mrs. Benedicta Molokwu
confined that the Tony Blair commission for Africa is to assists small and
medium scale enterprises (SMEs) in Nigeria by creating access to loan and on
lending through banks. In the same direction, the government through
SMEDAN has also called the G8 to assist in providing an enabling environment
for small business to thrive in Nigeria. In a paper titled Developing Africa’s
small and medium scale enterprises (SME) potential. “How G8 can do more to
help Africa organized by the Africa business roundtable and Tony Blair
Commission for Africa in Lagos”.
According to Mrs. Modupe Adelaja the Director of SMEDAN she sought
support from the G8 to assist the effort of the stakeholder to streamline and
simplify the procedure for business registration and taxation at the three tiers
of government adding that this would allow small and medium scale
enterprises (SMEs) to move from informal to formal level.
There is no doubt that, if the current economic reform programme in
Nigeria can be sustained, the capacity of small and medium scale enterprises
(SMEs) would be enhanced and improved. This would no doubt have a positive
effect for employment generations, wealth creation, and poverty alleviation etc.
69
Above all, it would set Nigeria economy on the path to recovery, promote
economic growth and national development.
2.4.3 The Role/Importance of Small and Medium Scale Enterprises (SMEs)
to the Nigeria Economy
In developing country like Nigeria, the importance of small and medium
scale enterprises (SMEs) in the process of social economic development cannot
be overlooked. The small and medium scale enterprises (SMEs) are very
important to the economy in the sense that large percentage of their production
inputs are sourced locality thus, reducing the pressure on the limited foreign
exchange earnings, helping to eliminate some of the deficit in the balance of
payment.
Ikherehon (2004), enumerates the roles of small and medium scale
enterprises (SMEs) as summarized below:
• Small and medium scale enterprises (SMEs) constitute the very basis of
the national economy.
• Developing of local technology.
• Provide an effective means of stimulating indigenous entrepreneurship.
• Mobilization and utilization of domestic savings.
• Greater employment creation per unit of capital employment.
• Ensure the structural balance in terms of large and small industry
sectors as well as rural urban areas.
70
• Ensure the supply of high quality parts and components and
intermediate products thereby strengthening the international
competiveness of manufacturer’s goods.
• Stimulate technological development and innovations, produce
specialized item in small quality to meet current and diverse demands.
• Effective in subcontracting with large enterprises.
• Increase efficiency by reducing cost and improving flexibility.
• Capacity to expand export possibly and substitute import effectively.
In addition to above, Nwoye (2005), on the importance of small and
medium scale enterprises (SMEs), stressed that “it is now realized that the
large scale enterprises have not played the dynamic role they are supposed to
play in the rapid growth and development of the economy”. This role includes
substantial contribution of the sector to the economic development of a nation
in the form of improved GDP, employment generation, increasing local value
added, technological development among others.
However, the importance of small and medium scale enterprises (SMEs)
in the development of the country has been summarized in Nigeria third
national development plan 1975-1980 as the generation of employment
opportunities, stimulation of indigenous entrepreneurship, facilitation of
effective mobilization of local resources including capital and skill as well as
reduction in regional disparities (Rahanaty, 2009).
71
Summary of Review Literature
Highpoints
The role of small and medium scale enterprises in the national economy
cannot be underestimated. However, the importance of small and medium
scale enterprises (SMEs) in the development of the country has been
summarized in Nigeria as the generation of employment opportunity,
stimulation of indigenous entrepreneurship, facilitation of effective mobilization
of local resources including capital and skill as well as reduction in regional
disparities.
Unfortunately, small and medium scale enterprises have not played the
significant role they are expected to play in Nigeria economic growth and
development. Small and medium scale enterprises in Nigeria have a long way to
go for the sector to be productive enough and play the crucial role it is expected
to be in relation to contributing to the growth and development of the economy
of Nigeria. The challenges and problems of the small and medium scale
enterprises in Nigeria are hydra-headed and hence can only be effectively
tackled by a multi-dimensional and concerted approach by all stakeholders i.e.
the government (Federal, State and Local) and other agencies and parastatals,
banks, regulatory authorities as well as small and medium scale enterprises
(owner and management), the employees and other donor agencies. It has been
summerised that the main causative factor as to why Nigerian small and
medium scale enterprises are performing below expectation as to having a
72
relationship to our environment. This includes our culture, government, lack-
luster approach to government policy enunciation and poor implementation
among others.
Gaps in Reviewed Literature
This study seeks to investigate small and medium scale enterprises to
come up with a set of potential determinates that affect the adoption of small
and medium scale enterprises and set of potential supporting activities to
influence economic development in Nigeria. Many authors have concentrated in
giving out solutions to the problems of small and medium scale enterprises,
but have also neglected some vital solutions to the problems in which the
researcher tends to disclose with the believe that it will close the gaps and will
also contribute to the effectiveness and efficiency of the small and medium
scale enterprises in Nigeria.
These solutions include:
� Government should ensure that there will be no improper
implementation of its policies towards small and medium scale
enterprises and should not in the area of incentive and infrastructural
development neglect business activities to facilitate small and medium
scale enterprises.
� Government should also adequately support small and medium scale
enterprises financially, to avoid lack of capital, perhaps by creating
73
lending in institutions to enhance the capacity of small and medium
scale enterprises.
� Small and medium scale enterprises should ensure that they resolve
their internal problems which hinder the success of the small and
medium scale enterprises. For instance, they should ensure that there
are effective management practices or expertise, effective accounting
standards, adequate manpower and avoid financial indiscipline and
corruption in order to boost the performance of the small and medium
scale enterprises in Nigeria.
74
REFERENCES
Alas an, A.B. and Yakubu N.A (2011), Entrepreneurship Studies: Theories and Practice of Entrepreneurship Development; Insurance and Enterprise in Nigeria, Benin, Gompia Press, Revised Edition.
Abereijo, I.O. and Fayomi, A. (2005), ‘Innovative Approach small and medium scale enterprises financing in Nigeria’: A review of small and medium scale enterprises equity investment scheme (SMIEIS), Ile-Ife: Centre for industrial Research & Development, OAU; Journal of Social Science vol.11(3).
Aigboduwa, J.E and Oisamoje, M.D. (2013), ‘Promoting small and medium scale enterprises in the Nigerian oil and gas industry: Nigerian Westenister Dredging and Marine Ltd’. European Scientific Journal January 2013 edition vol.9.
Aladekomo, F. (2003), The small and medium scale enterprises (SMEs) landscape: Environmental Government Policies programmes and Institutional Support. A paper delivered at the two days workshop on “Strategies for operation aliasing small and medium Industries Equity Investment Scheme (SMIEIS) in Nigeria”, held at WEMA Bank training School: Lagos 23-24 August.
Alawe, T. (2004), Entrepreneurship process and Small Business Management: Industrial Science Centre, Owoyenic House, Abeokuta Road Sango Otta Ogun state, Nigeria.
Arriyo, D. (2007), Small Firm are the backbone of Nigeria Economy: Africa Economic Analysis, Africa Business Information Service, Bridgnorth United Kingdom.
Ayifagari, M.T. Beck and Demirguc-Kunt, A. (2003), Small and medium scale enterprises across the Globe: A New Database; World Bank, Development Research Group. Working paper 3127 Washington DC.
Balunywa, W. (2010), What are Small Scale Enterprises? Entrepreneurship and Small Business Enterprise: Makere University Business School at http://evancarmicheal.com/Africa-Account/1639/40-what are small enterprises-entrepreneurship-and-small-business-enterprises-growth-i.
banmach, C.M. (2008), Basic Small Business management: Obafemi Awolowo University Press Ltd.
Birley, S. (2004), Start-up in Small Business and Entrepreneurship, eds. Burns, P. and Dewhurst, J. Macmilan.
75
CBN (2004), Progress Report on SMIEIS:, Accessible from http://www.cenbank.org.
Curran, J. and Blackburn, R. (2007), Paths of Enterprise Future of the Small Business: London, Rocitledge.
Ekpeyong, D. and Nyang, MO. (2002), Small and medium scale enterprises in Nigeria: Their Characteristics, problems and sources of Finance. African Economic research Consortium, Nairobi.
European Commission (2007), Enterprises and Industry: small and medium scale enterprise Definition:. Accessed at http://europa.eu.int/comm/enterprise/enterpriseplolicy/smedefinition/indexen.htm.
Feldman, U. (2009), ‘Small And Medium Scale Enterprises (SMEs) Key failure-Factor: A Comparison between United Kingdom’ and Nigeria, in Journal of Social Science 18-(3) 199-207, Kent, University of Kent.
Ihua, U.B. (2010), ‘Local Content Policy and small and medium scale enterprises (SMEs) Sector promotion: The Nigerian Oil Industry Experience’. International Journal of Business and Management. Vol.5, No.5, May 2010.
Ikharehon, J.I. (2004), An Introduction to Small Scale Business management, Benin, Best Printers Benin City.
Ireghah, M.M. (2011), Entrepreneurship Studies: Concepts and Practice: The Requirement for starting A Business Enterprise, Benin, Gompia Press, Revised Edition.
Ireghah, M.M. (2009), ‘Analysis of the impact of Macro Economic Policies on Entrepreneurial Development’ in Nigeria (Accepted for Publication) Auchi Journal of Entrepreneurial Development.
Iromala, R.U. (2006), Small and Medium Scale Business Development, Lagos; Cedar Trust Venture Ltd.
Izedomi, (2006), ‘Sourcing Finance for Start-up and Existing Business in Nigeria’: Prospects and Challenges. ICAN Student Journal, vol.10, No.2.
Joshua, M. (2008), Small and Medium Scale Business as Instrument of Economic Growth in Nigeria. Lagos, Kinston Publishers.
Kozak, R. (2007), Small and Medium Forest Enterprises: Instrument of Change in the Developing World. Vancouver, British Colombia, University of British Columbia.
76
Macqueen, D. (2006), Governance Towards responsible Forest Business. Guidance on Different Types of Forest Business and the Ethics to which they gravitate. International Institute for Environment and Development (IIED): London, United Kingdom.
Macqueen, D. (2004), Association of Small and Medium Forest Enterprises: An Initial Review of Issues for Local Livelihood and Sustainability. International Institute for Environment and Development (IIED):, Briefing paper, London, United Kingdom.
National Bureau of Statistic Report (2009), Federal Republic of Nigeria.
National Development Plan (1970-1974), Federal Republic of Nigeria.
Njoku, A. (2002), as cited in www.valuefronteraonline/publication.jsp?typeaponeindustrialeconomics-smes.
NOGIC, Act (2012), Nigerian Oil and Gas Industry Content Development Act. Abuja 22 April 2012.
Obo, A.W. (2002), Purpose for Small Scale Industries Development, Vol.xvialo.2.
Odedokun, M.O. (2004), Effectiveness of Selective Credit Policies Alternative Framework of Evaluation and World Development vol.16 pp.120-122.
Ogechukwu, A. (2006), The Role of Small Scale Industry in National Development in Nigeria:. Texas Corpus Christi, Texas, United State, November 1-3 2006.
Ogujiuba, K.K., Ohuche, F.K., and Adenuga, A.O. (2004), Credit Availability to Small And Medium Scale Enterprises in Nigeria, The importance of New Capital Base for Banks-Background and Issues:. Working Paper Accessed in December 2010 in www.valuefronteraonline.com/publication.jsp?type=aponeindutrialeconomics-smes.
Olarewaju, (2001) as cited in www.valuefronteraonline/publication.jsp?typeaponeindustrialeconomics-smes.
Omotola, D. (2008), Small Scale Enterprises, Economic Reform and National Development in Nigeria:. Logos Adejo Publishing.
Onugu, B., (2005), Small And Medium Scale Enterprises in Nigeria (SMEs) problem and prospect: Being a dissertation submitted to St. Clement University in partial fulfillment of he Award of the Degree of Doctor of Philosophy in Management.
77
Timmons, J.A., (2003), New Venture Creation: Entrepreneurship for 21st Century, Burr Ridge, IL, USA, Irwin Press.
UNCTAD (2004), Providing sustainable financial and Non-Financial Services for Small And Medium Scale Enterprise Development, Geneva: United Nations.
World Bank, “Review on Small Business Activities”.
World Bank, (2001), World Development Report. Washington, Oxford University Press for the World Bank.
World Bank, (1989), Study on “Small and Medium Scale Enterprises”.
78
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
According to, Onodugo (2010:65), it is in this section that the researcher
stamps his scientific status on the process. Consequently, it must be done in
such a way that doubting “Thomas” can repeat the process in an attempt to
verify the findings. To students, this section is very critical if their theses and
dissertations will meet the required standard and acceptability among their
numerous audiences, including their supervisors.
3.2 Research Design
Design simply means the plan or blue-print on how to go about data
collection and analysis, all aimed at providing solutions to the problem under
investigation. Broadly speaking, it entails the specification of procedures that
would be deployed in the field work (Chukwuemeka, 2002). The specific
purpose of research design is to obtain data that will enable the researcher to
test the pre-set hypotheses or answer research questions of the study (Asika,
1991). In particular, research design seeks to answer the questions about the
what, where, when, how and by what means data would be generated to
provide the solutions under investigation (Eboh, 2009).
Owing to the nature and requirement of the topic under study which
bothers and examining current opinion on this note, samples were drawn from
the different population representing the interest groups relevant to the study.
79
The researcher used a carefully selected sample from population for intensive
examination and classification were such a manner as to determine findings
from the sample population.
3.3 Area of Study
This is often erroneously used interchangeably with the scope of the
study. There is world of difference between the two. Area of study is simply
interested in the geographical area coverage of the research effort (Onodugo,
2010). As regards this topic, the study was carried out within Enugu
Metropolis and cannot therefore, be said to wholly or reasonably represent the
views of all parties mentioned in this study.
3.4 Sources of Data Collection
Onodugo (2010) simply defines data as facts and figures. That it is the
major pillar of research work. It is what differentiates research from guess
work, imagination, myths and other sources of knowledge. Data can be
obtained from two major sources, viz: primary and secondary. Both are
extensively used in this work, for the purpose of drawing an empirical
conclusion or analysis of the study so as to come up with fairly objective
findings.
3.4.1 Primary Source of Data
These are original data collected basically for the purposes of the
problem under investigation. According to Uzoagulu (1998), it contains the
80
data originally assembled by the person who actually observed the
phenomenon. Primary data mainly come from direct observation of event,
manipulation of variables, contrivance of research situations including
performance experiments and responses to questionnaire. Therefore, in this
study data were obtained through distributed questionnaires designed for this
purpose, in addition, oral interview were conducted briefly to supplement the
information derived from the questionnaire. This is aimed at reducing the
rigidity associated with the designed questionnaire and also to give the
respondents the opportunity of supplying those informations that the
structured questionnaire did not accommodate.
3.4.2 Secondary Source of Data
These comprise sources of data which, though needed for the current
study, were collected primarily for another study. Data from these sources were
not original to the researcher; they were assembled by another person. In this
study secondary data collected include: University Library, textbooks, journals,
newspapers, magazines, encyclopedias, other people’s project reports, websites
in the internet (electronic sources).
3.5 Instruments for Data Collection
The generic tools for data collection are questionnaires, interviews and
documentary or publications. A brief description of each shall be made
hereunder as follows:
81
(a) Questionnaire: A Questionnaire is a list of question designed to elicit
information from specified target respondents. This, they do, by filling in
answers in spaces provided for that purpose. This is the most widely
used tool especially for surveys covering a wide range of sample
population. This is a set of questions relating to the aims and objectives
of the research study to which the respondents are required to answer by
writing in their responses. It is usually used when factual information is
desired about the past, present and anticipated event and also the
prevailing conditions and practices.
Questionnaire were designed into dichotomized multiple choice
questions which give the respondent the opportunity which give “yes”,
“No”, undecided or choosing from a range of answers, spaces were the
topic and also in open ended question (Nwadozie and Akuezuilo,
2003:118). Questionnaire channeled to owners of small and medium
enterprises in Enugu, lending institutions like banks, oil and gas sector,
some government bodies, investors and some individual bodies.
(b) Oral interviews: This is a question and answer situation between the
researcher and the respondent with a view to eliciting relevant data for
the study being carried out. Interviews could be done between the
interviewer and the interviewee on one-on-one basis. It could also take
place between the interviewer and a group of respondents. In this study,
the structural interview was prepared for he SME owners, SME
82
operators, investors and all the SME interest group who are directly
involved in the growth of SME.
(c) Documentary Research: This involves the location and examination of
available data relevance to the research study. The research employed
this method in locating information from libraries, journals lecture notes,
and some were sources from publication in the internet.
3.6 Determination of Population Size
One simple way to capture the concept of population that all can relate
to, is the concept of population from the perspective of demography. In this
sense, population comprises all the elements of particular group.
The population used for this study is based on the number of registered
small and medium scale enterprises in Enugu metropolis. However, there are
828 registered small and medium scale enterprises (SMEs) in Enugu
metropolis.
3.7 Sampling Techniques and Sample Size Determination
The sample for this study is based on the study of the registered small
and medium scale enterprises (SMEs) in Enugu state. The researcher used
random sampling techniques. The questionnaire will be used as the major
instrument of sample size determination. The sample size frame shall consist of
the number of small and medium scale enterprises in Enugu sate.
83
The sample size is determined as follows:
Using Yaro’s Yamane formula
n = N
1 + N(e)2
Where n = Sample size
N = Population (No of SMEs in Enugu State)
e = Margin of error
For instance, with a margin of error of 5% and a population of 828 SMEs in
Enugu State, sample size can be determined.
Where n = ?
N = 828
e = 5%
n = 828 1 + 828(0.05)2
828 1 + 2.07
n = 828 3.07 ∴ n = 269.70684 n ≅ 270
84
3.8 Method of Data Analysis
The data collected from interview and questionnaires were presented in
tables. The data collected were analyzed by using percentage and inferential
statistics. The chi-square (x2) distributed was the statistical tool used in testing
the acceptability or otherwise of the hypothesis posed for this study. The
calculated values were compared with the tabulated values. The null
hypothesis (Ho) is accepted, when the calculated value is less than the
tabulated value and equally the alternative (Hi) is accepted, on the rejection of
the null hypothesis, that is when the calculated chi-square value is greater
than the tabulated value. The calculated values used with the following
formula.
X� = ∑�����
��
Where x2 = Chi-Square
OF = Observed Frequency
EF = Expected Frequency
Σ = The Sum
Expected value of classes of response level of significance ( ) of freedom, (df) = (r-1) (c -1)
Where df = degree of freedom
r = number of rows
c = number of columns
85
REFERENCES
Asika, N. (1991), Research Methodology in the Behavioural Science. Lagos: Longman Nigeria PLC.
[
Chukwuemeka, E.E.O. (2002), Research Methods and Thesis: A multi-Disciplinary Approach. Enugu: Hope Rising Venture, St. Luke Shopping Complex Obiagu.
Eboh, E.C. (2009), Social and Economic Research Principles and Methods. Enugu: African Institute for Applied Economics.
Nwadozie, B.M. and Akuezuilo, E.O. (2003), Research methodology and Statistics, Awka: Christon printing and Publishing Company.
Onodugo, V.A. (2010), Social Science research principle, Method and Applications. Enugu: El’Demark Publishing Company.
Uzoagulu, A.E. (1998), Practical Guide to Writing Research Project Reports in Tertiary Institutions. Enugu: John Jacob’s Classic Publishers.
86
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
The relevance and usefulness of data presentation and analysis in the
research work cannot be over emphasized. The objective of this chapter is to
present and analyze the data collected during the research survey and to show
the findings resulting from the data collected. The data will be tabulated and
the relationship/among items in the table will be tested in order to prove their
validity or otherwise. It should be noted however, that questions related to the
testing of the hypothesis will be analyzed.
4.1 Data Presentation, Interpretation and Analyses
This chapter supplies analysis of data collected through the questionnaires
distributed and retrieved in order to ascertain the problems and prospect of
small and medium scale enterprises in Nigeria economy. The responses were
collected and chi-square method adopted in analyzing the responses and
testing the hypothesis.
A total of two hundred and seventy (270) copies of the questionnaires were
administered out of which two hundred and forty (240) copies representing
(89%) of the questionnaire were properly completed and retrieved while thirty
(30) copies representing 11% were not retrieved.
87
Table 4.1: Analysis of Response Rate
S/N Administered questionnaire Frequency Percentage
1 Returned 240 89%
2. Unreturned 30 11%
Total 270 100%
Source: Field Survey, 2014
The rest of the chapter provides the result of socio economic questions posed to
the respondents and discussion of data analysis of responses from the two
hundred and fourty (240) responses that were properly filled, completed and
retrieved through the research instruments adopted.
4.2 Respondents characteristics and classifications
Part A:
Analysis of Respondents’ Bio-Data
The bio-data analyses of the two hundred and forty (240) properly completed
questionnaires were shown below:
Table 4.2: Sex
Feature Frequency Percentage
Male 144 60
Female 96 40
Total 240 100
Source: Field Survey, 2014
88
Table 4.2 shows that one hundred and forty four (144) respondents
representing 60% of the sample size were males while ninety-six (96)
respondents representing 40% of the sample size were females.
Thus, majority of the respondents were males.
Table 4.3: Age
Feature Frequency Percentage
Below 25 years - -
25 – 35 years 20 17
36 -45 years 77 64
Above 45 years 23 19
Total 240 100
Source: Field Survey, 2014
Table 4.3 shows that no respondent representing no percentage of the sample
size were of the age group below 25 years, 20 respondents representing 17% of
the sample size were of the age group 25-35 years, seventy seven (77)
respondents representing 64% of the sample size were of the age group 36-
45years while option above 45 years attracted 23 respondents representing
19%.
Thus, majority of the respondents were of the age group25-35 years.
89
Table 4.4: Marital Status
Feature Frequency Percentage
Marital Status
Single 100 42
Married 140 58
Divorced/Separated - -
Widow/Widower - -
Total 240 100
Source: Field Survey, 2014
Table 4.4 shows that hundred (100) respondents representing 42% of the
sample size were singles, one hundred and forty (140) respondents
representing 58% of the sample size were married while other options made
available in the question attracted no respondent.
Thus, majority of the respondents were singles.
Table 4.5: Educational Background
Feature Frequency Percentage
Educational
Background
WAEC/NECO 20 8
ND/NCE 20 8
HND/B.Sc 68 28
MBA/M.Sc 84 36
Professional 48 20
Total 240 100
Sources: Field Survey, 2014
90
Table 4.5 shows that twenty (20) respondents representing 8% of the sample
size were secondary school leavers, twenty (20) respondents representing 8% of
the sample size were ND/NCE holders, sixty-eight (68) respondents
representing 64% of the sample size were HND/B.Sc holders, eighty four (84)
respondents representing 36% of the sample size were MBA/M.Sc holders
while another twenty-four (24) respondents representing 20% of the sample
size were professionals. Thus, majority of the respondents were HND/B.Sc
holders.
Table 4.6: Years in Service
Feature Frequency Percentage
Less than 5 years 32 13
5 – 10 years 192 79
11 – 15 years 12 5
16 – 20 years 6 3
Above 20 years - -
Total 240 100
Sources: Field Survey, 2014
Table 4.6 shows that thirty-two (32) respondents representing 13% of the
sample size have been on the job for less than five years, one hundred and
ninety two (192) respondents representing 79% of the sample size have been on
the job for a period of 5-10 years, twelve (12) respondents representing 5% of
the sample size have been on the job for a period of 11-15 years, six (6)
respondent representing 3% of the sample size has been on the job for a period
91
of 16-20 years while option 20 years and above attracted no respondent. Thus,
majority of the respondents have been on the job for less than five years.
4.3 Presentation and Analysis of data according to research statement
Determining the impact of small and medium scale enterprises on economic
generation, the responses were determined by requesting the respondents to
rate the output of their responses on a scale ranging from strongly agree to
strongly disagree coded 5 to 1 respectively.
Part B:
Analyses of Responses to Research Questions
TABLE 4.7: Accelerated economic growth and development is a sine qaua non for improving the quality of life.
Description Frequency Percentage
Strongly Agree 72 30
Agree 72 30
Undecided 44 18
Disagree 26 11
Strongly Disagree 26 11
Total 240 100
Sources: Field Survey, 2014
92
Table 4.7 shows that 72 respondents representing 30% of the sample strongly
agreed, 72 respondents representing 30% of the sample agreed, 44 respondents
representing 18% of the sample undecided, 26 respondents representing 11%
of the sample while another 26 respondents representing 11% of the sample
strongly disagreed with the statement. Thus, a majority of the respondent
agreed with the statement.
TABLE 4.8: government policies adequately support to improve and enhance the capacity of small and medium scale enterprises in Nigeria
Description Frequency Percentage
Strongly Agree 84 35
Agree 86 36
Undecided 20 8
Disagree 24 10
Strongly Disagree 26 11
Total 240 100
Sources: Field Survey, 2014
Table 4.8 shows that 84 respondents representing 35% of the sample strongly
agreed, 86 respondents representing 36% agreed, 20 respondents representing
8% of the sample undecided, 24 respondents representing 10% of the sample
size disagreed while 26 respondents representing 11% of the sample strongly
disagreed with the statement. Thus, majority of the respondent agreed with the
statement.
93
TABLE 4.9: Small and medium scale enterprises contribute to global economic growth and development
Description Frequency Percentage
Strongly Agree 58 24
Agree 60 25
Undecided 108 45
Disagree 6 3
Strongly Disagree 8 3
Total 240 100
Sources: Field Survey, 2014
Table 4.9 shows that 58 respondents representing 24% of the sample strongly
agreed, 60 respondents representing 25% agreed, 108 respondents
representing 46% of the sample undecided, 6 respondents representing 3% of
the sample size disagreed while 8 respondents representing 3% of the sample
strongly disagreed with the statement. Thus, majority of the respondent were
undecided about the question.
TABLE 4.l0: frequent changes and sometimes conflicting government monetary policies have in any way tend to hurt small and medium scale enterprises in Nigeria
Description Frequency Percentage
Strongly Agree 50 21
Agree 54 23
Undecided 46 19
Disagree 44 18
Strongly Disagree 46 19
Total 240 100
Sources: Field Survey, 2014
94
Table 4.10 shows that 50 respondents representing 21% of the sample strongly
agreed, 54 respondents representing 23% agreed, 46 respondents representing
19% of the sample undecided, 44 respondents representing 18% of the sample
size disagreed while 46 respondents representing 19% .of the sample strongly
disagreed with the statement. Thus, a majority of the respondent agreed with
the statement.
TABLE 4.11: Government neglect small and medium scale enterprises in the area of incentive and infrastructural development to facilitate business entity
Description Frequency Percentage
Strongly Agree 88 37
Agree 82 34
Undecided 50 21
Disagree 10 4
Strongly Disagree 10 4
Total 240 100
Sources: Field Survey, 2014
Table 4.11 shows that 88 respondents representing 37% of the sample strongly
agreed, 82 respondents representing 34% agreed, 50 respondents representing
21% of the sample undecided, 10 respondents representing 4% of the sample
size disagreed while 10 respondents representing 4% of the sample strongly
disagreed with the statement. Thus, majority of the respondent strongly agreed
with the statement.
95
TABLE 4.12: There is significant financial support given to small and medium scale enterprises in Nigeria by government and other individual bodies in order to thrive.
Description Frequency Percentage
Strongly Agree 84 35
Agree 86 36
Undecided 20 8
Disagree 24 10
Strongly Disagree 26 11
Total 240 100
Sources: Field Survey, 2014
Table 4.12 shows that 84 respondents representing 35% of the sample strongly
agreed, 86 respondents representing 36% agreed, 20 respondents representing
8% of the sample undecided, 24 respondents representing 10% of the sample
size disagreed while 26 respondents representing 11% of the sample strongly
disagreed with the statement. Thus, majority of the respondents agreed with
the statement.
TABLE 4.l3: Entrepreneurship reduces poverty and improve standard of living
Description Frequency Percentage
Strongly Agree 94 39
Agree 44 18
Undecided 28 12
Disagree 58 24
Strongly Disagree 16 7
Total 240 100
Sources: Field Survey, 2014
96
Table 4.13 shows that 94 respondents representing 39% of the sample strongly
agreed, 44 respondents representing 18% agreed, 28 respondents representing
12% of the sample undecided, 58 respondents representing 24% of the sample
size disagreed while 16 respondents representing 7% of the sample strongly
disagreed with the statement. Thus, majority of the respondents agreed with
the statement.
TABLE 4.l4: Government established various support institutions and reliefs measures aimed at improving of SMEs
Description Frequency Percentage
Strongly Agree 84 35
Agree 86 36
Undecided 20 8
Disagree 24 10
Strongly Disagree 26 11
Total 240 100
Sources: Field Survey, 2014
Table 4.14 shows that 84 respondents representing 35% of the sample strongly
agreed, 86 respondents representing 36% agreed, 20 respondents representing
8% of the sample undecided, 24 respondents representing 10% of the sample
size disagreed while 26 respondents representing 11% of the sample strongly
disagreed with the statement. Thus, majority of the respondents agreed with
the statement.
97
TABLE 4.l5: Small and medium scale enterprises have immensely contributed to the economic growth in Nigeria
Description Frequency Percentage
Strongly Agree 80 33
Agree 72 30
Undecided 28 12
Disagree 32 13
Strongly Disagree 28 12
Total 240 100
Sources: Field Survey, 2014
Table 4.15 shows that 80 respondents representing 33% of the sample strongly
agreed, 72 respondents representing 30% of the sample size agreed, 28
respondents representing 12% undecided, 32 respondents representing 13%
disagreed while 28 respondents representing 12% of the sample strongly
disagreed. Thus, a majority of the respondent strongly agreed with the
statement product brand building and organization profitability.
TABLE 4.l6: Small and medium scale enterprises provided effective means of stimulating indigenous entrepreneurship
Description Frequency Percentage
Strongly Agree 52 22
Agree 48 20
Undecided 46 19
Disagree 44 18
Strongly Disagree 50 21
Total 240 100
Sources: Field Survey, 2014
98
Table 4.16 shows that 52 respondents representing 22% of the sample strongly
agreed, 48 respondents representing 20% agreed, 46 respondents representing
19%, undecided, 44 respondents representing 18% disagreed while 50
respondents representing 21% of the sample size strongly disagreed with the
statement. Thus a majority of respondent agreed with the statement.
Table 4.17: Entrepreneurship can promote industrial and technological growth
Description Frequency Percentage
Strongly Agree 84 35
Agree 86 36
Undecided 20 8
Disagree 24 10
Strongly Disagree 26 11
Total 240 100
Sources: Field Survey, 2014
Table 4.17 shows that 84 respondents representing 35% of the sample strongly
agreed, 86 respondents representing 36% agreed, 20 respondents representing
8% of the sample undecided, 24 respondents representing 10% of the sample
size disagreed while 26 respondents representing of the sample strongly
disagreed with the statement. Thus, majority of the respondents agreed with
the statement.
99
Table 4.18: The role played by government towards promotion and development of small and medium scale enterprises in Nigeria is highly effective.
Description Frequency Percentage
Strongly Agree 72 30
Agree 64 27
Undecided 64 27
Disagree 30 12
Strongly Disagree 10 4
Total 240 100
Sources: Field Survey, 2014
Table 4.18 shows that 72 respondents representing 30% of the sample strongly
agreed, 64 respondents representing 27% agreed, 64 respondents representing
27% undecided, 30 respondents representing 12% of the sample disagreed
while 10 respondents representing 4% of the sample strongly disagreed with
the statement. Thus, a majority of the respondents strongly agreed with the
statement.
Table 4.19 Unemployment is detrimental to economic growth and development.
Description Frequency Percentage
Strongly Agree 58 24
Agree 60 25
Undecided 108 46
Disagree 6 2
Strongly Disagree 8 3
Total 240 100
Sources: Field Survey, 2014
100
Table 4.19 shows that 58 respondents representing 24% of the sample strongly
agreed, 60 respondents representing 25% agreed, 108 respondents
representing 46% of the sample undecided, 6 respondents representing 2% of
the sample size disagreed while 8 respondents representing 3% of the sample
strongly disagreed with the statement. Thus, majority of the respondent were
undecided about the question.
Table 4.20 Poor management practices constrain the success of small and medium scale enterprises
Description Frequency Percentage
Strongly Agree 50 21
Agree 54 23
Undecided 46 19
Disagree 44 18
Strongly Disagree 46 19
Total 240 100
Sources: Field Survey, 2014
Table 4.20 shows that 50 respondents representing 21% of the sample strongly
agreed, 54 respondents representing 23% agreed, 46 respondents representing
19% of the sample undecided, 44 respondents representing 18% of the sample
size disagreed while 46 respondents representing 19% of the sample strongly
disagreed with the statement. Thus, a majority of the respondent agreed with
the statement.
101
Table 4.21 Financial problems, poor management practices or expertise, poor accounting system, lack of materials, government unfavourable fiscal policy and lack of infrastructural facilities are the major constraint to the development of small and medium scale enterprises in Nigeria
Description Frequency Percentage
Strongly Agree 86 36
Agree 72 30
Undecided 46 19
Disagree 28 12
Strongly Disagree 8 3
Total 240 100
Sources: Field Survey, 2014
Table 4.21 shows that 86 respondents representing 36% of the sample strongly
agreed, 72 respondents representing 30% agreed, 46 respondents representing
19% undecided, 28 respondents representing 12% disagreed while 8
respondents representing 3% of the sample size strongly disagreed with the
statement. Thus a majority of respondent agreed with the statement.
Table 4.22: Lack of infrastructural facilities hinder the performance of small and medium scale enterprises
Description Frequency Percentage
Strongly Agree 84 35
Agree 86 36
Undecided 20 8
Disagree 24 10
Strongly Disagree 26 11
Total 240 100
Sources: Field Survey, 2014
102
Table 4.22 shows that 84 respondents representing 35% of the sample
strongly agreed, 86 respondents representing 36% agreed, 20 respondents
representing 8% of the sample undecided, 24 respondents representing 10% of
the sample size disagreed while 26 respondents representing 11% of the
sample strongly disagreed with the statement. Thus, majority of the
respondents agreed with the statement.
4.4 Presentation and analysis of data according to research hypothesis
This subsection of this research report restated the hypothesis formulated and
tested it so as to determine the reliability and dependability of the thesis and
this was done using chi-square formula.
Part C:
Testing of Hypotheses
Hypothesis I
H0: The role played by government towards promotion and development of
small and medium scale enterprises in Nigeria is not highly effective.
H1: The role played by government towards promotion and development of
small and medium scale enterprises in Nigeria is highly effective.
To test this hypothesis, statement used for table 18 was used.
103
The role played by government towards promotion and development of
small and medium scale enterprises in Nigeria is highly effective.
Contingency Table
CELL OF EF OF-EF (OF-EF)2 (OF-EF)2
EF
C1 86 48 38 1444 30.08
C2 72 48 24 576 12.00
C3 46 48 -2 4 0.08
C4 28 48 -20 400 8.33
C5 8 48 -40 1600 33.33
TOTAL 240 X2 = 83.82
� calculate� = 83.82
� tab value at 5% level of signi icance
∝ = 5% = 0.05
df = $r − 1($c − 1(
where r = row total C = column total
r = 5, c = 2
df = $5 − 1($2 − 1(
df = 4 x 1 = 4
� tab at 5% level of signi icance df 4 = 9.49
104
INTERPRETATION
From the analysis above, � calculated value is 83.82 while � tabulated 12345 67 9.49.
This shows that � calculated of 83.82 is greater than � tabulated of 9.49 i.e
� calculated (83.82) > � tabulated of 9.49.
Therefore, we accept H1 which states that the role played by government
towards promotion and development of small and medium scale enterprises in
Nigeria is highly effective.
Hypothesis II
Ho: Small and medium scale enterprises have not contributed to the
economic growth in Nigeria.
H1: Small and medium scale enterprises have immensely contributed to the
economic growth in Nigeria.
To test this hypothesis, statement used for table 15 was used.
105
Small and medium scale enterprises have immensely contributed to the economic growth in Nigeria
Contingency Table
CELL OF EF OF-EF (OF-EF)2 (OF-EF)2
EF
C1 72 48 24 576 12.00
C2 64 48 16 256 5.33
C3 64 48 16 256 5.33
C4 30 48 -18 324 6.75
C5 10 48 -38 1444 30.08
TOTAL 240 X2 = 59.49
� calculate� = 59.49
� tab value at 5% level of signi icance
∝ = 5% = 0.05
df = $r − 1($c − 1(
where r = row total C = column total
r = 5, c = 2
df = $5 − 1($2 − 1(
df = 4 x 1 = 4
� tab at 5% level of signi icance df 4 = 9.49
106
INTERPRETATION
From the analysis above, � calculated value is 59.49 while � tabulated 12345 67 9.49.
This shows that � calculated of 59.49 is greater than � tabulated of 9.49 i.e
� calculated (59.49) > � tabulated of 9.49.
Therefore, we accept H1 which states that Small and medium scale enterprises
have immensely contributed to the economic growth in Nigeria.
Hypothesis III
Ho: Financial problems, poor management practices or expertise, poor
accounting system, lack of materials, government unfavourable fiscal
policy and lack of infrastructural facilities are not the major constraint to
the development of small and medium scale enterprises in Nigeria.
H1: Financial problems, poor management practices or expertise, poor
accounting system, lack of materials, government unfavourable fiscal
policy and lack of infrastructural facilities are the major constraint to the
development of small and medium scale enterprises in Nigeria.
To test this hypothesis, statement used for table 21 was used.
107
Financial problems, poor management practices or expertise, poor accounting system, lack of materials, government unfavourable fiscal policy and lack of infrastructural facilities are the major constraint to the development of small and medium scale enterprises in Nigeria.
Contingency Table
CELL OF EF OF-EF (OF-EF)2 (OF-EF)2
EF
C1 80 48 32 1024 21.33
C2 72 48 24 576 12.00
C3 28 48 -20 400 8.33
C4 32 48 -16 256 5.33
C5 28 48 -20 400 8.33
TOTAL 240 X2 = 55.32
� calculate� = 55.32
� tab value at 5% level of signi icance
∝ = 5% = 0.05
df = $r − 1($c − 1(
where r = row total C = column total
r = 5, c = 2
df = $5 − 1($2 − 1(
df = 4 x 1 = 4
� tab at 5% level of signi icance df 4 = 9.49
108
INTERPRETATION
From the analysis above, � calculated value is 55.32 while � tabulated 12345 67 9.49.
This shows that � calculated of 55.32 is greater than � tabulated of 9.49 i.e
� calculated (55.32) > � tabulated of 9.49.
Therefore, we accept H1 which states that
Financial problems, poor management practices or expertise, poor accounting system, lack of materials, government unfavourable fiscal policy and lack of infrastructural facilities are the major constraint to the development of small and medium scale enterprises in Nigeria.
Hypothesis IV
Ho: There is no significant financial support given to small and medium scale
enterprises in Nigeria by government and other individual bodies in order
to thrive.
H1: There is significant financial support given to small and medium scale
enterprises in Nigeria by government and other individual bodies in order
to thrive.
To test this hypothesis, statement used for table 12 was used.
109
There is significant financial support given to small and medium scale
enterprises in Nigeria by government and other individual bodies in order
to thrive.
Contingency Table
CELL OF EF OF-EF (OF-EF)2 (OF-EF)2
EF
C1 84 48 36 1296 27.00
C2 86 48 38 1444 30.08
C3 20 48 -28 784 16.33
C4 24 48 -24 576 12.00
C5 26 48 -22 484 10.08
TOTAL 240 X2 = 95.49
� calculate� = 95.49
� tab value at 5% level of signi icance
∝ = 5% = 0.05
df = $r − 1($c − 1(
where r = row total C = column total
r = 5, c = 2
df = $5 − 1($2 − 1(
df = 4 x 1 = 4
� tab at 5% level of signi icance df 4 = 9.49
110
INTERPRETATION
From the analysis above, � calculated value is 95.49 while � tabulated 12345 67 9.49.
This shows that � calculated of 95.49 is greater than � tabulated of 9.49 i.e
� calculated (95.49) > � tabulated of 9.49.
There is significant financial support given to small and medium scale
enterprises in Nigeria by government and other individual bodies in order to
thrive.
111
CHAPTER FIVE
FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings
On the analysis relating to the responses on the small and medium scale
enterprises (SMEs) in Nigeria: problems and prospect reveals that accelerated
economic growth and development is a sine qua non for improving the quality
of life.
However, the analysis showing responses on whether small and medium scale
enterprises contribute to global economic growth and development, reveals that
majority of respondents agreed on that.
Analyses of the research statement reveal that frequent changes and
sometimes conflicting government monetary policies have in any way tend to
hurt small and medium scale enterprises (SMEs) in Nigeria.
It discovers from the analysis that Government neglect small and medium scale
enterprises in the area of incentive and infrastructural development of facilitate
business entity as majority of respondent strongly agreed on that.
The analysis of the responses also discloses that government and other
individual bodies have given small and medium scale enterprises (SMEs) in
Nigeria financial support in order to thrive.
112
Analysis on the responses also reveals that entrepreneurship reduces poverty
and improve standard of living as majority strongly agreed on the statement.
From the findings and as indicated in the table 14, it shows that majority of the
respondents strongly agreed that government established various support
institutions and reliefs measures aimed at improving small and medium scale
enterprises (SMEs) in Nigeria.
On the analysis relating to the responses on the statement that small and
medium scale enterprises provided effective means of stimulating indigenous
entrepreneurship, it reveals that majority of respondents strongly agreed on the
statement.
Entrepreneurship can promote industrial and technological growth as revealed
from the analysis of responses.
It also shows that unemployment is detrimental to economic growth and
development as majority of respondents agreed on the statement.
Analysis of the research statement reveals that poor management practices
constrain the success of small and medium scale enterprises. It also discovers
from the analysis of responses that lack of infrastructural facilities hinder the
performance of small and medium scale enterprises (SMEs) in Nigeria.
Lastly, the hypotheses tested in the table 18 shows that majority of the
respondents strongly agreed that there is significant relationship existing
113
between government, promotion and development of small and medium scale
enterprises (SMEs) in Nigeria.
Table 15 indicates from the analysis of responses that small and medium scale
enterprises have immensely contributed to the economic growth in Nigeria.
Table 21, shows that there are confronting constraints to the development of
small and medium scale enterprises (SMEs) in Nigeria as the majority of
respondents strongly agreed on the statement.
While, table 12, also reveals that government and other bodies have given small
and medium scale enterprises (SMEs) in Nigeria financial support in order to
thrive.
5.2 Conclusion
This study has been an attempt to examine small and medium scale
enterprises (SMEs) in Nigeria: problems and prospect, having gone through the
whole length of data analysis, hypothesis, testing and discussions. The
following conclusions are hereby drawn that the role played by government
towards promotion and development of small and medium scale enterprises in
Nigeria is highly effective, in the sense that government supported small and
medium scale enterprises (SMEs) through favourable investment policies,
institutional and fiscal policy, protective business law and financial incentives
to encourage the national development and indigenization policy which small
and medium scale enterprises (SMEs) are very central to. Several micro
114
lending institutions were established to enhance the capacity and development
of small and medium scale enterprises and liberalization of the banking sector
to enhance the banking institutions for effective participation in the growth and
capacity building of small and medium scale enterprises in Nigeria.
That small and medium scale enterprise has immensely contributed to
the economic growth and development in Nigeria, in the sense that they have
been recognized as indispensable components of national development in both
developed and developing economies. This sector of the economy acknowledged
to contribute substantially in enhancing employment creation, poverty
alleviation, equitable distribution of resources, income distribution, technical
and technological innovation, entrepreneurial skills development, more uniform
industrial and economic region.
That there are various confronting constraints to the development of
small and medium scale enterprises (SMEs) in Nigeria, in the sense that, it is
worrisome that despite the incentives, favourable policies and regulations and
preferential support by government aimed at improving small and medium
scale enterprises, has performed below expectation in Nigeria. While the
challenges associated to small and medium scale enterprises and their failure
has been widely acclaimed. Some of these include, lack of planning, inimical
government regulations, poor marketing strategies, lack of technical know-how,
lack of infrastructural facilities, lack of capital and internal characteristics and
problems which includes, poor management practices, poor accounting
standards, shortage of manpower, financial indiscipline and corruption etc.
There is significant support given to small and medium scale enterprises in
Nigeria by government and other individual bodies in order to thrive.
115
5.3 Recommendations
The impact of small and medium scale enterprises in Nigeria cannot be
overemphasized, hence it has been seen, has a pivotal instrument of economic
growth and development either in developed or developing economic. In the
lights of the above analysis, the researcher recommend government should
ensure that there will be no improper implementation of its policies towards
small and medium scale enterprises and should not in the area of incentive
and infrastructural development neglect business activities to facilitate small
and medium scale enterprises. The researcher also recommends that
government should also adequately support small and medium scale
enterprises financially, to avoid lack of capital, perhaps by creating lending
institutions to enhance the capacity of small and medium scale enterprises.
Moreover, small and medium scale enterprises should ensure that they
resolve their internal problems which hinder the success of the small and
medium scale enterprises. For instance, they should ensure that there effective
management practices or expertise effective accounting standards, adequate
manpower and avoid financial indiscipline and corruption in order to boost the
performance of the small and medium scale enterprises in Nigeria.
Area for further study
Though, the researcher has undertaken a research work on the problems and
prospects of small and medium scale enterprises here in Nigeria in which
findings and recommendations have been drawn. But that should not solve the
same problems in which other small and medium scale enterprises in other
countries of the world are encountering. Therefore, it should be an area of
further study for the future researchers to follow the same procedure or step to
find out similar problems and prospects of small and medium scale enterprises
in other countries of the world, so that the study would be universally and
globally accepted.
116
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121
APPENDIX I
School of Postgraduate Studies, Department of Management, Faculty of Business Administration, University of Nigeria, Enugu Campus.
Dear Sir/Madam,
A REQUEST FOR COMPLETION OF THE QUESTIONNAIRE The undersigned is an MBA student of the above named department and institution. I am undertaking a purely academic research work on the “Small and Medium Scale Enterprises in Nigeria: Problems and Prospects”. I humbly beseech you to kindly tick ( √ ) in the box most appropriate to your opinion to each of the question asked. You can also include your suggestion in the space provided. All information provided will be handled with utmost confidentiality and shall be used solely for this academic work. I will highly appreciate your co-operation and response. Thanks for your anticipated co-operation. Yours faithfully,
EZEMA MALACHI .C. (The Researcher)
122
QUESTIONNAIRE
SECTION A:
(1) Sex:
(a) Male (b) Female
(2) Age Group:
(a) Below 30 (b) 30 – 40 (c) 41 – 50 (d) 51 and above
(3) Marital Status:
(a) Single (b) Married (c) Divorce
(4) Educational Qualification: (a) WASSCE/SSCE (b) OND (d) HND (e) B.Sc
(5) Work Experience:
(a) Below 10 years (b) 11-20 years (c) 21-30 years (d) 31-35 years
SECTION B:
1. Government misappropriate grant and channel the fund planned to
provide for the business operations to political projects.
(a) Strongly Agree (b) Agree (c) Undecided
(d)Disagree (e) Strongly Disagree
2. Small and medium scale enterprises create greater employment per
unit of capital employment in Nigeria.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
3. Small and medium scale enterprises stimulate technological
development and innovation, produce specialized items in small
quantity to meet current and diverse demand.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
123
4. Inadequate finance or capital is usually a constraint to small and
medium scale enterprises in Nigeria.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
5. Inadequate information base, affects the project realization of small
and medium scale enterprises.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
6. Financial indiscipline and corruption contribute to the problems of
small and medium scale enterprises.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
7. Accelerated economic growth and development is a sine qua non for
improving the quality of life.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
8. Government policies adequately support to improve and enhance the
capacity of small and medium scale enterprises in Nigeria.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
9. Small and medium scale enterprises contribute to global economic
growth and development.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
10. Frequent changes and sometimes conflicting government monetary
policies have in any way tend to hurt small and medium scale
enterprises in Nigeria.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
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11. Government neglect small and medium scale enterprises in the area
of incentive and infrastructural development to facilitate business
entity.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
12. Government and other individual bodies have given small and
medium scale enterprises in Nigeria financial support in order to
thrive.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
13. Entrepreneurship reduces poverty and improve standard of living.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
14. Government established various support institutions and reliefs
measures aimed at improving of SMEs.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
15. Small and medium scale enterprises have immensely contributed to
the economic growth in Nigeria.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
16. Small and medium scale enterprises provided effective means of
stimulating indigenous entrepreneurship.
(a) Strongly Agree (b) Agree (c) Undecided
(d) Disagree (e) Strongly Disagree
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17. Entrepreneurship can promote industrial and technological growth.
(a) Strongly Agree (b) Agree (c) Undecided (d) Disagree
(e) Strongly Disagree
18. The role played by government towards promotion and development of
small and medium scale enterprises in Nigeria is highly effective.
(a) Strongly Agree (b) Agree (c) Undecided (d) Disagree
(e) Strongly Disagree
19. Unemployment is detrimental to economic growth and development.
(a) Strongly Agree (b) Agree (c) Undecided (d) Disagree
(e) Strongly Disagree
20. Poor management practices constrain the success of small and medium
scale enterprises.
(a) Strongly Agree (b) Agree (c) Undecided (d) Disagree
(e) Strongly Disagree
21. Financial problems, poor management practices or expertise, poor
accounting system, lack of materials, government unfavourable fiscal
policy and lack of infrastructural facilities are the major constraint to the
development of small and medium scale enterprises in Nigeria.
(a) Strongly Agree (b) Agree (c) Undecided (d) Disagree
(e) Strongly Disagree
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22. Lack of infrastructural facilities hinders the performance of small and
medium scale enterprises.
(a) Strongly Agree (b) Agree (c) Undecided (d) Disagree
(e) Strongly Disagree