IMPACT OF SMALL AND MEDIUM SCALE ENTERPRISES (SMES) ON THE ECONOMY
(A STUDY OF FIVE SELECTED SMES IN APAPA, LAGOS)
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CHAPTER ONE
INTRODUCTION
1.1 Background to the study
Small and medium scale enterprises have long believed to be catalysts for economic growth and national development both in developed and developing countries. In Nigeria where private sector is not well developed SME is assumed to play the role of employment generation, facilitator of economic recovery and national development.
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. (Ogujiuba, 2004; Onugu, 2005; Ihua, 2009).
Although small business activities had existed 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 (Agbonifor, 1998).
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 enterprise would enhance the capacity of the indigenous capitalist class, as a potential player in economic growth and national development (Agumagu, 2006).
Data from the federal office of statistics in Nigeria affirmed this importance when it reveals that about 97 percent of the entire enterprises in the country are SMEs and they employed an average of 50% of the working population as well as contributing to50 percent of the country industrial output. As Ariyo (1999) and Ihua (2009) averred, SMEs in Nigeria are not only catalyst of economic growth and development, but are also the bedrock of the nation.
1.2 Statement of the Problem
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. yet some of the challenges of the SMEs are induced by the operating environment (government policy, globalization effects, financial! institutions etc) others are functions of the nature and character of SMEs themselves (Onugu, 2005).
The performance of 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 SMEs in Nigeria.
Some of the challenges 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.
Furthermore, the internal characteristics of small and medium scale enterprises 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 capita! and lack of information among other problems.
1.3 Aims and Objectives of the Study
This research work seeks to study the impact of small and medium scale enterprise on the economy and the objectives of this study include:
- To examine the effect of small medium enterprises on the economy of the Nigeria.
- To determine the extent to which infrastructure determines the performance of SMEs.
- To examine the effect of credit facilities on SMEs operation in Nigeria.
- To identify the various problems and constraints encountered by SMEs in the course of their operation.
1.4 Research Questions
What are the effects of small and medium scale enterprises on the economy of the Nigeria?
- To what extent does infrastructure determine the performance of SMEs?
- To what extent does a credit facility affect the operation of SMEs in Nigeria?
- To what extent does SMEs encounter problems and challenges in the course of their operation?
1.5 Research Hypothesis
In assessing the purpose of the study, this research project seeks to answer the following questions:
- Ho: There is no significant relationship between SMEs and the revamping of Nigeria Economy.
H1: There is significant relationship between SMEs and the revamping of Nigeria Economy.
- Ho: There is no significant relationship between credit facilities and the operation of SMEs in Nigeria.
H1: There is significant relationship between credit facilities and the operation of SMEs in Nigeria.
1.6 Scope of the Study
The study evaluates the impact of small and medium scale enterprise on the economy with a view to explore bottling businesses located in Apapa, Lagos. The study as perceived might face some logistic challenges in term of the time and the costs involved in carrying out the research, but nevertheless, it would endeavor to accomplish its aims and objectives.
1.7 Significance of the Study
It is hoped that the findings and recommendations of the study will be of great benefit through the following ways:
The study will broaden students understanding about the effect of Small and Medium scale Enterprise on Nigeria economy.
The study will also of great benefit to the public by bringing to their awareness about the existence of SMEs and the roles it played in upgrading the society welfare.
The study will also help entrepreneur to expound in their various business lines, equipping them about how to source for support from financial institution.
REFERENCES
Agbonifor, o. (1998), Regional Industrial Development: Theories, Models and Empirical Amsterdam: Elsevier Science publication.
Agumagu, O. (2006). Entrepreneurship development policy; A renewed perspective for achieving economic development in Nigeria. Nigerian Academy of Management Journal(1), pp. 179-192
Abiodun, F. (2012). Small and medium problems and prospects. Nigeria: the problems and prospects.
Ihua, U. (2009). SMEs Key Failure-Factor: A Comparison between United Kingdom and Nigeria, Journal of Social Science 18-(3).
Onugu, A. (2005). Introduction to business a conceptual! Standard publication: p.1.
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