ASSESSMENT OF THE IMPACT OF SMALL AND MEDIUM SCALE ENTERPRISE ON NIGERIA ECONOMY
(A STUDY OF KOLEX NIGERIA LIMITED IN IKEJA)
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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 (Olorunshola, 2002).
Over the years, successive governments in Nigeria have recognized the importance and the vital role of the Small and Medium Scale Enterprises (SMEs) in ensuring meaningful and sustainable growth in a developing economy. Emphasis has shifted from large-scale capital intensive enterprises to small and medium scale ones because of their potentials for developing domestic linkages for rapid and sustainable industrial development. Apart from their potential for ensuring self-reliant industrialization, SMEs are also in a better position to boost employment (Goldstein, 2001).
The mounting poverty level in developing economies is posing significant threat to the very existence and sustainability of the economies. In Nigeria, various economic programmes introduced by various governments in the past have not significantly reduced the level of poverty. The failure of various development programmes to impact on the level of welfare of the citizens in terms of poverty reduction particularly through employment generation. This triggered a new focus on the role and importance of small and medium sized enterprises as a viable channel to attaining economic growth and development (Agumagu, 2006).
Downing (1991) have made many attempts to establish statistical nexus between poverty rates and overall microeconomic performance on the basis of aggregate time series data but there are few studies on the factors that usually influence the capacity of the small firms and most of the factors have not been conclusively determined the factors, which influence their capacity to alleviate poverty.
The provision of credit to the grassroots has been a leading component of many of the government programmes. The policies lack of access to productive capital to which is one of the main factors that is preventing the populace from breaking away from the ‘poverty trap’. This trap makes it extremely difficult for the grassroots to overcome poverty without outside intervention. The trap can be viewed in terms of the population’s low capacity to generate income, savings, and investment in the economic environment that offers limited employment opportunities, which thus leave the grassroots in perpetual poverty and deprivation. According to Gottschalk and Danziger (1985) the idea of enabling the poor to have access to loans is based on the virtuous cycle principle: ‘low income, investment, more income, more credit, more investment, more income’.
1.2 STATEMENT OF THE PROBLEM
The performance and effectiveness of small and medium scale enterprises 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 particularly in assessing its role on economic growth and development.
Despite government institutional and policies support in enhancing the capacity of small and medium scale enterprises, small and medium scale enterprises has fallen short of expectations. This has generated serious concern and sceptism on whether SME can bring about economic growth and national developments in Nigeria. The concern is even more disturbing when comparing SME in Nigeria with other countries particularly where SME has become harbinger of economic reconstruction and transformation (Mazzarol, and Thein, 1999).
Small and medium scale enterprises have 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 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.
Again, Entrepreneurs are in business (take risk) because they want to make profit. Where the expected returns from a venture are lower than the opportunity costs, it will act as a disincentive for the entrepreneur. Due to collapsed infrastructural facilities and unbridled corruption, where entrepreneurs have to spend huge sums to provide some basic infrastructure and bribe government officials, it makes the costs of doing business in the country too high with adverse implication for profitability.
1.3 AIM AND OBJECTIVES OF THE STUDY
The aim of this research is to assess small and medium scale enterprises on Nigeria Economy. The objectives of the study include:
- Examine the effect of SMEs in the development of Nigeria Economy.
- To find out the financing opportunities available to SMEs in Nigeria.
iii. Evaluate the challenges faced by SMEs in Nigeria.
- Examine the effect of SMEs operation in poverty eradication.
1.4 RESEARCH QUESTION
The research will attempt to provide solution to the following research questions:
- To what extent does the SMEs have any effect in the development of Nigeria Economy?
- Are there adequate financing opportunities available to SMEs in Nigeria?
iii. What are the challenges faced by SMEs in Nigeria?
- To what extent can SMEs alleviate poverty in Nigeria?
1.5 RESEARCH HYPOTHESES
The following hypotheses were developed for the study:
Hypothesis One
Ho: There is no positive relationship between SMEs and the development of Nigeria economy.
H1: There is positive relationship between SMEs and the development of Nigeria economy.
Hypothesis Two
Ho: There is no significant relationship between SMEs and poverty eradication in Nigeria
H1: There is significant relationship between SMEs and poverty eradication in Nigeria.
1.6 SCOPE OF THE STUDY
The study examines small and medium scale enterprises (SMEs) in Nigeria with a view to explore selected SMEs in Ikeja, Lagos-Nigeria. 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
In recognition of the crucial roles played by SMEs with respect to economic growth and development, the study will broaden students understanding about the various initiatives carried out by the succeeding governments in Nigeria which was aimed at promoting the cause of SMEs in the country.
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 with the most tangible among the different incentive packages that enhanced the financial opportunities of SMEs.
The study will also help entrepreneur to expound in their various business lines, equipping them about how source for support from financial institution.
REFERENCES
Agumagu, O. (2006). Entrepreneurship development policy; A renewed perspective for achieving economic development in Nigeria. Nigerian Academy of Management Journal, 1 (1), pp. 179-192.
Downing, J. (1991). Gender and Growth Microenterprises Journal of Small Enterprises Development vol. 2, No 1. pp 4 ‘“ 12.
Goldstein, D. M. (2001). Microenterprise Training Programs, Neoliberal common sense, and the discourses of self-esteem in J. Goode, & J. Maskovsky (Eds). The new Poverty Studies pp. 236 ‘“ 272
Gottschalk, P. and Danziger, S. (1985). ‘ A Framework for Evaluating the Effects of Economic Growth and Transfers on Poverty,’ The American Economic Review 75(1), 153-161.
Mazzarol, T. and Thein, V. (1999). Factors Influencing Small Business Start Ups. International Journal of Entrepreneurial Behaviour and Research, 5(2), 48-63.
Olorunshola, K. (2002). Global perspective perceptions of SME growth constraints in Nigeria Journal of Small Business Management, 40 (1), pp58-65
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