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THE ROLE OF SMALL AND MEDIUM ENTERPRISES

IN THE NIGERIAN ECONOMY.

ABSTRACT

This research work was designed to determine the role of small and medium enterprise in the development of Nigeria economy. Some selected enterprises were used as a case study and questionnaires were administered in order to extract information on this project. The objectives of the study includes to identify the roles of small and medium enterprises in the development of the Nigeria economy and to evaluate the problems the encountered in the establishment of small businesses. Some literature were reviewed in relation to the topic with the themes and sub themes of the study. However, in research methodology, the researcher used some instruments for data collection. These instrument s emanated from both the primary and secondary source of data. The data collected were analyzed, grouped into frequency, computed and arranged in tables for easy references. The statistics tools for analysis are the simple percentage and chi-square technique. These techniques were appropriately applied at 5% level of significance. The result of the study shows that small and medium enterprise plays a vital role in the development of Nigerian economy despite the various problems the encounter in the establishment of small businesses. Some recommendation were also made based on the results of the findings.

TABLE OF CONTENTS

Title page

Certification

Dedication

Acknowledgement

Abstract

Table of Contents

CHAPTER ONE: INTRODUCTION

1.1. Background of the Study

1.2. Statement of the Problem

1.3. Objective of the Study

1.4. Significance of the Study

1.5. Scope and Limitation

1.6. Research Question

1.7. Definition of Terms

CHAPTER TWO: LITERATURE REVIEW

2.1. Meaning and Concept of Small Business Enterprise

2.2. Basic Characteristics of Small Scale Enterprise

2.3. Types of Small business

2.4. Sources of Fund to Small Businesses

2.5. Government Influence on Small business Enterprises

2.6. The Role of Small Scale Business

2.7. Problems of Establishing Small Business Enterprise in Nigeria CHAPTER THREE: RESEARCH METHODOLGOY AND DESIGN

3.1. Research Design

3.2. Sample Size Used

3.3. Instrument for Data Collection

3.4. Population of the Study

3.5. Validity and Reliability of Instrument

3.6. Method of Data Analysis

CHAPTER FOUR: PRESENTATION OF DATA

4.1. Data Presentation and Analysis

4.2. Testing of Hypothesis

CHAPTER FIVE: SUMMARY OF FINDINGS, RECOMMENDATION

AND CONCLUSION

5.1. Summary of Findings

5.2. Recommendations

5.3. Conclusions Bibliography

Appendix A

Appendix B

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

For the past decades, small business enterprises in Nigeria were characterized as essentially backward and cog in the wheel of the overall development of the Nigeria economy. As a result of this, there has been a prevalent feeling that such businesses could be assisted only for social reasons, not as a promising opportunity for national development. Obviously, too little attention has been paid to the benefits to be derived from helping small enterprises of modernize and grow. This attitude arose partly amongst both the citizens and government and mainly from the very nature of the small business which made it difficult for its impact to be felt in the economy.

The latent contributions which small business can make are now attracting recognition. This awareness is manifest in the everincreasing number of Nigerians who daily strive to put up their personal ideas and abilities to effective use [by starting small business] ventures. Evidence around the world indicate that small scale enterprise provide an effective means of stimulating indigenous entrepreneurship, enhancing greater employment opportunities per unit of capital invested and aiding the development of technology. Through their wide dispersal, they provide an effective means of mitigating rural-urban migration and resource utilization. Furthermore, by producing intermediate products for use I n large scale enterprises, small businesses contribute to the strengthening of industrial linkages.

Accordingly, due to the recognition of the roles of small business, the Nigerian government has since 1970 initiated programmes for the assistance of small businesses, especially, in the areas of finance, extension and advisory services including, training and provision of infrastructures. All these are designed to enhance the development of small businesses. Successive governments in Nigeria have for the past three decades shown great interest in the financing of small businesses by establishing specialized banks and other credit agencies/schemes to provide customized funding.

In spite of all the contributions and the attention given to it by the government, the small business enterprise is still confronted with problems peculiar to what many may refer to as the ‘Nigerian factor’.

One of such problems is the lack of funds, “It takes money to do business”. From the time a business idea is conceived of [the promotional state] until after it has ceased to operate, there are financial implications in every activity at every point in time associated with the businesses. It is therefore not surprising that the issue of financing is of major concern to small business organization. Despite that, the role of SMEs in Nigeria cannot be underestimated.

It is noteworthy that most of the small businesses in Nigeria are sole proprietorship and partnerships.

1.2. STATEMENT OF THE PROBLEM

Nigeria is currently witnessing an alarming rate of unemployment rate is growing tin geometric progression. The economy is also increasingly finding it difficult to cope as Nigerian economy is waning. A lot of experts have called for the creation of an enabling environment for small –scale enterprise to thrive. They cited Asian

“Tigers” such as Malaysia, China, Sought Korea, Indonesia, Singapore and Thailand where both the government and individuals knowing the importance of small scale industrial development join forces together in fostering effective and sustainable small scale enterprises in their countries. Evidence also abound that in the above mentioned places, a lot is being done to empower the growth of this sub sector of the economy. The role small scale industries in the development of indigenous technology can not therefore be over emphasized.

1. 3. OBJECTIVES OF THE STUDY

This study seeks to identify the role of the small scale

enterprise in the overall development of the nation’s industrial sector. It also aims at finding ways of making small scale enterp5rises more effective in order to enhance to economic development of the nation’s indigenous technology.

Moreover, in this study, attempt will be made to achieve the

following:

[a] To assess the importance of the identified roles of small scale enterprises in the development of Nigerian Economy. [b] To determine whether or not the Nigerian small scale enterprises make use of all the credit facilities available to them and the reasons for the stand they take in relation with their initial capital.

To consider the nature and level of financial assistance desired by them and compares it with the already available forms of assistance desired by them and compares it with the already available forms of assistance.
To evaluate the problems encountered I utilization of the available opportunities and or facilities as regards fixed assets like land and locations.
To suggest ways by which these problems could be tackled in order to improve the financial condition of the small scale businesses and boost their source of their raw materials

generation.

To ascertain whether or not government policies have been favourable to the establishment of small scale enterprises especially as it concerns power supply.
To assess the level of consumers’ preference to imported goods and determine the rate at which it affects the establishment and activities of small scale enterprises in

Nigeria.

1.3. SIGNIFICANCE OF THE STUDY

The study is thus important because of its potentiality in the development of the small business sector which has been characterized as the “man carrier of development and the engine of social and economic growth” in Nigeria. The study will also help in identifying why people don’t go into small –scale enterprise despite its numerous advantages. It will also find our problems encountered while running the business. The study will help government identify areas requiring attention, thus stimulating government into proper directing of loans and incentives to improve upon existing ventures. It will also provide useful guide for prospective entrepreneur that wish to choose self-employment as a career. And finally, it will serve as secondary data for subsequent studies by a prospective researcher.

1.4. SCOPE AND LIMITATION

A good number of factors made the study difficult. Notably, is the time factor. The time available for the study was so short that the study was done almost in rush. Due to the limited time too, the researcher based his study only on selected small business enterprises within Nigeria. Another problem was combing course work, office work, research work and financial constraints to carryout a full and unbiased study.

1.5. RESEARCH QUESTION

What are the roles of small scale enterprises in the development of Nigerian economy?
Has lack of land and good location been a problem in the establishment of small scale enterprise in Nigeria?
Does epileptic power supply in Nigeria hinders establishment of small business enterprises?
Has unavailability of raw materials been a problem in establishment of small scale enterprises?
Has government policies been unfavourable to establishment of small scale enterprise in Nigeria?
Does the consumer’s preference to imported goods adversely affect the establishment of small scale enterprise in Nigeria? [7] Has establishment of small scale enterprise been hindered by unviable market?
What are the average source of the initial capital of studied small business ventures?
How successfully are their applications for bank loans and what is its percentage?
What are the sources of your raw materials?
Does lack of machines and equipment as difficulty in acquiring them impedes the establishment of small scale enterprise. [12] Does psychological factors such as lack of confidence lack of creativity, fear of failure etc been a problem in establishment of small scale enterprise in Nigeria?

[13] Does socio – cultural factors such as housewife syndrome, civil servant mentality, females not seen as good entrepreneurs been a problem in establishment of small scale enterprise in

Nigeria?

1.6. DEFINITION OF TERMS

Small Scale Enterprise: – The definition of small scale enterprise varies with people and countries such that it is better defined based on the characteristics. In the Nigerian context, small scale enterprise is any processing, serving or manufacturing industry with an investment in machinery and equipment above N500,000

[Waboi, 1987].

According to the centre for management development in a policy proposal to Federal Government in 1982, A small scale enterprise is a manufacturing, processing or service enterprise involved in a factory or production type operation employing up to 50 full time employees, investment in plant machinery are utilized in its operation.

Management: – According to Akpala [1990. pg 3] Management is the process of combing and utilizing an organization input [men, materials and money] by planning, organizing, directing and controlling for the purpose of producing output [goods and services].

Entrepreneur: – According to Hagen, an entrepreneur is an individual who conceives the idea of business, design the organization of the firm, accumulates capital, recruits labour, establishes relations with supplies, customers and the government and converts the conception into a functioning organization business.  Opportunity: An opportunity is a potential gainful situation that must be recognized and exploited, an opportunity has the qualities of being attractive, durable and timely. It is anchored in product or services which creates or adds value for its buyers or end users.