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SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA PROBLEMS AND PROSPECTS

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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.

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

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

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

(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

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.

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?

(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.

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

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.

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)

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.

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

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.

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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