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THE NIGERIAN
MEDIUM SCALE BUSINESSES: ISSUES, CHALLENGES AND PROSPECTS
ABSTRACT
The research
work aimed at examining the issues, challenges and prospects of the Nigerian
Medium Scale Businesses. The main
instrument used to generate data for the study was the questionnaire.
The key
issues uncovered by the research study are that respondents agreed that medium
scale enterprises have played a significant role in the Nigerian economy. Also most of the barriers to the growth of
medium scale businesses include poor managerial skill, lack of feasibility
studies, lack of timely information, inconsistent government policies and
inadequate infrastructural facilities.
However, the
findings of the study, the following recommendations are proffered. The Federal
Government should provide enabling environment like the provision of
infrastructures such as good roads, electricity supply, water to enable the
operations of SMEs in Nigeria.
Bank
officials should be mobilised to base investment on potential rather than
security and collateral only. The
nation’s government should guarantee both political and economic stability
which will help in the growth of survival and expansion f medium scale
enterprise.
Finally,
Government regulations should be such that from time to time will not hinder
the establishment of new and growth of existing small and medium scale
enterprise in any part of the country.
TABLE OF
CONTENTS
CHAPTER
ONE: INTRODUCTION
1.0 Background to the Study
1.1 Statement of the Problem
1.2 Objectives of the Study
1.3 Significance of the Study
1.4 Research Questions
1.5 Research Hypothesis
1.6 Scope and Limitations of Study
1.7 Definition of terms
1.8 Outlines of Other Chapters
References
CHAPTER
TWO: LITERATURE REVIEW
2.0 Preamble
2.1 Historical Background of Medium Scale
Enterprises in Nigeria
2.2 Review of Relevant Entrepreneurial
Theories
2.3 Meaning and Definition of Medium Scale
Business
2.3.1 Characteristics of Medium Scale Business
2.4 Management and Operations of Medium
Scale Businesses
2.5 A Review of the Nigerian Economic –
Buoyant and Depressed
2.5.1 Buoyant Economy
2.5.2 Depressed economy
2.6 Problems of Medium Scale Industries in
the Nigerian Economy
2.7 Prospects of Medium Scale Businesses
2.8 Some Development Programmes Assisting
the Development of Medium Scale Enterprises in Nigeria
2.9 Medium Scale Business Success in Nigeria
References
CHAPTER
THREE: RESEARCH METHODOLOGY
3.0 Preamble
3.1 Research Design
3.2 Research Methodology
3.3 Scope of Data
3.4 Data Collection Methods
3.4.1 Questionnaire
3.4.2 Interview
3.5 Population and Sample Size
3.6 Filed Work
3.7 Analytical Procedure
References
CHAPTER
FOUR:
PRESENTATION AND ANALYSIS OF DATA
4.0 Preamble
4.1 Analysis of Bio-Data
4.2 Analysis and Interpretation of Responses
to Questions
in the
Questionnaire
4.3 Testing and Interpretation of Hypothesis
4.4 Findings
CHAPTER
FIVE: SUMMARY
5.0 Preamble
5.1 Summary of Findings
5.3 Conclusions
5.4 Recommendations
5.5 Suggestion for Further Studies
Bibliography
Appendix
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND TO THE STUDY
Historical
facts has show that prior to the late 19th century, cottage industries, mostly
small and medium scale businesses controlled the economy of Europe. The industrial revolution changed the status
quo and introduced mass production. The
twin oil shocks during the 1970s undermined the mass production model, which
triggered an unexpected reappraisal of the role and importance of small and
medium sized enterprises in the global economy.
Findings by economists over the years show that small firms and
entrepreneurships play a much more important role in economy growth and
development. (www.wiki.answer.com).
Many
economies, developed and developing, have come to realize the value of small
businesses. They are seen to be
characterized by dynamism, witty innovations, efficiency and their small size
allows for faster decision-making process.
Government all over the world have realized the importance of this
category of companies and have formulated comprehensive public policies to
encourage, support and fund the establishment of SMEs. Developments in small and medium enterprise
are a sin quo non for employment generation, solid entrepreneurial base and
encouragement for the use of local raw materials and technology. Giving insight into the SME phenomenon, a
paper delivered at a forum by Mallam Mohammed Hayatu been, titled “Stakeholders
Roles and the development benefits in a virile small Enterprise Sector’s,
pointed out that small business operations are propelled by the dynamic theory,
which makes them efficient and prone to constant change. He gave a comparative statistics using 9
developed countries on how SMEs create employment, increase job growth, induce
change, innovation and competitions. (www.wiki.answer.com).
The benefits
of SMEs, to any economy are easily noticeable, they include: contribution to
the economy in terms of output of goods and services, creation of jobs at relatively
low capital cost, especially in the fast growing service sector, provide a
vehicle for reducing income disparities, develop a pool of skilled and
semi-skilled workers as a basis for the future industrial expansion; improve
forward and backward linkages between economically, socially and geographically
diverse sectors of the economy, provide opportunities for developing and
adapting appropriate technological approaches; offer an excellent breeding
ground for entrepreneurial and managerial talent, the critical shortage of
which is often a great handicap to economic development among others.
(www.wiki.answer.com).
Now
government has seen the importance of small and medium scale enterprise in the
era of economic development of the nation and employment generation. As a result of these realizations, programs
and institutions were established for the development of small and medium scale
enterprises. Some of these programmes includes, National Economic Reconstruction
Fund (NERFUND). Small Scale Industry Credit Scheme (SSICS), Nigerian Bank for
Commerce and Industry (NBCI), Directorate for Food, Roads and Rural
Infrastructure (DFRRI). The Structural
Adjustment Programme (SAP) which was aimed basically at restructuring the
economy of the country during General Ibrahim Babangida’s administration was a
tremendous help in discussing matters concerning medium scale enterprises.
(Ojo, 1995;248).
Despite all
these programmes by the Federal Government to aid the growth and development of
small and medium scale enterprises, these businesses have not reached the
expected potentials in the country.
Why? This is because there is no
effective and efficient policy formulations, implementation and clear frame
work of the programmers.
1.1 STATEMENT OF THE PROBLEM
The
challenges facing the growth and survival of Small and Medium Scale Enterprises
(SMEs) in many developing countries are monumental. The most worrying among these challenges is
funding. Most new small business enterprises are not very attractive prospects
for banks, as they want to minimize their risk profile. The low level of SME development in Nigeria
was generally attributed to the poor implementation of government policies
aimed at SME support facilities and incentives, including loans, training
facilitates, industrial estates, infrastructure and the provision of raw
materials at subsidized rates for SMEs not until recently when the Banker’s
committee intervened in 2001 with a scheme themed the small and Medium
Industries Equity Investment schemes (SMIEIS).
The scheme relegated to the background government credit schemes that
are not well thought out and implemented. (www.wiki.answer.com).
The economic
environment under SAP had almost certainly increased poverty levels and
resulted in a reduction in overall consumer spending as well as a decline in
savings and capital investment (Awoniyi 1996, Hambagda 1987). This in turn had undermined plans for further
accumulation and capital formation especially for capital- intensive SMEs. The problem of an unstable political
environment (especially during periods of elections and after the annulled
presidential election results of 1993) was another factors. The politically risk climate made many
entrepreneurs especially foreign ones, increasingly uncertain of the business
environment and of their prospects. (www.all business.com).
The lack of
qualified entrepreneurs and employers in the absence of well-established
training centre are also impediments to the development of SME’s in Nigeria,
especially technically complex ventures are not likely to be sufficiently
competent in management, organization and quality production to adhere to
internationally competitive standards and such SME’s therefore cannot survive
without government protection from imports.
There is also lack of adequate information concerning areas of business
in the sectors generally. Most people
with funds tend to use them in well-established sectors rather than seeking new
production and new market niches. (www.allbusiness.com).
However, not
all of the responsibility for the difficulties of SME’s in general can be
placed on the Nigerian government or on the small businesses. Nigeria’s relatively short history of
experience in industrial, mechanized and relatively high-tech production is
typical of most African economies and could account for much of the lack of expertise
in policy making and in management and manufacturing operations. The present technological and scientific
dependency on the West should be seen as a legacy of the colonial past, and it
will certainly take sometime to develop competitive domestic production of
machinery and capital goods. Some
long-term strategies goals are important in this content, as well as the
patience and determination to see such policies through to the end, and this
would require a high level of consistency in policy making.
(www.allbusiness.com).
1.2 OBJECTIVES OF THE STUDY
The
objectives of the study are to:
Determining
the performance of medium scale businesses in Nigeria.
Identifying
the problems faced by businesses and the prospects of these businesses.
Proffering
solutions by making necessary recommendations of reducing and eliminating the
problems that will be highlighted.
1.3 SIGNIFICANCE OF THE STUDY
It is
expected that the outcome of the study would be useful in the following areas:
i. The study would be beneficial to
individuals, especially those who may want to set up their own businesses and
also entrepreneurs who may want to improve the survival rate of medium scale
industries in a depressed economy like Nigeria.
ii. To give an indepth information and
analysis on the causes of their problems with a view to suggesting and
developing ways and other alternatives aside their prospects which shall also
be critically viewed to ensure the success of medium scale enterprises in
Nigeria.
iii. It would also be an effective way to find
lasting solution to the problem of unemployment is for the government to
encourage the growth and expansion of small and medium scale business.
1.4 RESEARCH QUESTIONS
The
following research questions were addressed drawn from the research work:
- How are medium-scale businesses
successful in Nigeria?
- Can government assist medium-scale
industries in developing nations?
- Can medium-scale businesses serve as
incubators to larger industries?
- Do medium scale enterprises have access
to adequate capital?
- Are there any economic benefits
derivable from the operation of medium scale businesses?
1.5 RESEARCH HYPOTHESIS
The
following hypotheses are postulated from the study;
Hypothesis
one
Ho: Medium-scale business cannot be successful
in Nigeria
H1: Medium-scale business can be successful in
Nigeria
Hypothesis
Two
Ho: Medium-scale enterprises cannot be
beneficial to economic growth.
H1: Medium-scale enterprises can be beneficial
to economic growth.
Hypothesis
Three
Ho: Medium-scale enterprises cannot obtain
adequate capital to operate.
H1: Medium-scale enterprises can obtain
adequate capital to operate.
1.6 SCOPE AND LIMITATIONS OF STUDY
The scope of
the study would cover the medium scale business challenges, prospects as well
as the issues with respect to the Nigerian economy. The findings of this study may be relevant to
other forms of incorporating or owning a business in Nigeria.
Also
entrepreneur in Nigeria may find relevant or not to the findings of this
research. This may not be in consonance
with some people’s peculiar orientation and culture vis-à-vis the country’s
distribution the level of interactions between entrepreneur, their employees
and the government and also the privileged class.
Finally,
since the Nigerian economy is a bit improved, coupled with financial
constraints, the researcher might not have had access to relevant documents
that may perhaps have contributed in one way or the other to their research.
1.7 DEFINITIONS OF TERMS
The
following terms considered relevant to the study are explained thus:
Business:
Any endeavour engaged in aimed at making private profit. (Lawal; 1993:228)
Economic
growth: An increase in the economic conditions in any country characterized by
increased in per capital income. (Lawal 1998:13)
Growth of
medium scale enterprise: Determined by the rate of expression or increase in
the total income earned per annum. (Ojo, 1995:82)
Financial
institutions: Established institution to help and support small and medium
enterprises in funding and providing advice. (Lawal A.A 1998:13)
1.8 OUTLINES OF OTHER CHAPTERS
The
remaining parts of the study is carried out as thus;
Chapter Two:
This chapter considers the relevant
write-ups to the study. It involves the
review of previous literatures on the study as well as the current ones.
Chapter
Three: This chapter talks about the research methodology used in collecting and
analyzing necessary data.
Chapter
Four: This chapter is all about the presentation and analyses of data collected
in chapter three.
Chapter
Five: This chapter presents a
comprehensive summary of findings of the study and a conclusion which shall be
drawn from the findings and it also includes the researcher recommendations of
the study.
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