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The
Relevance of Small and Medium Scale Enterprises to Nigeria’s Economic
Development: An Investigation
Abstract
The economy of any nation is driven by
the level of industrialization, while the level of industrialization is
determined by a number of other factors. In a developing economy like Nigeria,
Small and Medium scale enterprises play a vital role in economic development. Unfortunately,
these categories of industries are bedeviled with many problems ranging from
lack of infrastructural facilities, low technological know-how, lack of
technical skills to financing problems. This research is centered on financing small
and medium scale enterprises for economic development. It explored the present
pattern of financing, the alternative sources of financing SMEs as well as
government effort past and present geared towards improving the financial
status of such categories of industries. It also examined the problems faced by
SMEs in raising the needed capital. The overall objective of the study is to
seek for improved or new methods of financing SMEs for improved performance
which will in turn lead to economic growth and development of the nation. To
carry out the study; data were collected from both primary and secondary
sources. The main data collection instruments were a structured questionnaire
and personal interview. The data collected were presented in tables as frequency
distribution and analyzed with percentages and frequencies. The sign test and person product moment
correlation coefficient were used to test the hypothesis. The end result of the
research shows that small and medium scale enterprises were underfinanced and
various measures were suggested to improve the funding status including direct
government intervention in financing.
Chapter One
Introduction
1.1 Background to the Study
The Nigerian Economy has been unstable.
It has witnessed a lot of downturn over the years. Since the oil boom of the
80’s, the state of the economy has deteriorated and Nigeria has continued to be
ranked among the least developed nation. So many reasons can be adduced for the
slow pace of economic growth. Such reasons include; mono-cultural economy, low
industrialization, high import dependency and corruption. Various regimes in
the past had come up with one initiative or the other in a bid to turnaround
the economic fortunes of this country. Also some bodies or agencies have been
established to oversee and solve the problem of poverty and promote economic
advancement. In this regard, bodies like the National Poverty Alleviation
Programme (NAPEP), Family Economic Advancement Programme (FEAP), Small and
Medium Scale Enterprises Development Agency (SMEDAN) etc. were established.
Past governments have been involved in
different development plans all geared towards uplifting the nation’s economy.
The government of Gen Sanni Abacha lunched a development plan tagged vision
2010. It was a plan that was drawn to put to achieve certain level of
development of Nigerian economy by the year 2010. The government of President
Olusegun Obasanjo in effort to turnaround the economy, embarked on so many
reforms in different sectors of the economy including; education, energy, solid
minerals, works, transport etc. He also established the Due Process Office that
brought a lot of positive changes in the contract award process and execution.
The present government of Alhaji
Yar’adua has come up with its own agenda popularly known as the seven point
agenda. Through the seven point agenda his government intends to focus on key
sectors of the economy that will speed up economic development of the nation.
He has also launched a development plan titled vision 2020.Through this plan he
intends to speed up economic development that will put Nigeria among 20 topmost
economies by the year 2020. This he has already started pursuing with greatest
emphasis on the power sector.
Despite these laudable programmes and plans, the pace of economic development seems to be at a standstill. In fact, with the global financial meltdown leading to world economic recession, the economy seems to be deteriorating further. One problem that has been identified as a clog in the wheel of economic advancement is the neglect of small and medium scale enterprises or what some call micro-entrepreneurs. It has been established in both advanced and emerging economies that the growth of most economies has been anchored on the growth of small and medium scale enterprises Muhammad. (2003)
Countries like Bangladesh, India, Indonesia etc. are doing well today because they have gotten it right in developing the middle level manpower that accounts for more than half of the productive sector. In Nigeria, despite the fact that government has in one way or the other tried to recognize the sector and accord it a sort of priority, there are still many challenges restraining the small and medium scale enterprises from realizing their objectives. Some of the challenges that are teething to small and medium scale enterprises range from lack of infrastructural facilities, low technological advancement in terms of machinery, absence of experts and technical skills to lack of fund and inability to access credit facility from banks.
1.2 Statement of the Problem
The most critical among the challenges
faced by small and medium scale enterprises is lack of adequate capital and
inability to access bank credit. An economy can only grow through support from
the financial sector in availing credits to different sectors. One of the
agenda of banking reforms or recapitalization was to enable banks support the
real sector of the economy by availing credits to firms in these critical
sectors. If credit is made available to the formal sector while neglecting the
informal sector where the medium and small scale enterprises fall in, there
will still be gap in the growth of the economy.
While the large scale enterprises have
access to bank credit, the small and medium scale enterprises find it difficult
to obtain bank credit. It is in the bid to resolve this problem that the
Federal Government in conjunction with Central Bank of Nigeria carried out
reforms in the lower side of the finance industry. Among the reforms is
liberalizing the licensing of micro-finance banks and conversion of community
banks to micro-finance banks.
Micro-finance banks are expected to provide
micro-credits to small unstructured businesses, salary earners, artisans, food
vendors, small farmers and traders. It is in pursuit of this objective as well
as the drive to reduce unemployment that the Central Bank established skill
acquisition centers located in three geopolitical zones in the country. The
essence of establishing the centers is to empower the youth through relevant
skills training and subsequently increase their access to fund (credits) with
which to start up business.
The main issue now is whether government
has realized or failed to realize its objective of enabling the informal sector
of the economy to have easy access to credit and whether or not the sector has
contributed meaningfully to the economic development of the nation.
This research will focus on
micro-credits and its accessibility by medium and small scale enterprises and individuals’
entrepreneurs and other modes of financing them.
The research will be tailored to provide
answers to the following questions.
1. What
is the present pattern of financing of microenterprises in Nigeria?
2. How
much of the financing has come from bank microcredit.?
3. Apart
from bank credit what other alternative sources of funding are open to small
and medium scale enterprises?
4. What
are the problems encountered by the small and medium scale enterprises in
accessing Micro-credit?
5. What
specific lessons can Nigeria learn from other economies in the area of
facilitating access to microcredit scheme?
6. Has
micro credit disbursed to small and medium scale enterprises contributed to the
Gross Domestic Product of the nation?
The Relevance of Small and Medium Scale Enterprises to Nigeria’s Economic Development: An Investigation
NB: The Complete Thesis is well written and ready to use.
