CHALLENGES OF SMALL MEDIUM ENTERPRIES DEVELOPMENT IN NIGERIA: A CASE STUDY IN UGHELLI SOUTH LOCAL GOVERNMENT AREA
Abstract
The importance of health expenditure has been greatly underestimated not only by policy analysts but also by many African countries governments. The popular cliché that health is wealth is more than just a word, it is a fact. This is so because the wealth of any nation is essentially linked to her health. A healthier population will definitely create wealth (ceteris paribus). This study therefore investigate the impact of government health expenditure on health outcomes in Nigeria from the period of 1981 to 2020. The Autoregressive Distributed Lag (ARDL) estimation technique and Error Correction Model (ECM) technique were adopted for analyzing the data used in the study. From the first model estimation, government recurrent expenditure is seen to have a significant negative impact on under 5 mortality rate. The error correction model shows that errors in the short run are corrected in the long run. This relationship was also found to be statistically significant at the 1% level. From model two, both government recurrent and capital health expenditure has a negative impact on life expectancy with only capital health expenditure showing a statistically significant impact on life expectancy. The error correction model shows that short run distortions are corrected up to 28%. There is a unidirectional causal relationship between government recurrent health expenditure and life expectancy with a p-value of 0.0206. Government recurrent and capital health expenditures granger causes under 5 mortality rate. Government recurrent and capital health expenditures also granger causes real GDP. From the various diagnostic tests we find that the models are normally distributed, free from serial correlation. Based on the findings from the study, the following recommendations are made; The government should increase the investment in key critical area of the health sector such as health centers for easy access, in order to curb the menace of under 5 mortality rate. The government should improve the welfare of health care personnel. This will help to improve the health outcomes indices of under 5 mortality rate and life expectancy level. The health care facility should be increased in tandem with the ever increasing population. The government should make health care services both available and affordable especially for under 5 and the elderly.
TABLE OF CONTENTS
Title Page - - - - - - - - - i
Dedication - - - - - - - - - ii
Declaration - - - - - - - - - iii
Certification - - - - - - - - - iv
Acknowledgments - - - - - - - - - v
Table of Contents - - - - - - - - vi
Abstract - - - - - - - - - - x
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study - - - - - - - 1
1.2 Statement of the Problem - - - - - - - 5
1.3 Objectives of the Study - - - - - - - 6
1.4 Research Hypotheses - - - - - - - - 6
1.6 Significance of the Study - - - - - - - 7
1.7 Scope of the Study - - - - - - - 7
CHAPTER TWO: LITERATURE REVIEW
2.1.1 Conceptual framework - - - - - - 8
2.1.2 Public Health Expenditure- - - - - 8
2.1.3 Determinants of Health Expenditure - - - - 9
2.2 Empirical Review - - - - - - 18
2.2.1 Summary of Literature Review on Government Health
Expenditure and Health Outcomes - - - - - - 32
2.3 Theoretical Framework - -- - - - - - 38
2.3.1 Keynesian Theory of Public Expenditure - - -- 38
2.3.2 Wagner”s Law of Increasing State Activities - - - - 39
2.3.3 The Theory of Public Expenditure by Musgrave - - - 41
2.3.4 Baumol’s Unbalanced Productivity Growth - - - - - 42
2.3.5 Peacock and Wiseman Theory of Public Expenditure - - - - 42
2.3.6 Classical Theory of Government Expenditure- - - - - 43
CHAPTER THREE: RESEARCH METHODS
3.1 Research Design - - - - - - - - 45
3.2 Nature, Sources and Description of Data - - - - 45
3.3 Model Specification - - - - 46
3.4 Apriori Expectation - - - - - - 47
3.5 Estimation Tecniques - - - - - - - 48
3.6 Descriptive Statistics - - - - - - 48
CHAPTER FOUR: RESULTS AND DISCUSSION
4.1 Data Analysis - - - - - - 53
4.1.1 Descriptive Statistics - - - - - 53
4.1.2 Unit Root Tests - - - - - - - - 54
4.2.3 ARDL-Bounds Test Approach to Cointegration - - - 55
4.3 Model Estimation and Discussion of Findings - - - 57
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary - - - - - - - 65
5.2 Major Findings of the Study - - - - - 66
5.3 Policy Implication of the Major Findings - - - - - 67
5.4 Conclusion - - - - - - 67
5.5 Recommendation 68
5.6 Contribution to knowledge 68
References - - - - - - - - - - 70
Appendix - - - - - - - - - - 77
LIST OF TABLES
Table 2.2.1: Summary of literature on Government Health Expenditure and Health Outcomes - - - - - - 34
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Until the early 1960’s many economist and business administrators viewed the existence of small scale industries in less developed countries as justified by scarcity of capital and administrative experience. It was often argued that with economic growth, the small scale traditional type of enterprise would in one sector after another be superseded by modern forms of large-scale production in order to ensure an orderly transitions small and medium scale enterprise were seen to deserve support, but mainly in sectors where modern methods could not be immediately applied. In the mid-1960’s a new approach to small and medium-scale enterprise (SME) development began to emerge due to a number of factors.
First, there was growing concern over low employment elasticity of modern, large-scale production. It was claimed that even with more optimal policies, this form of industrial organization was unable to absorb a significant proportion of the rapidly expanded labour force. Secondly, there was widespread recognition that the benefit of economic growth were not being fairly distributed, and that the use of large-scale, capital intensive techniques was partly to be blame (Chenery, 2014).
Thirdly, empirical diagnosis showed that the causes of poverty were not confined to unemployment, and that most of the poor were unemployed in a large variety of small-scale, low production (Aftab and Ratim, 2021).
This suggested a new role for small industrial or what has come to be labeled “the urban informal sector” small labour-intensive industries were seen not only to increase employment, but also to increase the standard of living of the poor. They were also thought to be capable of providing a new dynamic of economic growth. The new objective was not just to stop the retreat, but to promote the small-scale sector. The performance and effectiveness of small and medium scale enterprises development 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 development particularly in assessing its role on economic growth and development despite government institutional and policies support to enhance the capacity of small and medium scale enterprises development, it 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 SMEs in Nigeria with other countries particularly where SMEs has become harbinger of economic reconstruction and transformation (Ihua, 2009).
In the case of Nigeria small and medium scale enterprises development have performed at very abysmal level. This low performance has further exacerbated poverty, hunger, unemployment and low standard of living of the people in a country whose economies is ailing. The current Challenges of hunger, poverty and unemployment have undermined the capacity of the economy and small and medium scale enterprises development are seen as mechanism for intervention in addressing these long-term problem of the economy unfortunately, SMEs have not been able to propel economic growth and development which are quintessence of mitigating the effect of poverty, hunger, unemployment and low standards of living in the economy.
The challenge of addressing the problem of hunger, poverty and unemployment is even more worrisome when considering the actualization of the millennium development goals (MDGS) of the country by 2015. If Nigeria is to achieve the millennium development goals by 2015, one of the sure ways is to enhance the capacity of its SMEs. It is based on the foregoing and government policy initiatives that the researcher embarked on a research such as this, to investigate the challenges of small and medium scale enterprises development in Nigeria (A case study of Ughelli Local Government Area).
1.2 Statement of the Problem
Small and Medium Enterprises (SMEs) in Nigeria have not performed creditably well and hence have not played the expected vital and vibrant role in the economic growth and development of Nigeria. This situation has been of great concern to the government, citizenry, operators, practitioners and the organised private sector groups. Year in year out, the governments at federal, state and even local levels through budgetary allocations, policies and pronouncements have signified interest and acknowledgement of the crucial role of the SME sub-sector of the economy and hence made policies for energizing the same. It has been shown that there is a high correlation between the degree of poverty hunger, unemployment, economic well being (standard of living) of the citizens of countries and the degree of vibrancy of the respective country’s SMEs. If Nigeria were to achieve an appreciable success towards attaining the Millennium Declaration Goals for 2015, one of the sure ways would be to vigorously pursue the development of its SMEs. Some of the key Millennium Declaration Goals like halving the proportion of people living in extreme poverty, suffering from hunger, without access to safe water, reducing maternal and infant mortality by three-quarts and two thirds respectively and enrolment of all children in primary school by 2015 may indeed be a mirage unless there is a turnaround of our SMEs’ fortunes sooner than later. The time is now to do something surgical to the situation of our SMEs given the aggravating level of poverty in Nigeria and the need to meet up with the Millennium Declaration Goals (Kayode, 1989).
The Challenges that SMEs contend with are enormous no doubt but it is curious to know that some SMEs are able to overcome them. This gives hope and should provide a basis for optimism that there is a way out. There must be some survival strategies, which are not known to many SME promoters. This research is also intended to explore and unravel some of the key business survival strategies, which have worked for a few thriving SMEs. The benefits of this could be tremendous in that other SMEs facing threats of extermination as well as new and proposed new ones could also borrow a leaf from them. Many other countries have been able to energize and transform their SME sub-sector to such a vibrant one that they have been able to reduce to the barest minimum their unemployment and poverty level because of the immense contribution of the sub-sector to their economic growth and development. It is expected that the outcome of this research will go a long way in ensuring a turnaround of Nigeria’s SME sub-sector. The research would come up with a set of recommendations for various stakeholders for implementations. With the concerted efforts of all and sundry including governments at all levels, SME promoters, Agencies and Departments of Governments involved in the SME sub-sector, Non Governmental Organisations (NGOs), Multilateral Agencies, Banks, Financiers, Investors, etc. It is hoped that the fortunes of SMEs in Nigeria would dramatically improve (Tuleja, 2011).
From the above, the key areas of shortcomings of the Nigerian SME subsector could be summarised as:
i) Rate of survival: it is said that less than 5% of SMEs survive beyond their first year of existence.
ii) Contribution to Industrial employment: whereas in great and developed economies of Germany, United States of America and even South Korea, SMEs account for as high as 64% of industrial employment, a comparative figure in Nigeria is around 31%, less than half of those in developed countries. The 31% of SME contribution to industrial growth is rather disturbing given the high degree of unemployment rate in Nigeria as well as the poverty level in the country as measured by the following indices and figures on Nigeria’s Human Development Indicators: Illiteracy Rate, Infant Mortality Rate, Life expectancy at Birth and GDP Growth Rate as compared with other countries. It is expected that these developmental indices will increase with improvement in Nigeria’s SME sub-sector’s performance, as has been the case with economies whose SMEs have developed and grown steadily over the years.
iii) Contribution to Industrial Production in particular and GDP in general: in spite of the fact that there is hardly any well-documented, reliable and current data, it is rather obvious that the contributions of SMEs to the Nigerian Industrial output in particular and the Gross Domestic Product in general are less than satisfactory. Evidence for this poor performance is buttressed by the fact that most manufacturing enterprises in Nigeria had operated well below capacity in the last two decades. At times the capacity utilization has been as low as thirty percent (30%). Only the multinational businesses had thrived with many SMEs folding up and thus aggravating the unemployment situation in the country and its attendant high crime rate (Tuleja, 2011).
The constraints to full industrial capacity utilization have been enumerated to include limited access to financing, high costs of funds and equipment, infrastructural inadequacies, unpredictable and inconsistent government policies, low purchasing power of consumers, low quality of manufactured goods, multiple taxes and levies on manufacturing inputs and manufactured goods, inefficiencies of customs and ports administration, dumping of cheap finished products on the Nigerian market, inadequate legal framework and non patronage of locally produced goods by government and its agencies. The government in The Nigerian Vision 2010 initiatives had envisioned an environment in which small and medium scale enterprises development would contribute about 34% (gross value of manufacturing to GDP ratio) to the national product and generate 60-70% employment with sustainable yearly growth, and a low mortality rate for businesses. The envisioned future for SMEs in Nigeria is that of “a strong and virile small and medium scale enterprise that enjoys strong institutional support, contributing significantly to the Gross National Product (GNP)”. Following the aforementioned, there is the need to practice and strategically place small and medium-scale enterprises in Nigeria to be active players and not spectators in the emerging world economy (CBN, 2005).
1.3 Objectives of the Study
The primary objective of this study is to examine the challenges of small and medium scale enterprises development in Nigeria.
The specific objectives are as follows:
i) To asses the role of SMEs in economic growth and development
ii) To examine how Technical know-how affects the prospect of small and medium scale enterprises development in Nigeria
iii) To examine the strategies used by small and medium scale enterprises development in Nigeria
iv) To ascertain the means by which management can raise enough capital for the running of business.
1.4 Research Hypotheses
The following hypotheses are formulated for the study;
1. H0: There is no significant difference between assessing the role of SMEs in economic growth and development.
H1: There is a significant difference between assessing the role of SMEs in economic growth and development.
2. H0: Technical know-how affects the prospect of small and medium scale enterprises development in Nigeria
H1: Technical know-how does not affect the prospect of small and medium scale enterprises development in Nigeria
3. H0: There is no significant relationship between examining the strategies used by small and medium scale enterprises development in Nigeria
H1: There is a significant relationship between examining the strategies used by small and medium scale enterprises development in Nigeria.
4. H0: Management cannot raise enough capital for the running of business.
H1: Management can raise enough capital for the running of business.
1.5 Significance of the Study
The performance and effectiveness of small and medium scale enterprise as an instrument of economic growth and development in Nigeria has long been under scrutiny.
The information obtained from this study will be significant to the business and marketing strategies to be adopted in a period, the prospects will not only benefit holders of the business but also the masses in boosting the standard of living and employment generation. It will also be useful to government and it’s agencies in policy initiation towards SMEs and to researchers generally.
1.6 Scope of the Study
This research cover the area of promoting small and medium scale enterprises development in Nigeria with particular attention to the role of the government and other external factors that can affect positively the development of small and medium scale enterprises in Nigeria. The study will cover the period between 1994 - 2014.
1.7 Limitations of the Study
In the course of this research work, there are confrontations which the researcher faced, they are;
Time Limitation: The time given to the researcher to carryout this study is obliviously short, therefore make it difficult for the researcher to really go deep into this study.
Finance: The researcher is faced by financial constrain, and without finance little or nothing can be done.
Respondents: Like it is stated, limitations of the study some people do not respond when they are given questionnaire, some are reserved when it comes to giving vital information. Adequate and complete information on hardly gotten from respondent.
1.7 Definition of Terms
SME: Small and Medium Scale Enterprise
Economy: Community’s system using its resources to produce wealth; state of a country’s property.
Entrepreneur: A person who organizes a commercial undertaking mostly involving risk.
Strategic: The act of planning and directing of the whole operation of a plan or policy.
Expansion: the act of spreading or becoming large.
SAP: Structural Adjustment Programme.
SPI: Strategic Planning Institution.
CBN: Central Bank of Nigeria
NIDB: Nigerian Industrial Development Bank
FEAP: Family Economic Advancement Programme.
NNDC: New Nigeria Development Company.
NBCI: Nigerian Bank of Commerce and Industry.
SSICS: Small Scale Industry Credit Scheme.
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