ABSTRACT
As agreed
by many, the development of small firm is a precondition for any country on the
sustainable growth and development of its industry. SMEs are industries of
tomorrow unless these inductees survive today and grow; we may not have large
industries of tomorrow
In an
attempt to evolve a virile SMF that would size un the challenges of the 2Ist
century, efforts were made at an extensive usage of both secondary sources
comprises relevant information from text books, journals, periodicals, seminar
papers and previews literature on the subject matter, the primary source was
through the administration of questionnaires and personal interview condition.
With the
objectives of evolving new strategies and policies that will not only ensure
the survival of small firms but also result in their development and growth
based on findings, this research work was divided into five (5) chapters.
Chapter
one(l) is the introductory chapter which introduces the project topic in terms
of stating reasons which has prompted the research explains the objectives,
significance, statement of problem and scope of the study.
Chapter
two (2) comprises general review on the subject matter. It also involves
definition of concepts, why have public policy in the development of SME's in
Nigeria, growth of SMEs in Nigeria, obstacles Targets of small firm policy,
problems of SMEs in Nigeria and theories guiding SME.
Chapter
four (3) exemplified the procedures and methodology adopted in the task or
process of collecting data/ information made use of in the course of study.
Chapter
four (4) is designed to analyses and interprets all the data generated in the
course of the study. The data mainly used is from the administration of
questionnaires and interviews.
Lastly,
Chapter five (5) is the conclusion and involves the study, finding,
recommendations and conclusion made to enhance further research.
TABLE OF CONTENTS
Title
Page
Certificate i
Dedication ii
Acknowledgement iii
Abstract v
Table of
Contents vi
Chapter One: Introduction
1.1 Introduction 1
1.2 Statement of Problem 4
1.3 Objectives of the Study 5
1.4 Significance of the study 6
1.5 Research Questions 8
1.6 Research Hypothesis 9
1.7 Scope and Limitation 10
1.8 Plan of Study 11
1.9 Conceptual Clarification 12
Reference 14
Chapter Two: Literature
Review & Theoritical Framework
2.0 Literature Review 15
2.1 Definition of Small‑Scale Enterprises
(SSIES) 15
2.2 Meaning of Public Policy 20
2.3 Why have public policy been the
development of
SMEs in Nigeria 21
2.4 The Growth of Small‑Scale Enterprises in
Nigeria. 23
2.5 The objectives and Targets of Small Firm
Policy 26
2.6 Major Policy measure for Small firms
Development in Nigeria 28
2.7 Source of Finance for Cottage and Small‑Scale
Industries in Nigeria. 31
2.8 Problems of Small and Medium Enterprises
in Nigeria 39
2.9 Theoretical Framework 44
2.10 Summary of the Chapters. 47
Reference 50
Chapter Three:
Summary, Recommendation, Conclusion
3.0 Summary, Recommendation, Conclusion 52
3.1 Summary 52
3.2 Recommendation 54
3.3 Conclusion 58
Bibliography 60
CHAPTER ONE
INTRODUCTION
A Small scale industry is defined as one employing fewer
than 300 persons and having a capital less than $28,000. lt was also defined by
the Central Bank of Nigeria (CBN) as an enterprises in which total investment
(including land and working capital) did not exceed N500,000 and or the annual
turnover did not exceed N5.0 million.
Public policy on the other hand is defined as the
development of laws and regulation that impact consumers in the market place.
lt can also be defined as the principles under which freedom of contract or
private dealings are restricted by law for the good of the community. lt is
also a governmental law, rule, statute or edict that expresses the governments’
goals and provides for rewards and punishments to promote their attainment.
Small firms are said to be the backbone of the Nigerian
economy in as much as enterprise policy is relevant to those looking to achieve
economic development in urban areas experiencing high level of deprivation. Public
policy on small firms development in Nigeria has to be concerned with two
issues: the creation of employment in smaller enterprise and the problems which
smaller enterprise experience in obtaining access to finance. Therefore, any
discussion of the impact of public policy on small firms development in Nigeria
has to be prefaced by asking why such policies should exist. Economist justify
government intervention in a market economy when there is evidence of ‘market
failure’. Although liberal economist would argue that the presence of market
fallure is a necessary, but not sufficient condition for government
intervention.
lt is then appropriate to examine carefully the
arguments, which have been prescribed by the goverment in support of its small
firm policies. Probably, the most frequently heard but least sophisticated, is
that small firms have been shown to be a major source of job creation. Thus, to
justify intervention in a market econömy, it is necessary to identify precisely
where the market failure exist and whether it is possible to rectify that
market failure through govemment intervention.
lt is also important to assess who are the losers and the
beneficiaries. Ideally, this has to be placed within a macroeconomics
framework to yield an overall assessment. The prime objective of macro‑economic
policy is not solely to assist smaller firms, but rather to provide a framework
for all sizes of enterprises in the economy.
Similarly, when we talk of small firms, we are talking of
industries of tomorrow. Unless these industries survive today and grow, we may
not have big or large‑scale enterprise tomorrow. lt is no longer news that the
small and medium scale enterprises in many countries offer more than 50 percent
of the total employment opportunities.
For instance in Nigeria, the SMEs are believed to
constitute 70 percent of corporate Nigeria (Management and communication review
1998 Volume 1 No. 1. Thus, for a country like Nigeria, adopting very vffective
development policies would in no small measure foster the survival and growth
of SMEs, which is conceived as a way of solving its numerous economic problems.
The near static annual growth rate of the industrial sector in Nigeria and
other less development countries (LDCs) and the growing disappointment with
results of development efforts on SME has prompted the reason for this
research.
The basic roles and features of SNIEs in most countries
are similar but mention few should be made of the fact that there is no
universally acceptable definition of SME because the classification of business
into small, medium or large scale is a subjective and qualitative judgment.
Nigeria’s SMEs (generally an umbrella term for firms with less than 260
employees) experience a lot of problems and hardship, and this is not just as
an effect if economic down turn. There are a number of bottlenecks, including
services under capitalization with difficulty in gaining access to bank credits
and other financial markets. This brings about corruption and lack of
transparency (although this is very general to the society), very high
bureaucratic costs are but except with the intervention of the government and
support for the roles that SMEs play in the national economic development and
competitiveness. Still emphasizing on the important and sensitive nature of
SMEs there has been a decision switch of emphasis from capital intensive large
scale industrial products based on the philosophy of import substitution to
SMEs with immense potentials for developing domestic linkages for rapid, sustainable
industrial development.
Lastly, it should not be the sole role of govermnent to
provide financial assistance for businesses such as the National Small Business
Office (NSBO). NSBO is an independent body with the overall responsibility of
the nation and all policies and programmes relating to small business including
micro business. The NSBO will then have to seriously look into how it can
encourage the growth of equity funding in Nigeria. Largely practiced in both
the United States (US) and the United Kingdom (UK). This funding help provide
the necessary funds or venture capital as it is widely known, has been the
secret behind the growth of silicon valley and the mass number of fast growing
high technology companies that abound there. With the high number of
billionaires originating from Nigeria, this has to find a way of encouraging
then to invest their wealth in small up and coming business, thereby helping
them and the country to grow and prosper.
Conclusively, it is strongly believed that this research
work will examine and identify the impact of public policy on small firm
development in Nigeria within a wider framework of the economy.
1.2 STATEMENT OF PROBLEM
lt has been shown that despite all the research works,
seminars, lectures and other efforts made at creating the much needed
environment for the survival and development of SMEs in Nigeria, especially in
this period of economic down turns have not yielded proportionate or expected
achievements, one begins to wonder what precisely may be responsible for this
over the years. The SMEs have not been able to play their sensitive roles in
the economy and this has truly affected other key areas of our socio‑economic
and political sphere.
An important question to ask is “what factors have stood
against the expected rate of growth and development of SMEs particularly in the
LDCs“? The African experience has shown that there had been a continuous fall
in the number of SMEs. Considering the vital roles, which the SMEs play in
modern societies, drastic and genuine efforts must be made to arrest this
situation if the African countries and Nigeria in particular is to size up with
the challenges of the future. As earlier stated, the SMEs have much greater
linkage effects and thus whatever state it finds itself is perhaps how the
other sensitive sectors would be affected. Unless the SMEs survive today and
grow, we may not have big or large enterprises tomorrow.
1.3 OBJECTIVES
OF TUE STUDY
The objectives of the study are:
(a) To possibly evolve new policies that will
not only ensure the survival of SMEs but will result in their development and
growth based on the findings.
(b) To isolate and determine the response of
public policy towards small firms development in Nigeria.
(c) To provide
the basis for an economic blueprint on strengthening the SMEs as against the
marginalisation of some SME, lack of competitiveness etc.
(d) To
undertake a comprehensive review of development policies adopted in Nigeria in the
past with a view of eliminating existing bottlenecks.
(e) To focus on an assessment of small firms
response to macro‑economic policies in Nigerian with a view to assessing the
impact of these policy on two issues:
- The
creation of employment in small enterprise and
- The
problem which smaller enterprises experience in obtaining access to finance.
lt is on this note that we shall examine an authoritative
review by De‑Koning, Snijders and Viamen, which pointed out four main
objectives in small and medium enterprises (SMEs) policy pursued by EC members’
status in relation to the Nigerian Context.
1 . Strengthening the production chain
2. Creation of employment
3. Competition
4. Diversification.
All these aforementioned
objectives shall be our focus in this research work.
1.4 SIGNIFICANCE OF THE STUDY
The significance of the study is that it would add to the
present knowledge as regards the impact of public policy on small firms
development in Nigeria. It is hoped that with these new outlook, the SMEs will
facilitate the development of a broader base indigenous entrepreneurial culture
for the country and a higher value added to domestic industrial production.
Also, the promQtion of SME is seen as a major tool for boosting employment as
they employ a large number of people per unit of investment capital than large‑scale
capitalintensive enterprises (Economic dialogue, May 1989 by NASSI). So also, a
study done by the Federal Office of Statistics (FOS) shows that 97 percent of
businesses in Nigeria employ less than 100 employees and the SME sector
provides an average of 50 percent of Nigeria’s employment and 50 percent of its
industrial output.
Again, potential investors would generally find the
research highly useful, as it would direct them on the path of effective
decision‑making. Statistics have shown that about a half of the potential
investors are held back with respect to investing in SMEs for fear of not being
able to effectively manage and make the desired profits from such line of
investments.
The study would also be of immense benefits to the large‑scale
enterprises that are in most cases depending on those SME in terms of sourcing
for raw materials etc. There is hardly any country which can do very well in
its industrial sector without the presence of SMEs.
As part of its numerous benefits, the study will be very
useful to the Nigeria Society of which a greater percentage (about 70 percent)
are under the employment of SMEs. In recent years, the International Labour
Organization (ILO) has employment for the future in most third world countries.
Furthermore, government, Non‑Govenunental Organisations
(NG0s), International Organisations such as United Nations Industrial
Development Organisations (UNIDO) and other interest groups like Banks etc
would find this study very useful, as it would enhance better decision‑making
or promulgation of public policies that tends to influence the growth and
development of SMEs.
As the study provides the basis for a conducive economic
and even political atmosphere, it will boat the influx of foreign investors who
not only provides more employment but also the necessary skills and technical
know‑how for SMEs. As the country develops industrially, it earns a better
political status in the comity of nations.
Finally, students of higher institutions of learning and
researchers who intend to carry out studies in similar areas are offered a
basis for research considering the findings and recommendations, which this
research work is expected to provide. It perhaps will also indicate area for
further study.
1.5 RESEARCH QUESTIONS
It has been shown that despite all the research works,
articles and lectures made at creating the survival and development of SMEs in
Nigeria, the SMEs at present experience a lot of problems and hardship and this
is not just as an effect of the economic down turn. There are a number of
bottlenecks, including serious under capitalization with difficulty in gaining
access to bank credit and other financial markets. Corruption and lack of
transpareney (although this is very general to the Nigeria soeiety), very high
bureaucratic cost, but most damagingly, a seemingly lack of government interest
in and support for the roles that SMEs play in national economic development
and competitiveness.
The questions asked are mainly to extract the nature and
most importantly evolve the impacts of public policy on small firms development
in Nigeria. The question is all about solving problems of small firm and
government policies. lt embraces more finance, production technology and
government policies etc, An important question to ask is what factors have
stood against the expected rate of growth and development of SMEs particularly,
in the LDc?” Many others are:
a.
Do government policies
have effect on the development of small firms in Nigeria?
b.
Are there much co‑operation
between the SMEs and LSEs?
c.
How is raw material
being sources?
d.
How is initia.1 eapital
for business obtained?
e.
What is the highest
academic certificate obtained by the enterprises?
f.
How often are the
capital markers contacted for fund?
To solve the above problems and questions, the government
must assist by establishing a well funded National Credit Guarantee Fund that
will act as buffer for credit facilities from banks and other financial
institutions over and above the equity provided under Small and Medium
Industries Equity Investment Scheme (SMIEIS).
1.6 RESEARCH
HYPOTHESIS
A hypothesis is a conjecture or a predietion of what can
be seen in the world of reality and this prediction is made from the world of
theory. It has several functions in research. These are as follows:
a. lt is a link between the world of
reality and the world of theory and explanations (abstractions).
b. lt
transforms the researcher’s ideas into testable forms.
c. lt helps to specify what variables are
to be measured or collected by Researcher in order that he may have the
expected results or discoveries.
d. lt shows the direction of data
analysis.
e. lt helps the researcher to focus his
attention and efforts in the right direction.
W shall look at two hypotheses with two variables to be
used. These are:
HYPOTIIESIS ONE
H0: That
Government Policies have negative effects on the development of small firms
H1: That
Government Policies have positive effects on the dev elopment of SMEs.
HYPOTHESIS TWO
H0: That
there is no significant relationship between initial capital and the size of the
enterprises.
H1: That
there is significant relationship between initial capital and the size of SMEs.
Thus, the two variables in this hypothesis are:
X: Government policies (variation in degree)
Y: Development (Variation in kind or quantity)
So, X variable (the cause), triggers Y variable (the
effect) to happen. It is then very easy to identify both dependent (Y) and
independent (X) variables.
1.7 SCOPE AND
LIMITATION
For the purpose of the study, the study areas shall be
few selected from industrial estates in Lagos State of Nigeria. The choice of
Lagos State is not unconnected with its huge industrial nature but the review
of literature would be majority from the Nigerian perspective.
Moreso, the primary data collection which is through the
administration of questionnaires would not exceed the study area, Lagos State.
This is not unconnected with co.nstraints such as time, distance and finance
just to mention a few. But also, will the report form part of a study approved
by the Presidential Advisory Council on Investment in Nigeria for the
preparation of sector profiles that would serve as reference documentation for
the promotion of target at sectors to the international investing public. Of
such are food processing, Textiles and clothing, Leather and leather products,
Rubber processing, Timber and Wood processing, Metallic Materials processing
and fabrication, Non‑Metallic processing, Petro‑Chemicals and Pharmaceuticals
of which they are all primary SME subsystems for foreign investment and
potentials areas for accelerating the pace of industrial development in
Nigeria.
PLAN OF STUDY
The study report will consist of five chapters, the first
chapter present the introduction which introduces the project topic in terms of
highlighting reasons which has prompted the research and explains the statement
of problems, objectives of study, Significance, Methodology, Literature review,
Research questions and the scope of study.
Chapter two is a general review of literature on the
subject matter and the theoretieal framework of which two different theories
will be looked into. This is necessary as it provides a basis and focus for
this study.
Chapter three exemplifies the procedures and methodology
adopted in the task or process of collecting data/information made use of in
the course of the study and also explains other related issue that would in no
small foster a proper understanding and solving of the problems at hand.
Chapter four is designed to analyse and interpret all the
data generated in the source of the study. The data mainly used is primary data
sources from the administration of questionnaires and interviews.
Lastly, chapter five is the conclusion and deals with the
summary of the study, Recommendation and conclusion made to enhance fürther
research.
CONCEPTUAL CLARIFICATION
Public Policy: Refers to
as a government programme of action or the regulation of goverment activities
that is, what government intends to do or how it intends to do it (implementation).
Development: is an
increase in output coupled with positive social changes and the standard of living
of an individual. So also does development perceives the process of optimizing
the resources of a nation to meet the needs of the people and their enlightened
daspiration and endowing them with the capacity to sustain their achievement.
Micro Enterprises: are those with between 0 and 9 employees with a digital
of less than a million Naira.
Small Scale Enterprises: are those with 10 to 99 employees with an investment not
less than ten million Naira (N 10m).
Medium Scale Enterprises: is sometimes used interchangeably with small scale
enterprises but medium scale enterprises has a project above ten million Naira
but net up to fifty million Naira and at the same time employing not less than
100 people to 199 employees.
Large Scale Enterprises: are industries whose turnover or asset is not less than
one billion with above 500 employees.
Equity Funding: is known as the fairness of money resource but has not
been used effectively in SMEs.
Macro Economic Policy: refers to the instrument by which a government tries to
regulate or modify the economic affairs of the country in keeping with certain
objeetives. In other words, it is the study of economy wide phenomena including
inflation, economie growth and system wide productivity. Others include
interest rate, füll employment, balance of payment, price stability.
Capital: is a wealth that can be
used to produce more wealth, it is also a sum of money used to start a business.
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