SMALL AND MEDIUM SCALE ENTERPRISES A GATEWAY FOR RAPID ECONOMIC DEVELOPMENT IN NIGERIA

TABLE OF CONTENTS

Title page     -      -        -        -        -        -        -        -        -        -        -        i

Approval page   -  -        -        -        -        -        -        -        -        -        -        ii

Dedication   -        -        -        -        -        -        -        -        -        -        -        iii

Declaration -         -        -        -        -        -        -        -        -        -        -        iv

Acknowledgement                    -        -        -        -        -        -        -        -        -        v

Abstract       -        -        -        -        -        -        -        -        -        -        -        vi

CHAPTER ONE

1.0 Introduction    -        -        -        -        -        -        -        -        -        -        1

1.1 Background of the study    -        -        -        -        -        -        -        -        2

1.2 Statement of the problems  -        -        -        -        -        -        -        -        4

1.3 Statement of hypothesis         -     -        -        -        -        -        -       -                     6

1.4 Purpose of the study -       -        -        -        -        -        -         -        -         7

1.5 Significant of the study       -        -        -        -        -        -        -        -        8

1.6 Scope of the study    -        -        -        -        -        -        -        -        -        8

1.7 Definition of terms   -        -        -        -        -        -        -        -        -        9

CHAPTER TWO: LITERATURE REVIEW

2.1 Review of current literatures         -        -        -        -        -        -        -        12

2.2 Historical perspectives of the research area       -        -        -        -        -        14

2.2.1 Characteristics of SMEs in Nigeria      -        -        -        -        -        -        17

2.2.2 Current policy intervention-      -        -        -        -        -        -        -        18

2.2.3 Component of proposed policy that can be adopted in Nigeria  -        -        20

2.2.4 How to set up a SMEs    -        -        -        -        -        -        -        -        25

2.2.5 Source of finance for SMEs      -        -        -        -        -        -        -        26

2.2.6 Importance of SMEs to owners -        -        -        -        -        -        -        30

2.2.7 Importance of SMEs to Nigeria the Economy        -        -        -        -        -        31

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction    -        -        -        -        -        -        -        -        -        -        33

3.2 Area of study  -        -        -        -        -        -        -        -        -        -        33

3.3 Research design        -        -        -        -        -        -        -        -        -        33

3.4 Sample and sampling techniques  -        -        -        -        -        -        -        34

3.5 Instruments for data collection     -        -        -        -        -        -        -        34

3.6 Administration of the instruments          -        -        -        -        -        -        -        35

3.7 Method of data analysis and presentation         -        -        -        -        -        -        35

CHAPTER FOUR: DATA PRESENTION AND ANALYSIS

4.1 Introduction    -        -        -        -        -        -        -        -        -        -        36

4.2 Respondents characteristics and classification  -        -        -        -        -        36

4.3 Presentation and analysis of Data -        -        -        -        -        -        -        37

4.4 Test of Hypothesis    -        -        -        -        -        -        -        -        -        48

4.5 Findings     -   -        -        -        -        -        -        --       -        -        -        51

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary        -        -        -        -        -        -        -        -        -        -        52

5.2 Conclusion     -        -        -        -        -        -        -        -        -        -        53

5.3 Recommendations    -        -        -        -        -        -        -        -         -        55

       References     -        -        -        -        -        -        -        -        -        -        56

       Appendix                -        -        -        -        -        -        -        -        -        -        60

CHAPTER ONE

1.0 INTRODUCTION

Small and medium scale enterprises (SMEs) occupy a place of pride in virtually every country or state. Because of the significant roles SMEs played in the growth and development of various economies, SMEs have aptly been refer to as ”the engine of growth” and “catalyst for socio-economic transformation of any country”, SMEs represent a veritable vehicle for achievement of national economic objective of employment generation and poverty reduction at low investment cost as well as development of entrepreneurial capabilities including indigenous technology, other intrinsic benefit of vibrant SMEs, including access to the infrastructural facilities occasioned by existence of such SMEs in their surroundings, the stimulation of the economics such as suppliers of various items and distributers traders for items produces and or needed by the SMEs, stemming from rural urban migration, enhancing standard of living of the employees of SMEs and their dependent as well as those who are directly or indirectly associated with them. Supporting this Act Ajose (2018) stated that SMEs are the pivot of growth and first point of contact for business world.

Small scale and medium size enterprise (SMEs) are a very heterogeneous of business usually operating in service trade, Agric-business and manufacturing sectors. They include wide variety of firms such as village handcraft makers, small machines shops and computer software firms that possess a wide range of sophisticated skills, some are dynamic, innovative and are growth while others are satisfied to remain small and perhaps family owned. SMEs usually operate in the formal sector of the economy and employ mainly wage earning workers. SMEs are often satisfied by the number of employees and or by the value of their assets, the size classification varies related to the size of the economy and it endowment. It is important to note that, there is minimum as well as maximum size for SMEs (Inegbenebor, 2018).

1.1 BACKGROUND OF THE STUDY

Small and medium enterprise (SMEs) as define as defined by the national council of industries, refers to as business enterprise whose total cost including land is not more than Two Hundred Million Naira (N200,000000) only. A lot has been said and written about 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 talking, governments at various levels (local, state and federal levels) have in one way or the other focused on SMEs. While some government hard formulated policies aimed at facilitating and empowering the growth, development and performance of the SMEs and others had focused on assisting the SMEs to grow throw soft loans and other fiscal incentives, international agencies and organization (World Bank, United Nation Industry Development Association, International finance co-corporation (IFC), United Kingdom  Development for International Development, European Investment Bank etc. are not only keenly  interested in making SMEs rebuts and vibrant in developing countries but always heavily invested in locally, severally non-governmental organization such as fate foundation, support and training organization entrepreneurship programs (STEP), the Nigerian Promotion Commission (NIPC) the Association of Nigerian  Development Finance Institutes ( ANDFIs), as well as Individual Development Finance Institutes (INDFIs) hard been promoting the growth of SMEs in Nigeria through advocacy and capacity building initiation and have concerned to canvas for better support structures for operators in SMEs sub-sector. All the massive attention and support given to SMEs relate to the widely acclaimed fact that SMEs are job and wealth creators. In justifying the introduction of SMEs in 2018, the then governor of Central Bank of Nigeria Chief Joseph Sanusi said with a concerted effort and renewed commitment from all stakeholders, this scheme will surely sucked and realized it intended objective of revamping the SMEs as engine of the growth in the economy and a veritable tool for the development of indigenous technology, rapid industrialization, generation of employment and economic development in Nigeria. In recognition of the enormous some of which have been outline above various special measures and government programs, have been designed and policies enunciated and executed by the government to encourage their SMEs developments and hence make them more vibrant in Nigeria, the highlight of this measures include;

1)    Fiscal incentive and protective fiscal policies

2)    Specialized financial institutes and funding scheme for the SMEs

3)    Favorable tariff structures

4)    The SMEs funding scheme

5)    Selected exception and preferential treatment in exercise duties

6)    Establishments of export processing zone

7)    Selected reservation of items for exclusive manufacturing of SMEs

8)    Government full weight and support for NEPAD and AGOA activities.

However despite all these policies aimed at revamping the SMEs the have performed rather below expectation in Nigeria.

1.2 STATEMENT OF THE PROBLEMS

Small and medium scale enterprise have played and continued to play significant roles in the growth, development and industrialization of many economies in the world. In the case of Nigeria SMEs have performed below expectation due to the itemized problems below;

1. A combination of problems which ranges from attitudes and habits of SMEs themselves through environmental related factors, inability of government and frequent change of government policies.

2. The supportive business environment for SMEs as it still weak in Nigeria. The SMEs support programs are poorly coordinated and lack of the necessary coverage to reach all the sectors of the small business community.

3. All must all the micro-finance institution (MFIs) are supposed to cater for those enterprise with credit lending. However project lending and risks capital for SMEs is virtually unavailable in Nigeria.

4. The private equity and venture capital fund established in Nigeria are few and cater primarily to the needs of expansion of established business and private companies.   

5. Small and medium enterprise (SMEs) in Nigeria are faced compounded problems ranging bad government policies or administration.

6. Inadequate of funding or capital and even poor innovation ideas in the aspect of enterprise.

1.3 STATEMENT OF HYPOTHESIS

From the above objective we make the following hypothesis;

1. H0: Small and medium scale enterprises is a gateway for rapid economic development.

     H1:  Small and medium scale enterprise is not a gateway for rapid economic development.

2. H0: The first major problem facing small and medium scale enterprises in Nigeria is access to finance or capital problems.

     H1: The first major problem facing small and medium scale enterprises in Nigeria is not access to finance or capital problems.

3. H0: Small and medium scale enterprises has a positive effect on economic development.

         H2: Small and medium scale enterprises has no positive effect on economic development.

1.4 PURPOSE OF THE STUDY

The main objective or purpose of this study is to determine how small and medium scale enterprise can be used as a catalyst for economic growth and development. However the objective of the study are;

1) To determine the constraint affecting small and medium scale enterprise development in Nigeria.

2) To evaluate financial service and incentive available for small and medium scale enterprise in Nigeria.

3) To analyze and explain if there is any relationship between small and medium scale enterprise (SMEs) and economic development in Nigeria.

4) To determine how policies can be utilize effectively to foster development of (SMEs) in Nigeria.

1.5 SIGNIFICANT OF THE STUDY

Since finance has been identified as the major obstacle to the development of small and medium scale enterprises (SMEs), this project will suggest the importance of SMEs in economic growth and development and how government can solve the problems of finance of SMEs which has been identified.

The project will also suggest policies which can be made and enforce or implemented by the government which will enhance the growth of SMEs and which will further pave way for economic development in Nigeria. The project will also serve as the reference materials to student and others scholars who will want to conduct further research on small and medium scale enterprises in Nigeria. The will have empirical data to be viewed for the purpose of this study and will be able to know what has been done to the area so as to identify the vacuum to be filled.

1.6 SCOPE OF THE STUDY

The scope of the study is very wide as it is not directed to any particular part of Nigeria but rather to the Nigeria economy as a whole. It ranges from the importance of small and medium scale enterprises in the development of country’s economy to the way which government will support SMEs which could be a gateway for rapid economic development in Nigeria.

1.7 DEFINATION OF TERMS

1. Small Scale Enterprises (SSE): This an enterprise with total capital of about N1 Million but not exceeding N40 Million with labor size between 1-35 workers.

2. Medium Scale Enterprises (MSE): This an enterprise with total capital of about N40 Million but not exceeding N50 Million with labor size between 3-100 workers (this varies from country and region).

3. Enterprises: This can be defined as a venture or business that is managed or ran by the people of the country rather than the government that county that it is privately owned business.

4. NASME: Nigeria association of small and medium enterprises which is an umbrella of an association of all SMEs.

5. MAN: Manufactures association of Nigeria; is an official umbrella of all Small Scale and Medium Enterprises (SMEs) in Nigeria.

6. NASSI: Nigeria association of small Industries is the umbrella association of all SMEs in Nigeria.

7. SMEDAN: Small and Medium Enterprises Development Agency of Nigeria.

8. DFIs: Development Finance Institutes, are companies involves in protecting and developing finance such as Bank of Industry.

9. Equity: Means ownership of net monetary value in a company.

10. Capital: Means liquid or already produces durable goods available for business such as steam shovels (equipment) and office building etc.

10. Sole Proprietorship: Is the one man business who provide the business capital, run the business, take all the major decision, profit and undertake the risks alone.

12. Partnership: Is the unincorporated business formed by an association of two to twenty person who by an agreement (usually legal) decide to run a business together and share the risks and profit of the business.

13. Private Limited: Liability Company: Is a form of business enterprises jointly owned by the shareholders from two to fifty and which shares are not transferable easily.

14. Public Limited Liability Company: Is a form of business enterprises jointly owned by the number of shareholders from seven to infinity and for which shares are easily transferable.

15. Co-operatives society: Is a form of private business organization by the people with common interest for the purpose of engaging or providing service for the members.

16. Public Enterprises: Are government or state owned business organization which is usually set up by an Act of Legislation with the main aim of maximizing public welfare example; National Electric Power Authority  (NEPA)

17. Joint Enterprises: Are those businesses undertaking in which private investors and government are in partnership e.g. cement or car assembling enterprises etc.

18. Growth: This is an economic terms which means increase in productivity or output of a country.

19. Development: Means increase in the standard of living of people in a country i.e. reduction in poverty, unemployment and increase in the even distribution of national resources.