TABLE OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
1.2 STATEMENT OF THE PROBLEM
1.3 OBJECTIVES OF STUDY
1.4 RESEARCH
QUESTIONS
1.5 STATEMENT OF HYPOTHESES
1.6 SIGNIFICANCE THE STUDY
1.7 DELIMITATION OF THE STUDY
1.8 OPERATIONAL DEFINITION OF TERMS
CHAPTER TWO
LITERATURE REVIEW
2.1 AN OVERVIEW OF SMALL AND MEDIUM
INDUSTRIES
2.2 FEATURES OF SMALL AND MEDIUM INDUSTRIES
(SMI )
2.3 PROBLEMS OF SMALL AND MEDIUM INDUSTRIES
(SMI) IN NIGERIA
2.4 THE ROLE OF SMALL AND MEDIUM INDUSTRIES
IN NIGERIAN ECONOMY
2.5 PAST EFFORTS BY THE GOVERNMENT AT
REVAMPING SMALL AND MEDIUM INDUSTRIES IN NIGERIA
2.6 CURRENT FINANCING INITIATIVES AND THE WAY
FORWARD
2.7 THE WAY FORWARD
CHAPTER
THREE
RESEARCH METHODOLOGY
3.1 INTRODUCTION
3.2 RESEARCH METHODOLOGY AND DESIGN
3.3 POPULATION
OF THE STUDY
3.4 SAMPLE AND SAMPLING PROCEDURE
3.4 RESEARCH
INSTRUMENT
3.6 VALIDITY
OF INSTRUMENT
3.7 RELIABILITY
OF INSTRUMENT
3.8 METHOD
OF DATA ANALYSIS
CHAPTER FOUR
DATA
ANALYSIS, INTERPRETATION AND DISCUSSION
4.1 DEMOGRAPHIC DISTRIBUTION OF RESPONDENTS DISTRIBUTION
OF RESPONDENTS ACCORDING TO THEIR GENDER
4.2 DATA ANALYSIS
4.3 SUMMARY OF FINDINGS
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 INTRODUCTION
5.2 SUMMARY OF FINDINGS
5.3 CONCLUSION
5.4 RECOMMENDATIONS
5.5
SUGGESTIOS
FOR FURTHER RESEARCH
REFERENCES
APPENDIX : Questionnaire
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Interest in the role of Small and
Medium Industries in the development process continues to be in the forefront
of policy debates in developing countries. The advantages of Small and Medium
Industries are numerous, including: the encouragement of entrepreneurship; the
greater likelihood that Small and Medium Industries will utilise labour
intensive technologies and thus have an immediate impact on employment
generation; they are easily established rapidly and put into operation to
produce quick returns. More generally the development of Small and Medium
Industries can be seen to be accelerating the achievement of wider economic and
socio-economic objectives, including poverty alleviation.
The role of finance has been viewed as
a critical element
for the development of small-scale industries. Previous studies have
highlighted the limited access to financial resources available to smaller industries
compared to larger organisations and the consequences for their growth and
development (Udechukwu, 2003). Typically, smaller industries face higher
transactions costs than larger industries in obtaining credit (Olorunshola,
2003). Poor management and accounting practices have hampered the ability of
smaller industries to raise finance. Information asymmetries associated with
lending to small-scale borrowers have restricted the flow of finance to smaller
industries. In spite of these claims however, some studies show a large number
of small industries fail because of non-financial reasons.
The panacea for solving problems of
economic growth in developing countries often reside in the development of Small
and Medium Industries. The establishment of those industries has been the
centerpiece of industrial development of many countries such as India, Malaysia,
Pakistan and Indonesia, to mention a few. It is expected that the
gains to be derived from the establishment of small-scale industries will be
translated into the generation of employment at a low investment cost. These
industries will also be able to harness raw materials locally and serve as raw
inputs to the large-scale industries.
A business whether small of
big, simple of complex, private or public is created to provide competitive
prices. Business in Nigeria
has been classified as small, medium and large. In both the developed and
developing countries, the government is turning to Small and Medium Industries,
as a means of economic development and a veritable means of solving problems.
It is also a seedbed of innovations, inventions and employment. Presently in Nigeria, SMI
assist in promoting the growth of the country’s economy, hence all the levels
of government at different times have policies which promote the growth and
sustenance of SMI. Small and Medium Industries orientation is part of the Nigerian
history. Evidence abound in the communities of what successes our great grand
parents, made of their respective trading concerns, yam barns, cottage
industries, and the likes. The secret behind the success of a self reliant
strategy does not lie in any particular political philosophy, so much as the
people’s attitude to industrial and in the right incentive is adequate enough
to make risk worthy businesses a necessity for the nation. There had been many
policy actions by the government, governmental agencies and the private sector
to promote SMI in Nigeria.
Many experts recognize marketing as a major problem and relevant solution to
the growth of SMI.
This research work identifies the
historical development and orientation of SMI in Nigeria, tackles the operational
definition and scope, describes the role of the Nigerian government as a
participant, regulator and facilitator, both legally and politically in the
growth of SMI. It identifies the marketing problems of SMI in Nigeria, the
provision and enactment of beneficial and supportive laws, the provision of
infrastructural facilities, constant man- power and development, direct
financial assistance to SMI and the establishment of finance institutions to
support SMI. It identifies the roles of SMI in Nigeria’s development and growth.
It concludes by clearly specifying the role of government to the survival of SMI
in Nigeria,
and advances relevant recommendations. For SMI to survive marketing practice
and principles must be given prominence.
Economic history is well stocked with
enough insights into the humble beginnings of present great corporations.
Evidence abound that almost all of the multinational giant corporations in
America, Europe and even Nigeria were cottage industries, growing as their
industry grew, and through their own sheer ability, marketing skills, and
efforts to reproduce and produce existing products better and cheaply. Japan’s economy
was dominated by traditional industries, cottage firms and by many SMI, who
drew their strength, not only from the abundance of capital, but from the role
of marketing in guaranteeing the growth of SMI.
1.2 STATEMENT OF THE PROBLEM
The key problem facing most Small and
Medium Industries
is lack of finance whether for the establishment of new industries or to carry
out expansion plans. The inability to attract financial credit or resources has
hindered or stifled the growth of small-scale industrial. The reasons for the
lack of fund include the followings:
- High rate of
inflation that led to the vast depreciation of Naira exchange rate, thus making
it difficult for most Small and Medium Industries to obtain required inputs for
expansion.
- Low level of
savings in the economy, which leads to low capital formation.
- High rate of interest charged on loans, which scares off potential small and
medium scale industrialists. The unwillingness of retail banks to grant credit
to Small and Medium Industries because
of the low creditworthiness of these industries has also hampered their growth
over the years.
Bothered by the persistent decline in
the performance of the industrial sector and with the realization of the fact
that the Small and Medium Industries hold the key to the revival of the
manufacturing sector and the economy, the Central Bank of Nigeria successfully
persuaded the Bankers’ Committee in 2000 to agree that each bank should set
aside 10 percent of its annual pre-tax profit for equity investment in Small
and Medium Industries. To ensure the effectiveness of the programme, banks are
expected to identify, guide and nurture industries
to be financed by the scheme. The activities targeted under the scheme include
agro-allied, information technology, telecommunications, manufacturing, educational
establishments, services, tourism and leisure, solid minerals and construction.
The scheme was formally launched in August 2001. At the end of June 2004 over N24 billion had been
set aside under the scheme while less than N10 billion had been invested. However,
2001 World Bank survey on Nigeria
showed that although 85 percent of firms had relationships with the Small and
Medium Industries Equity Investment Scheme (SMIEIS), not all of them has access
to credit.
The main thrust of this study is to
evaluate the effectiveness of the Small and Medium Industries Equity Investment
Scheme (SMIEIS) as regard the extent to which it has been able to solve the
financial problem of Small and Medium Industries in Nigeria.
1.3 OBJECTIVES
OF STUDY
The main objective of this study is to
assess the role of government in the growth of Small and Medium Industries.
However, specific objectives includes;
Ø The evaluation of the various survival strategies put in
place by the government for Small and Medium Industriesin Nigeria.
Ø The examinination of the mode of operations of the schemes
or strategies
in terms of its lending policies, guiding principles etc.
Ø The identification of the major constraints hindering the effectiveness
of the strategies adopted by the
government.
Ø To make suggestions as to how the performance of the Small
and Medium IndustriesEquity Investment Scheme (SMIEIS) could be improved.
Ø Finding out the role of banks (Banks of Industries,
Commercial Banks, Micro-finance banks and the Central Bank of Nigeria ) in supporting the growth of Smalll and
Medium Industries in Nigeria.
1.4 RESEARCH QUESTIONS
This research work shall be guided by
the following
research questions:
(i)
How effective
has the survival strategies put in place by the Nigerian government been in
solving the financial problem of Small-Scale industries in Nigeria?
(ii)
Is there any
significant relationship between the past efforts by the government to revamp
SMI and its performance in Nigeria?
(iii)
Is there any significant
relationship between Small and Medium Industriesand the growth in the Nigerian economy?
1.5 STATEMENT OF HYPOTHESES
The hypotheses to be tested in the course of the study are
stated below:
HO1:
The survival strategies put in place
by the Nigerian government has not been
effective in solving the financial problem of Small and Medium Industries in Nigeria.
H11: The survival strategies put in place by
the Nigerian government has been effective in solving the financial problem of Small
and Medium Industries in Nigeria
H02:
There is no significant relationship
between Small and Medium Industries and the growth in the Nigerian economy.
H12: There is no significant relationship
between Small and Medium Industriesand the growth in the Nigerian economy.
H03:
There is no significant relationship
between the past efforts by the government to revamp SMI and its performance in
Nigeria.
H13: There is a significant relationship
between the past efforts by the government to revamp SMI and its performance in
Nigeria.
1.6 SIGNIFICANCE THE STUDY
Small and Medium Industries in Africa rely largely on own savings, not only to grow but
also to innovate. These industries often need real services support and formal
finance assistance, failing which under-investment in long term capabilities
(training and Research & Development) may result, (Oyelaran-Oyeyinka,
2003). It was in the bid to solve the problems confronting small and medium
scale Industrialist that the Small and Medium Industries Equity Investment
Scheme (SMIEIS) was established. Years after its establishment, it is necessary
to evaluate the performance of the scheme in the light of its purpose and other
roles played by the government in revamping the vital and indispensable
subsector of the Nigerian economy. This study would be beneficial to small
scale operators, students, bankers, financial institutions etc who desire to know more about the the role of the
government in the growth of Small and Medium
Industries (SMI).
1.7 DELIMITATION OF THE STUDY
Every notable task always has its own
ups and downs. Hence, the factors that can militate against the success of this
research work but which the researcher hopes to successfully manage include the
following:
i.
Availability
of relevant and up-to-date literatures on government policies and incentives in a country like Nigeria where less attention is
paid to documentation and even where the documents are available, they usually
not frequently updated;
ii.
The stress
involved in getting relevant and up-to-date literatures and researchable
materials and;
iii.
The reluctance
of data owners to release them for research purpose.
iv.
Finance and
time constraint on the part of the researcher.
1.8 OPERATIONAL DEFINITION OF TERMS
The following terms are defined as used in the research in
order not to cause confusion for the users of the research.
- Micro/Cottage Industry: An industry with a labour size
of not more than 10 workers, or total cost of not more than N1.50 million,
including working capital but excluding cost of land.
- Small-Scale Industry: An industry with a labour size
of 11-100 workers or a total cost of not
more thanN50 million, including working capital but excluding cost of land.
- Medium Scale Industry: An industry with a labour size
of between 101-300 workers or a total cost of over N50 million but not
more than N200 million, including working capital but excluding cost of
land.
- Industry: an industry is defined as a group
of firms producing the total amount of the particular goods supplied to
the market.
- Policy: This is discribed as a priciple or rule to guide decisions and achieve rational outcomes.
- Incentives: This is any factor (financial or non
financial) that enables or motivates
aparticular course of
cation, or counts as a reason for preferring one chioce for the
alternative.
- Small and Meduim Industry: This is defined is any industry within
the minimum asset base on N200m excluding land and working capital, with
the number of staff employed by the industry to between 10 and three
hundred.
- Fiscal Policies: These are government policies
about the collection and spending of money.
- Capital Intensive: This describes the process tha require a high
concentratioj of capital relative to labour per unit of output produced by
such processes.
- Labour Intensive: This is refered to as the
processes involved in production that requires relatively large amount of
labour (skilled, semi skilled and unskilled)
- Monetary Policies: These are government policies regulating
whether the country’s money supply grows, and if so, how fast.
- Management: This is the process of making
prudent use of industrial resouces in order to achieve pre-determined
goals and objectives.
- Marketing: This is referred to as all
activities aimed at identifying and satisfying customers’ needs through
beneficial exchanges with target markets.
- Industrial Resources: These are raw materials that are
used in the production of other goods and services. Such resources
includes land, labour, capital and industrialists.
- Gross Domestic Product: This is the output of goods and services
produced by indegenes and non-indegenes in a country.
- Business Sector: This include corporate
eneterprises and all organisations producing goods and services with a
view of making profit.
- Growth: This refers to an increase in
the sizes, amount, degree and positive activities.
- Job: This is defined as a series of
tasks performed by an individual or
an incumbent with a view to achieving organisational goals and objectives.
- Bank Rate: This is the rate of interest a bank for lending money which is fixed
by the charged by Central Bank in a particular country.
- Bank: This is refered to as an
organisation that renders various financial services and also an
institution where money and other valuables are kept.
- Loan: This refers to the money that an organisation such
as bank lends to another organisation or individual.
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