ASSESSING THE CHALLENGES FACING SMALL SCALE RECHARGE CARD BUSINESSES IN NIGERIA (A CASE STUDY OF TEVOLI RECHARGE CARD BUSINESSES IN IKORODU AREA OF LAGOS)

CHAPTER ONE

INTODUCTION

Background of the study

The establishment of recharge card businesses in Nigeria both small scale and large scale has ultimately helped in the socio economic development of the country. For this development that has been as a result of the building and establishment of these recharge card businesses to be lasting, the challenges confronting the small scale recharge card businesses in Nigeria has to be limited as negligence of these challenges may lead to the shutting down of the already existing ones thereby discouraging entrepreneurs from investing this profitable niche of business known as the hospitality sector of Nigeria.

The Small and medium scale enterprises have long been recognized as an instrument of economic growth and development in Nigeria. This growing recognition has led to the commitment of World Bank group on Small scale recharge card businesses sector, as core element in its strategy, to foster economic growth, employment and poverty alleviation. The World Bank group in 2004 approved roughly $2.4 billion in support of Micro, Small and Medium Enterprises (World Bank, 2001).The Small scale recharge card businesses have been given due recognitions especially in the developed nations for playing very important roles towards fostering accelerated economic growth, development and stability within several economies. Several researches have been conducted on the prospect and challenges of Small scale recharge card businesses in Nigeria and abroad as Small- and medium-sized enterprises (Small scale recharge card businesses) have long been believed to be important in supporting economics development within a country (see Akhtar& CDASED, 1999; Mazzarol, Volery, Doss, and Thein, 1999; Al-Shaikh, 1998) while others such as Chukwuemeka (2006), Agwu and Emeti, (2004), Arinaitwe (2006), Lundström (2005), Oboh (2002), Okpara (2000), Wale-Awe (2000), Ihyembe (2000), Bruch and Hiemenz (1984), Binks and Ennew (1996), Baumback (1983); and a host of othershave observed various factors or challenges that impedes the performance of Small scale recharge card businesses ranging from inadequate finance, poor infrastructural facilities, inadequate managerial skill, weak and instability of government policies and other presumed factors and challenges causing premature death of Small scale recharge card businesses as Beckman (1983) classified the problems as internal and external. Many studies have looked at the respective factors that are germane to the success of Small scale recharge card businesses. Teoh and Chong (2008), Ding and Li (2010) argued about that lack of access to credit and managerial skills are the major obstacles to entrepreneurship development and that in a knowledge-based economy, the intellectual capital is gradually replacing the physical assets in modern enterprises. In the seminal work of Aschauer (1989), he finds that the provision of public infrastructure is a significant determinant of aggregate productivity of Small scale recharge card businesses. Pointing to these different findings, it appears that empirical studies on the prospects and challenges of Small scale recharge card businesses are still largely inconclusive as the direction to which of these factors serve as prospects for Small scale recharge card businesses and those which are really challenges have not been properly identified. In tandem with the objective thrust of this study, none of these studies has observed the ranking of these challenges in order of their importance or the priorities on the Small scale recharge card businesses. The authors only argued on the presumed factors that affect Small scale recharge card businesses, that is why this study intends to look at factors that have the highest priorities or ranking order of importance using principal component of factor analysis; being the gap existing in empirical works. Apart from this introductory section, the remaining aspect of this study is divided into four other sections.

Statement of the general problem

Okpara & Wynn (2007) research on small-business development has shown that the rate of failure in developing countries is higher than in the developed world. According to Arinaitwe (2006) small business enterprises are faced with the problems of lack of technological know how, lack of managerial skills, lack of adequate legislature to protect small business enterprise against the competitions from multinational and imported goods and lack of finance or difficult in obtaining soft loan. Credit policies in Nigeria have also tended to discriminate against small scale enterprises; consequently, most of these enterprises have been forced to obtain funds from family members or from micro credit markets which interest rates are very high and often injurious. Again, while small business is being acknowledged for its development contribution, it still faces many obstacles that limit their long term survival and development. Research on smallbusiness development has shown that the rate of failure in developing countries is higher than in the developed world (Okpara & Wynn 2007) In Nigeria, Arinaitwe (2002) in Okpara & Wynn (2007) stress that “scholars have indicated that starting a business is a risky venture and warn that the chances of small-business owners making it past the five-year mark are very slim”(p.24). Okpara & Wynn (2007) further stated that the obstacles facing SME include a lack of financial resources, lack of management experience, poor location, laws and regulations, general economic conditions, as well as critical factors such as poor infrastructure, corruption, low demand for products and services, and poverty. The big firms dominate every opportunity for obtaining loans and raw materials. They attract employees by offering better wages and benefits, and secure most of government procurement and contracts.

Significance of the study

Assessing the challenges of small scale recharge card businesses in Nigeria would help highlight the challenges confronting small scale recharge card businesses in Nigeria with a view to tackling such challenges so that investors can be confident enough to invest in the Nigerian economy which would at the long run help in the socio economic development of Nigeria.

Objectives of the study

The following are the aims and objectives of embarking on this study

• To examine the challenges of small scale recharge card businesses in Lagos
• To identify factors that can enhance growth of small scale recharge card businesses in Lagos.
• To know if investors are confident of investing in the hospitality sector of Nigeria.
• To know the magnitude of challenges confronting small scal recharge card businesses in Lagos.
• To proffer solutions to the development of small scale recharge card businesses in Nigeria.

Scope of the study

This study is on the assessment of the challenges facing small scale recharge card businesses in Nigeria. With recharge card businesses Lagos as the case study.

Research questions

• What are the challenges of small scale recharge card businesses in Nigeria?
• What are the factors that can enhance the growth of small scale recharge card businesses in Nigeria?
• What is the level of challenge confronting the hospitality sector in Nigeria?
• What are the solutions to the development of small scale recharge card businesses in Nigeria?

Research Hypothesis

H0: the challenges of small scale recharge card businesses in Lagos are low

H1: the challenges of small scale recharge card businesses in Lagos are high

H0: small scale recharge card businesses do not impact on the economic status of Nigeria

H1: small scale recharge card businesses impacts on the economic status of Nigeria

Definition of terms

• Infrastructure: The basic physical and organizational structures and facilities (e.g. buildings, roads, and power supplies) needed for the operation of a society or enterprise.
• Economy: The state of a country or region in terms of the production and consumption of goods and services and the supply of money.