IMPACT ANALYSIS OF SMALL AND MEDIUM ENTERPRISE (SMEs) IN ECONOMIC DEVELOPMENT IN NIGERIA(A SURVEY OF SELECTED PRIVATE ORGANIZATIONS IN RIVERS STATE)

Abstract

This paper seeks to investigate Small and Medium Enterprises as a veritable tool in Economic Growth and Development. A survey method was used to gather data from 280 SME/Entrepreneurial officers and Managers from Port Harcourt main city where there is high prospect for SMES. Data was collected with a structured questionnaire and analyzed with several descriptive statistics to identify the perception of the roles of SMEs in Nigeria. The results of the study therefore reveals that the most common constraints hindering small and medium scale business growth in Nigeria are lack of financial base and poor capacity utilization, poor management, corruption, lack of training and expertise, poor infrastructure, poor government policies, and low value for locally produced product and services. Hence, it therefore recommends that Government should as matter of urgency assist prospective entrepreneurs to have access to finance and necessary information relating to business opportunities, modern technology, raw materials, market, plant and machinery which would enable them to reduce their operating cost and be more efficient to meet the market competitions.

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

The definition of small scale enterprise varies with people and countries such that it is better defined based on the features seen by a group of persons within a specific geographical region. The Nigerian context, defines small scale enterprise as any processing, serving or manufacturing industry with an investment in machinery and equipment above N500,000 (Waboi, 1987). According to the centre for management development in a policy proposal to Federal Government in 1982, A small scale enterprise is a manufacturing, processing or service enterprise involved in a factory or production type operation employing up to 50 full time employees, investment in plant machinery are utilized in its operation.

In the past, small business enterprises in Nigeria were characterized as essentially backward and cog in the system of the overall development of the Nigeria economy. As a result of this, there has been a widespread notion that such businesses could be supported only for social reasons, not as a promising opportunity for national development. Obviously, too little attention has been given to the remuneration to be derived from helping small enterprises modernize and grow. This trend was partly due to both the citizens and government and mainly from the very nature of the small businesses which made it difficult for its impact to be felt in the economy.

The embryonic contributions which small business can make are now attracting recognition. This awareness is manifest in the ever increasing number of Nigerians who daily strive to put up their personal ideas and abilities to effective use by starting small business ventures. Evidence around the world indicate that small scale enterprise provide an effective means of stimulating indigenous entrepreneurship, enhancing greater employment opportunities per unit of capital invested and aiding the development of technology. Through their wide dispersal, they provide an effective means of mitigating rural-urban migration and resource utilization.

Furthermore, by producing intermediate products for use in large scale enterprises, small businesses contribute to the strengthening of industrial connections. Accordingly, due to the recognition of the roles of small business, the Nigerian government has since 1970 initiated programmes for the assistance of small businesses, especially, in the areas of finance, extension and advisory services including, training and provision of infrastructures. All these are designed to enhance the development of small businesses. Successive governments in Nigeria have for the past three decades shown great interest in the financing of small businesses by establishing specialized banks and other credit agencies and schemes to provide customized funding.

In spite of all the contributions and the attention given to it by the government, the small business enterprise is still confronted with problems peculiar to what many may refer to as the ‘Nigerian factor’. One of such problems is the lack of funds, “It takes money to do business”. From the time a business idea is conceived of and passing through the promotional stage until after it has ceased to operate, there are financial implications in every activity at every point in time associated with the businesses. It is therefore not surprising that the issue of financing is of major concern to small business organization.

Despite that, the role of SME’s in Nigeria cannot be underestimated. It is noteworthy that most of the small businesses in Nigeria are sole proprietorship and partnerships.

1.2. STATEMENT OF THE PROBLEM

Nigeria’s current alarming rate of unemployment rate is growing exponentially. The over dependence on oil as the major GDP provider and the reliance on the federal government to meet economic needs is an issue that requires redress. The economy is finding it increasingly difficult to cope as Nigerian economy is waning. A lot of experts have called for the creation of an enabling environment for small –scale enterprise to thrive. Issues such as poor technology, poor infrastructure and a weight of activities borne by the federal government has peaked causing a downturn that can only be over turned by support inwardly. The federal government at this stage cannot manage the increasing needs of the populace.

1.3. OBJECTIVES OF THE STUDY

This study seeks to identify the role of the small scale enterprise in the overall development of the nation’s industrial sector. It also aims at finding ways of making small scale enterprises more effective in order to enhance to economic development of the nation’s indigenous technology. Moreover, in this study, attempt will be made to achieve the following:

1. To assess the importance of the identified roles of small scale enterprises in the development of Nigerian Economy.
2. To determine whether or not the Nigerian small scale enterprises make use of all the credit facilities available to them.
3. To consider the nature and level of financial assistance desired by them to be effectively operational.
4. To evaluate the problems encountered in the utilization of available opportunities and or facilities as regards fixed assets like land and locations.
5. To suggest ways by which these problems could be tackled in order to improve the financial proviso of small scale businesses.
6. To ascertain whether or not government policies have been favourable to the establishment of small scale enterprises.
7. To assess the level of contribution to the GDP by SME’s

1.4 SIGNIFICANCE OF THE STUDY

The study is thus important because of its potentiality in the development of the small business sector which has been characterized as the “man carrier of development and the engine of social and economic growth” in Nigeria. The study will also help in identifying why people don’t go into small –scale enterprise despite its numerous advantages. It will also find our problems encountered while running the business. The study will help government identify areas requiring attention, thus stimulating government into proper directing of loans and incentives to improve upon existing ventures. It will also provide useful guide for prospective entrepreneur that wish to choose self-employment as a career. And finally, it will serve as secondary data for subsequent studies by a prospective researcher.

1.5 RESEARCH QUESTION

1. Are there notable technological improvement in the products and services of SMEs?
2. Are SMEs actively involved in taxation compliance?
3. Are SMEs actively utilizing the human and natural resources available?
4. Does SME product and services reduce reliance on importation?

1.6 STATEMENT OF HYPOTHESIS

Hypothesis 1

There is a significant relationship between SMEs growth and economic development.

There is no significant relationship between SMEs growth and economic development.

Hypothesis 2

There is a significant relationship between taxation compliance and the growth and development of SMEs.

There is no significant relationship between taxation compliance and the growth and development of SMEs.

Hypothesis 3

There is a significant relationship between utilizing the human and natural resources by SMEs and economic growth.

There is no significant relationship between utilizing the human and natural resources by SMEs and economic growth.

Hypothesis 4

There is a significant relationship between SME product and services and reduced importation.

There is no significant relationship between SME product and services and reduced importation.

1.7 SCOPE AND LIMITATION

The scope of this research was made on small and medium enterprises that were established within the Port Harcourt metropolis. These enterprises are spread across many divisions of the industry; this is so to capture the different contributions and challenges faced in the growth and development of the enterprises. Challenges faced in carrying out the research as planned are the spread of the locations of the enterprises and their cooperation as it requires information that may seem sensitive. Collation of data as a result of reluctance from the sample population was also a notable constraint. In addition picking the enterprise that is categorized as small or medium was a challenge this is so because the outward appearance of the business cannot suggest the size of the corporation.

1.8 DEFINITION OF TERMS

SME: Small and Medium Enterprises.

SMEDAN: Small and Medium Enterprises Development Agency of Nigeria

SMIEIS: Small and Medium Industries Equity Investment Schemes

DFI: Development Finance Institutions

ANDFI: Association of Nigerian Development Financial Institution

NIPC: Nigeria Investment Promotion Commission

IFC: international finance Commission

Management: – According to Akpala (1990. p 3) Management is the process of combing and utilizing an organization input [men, materials and money] by planning, organizing, directing and controlling for the purpose of producing output (goods and services)

Entrepreneur: – According to Hagen, an entrepreneur is an individual who conceives the idea of business, design the organization of the firm, accumulates capital, recruits labour, establishes relations with supplies, customers and the government and converts the conception into a functioning organization business.

Development: This entails growth of the business, increases in goods and services and t he improvement of lives of the citizen.