THE CHALLENGES OF SMALL SCALE ELECTRONIC ENTERPRISES IN NIGERIA (A CASE STUDY OF IBRAHIM BABA GIDA MARKET, MOROKO ROAD, SULEJA, NIGER STATE)

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

The performance and effectiveness of small scale electronic enterprises as an instrument of economic growth and development in Suleja, Niger State has long been under scrutiny. The low performance and inefficiency that characterized small and medium scale enterprises particularly in assessing its role on economic growth and development needs thorough examination. Despite government institutional and policies support to enhancing the capacity of small scale enterprises, the enterprises have fallen short of expectations. In the case of Nigeria, small scale electronic enterprises have performed at very abysmal level. This low performance of small scale electronic business has further exacerbated poverty, hunger and low standard of living of people in a country whose economics is ailing. The current challenges of finance, inadequate infrastructural activities have undermined the capacity of the economy and small scale electronic enterprises are seen as mechanism for intervention to addressing these long term problem of the economy. Small scale electronic Enterprises whether new or existing, often face certain challenges when they approach products providers for both enterprise fixed capital investment and market standards. The insufficient supply of microloans is a major issue, particularly where business creators are unemployed persons, women or form part of ethnic minorities with different cultural dependencies. Supporting the supply of microloans is therefore not only an issue of entrepreneurship and economic growth, but also of social inclusion (Karatas et al., 2008). The challenges of small scale electronic enterprises in Nigeria are tied to some economic variables and the challenges that generally characterized the nation’s economy. Some of the challenges and problems include lack of finance, high poverty incidence, high level of unemployment, low industrialization capacity, inadequate infrastructure, insecurity of the business climate and inconsistent government policies among others. Nevertheless, the internal characteristics of small scale electronic enterprises too have also interact with some economic variables to undermine the capacity of the economy of Niger state. Issues like poor management practice, low level of entrepreneurial skills, lack of information and inadequate equity capital among other problems. Small and medium scale enterprises (SMEs) are largely viewed as the engine wire of any nation’s economic growth and they are regarded as justifiable means that propel development globally. SMEs are labour intensive; as much as they are capital saving business ventures. They are capable of making people self-reliant and generating billions of new jobs globally (Abeh, 2017a, b; Kadiri, 2012). They are also observed as the key drivers to economic growth and poverty reduction (Agwu & Emeti, 2014). SMEs are significant parts that links, strengthen and enhances the development of the countries. Their performance and growth in manufacturing, agriculture, services, etc., has been considered as the drivers and has contributed to the Nigeria economy. Historically, Nigeria’s independence in 1960 marked a turning point in the growth and development of SMEs, which has created much of the emphasis on SMEs as panacea in the reduction of poverty and joblessness or unemployment in Nigeria as a whole. The adoption of the Economic Reform Programme (ERP) of 1986 indicated a pivotal shift from impressive, capital intensive and large scale industrial projects based on import substitution to small scale industries with enormous potentials for the development of domestic linkages for sustainable economic and industrial development (Agwu & Emeti, 2014). As such, SMEs perform very important part of the Nigerian economy (Eniola & Ektebang, 2014). Though, SMEs have developed over the years in Nigeria in spite of its challenges. SMEs reduce the flow of rural to urban migration because SMEs can easily be set up with minimal capital and managerial skills. As much as they can easily be set up, they contribute significantly to a country’s Gross Domestic Product (GDP). Majority of the Small scale electronic enterprises in Suleja, Niger state are family/sole proprietorship businesses depending on their activities. However, commercial SMEs constitute more than eighty percent of the entire number of SMEs in Niger State. SMEs in the contexts of this study are enterprises that have the same common characteristics of ownership and management of individuals or family, and the decision-making processes are often personal. Mainly it requires little amount of capital base in general to establish SMEs, and often finds it difficult to raise needed funds for expansion. In Nigeria, the ongoing economic reform process is aimed at reducing unemployment and strengthening of basic institutions, poverty and sub sector of the economy target at enhancing and improving the capacity of small and medium scale enterprises which is beginning to show a renew optimism on small and medium scale enterprises as instrument of economic growth and development despite these problems and challenges.

1.2 STATEMENT OF THE PROBLEM

Small scale electronic enterprises in Nigeria are largely owned and managed by entrepreneurs with the help of family members, friends and other closed relations. In most cases, entrepreneurs are usually the major financier of SMEs and do not explore the opportunity of sourcing from external sources due to lack of knowledge or unavailability of any of such opportunities around them. The owners do not understand the importance of external source of capital and the impact on the expansion of business. In other cases, the small scale electronic businesses experience difficulties in sourcing for capital from their homes or individuals. Even in the case where financial houses agree to provide equity capital, conditions are always stiff and difficult to meet. About 80% of Small scale electronic enterprises in Nigeria are greatly affected by the problem of inadequate financing. There is a lot of problems which arise from poor financing. Despite all measures adopted after in Nigeria since its independence in 1960 all effort to increase growth of small scale electronic enterprises continued to be faced with difficult conditions. 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. Research on small business development has shown that the rate of failure in developing countries is higher than in the developed world (Okpara & Wynn 2007). 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 problem therefore is to find out how Nigerian small scale electronic enterprises could be encouraged and sustained despite all this challenges.

1.3 AIMS OF THE STUDY

The major purpose of this study is to examine the challenges of small scale electronic enterprises in Nigeria. Other general objectives of the study are:

1. To examine whether multiple taxation constitute a major challenge in the performance of small scale Electronic enterprises in Suleja, Niger State.
2. To examine the challenges and difficulties hampering the growth and survival of small scale Electronic enterprises in Suleja, Niger State.
3. To examine the effect of poor financing on the performance of small scale Electronic enterprises in Suleja, Niger State.
4. To examine the factors that can enhance the growth and survival of small scale Electronic enterprises in Suleja, Niger State.
5. To examine the causes of small businesses short live in Nigeria.
6. To examine the relationship between policies implemented for SMEs and the survival of small scale Electronic enterprises in Suleja, Niger State.
7. To proffer solutions to the development of small scale electronic businesses in Nigeria.

1.4 RESEARCH QUESTIONS

1. Does multiple taxation constitute a major challenge in the performance of small scale Electronic enterprises in Suleja, Niger State?
2. What are the challenges and difficulties hampering the growth and survival of small scale Electronic enterprises in Suleja, Niger State?
3. Does poor financing affect the performance of small scale Electronic enterprises in Suleja, Niger State?
4. What are the factors that can enhance the growth and survival of small scale Electronic enterprises in Suleja, Niger State?
5. What are the causes of small businesses short live in Nigeria?
6. What is the relationship between policies implemented for SMEs and the survival of small scale Electronic enterprises in Suleja, Niger State?
7. What are the solutions to the development of small scale electronic businesses in Nigeria?

1.5 RESEARCH HYPOTHESES

Hypothesis 1

1.  There is no significant effect of poor financing on the performance of small scale Electronic enterprises in Suleja, Niger State.
2. There is a significant effect of poor financing on the performance of small scale Electronic enterprises in Suleja, Niger State.

Hypothesis 2

1.  There is no significant relationship between policies implemented for SMEs and the survival of small scale Electronic enterprises in Suleja, Niger State.
2. .

1.6 SIGNIFICANCE OF THE STUDY

The study findings will be of immense importance in the sense that: the study will be useful to small business owners for them to understand the major challenges facing the sector and develop strategies to mitigate the challenges. Start-ups might avoid being trapped by the challenges if they prepare adequate strategies to mitigate the challenges. Researchers of small businesses success strategies might find the paper useful in understanding major challenges facing small businesses in Nigeria. Researchers will also understand the challenges highlighted in the literature to investigating more challenges facing small businesses in the specific industry, and investigate the strategies successful small businesses have used to mitigate the challenges. The study shall therefore serve as a reference for further research.

1.7    SCOPE OF THE STUDY 

The study is based on the challenges of small scale electronic enterprises in Suleja, Niger State, a case study of Ibrahim Baba Gida market, Moroko Road, Suleja, Niger state, Nigeria. 

1.8 LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 DEFINITION OF TERMS

Small Enterprise: An enterprise whose total cost including working capital but excluding cost of land is between ten million naira (10,000,000) and one hundred million naira (100,000,000) and workforce between eleven (11) and seventy (70) full time staff and a turnover of not more than ten million naira (10,000,000) in a year.

Economic Growth: This means the enhancement of profit generated by the designed economic resources of a nation or individual.

Financial Institution: This could be a financial system of any country’s set of institutional and other arrangements put in place for the transfer of savings from those who generate them to those who ultimately use them for investment or consumption.