Description
Entrepreneurial Business Orientation And Economic Survival Of Nigerians
ISSN: 2306-9007 Akande (2014)
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Entrepreneurial Business Orientation and Economic Survival
of Nigerians
AKANDE.O.O
Department of Management and Accounting, Faculty of Management Sciences
Ladoke Akintola University o Technology, Ogbomoso, Oyo State, Nigeria.
Email: [email protected]
Tel: +234-803-3744-861
Abstract
This study examines the effect of Entrepreneurial business operation on the economic survival of the
Nigeria people in Ilorin Metropolitan area. Random sampling techniques was used, from which the sample
of various SMEs Owners (Entrepreneurs) was drawn through the simple random sampling, a sample of
(50) Entrepreneur were selected from a list of registered SMEs-Owner in Ilorin. Fifty (50) Questionnaires
were administered and distributed to the Entrepreneurs across the South local government in Ilorin. The
responses were analyzed using Statistical Package for Social Sciences (SPSS) analytical package. The
results of the research show that small scale business operation has a positive and significant effect on the
economy Survival. From the analysis carried out and the data obtained from this research work, the result
validates that Small scale business operations contribute to the economic growth of a nation. Also, there is
a significant relationship between entrepreneurial business operations and the productivity. Establishment
of small scale businesses brings at least 50% increase in profitability and productivity has the age of the
business increase. There is positive relationship between small scale business and employment. The higher
the small scale business established the more employment of youths increase.
Key Words: Small and medium scale Business, Business Orientation, Entrepreneurial, Economic; Ilorin,
Nigeria.
Introduction
Economics means the total/ aggregate sum of buying and selling, production and distribution activities,
labour etc. It consists of an economic system which includes production, distribution, consumption and
services in a nation. A given economy is the result of a set of processes that involves its culture, values,
education, technological evolution, history, social organisation, political structure and legal systems, as
well as its geography, natural resource endowment and ecology, as main factors. These factors give
context, content and set the conditions and parameters in which an economy functions. Some cultures
create more productive economies and function better than others, creating higher value or Gross Domestic
Product (GDP). GDP per capital and unemployment are part of the methods by which an economy is
measured. Many countries over the decade have designed a lot of means to improve, enhance and have a
sustainable economy. This awareness made many developing countries including Nigeria to have a change
of direction of industrial development from large scale business to development to small scale development
from early 1960s (Dende and Joshua, 2012).
Small and medium scale enterprises (SMES) have been identified to develop and positively improve the
economy. Countries such as Japan, China, North America and Asian countries have had such a rapid
growth in their economy which is attributed to SMES. Also developing nations, such as Nigeria
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characterised as low income earners by the World Bank, value SMES for several reasons. The role of
SMES as an engine to economic growth as garnered considerable public attention. It is accepted globally as
a tool for empowering the citizens and economic growth (Patrick 2009). For a nation irrespective of its
economic ideology, to achieve meaningful and sustainable development, adequate attention must be given
to wide spread of economic activities through entrepreneurship and SMES generation.
The SMES development facilitates the mobilization of human and capital resources towards economic
development, in general and the rural sectors in particular. They have been identified as a vehicle for
employment generation and providing opportunities for entrepreneurial sourcing, training, development
and empowerment. SMES constitutes the driving force of industrial growth and development. This
basically due to their great potential in ensuring diversification and expansion of industrial production as
well as the attainment of the basic objectives of development. SMES utilize local raw materials and
technology thereby aiding the realization of the goal self reliance. Also, government at various levels
(local, state and federal levels) have in one way or the other focus on the performance of SMESS for
economic gains.
Statement of Problem
The Nigeria national economy is characterized by mirage of problems which has constituted a sleepless
night to developmental oriented governance. The most disturbing thing in the country is the menace of
unemployment. Nigeria is faced with the challenge of curbing increase in crime rate, unprecedented
increase in prostitution, high mortality rate, and political thurggery among others which are traceable to
youth unemployment (Safiriyu and Njogo, 2012). More so, dwindling economic growth and development
attributable to insufficient number of economic activities call for people to engage in entrepreneurship in
the form of small and medium scale enterprises especially at such time as this which on the long run will
translate to improve and sustainable economic growth and development otherwise, the country will suffer
relegation in the committee of nations.
There is need to embark on the study to investigate the effect of small business operation on the economic
survival of people in a nation. This study remain germane by examine the influence of entrepreneurial
business operation on economy survival of Nigeria people in Ilorin metropolitan area. Specifically, the
study will answer the following research question:
? Does promotion and development of small scale business operation improve employment of Ilorin
residents?
? Is there any relationship between entrepreneurial process and economy development?
? Is improvement in infrastructure attributed to small scale business operations?
Research Hypothesis
The hypotheses for this study are stated in the null form as follows:
H
0
1: Small businesses orientation does not have effect on the employment, productivity,
and economic survival.
H
02
: There is no significant relationship between Profitability and Entrepreneur business process.
Literature Review
SMEs has been defined in different ways by many authors. What constitutes a small business varies widely
around the world. Small businesses are normally privately owned corporations, partnerships, or sole
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proprietorships. According to Adelaja (2008), in Nigeria, the small and medium industry enterprises
investment scheme (SMIEIS) defines SMEs as any enterprises with a maximum asset base of two hundred
million naira excluding land and working capital and with a number of staff employed not less than ten or
more than three hundred.
The development of many countries is often measured by such indices as the level of industrialization,
modernization, urbanization, gainful and meaningful employment for all those who are able and willing to
work, income per capital, equitable distribution of income and the welfare and quality of life enjoyed by the
citizenry. However, there has been great increase, over the years, in the interest of nations on SMEs.Also in
Nigeria, SMEs represent the overwhelming majority of industrial capacity in developing countries. A fact
confirmed by (Ajayi,1997; Ayozie,2011) Where it was postulated that presenting small scale business in
Nigeria constitute over 80 percent of all registered companies, occupying positions in agro based and allied
industries, rubber based, leather shoes industries, chemical, electronics, general merchandising, restaurants,
dress making, cane-chairs ,leather products ,pomade and toiletries ,animal feeds and husbandry, printing
etc.
Emmanuel and Daniya(2012) identified problems facing the economy of Nigeria When they said “Despite
the abundant natural resources, the country still finds it very difficult to discover her developmental bearing
since independence .Quality and adequate infrastructural provision has remained a night-mare, the real
sector among others have witnessed downward performance while unemployment rate is on the increase.
Basil(2005) suggested that “given the vital and salutary role and contributions, which the SMEs play in
other developed economies, and considering the on-going reforms by the government of Nigeria, which are
primarily aimed at creating wealth, reducing poverty, generating employment, re-orienting values, and
stimulating real economic growth, it becomes compelling for the SME sub-sector to be revamped
,overhauled and energised towards playing its expected roles .He further mentioned that the SMEs remain a
veritable vehicle for such an expected complete turnaround in the economy of Nigeria.
In concrete terms, Ayozie (2011) expressed that small scale industries constitute a greater percentage of all
registered company in Nigeria, and they have in existence for a quite a long time. Majority of the small
scale industries developed from the cottage industries to small enterprises-which is the bases of self
reliance and hence, economic growth particularly when SME is manufacturing and export oriented.
Increasingly, economic development experts are abandoning traditional approaches to economic
developments that rely on recruiting large enterprises with tax breaks, financial incentives, and other
inducements, Instead, they are relying on building businesses from the ground up and supporting the
growth of existing enterprises. The first is to develop and support entrepreneurs and small businesses. The
second is to expand and improve infrastructure and to develop or recruit a highly skilled and educated
workforce. Both efforts depend in large part on improving the quality of life in the community and creating
an attractive business climate (Kelly, 2007).
Another justification for the role played by small scale industries in development identified by Yusuf
(2010), is that they, small scale industries ensure a more equitable distribution of national income and at the
same time facilitates an effective mobilization of resources (which were hitherto lying idle) of capital and
skill. This is especially true in Nigeria where incomes are low and domestic market too thin for the
development of capital intensive industry to levels large enough to create employment opportunities to any
significant level. He further expressed that small scale industries also complement the agricultural sector by
providing employment during the agricultural slack season after harvest. In both the developed and
developing countries, the government is turning to small and medium scale industries as a means of
economic development and a verifiable means of solving problems. It also a seedbed of innovation,
invention and employment. Presently in Nigeria, SMES assist in promoting the growth of the country’s
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economy, hence all the levels of government at different times have policies which promote the growth and
sustenance of SMEs. Small scale industries orientation is part of the Nigerian history.
Ahmed (2006) also stated that, “the small and medium scale industry is seen as a key to Nigeria’s growth
and alleviation of poverty and unemployment in the country”. Therefore, promotion of such enterprises in
developing economies like Nigeria is of paramount importance since it brings about a great distribution of
income and wealth, economic self-independence, entrepreneurial development employment and a host of
other positive, economic uplifting factors. This is agreed upon by Abiodun, 2010 in his study where he
stated that small and medium scale enterprises have been long recognised as an instrument of economic
growth and development. This growing recognition has led to the commitment of World Bank group on
SMEs sector as core element in its strategy to foster economic growth, employment and poverty alleviation.
There is no doubt that small scale enterprises exist in most economic environment (Aremu and Adeyemi,
2011).
Impact of SMEs on the Economy
SMEs have no doubt been indeed recognized as the main engine of economic growth and development, a
major variable for promoting private sector, development and partnership. (Basil, 2005). He further said
that the key roles of SMEs include mobilization of domestic savings for investment, significant
contribution to Gross Domestic Product (GDP) and Gross National Income (GNI), harnessing of local raw
materials, employment creation poverty reduction and alleviation, enhancement in standard of living,
increase in per capital income, skills acquisition, advancement in technology and expert growth and
diversification. Other parameters usually used to measure the performance of SMEs include percentage of
working population employed by the SMEs in a given country or economy, the percentage contribution to
the country’s GDP, managerial and technical capacity building, percentage of of revenue internally
generated or percentage of total PAYE accruing to the government from the SMEs employees, yearly
increase in average household income (Basil, 2005). He continued by saying “aside from providing
opportunities for employment generation, SMEs help to provide effective means of curtailing rural-urban
migration and resource utilization.
By largely producing intermediate product for use in large scale companies, SMEs contribute to the
strengthening of industrial inter linkages and integration. Also, Yusufu 2010 agreed by stating that it can,
among other things, help promote agro based industries, which is another important threshold for
development in industrially backward area of the world. Small scale industries can also help curb
rural/urban migration in which cities are prone to, thus, reducing unemployment, crime and other vices as a
result of the menace of such movement. Most importantly is that it can complement large industries in
producing goods and services which are hitherto imported. In agreement with the others, Ayozie 2011
expressed that SMEs have contributed greatly to Nigeria’s development by the provision of employment,
marketing of goods and services and the growth and development if the rural areas. It has also brought
about the growth of indigenous entrepreneurship in Nigeria. he further stated that “ the provision of
employment, innovation and areas marketing for goods and services which are offered for sales”. A lot of
youths, retired workers and out of school graduates are now gainfully employed, thereby reducing the
unemployment rate and its attendant’s social complication of armed robbery and white collar crime. They
contribute to the labour market by absorbing an ever growing supply. In doing this, they have sufficiently
helped to curtail the rising unemployment in Nigeria.
On this premises, Kelly (2007) disagreed with this notion of qualitative impact of SMEs on the economy.
He said the overarching question is whether promoting entrepreneurship and small businesses make sense
as an economic development strategy. He concludes that it probably does but with some caveats. Small
businesses are potent job creators, but so are large businesses. The attribution of the bulk of net job creation
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to small businesses arises largely from relatively large job losses at large firms, not to especially robust job
creation by small firms. More importantly, data show that on average, large businesses offer better jobs
than small businesses, in terms of both compensation and stability. Though, he later suggested that small
businesses remain a significant source of new jobs in the United States. However, some scholars have
contrary opinion as to the impact of SMEs. One of them said, there is little doubt amongst proponents of
private sector development that entrepreneurship is the key to economic growth and development (Etebefia
and Akinkumi). Kelly 2007 also suggest in his study that small scale businesses may not be quiet the
fountainhead of job creation they are purported to be, especially when it comes to high paying jobs that are
stable and offer good benefits. Big film jobs are typically better jobs also, Emmanuel and Daniya,2012
Harnessing the economic potential of SMEs Nigeria is still a mirage since several policies aimed at small
and middle scale enterprises development did not stand the test of time due to poor implementation, erratic
financing of schemes initiated by the government and other administrative bottle necks.
Methodology
The study area was Ilorin, Kwara-State, South-western Nigeria; a choice based on its strategic location as
part of largest city with peace business solution, (Nigeria Business group, 2008). Both Primary and
secondary data were used. The primary Data was obtained through questionnaires design and administered
to small and medium scale business Owner in Ilorin south local government area. The responses were
keyed into the computer and analyzed using Statistical Package for Social Sciences (SPSS) analytical. The
SPSS has the incredible capabilities and flexibilities of analyzing huge data within seconds and generating
an unlimited gamut of simple and sophisticated statistical results including simple frequency distribution
tables, polygons, graphs, pie charts, percentages, cumulative frequencies, binomial and other distributions.
Non-parametric statistical test Such as ANOVA and Chi-Square was used to test the formulated
hypotheses, hypothesis one was analyse using ANOVA while Chi-Square was used to analyse hypothesis
using SPSS Package/Software.
Results and Discussion
The detailed result obtained during this study is attached in the appendix. A total of 50 respondents with
62% male and 38% female aged between 20 and 50 years were interviewed during the course of this
research.
Table 1 shows the age of respondents
Age of respondent
Frequency Percent Valid Percent
Cumulative
Percent
below 20 2 4.0 4.0 4.0
between 20-50 32 64.0 64.0 68.0
above 50 16 32.0 32.0 100.0
Total 50 100.0 100.0
Source; Survey, 2014.
58% of the respondents were found to have been in business at least five years while 30% of the
entrepreneurs started business started business within two to five years while 12% started business less than
2 years.
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Table 2; shows the age of the business
Age of business
Frequency Percent Valid Percent
Cumulative
Percent
below 2yrs 6 12.0 12.0 12.0
2-5yrs 15 30.0 30.0 42.0
above 5yrs 29 58.0 58.0 100.0
Total 50 100.0 100.0
Source; Survey, 2014.
A good number of the businesses (44%) are involved in trading of manufactured goods (Fig1). 38% are
involved in manufacturing while only 18% are involved in service rendering. Result of analysis from one
way analysis of variance show that there is a significant relationship between the type of business
(manufacturing, trading and service)and profitability/progress of the business (p=0.009).
Below figure shows the percentage of respondents that are involved in the different types of Business.
Source; Survey, 2014.
Figure 1; types of small business in Ilorin
About 98% (Fig2.) of the respondents are profitable in their small scale business with 40% making profit
between the range of 1-50%, 26% making double and 32% making more than double. This 32% can be
considered as very profitable. The level of profitability is shown in figure2 below.
Source; Survey, 2014.
Figure 2. showing how profitable a small business
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From the analysis, it was observed that even though a higher percentage made profit, a number of
them(40%) made a profit of N200,000 – N500,000., while 26% made a profit between N600,000 –
N1,000,000 and only 32% made a profit above N1,000,000 annually. This is represented in figure 3 below.
Source; Survey, 2014.
Figure 3. Annual profit of small scale business.
The result of this research as regards employment showed that there is relationship between employment
and small scale business. The higher the small scale business, the higher the employment created. The use
of analysis of variance showed there is a significant relationship between small scale business and
employment (p=0.00). Also, 42% of the reason why the government should encourage small scale business
establishments as suggested by the people was to improve and increase employment. This is shown in
figure 5.
Source; Survey, 2014.
Figure 4. Impact of small scale Business
58% of the respondents agreed to have increased their employment of more staffs while the other
percentage still retained the number of people they employed when starting up or have reduce the total
number of their employee.
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Figure 5 below shows how small scale businesses have increased the number of their staffs over the years.
Source; Survey, 2014.
Figure 5. SMEs Impact on employment Rate.
However, 32% has doubled the number of their staffs, 26% still retain the number of their staffs, while 18%
has employed or increase the total number of employment more than half. Also, 70% of those employed
fall between the age range of 20-40, this suggest that a higher percentage of youth are employed by small
scale businesses. A vast majority of the respondents confirmed that there were infrastructural developments
introduced to the area as a result of small scale business operation. The majority of those in business over
5years (58%) agreed that there have been roads, electricity, housing projects etc as a result of small scale
business operation in Ilorin. The relationship between infrastructure and the age of the business (p?0.03).
The infrastructures that have been introduced as a result of small scale businesses in Ilorin south as gotten
by the research is depicted in figure 6 below.
Figure 6. SMEs Impact on Infrastructural Development.
Test of Hypotheses
H
01
: Small businesses orientation does not have effect on the employment, productivity,
and economic survival.
The rational test of hypothesis was to confirm the doubt about whether small business orientation Influence
economic survival in term of employment, Business profitability and infrastructure development.
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Table 3: analysis of variance between small business Orientation and Economic survival.
Source; Survey, 2014.
For there to be a positive effect, P ? 0.05. From the ANOVA analysis, considerable level is 0.03. This
negates the hypothesis and we reject the null hypotheses and conclude that Small businesses orientation
have effect on the employment, productivity and economic survival.
H
02
: There is no significant relationship between Profitability and Entrepreneur business process.
Table 4a: chi square analysis on profitability and entrepreneur businesses Process.
Observed N Expected N Residual
0 1 12.5 -11.5
N200,000-N500,000 20 12.5 7.5
N600,000-N1m 13 12.5 .5
above N1,000,000m 16 12.5 3.5
Total 50
Source; Survey, 2014.
The table4b below summarises the outcome of our model data in the chi-square analysis
Table4b: Test Statistics using Chi-square
Entrepreneur Profitability
Chi-Square 16.080
a
Df 3
Asymp. Sig. .001
Source; Survey, 2014.
The critical value of X2, i.e. the table value, at five percent (0.05) significance level = 12.5 Thus, we reject
null hypothesis if the calculated value of X2 is greater than 12.5 and vice versa. Also when p?0.05 reject
null, when p>0.05, retain null. From the chi analysis table above, X2 i.e chi value was 16.080 which is
greater than the expected value of 12.5. Also the significant level(p value) is equal to 0.001. Thus, we reject
the null hypothesis. This means there is significant relationship between profitability and entrepreneur
businesses Process.
Conclusion
This research work investigated the impact of small scale business operation on the economic life of the
Ilorin people. The results of the research show that small scale business operation has a positive and
significant effect on the economy. From the analysis carried out and the data obtained from this research
work, the result validates that Small scale business operations contribute to the economic growth of a
nation. Also, there is a significant relationship between small scale business operations and the
productivity. Establishment of small scale businesses brings at least 50% increase in profitability and
Sum of Squares Df Mean Square F Sig.
Between Groups 21.732 2 10.866 3.790 .030
Within Groups 134.768 47 2.867
Total 156.500 49
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productivity has the age of the business increase. There is positive relationship between small scale
business and employment. The higher the small scale business established the more employment of youths
increase. In the long run, infrastructures are improved in the areas where the small scale businesses are
operational and located. Infrastructures such as electricity, roads, street lights, healthcare centres, financial
institutions etc are established over a time. This is attributed to the presence of small scale businesses.
Recommendations
Based on the findings, the following recommendations are made:
? Government should allow tax free for small scale businesses especially at the first few years of
establishment.
? There should be provision for low interest loan and credit facilities which should be made readily
available to the small scale business operations.
? People and consumers should be encouraged to patronize local products and services, this will
increase the output of the small scale business as well as increase their profitability.
? Also, there should be creation of training small scale business operators on such things as marketing,
ICT, financial management etc as all these skills are necessary to run a successful business.
References
Abiodun, F. (2010). Small and Medium Scale Enterprises in Nigeria: The Problems and prospects.
Adelaja, A.O. The Importance of Small and Medium Scale Industries in a Developing/underdeveloped
Economy; Nigeria as a case study. Pg 1-2.
Ahmed, S.A. (2006). The Roles of SMES in Developing Economy.
Aremu, M.A. and Adeyemi, S.L. (2011). Small and Medium Scale Enterprises as a Survival Strategy for
Employment Generation in Nigeria. Journal of sustainable development. 4(1).200.
Ayozie, D.O. (2011).The role of small scale industry in national development in Nigeria. Universal journal
of managementand social sciences, 1(1), 28.
Basil, A.N.O. (2005). Small and Medium Enterprises in Nigeria; Problems and Prospects. St. Clement
University.
David, B.E and Nyong, M.O. (1992). Small and Medium Scale Enterprises in Nigeria; Their
Characteristics, Problem and Sources of Finance. In: AERC research paper 16; African economic
research. Consortium; Nairobi.
Dende, J.A. and Joshua, A.O. (2012). Roles and problems for small scale development programs in
Nigeria. International journal of management and business studies, 2,77
Emmanuel, O.O. and Daniya, A.A. (2012). Development of small and medium scale enterprises; the role of
government and other financial institutions. In; Arabian journal of business and management
review(OMANA Chapter). Vol.1, pg 26 No.7.
Etebefia, O. S. and Akinkumi, B. W. (2013). The contribution of small scale industries to the national
Economy. Standard Research Journal of Business Management Vol1 (2): 60-71, August 2013.
Kelly, E. (2007). The role of small and large businesses in economic development. www.kansascityfed.org.
Federal Reserve Bank of Kansas City. pg 90-91.
Nigeria Business group (2008): Entrepreneurship in Nigeria
Patrick,O. (2009).The role of small and medium size enterprises for economic growth. Essay.es.
Safiriyu, A.M. and Njogo, B.O. (2012). Impact of small and medium scale enterprises in the generation of
employment in Lagos state. Kuwait chapter of Arabian journal of business and management review,
1(11), 109.
Yusufu, N.B. (2010). Economics of small scale industries; a look at programs for the growth and
development of small scale industries in Nigeria. In; ICBI, university of kelaniya, sri lanka. pg2-5.
doc_117273177.pdf
Entrepreneurial Business Orientation And Economic Survival Of Nigerians
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Entrepreneurial Business Orientation and Economic Survival
of Nigerians
AKANDE.O.O
Department of Management and Accounting, Faculty of Management Sciences
Ladoke Akintola University o Technology, Ogbomoso, Oyo State, Nigeria.
Email: [email protected]
Tel: +234-803-3744-861
Abstract
This study examines the effect of Entrepreneurial business operation on the economic survival of the
Nigeria people in Ilorin Metropolitan area. Random sampling techniques was used, from which the sample
of various SMEs Owners (Entrepreneurs) was drawn through the simple random sampling, a sample of
(50) Entrepreneur were selected from a list of registered SMEs-Owner in Ilorin. Fifty (50) Questionnaires
were administered and distributed to the Entrepreneurs across the South local government in Ilorin. The
responses were analyzed using Statistical Package for Social Sciences (SPSS) analytical package. The
results of the research show that small scale business operation has a positive and significant effect on the
economy Survival. From the analysis carried out and the data obtained from this research work, the result
validates that Small scale business operations contribute to the economic growth of a nation. Also, there is
a significant relationship between entrepreneurial business operations and the productivity. Establishment
of small scale businesses brings at least 50% increase in profitability and productivity has the age of the
business increase. There is positive relationship between small scale business and employment. The higher
the small scale business established the more employment of youths increase.
Key Words: Small and medium scale Business, Business Orientation, Entrepreneurial, Economic; Ilorin,
Nigeria.
Introduction
Economics means the total/ aggregate sum of buying and selling, production and distribution activities,
labour etc. It consists of an economic system which includes production, distribution, consumption and
services in a nation. A given economy is the result of a set of processes that involves its culture, values,
education, technological evolution, history, social organisation, political structure and legal systems, as
well as its geography, natural resource endowment and ecology, as main factors. These factors give
context, content and set the conditions and parameters in which an economy functions. Some cultures
create more productive economies and function better than others, creating higher value or Gross Domestic
Product (GDP). GDP per capital and unemployment are part of the methods by which an economy is
measured. Many countries over the decade have designed a lot of means to improve, enhance and have a
sustainable economy. This awareness made many developing countries including Nigeria to have a change
of direction of industrial development from large scale business to development to small scale development
from early 1960s (Dende and Joshua, 2012).
Small and medium scale enterprises (SMES) have been identified to develop and positively improve the
economy. Countries such as Japan, China, North America and Asian countries have had such a rapid
growth in their economy which is attributed to SMES. Also developing nations, such as Nigeria
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characterised as low income earners by the World Bank, value SMES for several reasons. The role of
SMES as an engine to economic growth as garnered considerable public attention. It is accepted globally as
a tool for empowering the citizens and economic growth (Patrick 2009). For a nation irrespective of its
economic ideology, to achieve meaningful and sustainable development, adequate attention must be given
to wide spread of economic activities through entrepreneurship and SMES generation.
The SMES development facilitates the mobilization of human and capital resources towards economic
development, in general and the rural sectors in particular. They have been identified as a vehicle for
employment generation and providing opportunities for entrepreneurial sourcing, training, development
and empowerment. SMES constitutes the driving force of industrial growth and development. This
basically due to their great potential in ensuring diversification and expansion of industrial production as
well as the attainment of the basic objectives of development. SMES utilize local raw materials and
technology thereby aiding the realization of the goal self reliance. Also, government at various levels
(local, state and federal levels) have in one way or the other focus on the performance of SMESS for
economic gains.
Statement of Problem
The Nigeria national economy is characterized by mirage of problems which has constituted a sleepless
night to developmental oriented governance. The most disturbing thing in the country is the menace of
unemployment. Nigeria is faced with the challenge of curbing increase in crime rate, unprecedented
increase in prostitution, high mortality rate, and political thurggery among others which are traceable to
youth unemployment (Safiriyu and Njogo, 2012). More so, dwindling economic growth and development
attributable to insufficient number of economic activities call for people to engage in entrepreneurship in
the form of small and medium scale enterprises especially at such time as this which on the long run will
translate to improve and sustainable economic growth and development otherwise, the country will suffer
relegation in the committee of nations.
There is need to embark on the study to investigate the effect of small business operation on the economic
survival of people in a nation. This study remain germane by examine the influence of entrepreneurial
business operation on economy survival of Nigeria people in Ilorin metropolitan area. Specifically, the
study will answer the following research question:
? Does promotion and development of small scale business operation improve employment of Ilorin
residents?
? Is there any relationship between entrepreneurial process and economy development?
? Is improvement in infrastructure attributed to small scale business operations?
Research Hypothesis
The hypotheses for this study are stated in the null form as follows:
H
0
1: Small businesses orientation does not have effect on the employment, productivity,
and economic survival.
H
02
: There is no significant relationship between Profitability and Entrepreneur business process.
Literature Review
SMEs has been defined in different ways by many authors. What constitutes a small business varies widely
around the world. Small businesses are normally privately owned corporations, partnerships, or sole
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proprietorships. According to Adelaja (2008), in Nigeria, the small and medium industry enterprises
investment scheme (SMIEIS) defines SMEs as any enterprises with a maximum asset base of two hundred
million naira excluding land and working capital and with a number of staff employed not less than ten or
more than three hundred.
The development of many countries is often measured by such indices as the level of industrialization,
modernization, urbanization, gainful and meaningful employment for all those who are able and willing to
work, income per capital, equitable distribution of income and the welfare and quality of life enjoyed by the
citizenry. However, there has been great increase, over the years, in the interest of nations on SMEs.Also in
Nigeria, SMEs represent the overwhelming majority of industrial capacity in developing countries. A fact
confirmed by (Ajayi,1997; Ayozie,2011) Where it was postulated that presenting small scale business in
Nigeria constitute over 80 percent of all registered companies, occupying positions in agro based and allied
industries, rubber based, leather shoes industries, chemical, electronics, general merchandising, restaurants,
dress making, cane-chairs ,leather products ,pomade and toiletries ,animal feeds and husbandry, printing
etc.
Emmanuel and Daniya(2012) identified problems facing the economy of Nigeria When they said “Despite
the abundant natural resources, the country still finds it very difficult to discover her developmental bearing
since independence .Quality and adequate infrastructural provision has remained a night-mare, the real
sector among others have witnessed downward performance while unemployment rate is on the increase.
Basil(2005) suggested that “given the vital and salutary role and contributions, which the SMEs play in
other developed economies, and considering the on-going reforms by the government of Nigeria, which are
primarily aimed at creating wealth, reducing poverty, generating employment, re-orienting values, and
stimulating real economic growth, it becomes compelling for the SME sub-sector to be revamped
,overhauled and energised towards playing its expected roles .He further mentioned that the SMEs remain a
veritable vehicle for such an expected complete turnaround in the economy of Nigeria.
In concrete terms, Ayozie (2011) expressed that small scale industries constitute a greater percentage of all
registered company in Nigeria, and they have in existence for a quite a long time. Majority of the small
scale industries developed from the cottage industries to small enterprises-which is the bases of self
reliance and hence, economic growth particularly when SME is manufacturing and export oriented.
Increasingly, economic development experts are abandoning traditional approaches to economic
developments that rely on recruiting large enterprises with tax breaks, financial incentives, and other
inducements, Instead, they are relying on building businesses from the ground up and supporting the
growth of existing enterprises. The first is to develop and support entrepreneurs and small businesses. The
second is to expand and improve infrastructure and to develop or recruit a highly skilled and educated
workforce. Both efforts depend in large part on improving the quality of life in the community and creating
an attractive business climate (Kelly, 2007).
Another justification for the role played by small scale industries in development identified by Yusuf
(2010), is that they, small scale industries ensure a more equitable distribution of national income and at the
same time facilitates an effective mobilization of resources (which were hitherto lying idle) of capital and
skill. This is especially true in Nigeria where incomes are low and domestic market too thin for the
development of capital intensive industry to levels large enough to create employment opportunities to any
significant level. He further expressed that small scale industries also complement the agricultural sector by
providing employment during the agricultural slack season after harvest. In both the developed and
developing countries, the government is turning to small and medium scale industries as a means of
economic development and a verifiable means of solving problems. It also a seedbed of innovation,
invention and employment. Presently in Nigeria, SMES assist in promoting the growth of the country’s
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economy, hence all the levels of government at different times have policies which promote the growth and
sustenance of SMEs. Small scale industries orientation is part of the Nigerian history.
Ahmed (2006) also stated that, “the small and medium scale industry is seen as a key to Nigeria’s growth
and alleviation of poverty and unemployment in the country”. Therefore, promotion of such enterprises in
developing economies like Nigeria is of paramount importance since it brings about a great distribution of
income and wealth, economic self-independence, entrepreneurial development employment and a host of
other positive, economic uplifting factors. This is agreed upon by Abiodun, 2010 in his study where he
stated that small and medium scale enterprises have been long recognised as an instrument of economic
growth and development. This growing recognition has led to the commitment of World Bank group on
SMEs sector as core element in its strategy to foster economic growth, employment and poverty alleviation.
There is no doubt that small scale enterprises exist in most economic environment (Aremu and Adeyemi,
2011).
Impact of SMEs on the Economy
SMEs have no doubt been indeed recognized as the main engine of economic growth and development, a
major variable for promoting private sector, development and partnership. (Basil, 2005). He further said
that the key roles of SMEs include mobilization of domestic savings for investment, significant
contribution to Gross Domestic Product (GDP) and Gross National Income (GNI), harnessing of local raw
materials, employment creation poverty reduction and alleviation, enhancement in standard of living,
increase in per capital income, skills acquisition, advancement in technology and expert growth and
diversification. Other parameters usually used to measure the performance of SMEs include percentage of
working population employed by the SMEs in a given country or economy, the percentage contribution to
the country’s GDP, managerial and technical capacity building, percentage of of revenue internally
generated or percentage of total PAYE accruing to the government from the SMEs employees, yearly
increase in average household income (Basil, 2005). He continued by saying “aside from providing
opportunities for employment generation, SMEs help to provide effective means of curtailing rural-urban
migration and resource utilization.
By largely producing intermediate product for use in large scale companies, SMEs contribute to the
strengthening of industrial inter linkages and integration. Also, Yusufu 2010 agreed by stating that it can,
among other things, help promote agro based industries, which is another important threshold for
development in industrially backward area of the world. Small scale industries can also help curb
rural/urban migration in which cities are prone to, thus, reducing unemployment, crime and other vices as a
result of the menace of such movement. Most importantly is that it can complement large industries in
producing goods and services which are hitherto imported. In agreement with the others, Ayozie 2011
expressed that SMEs have contributed greatly to Nigeria’s development by the provision of employment,
marketing of goods and services and the growth and development if the rural areas. It has also brought
about the growth of indigenous entrepreneurship in Nigeria. he further stated that “ the provision of
employment, innovation and areas marketing for goods and services which are offered for sales”. A lot of
youths, retired workers and out of school graduates are now gainfully employed, thereby reducing the
unemployment rate and its attendant’s social complication of armed robbery and white collar crime. They
contribute to the labour market by absorbing an ever growing supply. In doing this, they have sufficiently
helped to curtail the rising unemployment in Nigeria.
On this premises, Kelly (2007) disagreed with this notion of qualitative impact of SMEs on the economy.
He said the overarching question is whether promoting entrepreneurship and small businesses make sense
as an economic development strategy. He concludes that it probably does but with some caveats. Small
businesses are potent job creators, but so are large businesses. The attribution of the bulk of net job creation
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to small businesses arises largely from relatively large job losses at large firms, not to especially robust job
creation by small firms. More importantly, data show that on average, large businesses offer better jobs
than small businesses, in terms of both compensation and stability. Though, he later suggested that small
businesses remain a significant source of new jobs in the United States. However, some scholars have
contrary opinion as to the impact of SMEs. One of them said, there is little doubt amongst proponents of
private sector development that entrepreneurship is the key to economic growth and development (Etebefia
and Akinkumi). Kelly 2007 also suggest in his study that small scale businesses may not be quiet the
fountainhead of job creation they are purported to be, especially when it comes to high paying jobs that are
stable and offer good benefits. Big film jobs are typically better jobs also, Emmanuel and Daniya,2012
Harnessing the economic potential of SMEs Nigeria is still a mirage since several policies aimed at small
and middle scale enterprises development did not stand the test of time due to poor implementation, erratic
financing of schemes initiated by the government and other administrative bottle necks.
Methodology
The study area was Ilorin, Kwara-State, South-western Nigeria; a choice based on its strategic location as
part of largest city with peace business solution, (Nigeria Business group, 2008). Both Primary and
secondary data were used. The primary Data was obtained through questionnaires design and administered
to small and medium scale business Owner in Ilorin south local government area. The responses were
keyed into the computer and analyzed using Statistical Package for Social Sciences (SPSS) analytical. The
SPSS has the incredible capabilities and flexibilities of analyzing huge data within seconds and generating
an unlimited gamut of simple and sophisticated statistical results including simple frequency distribution
tables, polygons, graphs, pie charts, percentages, cumulative frequencies, binomial and other distributions.
Non-parametric statistical test Such as ANOVA and Chi-Square was used to test the formulated
hypotheses, hypothesis one was analyse using ANOVA while Chi-Square was used to analyse hypothesis
using SPSS Package/Software.
Results and Discussion
The detailed result obtained during this study is attached in the appendix. A total of 50 respondents with
62% male and 38% female aged between 20 and 50 years were interviewed during the course of this
research.
Table 1 shows the age of respondents
Age of respondent
Frequency Percent Valid Percent
Cumulative
Percent
below 20 2 4.0 4.0 4.0
between 20-50 32 64.0 64.0 68.0
above 50 16 32.0 32.0 100.0
Total 50 100.0 100.0
Source; Survey, 2014.
58% of the respondents were found to have been in business at least five years while 30% of the
entrepreneurs started business started business within two to five years while 12% started business less than
2 years.
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Table 2; shows the age of the business
Age of business
Frequency Percent Valid Percent
Cumulative
Percent
below 2yrs 6 12.0 12.0 12.0
2-5yrs 15 30.0 30.0 42.0
above 5yrs 29 58.0 58.0 100.0
Total 50 100.0 100.0
Source; Survey, 2014.
A good number of the businesses (44%) are involved in trading of manufactured goods (Fig1). 38% are
involved in manufacturing while only 18% are involved in service rendering. Result of analysis from one
way analysis of variance show that there is a significant relationship between the type of business
(manufacturing, trading and service)and profitability/progress of the business (p=0.009).
Below figure shows the percentage of respondents that are involved in the different types of Business.
Source; Survey, 2014.
Figure 1; types of small business in Ilorin
About 98% (Fig2.) of the respondents are profitable in their small scale business with 40% making profit
between the range of 1-50%, 26% making double and 32% making more than double. This 32% can be
considered as very profitable. The level of profitability is shown in figure2 below.
Source; Survey, 2014.
Figure 2. showing how profitable a small business
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From the analysis, it was observed that even though a higher percentage made profit, a number of
them(40%) made a profit of N200,000 – N500,000., while 26% made a profit between N600,000 –
N1,000,000 and only 32% made a profit above N1,000,000 annually. This is represented in figure 3 below.
Source; Survey, 2014.
Figure 3. Annual profit of small scale business.
The result of this research as regards employment showed that there is relationship between employment
and small scale business. The higher the small scale business, the higher the employment created. The use
of analysis of variance showed there is a significant relationship between small scale business and
employment (p=0.00). Also, 42% of the reason why the government should encourage small scale business
establishments as suggested by the people was to improve and increase employment. This is shown in
figure 5.
Source; Survey, 2014.
Figure 4. Impact of small scale Business
58% of the respondents agreed to have increased their employment of more staffs while the other
percentage still retained the number of people they employed when starting up or have reduce the total
number of their employee.
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Figure 5 below shows how small scale businesses have increased the number of their staffs over the years.
Source; Survey, 2014.
Figure 5. SMEs Impact on employment Rate.
However, 32% has doubled the number of their staffs, 26% still retain the number of their staffs, while 18%
has employed or increase the total number of employment more than half. Also, 70% of those employed
fall between the age range of 20-40, this suggest that a higher percentage of youth are employed by small
scale businesses. A vast majority of the respondents confirmed that there were infrastructural developments
introduced to the area as a result of small scale business operation. The majority of those in business over
5years (58%) agreed that there have been roads, electricity, housing projects etc as a result of small scale
business operation in Ilorin. The relationship between infrastructure and the age of the business (p?0.03).
The infrastructures that have been introduced as a result of small scale businesses in Ilorin south as gotten
by the research is depicted in figure 6 below.
Figure 6. SMEs Impact on Infrastructural Development.
Test of Hypotheses
H
01
: Small businesses orientation does not have effect on the employment, productivity,
and economic survival.
The rational test of hypothesis was to confirm the doubt about whether small business orientation Influence
economic survival in term of employment, Business profitability and infrastructure development.
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Table 3: analysis of variance between small business Orientation and Economic survival.
Source; Survey, 2014.
For there to be a positive effect, P ? 0.05. From the ANOVA analysis, considerable level is 0.03. This
negates the hypothesis and we reject the null hypotheses and conclude that Small businesses orientation
have effect on the employment, productivity and economic survival.
H
02
: There is no significant relationship between Profitability and Entrepreneur business process.
Table 4a: chi square analysis on profitability and entrepreneur businesses Process.
Observed N Expected N Residual
0 1 12.5 -11.5
N200,000-N500,000 20 12.5 7.5
N600,000-N1m 13 12.5 .5
above N1,000,000m 16 12.5 3.5
Total 50
Source; Survey, 2014.
The table4b below summarises the outcome of our model data in the chi-square analysis
Table4b: Test Statistics using Chi-square
Entrepreneur Profitability
Chi-Square 16.080
a
Df 3
Asymp. Sig. .001
Source; Survey, 2014.
The critical value of X2, i.e. the table value, at five percent (0.05) significance level = 12.5 Thus, we reject
null hypothesis if the calculated value of X2 is greater than 12.5 and vice versa. Also when p?0.05 reject
null, when p>0.05, retain null. From the chi analysis table above, X2 i.e chi value was 16.080 which is
greater than the expected value of 12.5. Also the significant level(p value) is equal to 0.001. Thus, we reject
the null hypothesis. This means there is significant relationship between profitability and entrepreneur
businesses Process.
Conclusion
This research work investigated the impact of small scale business operation on the economic life of the
Ilorin people. The results of the research show that small scale business operation has a positive and
significant effect on the economy. From the analysis carried out and the data obtained from this research
work, the result validates that Small scale business operations contribute to the economic growth of a
nation. Also, there is a significant relationship between small scale business operations and the
productivity. Establishment of small scale businesses brings at least 50% increase in profitability and
Sum of Squares Df Mean Square F Sig.
Between Groups 21.732 2 10.866 3.790 .030
Within Groups 134.768 47 2.867
Total 156.500 49
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productivity has the age of the business increase. There is positive relationship between small scale
business and employment. The higher the small scale business established the more employment of youths
increase. In the long run, infrastructures are improved in the areas where the small scale businesses are
operational and located. Infrastructures such as electricity, roads, street lights, healthcare centres, financial
institutions etc are established over a time. This is attributed to the presence of small scale businesses.
Recommendations
Based on the findings, the following recommendations are made:
? Government should allow tax free for small scale businesses especially at the first few years of
establishment.
? There should be provision for low interest loan and credit facilities which should be made readily
available to the small scale business operations.
? People and consumers should be encouraged to patronize local products and services, this will
increase the output of the small scale business as well as increase their profitability.
? Also, there should be creation of training small scale business operators on such things as marketing,
ICT, financial management etc as all these skills are necessary to run a successful business.
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