Description
Small scale enterprises sector has been recognized as an integral component of economic development and a crucial element in the effort to lift countries out of poverty . Onwuka and Ile posited that the reason why government attention has always been on the small scale enterprises is that the total aggregate of small scale enterprises has the potential for accelerating the pace of economic development of the country and has successfully played positive role in the economic life of Nigerian in the rural areas.
IOSR Journal of Business and Management (IOSR-JBM)
e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 16, Issue 5. Ver. I (May. 2014), PP 19-25
www.iosrjournals.org
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Challenges of Small Scale Industries in Sustainable Development
in Nigeria.
Arinze Gabriel Onukwuli¹, Uche G Akam Ph.D², Ebele Mary Onwuka Ph.D
1
School Of Business, Federal College Of Education (Technical) Umunze, Anambra State, Nigeria
2
Department Of Business Administration, Anambra State University, Igbariam
3
Department Of Business Administration, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria.
Abstract: The study examines the challenges of small scale industries in sustainable development and
employment generation in Anambra State, Nigeria. A sample size of 204 (managers of small scale industries in
Anambra State) respondents determined at 5% level of significance for sample error, using Eastman Kodak’s
sample size for inventory population was selected from a population of 12,627 managers using stratified
random sampling method for the purpose of questionnaire administration. Z-test statistic for population
proportion was conducted to test the variation of opinion on challenges’ affecting small scale industries
sustainability and employment generation. Results revealed that small scale industries in Anambra State exist in
an environment characterized by both internal and external challenges which impact negatively on
sustainability and employment generation. Variables identified as hindrances and were termed: credit is not
often assessable; managerial competence; technology; research and development; and credit records are
internal factors. While corruption and crime; multiple taxation; high competition and infrastructural base are
external factors. The study calls for the financial regulatory system and government intervention in today’s
volatile operating environment. Therefore, the financial system is urged to extend credit facilities with mineral
interest rates and stimulus packages to small scale industries while the various tiers of government should deal
decisively with crime and corruption in both public and business communities coupled with streamlined taxation
and improvement in infrastructural base.
Keywords: Employment Generation, Environmental Challenges, Small Scale Industries, Sustainable
Development,
I. Introduction
Small scale enterprises sector has been recognized as an integral component of economic development
and a crucial element in the effort to lift countries out of poverty [1]. Onwuka and Ile [2] posited that the reason
why government attention has always been on the small scale enterprises is that the total aggregate of small
scale enterprises has the potential for accelerating the pace of economic development of the country and has
successfully played positive role in the economic life of Nigerian in the rural areas. Most often, small scale
industries make more efficient use of inputs like idle resources, local raw materials, capital and labour than
larger industries [3].
Poverty is becoming an obvious phenomenon worldwide and in line with Ikoni [4], poverty is
noticeable in all parts of the world but the extent, severity and characteristics of poverty may differ within and
across countries. Ajala and Fakoye in Ogbuabor, Malaolu and Elias [5] confirmed that poverty is more
pronounced in developing countries such as Sub-Saharan African and South Asia. According to UNDP [6]
reports, the human poverty index (HPI) value for Nigeria was 36, ranking 114 out of 135 countries measured.
This was in line with Ogbuabor et. al., [5] that 50% of Africa?s population lives below the poverty line, while in
Nigeria about 70
0
/
0
of the population are poor.
What necessitates this study is the Nigerian vision of being counted among the first twenty economies in the
world by 2020 cannot be attained in a socio economic milieu of hunger, poverty and unemployment among a
large segment of its population. However this will only be a reality if the necessary imperatives that meets the
need of the present generation without compromising the ability of future generation to meet their need.
According to Ogbuabour et. al., [5] the concept of small scale enterprise offers a variable policy option in the
fight against poverty and unemployment in Nigeria.
II. Review Of Related Literature
2.1 Conceptual Review
There is no single criterion for classifying business enterprises as small or medium scale business
globally. However, evidence from literature shows that in defining small scale business, reference is usually
made to some quantifiable measures such as; number of people employed by the enterprises, investment outlay,
the annual turnover (sales) and the asset value of the enterprises or a combination of these measures (Olabisi et.
Challenges Of Small Scale Industries In Sustainable Development In Nigeria.
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al., [1]. Olagunju [11] taking into consideration the reality of Nigeria situation, views small scale business
enterprises to include all business venture which are set up to provide one satisfaction (utility) or the other for a
defined market target and with capital and asset base as low as N5,000 and as high as N1,000,000. Onwuka and
Ile [2] defined small scale business as „any manufacturing plants employing fewer than five hundred workers,
investing not more than eight hundred thousand dollars ($800,000) or one million dollars ($1,000,000) and
which does dominates its industry?. Olayiwola and Ogundele [12] opined that a small scale industry is an
industry with labour size of between 11 - 100 or a total cost of not more than N50 million, including working
capital but excluding cost of land. Fabayo, [13] classify small scale business in Nigeria into three sectors:
Production sector including agricultural processing, manufacturing and mining; Service sector and Trading
sector including wholesale and retails.
This study will take on the productive sector (manufacturing) of Fabayo [13] with Olayiwola and
Ogundele [12] classification of an enterprise with labour size of between 11 - 100 or a total cost of not more
than N50 million, including working capital and excluding cost of land.
Sustainable development as an evolving concept, which is continually redefined and reinterpreted can
be formally stated as a twin principle of intra and inter-generational equity [14]. The world council for
environment and development [15] defines sustainable development as development that meets present needs
without compromising the ability of future generation to meet their own needs. In other word, it is that
development that can stand a test of time. Sustainability implies the need to depart from hither to dominant
models of development that fail to balance the need of people and the planet in the pursuit of peace and
prosperity [16]. The sustainability debate anchored on the assumption that societies need to manage three types
of capital (economic, social and natural), which may be non-substitutable and whose consumption might be
irreversible [17]. It emphasized the importance of capacity building and by capacity building Obi [18] opines
that is an externally or internally initiated process designed to help individuals and groups to appreciate and
manage their changing circumstances, with the objective of improving the stock of human, social, financial,
physical and natural capital in an ethically defensible way.
Anyadike et. al., [19] in their studies on entrepreneurship development and unemployment generation
in Nigeria, relying extensively on current articles from other scholars on entrepreneurship development and
government statistical documentation defined unemployment as the conglomerate of youth with diverse
background, willing and able to work, but cannot find any. Employment generation according to American
economic association committee in Ogbuabor et. al., [5] means the availability of employment so that those
qualified people who seek job at prevailing rates can find them in productive activities without considerable
delay.
2.2 Theoretical Review
The theoretical foundation of this study anchored on;
The vicious circle of poverty theory, and
The unbalanced growth theory
The vicious circle of poverty theory was propounded by Nurkse [20], posits that there are circular
relationships known as the vicious circles of poverty that tend to perpetuate the low level of development in less
developed countries like Nigeria. In other words, there is a circular related forces tending to act and react upon
one another in such a way as to keep a country in a state of poverty. For instance, a poor man not having enough
to eat, being under fed, his health may be weak, being physically weak, his working capacity is low, which
means that he is poor, which in turn means that he will not have enough to eat and so on. The basic vicious
circle stems from the fact that total productivity in low income countries is low due to deficiency of capital
market imperfections, economic backwardness and underdevelopment, and this circle operated both on demand
and supply sides [5]. The significant of the vicious circle of poverty theory to this study is that poverty once
started could continue for generation unless there is outside intervention. This intervention may be in form of
tackling the challenges of small scale industries in sustaining development and employment generation in
Nigeria.
The theory of unbalance Growth postulated by Hirschman [20] states that advanced and deliberately
unbalancing the economy according to pre-designed strategy is the best way to achieve economic growth in an
underdeveloped country. According to this theory investment should be in selected sectors rather than
simultaneously in all sectors of the economy. The significant of this theory to the study is that investment in
strategically selected industries (small scale industries) of the economy will lead to new investment opportunity,
employment generation so as to pave the way for further economic development.
2.3 Empirical Review.
Akeredolu in Ogbuabor et. al, [5] examined 52 indigenous small scale enterprises in Lagos State,
Nigeria in order to establish the relationship between small scale enterprises and poverty reduction. The findings
Challenges Of Small Scale Industries In Sustainable Development In Nigeria.
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indicate that one of the most effective ways of poverty reduction in Lagos State is the development of small
scale enterprises. The business environment has a significant impact on the growth of small scale enterprises.
For small scale enterprises to grow, it is important to strengthen not only the internal business environment but
also the external business environment. This was in line with the World Bank [14] report that environment have
either a negative or positive effect on the growth or failure of small scale enterprises in Africa.
Kadiri [22] explored the contributions of small scale enterprises to employment generation in Nigeria
by providing sectorial analysis of the efficacy of small scale enterprises as a vibrant tool for employment
generation. The Bionomical logistic regression analysis was explored as the tool for statistical analysis. Result
of the study shows that the sector was unable to achieve this goal due to its inability to obtain adequate business
finance. Onakoya, Fasanya and Abdulrahman [23], studies on the impact of financing small scale enterprises on
economic growth in Nigeria, using quarterly time series data for 1992 to 2009. The results reveal that loan to
small scale enterprises have a positive impact on the economic performance while interest rate has a negative
impact on economic growth. They concluded that the worst obstacle confronting small scale industries in
Nigeria is managerial capacity, and access to capital or finance. Ighoroje and Oboro [24] examined the problems
of financing small scale business enterprises in Nigeria and the way forward. The study identified the sources of
finance, types of finance available for small business enterprises and problem inhibiting business enterprise in
Nigeria in securing funds for the smooth operation. The study concluded that adequate finance is indispensable
for the successful operations of small scale enterprises in Nigeria. Ikeanyionwu [25], study on entrepreneurship
skills for effective management of small scale business by entrepreneurs in Onitsha North local government area
of Anambra State. Result from the analysis shows that financial management skills which form the bedrock
upon which the success of any business can rest and grow are highly needed, other skill which are highly needed
are administrative skills, professional skills and information technology skills.
Akighir [26] work on rice processing and poverty reduction in Kwanda local Government Council of
Benue State Nigeria, The study measured poverty status using head count ratio and poverty gap measures. The
findings showed that rice processing reduced the poverty status of the respondents. The study identified the
challenges of rice processing to include; low capital, poor transportation network and low price of locally
processed rice among others. Idemobi [7], study on the problem of sustaining the growth of small scale and
medium enterprises in a typical Sub-Saharan African context applying Chi-square inferential statistic to sample
of 120 participants. The results found that poor infrastructural facilities (especially electricity, water and roads),
lack of access to formal source of credit, high incidence and prevalence of violent crime leading to high
operational costs are the major impediments to sustaining the growth and survival of small and medium
enterprises. The study specifically found that due to the high cost of production especially the high cost of self
generated electricity, small and medium enterprises collapse at an alarming rate in Nigeria. The World Bank
report in Onukwuli, Nwagbala, Ofodile and Umeifekwem [27] found out that about 70% of small scale
enterprises perceived corruption as an impediment to the firms. According to Umolu in Mba, [28] many
developing countries suffer from deplorable State of basic infrastructure (transportation, telecommunication, and
electricity). They indicated that part of alternative source of power to business in any part of Nigeria is about
one third of overall operation cost.
Scholars have indicated that starting a business is a risky venture and warn that the chances of small
scale business owners making it past the five year mark are very slim [1]; [7]. Successive Nigeria Government
has instituted poverty alleviation programs and job creation schemes through small scale businesses to alleviate
these problems of poverty and unemployment. Some of the programs include; National Economic
Empowerment and Development Strategy (NEEDS) in 2004; National poverty Eradication Programs (NAPEP)
in 2001; the National Directorate of Employment (NDE) in 1986; and Green Revolution (GR) in 1980.
Despite the efforts, supports and incentive programs to small scale industries in Nigeria, Akabueze [8]
clearly stated that it would seem reasonable to expect that small scale business would grow and flourish but the
rate of business failure continues to increase creating unemployment problem and poverty. According to NBS
[9] and Suleiman [10], the unemployment rate in Nigeria increased from 11.9% in 2005 to 12.7% in 2007,
14.9% in 2008, 19.7% in 2009, 21.4% in 2010 23.9% in 2011. Nigeria?s poverty incidence increased from
54.4% in 2004 to 69% in 2010. While the population in poverty increased from 68.7 million in 2004 to 112.5
million in 2010.
The problem of the study is to locate what could be the internal and external environmental challenges
for the high failures of small scale enterprises in Anambra State, Nigeria. The main objective of this study is to
explore the environmental constraints which could lead to non sustainability of small scale enterprises in
Anambra State, Nigeria. Specifically, the study intends to:
1. Identify the internal environmental constraints affecting small scale enterprises sustainability and employment
generation in Anambra State.
2. Identify the external environmental constraints affecting small scale enterprises sustainability and job creation
in Anambra State.
Challenges Of Small Scale Industries In Sustainable Development In Nigeria.
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In order to achieve these objectives the following questions were answered.
1. What are the internal environmental constraints that hinder small scale industries sustainability and
employment generation in Anambra State, Nigeria?
2. What are the external environmental challenges that pose obstacle to small scale industries
sustainability and job creation in Anambra State, Nigeria?
Arising from the background study, subsequent objectives of the study and research questions, the following
hypotheses were generated and tested:
Ho1: There is no significant variation between internal constraints of small scale industries sustainability and
employment generation.
Ho2: There is no significant variation between external constraints of small scale enterprises sustainability
and employment creation.
III. Materials And Methods
The survey research design method was used in the study. It involves using self designed sustainability
and employment generation questionnaire. The population of the study consists of all small scale enterprises that
engage in productive venture located in Anambra state. According to Olayiwola and Ogundele [12] the size of
business that fall into this category are those that employ between eleven (11) and one hundred (100). Statistics
provided from the registry of business and social development in the 21 local government council headquarters
of Anambra State show that the population of this level of small scale enterprises still operating in this area is
twelve thousand six hundred and twenty-four (12,624). A sample size of 225 participants determined at 5%
level of significance for sample error using Eastman Kodak?s sample size for inventory population formular [29]
was selected using proportionate stratified random sampling method for purpose of questionnaire
administration.
The instrument used in the study is closed-ended questionnaire. The questionnaire comprises of two
sections or parts. The scale used to measure the internal challenges construct in this study were derived from
instruments designed from previous study in which their reliability and validity were checked and reported.
Five internal environmental obstacles associated with sustainability and employment generation were selected
for analysis. The scale used to measure these five factors had already been constructed, used and tested by
Onukwuli et. al.,[27]. Each scale modified to four point likert-scale items. Degree of agreement varies from 1 –
4 representing “1” for strongly disagree, “2” for disagree “3” for agree and “4” for strongly agree. Onukwuli et.
al., [27] disclosed reliability by a test-retest using Pearson product moment correlation coefficient which yields
0.78 for internal environmental challenges.
Questions in external sustainability and employment generation of small scale enterprise were also
adapted and modified from previous research. The scale was constructed from four commonly used global items
like, generally speaking high competition affects your enterprise; crime, corruption and security of life and
property is a threat to survival and sustainable development of the enterprise; cost of doing business is high; and
failure of the government to provide good infrastructural base (water, electricity, effective communication
system, good road network to people and business environments). In order to establish the reliability of the
instrument, a pilot study was carried out on a sample of 20 managers of the small scale industries operating at
Nkpor, Idemili North Local Government area, Anambra State using test-retest method. The reliability test was
0.82, hence reliable.
The sustainable development and employment generation questionnaire responses of the respondents
were analyzed using mean score criterion (mean = 2.5) on a four point scale, while Z–test score for population
proportion was used to test the hypotheses at 5% level of significant. A total of 225 copies of the sustainable
development and employment generation questionnaire administered out of which five were not properly
completed while 16 were not returned and 204 (90.7%) were used for analysis.
IV. Results
The research questions formulated for this study were analyzed using mean score criterion. In other to
answer the research question one which states, “What are the internal environmental challenges of small scale
industries that hinder sustainability and employment generation in Anambra State”? Mean score criterion on
responses to questionnaire on firms? internal obstacles of small scale enterprises sustainability and employment
generation was employed. We accept as a factor if the mean score associated with a variable is equal or greater
than 2.5 and reject as a factor if the mean score associated with it is less than 2.5. The variable “credit is often
not assessable because of the cost of procuring it from the market based source” recorded the highest factor
with mean score of 3.19 while “establishment not easily located and networked to either crucial buyers or
sellers” variable recorded the least with mean score 2.54. Therefore the four factors are more than 2.5 mean
scores and are accepted as factors that hinders effective sustainability and employment generation in small scale
enterprises in Anambra State, Nigeria.
Challenges Of Small Scale Industries In Sustainable Development In Nigeria.
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To answer the research question two which state “What are the external environmental challenges of
small scale enterprises that hinders sustainability and employment generation in Anambra State, Nigeria. Result
of the analysis on firms external challenges indicated that the variables high competition; crime and corruption;
cost of doing business; and failure of government to provide good infrastructural base recorded above 2.5 on a
four point scale. Corruption, crime, security of life and property has shown the most important external
challenges to small scale enterprises sustainability and employment generation. The overall or weighted mean
score for external variables is 2.68.
Hypothesis one which states, “there is no significant variation in the opinion of the respondents on
internal constraints of small scale enterprises sustainability and employment generation in Anambra State
Nigeria was tested for significance using Z-test Statistic. The summary of results is shown in Table one.
Table 1: Summary of Z-test statistic and significance results on internal environmental constraints of small
scale enterprises sustainability and employment generation.
Variables n significance Z- statistic values decision rule
Level ( Z-cal Z-crit on null hypothesis
Internal environmental
constraints on sustainability 204 0.05 0.14 ±1.96 Accepted
and employment generation
Source: Results of empirical data, 2014.
Table 1 above, shows that a, ± Z (
= ± Z (0.25) = ± 1.96 is required for significance (two tailed test). Since
the calculated Z (0.14) is less than critical Z (±1.96) we accept the null hypothesis and conclude that there was
no significant variation between the opinions of managers or its representatives on internal constraint affecting
small scale enterprises sustainability and employment generation in Anambra State, Nigeria.
Hypothesis two which states, “there is no significant variation in the opinion of the respondents on external
constraints of small scale enterprises sustainability and employment generation in Anambra State, Nigeria was
tested for significance using Z-test Statistic. The summary of results is shown in Table two.
Table 2: Summary of Z-test statistic and significance results on external environmental constraints of small
scale enterprises sustainability and employment generation
Variables n significance Z- statistic values decision rule
( Z-cal Z-crit on null hypothesis
External environmental
constraints on sustainability 204 0.05 0.13 ±1.96 Accepted
and employment generation
Source: Results of empirical data, 2014
Table 2 above, shows that a, ± Z (
) = ± Z (0.025) = ± 1.96 is required for significance (two tailed test). Since
the calculated Z (0.13) is less than critical Z (±1.96), we accept the null hypothesis and conclude that there was
no significant difference between the opinions of managers or its representatives on external constraint affecting
small scale enterprises sustainability and employment generation in Anambra State, Nigeria
V. Disscussion Of Results
The first hypothesis which states „there is no significant variation between internal environmental
constraints of small scale industries sustainability and employment generation? was accepted. This shows that
internal obstacles encountered by small scale Industries in Anambra state affected their sustainability and
employment generation. The finding of this study agrees with the work of Nurkse [20] in his theory of vicious
circle of poverty. Result shows that the vicious circle of internal environmental constraints of small scale
industries once started could affect total productivity, economic backwardness, sustainability and employment
generation. The findings also have collaborated with the works of Ikeanyionwu [25]; Ighoroje and Oboro [24];
Kadiri [22]; and Onakoya et. el., [23] that managerial competence; credit not often accessible; and enterprise not
easily net worked is proved to have adverse relationship with small scale sustainability and employment
generation.
The second hypothesis which states that „there is no significant variation between external
environmental constraints of small scale industries sustainability and employment generation? was accepted.
Challenges Of Small Scale Industries In Sustainable Development In Nigeria.
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The result of interpretation agrees with work of Idemobi [7] on the problem of sustaining the growth of small
and medium enterprises in a typical Sub Saharan African context. The result found that poor infrastructural
facilities, high incidence and prevalence of crime leading to high operational cost are the major impediments to
sustaining the growth and survival of small scale and medium enterprises. The finding also collaborated with the
work of Umolu in Mba [28] that the alternative source of power to business in any part of Nigeria is about one
third of overall operation cost
VI. Conclusion And Recommendations
The aggregate of small scale industries has the potential for accelerating the pace of economic
development and employment generation of the country and has successfully played positive role in the
economic life of Nigerians in the rural areas. For small scale industries to perform such functions effectively
these challenges in the business environment must be addressed. The obstacles as identified and examined in the
study include; credit is not often assessable; competence and managerial skills are lacking; information
technology; and investment in research and development. Others are bad credit record; corruption, crime and
security of life and property; high cost of doing business; high competition and weak infrastructural base.
Based on these findings, this research work recommends that; the financial system is urged to extend
credits facilities with minimal interest rate as a means of resolving the challenges of credit not often assessable
and empowering emerging small scale industries through stimulus packages. More so, there is need for the
various tiers of government to deal decisively with crime and corruption in both public and business community
coupled with streamlining the multiple taxation and finally improvement in infrastructural facilities.
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doc_268493925.pdf
Small scale enterprises sector has been recognized as an integral component of economic development and a crucial element in the effort to lift countries out of poverty . Onwuka and Ile posited that the reason why government attention has always been on the small scale enterprises is that the total aggregate of small scale enterprises has the potential for accelerating the pace of economic development of the country and has successfully played positive role in the economic life of Nigerian in the rural areas.
IOSR Journal of Business and Management (IOSR-JBM)
e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 16, Issue 5. Ver. I (May. 2014), PP 19-25
www.iosrjournals.org
www.iosrjournals.org 19 | Page
Challenges of Small Scale Industries in Sustainable Development
in Nigeria.
Arinze Gabriel Onukwuli¹, Uche G Akam Ph.D², Ebele Mary Onwuka Ph.D
1
School Of Business, Federal College Of Education (Technical) Umunze, Anambra State, Nigeria
2
Department Of Business Administration, Anambra State University, Igbariam
3
Department Of Business Administration, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria.
Abstract: The study examines the challenges of small scale industries in sustainable development and
employment generation in Anambra State, Nigeria. A sample size of 204 (managers of small scale industries in
Anambra State) respondents determined at 5% level of significance for sample error, using Eastman Kodak’s
sample size for inventory population was selected from a population of 12,627 managers using stratified
random sampling method for the purpose of questionnaire administration. Z-test statistic for population
proportion was conducted to test the variation of opinion on challenges’ affecting small scale industries
sustainability and employment generation. Results revealed that small scale industries in Anambra State exist in
an environment characterized by both internal and external challenges which impact negatively on
sustainability and employment generation. Variables identified as hindrances and were termed: credit is not
often assessable; managerial competence; technology; research and development; and credit records are
internal factors. While corruption and crime; multiple taxation; high competition and infrastructural base are
external factors. The study calls for the financial regulatory system and government intervention in today’s
volatile operating environment. Therefore, the financial system is urged to extend credit facilities with mineral
interest rates and stimulus packages to small scale industries while the various tiers of government should deal
decisively with crime and corruption in both public and business communities coupled with streamlined taxation
and improvement in infrastructural base.
Keywords: Employment Generation, Environmental Challenges, Small Scale Industries, Sustainable
Development,
I. Introduction
Small scale enterprises sector has been recognized as an integral component of economic development
and a crucial element in the effort to lift countries out of poverty [1]. Onwuka and Ile [2] posited that the reason
why government attention has always been on the small scale enterprises is that the total aggregate of small
scale enterprises has the potential for accelerating the pace of economic development of the country and has
successfully played positive role in the economic life of Nigerian in the rural areas. Most often, small scale
industries make more efficient use of inputs like idle resources, local raw materials, capital and labour than
larger industries [3].
Poverty is becoming an obvious phenomenon worldwide and in line with Ikoni [4], poverty is
noticeable in all parts of the world but the extent, severity and characteristics of poverty may differ within and
across countries. Ajala and Fakoye in Ogbuabor, Malaolu and Elias [5] confirmed that poverty is more
pronounced in developing countries such as Sub-Saharan African and South Asia. According to UNDP [6]
reports, the human poverty index (HPI) value for Nigeria was 36, ranking 114 out of 135 countries measured.
This was in line with Ogbuabor et. al., [5] that 50% of Africa?s population lives below the poverty line, while in
Nigeria about 70
0
/
0
of the population are poor.
What necessitates this study is the Nigerian vision of being counted among the first twenty economies in the
world by 2020 cannot be attained in a socio economic milieu of hunger, poverty and unemployment among a
large segment of its population. However this will only be a reality if the necessary imperatives that meets the
need of the present generation without compromising the ability of future generation to meet their need.
According to Ogbuabour et. al., [5] the concept of small scale enterprise offers a variable policy option in the
fight against poverty and unemployment in Nigeria.
II. Review Of Related Literature
2.1 Conceptual Review
There is no single criterion for classifying business enterprises as small or medium scale business
globally. However, evidence from literature shows that in defining small scale business, reference is usually
made to some quantifiable measures such as; number of people employed by the enterprises, investment outlay,
the annual turnover (sales) and the asset value of the enterprises or a combination of these measures (Olabisi et.
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al., [1]. Olagunju [11] taking into consideration the reality of Nigeria situation, views small scale business
enterprises to include all business venture which are set up to provide one satisfaction (utility) or the other for a
defined market target and with capital and asset base as low as N5,000 and as high as N1,000,000. Onwuka and
Ile [2] defined small scale business as „any manufacturing plants employing fewer than five hundred workers,
investing not more than eight hundred thousand dollars ($800,000) or one million dollars ($1,000,000) and
which does dominates its industry?. Olayiwola and Ogundele [12] opined that a small scale industry is an
industry with labour size of between 11 - 100 or a total cost of not more than N50 million, including working
capital but excluding cost of land. Fabayo, [13] classify small scale business in Nigeria into three sectors:
Production sector including agricultural processing, manufacturing and mining; Service sector and Trading
sector including wholesale and retails.
This study will take on the productive sector (manufacturing) of Fabayo [13] with Olayiwola and
Ogundele [12] classification of an enterprise with labour size of between 11 - 100 or a total cost of not more
than N50 million, including working capital and excluding cost of land.
Sustainable development as an evolving concept, which is continually redefined and reinterpreted can
be formally stated as a twin principle of intra and inter-generational equity [14]. The world council for
environment and development [15] defines sustainable development as development that meets present needs
without compromising the ability of future generation to meet their own needs. In other word, it is that
development that can stand a test of time. Sustainability implies the need to depart from hither to dominant
models of development that fail to balance the need of people and the planet in the pursuit of peace and
prosperity [16]. The sustainability debate anchored on the assumption that societies need to manage three types
of capital (economic, social and natural), which may be non-substitutable and whose consumption might be
irreversible [17]. It emphasized the importance of capacity building and by capacity building Obi [18] opines
that is an externally or internally initiated process designed to help individuals and groups to appreciate and
manage their changing circumstances, with the objective of improving the stock of human, social, financial,
physical and natural capital in an ethically defensible way.
Anyadike et. al., [19] in their studies on entrepreneurship development and unemployment generation
in Nigeria, relying extensively on current articles from other scholars on entrepreneurship development and
government statistical documentation defined unemployment as the conglomerate of youth with diverse
background, willing and able to work, but cannot find any. Employment generation according to American
economic association committee in Ogbuabor et. al., [5] means the availability of employment so that those
qualified people who seek job at prevailing rates can find them in productive activities without considerable
delay.
2.2 Theoretical Review
The theoretical foundation of this study anchored on;
The vicious circle of poverty theory, and
The unbalanced growth theory
The vicious circle of poverty theory was propounded by Nurkse [20], posits that there are circular
relationships known as the vicious circles of poverty that tend to perpetuate the low level of development in less
developed countries like Nigeria. In other words, there is a circular related forces tending to act and react upon
one another in such a way as to keep a country in a state of poverty. For instance, a poor man not having enough
to eat, being under fed, his health may be weak, being physically weak, his working capacity is low, which
means that he is poor, which in turn means that he will not have enough to eat and so on. The basic vicious
circle stems from the fact that total productivity in low income countries is low due to deficiency of capital
market imperfections, economic backwardness and underdevelopment, and this circle operated both on demand
and supply sides [5]. The significant of the vicious circle of poverty theory to this study is that poverty once
started could continue for generation unless there is outside intervention. This intervention may be in form of
tackling the challenges of small scale industries in sustaining development and employment generation in
Nigeria.
The theory of unbalance Growth postulated by Hirschman [20] states that advanced and deliberately
unbalancing the economy according to pre-designed strategy is the best way to achieve economic growth in an
underdeveloped country. According to this theory investment should be in selected sectors rather than
simultaneously in all sectors of the economy. The significant of this theory to the study is that investment in
strategically selected industries (small scale industries) of the economy will lead to new investment opportunity,
employment generation so as to pave the way for further economic development.
2.3 Empirical Review.
Akeredolu in Ogbuabor et. al, [5] examined 52 indigenous small scale enterprises in Lagos State,
Nigeria in order to establish the relationship between small scale enterprises and poverty reduction. The findings
Challenges Of Small Scale Industries In Sustainable Development In Nigeria.
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indicate that one of the most effective ways of poverty reduction in Lagos State is the development of small
scale enterprises. The business environment has a significant impact on the growth of small scale enterprises.
For small scale enterprises to grow, it is important to strengthen not only the internal business environment but
also the external business environment. This was in line with the World Bank [14] report that environment have
either a negative or positive effect on the growth or failure of small scale enterprises in Africa.
Kadiri [22] explored the contributions of small scale enterprises to employment generation in Nigeria
by providing sectorial analysis of the efficacy of small scale enterprises as a vibrant tool for employment
generation. The Bionomical logistic regression analysis was explored as the tool for statistical analysis. Result
of the study shows that the sector was unable to achieve this goal due to its inability to obtain adequate business
finance. Onakoya, Fasanya and Abdulrahman [23], studies on the impact of financing small scale enterprises on
economic growth in Nigeria, using quarterly time series data for 1992 to 2009. The results reveal that loan to
small scale enterprises have a positive impact on the economic performance while interest rate has a negative
impact on economic growth. They concluded that the worst obstacle confronting small scale industries in
Nigeria is managerial capacity, and access to capital or finance. Ighoroje and Oboro [24] examined the problems
of financing small scale business enterprises in Nigeria and the way forward. The study identified the sources of
finance, types of finance available for small business enterprises and problem inhibiting business enterprise in
Nigeria in securing funds for the smooth operation. The study concluded that adequate finance is indispensable
for the successful operations of small scale enterprises in Nigeria. Ikeanyionwu [25], study on entrepreneurship
skills for effective management of small scale business by entrepreneurs in Onitsha North local government area
of Anambra State. Result from the analysis shows that financial management skills which form the bedrock
upon which the success of any business can rest and grow are highly needed, other skill which are highly needed
are administrative skills, professional skills and information technology skills.
Akighir [26] work on rice processing and poverty reduction in Kwanda local Government Council of
Benue State Nigeria, The study measured poverty status using head count ratio and poverty gap measures. The
findings showed that rice processing reduced the poverty status of the respondents. The study identified the
challenges of rice processing to include; low capital, poor transportation network and low price of locally
processed rice among others. Idemobi [7], study on the problem of sustaining the growth of small scale and
medium enterprises in a typical Sub-Saharan African context applying Chi-square inferential statistic to sample
of 120 participants. The results found that poor infrastructural facilities (especially electricity, water and roads),
lack of access to formal source of credit, high incidence and prevalence of violent crime leading to high
operational costs are the major impediments to sustaining the growth and survival of small and medium
enterprises. The study specifically found that due to the high cost of production especially the high cost of self
generated electricity, small and medium enterprises collapse at an alarming rate in Nigeria. The World Bank
report in Onukwuli, Nwagbala, Ofodile and Umeifekwem [27] found out that about 70% of small scale
enterprises perceived corruption as an impediment to the firms. According to Umolu in Mba, [28] many
developing countries suffer from deplorable State of basic infrastructure (transportation, telecommunication, and
electricity). They indicated that part of alternative source of power to business in any part of Nigeria is about
one third of overall operation cost.
Scholars have indicated that starting a business is a risky venture and warn that the chances of small
scale business owners making it past the five year mark are very slim [1]; [7]. Successive Nigeria Government
has instituted poverty alleviation programs and job creation schemes through small scale businesses to alleviate
these problems of poverty and unemployment. Some of the programs include; National Economic
Empowerment and Development Strategy (NEEDS) in 2004; National poverty Eradication Programs (NAPEP)
in 2001; the National Directorate of Employment (NDE) in 1986; and Green Revolution (GR) in 1980.
Despite the efforts, supports and incentive programs to small scale industries in Nigeria, Akabueze [8]
clearly stated that it would seem reasonable to expect that small scale business would grow and flourish but the
rate of business failure continues to increase creating unemployment problem and poverty. According to NBS
[9] and Suleiman [10], the unemployment rate in Nigeria increased from 11.9% in 2005 to 12.7% in 2007,
14.9% in 2008, 19.7% in 2009, 21.4% in 2010 23.9% in 2011. Nigeria?s poverty incidence increased from
54.4% in 2004 to 69% in 2010. While the population in poverty increased from 68.7 million in 2004 to 112.5
million in 2010.
The problem of the study is to locate what could be the internal and external environmental challenges
for the high failures of small scale enterprises in Anambra State, Nigeria. The main objective of this study is to
explore the environmental constraints which could lead to non sustainability of small scale enterprises in
Anambra State, Nigeria. Specifically, the study intends to:
1. Identify the internal environmental constraints affecting small scale enterprises sustainability and employment
generation in Anambra State.
2. Identify the external environmental constraints affecting small scale enterprises sustainability and job creation
in Anambra State.
Challenges Of Small Scale Industries In Sustainable Development In Nigeria.
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In order to achieve these objectives the following questions were answered.
1. What are the internal environmental constraints that hinder small scale industries sustainability and
employment generation in Anambra State, Nigeria?
2. What are the external environmental challenges that pose obstacle to small scale industries
sustainability and job creation in Anambra State, Nigeria?
Arising from the background study, subsequent objectives of the study and research questions, the following
hypotheses were generated and tested:
Ho1: There is no significant variation between internal constraints of small scale industries sustainability and
employment generation.
Ho2: There is no significant variation between external constraints of small scale enterprises sustainability
and employment creation.
III. Materials And Methods
The survey research design method was used in the study. It involves using self designed sustainability
and employment generation questionnaire. The population of the study consists of all small scale enterprises that
engage in productive venture located in Anambra state. According to Olayiwola and Ogundele [12] the size of
business that fall into this category are those that employ between eleven (11) and one hundred (100). Statistics
provided from the registry of business and social development in the 21 local government council headquarters
of Anambra State show that the population of this level of small scale enterprises still operating in this area is
twelve thousand six hundred and twenty-four (12,624). A sample size of 225 participants determined at 5%
level of significance for sample error using Eastman Kodak?s sample size for inventory population formular [29]
was selected using proportionate stratified random sampling method for purpose of questionnaire
administration.
The instrument used in the study is closed-ended questionnaire. The questionnaire comprises of two
sections or parts. The scale used to measure the internal challenges construct in this study were derived from
instruments designed from previous study in which their reliability and validity were checked and reported.
Five internal environmental obstacles associated with sustainability and employment generation were selected
for analysis. The scale used to measure these five factors had already been constructed, used and tested by
Onukwuli et. al.,[27]. Each scale modified to four point likert-scale items. Degree of agreement varies from 1 –
4 representing “1” for strongly disagree, “2” for disagree “3” for agree and “4” for strongly agree. Onukwuli et.
al., [27] disclosed reliability by a test-retest using Pearson product moment correlation coefficient which yields
0.78 for internal environmental challenges.
Questions in external sustainability and employment generation of small scale enterprise were also
adapted and modified from previous research. The scale was constructed from four commonly used global items
like, generally speaking high competition affects your enterprise; crime, corruption and security of life and
property is a threat to survival and sustainable development of the enterprise; cost of doing business is high; and
failure of the government to provide good infrastructural base (water, electricity, effective communication
system, good road network to people and business environments). In order to establish the reliability of the
instrument, a pilot study was carried out on a sample of 20 managers of the small scale industries operating at
Nkpor, Idemili North Local Government area, Anambra State using test-retest method. The reliability test was
0.82, hence reliable.
The sustainable development and employment generation questionnaire responses of the respondents
were analyzed using mean score criterion (mean = 2.5) on a four point scale, while Z–test score for population
proportion was used to test the hypotheses at 5% level of significant. A total of 225 copies of the sustainable
development and employment generation questionnaire administered out of which five were not properly
completed while 16 were not returned and 204 (90.7%) were used for analysis.
IV. Results
The research questions formulated for this study were analyzed using mean score criterion. In other to
answer the research question one which states, “What are the internal environmental challenges of small scale
industries that hinder sustainability and employment generation in Anambra State”? Mean score criterion on
responses to questionnaire on firms? internal obstacles of small scale enterprises sustainability and employment
generation was employed. We accept as a factor if the mean score associated with a variable is equal or greater
than 2.5 and reject as a factor if the mean score associated with it is less than 2.5. The variable “credit is often
not assessable because of the cost of procuring it from the market based source” recorded the highest factor
with mean score of 3.19 while “establishment not easily located and networked to either crucial buyers or
sellers” variable recorded the least with mean score 2.54. Therefore the four factors are more than 2.5 mean
scores and are accepted as factors that hinders effective sustainability and employment generation in small scale
enterprises in Anambra State, Nigeria.
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To answer the research question two which state “What are the external environmental challenges of
small scale enterprises that hinders sustainability and employment generation in Anambra State, Nigeria. Result
of the analysis on firms external challenges indicated that the variables high competition; crime and corruption;
cost of doing business; and failure of government to provide good infrastructural base recorded above 2.5 on a
four point scale. Corruption, crime, security of life and property has shown the most important external
challenges to small scale enterprises sustainability and employment generation. The overall or weighted mean
score for external variables is 2.68.
Hypothesis one which states, “there is no significant variation in the opinion of the respondents on
internal constraints of small scale enterprises sustainability and employment generation in Anambra State
Nigeria was tested for significance using Z-test Statistic. The summary of results is shown in Table one.
Table 1: Summary of Z-test statistic and significance results on internal environmental constraints of small
scale enterprises sustainability and employment generation.
Variables n significance Z- statistic values decision rule
Level ( Z-cal Z-crit on null hypothesis
Internal environmental
constraints on sustainability 204 0.05 0.14 ±1.96 Accepted
and employment generation
Source: Results of empirical data, 2014.
Table 1 above, shows that a, ± Z (
= ± Z (0.25) = ± 1.96 is required for significance (two tailed test). Since
the calculated Z (0.14) is less than critical Z (±1.96) we accept the null hypothesis and conclude that there was
no significant variation between the opinions of managers or its representatives on internal constraint affecting
small scale enterprises sustainability and employment generation in Anambra State, Nigeria.
Hypothesis two which states, “there is no significant variation in the opinion of the respondents on external
constraints of small scale enterprises sustainability and employment generation in Anambra State, Nigeria was
tested for significance using Z-test Statistic. The summary of results is shown in Table two.
Table 2: Summary of Z-test statistic and significance results on external environmental constraints of small
scale enterprises sustainability and employment generation
Variables n significance Z- statistic values decision rule
( Z-cal Z-crit on null hypothesis
External environmental
constraints on sustainability 204 0.05 0.13 ±1.96 Accepted
and employment generation
Source: Results of empirical data, 2014
Table 2 above, shows that a, ± Z (
) = ± Z (0.025) = ± 1.96 is required for significance (two tailed test). Since
the calculated Z (0.13) is less than critical Z (±1.96), we accept the null hypothesis and conclude that there was
no significant difference between the opinions of managers or its representatives on external constraint affecting
small scale enterprises sustainability and employment generation in Anambra State, Nigeria
V. Disscussion Of Results
The first hypothesis which states „there is no significant variation between internal environmental
constraints of small scale industries sustainability and employment generation? was accepted. This shows that
internal obstacles encountered by small scale Industries in Anambra state affected their sustainability and
employment generation. The finding of this study agrees with the work of Nurkse [20] in his theory of vicious
circle of poverty. Result shows that the vicious circle of internal environmental constraints of small scale
industries once started could affect total productivity, economic backwardness, sustainability and employment
generation. The findings also have collaborated with the works of Ikeanyionwu [25]; Ighoroje and Oboro [24];
Kadiri [22]; and Onakoya et. el., [23] that managerial competence; credit not often accessible; and enterprise not
easily net worked is proved to have adverse relationship with small scale sustainability and employment
generation.
The second hypothesis which states that „there is no significant variation between external
environmental constraints of small scale industries sustainability and employment generation? was accepted.
Challenges Of Small Scale Industries In Sustainable Development In Nigeria.
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The result of interpretation agrees with work of Idemobi [7] on the problem of sustaining the growth of small
and medium enterprises in a typical Sub Saharan African context. The result found that poor infrastructural
facilities, high incidence and prevalence of crime leading to high operational cost are the major impediments to
sustaining the growth and survival of small scale and medium enterprises. The finding also collaborated with the
work of Umolu in Mba [28] that the alternative source of power to business in any part of Nigeria is about one
third of overall operation cost
VI. Conclusion And Recommendations
The aggregate of small scale industries has the potential for accelerating the pace of economic
development and employment generation of the country and has successfully played positive role in the
economic life of Nigerians in the rural areas. For small scale industries to perform such functions effectively
these challenges in the business environment must be addressed. The obstacles as identified and examined in the
study include; credit is not often assessable; competence and managerial skills are lacking; information
technology; and investment in research and development. Others are bad credit record; corruption, crime and
security of life and property; high cost of doing business; high competition and weak infrastructural base.
Based on these findings, this research work recommends that; the financial system is urged to extend
credits facilities with minimal interest rate as a means of resolving the challenges of credit not often assessable
and empowering emerging small scale industries through stimulus packages. More so, there is need for the
various tiers of government to deal decisively with crime and corruption in both public and business community
coupled with streamlining the multiple taxation and finally improvement in infrastructural facilities.
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