Description
its a high grade complete project for the department of management science under the faculty of social sciences, submited to the University of education winneba, ghana.
ABSTRACT Small scale enterprises cover a wide range of industrial units and most occupy an important position in the industrial structure of any developing country. Across the world, small scale enterprises are crucial for economic growth, poverty alleviation, wealth creation and promotion of more pluralistic societies. They also serve as source of input for the multinationals thereby replacing existing foreign sources. The study also, is to examine the prospects and challenges of small scale enterprise in Nigeria as well as to examine the problem, source of finance to small and medium scale enterprises. Chi-square was used to carry out the analysis and the result obtained revealed that small scale enterprises has play a significance impact in increasing employment opportunities in Nigeria. In conclusion, adequate attention should be accorded to small scale enterprise in other to enhance good development and growth of the Nigeria economy. And also, the promotion of small scale enterprises should not be left only to government, but Banks, private consultancy firms, Multi-national companies, and training centers should encourage small scale enterprises by giving greater impetus to this sub-sector.
CHAPTER ONE
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1.0
Introduction The small scale enterprises cover a wide range of industrial units and
1.1 Background of the Study most occupy an important position in the industrial structure of any developing country. From the past thirty six years some negative images and influences of the colonial past, have continued to hinder the realization of the identity and personality. The struggle therefore includes the need to free the economy from the salvage of poverty. The struggle is socio-economic and it falls within the strategic realm of industrial organizations, alternatively referred to by some scholars as “business economics” or “industrial economics”. The future belongs to small scale enterprises so to say, in the economic development of the nation. It is therefore, imperative to give much attention to the prospects and challenges of small scale enterprises in Nigeria. There are many small scale enterprises today in this country. They are in form of sole proprietorship or partnership. It has also been observed that a lot of these small scale enterprises spring up here and there everyday and a lot are either abandoned by their proprietors, or die natural deaths and subsequently fail to achieve the objectives for which they were set up to achieve. Small scale enterprises have a crucial role to play in the development of an economy and industrial development that they cannot be ignored. Infact, small scale enterprises development should be one of the country’s development objectives. They can serve as source of inputs for the multinationals thereby replacing existing foreign sources. They are also training grounds for local skills and entrepreneurs, could become channels for mobilizing local savings, ensuring a more equitable distribution of income and reducing the migration of manpower from the urban areas. Across the world, Small and Medium Scale enterprises (SMES) are crucial for economic growth, poverty alleviation, wealth creation and
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promotion of more pluralistic societies. The ability of small scale enterprises to initiative a nation to the vanguard of industrialization is proven by the fact that it was the major instrument of development of the Asian Tiger (Singapore, South Korea, Taiwan China, Malaysia, Thailand, Philippines and Indonesia) and their ability to harness potentials of their small and medium scale enterprises put them on the right footing in their pursuit of a self reliant industry and a developed country. A business whether small or big, simple or complex, private or public e.t.c is created to provide competitive prices. Business in Nigeria has been classified as small, medium and large. However, a small scale enterprise can be defined by the criteria of project costs, capital, cost turnover by the employee e.t.c. Japan defined small scale enterprises as “manufacturing establishment employing 300 or less than 100 million years. According to Obitayo (2001). The concept of small scale enterprises varies from one country to country. He said statistically small scale Hence, enterprises was defined as those employing 10-99 workers. those employing more than 100 persons were classified as large scale. Anyanwu (2001) believed that each country derives it’s own definition based on the role small scale enterprises are expected to play in such economy and the programmes designed to achieved such goals. More also, the Central Bank of Nigeria (CBN) in it’s credit and monetary guidelines, defined small scale enterprises as those whose capital investment does not exceed N5,000,000 (including land and working capital) or whose turnover are not more than N25,000,000 annually. Small scale enterprises are those that compared to large enterprises that needs a shorter gestation period and relatively smaller market to be economical.
enterprises employing less than ten (10) workers were classified as micro and
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The impact of small scale enterprises in promoting growth and stability to manufacturing activities in Nigeria was identified in the National Development plan. Consequently in the Second National Development plan, (1970-1974). The Federal Government gave special attention to the development of small scale enterprises particularly in rural areas. It was suggested that is order to fill obvious needs and gaps; projects that can supply products such as rubber items, glass windows, exhaust pipes, radiators, interior upholstery, springs, cotton seeds, textile materials, bottles, household glass wine e.t.c are likely to spring up possibly through initiatives taken in the private sector. Also, along with the other proposals such as the creation of Industrial Development Centres and the financing of Small Scale Industries Credit Schemes in the Third Development plan, it was proposed that a study of effective methods of encouraging small scale industries should be conducted during the development plan period. In various studies, the United Nation Development Programme (UNDP) and the United Nation Industrial Development Organization (UNIDO) have revealed that the only way the existing enterprises can expand is to provide more job opportunities, backward integration and increase the use of locally available raw materials, the studies affirm that small scale enterprises provide the leading road to industrialization and development of indigenous entrepreneurship. In Nigeria, the Federal Government seems to have recognized this fact because in 1970, the section was accorded a high priority in the second National Development plan (1970-1974). Today, the spirit is still every much a live with succeeding regimes committing themselves towards their attainment but whether they have actually lived up to the realization of the laudable goals is another matter entirely.
1.2
Statement of the Problem
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According to Samuelson (2000) most small business are here today and gone tomorrow, the average life expectancy of business being a dozen years. Some will terminate in bankruptcy, many will be voluntarily brought to a close with signs of regret for cash and an expensive lesson learnt, others will come to a joyous, and while their owners learn a good jobs, better than the former business. Research has shown that the financial base of small scale enterprise in low and banks interest rate is high. The problem facing most small scale enterprises is that of access to institutional credit due to prevailing high interest rate regime. In spite of the establishment of many support institution like Nigeria Industrial Development Bank (NIDB) Nigerian Bank for Commerce and Industries (NBCI), Poverty Alleviation Programme (PAP) and many other they were not implemented in a way to achieve the set objectives.
1.3
Purpose of the Study The aims and objectives of this study is to realize the immense
contribution of small scale enterprises sub-sector in the economy. This research project also aim to highlight, and make critical study of the problems of small scale enterprises and offer useful recommendation that would enhance the implementation of the best solution so as to prevent the reoccurrence of such problem.
1.4
Significance of the Study The study is designed to expose the who be proprietors of small scale
industries to the problems they would encounter in the course of the business, and also highlight the remedies, and thereby keep them in a better
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position to run the business in the most optimal manner. The study is also of significance to the researcher in that he is exposed to research work.
1.5
Research Questions In view of the problem statement and in order to achieve the objectives
of the study the following becomes essential.
? What is the problem encounter by the operators of small scale
enterprises before and after the introduction of the business?
? What is the cause of failure of small scale enterprise? ? What is the major challenge facing the operation of the company? ? NAFDAC is a Government Agency that ensures safety of every
consumable product in the country hence its rigorous conditions does your products registered?
? Do the proprietors of small scale enterprise have any encouragement
from government?
1.6
Research Hypothesis In order to approach the research question empirically, some major
hypothesis was formulated and tested to enable us provide answer to the research questions earlier mentioned and provide a necessary sense of direction to the study.
Hypothesis One Alternative Hypothesis (H1): The present economic hardship is to a large extent; affecting the activities of small scale enterprise in Nigeria, the case study inclusive.
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Null Hypothesis (H0): The present economic hardship is to some extent; not affecting the activities of small scale enterprise in Nigeria, the case study inclusive. Hypothesis Two Alternative Hypothesis (H1): The extent to which small scale enterprise help increase employment opportunity in Nigeria is very deep, the case study inclusive. Null Hypothesis (H0): The extent to which small scale enterprise help increase employment opportunity in Nigeria is not very deep, the case study inclusive. Hypothesis Three Alternative Hypothesis (H1): Small scale business has support from the government Null Hypothesis (H0): Small scale business does not have support from the government Hypothesis Four Alternative Hypothesis (H1): The rate of which small scale business spring up gives hope to the young school leavers to start small scale business Null Hypothesis (H0): The rate of which small scale business are winding up discourages young school leavers to start small scale business
1.7
Scope of Delimitation The research project is designed to examine the challenges of establishing and managing small scale business in Nigeria. The scope of the research will be limited and coverage of a designated small scale business i.e Raggolis Water Nigeria Limited in Ikorodu Lagos
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This is imputed to economic of time and limited resources at hand.
1.8
Definition of Terms Business: Business is a social entity where individual interact to convert input into an output for public consumption. Promotion: (a) This is the act of elevating or raising an individual to a position, greater responsibility authority, status and pay. (b) It could also be said to consists of those activities, which are designed to bring the company’s goods and services to the awareness of customers. Policy: This involves the general principle or guide that guides the operation of an organization. Hypothesis: A suggested or answer to a problem. Entrepreneur: The individual, who organizes, manages and assumes the risks of a business. The originator of a business. Working Capital: Cash or assets that will be converted into cash within one year. Technology: The application of scientific knowledge to the solution of problem. Objective: The aim of goal or a business. Credit: The giving of goods and services for a promise of future payments. Bankruptcy: A state of financial rain, which results was a business or a person cannot meet outstanding debts. CHAPTER TWO
2.1
Review of Literature There is hardly any unique or usually accepted definition of a Small
and Medium Scale Enterprises (SMEs), because this classification is subjective and quantitative judgment (Ekpeyong, D.B.E and M.O Nyong,
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1992), rather each country tends to define these categories of enterprises based usually on the peculiar needs of public policies. Even within a country, the definition change over time depending on circumstance and specific objectives of the institutions and assistance rendered to promote this business. The importance of the Small and Medium Scales Enterprises (SMEs) to social and economic development in African and is almost undisputed in Nigeria. Throughout the continent, SMEs promotion is priority in the policy agenda of most African countries as its contribution to poverty alleviation and economic development is widely recognized. There is no doubt that SMEs constitute the seedbed for the forth coming generation of African entrepreneurs. Today SMEs in the developing world face more competitive pressures than ever before. The nature of competition has changed: it is now fiercer and it is base upon a wider range of factors. Indeed, whilst price continues to matter, particularly in domestic markets, factors such as quality, flexibility reliability and speed of delivery constitute the basis for dynamic competitiveness. Small and Medium Scale Enterprises are generally regarded as the driving force of economic growth, job creation and poverty reduction and alleviation in developing countries. They have been the means through which accelerated economic growth and rapid industrialization have been achieved (Harris and Gibson; 2006; Sauzer, 2005; Van Eeden, Viviers and Venter, 2004; Arinactive, 2002; Kiggundu, 2002; Yusuf and Schindehutte 2000; Monk, 2000). Japan defined Small Scale Enterprises as “manufacturing establishment employing 300 or less and investing less than 100 million years. According to the United States of American (U.S.A) defined small scale enterprises as manufacturing fewer than 500 workers, investing not more than 800,000 dollars to 1,000,000 dollars and which do not dominate the market.
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To the United Nations Industrial Development Organization (UNIDO) regards “Small Scale Enterprises as those with less than 150 employers and its payroll for such enterprises should be inform of:
? The traditional craftsman and artisans ? The small manufacturing enterprises which produce a variety of
consumer and simple producer goods. To the Central Bank of Nigeria (CBN) in it’s credit and monetary policy guidelines, defined small scale enterprises as those whose capital investment does not exceed N5,000,000 (including land and working capital) or whose turnover are not more than N25,000,000 annually. According to the Nigerian Bank for Commerce and Industry (NBIC) defined small scale enterprises as “an establishment whose capital investment does not exceed N500,000 this including building, machines and equipment and working capital but excluded cost of land. To the Centre for Industrial Research and Development (CIRD) Obafemi Awolowo University, Ile-Ife defined small scale enterprises as those with the total investment capital not exceeding N250,000 and employing not more than fifty (50) full time workers. More so, to the 3rd and 4th National Development Plan, Small Scale Enterprises is one that employs between (1) and ten (10) persons and whose capital outlay is not less than N100,000 to N150,000, or where investment in machinery and equipment do not exceed N600,000. To the Administrative Staff College of Nigerian (ASCON) Badagry, defined small scale industries as an industry whose cost of capital does not exceed N750,000 including the total cost of the land. In Nigeria, the Small and Medium Scales Industries Enterprises Investment Scheme (SMIEIS) defines, SMEs as any enterprises with a maximum asset based of N200 million excluding land and working capital and with a number of staff employed not less than 10 or more than 300.
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Furthermore, the Companies and Allied Matter Decree number 1 of 1990 section 376(2) defined small scale industries as industries, whose turn over is not more than (N2,000,000) or whose asset value (net worth) is not more than (N1,000,000). Also, Obitayo (2001) says economic literature on small scale enterprises lacks uniformity in the acceptable Anyanwu, (2001) believed that each country derives it’s own definition based on the role small size of small scale enterprises. The concept of small scale industries varies from country to country. He said that statistically small scale enterprises was defined as those employing 10-99 workers. Hence, enterprises employing less than ten(10) workers were classified as micro and those employing more than 100 person were classified as large scale.scale enterprises are expected to play in such economy and the programmes designed to achieved such goals. The Federal Government of Nigeria, following the introduction of the Structural Adjustment Programme (SAP) in 1986, took a bold step in four direction. In a global context, a general definition of Small and Medium Scale Enterprises (SMEs) using size and scale of operation not easy, but within the fixed co-ordinates of National boundaries, it might be relatively easier. At the 13th council meeting of National Council on Industry held in July, 2001, micro, small, medium enterprises were defined by the council as follows:
?
Micro or Cottage Enterprises- An industry with a labour size of not more than ten (10) workers or total cost of not more than N1.5millon including working capital but excluding cost of land.
?
Small Scale Enterprises: An industry with a labour size of between 11100 workers or a total cost of not more than N50million, including working capital but excluding cost of land.
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?
Medium Scale Industry:- An industry with a labour size of over 300 workers or total cost of land of over N200 million including working capital but excluding cost of land. In recent years, both the Federal, State Government and recently local
government have stepped up effort to promote the development of (SMEs) through increased incentive schemes including enhanced budgetary allocation for technical assistance programme. New lending schemes and credit institutions such as National Economics and Credit Reconstruction Fund (NERFUND), World Bank Assisted Small Scale Enterprises loans schemes, Nigeria Export and Import Bank (NEXIM), the commercial and merchant Bank, Universal Bank which were abolished in 2001. The economic rationale for general SMEs support in African especially in Nigeria builds consensus as it is relatively easy to justify. Some policies should be corrected for market failures that impose penalties on SMEs, helping them overcome their structural internal and external constraints on their growth. There is, however, more controversy on the type of interventions, institution, mechanisms, and conditions under which SMEs should be supported in a cost effective manner. Unfortunately, all these credit scheme have not been able to adequately address the fundamental problems which have constrained (SMEs) access to credit. The low crediting rating of this class of enterprises is attributable largely to their weak capital base, high mortality rate, low productivity and shortage managerial skill. Indeed, problems of poor access to finance appear to have developed into a vicious circle into leading to slow growth, stagnation and even rapid demise of SMEs. Inspite of the view that constitute a small business, all the above definition share common idea that small businesses are generally low in terms of investment and annual business turnover. The main criteria used throughout the world to consider and describe a business as being small scale includes the following:
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? The number of employees. ? Sales volumes/value ? Financial strength ? Relative size. ? Initial capital outlay. ? Independent ownership ? Type of industry ? Comparison with its past standard.
Most private companies are small scale business for one or more of the following reason above.
2.2
Evolution of Small Scale Enterprises Most countries begin their process of industrialization with small scale
enterprises. During the industrialization evolution, they formed the bedrock of industrialization in most countries that have developed quite successfully. These countries have deliberately evolved a coherent and effective industrial development culture which gave premium to small industries. These countries include most European countries, the United Kingdom champion it. The Japanese, out of their sheer desire to survive and develop a viable industrial structure, deliberately created an atmosphere that encouraged the thriving of small scale enterprises, which eventually metamorphosize into huge industrial success. The Koreans, more so, have equally succeeded through this line. Taiwan as well as other South-East Asian countries are also forging ahead along similar lines to becoming an industrial wonder. There is always a very strong linkage between industrial success and industrial culture and mentality especially with respect to recognizing and promoting the role of small scale enterprise in the economy.
2.3
Characteristics of Small Scale Enterprises in Nigeria
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In the literature, small scale enterprises are usually determined by various qualitative parameters. Such parameters include the number of people employed in the enterprises, the capital investment outlay, the size of the plant capacity the sophistication of the equipment, sales turnover, profit margin and perhaps market share. According to Dr. Poju Adeleke (1999) in Business and Management Journal Pg 16, says the existing official definition, such as the Federal Ministry of Industries, Central Bank of Nigeria (CBN) e.t.c, also emphasize nominal financial outlay as the operational indices for defining small scale enterprises. However, it is interesting to provide some real African examples of how these firms look like. For instance and unlike subsistence microenterprises, growth oriented SMEs often constitute full time, employments for both entrepreneurs and the workforce. Research carried out in Tanzania, Uganda and Zimbabwe (Trulsson, 1999) shows that the most competitive growth SMEs are often run by well educated entrepreneurs (at least with Alevels) who come from families where there is a prior record of enterprising activity, and that they have been employed in formal paid jobs before venturing into their own business. Small scale enterprises are characterized by simple management, finance and production techniques. They yield quick returns unlike larger enterprises which depends on the financial co-operation of both their owners and lending institution, small scale enterprises are financial largely by owner’s capital and exceptional case(s), borrowing from friends or relatives. Moreover, small scale enterprises are also characterized by low capital base, low capital intensity, relatively simple production technology, limited market power, restricted/narrow production lines.
2.4
Importance of Small Scale Enterprises in Nigeria. Many economies, developed and developing have come to realize the
value of small business. They are seen to be characterized by dynamism
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witty innovations, efficiency, and their small size allows for faster decision making process Government all over the world have realized the importance of this category of companies and have formulated comprehensive public policies to encourage, support and fund the establishment of SME’s. Developments in small and medium enterprises are a sine-qua-non for employment generation, solid entrepreneurial base and encouragement for the use of local raw materials and technology. It has encouraged self employment for many youths both in rural and urban areas. The spirit of successful entrepreneurship has taken over the mind of Nigerians, who believe in themselves and in the goal of self employment, instead of relying on government jobs. Through the establishment of man power development support schemes, and their involvement in the training and retraining of entrepreneurs, small scale industries have provide a pool of potential entrepreneurs and business people who are well equipped to start and successfully, manage industries whether small or large, not only in Nigeria, but overseas, successful business people in Nigeria like the Aliko Dangotes, the Ibrus, Mike Adenuga, Illodigwe and the Orji Kalus started as SMEs before the growth of their various business into conglomerates. It has reduced the dependence in government and large firms on salaries employment. This is evidenced from the liberalization policy of the government in telecommunication and education sectors as a lot of companies have been established to provide support staff and employment for Nigerians Small scale enterprises have stimulated rural development and achievement of a meaningful level of broad economic and rural development. To reduce the migration from rural to the urban centers. It has upgraded the social status of Nigerian youths, by showcasing them as very successful entrepreneurs and operators of small scale enterprises.
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According to Ikeano (2001) pointed out that “most of the intermediate products used by bigger enterprises are produced by small scale enterprises. In other words small scale enterprises are the stepping stone for large scale enterprises and the bed rock of national economy. Also, Owualah (2001) ascertained that small scale enterprises offer employment opportunities for unemployment and or underemployed in the urban sector. He went further to say that their impact on employment is given to the opportunities they provide for the skilled or the urban and rural workers. Philips (2002) also enumerated that small scale enterprises contribute immensely to employment opportunities. He said this to justify his ascertion “small scale enterprises generate significantly higher employment and output for a given amount of investment compared with large enterprises they contribute about 70% to industrial development. Yakubu (2002) revealed that the Third National Development plan specifically stated that “the main objectives of the government for the development of small scale enterprises are the creation of employment opportunities, mobilization of local resources, mitigation of rural migration, and more. He also revealed the fact that evidence had shown that Nigerian’s small scale sector makes more bigger contribution to both the Gross Domestic Product (GDP) and employment than the large scale sector in the 1990’s.
2.5
Why Promoting Small Scale Enterprises? It is widely accepted that SMEs constitute the backbone of the private Given the new international context and the
sector in any economy.
emergence of the so called “new competition (Best, 1990). It is very difficulty to conceive a buoyant economy that does not rely on the competitiveness and dynamism of its SMEs. In the developing world, not only do they contribute to economic growth but also have a tremendous development impact on societies and their peoples. SMEs are now seen as
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the main means, if not the only, to take people out of poverty and to build on better prospects for future generations. The contribution of SMEs to economic and social development results from the following aspects:
? SMEs make up over than 90 percent of business units in the world, and
account for between 50-60 percent of total employment (Kennedy et al,1999). If the informal sector was to be taken into account, it is believed that SMEs in African would account for almost 99 per cent of all business units (Chen 2001). Interestingly, research has shown that a high proportion of those businesses are likely to be run within the household (Chen et al,1999).
? SMEs are the main generators of employment opportunities for the
poor, and hence, main contributors to poverty alleviation. In Nigeria, SMEs account for most of the jobs generated in the private sector through the expansion of existing enterprises and the creation of new startups.
? SMEs contribute to a more equitable distribution of income as they
provide remuneration opportunities to a large group of very poor uneducated workers and women with few alternative source of income.
? SMEs stimulate local and regional development, as they tend to
agglomerate to make an effective and rational use of resource endowments.
? SMES promote an entrepreneurship culture and other business related
skills due to their low entry barriers.
? SMEs provide free on the job training and practical exposure that
cannot be obtained at school. In developing countries, the low impediments to set up businesses in unregulated activities can stimulate youth entrepreneurship.
2.6
Problems of Small Scale Enterprises in Nigeria
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SMEs face two main sets of problems that put them in disadvantages vis-à-vis by players. The first set is inherent to begin small, while the second reflects distortions of market factors. Firstly, the size of the production clearly matter. Smallness can be a serious handicap to achieving economics of scale and efficient production. Higher unit costs reduce profit and limit savings, machine reinvestments in the firm unlikely to occur. This “low equilibrium” trap has serious implications for growth prospects and cooperation strategies of SMEs. Low prices and limited personal constitution the main means to reduce costs and the only basis for competitiveness. This ‘vicious circle’ is difficult to break particularly in developing countries where market failure and macroeconomics imbalances are more acute. Attracting qualified labour is another major factor limiting the growth, prospects and productive capacity of SMEs. This is particularly relevant in manufacturing industries, as SMEs tend to operate in the so-called ‘3D’ sectors dirty, difficult and dangerous. Second, SMEs may face segmented factor markets. In other words, large firms may have greater or more privileged access to impact, credit, labour, infrastructural, information and technology markets. There are economic reasons for this; providers of productive factors find it easier, safer and cheaper to deal with a few large customers than a range of small and dispersed ones. Moreover, the major problems of small scale enterprises consist of financial organization and technology. The financial problems derived from the fact that the funds available to the business originated from the owners of the enterprises. The ability to borrow is derived by the small number/amount of assets it owns and the fact that it cannot raise capital from organized capital market such as small exchange market. Furthermore, borrowing from financial institutions, is very difficult and whether this is possible, the cost of such loan(s) is/are much higher,
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always reflecting the leads estimate of risk and uncertainty attached to the agreement/contract. The organizational problem is an outcome of the enterprises small size and the consequent inability to remain highly specialized workers/staff in the lines of accounting and management. The demand for the skills of such workers to be unemployment. Also and party due to financial problems smalls enterprises cannot easily afford to employ highly qualities personnel as existed in large scale organization. The technological aspect of the problems also linked with the management problems of small scale enterprises. Funds to purchase the latest invention in the area many of these small scale businesses do not embark on research and development programmes so that new ideas can be generated.
2.7
Factors to Promote Small and Medium Enterprises Development in Nigeria: An Analytical and Policy Framework Identifying the factors that enhance the competitive performance and
growth of SMEs is a necessary step in the process of cost-effective policy making. However, understanding SME behaviour is not easy. Within a region or country, it is common to find major variations the economic performance, capabilities and growth dynamics of enterprises. The reason for this is that the small enterprise economy is far from homogenous. This, is not surprising that under over-arching economic policies companies respond differently according to their own particular nature and materials characteristics. Among scholars and SMEs practitioners there appears to be a set of factors: those interval of the firms and those external to them. (a) INTERNAL FACTORS:- Among the internal elements, the framework distinguishes between general and capability factors, which are clearly interlinked with each other. The existence of all these and other interval factors and their multiple combination is what makes the SME spectrum so heterogeneous. Among the most important general SMEs factors are:
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? SIZE OF FIRM: Size matters for economic performance. Although
economies the scale are difficult to reap and unit costs are inversely reflected to firm size; small players can benefits from greater flexibility and specialization. There is however genetic problem inherit to begin small. Even a further breakdown within the SMEs category-between micro enterprises (iv employed) and others SMEs- throws light on divergent patterns of growth and performance (Mead and Liedholm, 1998).
? SKILLS OF FOUNDER: There is no need to emphasize that the skills
of the founder either gained through formal education or previous working experience, are related to firm performance. Research has shown that the most advanced and efficient SMEs are run be welleducated entrepreneurs with previous working experience in other business (Trulsson, 1999).
? LEGAL STATUS OF FIRM: (King 2001) said some SMEs may
benefit from operating in deregulated markets whereas other SMEs need to be registered to take advantage of existing institutions and support schemes.
? LOCATIONS: According to (Mc Cormick, 1999), he said firms
benefits from strategic location. He said for instance, African SMEs that are chistered and located in urban areas show better growth prospects than those operating in isolation and remote areas.
? OWNERSHIP:
It
has
been
widely
researched
that
women
entrepreneurs often have different goals and employ different business strategies than men. The acknowledgement of gender related patterns of enterprises dynamics is vital for policy formulation (Chen, 2001).
? DEVELOPMENT CYCLE OF FIRM: Research shown that the
problems, needs and challenges faced by SMEs vary out the different phases in their development cycle (Mean 1998).
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? POSITION IN THE VALUE CHAIN: An important aspect of SMEs
development is the ability of firms to move up to the value chain from labour intensive and low value-added operations to more sophisticated and rent rich activities. (Humpharey and Schmitz 2000).
? NATURE OF INDUSTRIAL ACTIVITY/SECTOR: It has been argued
that SMEs involved in capital extensive activities, enjoy higher returns and often generate. Richer rents than those firms operating in labour intensive industries (Lall, 2000 a). These general characteristics have an enormous influence on another set of ‘advances’ factors which are also internal of firms. b) EXTERNAL FACTORS: Whilst internal factors are important, the development of the SMEs sector needs of a conducive ‘business environment’ and specific support measures. These external factors can correct market failures and basis towards small firms. Some of the most important factors include.
?
MACROECONOMIC ENVIRONMENT: SMEs benefit from a stable macroeconomic environment, tight inflation control, low budget deficits, reasonable interest rates, and a competitive real exchange rate.
?
REGULATION AND POLICY FRAMEWORK: A conducive policy framework for SMEs often requires a market friendly regime that is opened up to new markets.
?
PHYSICAL INFRASTRUCTURE: The importance of a decent physical infrastructure for economic growth is undisputed. In Nigeria, the lack of functional and reliable basic traditional and modern infrastructure has clearly weighted against the competitive performance of SMEs.
?
FINANCIAL ASSISTANCE: It is widely acknowledged that financial constraints limit the investment capacity of SMEs, hence hampering their growth. In Nigeria, the problems are not so much the lack of finance but rather the accessibility by SMEs.
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?
TECHNICAL ASSISTANCE: It is often provided by horizontal and sector oriented public institutions as a complementary way to assist SMEs.
?
NETWORKING: In the context of economic globalization, begin connected to regional and international network of firms has become a must (Pedersen 1997) has stressed that the poor distribution networks in East and Southern and west Africa is a major factor accounting for the interior growth performance of small production.
2.8
Causes and Failure of Small Scale Enterprises in Nigeria. There are several of failures of small scale enterprises in Nigeria. Some
of these causes are lack of management skills, lack of technical/technological skills, lack of commercial skills and others. Mike (2001) highlighted that resistance to control from outside small enterprises causes limitation to source of finance, and which consequently affects it’s the maps of their financial structure. He also said that “the fact that most of the small scale enterprises do not want to be controlled by outsides also causes their failure. He went further by pointing to the fact that “majority of the small enterprises are owned by properties who have neither adequate general education nor the required skill to manage such enterprises. Consequently, the management of such businesses are on the basis of trial and error”. Olashore (2001) states that ‘lack of knowledge of economic environment and the entrepreneur poor preparation of project are the major problem facing the small scale enterprises in Nigeria and hence cause their failure. However, Olashore (2001) advised the government to increase its commitment by providing the necessary incentives, education and infrastructures and generally conducive environment, protective policies for the development of the small scale enterprise, Kolawole (2000) further enumerated another causes of failure as ‘the general lack of evaluations. He said that this causes is a striking phenomenon
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development in Nigeria. He further said that these are those international agencies presently engaging in some reviews of the lessons to be drawn from experiment in small management enterprises development during the part years. Kolawole (2000) However said that, inspite of the general lack of evaluation, a number of observations can be made based on many projects in which international labour organization nor has been engaged in and other research and studies. Kalejaiye (2000) revealed that “small scale enterprises real problems that result to failure actually lie more in bad attitudes towards day to day procedures that in particular inadequacies of marketing, personnel, organization and or control and that government is yet to appreciate sufficiently the tremendous impacts of the development and growth of the small scale enterprises in the national economy. Kalejaiye (2000) then suggested that in order to save operating costs, the small scale enterprises managers are likely to dispense with information system. Ovuorie (2001) in his research shed more light on the reason why so many small scale enterprises die so pre-maturely by stating that “most of them do not have active business goals/objectives from the on set and that when the first major storm set in the future becomes very bleak. In other words, what Ovuorie (2001) is saying is that most of the small scale businesses depends on importation of materials needed or raw-material but the moment a policy that affects their foreign dependence on importation is introduced they collapse.
2.9
Financing of Small and Medium Scale Enterprises in Nigeria. Well functioning and sustainable mechanization for SMEs financing
requires institution building and a market approach. Lending institutions are therefore require to improve their ability to provide financial services to SMEs through commercial mechanisms that lower costs and minimize their
23
risk exposure. These are also a number of trends in the financial service industry that are forcing banks to have a closer works at the SMEs market (Unitad, 1999). Globalization trends are increasing competition especially for servicing large corporate customers and driving down margins and fees. The improving liquidity if securities markets in many countries direct access to the capital markets in many countries is increasingly providing large corporation direct access to the capital markets and allowing them to by-pass financial intermediaries. Therefore, banks are under increasing pressure to expand their business towards SMEs customers and to develop mechanisms to improve the profitability of lending to SMEs. In recent years banks in developed countries have launched a number of initiatives that both improve the profitability of lending SMEs and also provide SMEs with better access to finance and to financial products than that are better failure to their needs (Aladekomo,2003). Furthermore, the financing of small scale enterprises goes a long way in determining the strength and success of the business enterprise. Akinwunmi (2001) said that small scale enterprises are not to remain forever, but the expansion of any business unwisely may be total. Akinwumi(2001) went ahead or further stating that “business expansion should be financial sound, ordinary from earnings or capital contribution of owners expansion in any case calls for careful advance planning. Oresotu (2001) declared that “in order to reduce the high risk cost associated with the financing of small scale enterprises, it is necessary for the institutions to be equipped with staffs that are capable of evaluating preinvestment feasibility studies and surprise projects execution. Mike (2001) identified that “the reason which make many commercial banks adduce for refusing to grant loans to small enterprises approach the banks with ill-conceived projects and unbalanceable propositions which expose them to considerable risks. Bankers have a duty to protect their
24
deposits, funds are ensured that they are invest in well digested viable feasible and qualitative projects that will be able to guarantee the payment of the loan and interest. Masha (2002) “In Nigeria, most small scale enterprises commence business with their personal capital, which is obtained through saving of owner or member of the same family. Owualah (2002) states that the major problem of many small scale founders is immediate capital problems to start the proposed business. Owualah (2002) further explained the source of capital, which are personal savings of the resources in cash original, family, member and friends, financial institutions and the recent innovations in the financing of small business all these depends on the size and large or age of the business.
2.10
Challenges of Small and Medium Scale Enterprises The challenges facing SMEs in many developing countries are monumental. The most worrying among these challenges is funding. Most new small business enterprises are not very attractive prospects for banks, as they want to minimize their risk profile. In Nigeria, the situation is not very different, until recently when the Banker’s committee interval in 2001 with a scheme themed the Small and Medium Industries Equity Investment Scheme (SMIEIS). The scheme relegated to the background government credit schemes that are not well through-out and implementation. Morealso, small and medium scales enterprises some challenges which are his listed below.
25
? Lack of infrastructure base: the lack of adequate infrastructure
constitutes one of the greatest challenges of SMEs development in Nigeria. Most SMEs have to resort to the private provisioning of water, electricity etc at great expense. In a World Bank study (1989), it was estimated that the cost of infrastructure accounted for 15 to 20 percent of the cost of establishing a manufacturing enterprises in Nigeria. These inadequacies consequently fall most heavily on small scale enterprises that cannot afford to provide their own services.
? Constrained access to credit: the banking sector is usually unwilling to
extent credit to the SMEs because of inadequately prepares project proposals, incomplete financial documentation, inadequate collateral including the inability to raise the required equity contribution and the absence of succession plan in the event of the death of the proprietor.
? Poor implementation of policies: the poor implementation of otherwise
sensible regulations and incentives which remain bureaucratic, inefficiently and often discriminatory. The resultant confusion and uncertainly in business decision and planning have adversely affected the SMEs.
? Procurement problems: these problems pose one of the greatest
constraints to improve capacity utilization rate among the SMEs. This problem is traceable to the unstable macroeconomic policy environment in the part years which led to the increase in customer’s duties and port charges, high cost of foreign exchange and consequent cut back on imported raw-materials in the factor of sub-optional local raw-materials supplies.
? Insufficient demand for products: insufficient demand for the products
of the SMEs is also an important challenges of SMEs. This can be attributed to the generals low purchasing power arising from customers. Dividing real incomes. To circumvent this, many SMEs have been adopting a credit sales policy whereby a reasonable
26
proportion of their output is sold on credit for a limited period at interest free rate.
? Inability to adjust prices: inability of SMEs to reasonably adjust their
prices to reflect additional costs following the substantial depreciation of the naira exchange rate. This is largely because doing so makes them incompetitive with large firms, while those face the added difficulty associated with begin price-takers.
? Poor educational background: lack of relevant educational background
and through manufacturing exposure by many SMEs proprietors. This is required in order for them to undertake complex expansion of their projects where such opportunity exists. Consequently, many of them are not sufficiently innovation and dynamic to meet growing and expanding business.
2.11
Prospects of Small Scale Enterprises in Nigeria. Small scale businesses offer enormous prospects in Nigeria towards
sustainable economic development. Adebusuyi, B.S (2001) states that if the various problems outline as challenges to small scale enterprises are addressed panacea would be found in practice of SMEs, which will would include;
? Resolving the collateral issues so as to enhance the prospects of the
SMEs for improved access to formal financial sector resources.
? Further streamlining of the regulatory procedures and strengthening the
capacity of relevance institutions so as to effectively implement and administer programmes and incentives for the SMEs.
27
? Provision
and maintenance
of
infrastructures
such
as road,
telecommunication, electricity and security. There is need to involve the private sector in these areas for greater efficiency.
? The promotion of industry: specific export expansion programmes
among the SMEs. In this regard, the extractive and ago-processing. Industries such as textile and garment, chemical and oil products present the greatest prospects.
? Further implications of tariff accompanied by a substantial reduction in
average tariff level.
? The need for a periodic comprehensive survey of the small scale
industries sector in the content of opportunities for export promotions.
? Lastly, small scale business can be instrument for a achieving “the
poverty alleviation objectives of the Government” because they are largely labour intensive, they can be used to create safety net in targeted poverty programmes.
2.12
Brief on SMIEIS The Small and Medium Scale Industries Equity Investment Scheme
(SMIES) was initiated, conceived and designed by Bankers committees as veritable alternative for funding of small and medium scale enterprises (SMEs). The schemes was approved by Bankers committee at its 246 th meeting held at December 21, 1999 and requires all banker in Nigeria to set aside 10 percent of profit before tax (PBT) annually as the banking industries contribution to governments effort towards stimulating economic growth and development. The scheme is expected to engender a new form of partnering between banks and promoters of industry. Banks are expected to identify genuine industrialist and provide them financial technical and managerial support.
28
The bankers committee approved operational
guidelines and
stakeholders responsibilities under the scheme on 19th June, 2001. That as from that date banks were excepted to commence investment in SMEs of their choice throughout the country. From the inception in June 2001 to 31 st Dec 2002 the total of eighty (80) banks out of ninety (90) had set aside a total sum of N13.07 billion for equity investment under the scheme. Out the amount, the sum of N1.73 billion had been invested in 36 SMEs profit by 19 banks as at 30 th October, 2002. Government on its part has set up Nigerian Agricultural Co-operative and Rural Development Bank (NACRDB) in place of the redundant Nigerian People’s Bank, to foster development and stimulate local SMEs to engender development of the rural areas.
2.13
Government new Strategies for promoting SMEs IN Nigeria. Although effort have been made by many successive government right
from the independence, to promote SMEs in the industrialization development. The development of the sub sector has been constrained by a number of factors as enunciated by Jamodu (2001) along which include both internal and external factors and these include:
? Unable macro-economic environment ? Inconsistent character of policy measures. ? Poor implementation and coordination of effort on SMEs. ? Absence of sustainable institution mechanism. ? Poor infrastructural facilities, i.e roads, railway system, water supply,
electricity, telecommunication e.t.c.
? Lack of effective financial support systems.
In addition to foregoing, the SMEs, in Nigeria are also handicapped by their peculiar internal characteristics which manifest in the following forms:
29
? Lack of equipment, which are mostly imported at greater cost addition,
these imported equipment are not easily adaptable to traditional process and their scales of operation.
? Lack of process technologies, designs patent e.t.c, that may involved
payment of royalties, technologies transfer fees e.t.c.
? Low level of technical skill in the form of technological, managerial
entrepreneurial and strategic capabilities.
? Lack of productive resources, especially finance.
2.14
New Strategies Jamodu (2001) opined from the forgoing that, the role of government in ameliorating the constraints of SMEs has been initiating remedial actions. This is more so with the rapid changing global environment moving towards deregulations, knowledge based economy, borderless trade and investment, which present new challenges and opportunities for SMEs in developing countries. He goes onto to say, it become necessary for a comprehensive and
integrated framework with sustainable support system capable of addressing the problems mentioned above and promoting a virile SMEs sub sector that would be well structured, organized and modernize, competitive in local and international markets environmentally friendly, vertically and horizontally Linked, inter and intra sectorally and with multinational corporation and veritable training ground for new generation of entrepreneurs. Since the inception of the present democratic dispensation in May 1999, the Federal Government has initiated and implicated number of policy measures, programmes and activities, which are in consonance with the
30
emerging framework and support system for SMEs development. These are in the following areas.
1
Promotion of good governance: The major components of good governance include transparency, accountability, rule of law and security of the life and property. These are being vigorously pursed by the government, which has it addition embark on anti-corruption crusade to sanitized the system.
2
SMEs Policy Reforms: The framework of the new industrial policy of Nigeria has a sub-sectoral SMEs policy framework, which is designed to make interventions and support facilities more feasible and applicable in targeting the various groups of enterprises within the sub sector.
3
Promoting
Entrepreneurship
Development
Programmes:
In
recognition of Entrepreneurship Development Programme (EDP) as effective instrument for promoting. SMEs, the Federal Ministry of Industry (FMI) inn collaboration with Nigeria Bank for Commerce and Industry (NBCI) introduced a concept and modality of EDP to Nigeria in 1986.
4
Improved Incentive to Interest in SMEs: Government has continued to expand the range of incentives to promote investment in Nigeria in general and SMEs in particular. The incentives varies and include tax tariff concessive, exemptions and relief.
5
Infrastructural Facilities i.e. water, power, road and telecommunication have remain a major obstacle to industrial development general and SMEs promotion in particular.
6
Funding of SMEs: Access to institutional finance has always constituted a pandemic problems for SMEs development in Nigeria. In the past a number, of scheme have been put in place to provide special credit lines for SMEs but these achieved vary limited impact for various reasons.
31
Furthermore, government is putting in a place a number of measures and facilities to enhance the access of micro, small and medium enterprises to institutional credit that would provide affordable medium to long terms loans.
2.15
The Roles of the Central Bank of Nigerian in Promoting SMEs CBN has since 1970s been instrumental to the promotion and
development of SMEs particulars through its credits allocation to sectors then classified as “preferred” including SMEs. For instance the CBN in the 1979/80 fiscal years directed that at least 20 percent of the loans advanced to indigenous borrower should be allocated to SMEs. This was subsequently raised from 16-20 percent to total loans and advances in April 1980 and 1990 respectively. However, given the uneconomic nature and cumbersome administration of such loans, banks preferred to pay penalties rather than channel credits to SMEs. The failure of the banks to meet the prescribed allocation led to the CBN to mandate the such defaulting banks as from 1987, to make such lending shortfalls available to it, for onward transfer to the sector through the Nigerian Bank for Commerce and Industry (NBCI). As a result of the imposition of sanctions by the CBN including mandatory transfer of lending shortfalls by defaulting banks. Most banks complied with CBN directives, lending-to-credit, expansion to SMEs and micro enterprises. For example, aggregate banks loan advance to these enterprises rose from N102.1million in 1980 to N5.900million, N42,302 million and N46.824million in 1990, 1996,1999 in that other. This representes 1.5, 22.9, 25.0and 13.3 percent of total banks loans and advances in those years respectively. According to monetary policy guidelines of 2001, CBN persuaded banks operating in Nigeria to set aside 10percent of their profit before tax for equity investment in SMEs.
32
Briefs History of Raggolies Water Nigeria Limited The company was founded by Gilbert and Ronald Chagoury. The Chagoury Group’s headquarters are based in West Africa. Its’s port folio of activities include construction and property development, flour mill, water bottling and purification, glass manufacturing, telecommunication, IT, Catering and International financing. The Group employs tens of thousands of peoples, considered by Gilbert Chagoury to be the best workforce in Africa. Starting with the production of flour and maize in the early 1970’s. The Chagoury group branched out primarily to meet its own needs. The need to service the company brought into existence an entire construction division that has grown into one of West Africa’s leading developers. In the 1980s to provide a infrastructure base and the chagoury group began expanding into transportation and technology to provide an all round self sufficiency for both its own business and the industrial requirement of West African State particularly Nigeria. TABLE AGGREGATE BANKING SYSTEM CREDIT TO THE PRIVATE SECTOR (N Billion) Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Credit to private sector 6.3 9.3 11.3 12.3 13.3 14.0 18.5 21.7 23.8 27.7 33.4 41.0 53.2 75.1 Credit to SMEs 0.1 0.2 0.2 0.4 0.4 1.1 1.5 4.7 5.2 6.0 7.5 9.4 24.0 26.0
33
Percentage of loan to SMEs 1.6 2.3 2.0 3.1 3.0 7.9 8.1 21.6 21.8 21.7 22.5 22.7 45.1 34.6
Target % 16 16 16 16 16 16 16 16 16 16 20 20 20 20
1994 104.2 35.5 34.1 20 1995 121.2 37.6 36.2 20 1996 132.4 38.7 37.7 20 1997 142.8 39.9 32.6 20 1998 156.7 40.7 38.6 20 1999 106.4 41.2 39.4 20 2000 200.6 56.4 42.3 20 Ratio of small enterprises loans to merchants Bank’s Total Credit Year 1992 1993 1994 1995 1996 1997 1998 1999 Q1 Q2 Q3 Q4 2000 Q1 Q2 Q3 Q4 To scale enterprises 3,493.9 4,900.0 5,489.3 9,159.6 5,595.8 7,137.9 7,800.8 8,018.8 8,941.2 6,800.8 6,389.1 8,630.1 6,587.9 5,380.1 51,100.1 Merchants Banks total 11,188.8 credit 25,189.8 30,185.1 30,612.2 41,139.5 54,491.5 60,290.6 64,536.6 64,136.0 54,959.9 49,257.7 61,784.0 69,994.6 64,767.3 565,871.7 Merchant bank loans to small scale enterprises in percentages 31.2 19.5 18.2 29.9 13.6 13.1 12.9 12.4 13.9 12.4 13.0 14.0 9.4 8.3 9.0
The abolition of mandatory banks credit allocation of 20% of its credit to small scale enterprises wholly by Nigerians took effective from October 1, 1996. NOTE: With effect from year 2001 universal banking commence and hence merchant Bank activities was abolished.
34
CHAPTER THREE
3.0
Research Methodology Introduction This section of this project deals with the methods to be used in
3.1
gathering facts and information’s needed for the completion of the research project. The method of data collection and research co-ordination will be analysed on this chapter. Several instrument will be used in collecting data that will not be subject to sentiments and make it valid. Instrument like questionnaire etc will be used during the conduct of the research. 3.2 Research Design The research refers to the plan basic which guides the data collection and analysis of data for the research work. It will specify the procedures for collecting data and activities to be performed. It will also help to identify the kind of information required and solve the problem at hand. Research design on the other hand means the structuring of investigation aimed at identifying variable and their relationship to one another. It serves as a blue print, an outline or scheme that allow a researcher to provide solution to the problem of how to generate data for this study, who is to study, and what to study. To this extent, the questionnaire to be administered will contain mostly structured personal questions and research question which will give the respondents the freedom to decide their responses. There will also be closed ended questions which will be provided to respondents with all containing choice options from which one option will be chosen. The questionnaire will administered to the staffs of the Ragolis Water Nigeria Limited operation department. Personal observations of the research
35
will also be used in examine their administrating process as it affect their organization efficiency in Ragolis water Nigeria Limited. All responses will be properly analysed and interpreted to yield a valid result.
3.3
Population A population can be defined as “the aggregate of all the cases that confirm to some designated set of specification. A population can further be defined as consisting of all the people employed in a particular industry. The population of this study comprises all staff of operation department of RAGGOLIS WATER NIGERIA LIMITED, IKORODU LAGOS.
3.4
Sample and Sampling Procedure On the other hand, a sample is “a set of element which is selected from a population with the aim of finding out something about the population from which it has been taken for the purpose of generalizing the conclusion reached for the whole population. What is found out about the sample is assumed to be true of the population as a whole. Furthermore, selecting a sample for a study has the following advantages,these are:- saves money, labour, time, a higher overall level of accuracy than full enumeration and permits deeper treatment of problem. Moreso, there are basically two(2) methods of sampling, these are the probability and the non-probability sampling. The probability sampling method is the one that can specify for each element of the population, the probability that it will be included in the sample, while for the non-
36
probability, sampling, there is no way of estimating the probability that every element has a change of being included in the sample and no assurance that every element will be included at all. In a nutshell, purposive/judgment form of non-probability samples was employed in the cause of this work simply because it assumed that, with good judgment and are appropriate strategy, one can hand pick the cases to be included in the sample and thus develop samples that are satisfactory in relation to one’s needs. The sample population of this work therefore, is the small scale industry, while sample size is the case study of this work.
3.5
Method of Data Collection Both direct data, and indirect data, were made use of in this research work. For the indirect data, the research work employed to use of various existing literature relevant to this work, textbooks, dailies, weekly and monthly magazines, documentary notes from the case study, relevant abstract from the Federal Office of Statistics, trade journals, statistical bulleting and other relevant secondary data to this work. Conversely, the primary sources of data made use of the questionnaire administration, personal interview schedule, direct observation method, sampling technique (judgment/purposive non-probability sampling technique) in the case of this research work. Henceforth, hypothesis were also stated and tested in order to determine whether or not relationship exist between/among variable that were employed.
3.6
Methods of Data Analysis
37
In the course of this research work, various methods were employed in the presentation, analysis and interpretation of data collected. Firstly, sample percentage proportions were use to determine the number of respondents in a form of percentage. They are all interpreted based on the respondents views. Secondly hypothesis were stated and tested with the use of chisquare (X2), observed frequently (0) was compared with the Expected frequency (E) with the use of Chi-square (X2c). The X2c formula is X2c = (0-E)2
E
Furthermore, chi-square calculated X2c was then compared with square tabulated (X2t) in order to know the validity and reliability of the decision rule before drawing the final conclusion. The decision rule is that; If X2c > X2t = Accept H1 If X2c < X2t = Reject Ho The above decision rule simply means that acceptance of Hi automatically enhance the rejection Ho and vice-versa. Additionally, using 95% (0.05) confidence limit, X 2c was compared X2t. This, then enhanced either the acceptance or rejection of Hi and viceversa, before the final conclusion(s) was/were drawn. The above was detailed in chapter four(4) of this research work. Lastly in this segment, personal interview schedule was also concluded in this research work. One of the senior staff in the production department of the case study was interviewed on the issue under discussion. His responses on this issue were presented in chapter four of the work. Direct observation
38
of the employees in the employees in the production department was also carried. 3.7 Validation of the Instrument To ensure content validity of the Instrument. Some copies f the drafted questionnaire were distributed to experts the project supervisor’s input was sought before coming up with the final draft of the questionnaire. 3.8 Reliability of the Instrument The reliability of the instrument were determined using a test – retest method. The instruments were trial tested at two weeks interval on staff of other small scale business.
39
CHAPTER FOUR
4.0
Presentation, Analysis and Interpretation of Data Introduction The purpose of this chapter is to present, analyses and interpret various
4.1
tools that is employed in the course of this research work. The presentation, analysis and interpretation exercise is fare subject to the questionnaires administered. Forty (40) questionnaires were sent for the case study, but the researcher was able to collect back 35 questionnaires from the respondents after being ticked sample/administered. Further, hypothesis were both stated and tested in this chapter so as to know the relationship/correlations that exist between/ among variable employed in this study. Simple percentage will be used to analyzed the data gathered from the respondents and chi-square method of analysis will be used to test the hypothesis. Using simple percentage, the formular goes thus; No of respondent Total of respondent
4.2
x 100 1
Analysis of Data Responses According to Sex Table 4.1
ALTERNATIVE MALE FEMALE TOTAL
NO OF RESPONDENTS 26 9 35
PERCENTAGE 74 26 100
From the table 4.1 above, it can be inferred that 26 respondents are male, while 9 respondents are female, which reveals 74% and 26%
40
respectively. This according to the observation of the researcher’s view is that there are more male staff than female staff in the case study. Responses According to Age Table 4.2 ALTERNATIVE (YEARS) BELOW 20 YEARS 20-29 30-39 40 YEARS & ABOVE TOTAL NO OF RESPONDENTS 2 11 18 4 35 PERCENTAGE 6 32 51 11 100
In the above table, it shows that 2 respondents which represents 6% are below the age of 20 years, while 11 respondents are between the age of 3039, while 4 respondents which represent 11% are 40 years and above. Responses According to Educational Qualification Table 4.3 ALTERNATIVE (YEARS) PRIMARY SECONDARY TERTIARY PROFESSIONALS TOTAL NO OF RESPONDENTS 5 9 20 1 35 PERCENTAGE 14 26 57 3 100
In the above table, it can be seen that 5 respondents are primary school leavers, 9 respondents are secondary school leaves, 20 respondents are tertiary leavers, while 1 respondent is professional, which reveal 14%, 26%, 57% and 3% respectively. Responses According Length of Service Table 4.4 ALTERNATIVE NO OF
41
PERCENTAGE
(YEARS) BELOW ONE YEAR 1-3 4-6 6 YEARS AND ABOVE TOTAL
RESPONDENTS 12 8 10 5 35
34 23 29 14 100
The table above shows that 12 respondent are below one year in the firm, 8 respondents are 1-3 years in the firm, while 10 respondents are 4-6 years in the firm, while 5 respondents are 6 years above, which reveals 34%, 23%, 29% and 14% respectively. Responses According to Marital Status Table 4.5 ALTERNATIVE (YEARS) MARRIED SINGLE DIVORCE TOTAL NO OF RESPONDENTS 7 27 1 35 PERCENTAGE 20 77 3 100
In the table above, it shows that 7 respondents are married, 27 respondent are single, while 1 respondents are divorced, which reveals 20%, 77% and 3% respectively.
Question 6; Through what Source is your Firms Finance Table 4.6 ALTERNATIVE (YEARS) PERSONAL/FRIEND BANKS CO-OPERATIVE GOVERNMENT AGENCIES
42
NO OF RESPONDENTS 28 3 2 2
PERCENTAGE 80 8 6 6
TOTAL
35
100
In the above table, it shows that 28 respondent agreed that the source available to the organization is from there personal savings and friends, while 3 respondents agreed that is from banks, while 2 respondents are from cooperative, while 2 respondents are from government agencies, which reveals, 80%, 8%, 6%, and 6% respectively. Question 7: Do most of the staff recruited have knowledge or skill of the work they are/were employed to do before there employment? ALTERNATIVE (YEARS) Yes No TOTAL NO OF RESPONDENTS 7 28 35 PERCENTAGE 20 80 100
From the above table, it shows that the 7 respondents favoured with yes, while 28 respondents favour with No, with the above statement, which reveals 20% and 80% respectively.
43
Question 8: In your Company the Majority of the Raw Material used are got from? Table 4.8 ALTERNATIVE LOCALLY IMPORTED TOTAL NO OF RESPONDENTS 22 13 35 PERCENTAGE 63 37 100
From the above table, it shows that 22 respondents believed that the raw materials used are got locally which represent 63%, while 13 respondent favoured with the imported, which represents 37%. QUESTION 9: Has company directly benefited from any government incentive to small scale enterprises? TABLE 4.9 ALTERNATIVE YES NO TOTAL NO OF RESPONDENTS 5 30 35 PERCENTAGE 14 86 100
In the above table, it shows that 5 respondents favoured with yes, while 30 respondents favoured with no, in the above statement, which reveals 14% and 86% respectively. QUESTION 10: Is an excise duty charge in your finished goods. TABLE 4.10 ALTERNATIVE YES NO TOTAL NO OF RESPONDENTS 3 32 35 PERCENTAGE 9 91 100
In the above table, it shows that 3 respondents agreed with yes with the statement that excise duty is charged on the finished product, while 32
44
respondents agreed with no, that excise duty is not charged on the finished product, which represents 90% and 91% respectively. QUESTION 11: Does your firm have enough customers for her product? TABLE 4.11 ALTERNATIVE YES NO TOTAL NO OF RESPONDENTS 28 7 35 PERCENTAGE 80 20 100
From the above table, it show that 28 respondents agreed with yes, while 7 respondents favoured with no, which reveals 80% and 20% respectively. Question 12: What is the attitude of customers to your products as compared to the customers attitude to its foreign made equivalent?
TABLE 4.12 ALTERNATIVE NO OF PERCENTAGE RESPONDENTS FAVOURABLE 12 34 UNFAVOURABLE 10 29 AVERAGE 13 37 TOTAL 35 100 In the above table, it shows that 12 respondents favourbale with the statement above, while 10 respondents unfavourbale with the statement, also 13 respondent agreed with average statements of the above statement, which reveals 34%, 29% and 37% respectively.
45
QUESTION 13: What is/are your organization motive(s) for embarking on small scale business? TABLE 4.13 ALTERNATIVE EMPLOYMENT OPPORTUNITIES LOCAL SOURCING OF RAW ASSIST IN CAPITAL FORMATION DIFFUSIOIN OF INNOVATIVE IDEA ALL OF THE ABOVE TOTAL NO OF RESPONDENTS 35 35 PERCENTAGE 100 100
In the above table, it shows that all the motive(s) are embarking on small scale business in Nigeria, particularly their organization.
QUESTION 14: Small scale enterprises has played a significant role in helping increase of employment opportunities in Nigeria. TABLE 4.14 ALTERNATIVE STRONGLY AGREED AGREED UNDECIDED TOTAL NO OF RESPONDENTS 23 10 2 35
46
PERCENTAGE 66 28 6 100
Moreover in the above table, it shows that 23 respondents strongly agreed with the statements, while 10 respondents agreed with the statement above, also 2 respondents are undecided, which reveal 66%, 28% and 6% respectively.
QUESTION 15: Inadequate finance has limited the expansion of small scale enterprises which in turn has limited their employment capacities and other domestic sourcing and mobilization activities. ALTERNATIVE STRONGLY NO OF RESPONDENTS 30 PERCENTAGE 86
AGREED AGREED 4 11 UNDECIDED 1 3 TOTAL 35 100 Table 4.15 above shows that 30 respondents, which represent 86% percent supported the above statement, while 4 respondents which represents 11% disagreed with the statement, while 1 respondents, which represents 3% strongly disagreed with the statement. Also majority of the respondents that supported the above statement specifically stated that this has affected and still affecting tremendously small scale business in Nigeria. QUESTION 16: Most of the intermediate products used by bigger firms are supplied/produced by small scale enterprises TABLE 4.16 ALTERNATIVE AGREED DISAGREE STRONGLY AGREED
47
NO OF RESPONDENTS 24 8 3
PERCENTAGE 68 23 9
TOTAL 35 100 Moreso, in the table 4.16 demonstrated above, it shows that 24 respondents agreed with the statement, while 8 respondents disagree with the statement, also 3 respondents strongly disagree with the statement, which reveals 68%, 23% and 9% respectively.
QUESTION 17: The present economic hardship is to a large extent affecting the activities of small scale enterprises in Nigeria. ALTERNATIVE STRONGLY AGREED AGREED UNDECIDED TOTAL NO OF RESPONDENTS 20 13 2 35 PERCENTAGE 57 37 6 100
In the table above, it shows that 20 respondent strongly agreed with the above statement, while 13 respondent agreed with it, also 2 respondent were undecided about the statement, which represent 57%, 37% and 6% respectively.
4.3
TEST OF HYPOTHESIS HYPOTHESIS ONE
H0: Small scale has not played a significant role in helping increasing of employment opportunity in Nigeria, case study inclusive. Hi: Small scale has played a significant role in helping increasing of employment opportunities in Nigeria, case study inclusive. TABLE 4.18 CONSTRUCTION OF ONE WAY CLASSIFICATION TABLE FROM TABLE 14 Alternative O E O-E (O-E)2 (O-E)2 E
48
Strongly Agree Agreed Undecided Total
23 10 2 35
11.7 11.7 11.7 35
11.3 -1.7 -9.7
127.7 2.89 94.1
10.9 0.2 8.0 19.1
The degree of freedom (df) = (3-1) = 2 :. X2 tab (3-1) (2-1) = 2 :. X2 tab2 = 5.99
Statistical Decision The decision criterion for this analysis requires the null hypothesis to be rejected if X2 calculated is greater than X2 tabulated. Otherwise reject. Conclusion of Result Since X2 calculated of (19.1) is greater than X2 tabulated of (5.99) other we reject the null hypothesis and accept the alternative hypothesis which indicates small scale has played a significant role in helping increasing employment opportunities in Nigeria. HYPOTHESIS TWO Ho: The present economic hardship to some extent affects the activities of small scale enterprises in Nigeria case study inclusive. Hi: The present economic hardship to large extent affects the activities of small scale enterprises in Nigeria.
TABLE 4.19 CONSTRUCTION OF ONE WAY CLASSIFICATION TABLE FROM TABLE 4.17 Alternative O Strongly Agree
49
E 11.7
O-E 8.3
(O-E)2 68.9
(O-E)2 E 5.9
20
Agreed Undecided Total
13 2 35
11.7 11.7
1.3 -9.7
1.69 94.1
0.1 8.0 14.0
The degree of freedom (df) = (3-1) = 2 :. X2 tab (3-1) (2-1) = 2 :. X2 tab2 = 5.99 Statistical Decision The decision criterion for this analysis requires the null hypothesis to be rejected if X2 calculated is greater than X2 tabulated. Otherwise reject.
Conclusion of Result Since X2 calculated of (14.0) is greater than X2 tabulated of (5.99) other we reject the null hypothesis and accept the alternative hypothesis which indicates small scale has played a significant role in helping increasing employment opportunities in Nigeria.
50
CHAPTER FIVE
5.0
SUMMARY, CONCLUSION AND RECOMMENDATION SUMMARY OF FINDINGS Small scale enterprises play a lot of roles in the Nigeria economy. The
5.1
role that small scale enterprises play in the Nigeria economy range from industrial development process to other vital sectors in Nigeria economy. This essay has critically examines the ‘prospects and challenges of establishing and managing small scale business in Nigeria economy’ with RAGOLIS WATER NIGERIA LIMITED IKORODU LAGOS forming the case study of the research work. In a nutshell, chapter of this work the general introduction to the issue under investigation, further stated the related problems, while the objectives, research question, research hypothesis, and limitation of the study were also highlighted. The methodology employed in the course of the work was briefly outlined in the chapter. Chapter two covered the literature review. Hence various literature were reviewed on the subject matter. It further covered the definition of small scale business in Nigeria, evaluation of small scale enterprise, characteristics, important, prospects and challenges of small scale enterprise. More also, the problem, the causes and the financing of small scale enterprise were also stated, it went further to explain the government new strategies for promoting SMES. Chapter three, was concern with the research methodology aspect of essay. Hence also both the primary and secondary source of data were revealed the re-statement of research hypothesis, the sample population and sample size of the work were also highlighted. The method used in presentation analysis and interpretation of data were also discussed, while the problem encountered during the field work especially during the administration of the questionnaires were also highlighted.
51
Moreover, chapter four was more or less concerned with the presentation analysis and interpretation of data. Data were presented in tabular forms before their analysis and tested so as to known the relationship that exist between/among variable so as to determine the validity and reliability of variables used and various responses from the respondents before reasonable, sound and valid conclusion were drawn.
5.2
CONCLUSION Small scale enterprises are the types of enterprises which cannot be
neglected in Nigeria due to the vital roles played in the economy. They are either directly or indirectly important to the Nigerian economy. Due to the above statement, adequate attention should be accorded to small scale enterprises in Nigeria in order to enhance good development and growth of the Nigerian economy. This work can be easily concluded by saying that small scale business should further be encouraged by the government, firms and individuals so that the reliance on foreign sector can be reduced and challenges facing small scale business can be eradicated.
5.3
RECOMMENDATION In view of the challenges/problems that encountered by small scale
enterprises in Nigeria, the following recommendations would be very indispensable so also alleviate the problems/challenges encountered by small enterprises in Nigeria. They are as follows: (a) Government should established a small scale enterprises corporation which will be responsible for organizing the activities of small scale enterprise in the country. The small scale corporation to be established should be ready to carryout the following functions:
? Conducts surveys of existing small scale industries in the country and
their production.
52
? To conduct feasibility studies for new production from potential small
scale enterprises.
? Manage order for industrial components and other materials for other
industrial group and government.
(b)
Create Guarantee Schemes:- A lot of difficulties are/were encountered by small scale enterprises in securing adequate financial support from various financial institutions. It is therefore recommended that a small scale credit guaranteed scheme should be established so as to reduce the risk of lending to small industrialists.
(c)
Procedural delays in granting loans to small scale enterprises should be minimized. Also guidance and counseling on the proper use of loan granted to small scale entrepreneur must be organized.
(d)
Small scale enterprises should be encouraged to be researched oriented so as to improve quality of their products and satisfy customers.
(e)
The Central Bank of Nigeria should continue to inform banks of the need to channel a significant portion of their loan to the small scale enterprises.
Finally, the promotion of small scale enterprises should not be left only to government, but banks, private consultancy, firms, multi-national companies, and training centres should encourage small scale enterprises by giving greater impetus to this sub-sector.
53
REFERENCES Anyanwu (2001) “Efficient Administration of credit for small scale industrial development” Bullion Publication of central Bank of Nigeria 2001. Asika N. (1991) “Research Methodology in Behavoiural science” Nac-Millian Publishing Ltd. Lagos University Press 1991 pg 43. Fedederal Office of Statistics (2005). Aladekomo, F. O. 2003 “The small and medium enterprises (SME) landscape; Environment, Government policies, progammes and institutional support” a paper delivered at the two day workshop on “strategies for operationalizing small and medium industries equity investment scheme (SMIEIS) in Nigeria” on 23-24 August 2003. CBN, 2004. “Progress Report on SMIEIS” Accesiblke from http://www.cenbank.org. Arinaitive S.K. (2006) factors constraining the growth and survival of small scale businesses. A Developing countries Analysis. Journal of American Academy of Business. Humphrey, S. and Schmitz, H. (2000) “Governance and upgrading: linking industrial cluster and global value chain research, IDS working paper 120, Brighton: Institute of Development studies, University of Sussex. Lall, S. (2000) “the Technological structure and performance of developing countries manufactured exports, 1985-1998; Oxford Development studi4es, Vol. 28, No 3, Pp. 337-369. Lall, S. (1991), “Marketing barriers facing developing country manufactured exporters: a conceptual note, Journal of Development studies, Vol 27, No 4, pp 137-150. Liedholm, C and Mead, D. (1998) “Small-scale industries in
54
developing countries
empirical evidence and policy implications’,
international Development paper, 9, Michigan State University. Liedholm, C and mead D. (1998) “small-scale industries in developing countries: empirical evidence and policy implications’, international Development paper, 9, Michigan state university. Mc Cormick, D. (1999). ‘African enterprise clusters and industrialization: theory and reality, ‘World Development
55
10th of Jan, 2013 Department of Management science Faculty of Social Management Science University Of Education Winneba Winneba Ghana.
Dear Sir/Madam, I am a student of the above named institution. As a part of the requirement for the award of B.Sc degree in Management Scienc, I am conducting a research study on “Prospects and Challenges of establishing and managing small scale business in Nigeria economy. This questionnaire is designed to elicit information that would be used for the study. I will be highly appreciate it if you will please filled in your responses on the spaces provided in the questionnaire. All information obtained shall be treated with strict confidence. Thanking you in anticipation for your cooperation. Yours faithfully Adebayo Oluwatosin T.
QUESTIONNAIRE Section A
1) SEX 2) AGE
(A) MALE ( (B) 20-29 Years
)
(B) FEMALE ( ( ( ) )
)
(A) Below 20 Years
56
(C) 30-39 Years
(
) ) ) ) ) ) ) ) ) ) ) ) )
(D) 40 Years and Above (
3) EDUCATIONAL QUALIFICATION
(A) Primary (B) Secondary (C) Tertiary (D) Professionals (A) BELOW One Year (B) 1-3 YEARS (C) 4-6 Years (D) 6 Years and Above
5) MARITAL STATUS
( ( ( ( ( ( ( ( ( ( (
4) LENGTH OF SERVICE IN THE FIRM
(A) Married (B) Single (C) Divorce
Section B
6) What is your source of financing the firm?
(A) Personal /Friend (B) Banks (C) Co-operative
( ( (
) ) ) )
(D) Government Agencies (
7) Do most of the staff recruited have knowledge or skill of the work they are
were employed to do before their employment? (A) Yes (B) No from______________? (A) Locally (B) Imported ( ( ) ) ( ) ( )
8) In your company the majority of the raw material used are got
57
9) Your company directly benefited from any government incentive to small
scale industries? (A) Yes (B) No (A) Yes (B) No (A) Yes (B) No ( ( ( ) ( ) ( ) ( ) ) )
10) Is an excise duty charge in your finished goods?
11) Does your firm have enough customers to her product?
12) What is the attitude of customers to your products as compared to the
consumers attitude to its foreign made equivalent? (A) Favourable (B) unfavorable (C) Average business? (A) (B) (C) (D) (F) Employment opportunities Local sourcing of raw materials Assist in capital formation Diffusion of innovative ideals All of the above ( ( ) ( ( ( ) ) ) ) ( ( ( ) ) )
13) What is/are your organization motive(s) for embarking on small scale
14) Small scale enterprises has played a significant role in help increase of
employment opportunities in Nigeria? (A) Strongly Agreed (B) Agreed (C) undecided. ( ( ( ) ) )
58
15)
Inadequate finance has limited the expansion of small scale enterprises
which is turn has limited their employment capacities and other domestic sourcing and mobilization activities. (a) (b) (c) 16) Agree Disagree Strongly disagree ( ( ( ) ) )
Most of the intermediate products used by bigger firms are supplied / (a) (b) (c) Agree Disagree Strongly disagree ( ( ( ) ) )
produced by small scale enterprises.
17) To what extent is the present economic hardship is affecting the activities of small scale enterprises in Nigeria, inclusively your firm? (a) (b) To a large extent To a Small extent ( ( ) )
59
doc_560836045.rtf
its a high grade complete project for the department of management science under the faculty of social sciences, submited to the University of education winneba, ghana.
ABSTRACT Small scale enterprises cover a wide range of industrial units and most occupy an important position in the industrial structure of any developing country. Across the world, small scale enterprises are crucial for economic growth, poverty alleviation, wealth creation and promotion of more pluralistic societies. They also serve as source of input for the multinationals thereby replacing existing foreign sources. The study also, is to examine the prospects and challenges of small scale enterprise in Nigeria as well as to examine the problem, source of finance to small and medium scale enterprises. Chi-square was used to carry out the analysis and the result obtained revealed that small scale enterprises has play a significance impact in increasing employment opportunities in Nigeria. In conclusion, adequate attention should be accorded to small scale enterprise in other to enhance good development and growth of the Nigeria economy. And also, the promotion of small scale enterprises should not be left only to government, but Banks, private consultancy firms, Multi-national companies, and training centers should encourage small scale enterprises by giving greater impetus to this sub-sector.
CHAPTER ONE
1
1.0
Introduction The small scale enterprises cover a wide range of industrial units and
1.1 Background of the Study most occupy an important position in the industrial structure of any developing country. From the past thirty six years some negative images and influences of the colonial past, have continued to hinder the realization of the identity and personality. The struggle therefore includes the need to free the economy from the salvage of poverty. The struggle is socio-economic and it falls within the strategic realm of industrial organizations, alternatively referred to by some scholars as “business economics” or “industrial economics”. The future belongs to small scale enterprises so to say, in the economic development of the nation. It is therefore, imperative to give much attention to the prospects and challenges of small scale enterprises in Nigeria. There are many small scale enterprises today in this country. They are in form of sole proprietorship or partnership. It has also been observed that a lot of these small scale enterprises spring up here and there everyday and a lot are either abandoned by their proprietors, or die natural deaths and subsequently fail to achieve the objectives for which they were set up to achieve. Small scale enterprises have a crucial role to play in the development of an economy and industrial development that they cannot be ignored. Infact, small scale enterprises development should be one of the country’s development objectives. They can serve as source of inputs for the multinationals thereby replacing existing foreign sources. They are also training grounds for local skills and entrepreneurs, could become channels for mobilizing local savings, ensuring a more equitable distribution of income and reducing the migration of manpower from the urban areas. Across the world, Small and Medium Scale enterprises (SMES) are crucial for economic growth, poverty alleviation, wealth creation and
2
promotion of more pluralistic societies. The ability of small scale enterprises to initiative a nation to the vanguard of industrialization is proven by the fact that it was the major instrument of development of the Asian Tiger (Singapore, South Korea, Taiwan China, Malaysia, Thailand, Philippines and Indonesia) and their ability to harness potentials of their small and medium scale enterprises put them on the right footing in their pursuit of a self reliant industry and a developed country. A business whether small or big, simple or complex, private or public e.t.c is created to provide competitive prices. Business in Nigeria has been classified as small, medium and large. However, a small scale enterprise can be defined by the criteria of project costs, capital, cost turnover by the employee e.t.c. Japan defined small scale enterprises as “manufacturing establishment employing 300 or less than 100 million years. According to Obitayo (2001). The concept of small scale enterprises varies from one country to country. He said statistically small scale Hence, enterprises was defined as those employing 10-99 workers. those employing more than 100 persons were classified as large scale. Anyanwu (2001) believed that each country derives it’s own definition based on the role small scale enterprises are expected to play in such economy and the programmes designed to achieved such goals. More also, the Central Bank of Nigeria (CBN) in it’s credit and monetary guidelines, defined small scale enterprises as those whose capital investment does not exceed N5,000,000 (including land and working capital) or whose turnover are not more than N25,000,000 annually. Small scale enterprises are those that compared to large enterprises that needs a shorter gestation period and relatively smaller market to be economical.
enterprises employing less than ten (10) workers were classified as micro and
3
The impact of small scale enterprises in promoting growth and stability to manufacturing activities in Nigeria was identified in the National Development plan. Consequently in the Second National Development plan, (1970-1974). The Federal Government gave special attention to the development of small scale enterprises particularly in rural areas. It was suggested that is order to fill obvious needs and gaps; projects that can supply products such as rubber items, glass windows, exhaust pipes, radiators, interior upholstery, springs, cotton seeds, textile materials, bottles, household glass wine e.t.c are likely to spring up possibly through initiatives taken in the private sector. Also, along with the other proposals such as the creation of Industrial Development Centres and the financing of Small Scale Industries Credit Schemes in the Third Development plan, it was proposed that a study of effective methods of encouraging small scale industries should be conducted during the development plan period. In various studies, the United Nation Development Programme (UNDP) and the United Nation Industrial Development Organization (UNIDO) have revealed that the only way the existing enterprises can expand is to provide more job opportunities, backward integration and increase the use of locally available raw materials, the studies affirm that small scale enterprises provide the leading road to industrialization and development of indigenous entrepreneurship. In Nigeria, the Federal Government seems to have recognized this fact because in 1970, the section was accorded a high priority in the second National Development plan (1970-1974). Today, the spirit is still every much a live with succeeding regimes committing themselves towards their attainment but whether they have actually lived up to the realization of the laudable goals is another matter entirely.
1.2
Statement of the Problem
4
According to Samuelson (2000) most small business are here today and gone tomorrow, the average life expectancy of business being a dozen years. Some will terminate in bankruptcy, many will be voluntarily brought to a close with signs of regret for cash and an expensive lesson learnt, others will come to a joyous, and while their owners learn a good jobs, better than the former business. Research has shown that the financial base of small scale enterprise in low and banks interest rate is high. The problem facing most small scale enterprises is that of access to institutional credit due to prevailing high interest rate regime. In spite of the establishment of many support institution like Nigeria Industrial Development Bank (NIDB) Nigerian Bank for Commerce and Industries (NBCI), Poverty Alleviation Programme (PAP) and many other they were not implemented in a way to achieve the set objectives.
1.3
Purpose of the Study The aims and objectives of this study is to realize the immense
contribution of small scale enterprises sub-sector in the economy. This research project also aim to highlight, and make critical study of the problems of small scale enterprises and offer useful recommendation that would enhance the implementation of the best solution so as to prevent the reoccurrence of such problem.
1.4
Significance of the Study The study is designed to expose the who be proprietors of small scale
industries to the problems they would encounter in the course of the business, and also highlight the remedies, and thereby keep them in a better
5
position to run the business in the most optimal manner. The study is also of significance to the researcher in that he is exposed to research work.
1.5
Research Questions In view of the problem statement and in order to achieve the objectives
of the study the following becomes essential.
? What is the problem encounter by the operators of small scale
enterprises before and after the introduction of the business?
? What is the cause of failure of small scale enterprise? ? What is the major challenge facing the operation of the company? ? NAFDAC is a Government Agency that ensures safety of every
consumable product in the country hence its rigorous conditions does your products registered?
? Do the proprietors of small scale enterprise have any encouragement
from government?
1.6
Research Hypothesis In order to approach the research question empirically, some major
hypothesis was formulated and tested to enable us provide answer to the research questions earlier mentioned and provide a necessary sense of direction to the study.
Hypothesis One Alternative Hypothesis (H1): The present economic hardship is to a large extent; affecting the activities of small scale enterprise in Nigeria, the case study inclusive.
6
Null Hypothesis (H0): The present economic hardship is to some extent; not affecting the activities of small scale enterprise in Nigeria, the case study inclusive. Hypothesis Two Alternative Hypothesis (H1): The extent to which small scale enterprise help increase employment opportunity in Nigeria is very deep, the case study inclusive. Null Hypothesis (H0): The extent to which small scale enterprise help increase employment opportunity in Nigeria is not very deep, the case study inclusive. Hypothesis Three Alternative Hypothesis (H1): Small scale business has support from the government Null Hypothesis (H0): Small scale business does not have support from the government Hypothesis Four Alternative Hypothesis (H1): The rate of which small scale business spring up gives hope to the young school leavers to start small scale business Null Hypothesis (H0): The rate of which small scale business are winding up discourages young school leavers to start small scale business
1.7
Scope of Delimitation The research project is designed to examine the challenges of establishing and managing small scale business in Nigeria. The scope of the research will be limited and coverage of a designated small scale business i.e Raggolis Water Nigeria Limited in Ikorodu Lagos
7
This is imputed to economic of time and limited resources at hand.
1.8
Definition of Terms Business: Business is a social entity where individual interact to convert input into an output for public consumption. Promotion: (a) This is the act of elevating or raising an individual to a position, greater responsibility authority, status and pay. (b) It could also be said to consists of those activities, which are designed to bring the company’s goods and services to the awareness of customers. Policy: This involves the general principle or guide that guides the operation of an organization. Hypothesis: A suggested or answer to a problem. Entrepreneur: The individual, who organizes, manages and assumes the risks of a business. The originator of a business. Working Capital: Cash or assets that will be converted into cash within one year. Technology: The application of scientific knowledge to the solution of problem. Objective: The aim of goal or a business. Credit: The giving of goods and services for a promise of future payments. Bankruptcy: A state of financial rain, which results was a business or a person cannot meet outstanding debts. CHAPTER TWO
2.1
Review of Literature There is hardly any unique or usually accepted definition of a Small
and Medium Scale Enterprises (SMEs), because this classification is subjective and quantitative judgment (Ekpeyong, D.B.E and M.O Nyong,
8
1992), rather each country tends to define these categories of enterprises based usually on the peculiar needs of public policies. Even within a country, the definition change over time depending on circumstance and specific objectives of the institutions and assistance rendered to promote this business. The importance of the Small and Medium Scales Enterprises (SMEs) to social and economic development in African and is almost undisputed in Nigeria. Throughout the continent, SMEs promotion is priority in the policy agenda of most African countries as its contribution to poverty alleviation and economic development is widely recognized. There is no doubt that SMEs constitute the seedbed for the forth coming generation of African entrepreneurs. Today SMEs in the developing world face more competitive pressures than ever before. The nature of competition has changed: it is now fiercer and it is base upon a wider range of factors. Indeed, whilst price continues to matter, particularly in domestic markets, factors such as quality, flexibility reliability and speed of delivery constitute the basis for dynamic competitiveness. Small and Medium Scale Enterprises are generally regarded as the driving force of economic growth, job creation and poverty reduction and alleviation in developing countries. They have been the means through which accelerated economic growth and rapid industrialization have been achieved (Harris and Gibson; 2006; Sauzer, 2005; Van Eeden, Viviers and Venter, 2004; Arinactive, 2002; Kiggundu, 2002; Yusuf and Schindehutte 2000; Monk, 2000). Japan defined Small Scale Enterprises as “manufacturing establishment employing 300 or less and investing less than 100 million years. According to the United States of American (U.S.A) defined small scale enterprises as manufacturing fewer than 500 workers, investing not more than 800,000 dollars to 1,000,000 dollars and which do not dominate the market.
9
To the United Nations Industrial Development Organization (UNIDO) regards “Small Scale Enterprises as those with less than 150 employers and its payroll for such enterprises should be inform of:
? The traditional craftsman and artisans ? The small manufacturing enterprises which produce a variety of
consumer and simple producer goods. To the Central Bank of Nigeria (CBN) in it’s credit and monetary policy guidelines, defined small scale enterprises as those whose capital investment does not exceed N5,000,000 (including land and working capital) or whose turnover are not more than N25,000,000 annually. According to the Nigerian Bank for Commerce and Industry (NBIC) defined small scale enterprises as “an establishment whose capital investment does not exceed N500,000 this including building, machines and equipment and working capital but excluded cost of land. To the Centre for Industrial Research and Development (CIRD) Obafemi Awolowo University, Ile-Ife defined small scale enterprises as those with the total investment capital not exceeding N250,000 and employing not more than fifty (50) full time workers. More so, to the 3rd and 4th National Development Plan, Small Scale Enterprises is one that employs between (1) and ten (10) persons and whose capital outlay is not less than N100,000 to N150,000, or where investment in machinery and equipment do not exceed N600,000. To the Administrative Staff College of Nigerian (ASCON) Badagry, defined small scale industries as an industry whose cost of capital does not exceed N750,000 including the total cost of the land. In Nigeria, the Small and Medium Scales Industries Enterprises Investment Scheme (SMIEIS) defines, SMEs as any enterprises with a maximum asset based of N200 million excluding land and working capital and with a number of staff employed not less than 10 or more than 300.
10
Furthermore, the Companies and Allied Matter Decree number 1 of 1990 section 376(2) defined small scale industries as industries, whose turn over is not more than (N2,000,000) or whose asset value (net worth) is not more than (N1,000,000). Also, Obitayo (2001) says economic literature on small scale enterprises lacks uniformity in the acceptable Anyanwu, (2001) believed that each country derives it’s own definition based on the role small size of small scale enterprises. The concept of small scale industries varies from country to country. He said that statistically small scale enterprises was defined as those employing 10-99 workers. Hence, enterprises employing less than ten(10) workers were classified as micro and those employing more than 100 person were classified as large scale.scale enterprises are expected to play in such economy and the programmes designed to achieved such goals. The Federal Government of Nigeria, following the introduction of the Structural Adjustment Programme (SAP) in 1986, took a bold step in four direction. In a global context, a general definition of Small and Medium Scale Enterprises (SMEs) using size and scale of operation not easy, but within the fixed co-ordinates of National boundaries, it might be relatively easier. At the 13th council meeting of National Council on Industry held in July, 2001, micro, small, medium enterprises were defined by the council as follows:
?
Micro or Cottage Enterprises- An industry with a labour size of not more than ten (10) workers or total cost of not more than N1.5millon including working capital but excluding cost of land.
?
Small Scale Enterprises: An industry with a labour size of between 11100 workers or a total cost of not more than N50million, including working capital but excluding cost of land.
11
?
Medium Scale Industry:- An industry with a labour size of over 300 workers or total cost of land of over N200 million including working capital but excluding cost of land. In recent years, both the Federal, State Government and recently local
government have stepped up effort to promote the development of (SMEs) through increased incentive schemes including enhanced budgetary allocation for technical assistance programme. New lending schemes and credit institutions such as National Economics and Credit Reconstruction Fund (NERFUND), World Bank Assisted Small Scale Enterprises loans schemes, Nigeria Export and Import Bank (NEXIM), the commercial and merchant Bank, Universal Bank which were abolished in 2001. The economic rationale for general SMEs support in African especially in Nigeria builds consensus as it is relatively easy to justify. Some policies should be corrected for market failures that impose penalties on SMEs, helping them overcome their structural internal and external constraints on their growth. There is, however, more controversy on the type of interventions, institution, mechanisms, and conditions under which SMEs should be supported in a cost effective manner. Unfortunately, all these credit scheme have not been able to adequately address the fundamental problems which have constrained (SMEs) access to credit. The low crediting rating of this class of enterprises is attributable largely to their weak capital base, high mortality rate, low productivity and shortage managerial skill. Indeed, problems of poor access to finance appear to have developed into a vicious circle into leading to slow growth, stagnation and even rapid demise of SMEs. Inspite of the view that constitute a small business, all the above definition share common idea that small businesses are generally low in terms of investment and annual business turnover. The main criteria used throughout the world to consider and describe a business as being small scale includes the following:
12
? The number of employees. ? Sales volumes/value ? Financial strength ? Relative size. ? Initial capital outlay. ? Independent ownership ? Type of industry ? Comparison with its past standard.
Most private companies are small scale business for one or more of the following reason above.
2.2
Evolution of Small Scale Enterprises Most countries begin their process of industrialization with small scale
enterprises. During the industrialization evolution, they formed the bedrock of industrialization in most countries that have developed quite successfully. These countries have deliberately evolved a coherent and effective industrial development culture which gave premium to small industries. These countries include most European countries, the United Kingdom champion it. The Japanese, out of their sheer desire to survive and develop a viable industrial structure, deliberately created an atmosphere that encouraged the thriving of small scale enterprises, which eventually metamorphosize into huge industrial success. The Koreans, more so, have equally succeeded through this line. Taiwan as well as other South-East Asian countries are also forging ahead along similar lines to becoming an industrial wonder. There is always a very strong linkage between industrial success and industrial culture and mentality especially with respect to recognizing and promoting the role of small scale enterprise in the economy.
2.3
Characteristics of Small Scale Enterprises in Nigeria
13
In the literature, small scale enterprises are usually determined by various qualitative parameters. Such parameters include the number of people employed in the enterprises, the capital investment outlay, the size of the plant capacity the sophistication of the equipment, sales turnover, profit margin and perhaps market share. According to Dr. Poju Adeleke (1999) in Business and Management Journal Pg 16, says the existing official definition, such as the Federal Ministry of Industries, Central Bank of Nigeria (CBN) e.t.c, also emphasize nominal financial outlay as the operational indices for defining small scale enterprises. However, it is interesting to provide some real African examples of how these firms look like. For instance and unlike subsistence microenterprises, growth oriented SMEs often constitute full time, employments for both entrepreneurs and the workforce. Research carried out in Tanzania, Uganda and Zimbabwe (Trulsson, 1999) shows that the most competitive growth SMEs are often run by well educated entrepreneurs (at least with Alevels) who come from families where there is a prior record of enterprising activity, and that they have been employed in formal paid jobs before venturing into their own business. Small scale enterprises are characterized by simple management, finance and production techniques. They yield quick returns unlike larger enterprises which depends on the financial co-operation of both their owners and lending institution, small scale enterprises are financial largely by owner’s capital and exceptional case(s), borrowing from friends or relatives. Moreover, small scale enterprises are also characterized by low capital base, low capital intensity, relatively simple production technology, limited market power, restricted/narrow production lines.
2.4
Importance of Small Scale Enterprises in Nigeria. Many economies, developed and developing have come to realize the
value of small business. They are seen to be characterized by dynamism
14
witty innovations, efficiency, and their small size allows for faster decision making process Government all over the world have realized the importance of this category of companies and have formulated comprehensive public policies to encourage, support and fund the establishment of SME’s. Developments in small and medium enterprises are a sine-qua-non for employment generation, solid entrepreneurial base and encouragement for the use of local raw materials and technology. It has encouraged self employment for many youths both in rural and urban areas. The spirit of successful entrepreneurship has taken over the mind of Nigerians, who believe in themselves and in the goal of self employment, instead of relying on government jobs. Through the establishment of man power development support schemes, and their involvement in the training and retraining of entrepreneurs, small scale industries have provide a pool of potential entrepreneurs and business people who are well equipped to start and successfully, manage industries whether small or large, not only in Nigeria, but overseas, successful business people in Nigeria like the Aliko Dangotes, the Ibrus, Mike Adenuga, Illodigwe and the Orji Kalus started as SMEs before the growth of their various business into conglomerates. It has reduced the dependence in government and large firms on salaries employment. This is evidenced from the liberalization policy of the government in telecommunication and education sectors as a lot of companies have been established to provide support staff and employment for Nigerians Small scale enterprises have stimulated rural development and achievement of a meaningful level of broad economic and rural development. To reduce the migration from rural to the urban centers. It has upgraded the social status of Nigerian youths, by showcasing them as very successful entrepreneurs and operators of small scale enterprises.
15
According to Ikeano (2001) pointed out that “most of the intermediate products used by bigger enterprises are produced by small scale enterprises. In other words small scale enterprises are the stepping stone for large scale enterprises and the bed rock of national economy. Also, Owualah (2001) ascertained that small scale enterprises offer employment opportunities for unemployment and or underemployed in the urban sector. He went further to say that their impact on employment is given to the opportunities they provide for the skilled or the urban and rural workers. Philips (2002) also enumerated that small scale enterprises contribute immensely to employment opportunities. He said this to justify his ascertion “small scale enterprises generate significantly higher employment and output for a given amount of investment compared with large enterprises they contribute about 70% to industrial development. Yakubu (2002) revealed that the Third National Development plan specifically stated that “the main objectives of the government for the development of small scale enterprises are the creation of employment opportunities, mobilization of local resources, mitigation of rural migration, and more. He also revealed the fact that evidence had shown that Nigerian’s small scale sector makes more bigger contribution to both the Gross Domestic Product (GDP) and employment than the large scale sector in the 1990’s.
2.5
Why Promoting Small Scale Enterprises? It is widely accepted that SMEs constitute the backbone of the private Given the new international context and the
sector in any economy.
emergence of the so called “new competition (Best, 1990). It is very difficulty to conceive a buoyant economy that does not rely on the competitiveness and dynamism of its SMEs. In the developing world, not only do they contribute to economic growth but also have a tremendous development impact on societies and their peoples. SMEs are now seen as
16
the main means, if not the only, to take people out of poverty and to build on better prospects for future generations. The contribution of SMEs to economic and social development results from the following aspects:
? SMEs make up over than 90 percent of business units in the world, and
account for between 50-60 percent of total employment (Kennedy et al,1999). If the informal sector was to be taken into account, it is believed that SMEs in African would account for almost 99 per cent of all business units (Chen 2001). Interestingly, research has shown that a high proportion of those businesses are likely to be run within the household (Chen et al,1999).
? SMEs are the main generators of employment opportunities for the
poor, and hence, main contributors to poverty alleviation. In Nigeria, SMEs account for most of the jobs generated in the private sector through the expansion of existing enterprises and the creation of new startups.
? SMEs contribute to a more equitable distribution of income as they
provide remuneration opportunities to a large group of very poor uneducated workers and women with few alternative source of income.
? SMEs stimulate local and regional development, as they tend to
agglomerate to make an effective and rational use of resource endowments.
? SMES promote an entrepreneurship culture and other business related
skills due to their low entry barriers.
? SMEs provide free on the job training and practical exposure that
cannot be obtained at school. In developing countries, the low impediments to set up businesses in unregulated activities can stimulate youth entrepreneurship.
2.6
Problems of Small Scale Enterprises in Nigeria
17
SMEs face two main sets of problems that put them in disadvantages vis-à-vis by players. The first set is inherent to begin small, while the second reflects distortions of market factors. Firstly, the size of the production clearly matter. Smallness can be a serious handicap to achieving economics of scale and efficient production. Higher unit costs reduce profit and limit savings, machine reinvestments in the firm unlikely to occur. This “low equilibrium” trap has serious implications for growth prospects and cooperation strategies of SMEs. Low prices and limited personal constitution the main means to reduce costs and the only basis for competitiveness. This ‘vicious circle’ is difficult to break particularly in developing countries where market failure and macroeconomics imbalances are more acute. Attracting qualified labour is another major factor limiting the growth, prospects and productive capacity of SMEs. This is particularly relevant in manufacturing industries, as SMEs tend to operate in the so-called ‘3D’ sectors dirty, difficult and dangerous. Second, SMEs may face segmented factor markets. In other words, large firms may have greater or more privileged access to impact, credit, labour, infrastructural, information and technology markets. There are economic reasons for this; providers of productive factors find it easier, safer and cheaper to deal with a few large customers than a range of small and dispersed ones. Moreover, the major problems of small scale enterprises consist of financial organization and technology. The financial problems derived from the fact that the funds available to the business originated from the owners of the enterprises. The ability to borrow is derived by the small number/amount of assets it owns and the fact that it cannot raise capital from organized capital market such as small exchange market. Furthermore, borrowing from financial institutions, is very difficult and whether this is possible, the cost of such loan(s) is/are much higher,
18
always reflecting the leads estimate of risk and uncertainty attached to the agreement/contract. The organizational problem is an outcome of the enterprises small size and the consequent inability to remain highly specialized workers/staff in the lines of accounting and management. The demand for the skills of such workers to be unemployment. Also and party due to financial problems smalls enterprises cannot easily afford to employ highly qualities personnel as existed in large scale organization. The technological aspect of the problems also linked with the management problems of small scale enterprises. Funds to purchase the latest invention in the area many of these small scale businesses do not embark on research and development programmes so that new ideas can be generated.
2.7
Factors to Promote Small and Medium Enterprises Development in Nigeria: An Analytical and Policy Framework Identifying the factors that enhance the competitive performance and
growth of SMEs is a necessary step in the process of cost-effective policy making. However, understanding SME behaviour is not easy. Within a region or country, it is common to find major variations the economic performance, capabilities and growth dynamics of enterprises. The reason for this is that the small enterprise economy is far from homogenous. This, is not surprising that under over-arching economic policies companies respond differently according to their own particular nature and materials characteristics. Among scholars and SMEs practitioners there appears to be a set of factors: those interval of the firms and those external to them. (a) INTERNAL FACTORS:- Among the internal elements, the framework distinguishes between general and capability factors, which are clearly interlinked with each other. The existence of all these and other interval factors and their multiple combination is what makes the SME spectrum so heterogeneous. Among the most important general SMEs factors are:
19
? SIZE OF FIRM: Size matters for economic performance. Although
economies the scale are difficult to reap and unit costs are inversely reflected to firm size; small players can benefits from greater flexibility and specialization. There is however genetic problem inherit to begin small. Even a further breakdown within the SMEs category-between micro enterprises (iv employed) and others SMEs- throws light on divergent patterns of growth and performance (Mead and Liedholm, 1998).
? SKILLS OF FOUNDER: There is no need to emphasize that the skills
of the founder either gained through formal education or previous working experience, are related to firm performance. Research has shown that the most advanced and efficient SMEs are run be welleducated entrepreneurs with previous working experience in other business (Trulsson, 1999).
? LEGAL STATUS OF FIRM: (King 2001) said some SMEs may
benefit from operating in deregulated markets whereas other SMEs need to be registered to take advantage of existing institutions and support schemes.
? LOCATIONS: According to (Mc Cormick, 1999), he said firms
benefits from strategic location. He said for instance, African SMEs that are chistered and located in urban areas show better growth prospects than those operating in isolation and remote areas.
? OWNERSHIP:
It
has
been
widely
researched
that
women
entrepreneurs often have different goals and employ different business strategies than men. The acknowledgement of gender related patterns of enterprises dynamics is vital for policy formulation (Chen, 2001).
? DEVELOPMENT CYCLE OF FIRM: Research shown that the
problems, needs and challenges faced by SMEs vary out the different phases in their development cycle (Mean 1998).
20
? POSITION IN THE VALUE CHAIN: An important aspect of SMEs
development is the ability of firms to move up to the value chain from labour intensive and low value-added operations to more sophisticated and rent rich activities. (Humpharey and Schmitz 2000).
? NATURE OF INDUSTRIAL ACTIVITY/SECTOR: It has been argued
that SMEs involved in capital extensive activities, enjoy higher returns and often generate. Richer rents than those firms operating in labour intensive industries (Lall, 2000 a). These general characteristics have an enormous influence on another set of ‘advances’ factors which are also internal of firms. b) EXTERNAL FACTORS: Whilst internal factors are important, the development of the SMEs sector needs of a conducive ‘business environment’ and specific support measures. These external factors can correct market failures and basis towards small firms. Some of the most important factors include.
?
MACROECONOMIC ENVIRONMENT: SMEs benefit from a stable macroeconomic environment, tight inflation control, low budget deficits, reasonable interest rates, and a competitive real exchange rate.
?
REGULATION AND POLICY FRAMEWORK: A conducive policy framework for SMEs often requires a market friendly regime that is opened up to new markets.
?
PHYSICAL INFRASTRUCTURE: The importance of a decent physical infrastructure for economic growth is undisputed. In Nigeria, the lack of functional and reliable basic traditional and modern infrastructure has clearly weighted against the competitive performance of SMEs.
?
FINANCIAL ASSISTANCE: It is widely acknowledged that financial constraints limit the investment capacity of SMEs, hence hampering their growth. In Nigeria, the problems are not so much the lack of finance but rather the accessibility by SMEs.
21
?
TECHNICAL ASSISTANCE: It is often provided by horizontal and sector oriented public institutions as a complementary way to assist SMEs.
?
NETWORKING: In the context of economic globalization, begin connected to regional and international network of firms has become a must (Pedersen 1997) has stressed that the poor distribution networks in East and Southern and west Africa is a major factor accounting for the interior growth performance of small production.
2.8
Causes and Failure of Small Scale Enterprises in Nigeria. There are several of failures of small scale enterprises in Nigeria. Some
of these causes are lack of management skills, lack of technical/technological skills, lack of commercial skills and others. Mike (2001) highlighted that resistance to control from outside small enterprises causes limitation to source of finance, and which consequently affects it’s the maps of their financial structure. He also said that “the fact that most of the small scale enterprises do not want to be controlled by outsides also causes their failure. He went further by pointing to the fact that “majority of the small enterprises are owned by properties who have neither adequate general education nor the required skill to manage such enterprises. Consequently, the management of such businesses are on the basis of trial and error”. Olashore (2001) states that ‘lack of knowledge of economic environment and the entrepreneur poor preparation of project are the major problem facing the small scale enterprises in Nigeria and hence cause their failure. However, Olashore (2001) advised the government to increase its commitment by providing the necessary incentives, education and infrastructures and generally conducive environment, protective policies for the development of the small scale enterprise, Kolawole (2000) further enumerated another causes of failure as ‘the general lack of evaluations. He said that this causes is a striking phenomenon
22
development in Nigeria. He further said that these are those international agencies presently engaging in some reviews of the lessons to be drawn from experiment in small management enterprises development during the part years. Kolawole (2000) However said that, inspite of the general lack of evaluation, a number of observations can be made based on many projects in which international labour organization nor has been engaged in and other research and studies. Kalejaiye (2000) revealed that “small scale enterprises real problems that result to failure actually lie more in bad attitudes towards day to day procedures that in particular inadequacies of marketing, personnel, organization and or control and that government is yet to appreciate sufficiently the tremendous impacts of the development and growth of the small scale enterprises in the national economy. Kalejaiye (2000) then suggested that in order to save operating costs, the small scale enterprises managers are likely to dispense with information system. Ovuorie (2001) in his research shed more light on the reason why so many small scale enterprises die so pre-maturely by stating that “most of them do not have active business goals/objectives from the on set and that when the first major storm set in the future becomes very bleak. In other words, what Ovuorie (2001) is saying is that most of the small scale businesses depends on importation of materials needed or raw-material but the moment a policy that affects their foreign dependence on importation is introduced they collapse.
2.9
Financing of Small and Medium Scale Enterprises in Nigeria. Well functioning and sustainable mechanization for SMEs financing
requires institution building and a market approach. Lending institutions are therefore require to improve their ability to provide financial services to SMEs through commercial mechanisms that lower costs and minimize their
23
risk exposure. These are also a number of trends in the financial service industry that are forcing banks to have a closer works at the SMEs market (Unitad, 1999). Globalization trends are increasing competition especially for servicing large corporate customers and driving down margins and fees. The improving liquidity if securities markets in many countries direct access to the capital markets in many countries is increasingly providing large corporation direct access to the capital markets and allowing them to by-pass financial intermediaries. Therefore, banks are under increasing pressure to expand their business towards SMEs customers and to develop mechanisms to improve the profitability of lending to SMEs. In recent years banks in developed countries have launched a number of initiatives that both improve the profitability of lending SMEs and also provide SMEs with better access to finance and to financial products than that are better failure to their needs (Aladekomo,2003). Furthermore, the financing of small scale enterprises goes a long way in determining the strength and success of the business enterprise. Akinwunmi (2001) said that small scale enterprises are not to remain forever, but the expansion of any business unwisely may be total. Akinwumi(2001) went ahead or further stating that “business expansion should be financial sound, ordinary from earnings or capital contribution of owners expansion in any case calls for careful advance planning. Oresotu (2001) declared that “in order to reduce the high risk cost associated with the financing of small scale enterprises, it is necessary for the institutions to be equipped with staffs that are capable of evaluating preinvestment feasibility studies and surprise projects execution. Mike (2001) identified that “the reason which make many commercial banks adduce for refusing to grant loans to small enterprises approach the banks with ill-conceived projects and unbalanceable propositions which expose them to considerable risks. Bankers have a duty to protect their
24
deposits, funds are ensured that they are invest in well digested viable feasible and qualitative projects that will be able to guarantee the payment of the loan and interest. Masha (2002) “In Nigeria, most small scale enterprises commence business with their personal capital, which is obtained through saving of owner or member of the same family. Owualah (2002) states that the major problem of many small scale founders is immediate capital problems to start the proposed business. Owualah (2002) further explained the source of capital, which are personal savings of the resources in cash original, family, member and friends, financial institutions and the recent innovations in the financing of small business all these depends on the size and large or age of the business.
2.10
Challenges of Small and Medium Scale Enterprises The challenges facing SMEs in many developing countries are monumental. The most worrying among these challenges is funding. Most new small business enterprises are not very attractive prospects for banks, as they want to minimize their risk profile. In Nigeria, the situation is not very different, until recently when the Banker’s committee interval in 2001 with a scheme themed the Small and Medium Industries Equity Investment Scheme (SMIEIS). The scheme relegated to the background government credit schemes that are not well through-out and implementation. Morealso, small and medium scales enterprises some challenges which are his listed below.
25
? Lack of infrastructure base: the lack of adequate infrastructure
constitutes one of the greatest challenges of SMEs development in Nigeria. Most SMEs have to resort to the private provisioning of water, electricity etc at great expense. In a World Bank study (1989), it was estimated that the cost of infrastructure accounted for 15 to 20 percent of the cost of establishing a manufacturing enterprises in Nigeria. These inadequacies consequently fall most heavily on small scale enterprises that cannot afford to provide their own services.
? Constrained access to credit: the banking sector is usually unwilling to
extent credit to the SMEs because of inadequately prepares project proposals, incomplete financial documentation, inadequate collateral including the inability to raise the required equity contribution and the absence of succession plan in the event of the death of the proprietor.
? Poor implementation of policies: the poor implementation of otherwise
sensible regulations and incentives which remain bureaucratic, inefficiently and often discriminatory. The resultant confusion and uncertainly in business decision and planning have adversely affected the SMEs.
? Procurement problems: these problems pose one of the greatest
constraints to improve capacity utilization rate among the SMEs. This problem is traceable to the unstable macroeconomic policy environment in the part years which led to the increase in customer’s duties and port charges, high cost of foreign exchange and consequent cut back on imported raw-materials in the factor of sub-optional local raw-materials supplies.
? Insufficient demand for products: insufficient demand for the products
of the SMEs is also an important challenges of SMEs. This can be attributed to the generals low purchasing power arising from customers. Dividing real incomes. To circumvent this, many SMEs have been adopting a credit sales policy whereby a reasonable
26
proportion of their output is sold on credit for a limited period at interest free rate.
? Inability to adjust prices: inability of SMEs to reasonably adjust their
prices to reflect additional costs following the substantial depreciation of the naira exchange rate. This is largely because doing so makes them incompetitive with large firms, while those face the added difficulty associated with begin price-takers.
? Poor educational background: lack of relevant educational background
and through manufacturing exposure by many SMEs proprietors. This is required in order for them to undertake complex expansion of their projects where such opportunity exists. Consequently, many of them are not sufficiently innovation and dynamic to meet growing and expanding business.
2.11
Prospects of Small Scale Enterprises in Nigeria. Small scale businesses offer enormous prospects in Nigeria towards
sustainable economic development. Adebusuyi, B.S (2001) states that if the various problems outline as challenges to small scale enterprises are addressed panacea would be found in practice of SMEs, which will would include;
? Resolving the collateral issues so as to enhance the prospects of the
SMEs for improved access to formal financial sector resources.
? Further streamlining of the regulatory procedures and strengthening the
capacity of relevance institutions so as to effectively implement and administer programmes and incentives for the SMEs.
27
? Provision
and maintenance
of
infrastructures
such
as road,
telecommunication, electricity and security. There is need to involve the private sector in these areas for greater efficiency.
? The promotion of industry: specific export expansion programmes
among the SMEs. In this regard, the extractive and ago-processing. Industries such as textile and garment, chemical and oil products present the greatest prospects.
? Further implications of tariff accompanied by a substantial reduction in
average tariff level.
? The need for a periodic comprehensive survey of the small scale
industries sector in the content of opportunities for export promotions.
? Lastly, small scale business can be instrument for a achieving “the
poverty alleviation objectives of the Government” because they are largely labour intensive, they can be used to create safety net in targeted poverty programmes.
2.12
Brief on SMIEIS The Small and Medium Scale Industries Equity Investment Scheme
(SMIES) was initiated, conceived and designed by Bankers committees as veritable alternative for funding of small and medium scale enterprises (SMEs). The schemes was approved by Bankers committee at its 246 th meeting held at December 21, 1999 and requires all banker in Nigeria to set aside 10 percent of profit before tax (PBT) annually as the banking industries contribution to governments effort towards stimulating economic growth and development. The scheme is expected to engender a new form of partnering between banks and promoters of industry. Banks are expected to identify genuine industrialist and provide them financial technical and managerial support.
28
The bankers committee approved operational
guidelines and
stakeholders responsibilities under the scheme on 19th June, 2001. That as from that date banks were excepted to commence investment in SMEs of their choice throughout the country. From the inception in June 2001 to 31 st Dec 2002 the total of eighty (80) banks out of ninety (90) had set aside a total sum of N13.07 billion for equity investment under the scheme. Out the amount, the sum of N1.73 billion had been invested in 36 SMEs profit by 19 banks as at 30 th October, 2002. Government on its part has set up Nigerian Agricultural Co-operative and Rural Development Bank (NACRDB) in place of the redundant Nigerian People’s Bank, to foster development and stimulate local SMEs to engender development of the rural areas.
2.13
Government new Strategies for promoting SMEs IN Nigeria. Although effort have been made by many successive government right
from the independence, to promote SMEs in the industrialization development. The development of the sub sector has been constrained by a number of factors as enunciated by Jamodu (2001) along which include both internal and external factors and these include:
? Unable macro-economic environment ? Inconsistent character of policy measures. ? Poor implementation and coordination of effort on SMEs. ? Absence of sustainable institution mechanism. ? Poor infrastructural facilities, i.e roads, railway system, water supply,
electricity, telecommunication e.t.c.
? Lack of effective financial support systems.
In addition to foregoing, the SMEs, in Nigeria are also handicapped by their peculiar internal characteristics which manifest in the following forms:
29
? Lack of equipment, which are mostly imported at greater cost addition,
these imported equipment are not easily adaptable to traditional process and their scales of operation.
? Lack of process technologies, designs patent e.t.c, that may involved
payment of royalties, technologies transfer fees e.t.c.
? Low level of technical skill in the form of technological, managerial
entrepreneurial and strategic capabilities.
? Lack of productive resources, especially finance.
2.14
New Strategies Jamodu (2001) opined from the forgoing that, the role of government in ameliorating the constraints of SMEs has been initiating remedial actions. This is more so with the rapid changing global environment moving towards deregulations, knowledge based economy, borderless trade and investment, which present new challenges and opportunities for SMEs in developing countries. He goes onto to say, it become necessary for a comprehensive and
integrated framework with sustainable support system capable of addressing the problems mentioned above and promoting a virile SMEs sub sector that would be well structured, organized and modernize, competitive in local and international markets environmentally friendly, vertically and horizontally Linked, inter and intra sectorally and with multinational corporation and veritable training ground for new generation of entrepreneurs. Since the inception of the present democratic dispensation in May 1999, the Federal Government has initiated and implicated number of policy measures, programmes and activities, which are in consonance with the
30
emerging framework and support system for SMEs development. These are in the following areas.
1
Promotion of good governance: The major components of good governance include transparency, accountability, rule of law and security of the life and property. These are being vigorously pursed by the government, which has it addition embark on anti-corruption crusade to sanitized the system.
2
SMEs Policy Reforms: The framework of the new industrial policy of Nigeria has a sub-sectoral SMEs policy framework, which is designed to make interventions and support facilities more feasible and applicable in targeting the various groups of enterprises within the sub sector.
3
Promoting
Entrepreneurship
Development
Programmes:
In
recognition of Entrepreneurship Development Programme (EDP) as effective instrument for promoting. SMEs, the Federal Ministry of Industry (FMI) inn collaboration with Nigeria Bank for Commerce and Industry (NBCI) introduced a concept and modality of EDP to Nigeria in 1986.
4
Improved Incentive to Interest in SMEs: Government has continued to expand the range of incentives to promote investment in Nigeria in general and SMEs in particular. The incentives varies and include tax tariff concessive, exemptions and relief.
5
Infrastructural Facilities i.e. water, power, road and telecommunication have remain a major obstacle to industrial development general and SMEs promotion in particular.
6
Funding of SMEs: Access to institutional finance has always constituted a pandemic problems for SMEs development in Nigeria. In the past a number, of scheme have been put in place to provide special credit lines for SMEs but these achieved vary limited impact for various reasons.
31
Furthermore, government is putting in a place a number of measures and facilities to enhance the access of micro, small and medium enterprises to institutional credit that would provide affordable medium to long terms loans.
2.15
The Roles of the Central Bank of Nigerian in Promoting SMEs CBN has since 1970s been instrumental to the promotion and
development of SMEs particulars through its credits allocation to sectors then classified as “preferred” including SMEs. For instance the CBN in the 1979/80 fiscal years directed that at least 20 percent of the loans advanced to indigenous borrower should be allocated to SMEs. This was subsequently raised from 16-20 percent to total loans and advances in April 1980 and 1990 respectively. However, given the uneconomic nature and cumbersome administration of such loans, banks preferred to pay penalties rather than channel credits to SMEs. The failure of the banks to meet the prescribed allocation led to the CBN to mandate the such defaulting banks as from 1987, to make such lending shortfalls available to it, for onward transfer to the sector through the Nigerian Bank for Commerce and Industry (NBCI). As a result of the imposition of sanctions by the CBN including mandatory transfer of lending shortfalls by defaulting banks. Most banks complied with CBN directives, lending-to-credit, expansion to SMEs and micro enterprises. For example, aggregate banks loan advance to these enterprises rose from N102.1million in 1980 to N5.900million, N42,302 million and N46.824million in 1990, 1996,1999 in that other. This representes 1.5, 22.9, 25.0and 13.3 percent of total banks loans and advances in those years respectively. According to monetary policy guidelines of 2001, CBN persuaded banks operating in Nigeria to set aside 10percent of their profit before tax for equity investment in SMEs.
32
Briefs History of Raggolies Water Nigeria Limited The company was founded by Gilbert and Ronald Chagoury. The Chagoury Group’s headquarters are based in West Africa. Its’s port folio of activities include construction and property development, flour mill, water bottling and purification, glass manufacturing, telecommunication, IT, Catering and International financing. The Group employs tens of thousands of peoples, considered by Gilbert Chagoury to be the best workforce in Africa. Starting with the production of flour and maize in the early 1970’s. The Chagoury group branched out primarily to meet its own needs. The need to service the company brought into existence an entire construction division that has grown into one of West Africa’s leading developers. In the 1980s to provide a infrastructure base and the chagoury group began expanding into transportation and technology to provide an all round self sufficiency for both its own business and the industrial requirement of West African State particularly Nigeria. TABLE AGGREGATE BANKING SYSTEM CREDIT TO THE PRIVATE SECTOR (N Billion) Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Credit to private sector 6.3 9.3 11.3 12.3 13.3 14.0 18.5 21.7 23.8 27.7 33.4 41.0 53.2 75.1 Credit to SMEs 0.1 0.2 0.2 0.4 0.4 1.1 1.5 4.7 5.2 6.0 7.5 9.4 24.0 26.0
33
Percentage of loan to SMEs 1.6 2.3 2.0 3.1 3.0 7.9 8.1 21.6 21.8 21.7 22.5 22.7 45.1 34.6
Target % 16 16 16 16 16 16 16 16 16 16 20 20 20 20
1994 104.2 35.5 34.1 20 1995 121.2 37.6 36.2 20 1996 132.4 38.7 37.7 20 1997 142.8 39.9 32.6 20 1998 156.7 40.7 38.6 20 1999 106.4 41.2 39.4 20 2000 200.6 56.4 42.3 20 Ratio of small enterprises loans to merchants Bank’s Total Credit Year 1992 1993 1994 1995 1996 1997 1998 1999 Q1 Q2 Q3 Q4 2000 Q1 Q2 Q3 Q4 To scale enterprises 3,493.9 4,900.0 5,489.3 9,159.6 5,595.8 7,137.9 7,800.8 8,018.8 8,941.2 6,800.8 6,389.1 8,630.1 6,587.9 5,380.1 51,100.1 Merchants Banks total 11,188.8 credit 25,189.8 30,185.1 30,612.2 41,139.5 54,491.5 60,290.6 64,536.6 64,136.0 54,959.9 49,257.7 61,784.0 69,994.6 64,767.3 565,871.7 Merchant bank loans to small scale enterprises in percentages 31.2 19.5 18.2 29.9 13.6 13.1 12.9 12.4 13.9 12.4 13.0 14.0 9.4 8.3 9.0
The abolition of mandatory banks credit allocation of 20% of its credit to small scale enterprises wholly by Nigerians took effective from October 1, 1996. NOTE: With effect from year 2001 universal banking commence and hence merchant Bank activities was abolished.
34
CHAPTER THREE
3.0
Research Methodology Introduction This section of this project deals with the methods to be used in
3.1
gathering facts and information’s needed for the completion of the research project. The method of data collection and research co-ordination will be analysed on this chapter. Several instrument will be used in collecting data that will not be subject to sentiments and make it valid. Instrument like questionnaire etc will be used during the conduct of the research. 3.2 Research Design The research refers to the plan basic which guides the data collection and analysis of data for the research work. It will specify the procedures for collecting data and activities to be performed. It will also help to identify the kind of information required and solve the problem at hand. Research design on the other hand means the structuring of investigation aimed at identifying variable and their relationship to one another. It serves as a blue print, an outline or scheme that allow a researcher to provide solution to the problem of how to generate data for this study, who is to study, and what to study. To this extent, the questionnaire to be administered will contain mostly structured personal questions and research question which will give the respondents the freedom to decide their responses. There will also be closed ended questions which will be provided to respondents with all containing choice options from which one option will be chosen. The questionnaire will administered to the staffs of the Ragolis Water Nigeria Limited operation department. Personal observations of the research
35
will also be used in examine their administrating process as it affect their organization efficiency in Ragolis water Nigeria Limited. All responses will be properly analysed and interpreted to yield a valid result.
3.3
Population A population can be defined as “the aggregate of all the cases that confirm to some designated set of specification. A population can further be defined as consisting of all the people employed in a particular industry. The population of this study comprises all staff of operation department of RAGGOLIS WATER NIGERIA LIMITED, IKORODU LAGOS.
3.4
Sample and Sampling Procedure On the other hand, a sample is “a set of element which is selected from a population with the aim of finding out something about the population from which it has been taken for the purpose of generalizing the conclusion reached for the whole population. What is found out about the sample is assumed to be true of the population as a whole. Furthermore, selecting a sample for a study has the following advantages,these are:- saves money, labour, time, a higher overall level of accuracy than full enumeration and permits deeper treatment of problem. Moreso, there are basically two(2) methods of sampling, these are the probability and the non-probability sampling. The probability sampling method is the one that can specify for each element of the population, the probability that it will be included in the sample, while for the non-
36
probability, sampling, there is no way of estimating the probability that every element has a change of being included in the sample and no assurance that every element will be included at all. In a nutshell, purposive/judgment form of non-probability samples was employed in the cause of this work simply because it assumed that, with good judgment and are appropriate strategy, one can hand pick the cases to be included in the sample and thus develop samples that are satisfactory in relation to one’s needs. The sample population of this work therefore, is the small scale industry, while sample size is the case study of this work.
3.5
Method of Data Collection Both direct data, and indirect data, were made use of in this research work. For the indirect data, the research work employed to use of various existing literature relevant to this work, textbooks, dailies, weekly and monthly magazines, documentary notes from the case study, relevant abstract from the Federal Office of Statistics, trade journals, statistical bulleting and other relevant secondary data to this work. Conversely, the primary sources of data made use of the questionnaire administration, personal interview schedule, direct observation method, sampling technique (judgment/purposive non-probability sampling technique) in the case of this research work. Henceforth, hypothesis were also stated and tested in order to determine whether or not relationship exist between/among variable that were employed.
3.6
Methods of Data Analysis
37
In the course of this research work, various methods were employed in the presentation, analysis and interpretation of data collected. Firstly, sample percentage proportions were use to determine the number of respondents in a form of percentage. They are all interpreted based on the respondents views. Secondly hypothesis were stated and tested with the use of chisquare (X2), observed frequently (0) was compared with the Expected frequency (E) with the use of Chi-square (X2c). The X2c formula is X2c = (0-E)2
E
Furthermore, chi-square calculated X2c was then compared with square tabulated (X2t) in order to know the validity and reliability of the decision rule before drawing the final conclusion. The decision rule is that; If X2c > X2t = Accept H1 If X2c < X2t = Reject Ho The above decision rule simply means that acceptance of Hi automatically enhance the rejection Ho and vice-versa. Additionally, using 95% (0.05) confidence limit, X 2c was compared X2t. This, then enhanced either the acceptance or rejection of Hi and viceversa, before the final conclusion(s) was/were drawn. The above was detailed in chapter four(4) of this research work. Lastly in this segment, personal interview schedule was also concluded in this research work. One of the senior staff in the production department of the case study was interviewed on the issue under discussion. His responses on this issue were presented in chapter four of the work. Direct observation
38
of the employees in the employees in the production department was also carried. 3.7 Validation of the Instrument To ensure content validity of the Instrument. Some copies f the drafted questionnaire were distributed to experts the project supervisor’s input was sought before coming up with the final draft of the questionnaire. 3.8 Reliability of the Instrument The reliability of the instrument were determined using a test – retest method. The instruments were trial tested at two weeks interval on staff of other small scale business.
39
CHAPTER FOUR
4.0
Presentation, Analysis and Interpretation of Data Introduction The purpose of this chapter is to present, analyses and interpret various
4.1
tools that is employed in the course of this research work. The presentation, analysis and interpretation exercise is fare subject to the questionnaires administered. Forty (40) questionnaires were sent for the case study, but the researcher was able to collect back 35 questionnaires from the respondents after being ticked sample/administered. Further, hypothesis were both stated and tested in this chapter so as to know the relationship/correlations that exist between/ among variable employed in this study. Simple percentage will be used to analyzed the data gathered from the respondents and chi-square method of analysis will be used to test the hypothesis. Using simple percentage, the formular goes thus; No of respondent Total of respondent
4.2
x 100 1
Analysis of Data Responses According to Sex Table 4.1
ALTERNATIVE MALE FEMALE TOTAL
NO OF RESPONDENTS 26 9 35
PERCENTAGE 74 26 100
From the table 4.1 above, it can be inferred that 26 respondents are male, while 9 respondents are female, which reveals 74% and 26%
40
respectively. This according to the observation of the researcher’s view is that there are more male staff than female staff in the case study. Responses According to Age Table 4.2 ALTERNATIVE (YEARS) BELOW 20 YEARS 20-29 30-39 40 YEARS & ABOVE TOTAL NO OF RESPONDENTS 2 11 18 4 35 PERCENTAGE 6 32 51 11 100
In the above table, it shows that 2 respondents which represents 6% are below the age of 20 years, while 11 respondents are between the age of 3039, while 4 respondents which represent 11% are 40 years and above. Responses According to Educational Qualification Table 4.3 ALTERNATIVE (YEARS) PRIMARY SECONDARY TERTIARY PROFESSIONALS TOTAL NO OF RESPONDENTS 5 9 20 1 35 PERCENTAGE 14 26 57 3 100
In the above table, it can be seen that 5 respondents are primary school leavers, 9 respondents are secondary school leaves, 20 respondents are tertiary leavers, while 1 respondent is professional, which reveal 14%, 26%, 57% and 3% respectively. Responses According Length of Service Table 4.4 ALTERNATIVE NO OF
41
PERCENTAGE
(YEARS) BELOW ONE YEAR 1-3 4-6 6 YEARS AND ABOVE TOTAL
RESPONDENTS 12 8 10 5 35
34 23 29 14 100
The table above shows that 12 respondent are below one year in the firm, 8 respondents are 1-3 years in the firm, while 10 respondents are 4-6 years in the firm, while 5 respondents are 6 years above, which reveals 34%, 23%, 29% and 14% respectively. Responses According to Marital Status Table 4.5 ALTERNATIVE (YEARS) MARRIED SINGLE DIVORCE TOTAL NO OF RESPONDENTS 7 27 1 35 PERCENTAGE 20 77 3 100
In the table above, it shows that 7 respondents are married, 27 respondent are single, while 1 respondents are divorced, which reveals 20%, 77% and 3% respectively.
Question 6; Through what Source is your Firms Finance Table 4.6 ALTERNATIVE (YEARS) PERSONAL/FRIEND BANKS CO-OPERATIVE GOVERNMENT AGENCIES
42
NO OF RESPONDENTS 28 3 2 2
PERCENTAGE 80 8 6 6
TOTAL
35
100
In the above table, it shows that 28 respondent agreed that the source available to the organization is from there personal savings and friends, while 3 respondents agreed that is from banks, while 2 respondents are from cooperative, while 2 respondents are from government agencies, which reveals, 80%, 8%, 6%, and 6% respectively. Question 7: Do most of the staff recruited have knowledge or skill of the work they are/were employed to do before there employment? ALTERNATIVE (YEARS) Yes No TOTAL NO OF RESPONDENTS 7 28 35 PERCENTAGE 20 80 100
From the above table, it shows that the 7 respondents favoured with yes, while 28 respondents favour with No, with the above statement, which reveals 20% and 80% respectively.
43
Question 8: In your Company the Majority of the Raw Material used are got from? Table 4.8 ALTERNATIVE LOCALLY IMPORTED TOTAL NO OF RESPONDENTS 22 13 35 PERCENTAGE 63 37 100
From the above table, it shows that 22 respondents believed that the raw materials used are got locally which represent 63%, while 13 respondent favoured with the imported, which represents 37%. QUESTION 9: Has company directly benefited from any government incentive to small scale enterprises? TABLE 4.9 ALTERNATIVE YES NO TOTAL NO OF RESPONDENTS 5 30 35 PERCENTAGE 14 86 100
In the above table, it shows that 5 respondents favoured with yes, while 30 respondents favoured with no, in the above statement, which reveals 14% and 86% respectively. QUESTION 10: Is an excise duty charge in your finished goods. TABLE 4.10 ALTERNATIVE YES NO TOTAL NO OF RESPONDENTS 3 32 35 PERCENTAGE 9 91 100
In the above table, it shows that 3 respondents agreed with yes with the statement that excise duty is charged on the finished product, while 32
44
respondents agreed with no, that excise duty is not charged on the finished product, which represents 90% and 91% respectively. QUESTION 11: Does your firm have enough customers for her product? TABLE 4.11 ALTERNATIVE YES NO TOTAL NO OF RESPONDENTS 28 7 35 PERCENTAGE 80 20 100
From the above table, it show that 28 respondents agreed with yes, while 7 respondents favoured with no, which reveals 80% and 20% respectively. Question 12: What is the attitude of customers to your products as compared to the customers attitude to its foreign made equivalent?
TABLE 4.12 ALTERNATIVE NO OF PERCENTAGE RESPONDENTS FAVOURABLE 12 34 UNFAVOURABLE 10 29 AVERAGE 13 37 TOTAL 35 100 In the above table, it shows that 12 respondents favourbale with the statement above, while 10 respondents unfavourbale with the statement, also 13 respondent agreed with average statements of the above statement, which reveals 34%, 29% and 37% respectively.
45
QUESTION 13: What is/are your organization motive(s) for embarking on small scale business? TABLE 4.13 ALTERNATIVE EMPLOYMENT OPPORTUNITIES LOCAL SOURCING OF RAW ASSIST IN CAPITAL FORMATION DIFFUSIOIN OF INNOVATIVE IDEA ALL OF THE ABOVE TOTAL NO OF RESPONDENTS 35 35 PERCENTAGE 100 100
In the above table, it shows that all the motive(s) are embarking on small scale business in Nigeria, particularly their organization.
QUESTION 14: Small scale enterprises has played a significant role in helping increase of employment opportunities in Nigeria. TABLE 4.14 ALTERNATIVE STRONGLY AGREED AGREED UNDECIDED TOTAL NO OF RESPONDENTS 23 10 2 35
46
PERCENTAGE 66 28 6 100
Moreover in the above table, it shows that 23 respondents strongly agreed with the statements, while 10 respondents agreed with the statement above, also 2 respondents are undecided, which reveal 66%, 28% and 6% respectively.
QUESTION 15: Inadequate finance has limited the expansion of small scale enterprises which in turn has limited their employment capacities and other domestic sourcing and mobilization activities. ALTERNATIVE STRONGLY NO OF RESPONDENTS 30 PERCENTAGE 86
AGREED AGREED 4 11 UNDECIDED 1 3 TOTAL 35 100 Table 4.15 above shows that 30 respondents, which represent 86% percent supported the above statement, while 4 respondents which represents 11% disagreed with the statement, while 1 respondents, which represents 3% strongly disagreed with the statement. Also majority of the respondents that supported the above statement specifically stated that this has affected and still affecting tremendously small scale business in Nigeria. QUESTION 16: Most of the intermediate products used by bigger firms are supplied/produced by small scale enterprises TABLE 4.16 ALTERNATIVE AGREED DISAGREE STRONGLY AGREED
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NO OF RESPONDENTS 24 8 3
PERCENTAGE 68 23 9
TOTAL 35 100 Moreso, in the table 4.16 demonstrated above, it shows that 24 respondents agreed with the statement, while 8 respondents disagree with the statement, also 3 respondents strongly disagree with the statement, which reveals 68%, 23% and 9% respectively.
QUESTION 17: The present economic hardship is to a large extent affecting the activities of small scale enterprises in Nigeria. ALTERNATIVE STRONGLY AGREED AGREED UNDECIDED TOTAL NO OF RESPONDENTS 20 13 2 35 PERCENTAGE 57 37 6 100
In the table above, it shows that 20 respondent strongly agreed with the above statement, while 13 respondent agreed with it, also 2 respondent were undecided about the statement, which represent 57%, 37% and 6% respectively.
4.3
TEST OF HYPOTHESIS HYPOTHESIS ONE
H0: Small scale has not played a significant role in helping increasing of employment opportunity in Nigeria, case study inclusive. Hi: Small scale has played a significant role in helping increasing of employment opportunities in Nigeria, case study inclusive. TABLE 4.18 CONSTRUCTION OF ONE WAY CLASSIFICATION TABLE FROM TABLE 14 Alternative O E O-E (O-E)2 (O-E)2 E
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Strongly Agree Agreed Undecided Total
23 10 2 35
11.7 11.7 11.7 35
11.3 -1.7 -9.7
127.7 2.89 94.1
10.9 0.2 8.0 19.1
The degree of freedom (df) = (3-1) = 2 :. X2 tab (3-1) (2-1) = 2 :. X2 tab2 = 5.99
Statistical Decision The decision criterion for this analysis requires the null hypothesis to be rejected if X2 calculated is greater than X2 tabulated. Otherwise reject. Conclusion of Result Since X2 calculated of (19.1) is greater than X2 tabulated of (5.99) other we reject the null hypothesis and accept the alternative hypothesis which indicates small scale has played a significant role in helping increasing employment opportunities in Nigeria. HYPOTHESIS TWO Ho: The present economic hardship to some extent affects the activities of small scale enterprises in Nigeria case study inclusive. Hi: The present economic hardship to large extent affects the activities of small scale enterprises in Nigeria.
TABLE 4.19 CONSTRUCTION OF ONE WAY CLASSIFICATION TABLE FROM TABLE 4.17 Alternative O Strongly Agree
49
E 11.7
O-E 8.3
(O-E)2 68.9
(O-E)2 E 5.9
20
Agreed Undecided Total
13 2 35
11.7 11.7
1.3 -9.7
1.69 94.1
0.1 8.0 14.0
The degree of freedom (df) = (3-1) = 2 :. X2 tab (3-1) (2-1) = 2 :. X2 tab2 = 5.99 Statistical Decision The decision criterion for this analysis requires the null hypothesis to be rejected if X2 calculated is greater than X2 tabulated. Otherwise reject.
Conclusion of Result Since X2 calculated of (14.0) is greater than X2 tabulated of (5.99) other we reject the null hypothesis and accept the alternative hypothesis which indicates small scale has played a significant role in helping increasing employment opportunities in Nigeria.
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CHAPTER FIVE
5.0
SUMMARY, CONCLUSION AND RECOMMENDATION SUMMARY OF FINDINGS Small scale enterprises play a lot of roles in the Nigeria economy. The
5.1
role that small scale enterprises play in the Nigeria economy range from industrial development process to other vital sectors in Nigeria economy. This essay has critically examines the ‘prospects and challenges of establishing and managing small scale business in Nigeria economy’ with RAGOLIS WATER NIGERIA LIMITED IKORODU LAGOS forming the case study of the research work. In a nutshell, chapter of this work the general introduction to the issue under investigation, further stated the related problems, while the objectives, research question, research hypothesis, and limitation of the study were also highlighted. The methodology employed in the course of the work was briefly outlined in the chapter. Chapter two covered the literature review. Hence various literature were reviewed on the subject matter. It further covered the definition of small scale business in Nigeria, evaluation of small scale enterprise, characteristics, important, prospects and challenges of small scale enterprise. More also, the problem, the causes and the financing of small scale enterprise were also stated, it went further to explain the government new strategies for promoting SMES. Chapter three, was concern with the research methodology aspect of essay. Hence also both the primary and secondary source of data were revealed the re-statement of research hypothesis, the sample population and sample size of the work were also highlighted. The method used in presentation analysis and interpretation of data were also discussed, while the problem encountered during the field work especially during the administration of the questionnaires were also highlighted.
51
Moreover, chapter four was more or less concerned with the presentation analysis and interpretation of data. Data were presented in tabular forms before their analysis and tested so as to known the relationship that exist between/among variable so as to determine the validity and reliability of variables used and various responses from the respondents before reasonable, sound and valid conclusion were drawn.
5.2
CONCLUSION Small scale enterprises are the types of enterprises which cannot be
neglected in Nigeria due to the vital roles played in the economy. They are either directly or indirectly important to the Nigerian economy. Due to the above statement, adequate attention should be accorded to small scale enterprises in Nigeria in order to enhance good development and growth of the Nigerian economy. This work can be easily concluded by saying that small scale business should further be encouraged by the government, firms and individuals so that the reliance on foreign sector can be reduced and challenges facing small scale business can be eradicated.
5.3
RECOMMENDATION In view of the challenges/problems that encountered by small scale
enterprises in Nigeria, the following recommendations would be very indispensable so also alleviate the problems/challenges encountered by small enterprises in Nigeria. They are as follows: (a) Government should established a small scale enterprises corporation which will be responsible for organizing the activities of small scale enterprise in the country. The small scale corporation to be established should be ready to carryout the following functions:
? Conducts surveys of existing small scale industries in the country and
their production.
52
? To conduct feasibility studies for new production from potential small
scale enterprises.
? Manage order for industrial components and other materials for other
industrial group and government.
(b)
Create Guarantee Schemes:- A lot of difficulties are/were encountered by small scale enterprises in securing adequate financial support from various financial institutions. It is therefore recommended that a small scale credit guaranteed scheme should be established so as to reduce the risk of lending to small industrialists.
(c)
Procedural delays in granting loans to small scale enterprises should be minimized. Also guidance and counseling on the proper use of loan granted to small scale entrepreneur must be organized.
(d)
Small scale enterprises should be encouraged to be researched oriented so as to improve quality of their products and satisfy customers.
(e)
The Central Bank of Nigeria should continue to inform banks of the need to channel a significant portion of their loan to the small scale enterprises.
Finally, the promotion of small scale enterprises should not be left only to government, but banks, private consultancy, firms, multi-national companies, and training centres should encourage small scale enterprises by giving greater impetus to this sub-sector.
53
REFERENCES Anyanwu (2001) “Efficient Administration of credit for small scale industrial development” Bullion Publication of central Bank of Nigeria 2001. Asika N. (1991) “Research Methodology in Behavoiural science” Nac-Millian Publishing Ltd. Lagos University Press 1991 pg 43. Fedederal Office of Statistics (2005). Aladekomo, F. O. 2003 “The small and medium enterprises (SME) landscape; Environment, Government policies, progammes and institutional support” a paper delivered at the two day workshop on “strategies for operationalizing small and medium industries equity investment scheme (SMIEIS) in Nigeria” on 23-24 August 2003. CBN, 2004. “Progress Report on SMIEIS” Accesiblke from http://www.cenbank.org. Arinaitive S.K. (2006) factors constraining the growth and survival of small scale businesses. A Developing countries Analysis. Journal of American Academy of Business. Humphrey, S. and Schmitz, H. (2000) “Governance and upgrading: linking industrial cluster and global value chain research, IDS working paper 120, Brighton: Institute of Development studies, University of Sussex. Lall, S. (2000) “the Technological structure and performance of developing countries manufactured exports, 1985-1998; Oxford Development studi4es, Vol. 28, No 3, Pp. 337-369. Lall, S. (1991), “Marketing barriers facing developing country manufactured exporters: a conceptual note, Journal of Development studies, Vol 27, No 4, pp 137-150. Liedholm, C and Mead, D. (1998) “Small-scale industries in
54
developing countries
empirical evidence and policy implications’,
international Development paper, 9, Michigan State University. Liedholm, C and mead D. (1998) “small-scale industries in developing countries: empirical evidence and policy implications’, international Development paper, 9, Michigan state university. Mc Cormick, D. (1999). ‘African enterprise clusters and industrialization: theory and reality, ‘World Development
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10th of Jan, 2013 Department of Management science Faculty of Social Management Science University Of Education Winneba Winneba Ghana.
Dear Sir/Madam, I am a student of the above named institution. As a part of the requirement for the award of B.Sc degree in Management Scienc, I am conducting a research study on “Prospects and Challenges of establishing and managing small scale business in Nigeria economy. This questionnaire is designed to elicit information that would be used for the study. I will be highly appreciate it if you will please filled in your responses on the spaces provided in the questionnaire. All information obtained shall be treated with strict confidence. Thanking you in anticipation for your cooperation. Yours faithfully Adebayo Oluwatosin T.
QUESTIONNAIRE Section A
1) SEX 2) AGE
(A) MALE ( (B) 20-29 Years
)
(B) FEMALE ( ( ( ) )
)
(A) Below 20 Years
56
(C) 30-39 Years
(
) ) ) ) ) ) ) ) ) ) ) ) )
(D) 40 Years and Above (
3) EDUCATIONAL QUALIFICATION
(A) Primary (B) Secondary (C) Tertiary (D) Professionals (A) BELOW One Year (B) 1-3 YEARS (C) 4-6 Years (D) 6 Years and Above
5) MARITAL STATUS
( ( ( ( ( ( ( ( ( ( (
4) LENGTH OF SERVICE IN THE FIRM
(A) Married (B) Single (C) Divorce
Section B
6) What is your source of financing the firm?
(A) Personal /Friend (B) Banks (C) Co-operative
( ( (
) ) ) )
(D) Government Agencies (
7) Do most of the staff recruited have knowledge or skill of the work they are
were employed to do before their employment? (A) Yes (B) No from______________? (A) Locally (B) Imported ( ( ) ) ( ) ( )
8) In your company the majority of the raw material used are got
57
9) Your company directly benefited from any government incentive to small
scale industries? (A) Yes (B) No (A) Yes (B) No (A) Yes (B) No ( ( ( ) ( ) ( ) ( ) ) )
10) Is an excise duty charge in your finished goods?
11) Does your firm have enough customers to her product?
12) What is the attitude of customers to your products as compared to the
consumers attitude to its foreign made equivalent? (A) Favourable (B) unfavorable (C) Average business? (A) (B) (C) (D) (F) Employment opportunities Local sourcing of raw materials Assist in capital formation Diffusion of innovative ideals All of the above ( ( ) ( ( ( ) ) ) ) ( ( ( ) ) )
13) What is/are your organization motive(s) for embarking on small scale
14) Small scale enterprises has played a significant role in help increase of
employment opportunities in Nigeria? (A) Strongly Agreed (B) Agreed (C) undecided. ( ( ( ) ) )
58
15)
Inadequate finance has limited the expansion of small scale enterprises
which is turn has limited their employment capacities and other domestic sourcing and mobilization activities. (a) (b) (c) 16) Agree Disagree Strongly disagree ( ( ( ) ) )
Most of the intermediate products used by bigger firms are supplied / (a) (b) (c) Agree Disagree Strongly disagree ( ( ( ) ) )
produced by small scale enterprises.
17) To what extent is the present economic hardship is affecting the activities of small scale enterprises in Nigeria, inclusively your firm? (a) (b) To a large extent To a Small extent ( ( ) )
59
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