CHAPTER ONE

INTRODUCTION

1.1            BACKGROUND OF THE STUDY

In recent years, particularly since the adoption of the economic reform programme in Nigeria in 1986, there has been a decisive switch of emphasis from the grandiose, capital intensive, large scale industrial project based on the philosophy of import substitution to small scale industries with immense potentials for developing domestic linkages for rapid, sustainable industrial development. Apart from their potential for ensuring a self reliant industrialization, in terms of ability to rely largely on local raw materials, small scale are also in a better position to boost employment, guarantee a more even distribution of industrial development in the country, including the rural areas, and facilitate the growth of non-oil exports.

In Nigeria, the definition of small and medium enterprises also varies from time to time and according to institutions, for instance, the Central Bank of Nigeria’s (CBN) monetary policy circular No: 27 of 1988 define small scale enterprises (excluding general commerce) as enterprises in which total investment (including land and working capital) did not exceed #500,000 and or the annual turn-over did not exceed #5.0 million.

Medium enterprise (excluding general commerce) as enterprises in which total investment and not exceed #1,000,0000 (1 million) and the annual turnover did not exceed #1.2 million. Small scale enterprises are one of the modern strategies underdeveloped countries are employing to break into the “league” of developed countries. Fasua (2006) categorized business that fall under small scale as follows firewood supply, plantain production, restaurant services, small scale poultry raising, operating a nursery for children, home laundry services and host of others. Business grouped under medium scale according to Fasusa are; soap production, hair/body cream production, chemical production, commercial poultry, profession approaches (law, accountancy, education) food and beverage production among others.

Consequently, both the federal and state governments and recently, local governments, have stepped up efforts to promote the development of small scale enterprises through increased incentive scheme, including enhanced budgetary allocations for technical, assistance programmes. New lending schemes and credits institutions for technical assistance programme New lending schemes and credit institutions such as the National Economic Reconstruction Fund (NERFUND), World Bank-assisted small-scale enterprises loan scheme (SMES), Nigeria Export and Import Bank (NEXIM), the people’s Bank of Nigeria (PBN) and the Community Bank have also emerged at both the national and local levels to boost the flow of development finance of small scale enterprises which have so far depended largely on personal funds and credit. From informal sources for both their investments and working capital.

1.2            STATEMENT OF THE PROBLEM

Small and medium enterprises are mostly managed by owners and relations. The financing in most cases in normally provided by the owners. The owners fail to realize the importance of external source of capital in order affect expansion in the business.

In another development, small and medium enterprise experiences difficulties in raising equity capital from the finance houses or individuals. Even when the finance house agrees to provide equity capital, the conditions are always dreadful.  All the result to inadequate capital available to the sector and thus lead to poor financing. This is the bane of most cottage industries in Nigeria. About 80% of small and medium enterprises are stifled because of this problem of poor financing and other problems associated with it (Chukwuemeka, 2006). The problems that emanated from poor financing include:

a)                 Lack of competent management which is the consequence of inability of owners to employ the services of experts.

b)                Use of obsolete equipment and methods of production because of owner’s inability to access new technology.

c)                 Excessive competition which resulted from sales which is a consequence of poor finance to cope with increased competition in the industry.

In spite of the different measures since 1960 to increase industrialization, small medium enterprises are still facing hard conditions. It is against the background that I examine managing small and medium business I Nigeria: prospects and challenges.

1.3 OBJECTIVES OF THE STUDY

The specific objectives of the study are:-

1)                To determine if high cost of raw materials affects the prices of goods and services 

2)                To determine the extent finance house strict conditions have affected the development of small and medium enterprise in Nigeria

3)                To assess the extent poor financing has affected small and medium business operation in Nigeria.

1.4 RESEARCH QUESTIONS

1)                Does high cost of available raw materials affects the prices of goods and services in business?

2)                To what extent has the finance house strict conditions affected the development of small scale?

3)                Does poor financing actually affect small and medium business operation?

1.5 SIGNIFICANCE OF THE STUDY

This study is aimed at explaining the problems and prospects involved in doing business in Nigeria, what business management is all about, how to set up business in Nigeria, how to raise funds for setting up small and medium scale enterprises, etc.

The study could serve as a useful insight to business consultants, entrepreneurs, and the government. The study will also serve as references material to management scholars and practitioners.

1.7 SCOPE OF THE STUDY 

This study generally covers every area regarding the problems and prospects involve in managing a business in Nigeria.  The researcher covered a small scale business enterprise such as God is Good Motors, Benin City.

1.8 LIMITATION OF THE STUDY

During the conduct of this research work, some factors posed constraints to the determined efforts of the researcher to carryout the research study with ease. Such factors include:

a.     Management Restriction: management refuse to allow access to information that is considered very confidential like detail information of the organizational corporate profile. As a result of the restrictions, I was able to work with only the information that was accessible.

b.     Time Constraint: Time is also another limiting factor that acts as hindrances in carrying out this research study. This is as a result of the fact that other academic activities were still being attended to in the course of carrying out this research work.

c.      Financial Constraint: money also acts as a problem in the conduct of the research work. Traveling expenses were incurred in getting the materials for the research work other expenses incurred generally during this research project work.

1.9 DEFINITION OF TERMS 1. BUSINESS: Is an activity engaged/indulged by individual or group of individual, to earn a living. 2. MANAGEMENT: This is the process of planning, organizing, directing and controlling the affairs of organizations for goal attainment. 3. MANAGER: This is a person in charge of/at the helm of the affairs of an organization. 4. SMALL AND MEDIUM ENTERPRISES: These are businesses outfits whose assets and liabilities are relatively small, when compared to that of big or multinational companies. 

5. SOURCES OF CAPITAL: These are various ways or means by whish a business raises money or finance, for business operations. 

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