ASSESSMENT OF SMALL AND MEDIUM SCALE BUSINESSES AS  A VERITABLE TOOL FOR ECONOMIC DEVELOPMENT

CHAPTER ONE

INTRODUCTION

1 .1     BACKGROUND OF THE STUDY

Experience has demonstrated that industrial development in every nation gives the best chance for creating sustained growth, job creation, savings and investment, and overall economic development. Nigeria, like any other developing nation with a low per-capital income, sees industrialisation and structural reform as necessary in the search for progress. One of the most pressing development concerns in Nigeria is the need to establish and implement policies and strategies for a more effective, competitive, and diverse industrial sector. This is especially significant when one considers the country's endowment as observed by  Olatoke's (2105)

Interestingly, people believe that while large corporations generate headlines in our news media, small and medium-sized enterprises are less essential. However, a closer analysis reveals that small and medium-sized firms are also vitally important in our society growth. Most of today's business giants began with humble beginnings, from the dreams and dedication of perhaps one person, while the backbone of our economic system hangs on those businesses e.g. (Oil and steel companies, etc.), but small scale industries constitute the muscle that enables such business giants above is obvious; that small medium scale businesses cannot compete directly with big business. According to Onochie (2019) studies has shown that the little businessman is most successful when he meets a demand that cannot or is not currently being met by his larger competitors. "Providing something better and different gives Nigeria's small businesses vibrancy."

Small and Medium Enterprises (SMEs), as defined by the National Council of Industries, are businesses whose total expenses, excluding land, do not exceed two hundred million naira (N200,000,000.00). A lot has been said and written about SMEs all across the world. It has also been the topic of many lectures and workshops, both locally and globally. Similarly, governments at various levels (local, state, and federal) have concentrated on Small and Medium Enterprises in one manner or another. While some governments developed policies to facilitate and empower SMEs' growth, development, and performance, others concentrated on aiding SMEs to expand through soft loans and other fiscal incentives. International agencies and organizations (World Bank, United Nations Industrial Development Organization (UNIDO), International Finance Corporation (IFC), United Kingdom Department For International Development (DFID), European Investment Bank (EIB), and others) are not only interested in making developing-country SMEs strong and vibrant, but have also heavily invested in them (World Bank 2018).

Locally, the Fate Foundation, the Support and Training Entrepreneurship Programme (STEP), the Nigerian Investment Promotion Commission (NIPC), the Association of Nigerian Development Finance Institutions (ANDFI), and individual Development Finance Institutions (DFIs) have been promoting the growth of SMEs in Nigeria through advocacy and capacity-building initiatives, and have continued to canvass for better support structures. All of the attention and assistance lavished on SMEs stems from the generally acknowledged reality that SMEs create jobs and money.  Justifying the introduction of SMES, Sanusi (2003) rstated that "with a concerted effort and renewed commitment from all stakeholders, this scheme will surely succeed and realize its intended objective of revamping the SMEs as engines of growth in the economy and a veritable tool for the development of indigenous technology, rapid industrialization, generation of employment for our teeming youths, and the pivot for sustainable economic growth." Small and medium-sized enterprises (SMEs) are celebrated in almost every country or state. Because of their (SMEs') important roles in the development and evolution of diverse economies, they have been correctly referred to as "the engine of growth" and "catalysts for socioeconomic transformation of any country.

As opined by  Ihekwoaba (2017), SMEs are a true vehicle for achieving national economic objectives such as job creation and poverty reduction at a cheap investment cost, as well as the development of entrepreneurial skills and indigenous technology. Other intrinsic benefits of vibrant SMEs include access to infrastructural facilities brought about by their presence in their surroundings, the stimulation of economic activities such as suppliers of various items and distributive trades for items produced and or required by the SMEs, resulting from rural urban migration, and the improvement of the standard of living of the SMEs' employees and their dependents, as well as those who are directly or indirectly associated with the SMEs.

1.2     STATEMENT OF PROBLEM

Small and medium-sized enterprises (SMEs) in Nigeria have not performed admirably, and thus have not played the expected vital and vibrant role in Nigeria's economic growth and development. As criticized by Nnamani (2020), the government, citizens, operators, practitioners, and organized private sector groups have all expressed grave concern about the situation. Year after year, governments at the federal, state, and even local levels have demonstrated interest in and recognition of the critical role of the SME sub-sector of the economy through budgetary allocations, policies, and pronouncements, and thus enacted policies to energize it. Similarly Imonitie (2021) observed that there have also been fiscal incentives, grants, support and aid from bilateral and multilateral agencies, as well as specialized institutions, all aimed at making the SME sub-sector more vibrant.  Just as it has been a major concern for everyone to promote the welfare of SMEs, it has also been a major source of concern for everyone that the key sub-sector has fallen short of expectations. When compared to what other developing and developed countries have accomplished with their SMEs, the situation is more disturbing and concerning. It has been demonstrated that there is a strong correlation between the degree of poverty, hunger, unemployment, economic well-being (standard of living) of a country's citizens and the vibrancy of the country's SMEs. If Nigeria is to achieve significant success in meeting the Millennium Declaration Goals for 2030, one of the sure ways would be to aggressively pursue the development of its SMEs (MDGS 2020) .

Akugbe (2021) pinpointing of the inadequacies of SMEs, noted that  problems of SMEs, which are not insurmountable are: a lack of entrepreneurial skills, poor management practices, limited access to money and capital markets, low equity participation from promoters due to insufficient personal savings due to their level of poverty and a low return on investment, insufficient equity capital, poor infrastructural facilities, a high rate of enterprise mortality, a shortage of skilled labor, and a multiplicity of regulatory agencies. Without a question, the issues and obstacles that SMEs face are immense, yet it is interesting to note that certain SMEs are able to overcome them. This gives hope and should give reason to be optimistic that there is a way out. There must be some survival strategies that many SME promoters are unaware of.  Upon this premise, the study seeks to asses small and medium scale businesses as  a veritable tool for economic development

1.3     PURPOSE OF THE STUDY

The overall objective of this research is to assess  small and medium scale businesses as  veritable tool for economic development. Other specific objectives includes:

In order to achieve this, the followings are the purpose of this study:

i.          To examine the   importance of SMEs in Nigeria economy.

ii.        To identify the major challenges militating  against the sustainability of SMEs.

iii.      To determine the role of government in assisting the SMEs in Nigeria.

iv.      To suggest effective approach for solving the  challenges of SMEs in Nigeria

1.4     RESEARCH QUESTIONS

The followings are the research questions:

i.          What are  the   importance of SMEs in Nigeria economy?

ii.        What are the major challenges militating  against the sustainability of SMEs?

iii.      What are the role of government in assisting the SMEs in Nigeria?

iv.      What other  effective approaches will ameliorate the constraints faced by SMEs?

1.5  SIGNIFICANCE OF THE STUDY

All and Sundry  have been seriously agitated as to what to do in order to reduce the crippling poverty, high level of ignorance and the embarrassing high  level unemployment rate in Nigeria. Given the vital and salutary role and contributions which SMEs play in other developed and developing economics.

This research is significance to potential, prospective and existing SMEs. The study will be an eye opener to them (owners of businesses) to know how to manage, its business, how to source for fund, principles and practice to employ in maximizing its profits and cost reduction. The individuals, who are not employed, will also gain from this study, in the sense that they can easily source for funds and establish business enterprises instead of searching for white collar jobs.Empirically, the study will contribute to the general body of knowledge and serve as a reference to scholars and study who wishes to conduct further studies in related field.

1.6     THE SCOPE OF THE STUDY

The scope of this study borders on an  assessment of  small and medium scale businesses as  veritable tool for economic development. The study will however be limited to selected small and medium scale businesses in Ibadan metropolis,  Oyo State.

1.7 LIMITATION OF THE STUDY

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that it is a new discourse thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size covering only selected small and medium scale businesses in Ibadan metropolis,  Oyo State. Thus findings of this study cannot be used for generalization for small and medium scale businesses  in other  States within Nigeria. Additionally, the researcher will simultaneously engage in this study with other academic work will impede maximum devotion to the research. Howbeit, despite the constraint  encountered during the  research,  all factors were downplayed in other to give the best and make the research successful.

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