CHAPTER ONE

INTRODUCTION

1.1 Background Of Study

Nigeria's economy has been in a state of flux. It has gone through a lot of ups and downs throughout the years. Nigeria's economy has worsened since the oil boom of the 1980s, and it has remained one of the world's least developed countries. The slow speed of economic growth can be attributed to a variety of factors. Mono-cultural economies, limited industrialization, heavy import dependency, and corruption are only a few of the reasons. Various regimes have attempted to turn around the country's economic fortunes in the past with various initiatives. There have also been certain bodies or agencies established to oversee and tackle the problem of poverty and promote economic progress. Bodies such as the National Poverty Alleviation Programme (NAPEP), the Family Economic Advancement Programme (FEAP), the Small and Medium Scale Enterprises Development Agency (SMEDAN), and others have been established to help with this. 2 Previous governments have been involved in a variety of development schemes aimed at improving the economy of the country. General Sanni Abacha's regime unveiled a vision for the 2010 growth plan. It was a strategy devised to achieve a particular degree of economic development in Nigeria by the year 2010. In order to turn around the economy, President Olusegun Obasanjo's government implemented a slew of reforms in areas including education, energy, solid minerals, public works, and transportation. He also founded the Due Process Office, which made significant improvements to the contract award and execution processes. The current government of Alhaji Yar'adua has developed its own program, dubbed the "seven-point agenda." His government plans to focus on important sectors of the economy through the seven-point agenda in order to accelerate the country's economic development. He also unveiled Vision 2020, a development strategy. He hopes to accelerate economic development with this approach, putting Nigeria among the top 20 economies by 2020. He has already begun to pursue this, with a particular focus on the power industry. 3 Despite these commendable programs and objectives, economic growth appears to be at a halt. In reality, the economy appears to be worsening further as a result of the global financial catastrophe, which has resulted in a global economic slump. The neglect of small and medium-scale firms, or what some refer to as micro entrepreneurs, has been identified as a stumbling block to economic progress. In both advanced and emerging countries, it has been shown that most economies' growth is based on the expansion of small and medium-sized businesses. Muhammad Yahya (2003).

Bangladesh, India, Indonesia, and other developing countries are doing well now because they have mastered the development of middle-level labor, which accounts for more than half of the productive sector. Despite the fact that the Nigerian government has tried in some way to acknowledge the sector and give it attention, there are still many obstacles preventing small and medium-sized businesses from achieving their goals. Small and medium-sized businesses face a variety of obstacles, including a lack of infrastructure, poor technological advancement in terms of machinery, a lack of experts and technical abilities, and a lack of funds and the inability to obtain loans from banks.

1.2 Statement of problem

The most serious problem that small and medium-sized businesses confront is a lack of enough capital and the inability to obtain bank loans. An economy can only thrive with the financial sector's assistance in providing loans to other sectors. One of the goals of banking reforms or recapitalization was to enable banks to support the real economy by providing loans to businesses in these vital industries. If credit is made available to the official sector while the informal sector, which includes medium and small businesses, is ignored, there will still be a gap in the economy's growth. While large-scale businesses have easy access to bank credit, small and medium-sized businesses have a tough time obtaining it. The Federal Government, in collaboration with the Central Bank of Nigeria, implemented reforms in the lower end of the financial industry in order to address this issue. Liberalizing the licensing of micro-finance institutions and converting community banks to micro-finance banks are two of the reforms. Small unstructured enterprises, salary earners, craftsmen, food sellers, small farmers, and traders are likely to receive micro-credits from microfinance institutions. The Central Bank built skill acquisition centers in three geopolitical zones around the country in order to achieve this goal, as well as to reduce unemployment. The purpose of the centers is to empower adolescents through relevant skills training and, as a result, boost their access to funds (credits) for business start-up.

1.3 Objective of study

The following are the objectives of this study;

1. Examine if there is any relationship between medium and small businesses and economic development.

2. To determine if the current financing pattern and proportionate contribution of bank loans is favourable for medium and small businesses in Nigeria.

3. To determine the key obstacles that small businesses have to obtaining credit from banks.

1.4 Research Hypothesis

The study will test the validity of the following hypothetical statement.

H01: There is no relationship between medium and small businesses and economic development.

H02: The current financing pattern and proportionate contribution of bank loans is not favourable for medium and small businesses in Nigeria.

1.5 Significance of study

This study will assist small and medium-sized firms in identifying other sources of funding for their businesses other than their own personal funds. It will be extremely useful to the current government in identifying potential areas of support for financing small and medium-sized businesses. The study will also help the government evaluate the impact of microfinance banks on financing small and medium-sized businesses since their inception, as well as their overall economic impact. Finally, the study will be of great use to students and scholars interested in SME funding, and it will serve as a starting point for future research.

1.6 Scope of study

This study is carried out on investigating small and medium scale enterprises and their relevance to  economic development. The study however is delimited to examining if there is any relationship between medium and small businesses and economic development, determining if the current financing pattern and proportionate contribution of bank loans is favourable for medium and small businesses in Nigeria and the key obstacles that small businesses have to obtaining credit from banks. Hence, based on the nature of the study, selected SMEs, in Uyo, Akwa-ibom state, will serve as enrolled participants for this study.

1.7 Limitation of study

Finance,inadequate materials and time constraint were the challenges the researchers encountered during the course of the study.

1.8 Definition of terms

Economic Development: economic development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and objectives.

Small and Medium Scale Enterprises: Small and medium-sized enterprises (SMEs) are businesses whose personnel numbers fall below certain limits.

CHAPTER TWO

REVIEW OF LITERATURE

INTRODUCTION

Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.

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