PROMOTION OF SMALL SCALE ENTERPRISES AND THEIR CONTRIBUTION TO THE ECONOMIC GROWTH OF NIGERIA
study critically examined the contributions of small and medium scale
enterprises to the economic growth of Nigeria and how SMEs can be promoted.
Since SMEs are the backbone of the economy, it is essential to adequately
promote and sustain their activities in-order to enjoy a developed and
methodology, the researcher used both primary and secondary sources of data for
the study. Primary source of data formed the basis for data analysis as
questionnaires were issued to officials of Small and Medium Scale Development
Agency of Nigeria (SMEDAN). Chi-square at a significance level of 0.05 was also
used to test hypothesis developed for the study.
from the study revealed that in actual fact, SMEs contribute tremendously to
the growth of the economy via increase in Gross Domestic Product (GDP). The
production of goods and services, creation of jobs, innovation of newer
products and revenue generation abilities of SMES have helped the economy of
Nigeria since Nigeria gained her independence in 1960. The government should
minimize tax burdens imposed on SMEs and provide adequate power supply to
create enabling environment for SMEs to survive and be adequately promoted.
1.1 BACKGROUND OF THE
production of goods and services in the most efficient manner has continued to
be the only viable and reliable option for development, growth and survival of
any economy. SMEs have been fully recognized by government and development
experts as the main engine of economic growth and a major factor by extension
in promoting the realization of the financial systems strategy 2020. This is because
the development of this sub-sector is an essential element in the growth strategy,
not only in contributing to improved standard of living; they also bring
substantial local capital formation and achieve high level of productivity and
a planning stand point, SMEs are increasingly recognized as the principal catalysts
for achieving equitable and sustainable industrial diversification and dispersal
and in most countries SMEs account for well over half of the total share of employment,
sales and value added (Udechukwu, 2003). This is not surprising because the
industrial sector in Nigeria has no significant record of meaningful
contribution to economic development since independence in 1960 because it has
not experienced any notable growth, traceable to indigenous industrial
entrepreneurship (Adewale, 2007). The Nigerian economy, since the early
seventies, has been dependent on oil products. As a result of the enormity of
revenue generated from oil, very little attention has been paid to proper
development of the industrial sector. The reason for the lacklustre performance
of the industrial sector is mostly associated with the poor attention paid to
the promotion and development of the small and medium scale sub-sector, which
is accepted worldwide to be the engine of economic growth and the basic foundation
for the industrialization process of any nation that desires to experience solid
development. This is more so because entrepreneurship development is a critical
aspect of skills development and keystone for economic revival and growth.
the vital role of small and medium scale enterprise (SMEs) as the only
authentic foundation for accelerated industrialization, growth and development,
as witnessed in all the Newly Industrialized Countries of South East Asia,
referred to as Asian Tigers, is recognized for its accelerative effect in
achieving macro-economic objectives such as full employment, income
distribution, development of local technology and stimulation of indigenous
entrepreneurship, mitigation of rural-urban migration, support and linkage of
the entire industrial sector by training of semi-skilled and non-skilled
manpower as well as the manufacturing and supply of spare parts and raw
materials to large scale industries.
1.2 STATEMENT OF THE
studies have identified financial constraint as the major obstacle to Small and
Medium Scale Enterprises Development in developing countries including Nigeria.
For instance, Adelaja (2003) argued that the access to institutional finance
has always constituted a pandemic problem for SME development in Nigeria. He
recalled that in the past, a number of schemes have been put in place to
provide special credit lines/windows for SMEs but this achieved very limited
The primary focus of this study emanates from the fact that small scale
enterprises owners do not have sufficient finance to carry on their due to the
low saving culture of the people in this part of the world. The reason for this
is not far fetch: low level of income basically. While it is an established
fact that Small and Medium Scale Enterprises face financial challenges, no
research has been conducted to investigate the effect the financial problem on
their contribution to economic development. Asaolu et al (2005) and many other
authors and researchers have deduced that the financial challenges mar the
developmental role of Small and Medium Scale Enterprises. But this may not be
true especially in the case of Nigeria where the informal sector, which is
constituted largely by the Small and Medium Scale Enterprises play a very
important role in the development of the nation’s economy. Therefore, this
study seeks to evaluate the promotion of Small and Medium Scale Enterprises
(SMEs) in Nigeria and their contribution to economic growth.
1.3 OBJECTIVES OF THE STUDY
The main purpose of this study is to identify and consequently analyze the most
effective and efficient way through which Small and Medium Scale Enterprises
could be financed and promoted.
In view of the above, the researcher intends to find out the following:
The role played by government towards promotion and development of Small and
Medium scale Enterprises (SMEs).
1. To examine the contribution of Small
and Medium scale Enterprises (SMEs) to the economy growth of Nigeria.
2. To identify the various challenges
militating against the promotion of Small and Medium scale Enterprises (SMEs)
3. To find suitable strategies that will
improve the development, growth and survival of Small and Medium scale
1.4 RESEARCH QUESTIONS
The study would examine the following questions:
1. What is the trend of financial support given to SMEs in Nigeria?
2. What impact do Small and Medium Scale Enterprises make to Nigeria’s economic
3. What contribution has the financial system made to the growth of SMEs in
4. How could the growth of Small and Medium Scale Enterprises be enhanced in
1.5 HYPOTHESIS OF THE STUDY
1. Ho: The
activities of Small and medium scale enterprises have not contributed to the
economic growth of Nigeria.
activities of Small and Medium scale Enterprises have contributed to the
economic growth of Nigeria.
2. Ho: Small and
Medium scale enterprises are not adequately promoted by the government of
Hi: Small and
Medium scale enterprises are adequately promoted by the government.
3. Ho: SMEDAN
officials have not effectively and efficiently
promoted SMEs in Nigeria
officials have effectively and efficiently promoted SMEs in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
Small and Medium scale Enterprises
(SMEs) in Africa rely largely on own savings, not only to grow but also to
innovate, firms often need real services support and formal finance assistance,
failing which under-investment in long term capabilities (training and R&D)
may result, (Oyelaran-Oyeyinka, 2003).
Besides finance, there are critical elements (including: knowledge, skills and
experience of staff; capacity and quality of internal facilities; information
and knowledge of market; intellectual and managerial leadership; external
infrastructure and the incentive system at the micro and macro levels) that
lacking within technology support institutions themselves. These undermine the
effectiveness of their support to Small and Medium scale Enterprises (SMEs).
This study is significant because it would help to evaluate the operations of a
vital segment of the industrial sector – Small and Medium Scale Enterprises
(SMEs) , which have been identified as having very high potential in promoting
economic growth and development (Oni and Daniya, 2012). The evaluation shall be
done with special focus on their financing thereby adding to the existing
literature on the subject matter.
1.7 SCOPE OF THE STUDY
This research work focuses on the
promotion of Small and Medium Scale Enterprises (SMEs) in Nigeria paying
special attention to the impact the government of Nigeria has on the
development of Small and Medium Scale Enterprises. The research intends to
study the essential problems encountered by Small and Medium Scale Enterprises
and suggest ways by which they can be adequately and efficiently financed.
Most of the information and data needed for the study would be gathered from
existing literature and from relevant government agencies such as the National Bureau of Statistics (NBS) and Small
and Medium Enterprise Development Agency of Nigeria (SMEDAN) etc.
1.8 LIMITATIONS OF THE
only limitation faced by the researcher in the course of carrying out this
study was the delay in getting data from the various respondents. Most
respondents were reluctant in filling questionnaires administered to them due
to their busy schedules and nature of their work. The researcher found it
difficult to collect responses from the various respondents, and this almost
hampered the success of this study.
1.9 DEFINITION OF TERMS
Business: The Oxford Learner’s Dictionary defines
business as a commercial activity, a means of live hood, a trade, profession,
Capital: capital can be defined s man-made productive
asset that are set aside for the production of other assets. In other
restricted cases, it is defined as money set aside to start business.
Economic Development: it can define as the process whereby a
country’s real per capital gross national product of income increases over a
sustained period of time through continuing increases i.e. per capital
Economic Growth: Economic growth
is the increase in the amount of the goods and services produced by an economy
over time. It is conventionally measured as the percent rate of increase in
real gross domestic product,
or real GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted
terms, in order to obviate the distorting effect of inflation
on the price of the goods produced. In economics,
"economic growth" or "economic growth theory" typically
refers to growth of potential output,
i.e., production at "full employment".
Economy: the word is used to mean a particular system
of organization for the production, distribution, and consumption of all things
people use to achieve a certain standard of living.
Entrepreneurship: The willing and ability of an individual to
seek out investment opportunities in an environment, and an environment, and be
able to establish and run an enterprise successfully based on the identified
Role: according to Merriam-Webster’ dictionary is
defined a function or part performed especially in a particular operation or
process or major.
Small and medium enterprises or small and medium-sized enterprises (SMEs, small and medium-sized businesses, SMBs, and variations of these terms) are companies
whose personnel numbers fall below certain limits. The abbreviation
"SME" is used in the European Union
and by international organizations such as the World Bank,
the United Nations
and the World Trade Organization
(WTO). Small enterprises outnumber large companies by a wide margin and also
employ many more people. SMEs are also said to be responsible for driving
innovation and competition in many economic sectors.
is The short form for Small and Medium
Enterprises Development Agency of Nigeria. (SMEDAN) was established by the SMEDAN Act of
2003 to promote the development of the MSME sector of the Nigeria Economy. The
Agency positions itself as a One Stop Shop for MSME
Development. Micro Enterprises are included in the clientele of the Agency
since they form the bedrock for SME's
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