SMALL AND MEDIUM SCALE BUSINESS ENTERPRISES AND ECONOMIC GROWTH OF NIGERIA (A Case Study of Vono Product Plc)
ABSTRACT
This project has been able to carry out
Small and Medium Scale business enterprises and economic growth. The
research sample is randomly selected from De Eugene De-Rose Industry and
Vono Product Plc by survey method composed of thirty (30) respondents.
Chapter one looked at the background of the study (introduction), the
statement of problems, objective of study. It also highlights research
questions, statement of hypothesis, significance of the study, scope of
the study, limitation of the study, history of the case study and
definitions of terms. Chapter two was based on literature review and
relevant texts on the subject topic. Chapter three outlined the research
methodology used in conducting the research work. It indicates that
this research work was carried out using the survey research method. The
use of questionnaire and personal interview in collecting relevant data
was adopted. Chapter four gives the data analysis, interpretation and
presentation of data collected; it also includes the test of hypotheses.
Finally, chapter five brings the research work to a conclusion by
giving a summary of findings, conclusion and recommendations. Therefore,
through the hypotheses tested it was concluded through chi-square
statistical package that –There is a significant correlating between
small and medium scale and economic growth of Nigeria.
TABLE OF CONTENT
PAGE
TITLE PAGE I
CERTIFICATE II
DEDICATION III
ACKNOWLEDGEMENT IV
ABSTRACT V
TABLE OF CONTENT VI-VII
CHAPTER ONE: INTRODUCTION
1.1 BACKGROUND TO THE STUDY 1
1.2 STATEMENT OF PROBLEMS 3
1.3 OBJECTIVES OF STUDY 4
1.4 RESEARCH QUESTIONS 5
1.5 STATEMENT OF HYPOTHESIS 5
1.6 SIGNIFICANCE OF THE STUDY 5
1.7 SCOPE OF THE STUDY 6
1.8 LIMITATION OF THE STUDY 6
1.9 HISTORY OF THE DE ROSE PURE WATER (SMALL
SCALE ENTERPRISE) 7
1.10 DEFINITION OF TERMS 10
REFERENCES 12
CHAPTER TWO: LITERATURE REVIEW
2.1 INTRODUCTION 13
2.2 THE CONCEPT OF SMALL AND MEDIUM SCALE
ENTERPRISES (SMEs) 13
2.3 ROLE OF THE SMES SUB-SECTOR IN THE GROWTH
OF THE ECONOMY 18
2.4 SIGNIFICANCE OF THE SMEs SUB-SECTOR IN THE
NIGERIAN ECONOMY 21
2.5 PROBLEMS OF SMALL AND MEDIUM ENTERPRISES IN
NIGERIA 23
2.6 PROSPECTS OF SMALL AND MEDIUM ENTERPRISES
IN NIGERIA 27
2.7 SMEDAN 35
2.8 COMPARATIVE ANALYSIS BETWEEN INDIA’S SMALL
SCALE 36
2.9 WHY SMEs IN NIGERIA HAVE PERFORMED BELOW
STANDARD 41
2.10 SMALL BUSINESS ENTERPRISES: A STRATEGIC
MANAGEMENT PRACTICE 46
REFERENCES 48
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 INTRODUCTION 50
3.2 RESEARCH DESIGN 50
3.3 THE STUDY POPULATION 50
3.4 STATEMENT OF RESEARCH QUESTIONS
AND HYPOTHESIS 50
3.5 COLLECTION OF DATA INSTRUMENT 51
3.6 PILOT TESTING: VALIDITY AND RELIABILITY TEST 52
3.7 DATA COLLECTION INSTRUMENT 52
3.8 METHOD OF DATA ANALYSIS 52
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS OF RESULT
4.1 INTRODUCTION 53
4.2 TESTING OF HYPOTHESIS 71
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY OF FINDINGS 74
5.2 CONCLUSION 75
5.3 RECOMMENDATIONS 75
QUESTIONNAIRE 77
CHAPTER ONE
INTRODUCTION
1.2 BACKGROUND TO THE STUDY
Small and medium scale Business
Enterprises in Nigeria economic growth cannot be over emphasized as
entrepreneurship is indispensable catalyst for the sustenance of the
economy in Nigeria as a whole.
Small and Medium Enterprises (SMEs) have
played and continue to play significant roles in the growth,
development and industrialization of many economies the world over. In
the case of Nigeria, SMEs have performed below expectation due to a
combination of problems which ranges from attitude and habits of SMEs
themselves through environmental related factors, instability of
governments and frequent government policy changes and somersaults
(Suleiman, 2005).
Obadan, (1997) highlights the top ten
problem areas of SMEs in Nigeria in decreasing order of intensity
include: management, access to finance, infrastructure, government
policy inconsistencies and bureaucracy, environmental factors, multiple
taxes and levies, access to modern technology, unfair competition,
marketing problems and non-availability of raw materials locally. Thus
managerial problems represent the greatest problem facing SMEs in
Nigeria while non availability of raw materials locally is the least
problem.
Interest in the role of small and medium
scale enterprises in the development process continues to be in the
forefront of policy debates in developing countries (Olorunshola, 2003).
The advantages claimed for small scale enterprises are various,
including : the encouragement of entrepreneurship; the greater like hood
that small scale enterprises will utilize labour intensive technologies
and thus have an immediate impact on employment generation; they can
usually be established rapidly and put into operation to produce quick
returns; small scale enterprises development can encourage the process
of both inter-and intra-regional decentralization; and they may well
become a countervailing force against the economic power of large
enterprises. More generally the development of small and medium scale
enterprises is seen as accelerating the achievement of wider economic
and socio-economic objectives, including poverty alleviation.
The role of finance has been viewed as a
critical element for the development of small and medium scale
industries. Previous study have highlighted the limited access to
financial sources available to small enterprises compared to large
organizations and the consequences for their growth and development
(Uduchukwu, 2003).
Typically, small enterprises face higher
transactions cost than large enterprises in obtaining credit
(Olorunshola, 2003). Poor management and accounting practices have
hampered the ability of small enterprises to raise finance. Information
asymmetries associated with lending to small scale borrowers have
restricted the flow of finance to small enterprises. In spite of these
claims however, some studies show a large number of small enterprises
fail because of non-financial reasons.
1.2 STATEMENT OF PROBLEMS
The statement of problems in this
research investigation is to evaluate the challenges of small and medium
business enterprises and economic growth of Nigeria. Generally, because
of problem of underdevelopment of entrepreneurship and small scale in
Nigeria, a lot of noble business ideas have been killed.
Market Trends: A major growth factor is
being able to identity and meets market gaps. The Nigerian SMEs ability
to identify market gaps has often been in doubt. Furthermore, it is a
way of identifying a gap in these sectors proper assessment of the
market potential and dynamics that is necessary for a proper value
proposition, which will help them to avoid investing wrongly. Failure to
plan against future market trends, lack of resourceful research and
other areas where small scale business is deficient in productions. The
lack of adequate knowledge might make a business manager loose a good
business opportunity, and the ability to tap into other grounds or
market to make more profit.
Political instability: This does not
encourage an investor to invest in the economy and even if he has
invested, he might decide to fold up due to the prevailing hostile
economic climate.
Inappropriate managerial skills: due to
lack of enough capital or sheer ignorance of technological advances,
entrepreneurs tend to purchase obsolete and inefficient equipment there
by setting the state ab initio, which bring about lower level
of productivity and poor product quality. It all results in huge
consequences on product output and market acceptability. The key ones
include inadequate infrastructural facilities (road, water, electricity
etc) insecurity of lives and property, inconsistent monetary, fiscal and
industrial policies.
Limited access to market, multiple
taxation and levies, lack of modern technology for processing and
reserving products, policy reversals, capacity limitation, data
inadequacies, harsh operating environment, fragile ownership base,
fragile capital base. While some the challenges that SMEs face are
induced by the operating environment (government policies, globalization
effects, financial institutions, local government policies, attitude to
work) etc other challenges are driven by the inherent characteristic of
the SMEs themselves.
1.3 OBJECTIVES OF STUDY
The main objective of the study is to
review the challenges of small and medium business enterprises and
economic growth in Nigeria. In so doing, the researcher intends giving
an in depth information and analysis on the operations and activities of
Eugene De Rose Industry and Vono Product Plc. In view of the above, the
researcher intends to find out the following,
(i) To evaluate the performance of the small medium enterprises toward the economic growth in Nigeria.
(ii) To examine the mode of operation of the enterprises in terms of growing the economy.
(iii) To identify the major constraints hindering the operations of the enterprises.
(iv) To make suggestion as to how the performance of the small and medium enterprise could be improved.
1.4 RESEARCH QUESTIONS
This research work is guided by the following research questions:
(i) How effective has the small and medium enterprises leading to the growth of Nigeria economy.
(ii) What is the mode of operations adopted under in the enterprises
(iii) What are the major constraints hindering the activities of the small and medium enterprises in Nigeria?
(iv) How can the performance of the small and medium enterprises could be improved.
1.5 STATEMENT OF HYPOTHESIS
The hypothesis is tested in the course of the study is stated below:
Ho: There is no significant correlation between SMEs and economic growth of Nigeria.
Hi: There is a significant correlation between SMEs and economic growth of Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The significance of this study is to
demonstrate that small and medium enterprises play a vital role in the
growth of Nigerian economy and the success of organization. Apart from
small and medium enterprises has an impact on organizational
performance.
Hoselitz (2002) says the perceived self
efficiency of enterprises has been proven to affect the strategies and
performance of their business. It also developed to the creation of new
organization of the country. Vital decision making organizations are
solely depend on the different behaviours of the entrepreneurs in such
organizations. It also aids and decides how the organizational goals are
accomplished. In conclusion small and medium enterprise ill terms of
the performance determine the growth rate of a particular country.
1.7 SCOPE OF THE STUDY
The scope of the study being the
challenges of small and medium business enterprises and economic growth
of Nigeria is taking Eugene De Rose Industry and Vono Products Plc as
case studies. However, the workers of the duo organizations would be
covered. The scope would also cover the period of 1999-2010.
1.8 LIMITATION OF THE STUDY
Synonymous with normal research work,
this project will be limited by time which is the greatest enemy of
human race is a major constraint to this project therefore makes it
impossible to carry out an exhaustive research work on the topic. It
also leads to inadequate detailed analysis of the topic.
Finance; due to the capital outlay that
is normally involved in any research, and the limited supply of funds,
this also constitutes a constraint.
Availability of materials; it is a known
fact that most research work thrives on the availability of secondary
data. The inadequacy of such materials for this work necessitates my
being confirmed to available literature in the libraries visited.
Other limitations identified include the
financial involvement, market trends, political instability,
inaccessibility of respondents, lack of basic statistics etc.
1.9 HISTORY OF THE DE ROSE PURE WATER (SMALL SCALE ENTERPRISE)
Eugene De Rose Pure Water Industry is an
organisation that was established a decade ago with vested interest in
beverages production. It is situated at 1/3 Eugene Close, opposite Iba
Housing Estate.
Since it began, it has been blazing the trails and creating remarkable pace setting in the spheres of production and creativity.
Its mission is to produce quality products and to give consumers of the products value for money.
Their products include the following:
Table water
Pure water, and
Water dispensing machines.
Table water
Eugene de Rose table water is produced
under the best hygienically supervised conditions, with the latest/best
automated bottling water equipment.
It is packed in various sizes, 50cl, 75cl, 150cl and 18.9 litres. It also offers personalised labels to brand various occasions.
Sachet water
This is prepared in 60cl of N60 per bag
Water Dispensing Machines
The water dispensing machines are
durable, dependable and affordable; it comes in different shapes and
sizes. Some of these dispensers are equipped with digital indicators
highlighting hot and cold temperatures, while some also have inbuilt
refrigerators for storage.
History of Vono Products Plc (Medium Scale Enterprise)
Vono Products Plc was incorporated on 9th
October, 1960 with initial objective of meeting the domestic and
institutional needs of homes, schools, hospitals and various
establishments in terms of metal and packaged beds. Its head office is
located at 326/328 Agege Motor Road, Lagos State.
Nature of business –
manufacturing distribution and marketing of industrial and domestic
related products, e.g. Mattresses, Cushions, sheetings, shoulder pads,
carpet underlay, complete bed innerspring mattresses, bunk-bed, hospital
bed and school furniture.
The company diversified five years later
into furniture items, hospital products and foam mattresses in a bid to
broaden its scope of operation and strengthen its competitive
advantage.
Vono is a house hold name in the
Nigerian Market with a very strong and enduring brand that has enjoyed
loyalty of the Nigerian populace for over four decades. As a pioneer in
the bedding industry, our products range are of international standard
and highly diversified covering such areas as schools, hospitals,
government institutions, hotels, homes and others. Vono has the
following plants:
- Foam factory
- Furniture factory and
- Metal factory
Our vision, which is to be leading
provider of seating and sleeping comfort and frontline manufacturer of
beddings and high brand metal / furniture products, is aptly
demonstrated by our ability, as on indigenous firm to become the
nation’s reference standard and model in terms of both product quality
and customer services.
- Vono is a member f the Manufacturers Association of Nigeria (MAN)
- Vono is a Member of the Furniture and Allied Products Manufactuers on Nigeria
- Vono is a Member of the Nigerian Employers Consultative Association
- Vono is also supportive of the Labour unions in the Industry i.e AMPISEN.
Vono Product Plc is a complete form,
furniture and bedding company with large array of products designed to
ensure comfort, development and conductive learning
How the topic affects the case study activities
The problems which SMEs such as Eugene
De Rose and Vono Products Plc face in Nigeria are the likely factors
that negatively affect Small and Medium Enterprises generally such as
lack of capital, poor electricity, poor credit facilities that is
problem of getting loan from banks e.g. Micro-Finance Banks etc. That
frustrates the enterprises sometimes out of functioning which in the
long run reduce employment rate and ruin the economic growth of this
country.
Therefore, it is observed that the
factors mentioned above are the problems militating against Eugene De
Rose and Vono Products Plc.
1.10 DEFINITION OF TERMS
Business Enterprise: This is the activity of providing goods and services involving financial and commercial and industrial aspect.
Small Enterprise: An
enterprise whose total cost including working capital but excluding cost
of land is between ten million naira (10,000,000) and one hundred
million naira (10,000,000) and one hundred million naira (100,000,000) a
workforce between eleven (11) and seventy (70) full time staff with a
turnover not more than ten million naira (10,000,000) in a year.
Medium Enterprise: A
company with total cost including working capital but excluding cost of
land or more than one hundred million naira (100,000,000) but less than
three hundred million naira (300,000,000) a staff strength of between
seventy on (71) and two hundred (200) full time workers with an annul
turnover of nor more than twenty million naira (20,000,000) only.
Large Enterprise: Any
enterprises whose total cost including working capital but excluding
cost of land is above three hundred million naira (300,000,000) a labour
force of over two hundred (200) worker an annual turnover of more than
twenty million naira (20,000,000) only.
Entrepreneur: He is an
innovative individual who perceives business ideas and put resources
together to exploit these ideas profitably in business.
Business: This consists of activities, interactions, sentiments and performance individual or groups.
Financing: It implies money as a support for an undertaking to facilitate small scale business.
Industries: There are different types of business units which vanes between agricultural, construction and manufacturing.
Economy: This is the relationship between production trade and supply of money in a given economy.
Economy Growth: It is an increase in the capacity of an economy to produce goods and services compared to the period of time to another.