THE NIGERIAN MEDIUM SCALE BUSINESSES: ISSUES, CHALLENGES AND PROSPECTS
The research work aimed at examining the
issues, challenges and prospects of the Nigerian Medium Scale
Businesses. The main instrument used to generate data for the study was
The key issues uncovered by the research
study are that respondents agreed that medium scale enterprises have
played a significant role in the Nigerian economy. Also most of the
barriers to the growth of medium scale businesses include poor
managerial skill, lack of feasibility studies, lack of timely
information, inconsistent government policies and inadequate
However, the findings of the study, the
following recommendations are proffered. The Federal Government should
provide enabling environment like the provision of infrastructures such
as good roads, electricity supply, water to enable the operations of
SMEs in Nigeria.
Bank officials should be mobilised to
base investment on potential rather than security and collateral only.
The nation’s government should guarantee both political and economic
stability which will help in the growth of survival and expansion f
medium scale enterprise.
Finally, Government regulations should
be such that from time to time will not hinder the establishment of new
and growth of existing small and medium scale enterprise in any part of
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.0 Background to the Study
1.1 Statement of the Problem
1.2 Objectives of the Study
1.3 Significance of the Study
1.4 Research Questions
1.5 Research Hypothesis
1.6 Scope and Limitations of Study
1.7 Definition of terms
1.8 Outlines of Other Chapters
CHAPTER TWO: LITERATURE REVIEW
2.1 Historical Background of Medium Scale Enterprises in Nigeria
2.2 Review of Relevant Entrepreneurial Theories
2.3 Meaning and Definition of Medium Scale Business
2.3.1 Characteristics of Medium Scale Business
2.4 Management and Operations of Medium Scale Businesses
2.5 A Review of the Nigerian Economic – Buoyant and Depressed
2.5.1 Buoyant Economy
2.5.2 Depressed economy
2.6 Problems of Medium Scale Industries in the Nigerian Economy
2.7 Prospects of Medium Scale Businesses
2.8 Some Development Programmes Assisting the Development of Medium Scale Enterprises in Nigeria
2.9 Medium Scale Business Success in Nigeria
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design
3.2 Research Methodology
3.3 Scope of Data
3.4 Data Collection Methods
3.5 Population and Sample Size
3.6 Filed Work
3.7 Analytical Procedure
CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1 Analysis of Bio-Data
4.2 Analysis and Interpretation of Responses to Questions
in the Questionnaire
4.3 Testing and Interpretation of Hypothesis
CHAPTER FIVE: SUMMARY
5.1 Summary of Findings
5.5 Suggestion for Further Studies
1.0 BACKGROUND TO THE STUDY
Historical facts has show that prior to the late 19th
century, cottage industries, mostly small and medium scale businesses
controlled the economy of Europe. The industrial revolution changed the
status quo and introduced mass production. The twin oil shocks during
the 1970s undermined the mass production model, which triggered an
unexpected reappraisal of the role and importance of small and medium
sized enterprises in the global economy. Findings by economists over
the years show that small firms and entrepreneurships play a much more
important role in economy growth and development. (www.wiki.answer.com).
Many economies, developed and
developing, have come to realize the value of small businesses. They
are seen to be characterized by dynamism, witty innovations, efficiency
and their small size allows for faster decision-making process.
Government all over the world have realized the importance of this
category of companies and have formulated comprehensive public policies
to encourage, support and fund the establishment of SMEs. Developments
in small and medium enterprise are a sin quo non for employment
generation, solid entrepreneurial base and encouragement for the use of
local raw materials and technology. Giving insight into the SME
phenomenon, a paper delivered at a forum by Mallam Mohammed Hayatu been,
titled “Stakeholders Roles and the development benefits in a virile
small Enterprise Sector’s, pointed out that small business operations
are propelled by the dynamic theory, which makes them efficient and
prone to constant change. He gave a comparative statistics using 9
developed countries on how SMEs create employment, increase job growth,
induce change, innovation and competitions. (www.wiki.answer.com).
The benefits of SMEs, to any economy are
easily noticeable, they include: contribution to the economy in terms
of output of goods and services, creation of jobs at relatively low
capital cost, especially in the fast growing service sector, provide a
vehicle for reducing income disparities, develop a pool of skilled and
semi-skilled workers as a basis for the future industrial expansion;
improve forward and backward linkages between economically, socially and
geographically diverse sectors of the economy, provide opportunities
for developing and adapting appropriate technological approaches; offer
an excellent breeding ground for entrepreneurial and managerial talent,
the critical shortage of which is often a great handicap to economic
development among others. (www.wiki.answer.com).
Now government has seen the importance
of small and medium scale enterprise in the era of economic development
of the nation and employment generation. As a result of these
realizations, programs and institutions were established for the
development of small and medium scale enterprises. Some of these
programmes includes, National Economic Reconstruction Fund (NERFUND).
Small Scale Industry Credit Scheme (SSICS), Nigerian Bank for Commerce
and Industry (NBCI), Directorate for Food, Roads and Rural
Infrastructure (DFRRI). The Structural Adjustment Programme (SAP) which
was aimed basically at restructuring the economy of the country during
General Ibrahim Babangida’s administration was a tremendous help in
discussing matters concerning medium scale enterprises. (Ojo, 1995;248).
Despite all these programmes by the
Federal Government to aid the growth and development of small and medium
scale enterprises, these businesses have not reached the expected
potentials in the country. Why? This is because there is no effective
and efficient policy formulations, implementation and clear frame work
of the programmers.
1.1 STATEMENT OF THE PROBLEM
The challenges facing the growth and
survival of Small and Medium Scale Enterprises (SMEs) in many developing
countries are monumental. The most worrying among these challenges is
funding. Most new small business enterprises are not very attractive
prospects for banks, as they want to minimize their risk profile. The
low level of SME development in Nigeria was generally attributed to the
poor implementation of government policies aimed at SME support
facilities and incentives, including loans, training facilitates,
industrial estates, infrastructure and the provision of raw materials at
subsidized rates for SMEs not until recently when the Banker’s
committee intervened in 2001 with a scheme themed the small and Medium
Industries Equity Investment schemes (SMIEIS). The scheme relegated to
the background government credit schemes that are not well thought out
and implemented. (www.wiki.answer.com).
The economic environment under SAP had
almost certainly increased poverty levels and resulted in a reduction in
overall consumer spending as well as a decline in savings and capital
investment (Awoniyi 1996, Hambagda 1987). This in turn had undermined
plans for further accumulation and capital formation especially for
capital- intensive SMEs. The problem of an unstable political
environment (especially during periods of elections and after the
annulled presidential election results of 1993) was another factors.
The politically risk climate made many entrepreneurs especially foreign
ones, increasingly uncertain of the business environment and of their
prospects. (www.all business.com).
The lack of qualified entrepreneurs and
employers in the absence of well-established training centre are also
impediments to the development of SME’s in Nigeria, especially
technically complex ventures are not likely to be sufficiently competent
in management, organization and quality production to adhere to
internationally competitive standards and such SME’s therefore cannot
survive without government protection from imports. There is also lack
of adequate information concerning areas of business in the sectors
generally. Most people with funds tend to use them in well-established
sectors rather than seeking new production and new market niches.
However, not all of the responsibility
for the difficulties of SME’s in general can be placed on the Nigerian
government or on the small businesses. Nigeria’s relatively short
history of experience in industrial, mechanized and relatively high-tech
production is typical of most African economies and could account for
much of the lack of expertise in policy making and in management and
manufacturing operations. The present technological and scientific
dependency on the West should be seen as a legacy of the colonial past,
and it will certainly take sometime to develop competitive domestic
production of machinery and capital goods. Some long-term strategies
goals are important in this content, as well as the patience and
determination to see such policies through to the end, and this would
require a high level of consistency in policy making.
1.2 OBJECTIVES OF THE STUDY
The objectives of the study are to:
- Determining the performance of medium scale businesses in Nigeria.
- Identifying the problems faced by businesses and the prospects of these businesses.
- Proffering solutions by making necessary recommendations of reducing and eliminating the problems that will be highlighted.
1.3 SIGNIFICANCE OF THE STUDY
It is expected that the outcome of the study would be useful in the following areas:
i. The study would be beneficial
to individuals, especially those who may want to set up their own
businesses and also entrepreneurs who may want to improve the survival
rate of medium scale industries in a depressed economy like Nigeria.
ii. To give an indepth information
and analysis on the causes of their problems with a view to suggesting
and developing ways and other alternatives aside their prospects which
shall also be critically viewed to ensure the success of medium scale
enterprises in Nigeria.
iii. It would also be an effective
way to find lasting solution to the problem of unemployment is for the
government to encourage the growth and expansion of small and medium
1.4 RESEARCH QUESTIONS
The following research questions were addressed drawn from the research work:
- How are medium-scale businesses successful in Nigeria?
- Can government assist medium-scale industries in developing nations?
- Can medium-scale businesses serve as incubators to larger industries?
- Do medium scale enterprises have access to adequate capital?
- Are there any economic benefits derivable from the operation of medium scale businesses?
1.5 RESEARCH HYPOTHESIS
The following hypotheses are postulated from the study;
Ho: Medium-scale business cannot be successful in Nigeria
H1: Medium-scale business can be successful in Nigeria
Ho: Medium-scale enterprises cannot be beneficial to economic growth.
H1: Medium-scale enterprises can be beneficial to economic growth.
Ho: Medium-scale enterprises cannot obtain adequate capital to operate.
H1: Medium-scale enterprises can obtain adequate capital to operate.
1.6 SCOPE AND LIMITATIONS OF STUDY
The scope of the study would cover the
medium scale business challenges, prospects as well as the issues with
respect to the Nigerian economy. The findings of this study may be
relevant to other forms of incorporating or owning a business in
Also entrepreneur in Nigeria may find
relevant or not to the findings of this research. This may not be in
consonance with some people’s peculiar orientation and culture vis-à-vis
the country’s distribution the level of interactions between
entrepreneur, their employees and the government and also the privileged
Finally, since the Nigerian economy is a
bit improved, coupled with financial constraints, the researcher might
not have had access to relevant documents that may perhaps have
contributed in one way or the other to their research.
1.7 DEFINITIONS OF TERMS
The following terms considered relevant to the study are explained thus:
Business: Any endeavour engaged in aimed at making private profit. (Lawal; 1993:228)
Economic growth: An increase in the economic conditions in any country characterized by increased in per capital income. (Lawal 1998:13)
Growth of medium scale enterprise: Determined by the rate of expression or increase in the total income earned per annum. (Ojo, 1995:82)
Financial institutions: Established institution to help and support small and medium enterprises in funding and providing advice. (Lawal A.A 1998:13)
1.8 OUTLINES OF OTHER CHAPTERS
The remaining parts of the study is carried out as thus;
Chapter Two: This
chapter considers the relevant write-ups to the study. It involves the
review of previous literatures on the study as well as the current ones.
Chapter Three: This chapter talks about the research methodology used in collecting and analyzing necessary data.
Chapter Four: This chapter is all about the presentation and analyses of data collected in chapter three.
Chapter Five: This
chapter presents a comprehensive summary of findings of the study and a
conclusion which shall be drawn from the findings and it also includes
the researcher recommendations of the study.