TABLE OF CONTENT
LIST OF TABLE
LIST OF FIGURES
OF THE STUDY
OF THE STUDY
OF THE STUDY
OF THE STUDY
OF THE HYPOTHESIS
OF THE STUDY
OF THE STUDY
1.10 DEFINITION OF TERMS
TWO – LITERATURE REVIEW
AND MEDIUM ENTERPRISES EQUITY INVESTMENT SCHEME
OF BANK RECAPITALIZATION TO SMEs
OF BANK RECAPITALIZATION IN THE PROMOTION OF SMEs
OF RECAPITALIZATION ON SMEs
OF BANK RECAPITALIZATION ON SMEs
2.7 SOURCES OF
2.8 THE GROWTH
OF SMALL SCALE INDUSTRIES AND CONTRIBUTIVE SCHEME
OF NIGERIAN MONEY DEPOSITE BANKS AND THE CONSOLIDATION OF THE SECTOR
AREA OF STUDY
POPULATION OF STUDY
RESEARCH INSTRUMENT AND INSTRUMENTATION
VALIDATION OF THE INSTRUMENT
ADMINISTATION OF THE STUDY
METHOD OF DATA ANALYSIS
LIMITATION OF THE STUDY
FOUR –DATA, ANALYSIS, FINDINGS AND DISCUSSION
DATA PRESENTATION AND ANALYSIS
DISCUSSION OF FINDINGS
FIVE- SUMMARY, CONCLUTION, RECOMMENDATIONS
SUMMARY OF FINDINGS
PROPOSAL FOR FUTHER STUDIES
This study was on the study of recapitalized commercial banks and their
SME customers in Nigeria. This study was guided by the following objectives; to determine the relationship between Commercial Banks and the
performance Small Business Entrepreneurs in Nigeria. To determine whether bank
recapitalization led to increase in funds for financing SMEs. To examine the
accessibility of Small and Medium Enterprise Equity Investment Scheme (SMEEIS)
funds to SMEs. The study employed
the descriptive and explanatory design; questionnaires in addition to library
research were applied in order to collect data. Primary and secondary data
sources were used and data was analyzed using the chi-square statistical tool
at 5% level of significance which was presented in frequency tables and
percentage. The respondents under the study were 60 SME owners Port Harcourt
The study findings revealed that there is a
negative significant relationship between commercial banks and the performance
of small business owners in Nigeria; based on the findings from the study, the
Nigerian banks and indeed all stakeholders should improve on the funds made
available to SMEs in Nigeria.
1.1 BACKGROUND OF THE STUDY
and Medium Enterprises (SMEs) play a vital role in the development of national
economy. Due to their importance and the crucial role they play in economic
development and growth of the nation, much attention has been placed on
financing of small and medium enterprises, since they are major contributors to
the economy of Nigeria. These enterprises are drivers of the economy; therefore
policy attention has to be given to them especially in developing economies because
of their impact on many sectors of the economy. Their impact is felt in the
following ways: Greater utilization of local raw materials, employment
generation, encouragement of rural development, development of entrepreneurship,
mobilization of local savings, linkages with bigger industries, provision of
regional balance by spreading investments more evenly, provision of avenue for
self employment and provision of opportunity for training managers and semi
In Nigeria, credit has been recognized as an
essential tool for promoting small and Micro Enterprises (SMEs), hence the need
for recapitalization of commercial banks in Nigeria. Bank recapitalization
which was effective from 2006 is aimed at making Nigerian banks stronger and
better in-order to finance all sectors of the economy including the major
drivers of the economy-Small and Medium Scale Enterprises. About 70 percent of
the population is engaged in the informal sector or in agricultural production.
The Federal and State governments have recognized that for sustainable growth
and development, the financial empowerment of the people is vital. If this
growth strategy is adopted and the latent entrepreneurial capabilities of this
large segment of the people is sufficiently stimulated and sustained, then
positive multipliers will be felt throughout the economy. To give effect to
these aspirations various policies have been instituted over time by the
Federal Government to improve rural and urban enterprise production
capabilities (Olaitan 2006)
central Bank of Nigeria on July 6th 2004, announced the recapitalization of
banking sector from N2 billion to N25 billion with effect from 1st January
2006. This was with a view to make the sector internationally competitive,
sound and improves its ability to provide credit to all the productive sectors
of the economy. In order to meet this obligation, banks embarked on strategies
of merger and acquisition, floating of new shares and so on. At the end of the exercise,
25 new banks emerged.
was hoped that the consolidation will make the banks stronger to be able to
provide large amount of funds to productive sectors of the economy which is
largely dominated by Small and Medium Enterprises, thereby making them grow
into large firms with enough resources to contribute to the economic
in December 2005, the CBN introduced new Micro-finance Policy (MFP) which was
designed to be public and private sector driven.
purpose of the policy was to strengthen community banks in order for them to be
able to grant collateral and non collateral loans to finance microeconomic
activities in the economy. The policy also aims at providing many people with
access to financial services who otherwise will have no access to these
and Medium Enterprises as said earlier have a crucial role to play in the
development of an economy, they are training grounds for local entrepreneurs,
they encourage local savings and ensure equitable distribution of wealth
thereby reducing rural- urban migration of human resources.
this end, government should collaborate with private sector in order to create
an enabling and conducive environment for SME’S in order to contribute
positively towards the development of the economy.
1.2 STATEMENT OF PROBLEM
Bank fraud, poor
lending and credit management practices in the Nigerian banking sector forced
the Central bank of Nigeria to revisit the capital structure of commercial
banks in Nigeria. These among other things led the Central
Bank of Nigeria (CBN) to give a directive that all banks should recapitalize
from N2 billion to N25 billion with effect from 1st January 2006.
This development led to various financial
activities in the Nigerian financial sector with most banks initially opting
for additional source of fund from the capital market via floating of shares.
Most banks at this stage started inviting members of the public to acquire new
shares in-order to meet up with the new minimum capital directed by the central
bank of Nigeria. Notwithstanding, some banks were not capable of raising the
new minimum capital by themselves, hence the need for mergers and consolidation
of banks, reducing the total number of banks in Nigeria to twenty five (25).
the consolidation of the banking sector presented new challenges to the banks
which require more efforts to control cost and increase their efficiency; this
in turn has effect the volume of credit facilities granted to small and medium
scale enterprises in Nigeria. A study conducted by Iloh et al (2012) reveals
the gap between deposit money bank deposits (DMBD) and commercial bank lending
to SMEs from year 2000 upward (the year that saw the end of merchant banks).
There is a wide margin between the two variables and while deposit money bank
deposits rose very high, commercial bank lending to SMEs declined from 2004 to
2010. The gap between commercial bank deposits and its lending to SMEs reveals
the shift in focus from lending to SMEs to lending to major investors (customers).
One is made to ask, while the banking sector is said to drive any economy, has
Nigerian commercial banks neglected SMEs, which is vital for the growth and development
of the Nigerian economy? Notwithstanding, it is interesting to note that community/Micro
finance bank (CMFB) lending to SMEs moved in the same trend with its bank
deposit. This implies that as community/microfinance bank deposits increased,
it’s lending to SMEs increased. Regardless of the direct impact of
community/microfinance bank on SMEs, SMEs still cry for lack of funding and
lending to SMEs in Nigeria is still poor. This is so because their capital,
reserve and deposit are very small and insufficient to meet the needs of small
and medium entrepreneurs.
1.3 OBJECTIVES OF STUDY
The primary objective of the study is to
examine the effects of bank recapitalization on small and medium scale
enterprises in Nigeria. Specific objectives of the study are:
To determine the relationship between Commercial Banks and the
performance Small Business Entrepreneurs in Nigeria.
To determine whether bank recapitalization led to increase in
funds for financing SMEs.
To examine the accessibility of Small and Medium Enterprise Equity
Investment Scheme (SMEEIS) funds to SMEs.
1.4 RESEARCH QUESTIONS
In-order to achieve the above stated
objectives, the researcher formulated the following research questions:
What is the relationship between commercial banks and the
performance small business entrepreneurs in Nigeria?
Does bank recapitalization increase funding for SMEs?
How accessible are Small and Medium Enterprise Equity Investment
Schene Funds to SMEs?
1.5 HYPOTHESIS OF THE
The following hypotheses are formulated in
line with the objectives and research questions of the study:
Ho: There is no significant relationship between Commercial bank
and the performance of Small Business Owners in Nigeria.
Hi: There is a
significant relationship between Commercial banks and the performance of Small
Business Owners in Nigeria.
Ho: Bank Re-capitalization has not led to the increase of funds
recapitalization has led to the increase of Funds to SMEs
Ho: Small and Medium Enterprise Equity Investment Scheme funds
are not easily assessable to SMEs
Hi: Small and Medium
Enterprise Equity Investment Scheme funds are easily assessable to SMEs
1.6 SIGINIFICANCE OF
Robust economic growth cannot be achieved
without putting in place well focused programmes to reduce poverty through
empowering the people by increasing their access to factors of production,
especially credit. The latent capacity of the poor entrepreneurs would be
significantly enhanced through the provision of microfinance services to enable
them engage in economic activities and be more self-reliant; increase
employment opportunities, enhance household income, and create wealth.
However, the lack of required financial
support from the microfinance banks to Micro Business operators in Port Harcourt
state has become a major concern in Nigeria. Hence, this study shall be
relevant to policy makers in the areas of finding out the impact of micro
financing on the small scale investors. Also, this study shall enhance further
research in the subject area.
1.7 SCOPE OF THE STUDY
scope of this research work is the recapitalized commercial banks and their SME
customers in Nigeria. However, due to the fact that there are many SME’s in
Nigeria, the research is limited to SME owners in Port Harcourt.
1.8 LIMITATIONS OF THE STUDY
and financial constraints were the major limitations of the study. Since the
researcher could not afford the cost of reaching out to more banks, money
became a challenge. The researcher was also engaged in other school activities
which also limited the time used for the project.
1.9 DEFINITION OF TERMS
An economy is the total sum of
product and service transactions of value between two agents in a region, be it
individuals, organizations or states. An economy consists of the economic system,
comprising the production, distribution or trade,
and consumption of limited goods
and services between two agents,
the agents can be individuals, businesses, organizations, or governments.
and Acquisitions: Mergers and acquisitions (abbreviated M&A) is an aspect of corporate strategy, corporate finance and
dealing with the buying, selling, dividing and combining of different companies
and similar entities that can help an
enterprise grow rapidly in its sector or location of origin, or a new field or
new location, without creating a subsidiary, other child entity or using a
Recapitalization is a sort of a
corporate reorganization involving substantial change in a company's capital structure.
Small and Medium Enterprises
Small and Medium Enterprise Equity Scheme
Olaitan, L. 2006. An empirical evaluation of the corporate
strategies of Nigerian companies. Journal of African Business, 2(2), 45-75.
Iloh V. C. 2012. The Effect of Bank Consolidation on Small
and Medium Scale Enterprises in Nigeria. Port Harcourt: Longman Nigeria