GREEN ENTREPRENEURSHIP AND SUSTAINABILITY OF SMES IN LAGOS STATE, NIGERIA

CHAPTER ONE

INTRODUCTION

1.1: BACKGROUND OF STUDY

In recent time the world economy has developed tremendously and this has been linked with activities of Small and Medium Scale Enterprises (SMEs) that signified how importance the role of small and medium scale enterprises (SME) in the world economy, especially in developing countries. A Study carried out by the Federal Office of Statistics shows that in Nigeria, Small and Medium Scale Enterprises make up 97% of productive units of the economy (Ariyo, 2005). Although smaller in size, they are the most important enterprises in the economy due to the fact that when all the individual effects are aggregated, they surpass that of the larger companies. The social and economic advantages of small and medium scale enterprises cannot be overstated. Panitchparkdi (2006) sees SMEs as a source of employment, competition, economic dynamism, and innovation which stimulates the entrepreneurial spirit and the diffusion of skills. Because they enjoy a wider geographical presence than big companies, SMEs also contribute to better income distribution. Over the years, small and medium scale enterprises have been an avenue for job creation and the empowerment of Nigeria’s citizens providing about 50% of all jobs in Nigeria and also for local capital formation. Being highly innovative, they lead to the utilization of our natural resources which in turn translates to increasing the country’s wealth through higher productivity. Small and Medium Scale enterprises have undoubtedly improved the standard of living of so many people in Nigeria today, especially those in the rural areas .(Ariyo, 2005).

However, the mortality rate of these small firms is very high. According to the Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN), 80% of SMEs die before their 5th anniversary. Among the factors responsible for these untimely close-ups are tax related issues, ranging from multiple taxations to enormous tax burdens among other issues etc. In many government policies, small and medium scale enterprises are usually viewed and treated in the same light as large corporations. However, their size and nature make them unique. Therefore, in dealing with small and medium scale enterprises, these unique qualities need to be considered. In levying of taxes for these enterprises in particular, issues that need to be considered are how these tax policies can be designed to bolster the growth of SMEs and the most effective ways to administer them. The importance of SMEs as a mechanism of economic growth and development is often ignored.

They are perceived as minute establishments that have minimal effect on the state of the economy. However, if favorable environment is created for these SMEs to grow through proper regulation, the SMEs sector has the highest propensity to transform our economy. In the same light, taxes are important for the government as they are the major source of funds for government expenditure. Income obtained from taxation of individuals and businesses are used to run governments as well as provide infrastructure such as good roads, water supply, and electricity which are essential for the smooth running of these businesses that are mainly manufacturing companies and as such rely on these commodities to survive.

Entrepreneurship education as part of the total educational system is the type of education that involves the acquisition of skills, ideas and management abilities necessary for job creation. An entrepreneur promotes employment rather than seeking for an employment. Therefore, there is a need to embrace this type of education and provide all the necessary resources needed to make functional. Quality entrepreneurship education could be used as a tool for fighting the war against poverty and unemployment in Nigeria. Entrepreneur is simply that student, employee, unemployed, politician, teacher, nurse, doctor, lawyer, engineer, accountant, manager and indeed anyone who is able to employ the tools of entrepreneurship namely innovation and uniqueness, to translate his ideas into income generating economic activities which the society benefits from (Udu and Udu, 2015)

Therefore, quality entrepreneurship education will enhance job creation which will subsequently reduce unemployment, poverty and social vices in Nigeria. This will also help to improve the standard of living; hence promote social economic and political development in Nigeria which is the cardinal objective of Millennium Development Goals (MDGs). Also, for the recipient of entrepreneurship education to be a job creator rather than job-seeker, he might acquire essential basic skills and attitudes which will enable him to function as an entrepreneur.

There is now a very serious attention paid to entrepreneurship education in tertiary institutions in Nigeria and the world-over. Gibson (2001) defined entrepreneurship as the process of using private initiative to transform a business concept into a new venture or to grow and diversify an existing venture or enterprise with high great potential. The reason for this off-course is obvious, Nigeria educational system that turns out graduates from about 150 Universities and 50 Polytechnics and Monotechnics have not trained our graduates to be self reliant, but to depend solely on white collar jobs for sustenance. As a result, there are several graduates from Nigerian Universities today who are not gainfully employed. Apart from the book knowledge that they gained there are no requisite skills to make them self dependent. There is therefore the need to engage the youth who constitute over 60 percent of the population in meaningful engagement to avoid unhealthy alternatives for this group of people.

Henry (2003) views entrepreneurship as the engine driving the economy of nations, creating new industries, young entrepreneurs, employments and wealth. Also in the view of Agbionu (2008), entrepreneurship involves a process aimed at creating wealth for the purpose of growth, development of the environment and sustaining SMES for national sustainability.

The 2010 Global Monitoring Report (GMR) of the United Nation Education, Scientific and Cultural Organization (UNESCO), revealed that about 92 per cent of Nigerian population survive on less than 2 dollar daily, while about 71 per cent survives on less than 1 dollar daily – a condition many have described as inexcusable judging from the abundant natural deposits and high human population at the country’s disposal. With an estimated population of about 167 million people

(2011) and crude oil selling as high as $104 dollar per barrel in the global market as at July 2012, the high level of poverty in comparison to the abundant resources available in Nigeria is highly unacceptable. There is therefore the urgent need for government and individuals to create more job opportunities for the teaming youths.

It is believed that employment of Nigerian graduates part-time, full-time or even underemployment can be said to have eluded Nigerian youths with Nigeria said to have one of the highest rates of youth unemployment in the unindustrialized world. Despite strong economic growth, youth’s full-time unemployment rate for 2006 – 2008 in Nigeria was put at 55.9% while countries like Japan, China, India, Korea, have joined community of industrialized nations by strengthening their small scale industries. Nigeria is yet to understand the relevance of this subsector.

It is based on the above that the researcher wishes to evaluate entrepreneurship as a major approach in solving unemployment and sustainability of SMES in Lagos State, Nigeria.

1.2 STATEMENT OF PROBLEM

As should be expected, the lack of employment potential, make crime a more attractive option for some Nigerian university graduates. It is common to find some graduates still roaming the streets, five years after graduating in search of jobs that either is not there or for which they are not qualified. It is therefore no coincidence that crimes such as kidnapping which is now a new and attractive industry is a thriving especially in the South-Eastern part of Nigeria. Other crimes include armed robbery, car snatching, pipeline vandalization, oil bunkering, and prostitution and so on.

Furthermore, high competition for economic resources and services, over-dependence on a single natural resource (oil) and the neglect of other crucial sectors of the economy also contribute to youth unemployment in Nigeria.

Have Nigerian policy makers been able to see through the connection between entrepreneurship and unemployment? Have they been able to conceive and formulate effective policies aimed at frontally addressing unemployment among the youths? While entrepreneurship may not be the absolute panacea to youth unemployment, an enabling environment that nurtures entrepreneurship is capable of reducing youth unemployment by at least half. It was argued that entrepreneurship is capable of providing the platform towards efforts aimed at reducing unemployment as well as promoting economic growth and development.

It is in the wake of the above that this study aimed at evaluating the possibility of entrepreneurship as a major approach in solving unemployment and sustainability of SMES in Lagos State, Nigeria.

1.3 RESEARCH OBJECTIVES

          The broad objective of this research is to evaluate green entrepreneurship as a tool for reduction of unemployment and sustainability of SMES in Lagos State, Nigeria.

The specific objectives are

1. To find out the possibility of solving the unemployment and sustainability of SMES in Lagos State, Nigeria through Green Entrepreneurship.

2. To also examine the extent to which different Green Entrepreneurship programmes have been able to lessen the unemployment problem in Lagos state.

1.4 RESEARCH QUESTIONS

          The following research questions are formulated for the purpose of the study

1.                 What is the possibility of Green Entrepreneurship programs sustaining Small Medium Enterprise Scales in Lagos State?

2.                 To what extent have different Green Entrepreneurship programs lessen the problems of unemployment in Lagos state.

1.5 RESEARCH HYPOTHESIS

For the purpose of this study, the following hypotheses were formulated to guide this study:

Hypothesis I

H₀: Green Entrepreneurship has not contributed to solving unemployment problem in Lagos state.

H_I: Green Entrepreneurship has contributed to solving unemployment problem in Lagos State.

Hypothesis II

H₀: Green Entrepreneurship programmes of government have no significant impact on the sustaining SMES in Lagos state.

H₁: Green Entrepreneurship programmes of government have a significant impact on the sustaining SMES in Lagos state.

1.6     SCOPE OF THE STUDY     

          The study covers the evaluation of entrepreneurship as a tool for reduction of unemployment and sustainability of SMES in Lagos State, Nigeria. In the course of the research work, effort shall be made to evaluate the relationship between Green Entrepreneurship and unemployment. More so, the research work shall examine ways through which strategic government entrepreneurship programs will help curb unemployment in Lagos state.

          The study is limited to Lagos State, the researcher consulted books, journals, magazines, newspapers and other documents not within the mentioned categories to source for his secondary data. Secondary data were sourced from both public and private resourced within the state.

1.7 SIGNIFICANCE OF THE STUDY

The relevance of this study can be viewed in two perspectives – practical and academic.

This study will assist the policy makers, Nigerians and government in the following ways;

To highlight the importance of Green Entrepreneurship and its relevance in the dynamic and unpredictable nature of our economy, it will also help the policy makers and regulators to objectively analyze the impact of Green Entrepreneurship in assisting government to wage war against unemployment in Nigeria and it will provide useful information to entrepreneurs all over Nigeria, and encourage entrepreneurship study for a better and enabling environment.

It will contribute to the variety of literature on Green Entrepreneurship, it will serve as a reference material for researchers interested in further studies on the topic.

1.8: LIMITATIONS OF THE STUDY

Despite the limited scope of this study, certain constraints were encountered during the research of this project; some of the constraints experienced by the researcher were given below:

Time: This was a major constraint on the researcher during the period of the work, considering the limited time given for this study, there was not much time to give this research the needed attention.

Finance: Owing to the financial difficulty prevalent in the country and its resultant prices of commodities, transportation fares, research materials etc. The researcher did not find it easy meeting all financial obligations.

Although there are problems placed in the limitations in this study, but it did not prevent the researcher from carrying out an effective and comprehensive research work on the subject matter.

1.9 OPERATIONAL DEFINITION OF TERMS

Asset: this something valuable that an entity owns, benefits from, or has use of, in generating income. Asset is also referring to something that an entity has acquired or purchased, and that has money value (its cost, book value, market value, or residual value).

Accounts payable: is the money owed by a business to its suppliers shown as a liability on a company''s balance sheet. It is distinct from notes payable liabilities, which are debts created by formal legal instrument documents.

Account Payable Management: is the administration of a company''s outstanding debts, or liabilities, to vendors for purchases of goods and services made on credit

Account Receivable: is the money which is owed to a company by a customer for products and services provided on credit. This is often treated as a current asset on a balance sheet. A specific sale is generally only treated as an account receivable after the customer is sent an invoice.

Cash Management: this refers to a broad area of finance involving the collection, handling, and usage of cash. It involves assessing market liquidity, cash flow, and investments.

Entrepreneur: this is an individual who, rather than working as an employee, runs a small business and assumes all the risk and reward of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes. The entrepreneur perceives an opportunity and often exhibits biases in taking the decision to exploit the opportunity.

Entrepreneurial: is a person who organizes, operates, and assumes the risk for a business venture.

Entrepreneurship: is the process of starting a business, typically a start-up company offering an innovative product, process or service.

Growth: Growth refers to a positive change in size, often over a period of time. Growth can occur as a stage of maturation or a process toward fullness or fulfillment.

Inventory Management: is activities employed in maintaining the optimum number or amount of each inventory item.

Liquidity: is the ability to convert an asset to cash quickly. It is a measure of the extent to which a person or organization has cash to meet immediate and short-term obligations, or assets that can be quickly converted to do this. It is the ability of current assets to meet current liabilities.

Receivables: is an asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers.

Return on Investment: return on investment (ROI) is the benefit to the investor resulting from an investment of some resource. It is a financial ratio that is intended to measure the benefit obtained from an investment.

Return on Assets (ROA): In the context of this work, return on assets is the ratio of annual net income to average total assets of a business during a financial year. It measures efficiency of the business in using its assets to generate net income. It is a profitability ratio. Return on assets indicates the number of kobo earned on each naira of assets. It is an indicator of how profitable a company is relative to its total assets. Return on assets provides an insight as to how efficient management is at using a firm’s assets to generate earnings. It is commonly referred to as return investment. Return on assets eliminates the effect of leverage, positive or negative, when a business uses debt financing (Oyebamii, 2015).

Return on Equity (ROE): Return on equity (ROE) is a performance metric which focuses on return to the shareholders of the company. For the purpose of this study, ROE is computed by dividing the profit attributable to equity holders by either the book value (Oyebamii, 2015).

Small or Medium Scale Enterprises (SME): these are the organisations with maximum of 199 workers and N500m in assets in line with the definition of NTWG (2009),

Working Capital: is a financial metric, which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital.

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 CONCEPT OF ENTREPRENEURSHIP

          A definition of entrepreneurship has been debated among scholars, researchers, practitioners, and even policy makers since the concept was first established in the early 1970s. Steinfioff and Burgers (1993) view entrepreneurship as the ability to develop a new venture or apply a new approach to an old business.

According to Gana (2001), entrepreneurship is the ability to seek investment opportunities and persisting to exploit that opportunity. On the other hand, Adeniyi (2013) sees the entrepreneur as one who chooses or assumes risks, identifies business opportunity, gathers resources, initiates actions and establishes an organization or enterprise to meet such demand or market opportunity. Allawadi