Tag Archives: Small and Medium Scale Enterprises

THE IMPACT OF MICRO, SMALL AND MEDIUM SCALE ENTERPRISES ON ECONOMIC DEVELOPMENT

THE IMPACT OF MICRO, SMALL AND MEDIUM SCALE ENTERPRISES ON ECONOMIC DEVELOPMENT

ABSTRACT

This research work examines and analyses the nature of small and medium scale enterprises as a bases for economic development of Nigeria using Benin City as a case study. The first part of the research work is theoretical back ground of the study where the research problem and the research aims and objectives are stated. Also included in this part is the research hypothesis, being that, small scale enterprises form the basis for economic development of Nigeria. The second part of this research which is the literature review tackles the operational definitions and characteristics of small scale enterprises. It also examines the various sources of fund available for small scale enterprises which include equity and debt. The research further explains the importance of small scale enterprises and their contributions to economic development of Nigeria, ranging from employment generation, revenue to the government and so on. The problems faced by small scale enterprises were also highlighted. In the empirical study, the researcher sampled and selected table water enterprises in Benin City with the aim of testing the hypothesis earlier stated. Based on the empirical results and findings, small scale enterprises are recognized as an important reservoir for economic development of Nigeria. The last aspect of this research work draws up the summary, conclusion and recommendations.

 

CHAPTER ONE

 1.1      INTRODUCTION

This research attempt to analyze the impact of small and medium enterprises as an industrial development strategy in Nigeria, using table water enterprises as a case study.

Small and medium scale enterprises (MSMEs) have been widely acknowledged as the spring board for sustainable economic development. In particular developing countries including Nigeria, have since 1970s shown increased interest in the promotion of small and medium scale enterprises for three main reasons, the failure of the past industrial policies to generate efficient self-sustaining reliance approach to development and recognition that dynamic and growing MSMEs can contribute substantially to a wide range of developmental objectives.

  These objectives include efficient use of resources, employment creation, mobilization of domestic savings for investment, encouragement, expansion and development of indigenous entrepreneurship and technology as well as income distribution etc.

Experience over the years as shown that small and medium scale enterprises are fundamental to the development of many nation and is  regarded as one of the most important process of attaining self- reliance, economic independence, the provision of goods and services, employment, income distribution and many other factors for the overall improvement of the welfare of the populace.

A small scale industry can be defined by the criteria of project cost, capital, cost, turn-over by the employee etc. The Nigerian Federal and State Ministry of Industry And Commerce have adopted the criterion of value of installed fixed capital to determine what a small scale industry is. In this respect, the value have varied from N 60,000.00 in 1972, N 159,000.00 in 1975, N 250,000.00 in 1979, N 500,000.00 in 1986, to a fixed investment of not more than N 2,000,000.00( Two million Naira) in 1992. This figure is exclusive of building and subject to government determination and land prevailing objective of public policy.

Small scale industries in Nigeria can be categorized into urban and rural enterprises, in a more formal way; they can be called organized and unorganized industries.  The organized industries have paid employees with a registered office while the unorganized industries (small scale) are mainly made up artisans who work in open space, operating in temporary wooden workshop or structure. The unorganized small scale industries rely mostly on apprentices or family members and mostly employ low rate or not salary paid workers. However, generally in Nigeria, the major activities involved in the small scale industrial sector include; soap and detergent, fabrics, textile and leather, local blacksmith, tinsmith, ceramic, clothing and tailoring, timber and winning, brick and cement, food processing, wood furniture, beverages, bakeries, electronic repairs, phone call centers, chemical based product and  mechanics, rental service and hairdressing.

The development of small scale industries is an essential element in the growth strategy of most economics and hold particular significance to Nigeria. Small scale industries not only contribute significantly to improve living standard, they also bring about substantial local capital formation and achieve high level of productivity and capability from the planning stand point. Small scale industries are increasingly recognized as the principal means for achieving equitable and sustainable industrial diversification and dispersal. In Nigeria, small scale industries account for well over half of the total share of employment, sales and value added.

Therefore, it has be agreed by both developed and developing countries in the world that small scale industries are significant instrument for generating economic growth, capable of promoting not only stable industrial structure but also a satisfactory balance partial distribution of industries.

With over 150 million people in Nigeria, productive farmland, rich varieties of mineral deposits, Nigeria should be a haven for small scale industries. The human and natural resources base is a significant feature that gives the country a specific status in the continent. However, just like other countries, Nigeria is witnessing a rapid population growth and this contrast with the less than average rate of development in communication, technological and social infrastructure. These problems constitute hindrance to the development of small scale industries which is a very important sector that will enhance the contribution of the private sector and provide the critical building block for industrialization and sustainable economic development.

Furthermore, with the dismantling of trade and other barriers, the world has been transferred into a global village. Consequently, the small industries in Nigeria are struggling to survive under intense and competitive environment, both domestic and international. In view of this, there is an urgent need to provide the required enabling environment for the development of small scale industries, so that they could adequately play the role expected of them in economic transformation. Such role include the mobilization of domestic savings for investment, appreciable contribution to gross domestic product, increase investment, increase harnessing of local raw materials, employment generation, significant contribution to poverty reduction effort through sustainable livelihood and enhancement in personal income, technological development and export diversification. This can be made possible through responsive industrial policy and government overall economic development strategies that will ensure the collaboration of all development partners and the effective coordination and utilization of economic resources.

1.2      STATEMENT OF THE RESEARCH PROBLEM

Small scale industries are most common form of business in Nigeria and this is very significant to the economic development of Nigeria. The aim of any economy (either industrialized or non-industrialized) depends largely on how well organized the small scale industries are. Looking at the standard and practice of small scale industries in Nigeria, taking table water factories in Edo state as a case study, they (small scale industries) seem to be stagnant, less adventurous than that of the developed countries. This study is projected towards providing answers to some of the question such as:

  1. Are small scale industries necessary and important tools for economic growth and development?
  2. To what extend has small scale industries help in enhancing self- reliance, productivity and employment generation?
  3. What are the factors negating the promotion of small scale businesses in Nigeria?

1.3       OBJECTIVES OF THE STUDY

The main objective of the study is to examine the impact of small scale enterprises on the development of      Edo state with reference to Edo state table water enterprises. It tends to find out the following:

  1. To investigate the factor responsible for the failure of small scale enterprises in Nigeria.
  2. To find the problems associated with small scale enterprises in Nigeria.
  3. To suggest a way out and technical difficulties normally encountered by small scale industries.
  4. To enlighten or make prospective investors aware that there is a lot of assistance in form of soft loan and advice to any prospective and potential business man or woman who want to establish a small business

1.4      SCOPE OF THE STUDY

The scope  cover all aspect of small scale enterprises, the role of small scale industries in facilitating economic development of the country, the peculiar problems small scale industries face the most, being management problem and access to finance and various role of government to ensure improvement in their performance.

However, for the purpose of this research work, Edo state table water industry is used as a base for the survey.

1.5      SIGNIFICANCE OF THE STUDY

The role of small scale enterprises in the economy cannot be over emphasized. It is the life blood of the economy of developing countries like Nigeria. There are more than a million of unemployed people in Nigeria, the public sector (government) alone cannot absorb these unemployed people or solve the problem of unemployment.

In views of this, this research is thus, necessary because it can be used as a means of enhancing and promoting individual participation in small scale enterprise or business in Nigeria through providing useful information about the nature of small scale industries. It may also serve as reference guide for those who want to venture into small scale business and thus be self-employed if the enabling environment is provided.

This research will also serve as a reference guide for those who want to undertake further studies on small scale industries.

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IMPACT OF ELECTRICITY POWER SUPPLY ON THE PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISE (SMSs) IN NIGERIA (1980 – 2014)

IMPACT OF ELECTRICITY POWER SUPPLY ON THE PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISE (SMSs) IN NIGERIA (1980 – 2014)

ABSTRACT

This study is a critical evaluation of the Impact of Electricity Power Supply on the Performance of Small and Medium Scale Enterprise in Nigeria (1980-2014).  The researcher made use of Ordinary Least Square (OLS) regression technique in analysing the Impact of Electricity Power Supply on Small and Medium Scale Enterprise in Nigeria.  There are also other variables that determine the performance of Small and Medium Scale Enterprise.  Findings from the study shows that all the variables included in the model contributes in explaining the performance of Small and Medium Scale Enterprise in Nigeria which shows R2 0.8899.  The contributions of these variables may strongly depend on the circumstances in Nigerian economic environment.  The study found out that a unit change in Electricity Power Supply has a positive impact on the output of small and medium scale Enterprise.  Based on the findings, certain recommendations were made which include government increasing investment in the power sector, government policies aimed at encouraging SMEs to access public equity capital and also a need for an opening of the market for greater competition in the supply and distribution of electricity.

 

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Access to a reliable electricity supply is widely considered to be vital to the operations of most small and medium-scale businesses (World Bank Enterprise Surveys, 2013). The analysis of Enterprise Survey data according to Foster and Steinbuks (2008), in middle and lower income countries, firms themselves consider access to electricity to be one of the biggest constraints to their business.

Inadequate electricity services can constrain business operations because a supply of electricity may simply be unavailable and, if it is available, securing a connection may be difficult and the supply unreliable, even before its cost is considered. High quality and accessible infrastructure encourages productivity, business growth and investment, but when it is poor and unreliable, businesses’ productivity and growth suffer.

An unreliable electricity supply can affect several aspects of business operations. The most significant impacts to productivity can be due to forced and unexpected halts in manufacturing processes, including running assembly lines, using machine tools, or producing textiles. Communications, delivery times, lighting and refrigeration are also affected by electricity insecurity, with consequences for the routine operation of businesses and their ability to ensure delivery times (Adenikinju, 2005).

Many small and medium-scale enterprises invest in their own stand-by generators to ensure an electricity supply, but these are often expensive compared to electricity from the grid. Generators also require some technical expertise as well as reliable supplies of fuel and spare parts. Yet, in sub-Saharan Africa and elsewhere own-generation by firms is reported to have increased in recent years.

Empirical studies have shown that the small and medium scale industries (SMEs) have in many state enhanced greater employment opportunities per unit of capital invested and aided the development of local technology. This explains the deep interest which developing nation has shown in the promotion of small and medium scale industries since the 1970s (Moyo, 2012).

1.2 Statement of Research Problem

There are various factors affecting the performance of small and medium scale enterprise sub sector ranging from inadequate capital to unfavourable tariff policy, however, the poor state of power supply in Nigeria is one of the significant factors militating against the performance of small and medium scale enterprise.

Despite series of investments made by past government over the years on the power sector to improve the poor state power situation in the country, the entire nation still suffers power shortage and black out (Godwin, 2015). The privatization of the power sector was meant to improve the power insecurity of the country but the national power grid has been on the decline from about 4000 megawatts in 1999 to 1300 megawatts in 2014 (Amadi, 2010).

The equity and quality of a country’s electricity power supply determines its ability to create competitive industries. Since the performance of SMEs In any state is greatly influenced by the electricity supply. Given the pathetic state of electricity power supply in Nigeria it is no wonder that the contribution of the development the state, manufacturing sector and the economy general is very negligible or unsupported by the government.

Power supply has remained unreliable and power out-ages load shedding and rationing has become very frequent. Power supply has been erratic and unreliable that many businesses have resorted to purchasing private generator at a very high cost. The substantial investment in private generating plants is estimated to be of capacity of over 250mm, which is almost half of power holding company of Nigeria (PHCN) available capacity.

1.3 Research Questions

The study would therefore provide answers to the following fundamental questions.

  1. What is the impact of electricity power supply on the productivity of SMEs in Nigeria?
  2. How does commercial Bank credit impact the productivity of SMEs?

1.4 Objective of the Study

The objectives of this research study are to provide a clear picture on the activities of effects of power on the performance of small and medium scale industries. The specific objectives of the study are:

  • To examine the impact of Electricity power supply on the performance of SMEs in Nigeria.
  • To examine the impact of commercial Bank credit on the performance of SMEs in Nigeria

1.5 Hypotheses

  1. H0: Electricity Power Supply does not have any significant impact on the productivity of SMEs in Nigeria.

H1:  Electricity Power Supply has significant impact on the productivity of SMEs in Nigeria.

  1. H0 Commercial Bank credit does not have any significant impact on the productivity of SMEs in Nigeria

H1          Commercial Bank credit does significant impact on impact of SMEs in Nigeria     

1.6   Significance of the Study

The outcome of this study will assist government parastatals and it agencies like the Ministry of power, who are the policy makers and regulatory bodies  and also the electricity distribution company scattered across the country for decision and policy making as regards improving the state of small and medium scale enterprise.

This study will create awareness to the government to see the extent to which neglect of infrastructural facilities such as electricity is hampering the performance of SMEs in meeting the potentials of providing employment per unit investment capital, facilitating   the   development   of   indigenous entrepreneurships,  enhancing  local  resources  utilization  and  value added,  expanding  non-oil  exports  at  competitive  prices,  improving balance of payment position and bring about overall growth and development of the state economy.

It will add to the available literature on the areas of study while also providing the platform for other researchers to further this study.

1.7 Scope of the Study

The research work is concerned basically with the roles to lay emphasis on power supply and the performance of small and medium scale enterprise in the state and will cover those SMEs in state that have electricity as relevant infrastructure for their production process. The analysis covers the period of 1980-2014.

1.8 Definition of Terms

–           Electricity Power Supply

–           Small and Medium Scale Enterprises (SMEs)

–           Productivity or Performance of SMEs

–           Commercial Bank Credit to SMEs

1.9 Electricity Supply

According to Energy Networks Association ‘ENA’ (2008), Customer Guide to Electricity Supply (2008),the physical process of electricity supply is divided into three broad stages; generation, transmission, and distribution. Power generation, transmission and distribution involve flow of currents with heat losses in conductors. These losses can be reduced through better design, construction and maintenance. In addition to the physical aspects, there is a commercial overlay involving the trading of electricity between generators and retailers or, in some circumstances, generators and large electricity users.

SMEs:  These are non subsidiary independent firms which employs fewer than a given number of employees of not less than 10 employees and not more than 250. Commercial Bank credit to SMEs in the case of SMEs, bank credit or loan is the major alternative of external funding (James & Ashamu 2014) the findings shows that Bank Credit to SMEs have significant effect of Nigeria economic growth.

Performance of SMEs:  SMEs all over the world have seen playing a crucial role in promoting economic development as well as industrial production in a developing economy such as Nigerian.  SMEs are considered as a living force for a sustainable economic development because of generating employment improving local technology output diversification developing indigenous entrepreneurship and forward integration with large scale industries. (A.O. Adaramola)

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