SMALL SCALE ENTERPRISE IN THE NIGERIA ECONOMY

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SMALL SCALE ENTERPRISE IN THE NIGERIA ECONOMY

ABSTRACT

The aim of this research study is to determine the impact of small and medium scale enterprise on the Nigeria economy. This study adopted the ordinary least square technique and time series data within the period of 1990 to 2014. Gross domestic product, unemployment rate and inflation rate were examined to determine its contribution to the growth of small and medium scale enterprise in Nigeria. Unemployment rate and inflation rate were found to impact negatively on the growth of small and medium scale enterprise while Gross domestic product was found to impact positively on SMEs. That is an increase in unemployment rate and inflation rate will lead to a decrease in the growth of SMEs while a unit increase in gross domestic product will lead to about 0.0003 unit increase in the growth of small and medium scale enterprise in Nigeria economy. Conclusively, strategies should be put in place by government to ensure the growth of SMEs because it’s an engine growth of an economy.

TABLE OF CONTENTS

CHAPTER ONE: INTRODUCTION

Background to the Study - - - - - - -

Statement of the Problem - - - - - - -

1.3 Objectives to the Study - - - - -

Research Questions - - - - - -

1.5 Research Hypotheses - - - - - - -

1.6 Significance of the study - - - - - -

1.7 Scope of the Study - - - - -

1.8 Limitations of the Study - - - -

CHAPTER TWO: LITERATURE REVIEW.

2.1 Introduction - - - - - -

2.1.1 Overview of the Nigerian Economy - - -

2.1.2 Characteristics of the Nigerian Economy - -

2.1.3 Natural Factor Endowments and Mono-cultural Characteristics -

2.2 Review Literature on Dependent Variable - - -

2.3 Review Literature on the Independent Variable - -

2.3.1 Concept of Small Scale Business Enterprise -

2.3.2 Overview of Small Scale Business in Nigeria - -

2.3.3 Characteristics of Small Scale Business in Nigeria

2.3.4 Problems ofSmall Scale Business in Nigeria - - -

2.3.5 Challenges facing Small Scale Enterprises in Nigeria - -

2.3.6 Importance of Small Scale Enterprises in Nigeria - -

2.3.7 Proposal, Policies and Incentives for Promoting Small and Medium Scale Enterprises in Nigeria - - - - -

2.3.8 Government Policies and Small Scale Business Operation in Nigeria

2.4 Theoretical Framework - - - - - -

2.4.1 The Endogenous Growth Theory - - -

2.5.2 The Exogenous or Neoclassical Model - - -

2.5.3 Pecking Order Theory/Hypothesis of Lending - -

CHAPTER THREE: METHODOLOGY

3.1 Introduction - - - - - -

3.2 Research Design - - - - - -

3.3 Population of the Study and Sampling Techniques - -

3.4 Sample Size - - - - - -

3.5 Sources of Data - - - - - -

3.6 Research Instrument - - - -

3.7 Model Specification - - - - - -

3.9 Method of Data Analysis - - - -

CHAPTER FOUR: DATA PRESENTATIONS AND ANALYSIS

4.1 Introduction - - - - -

4.2 Presentation of Descriptive Statistics of Nigeria economy variables and SMEs-

4.3 Presentation of Estimated Model - - - - -

4.4 Hypotheses Testing - - - - -

4.5 Discussion of Findings - - - -

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECONMMENDATION

5.1 Introduction - - - - -

5.2 Summary of Findings - - - - -

5.3 Recommendation - - - - - - -

5.4 Conclusions - - - - - - -

BIBLOGRAPHY - - - - -

LIST OF TABLE

Table 4.1 Descriptive Statistics Result - - - -

Table 4.2: The Ordinary Least Square Dependent Variable: AQ - -

Table 4.3 Correlation Matrix - - - - -

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

It is a known fact that developing economies all over the world strive to achieve industrial development. Nigeria, being a country with a developing economy is no exception. Over the years, the method of attaining this development has reduced attention on publicly owned large industries and focused more on privately owned small business enterprise. This is because the small scale enterprises are seen as a potent vehicle for the achievement of economic growth and development as they provide the best opportunity for job creation and rural development. The development of small business enterprise through effective financing options have stem debate and growing interest among researchers, policy makers and entrepreneurs, recognizing the immense contribution of the subsector to economic growth. Small business enterprise constitutes the driving force of such industrial growth and development. This is basically due to their great potential in ensuring diversification and expansion of industrial production as well as the attainment of the basic objectives of development. Small business enterprise utilize local raw materials and technology thereby aiding the realization of the goal of self-reliance. Also, governments at various levels (local, state and federal levels) have in one way or the other focused on the performance of Small scale enterprises for economic gains.

A small-scale enterprise is a business that employs a small number of workers and does not have a high volume of sales. Such enterprises are generally privately owned and operated as sole proprietorships, corporations or partnerships. The legal definition of a small-scale enterprise varies by industry and country.

Governments are often seen making frantic efforts in developing small scale enterprises. These enormous efforts are as a result of the activities of these enterprises having significant contribution to the employment generation, manpower development and gross domestic product of the country (Kadiri, 2012). It should be noted that the definition of small scale enterprise varies from one author to another.

Nevertheless, small scale enterprise is an enterprise that has relatively little capital investment that produces in small quantity and as a result control small share of the market with less than 50 employees (Olatunji, 2010.). Also, management, marketing and entrepreneurial functions are vested in the proprietor.

Small scale business started gaining prominence in Nigeria in the early 1970s when many personal enterprises started springing up. Before this time, agricultural dominate the economy. There were a lot of agricultural small holding before and during emergency of oil boom. Over 75 percent of agricultural holding were managed by the small farmers which comprise mainly family business Government agricultural holdings were not more than 10 percent. Awoniyi (2010) asserted that for any developing country to grow and develop economically, greater attention and concentration must be given to small business sector. The small scale business enterprise sector is a viable and important means to utilize the locally available resources, develop local technology for production for local consumption and export trade. Small enterprises development in area of agriculture is a means of sustainable food production, improve employment generation and combat food shortage in developing countries.

1.2 Statement of the Research Problem

Most of the small business in Nigeria have remained relatively small and seen stunted growth over the years. This is due to the fact that a large percentage of entrepreneurs in the country remain unserved by the formal financial institutions. Ironically, in spite of the vital roles of small enterprises in the economicgrowth and development of a nation, the effectiveness of these enterprises is still hampered bymany factors such as; Inadequate capital (finance); poor record keeping; poor or wrong location;poor planning; inadequate infrastructural facilities; and lack of skilled manpower etc (Leon,2009). Small and medium enterprises are mostly managed by owners and relations. The financing in most cases is normally provided by the owners. The owners fail to realize the importance of external source of capital in order affect expansion in the business; in most cases, by the owner, members of the family and friends in most cases.

In another development, small enterprise experience difficulties in raising equity capital from the finance institutions or individuals. Even when the finance institution agrees to provide capital, the conditions are always worst. All these result to inadequate capital available to the sector and thus lead to poor financing.Of all the above identified problems, finance arguably seems to be the greatest challenge (Leon,2009). Many of the small business have to content with the problem of raising sufficient start-up capitaland how to attract credit facilities from financial organizations like banks. Even where thesefacilities are available, small scale enterprises still have to provide collateral securities normallydemanded by most lending institutions. These are in addition to high interest rate charged onloans given by these lending institutions.

Without any doubt, the problem of finance is a major one particularly to the establishment and survival of small enterprises. The discussion of this issue is therefore, the basis of this research study.

1.3 Objectives to the Study

This study bridge the existing gap in the literature by empirically investigating the impact of small scale enterprise on the Nigeria economy.

More specifically the objectives include;

To determine the extent to which small and medium scale enterprise affects the Nigeria economy.

To determine the impact of inflation rate on small and medium scale enterprise in Nigeria?

To ascertain the effect of unemployment on small and medium scale enterprise in the Nigeria economy.

Research Questions

What is the extent to which small and medium scale enterprise affects the Nigeria economy?

What is the impact of inflation rate on small and medium scale enterprise in Nigeria?

What is the effect of unemployment on small and medium scale enterprise in the Nigeria economy?

1.5 Research Hypotheses

Ho: There is no significantextent to which small and medium scale enterprise affects the Nigeria economy.

Ho: There is no significant impact of inflation rate on small and medium scale enterprise in Nigeria.

Ho: There is no significant effect of unemployment on small and medium scale enterprise in the Nigeria economy.

1.6 Significance of the study

The significance of this study cannot be overemphasized, considering the fact that rapid development of the small business sector will contribute immensely to the development of any nation. A major barrier to this rapid development is the dearth of both debt and equity financing. Accessing finance has been identified as a key element for small scale enterprise to succeed in their drive to build productive capacity, to compete, to create jobs and to contribute to poverty alleviation in developing countries. This project work will help in filling the gap of lack of growth strategies for long-term actualization of their goals and objectives. Business enterprises formulate wrong or short-term goals or strategies without taking into consideration the long-term benefit and future of the firm. Lack of creative and innovative business ideas, underdeveloped entrepreneurship culture and limited understanding to modern production technologies, marketing and business techniques makes their strategies to fail. Thus, this study is significant to the extent that it determines the contributions of small business on the Nigeria economy. Furthermore, this study is of immense benefit to government as it would aid in the fine-tuning of policies that are intended to boost the small business sector through Micro Banking. The study also adds to the existing body of knowledge available to students and other researchers.

1.7 Scope of the Study

This study focus on the impact of small scale business enterprise in Nigeria economy within the period of 1990 to 2014.

1.8 Limitations of the Study

One major limitation of the study is the conflicting figures from the various sources. Often time, figures from the federal Bureau of statistics and the central Bank of Nigeria statistical bulletin are not the same. This indeed influences the outcome of this study. Again interms of measurement of variables, 100% cannot be guaranteed, but effort will be made to minimize errors and finally, the method of data analysis may not be sophisticated enough or appropriate for a study of this nature. However, efforts will be made such that the results from the study are accurate and reliable for policy implicatio

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