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1 THE CHALLENGES OF SMALL AND MEDIUM ENTERPRISES BASED ON VISION 20:2020 BY UBOMA, NKIRU UZOMA PG/MBA/10/54700 DEPARTMENT OF MARKETING FACULTY OF BUSINESS ADMINISTRATION UNIVERSITY OF NIGERIA ENUGU CAMPUS JULY 2012
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THE CHALLENGES OF SMALL AND MEDIUM ENTERPRISES
BASED ON VISION 20:2020
BY
UBOMA, NKIRU UZOMA
PG/MBA/10/54700
DEPARTMENT OF MARKETING
FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA
ENUGU CAMPUS
JULY 2012
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THE CHALLENGES OF SMALL AND MEDIUM ENTERPRISES
BASED ON VISION 20:2020
BY
UBOMA, NKIRU UZOMA
PG/MBA/10/54700
BEING A PROJECT SUBMITTED TO THE DEPARTMENT OF
MARKETING, FACULTY OF BUSINESS ADMINISTRATION,
UNIVERSITY OF NIGERIA, ENUGU CAMPUS IN PARTIAL
FULFILMENT OF THE REQUIREMENT FOR THE AWARD
OF MASTERS IN BUSINESS ADMINISTRATION (MBA)
DEGREE IN MARKETING.
JULY 2012
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CERTIFICATION
UBOMA, NKIRU UZOMA, a postgraduate student in the
Department of Marketing and with Registration Number
PG/MBA/10/54700 has satisfactorily completed the
requirements for research work for the award of Masters in
Business Administration (MBA) degree in Marketing.
The work embodied in this project has not been submitted in
part or full for either Diploma or Degree of this or any other
University.
-----------------------------
Uboma, NkiruUzoma
Student
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APPROVAL PAGE
This project has been read and approved for the Faculty of
Business Administration, University of Nigeria, Enugu
Campus.
-------------------------------- ------------------------
Dr.(Mrs) J.O Nnabuko Dr. S. C. Moguluwa
Supervisor Head of Department
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DEDICATION
I dedicate this work to the Almighty God for His mercies and
loving kindness towards me.
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ACKNOWLEDGEMENTS
The success of this work is attributed to the collective efforts of
many individuals. However, I bless the name of the Lord for
His grace and unspeakable love towards me in the course of
writing this project. My profound gratitude and appreciation
go to my wonderful supervisor and my role model, Dr. (Mrs)
J.O. Nnabuko for her timeless dedication, constructive
criticism and suggestions at different stages of this research
which gave it a touch of class.
I appreciate all the staff of Marketing Department UNEC for
their encouragement and moral support which gave me lots of
inspirations and enthusiasm throughout the learning period.
My sincere thanks go to all the respondents (management staff
of Small and Medium Enterprises in Enugu Metropolis) whose
data were collated and analyzed to make this work a success. I
say, thank you all.
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I am deeply grateful to my sweet mum, Mrs. L.I Uboma for
giving me a sound foundation which serves as the prerequisite
for this programme. You are the sweetest gift to me. May God
keep and preserve you. Amen. In the same vein, I want to
appreciate my sweet siblings IkennaUboma, ElonnaUboma,
Ebere and Amara, for all their prayers, moral supports and
sponsorships. May Almighty God deeply reward you all. Amen.
To my special and wonderful friends and mentors, whose
benevolent act towards me shall forever linger in my heart.
They include: AdaobiOkeke, Prof. Chinedu Nebo, Engr.
Kenneth Anyaji, Engr. Chris Obi, EngrAni (AloAluminiun),
Okolo Victor,Egbuaguchibuzo, Emmanuel Shedrack,
AmaechinaObiageri, Sir Jeff Okeke. May God bless you all.
Amen.
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ABSTRACT
Nigeria Vision 20:2020 Economic Transformation Blueprint is a
long range plan that aims at launching Nigeria in the league of
top twenty developed economies of the world by the year 2020.
However, the SME sub-sector has been identified by
government and development experts as the main engine of
economic transformation. This is because, the SMEs contribution
towards economic growth and development are numerous and
multifaceted. An active SME sub-sector is the principal means
by which a society stimulates indigenous entrepreneurship,
generates employment, wealth creation, poverty reduction, and
promotes material well being of its populace. SMEs in Nigeria
have been constrained by number of factors. Consequently, this
study has its objective to determining the challenges facing the
Small and Medium Enterprises and the effects of these
challenges in achieving Vision 20:2020. The researcher used
the survey research design. Data were collected mainly from
primary source. Questionnaires were administered to 70
respondents (the management staff of SMEs in manufacturing
sub-sector that are members of MAN). Census was used for the
study since the entire population of the management staff of
SMEs (70) was small. Data were presented using tables. A non-
parametric inferential statistics known as chi-square was used
to test the hypotheses. The study showed that, there is a huge
gap in infrastructures (power supply, roads networks, good
healthcare delivery, ICT), poor access to finance and insufficient
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commitment to capacity building. It recommended that in pursuit
of Vision 20:2020, both government and SMEs have important
roles to play such as; intensive commitment should be made
now more than ever by all levels of Government towards the
provision of adequate basic and technological infrastructures in
the area of power supply, roads, healthcare, ICT. SMEs should
be committed towards acquiring entrepreneurial skills and staff
training.
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TABLE OF CONTENTS
Cover Page ……………………………………………………….. ……i
Title Page …………………………………………………………. ……ii
Certification ………………………………………………………. ……iii
Approval Page …………………………………………………….. …..iv
Dedication ………………………………………………………….. …..v
Acknowledgements …………………………………………………….vi
Abstract ……………………………………………………………. ……vii
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study………………………………………..1
1.2 Statement of the Problem ………………………………………5
1.3 Objectives of the Study ………………………………………….8
1.4 Research Questions ……………………………………………..9
1.5 Hypotheses ……………………………………………………….9
1.6 Significance of the Study ……………………………………….10
1.7 Scope of the Study ………………………………………………13
1.8 Limitations of the Study …………………………………………14
1.9 Definition of Terms ………………………………………………15
References………………………………………………………..20
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Introduction ……………………………………………………….22
2.2 Conceptual framework ………………………………….……….24
2.3 Vision 20:2020…………………………………………..……..….26
2.3.1 Objectives of Vision 20: 2020 ………………………………..….29
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2.4 Definition and Concept of Small and Medium Enterprises
(SMEs) in Nigeria …………………………………………..…….36
2.4.1 Features of SMEs………………………………………………...43
2.5 Nigerian Economic Development Plans (Past and Present)…44
2.6 The Roles of SMEs in Achieving Vision 20: 2020 …………….51
2.7 The Challenges of SMEs in Achieving the Vision 20: 2020 ….54
2.7.1 Poor and Inadequate Infrastructure: Power and Transportation
Facilities …………………………………………………………...59
2.7.2 Poor Market Information and Lack of MarketAccess………...62
2.7.3 Harsh Business Operating Environment Resulting in High Cost
of Doing Business and Unfair Competition from Imported
Goods ……………………………………………………………...63
2.7.4 Non Access to Medium and Long Term Credit Facilities …….68
2.7.5 Inadequate Government Support…………………………….....69
2.8 Summary…………………………………………………………..72
References…………………………………………………………77
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction ………………………………….…………………….81
3.2 Area of the Study………………………………………………….81
3.3 Research Design………………………………………………….81
3.4 Sources of Data …………………………………………………..82
3.4.1 Primary Source …………………………………………………..82
3.5 Pilot Survey ……………………………………………………….83
3.6 Population of the Study ………………………………………….83
3.7 Sample Size Determination ……………………………………..85
3.8 Instruments for Data Collection………………………………….85
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3.9 Instrument Validation and Reliability……………………………85
3.10 Data Presentations and Analysis Techniques…………………87
References ………………………………………………………88
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Introduction………………………………………………………..89
4.2 Data Presentation…………………………………………………90
4.3 Test of Hypotheses……………………………………………...107
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
5.1 Introduction……………………………………………………….115
5.2 Summary of Findings…………………………………………..115
5.3 Conclusion………………………………………………………117
5.4 Recommendations……………………………………………..119
Bibliography……………………………………………………..122
Appendix A: Questionnaire……………………………….127
Appendix B: Reliability Result……………………………132
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LIST OF TABLES
Table 2.1: Classifications of Micro, Small Medium and Large
Enterprises. …………………………………………
Table 2.2: Sectoral Composition of SMEs in Nigeria ………
Table 3.1: Small and Medium Enterprises (members of MAN))
in Enugu Metropolis………………………………84
Table 4.2.1: Questionnaires Distribution and Return………...90
Table 4.2.2: Sex of the Respondents………………………….91
Table 4.2.3: Age Distribution of the Respondents……………92
Table 4.2.4: Organisational Classification………………………92
Table 4.2.5: Educational Qualification of the Respondents…93
Table 4.2.6: Responses to Ownership Structure of SMEs……93
Table 4.2.7: Responses to Staff Strength………………………94
Table 4.2.8: Respondents’ Awareness of Vision 20:2020……94
Table 4.2.9: Responses on Contributions to Vision 2020……95
Table 4.2.10: Respondents’ Possibility of Competing Favourably
with Other developed economies by the year 2020.
Table 4.2.11: Responses to Nigeria Vision 20:2020 Achievement..
Table 4.2.12: Responses to Finance………………………………97
Table 4.2.13: Responses on Collateral……………………………98
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Table 4.2.14: Responses on High Interest Rate………………….98 Table 4.2.15: Responses on Multiplicity of Tax…………………..99 Table 4.2.16: Responses on Information Technology…………...99 Table 4.2.17: Responses on High Taxes and Tariffs…………..100 Table 4.2.18: Responses on Experience………………………..100 Table 4.2.19: Reponses on Water Supply……………………….101 Table 4.2.20: Responses on Entrepreneurial Skill……………...101 Table 4.2.21: Responses on Power supply……………………..102
Table 4.2.22: Responses on Training……………………………103 Table 4.2.23: Responses on Road Network…………………….104 Table 4.2.24: Responses on Access to Market Information..…104 Table 4.2.25: Responses on Internet…………………………….105 Table 4.2.26: Responses on Improper Book Keeping…………105 Table 4.2.27: Responses on Healthcare Delivery………………106 Table 4.2.28: Responses on Telecommunication………………106 Table4.2.29: Responses on Skilled Labour…………………….107 Table 4.3.1: A Chi-Square Analysis of Hypothesis I Test…...108
Table 4.3.2: A Chi-Square Analysis of Hypothesis II Test….110 Table 4.3.3: A Chi-Square Analysis of Hypothesis III Test…..111
Table 4.3.4: A Chi-Square Analysis of Hypothesis IV Test …112 Table 4.3.5: A Chi-Square Analysis of Hypothesis V Test …114
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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The vision 20:2020 policy was articulated during Olusegun
Obasanjo administration (1999 – 2007) to make Nigeria one of
the twenty largest economies in the world by the year 2020. At
the inception of this policy, it was argued that the Nigerian
government had no intention, strategy and execution capacity
to make Nigeria one of the largest economies by 2020. On
assumption of office in May 2009, the Yar‟Adua
Administration set up the National Council on Vision 20:2020
to develop a blue print for the vision 20: 2020 in collaboration
with the National Planning Commission. In November, 2009,
the Nigerian Vision 20:2020 Economic Transformation
Blueprint for Nigeria was released to the public (Igbuzor,
2010:1). The SMEs sector has been identified as one of the
critical elements to achieving the Nigerian vision 20: 2020.
This is because a nurtured and well structured SME sector
can contribute significantly to employment generation, wealth
creation, poverty reduction and sustainable economic growth
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and development. This is in line with the vision for the SMEs
sector which is “To be the engine of economic growth, drivers
of sustainable industrial development and a globally
competitiveness”. The activities of SMEs in Nigeria cut across
several sectors of the economy and include manufacturing,
agriculture, solid minerals, metal fabrications, ICT, culture
and tourism, transportation, trade and commerce among
others. The establishment of small and medium enterprises
agency of Nigerian in 2003 was among some of the policies put
in place by government to promote orderly development of the
SMEs sector in the country.
The realization of the vision is hinged on creating the plat form
for success by urgently and immediately addressing the most
debilitating constraints to Nigeria‟s growth as well as putting
in place workable SMEs. The Nigerian Association of Small
and Medium Enterprises argued that the Nigeria Vision
20:2020 may not materialize until SMEs are empowered. This
is based on the view that economic goals cannot be achieved
without empowering the engine of economic growth
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(Adenekan, 2011:1). Small and Medium Enterprises (SMEs)
have been fully recognized by government and development
experts as the main engine of economic growth and a major
factor in promoting private sector development and
partnership. The development of SMEs is therefore an
essential element in growth strategy of most economies and
holds particular significance for Nigerian Vision 20:2020.
SMEs not only contribute significantly to improved living
standards, they also bring about substantial local capital
formation and achieve high levels of productivity and
capability. From a planning stand point, SMEs are
increasingly recognized as the principal means for achieving
equitable and sustainable industrial diversification and
dispersal which is a calling need towards achieving Vision
20:2020. SMEs account for over half of the total share of
employment, sales and value added. A major gap in Nigeria‟s
industrial development process in the past years has been the
absence of a strong and virile SMEs sub-sector. However like
most less developed and developing countries, the country is
witnessing a rapid population growth and this contrast with
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the less than average rate of development in communication,
technological and social infrastructure. Instability and high
turnover of staff have impacted negatively on the performance
of primary institutions responsible for policy monitoring and
implementation, resulting in distortions in macro-economic
structure and low productivity. These challenges constitute
hindrance to the development of SMEs which provide the
critical building block for industrialization and sustainable
economic growth needed for achieving vision 20:2020. More
so, with the dismantling of trade and other barriers, the world
has been transformed into a global village consequently, SMEs
in developing countries such as Nigeria are struggling to thrive
successfully under intensive competitive environment both
domestic and international. For this reason, there is an urgent
need to provide the required enabling environment for the
development of SMEs so that they could adequately play the
role expected of them in transformation and Vision 20:2020
accomplishment. Such roles include mobilization of domestic
savings for investment, appreciable contribution to gross
domestic product, increased harnessing of local raw material,
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employment generation, wealth creation, significant
contribution to poverty reduction effort through a sustainable
livelihood and enhancement in personal income, technological
development and export diversification (Udechukwu, 2003:7).
To attain 20:2020 in an aggressive competitive globalized
world where conventional tools are made obsolete by new
complexities, where past experience is inadequate for new
unknown, the gap with creativity, innovation and invention
must be filled to address the challenges facing SMEs which
have been recognized as the engine of economic growth
(Olufemi, 2008:1).
1.2 Statement of the Problem
The development and survival of viable SMEs in Nigeria is
critical to the sustainability and rapid transformation of
Nigeria to one of the twenty largest economies in the world by
2020. This is because SMEs hold the key to job creation,
employment generation, enhance productivity and wealth
creation towards launching Nigeria into the class of developed
economies (Kpakol, 2007: 2). In spite of efforts by many
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successive governments right from independence to promote
SMEs in the industrialization process the development of the
sub-sector has been constrained by a number of factors both
internally and externally such as unstable macroeconomic
environment, poor implementation and coordination of efforts
of SMEs, absence of sustainable institutional mechanism,
poor infrastructural facilities (electricity, road, railway system,
water supply), Lack of effective financial support system. The
role of government in fashioning policies and ameliorating the
constraints of SMEs has been fully recognized to be crucial in
initiating and facilitating remedial action. This is more so with
rapid changing global environment moving towards
deregulations knowledge-based economy, borderless trade and
investment which present new challenges and opportunities
for SMEs in developing countries like Nigeria (Kpakol,
2007:16).
Nigeria as a nation has had so many development plans in the
past such as Structural Adjustment Programme (SAP),
National Economic Empowerment Development Strategy
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(NEEDS), Millennium Development Goals (MDGs), Vision
2010 and many other developmental plans whose objectives
could not be achieved (Adebayo, 2008: 12). The causes of
failure of the above stated past development plans are
common and more so traceable to leadership problem, lack of
enabling environment, inadequate infrastructures, and
policies implementation. Chibundu (2006:42) said that the fact
that has emerged from the appraisal of various past and
present policy initiatives on the promotion of SMEs in Nigeria
is that although finance is a major constraint to the
development of SMEs in Nigeria, it is by no means the only or
most important constraint. The effective utilization of
substantial financial resources provided under various past
programmes was constrained by such factor as lack of skills
as well as absence of the enabling environment for investing in
small and medium scale sector. Although attention is paid
now more than ever with to the aforementioned constraints,
especially the controllable factors such as managerial skills,
effective cost control, working capital, management, marketing
management, monetary policy etc, much are yet to be done in
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ameliorating the constraints of SMEs towards achieving vision
20:2020.
1.3 Objectives of the Study
The broad objective of this study is to determine the
challenges faced by Small and Medium Enterprises in
achieving Vision 20:2020. The specific objectives of this study
include the following:
1. To determine whether adequate infrastructures (power,
roads, water supply and good healthcare delivery) will lead
to the growth of SMEs in Nigeria.
2. To know whether capacity building will promote the growth
of SMEs in Nigeria
3. To determine if access to credit facilities will lead to the
sustainability of SMEs in Nigeria.
4. To uncover the effect of high taxation on the growth of
SMEs in Nigeria.
5. To determine whether the Information, Communication
Technology (ICT) will lead to the growth of SMEs.
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1.4 Research Questions
To give the study a sharp focus and effectively guide its
prosecution, the following questions are propounded.
1. Do adequate infrastructures (power, roads, water supply
and good healthcare delivery) have effect on the SMEs
growth in Nigeria?
2. Does capacity building lead to growth of SMEs in Nigeria?
3. Does access to credit facilities lead to the sustainability of
SMEs in Nigeria?
4. Does high taxation affect on the growth of SMEs in Nigeria?
5. Does ICT has effect on the growth of SMEs in Nigeria?
1.5 Hypotheses
It is hypothesized in this study that:
1. Adequate infrastructures (power, roads, water supply and
good healthcare delivery) have no significant effect on
the growth of SMEs in Nigeria.
2. Capacity building will not significantly lead to the growth
of SMEs in Nigeria.
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3. Access to credit facilities has no significant effect on the
sustainability of SMEs in Nigeria.
4. High taxation has no effect on the growth of SMEs in
Nigeria.
5. ICT has no significant effect on the growth of SMEs in
Nigeria.
1.6 Significance of the Study
Many economies, developed and developing have come to
realize the value of small and medium businesses. These are
seen to be characterized by dynamism, innovation, efficiency,
and their small size allows for faster decision making process.
Economic development has been in the centre of all policies
and effort of the developing countries in the past years and
interest in the role of SMEs in the development process
continues to be in the fore front of these policy debates in
developing countries. SMEs worldwide have been appropriately
decried as the real engine of economic growth and
development by the rapid transformation of the Asian Tiger
countries of Malaysia, Indonesia, China, Taiwan, and Hong
kong in the recent past (Akwaeze, 1985:7). Government all
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over the world has realized the importance of this category of
companies and has formulated comprehensive public policies
to encourage, support and fund the establishment of SMEs.
Significantly, development of SMEs is a sine quonon for
employment generation, solid entrepreneurial base and
encouragement for the use of local raw materials.
Thus, the findings of this study will be of immense aid to the
Government of Nigeria as well as other countries,
academicians, researchers, non-governmental organisations
(NGOs) in realization vision 20: 2020. In specific terms the
following are the significance of this study to various
stakeholders.
When the nexus of challenges facing SMEs have been
overcome, the SMEs will function in full capacity. With the
enabling environment, the cost of doing business will
drastically reduced when compared with what is obtainable
today, they will be able to compete more favourable globally,
SMEs will be motivated to engage in exportation thus increase
in specialization.
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With an enabling environment, there is high chance of Return
on Investment, stability in Naira value, reduced rate of
inflation and these will inturn attract more investors.
When these challenges facing SMEs are surmounted, there
will be more enabling environment and as a result more SMEs
will be in operation and more investors will be attracted into
the country. Consequently, more jobs will be created, variety
of goods will be made available for choice maximization,, there
will be an increase in per capita income, higher standard of
living, and a more robust marketing system.
When the SMEs are working in full capacity, there will be
more investments and more and more investors will come into
the country because of high chance of Return on Investment
as a result of an enabling environment. Hence with high
operations of SMEs, there will be a significance increase on
the Gross Domestic Product (GDP), Gross National Product
(GNP), National Income, Foreign Exchange, Internal Generated
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Revenue (IGR) and also there will be a decrease in dependency
on imported goods.
Research students will expand their academic horizon by
acquiring more knowledge about those factors that militate
against the growth of SMEs in Nigeria. The study will also help
in enriching their secondary data in related studies in future.
Most importantly, this study will go to a great height in
highlighting the major and critical challenges of SMEs by
Vision 20:2020 and finally, it shall serve as stepping stone to
subsequent or future research efforts.
In the light of the above, the achievement of the country‟s
Vision 20:2020 will be a reality.
1.7 Scope of the Study
Asika (2006) defined Scope of Study as the geographical areas,
time period, people, institutions and other things which the
investigation intends to cover. The research discussed the
challenges of SMEs based on Vision 20:2020. The main
objective of Vision20:2020 is to launch Nigeria in the league of
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top 20 developed economies of the world by the year 2020.
Although SMEs have been identified as the engine for
economic development, however this study is narrowed down
to the manufacturing sub-sector of SMEs that are members of
Manufacturers Association of Nigeria (MAN) and National
Association of Small Scale Industrialist (NASSI) in Enugu
metropolis. This is because the manufacturing sub-sector of
SME holds strategic importance to the national growth and
development especially in the area of employment generation,
contribution to Gross Domestic Product (GDP), productivity,
value added contribution, technological development and also
based on the fact that they are export oriented which is
basically what is required to achieve Vision 20:2020.
1.8 Limitations of the Study
In the course of carrying out this research, some basic
problems were encountered by the researcher. Due to financial
constraint, the researcher could not get much necessary
information pertinent to the study. The limited time for the
study has an effect on this study as the research could not get
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all the required information needed. Also the attitude of the
respondents affects the research to a great height. Some of the
respondents were unwilling to co-operate with the researcher
because they felt they have nothing to benefit, while some
others felt that the researcher is invading on their privacy.
1.9 Definition of Terms
Vision 20:2020
Vision 20:2020 is a comprehensive framework designed to
stimulate economic growth in the country. The framework also
offers a blueprint for sustainable political development in
Nigeria. The Vision 20:2020is aligned with the goals of the
National Development Plan. One of the main objectives of
Vision 20:2020 is to place Nigeria in the top leading economies
of the world by the year 2020 (Afolabi 2008).
Business Environment;
Business environment consist of set of factors both internal
and external of an organization that can affect the operations
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of the organization and which the organization has little or no
control over (Osuagwu, 2002:115).
Sustainable Development;
According to World Trade Organization as cited in Anyika et.al
(2005:240) sustainable development is defined as the
development that meets the needs of present generation
without compromising the ability of the future generation to
meet their own needs.
Developed Countries;
This is used to categorize countries with developed economies
in which the tertiary and quaternary sectors of the industry
dominate which lead to high degree industrialization and living
standard (Adediran, 1997: 159).
Developing Countries;
This is use to describe those countries or nations that lack the
human and material resources used in improving the quality
32
of human lives which often lead to low level of living (Adediran,
1997:162).
Devaluation;
This is the reduction or depreciation in the value of country‟s
currency in relation to another (Adediran, 1997:161).
SMEs
Small and Medium Enterprises according to National Council
on Industry (2007) as cited in Onyia (2010:163)
Small Scale Industry is an industry with a total capacity
employed of over 1.50million naira but not more than 50
million naira including working capital but excluding cost of
land and/or a labour size of 11-100.
Medium Scale Industry is an industry with a total capital
employed of over 50million naira but not more than 200million
naira including working capital but excluding cost of land
and/or a labour size of 101- 300workers
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MAN
According to (MAN, 2012) Manufacturers Association of
Nigeria was established in May 1971 as a company limited by
guarantee. The establishment of the association was motivated
by the desire to have focal point of communication and
consultation between the industry on one hand and the
Government and the general public on the other hand. MAN is
in business to create a climate of opinion in this country in
which manufacturers can operate efficiently and profitably for
the benefit of its members. MAN was established to promote
and protect manufacturers‟ collective interest. MAN is made
up of the Medium and Large Scale Enterprises. However for
the purpose of this study, only the Medium Scale Enterprises
were observed.
NASSI
National Association of Small Scale Industrialist was founded
in 1978 and registered under the land perpetual C.A.C
Succession Act as a non profit making and non governmental
organization (NASSI, 2012).
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For the purpose of this study, only the manufacturing sub-
sector of this group was observed.
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References
Adebayo, E. (2003)‟‟ Marketing and Vision 20:2020 Nigeria‟‟.
www.mk/andv.2020.com.
Adediran, A. (1997) Marketing: Fundamental Principles and
Practice. Fola Associates Ibadan
Adenekan, S (2011) „‟SMEs, Critical to achieving Vision
20:2020‟‟ www.cenbank.org
Anyika et.al (2005) African Humanities and Nation Building Joe
Publishers Enugu.
Chibundu, E.(2006)‟‟ Strategies for Nigerian SMEs to grow‟‟.
The Vanguard September 30 and October 6.
www.nsukonline.academia.edu
Igbuzor, O (2010) Nigeria Vision 20:2020 Progress, Challenges
and the way forward. Africa Centre for Leadership
Strategy and Development. Robito Alliance Publishers
Kpakol, M (2007) Situating the poverty eradication strategies
through micro, Small and Medium Enterprises
Development, SME conclave/summit (Wed 19th – Fri
21st September)
36
Olufemi, A. (2008) „‟Packaging a Critical Factor in Attaining
Vision 20:2020‟‟. www.v.2020.com.
Osuagwu, L (2002) Marketing Principles & Management (2nd
Edition)Lagos: Grey Resource Publishers.
Udechukwu, F. N (2003)‟‟ Seminar on Small and Medium
Industries Equity Investment Scheme (SMIEIS) „‟CBN
Lagos. www.nsukonline.academia.edu
Nigeria Vision 20:2020 (2010 – 2013) The First National
Implementation Plan. Volume 11: Sectoral Plans and
Programmes. www.google.com. pdf.
37
CHAPTER TWO
REVIEW OF RELATED LITERATURE.
2.1 Introduction
By the year 2020, Nigeria would be 60 years old as an
independent nation. A man at 60 ought to be taking stock of
his achievements in life and consolidating those achievements.
What achievement would Nigeria be celebration at the age of
60? What should our vision be of Nigeria in the year 2020?
The Nigeria Vision 20:2020 economic transformation blueprint
is a plan for stimulating Nigeria‟s economic growth and
launching the country onto the path of sustained and rapid
economic growth to become one of the top twenty economies
by 2020. The vision is anchored on the National Economic
Empowerment Development Strategy (NEEDS), National
Development Plan, and the Seven Point Agenda of Late
President Umaru Musa Yar‟Adua (Igbuzor,2010:1).
To realize Vision 20:2020, Nigeria requires a strong and virile
SME sector. Small and Medium Enterprises are very important
part of Nigerian economy. SMEs have been fully recognized by
38
governments and development experts as the main engine of
economic growth and a major factor in promoting private
sector. In countries at same levels of development with
Nigeria, SMEs contribute a much higher proportion to GDP as
currently observed in Nigeria. Compared to other emerging
markets, Nigeria has historically shown lack of commitment to
building a strong SME sector: These economies have shown
consistent commitment to the development of SMEs by
implementing access to finance and financial incentives, basic
and technological infrastructures, adequate legal and
regulatory framework, and a commitment to building domestic
expertise and knowledge. In light of recent events in the
Nigerian macroeconomic environment, SMEs have compelling
growth potentials and like other emerging economies are likely
to constitute a significant portion of GDP in the near future
(Oyeyikan, 2011:1). In this research, we will take a look at
SMEs in Nigeria, major challenges being faced, Nigeria Vision
20:2020, and roles of government towards promoting SMEs to
achieve the vision.
39
2.2 Conceptual Framework
Onyenekenwa (2011:1) Economic planning is a deliberate
control and direction of the economy by a central authority for
the purpose of achieving definite target and objectives within a
specified period of time. The need for economic planning in
Nigeria and other developing countries is informed by the need
to address their characteristic development challenges;
poverty, urbanization, rapid population growth, agricultural
development, dualistic economy, underdeveloped natural
resources, technological backwardness, economic
backwardness, unemployment and disguised unemployment,
insufficient capital equipment and foreign trade.
What is a vision?
The concept of a vision is an abstract one, describing the state
of the desired future, often over a long period of time. Vision is
also the ability to think about the future with imagination or
wisdom (Dozie, 1998: 41). The vision 20: 2020 is a grand
agenda, which the Federal Government of Nigeria has
advanced as the main thrust of what is to be accomplished
between now and the year 2020. Vision 20: 2020 is a 13 years
plan of dramatic socio-economic transformation of the
40
country. That period of time is set aside to effect drastic
changes in the country. The goal of the vision is to transform
the Nigeria economy to be one of the largest economies of the
world. The countries in the league of most industrialized or
super industrialized countries are referred to as the G8 and
they include; Canada, France, Germany, Italy, Japan, Russia,
the United State of America, United kingdom. Following these
are some other countries that are classified as emerging
markets. These countries are in transitional phase, having
attained a level that shows in every aspect positives signs of
appreciable development. The „emerging markets countries
include; China, India, Mexico, Brazil, and South Africa. The
French President, Nicolas Sarkozy said recently that the G8
should eventually become G13 by adding these five countries
to the group. The other countries in the emerging market
category from which additional seven countries are selected to
make up the 20 most developed economies are mainly from
among the Asian Tigers (South Korea, Malaysia, Singapore and
Indonesia) countries in Middle East and countries in Eastern
Europe. In Africa, apart from Morocco, Egypt and South Africa
are only the countries in the category.
41
2.3 Vision 20:2020 of Nigeria
What is Vision 20:2020? Vision 20:2020 is a comprehensive
framework designed to stimulate economic growth in the
country. The framework also offers a blue print for sustainable
political development in Nigeria. The Vision 20:2020 is aligned
with the goals of the National Development Plan (NDP). One of
the Main objectives of Vision 20:2020 is to place Nigeria in the
top 20 leading economies of the world by the year 2020. To
achieve this objective, Nigeria would have to compete with
nations like United States, Japan, Germany, China, Italy,
United Kingdom, which have traditionally maintained the to
six ranking of the International Monetary Fund (IMR). In 2007,
IMF ranked Brazil 10, India 12, South Korea 13 and Indonesia
20 respectively. These nations are expected to vigorously
compete with Nigeria in the global economy. Nigeria is ranked
41. The IMF uses criteria based on several benchmarks such
as the Gross Domestic Product (GDP), the Gross National
Product (GNP) and the rise in Personal Income (international
monetary fund, 2007). According to Sanusi as cited in
(Abdulahi, 2008: 1) the federal government has taken steps to
42
harmonize the late President Yar‟ Adua‟s seven point Agenda,
NEEDS II and Vision 20:2020 to firm the National
Development Plan (NDO). He also said that the task of
ensuring a successful implementation of the harmonized
development agenda will not be easy but reaffirms the
government commitment to the NDP. The ministers have
projected that the energy institutions, particularly the power
sector, will need about 20 trillion naira to meet the needs of
the country by the year 2020. They also projected that there
will be an increase in generating capacity from 3000 mega
watts to 6000 Mega watts by December 2009 and to 10,000
mega watts by 2010 furthermore, they projected that oil
production will increase rapidly in 2008 to about 2.45 million
barrels per day. The current production is over two million
barrels per day. These projections translate into billions of
dollars in revenue for the government (Oyebode, 2007: 11).
The Vision 20:2020 agenda has aroused the interest of most
Nigerians towards striving to attain this great height of
development. However, Small and Medium Enterprises have
been fully recognized by government and development experts
43
as the main engine of economic growth and a major factor in
promoting private sector development and partnership. The
development of SMEs is therefore an essential element in
growth strategy of most economies and holds particular
significance for Nigeria Vision 20:2020. A major gap in Nigeria
industrial development process in the past years has been the
absence of a strong and virile SMEs sub-sector. However, like
most less developed and developing countries, the country is
witnessing a rapid population growth and this contrast with
the less than average rate of development in communication,
technological and social infrastructure. SMEs not only
contribute significantly to improved living standards they also
bring about substantial local capital formation and achieve
high levels of productivity and capability. From a planning
stand point, SMEs are increasingly recognized as the principal
means for achieving equitable and sustainable industrial
diversification and dispersal, and in most countries, SMEs
account for over half of the total share of employment, sales
and value added (Udechukwu, 2003: 7).
44
2.3.1 Objectives of Vision 20:2020
The holistic objective of Nigerians vision 20: 2020 is to become
one of the top 20 largest economies or most industrialized
countries of the world. Thus certain key parameters have been
set along diverse significant sectors for concentration of effort
(Ogwo, 2008: 2).
These parameters include;
1. Polity; By 2020, the country would be peaceful harmonious
and a stable democracy.
2. Macro economy; A sound, stable and globally competitive
economy with a GDP of not less than $900 billion and a per
capital income of not less than $4000 per annum.
3. Infrastructure; Adequate infrastructure service that support
the full mobilization for all economic sectors.
4. Education; Modern and vibrant education system which
provides for every Nigerian the opportunity and faculty to
achieve his maximum potentials and provides the country
with adequate and competent manpower.
5. Health; A health sector that supports and sustains a life
expectancy of not less than 70 years and reduces to the
45
bearest minimum the burden of infectious diseases such as
Malaria, HIV/AIDS and other debilitating diseases.
6 Agriculture; A modern technologically enabled
agricultural sector that fully exploit the vast agricultural
resources of the country, ensures national food security and
contributes significantly to foreign exchange earnings.
7 Manufacturing; A vibrant and globally competitive
manufacturing sector that contributes significantly to GDP
with a manufacturing value-added of not less than 40%.
According to Late President Umaru Musa Yar‟ Adua in his
speech at the inauguration of the apex implementation organ
of Vision 20:2020, he did express an expectation that the sub-
national governments will buy into the process by developing
their own vision plans with requisite federal support. “This
according to the president will promote the productive
philosophy of many governments, one economy, on nation.”
Having exhausted the broad objectives of vision 20:2020, the
pertinent questions to be asked include:
Is this vision a genuine and patriotic agenda?
46
Is this vision achievable?
Are politicians ready and willing to change the culture of
impunity against the masses?
Have our leaders been re-oriented to embrace the plan?
Is it only a federal government affaire?
How are the states and local governments involved?
What policies and laws are being put in place to back it
up?
What is role of SMEs towards achieving this vision
Is government ready to provide essential social
infrastructures that will aid the achievement of this
vision?
On the surface, the vision is laudable if it could be pursued
with the seriousness and commitment it deserves. That is the
only way it would be achieved in the real sense of the word.
Great nations have had at one time or the other realized their
down trodden status. That has taken them to a point of
decision from where they are propelled into action to find a
way out of their predicament (Onyeyikah, 2008: 77).
47
Some Element of Vision 20:2020
According to Ojo et-al (1996: 3) there are various perspectives
of a long-range vision depending on who the beholder or
visionary is and what his inspiration and mission are.
However, it is possible to envisage the following common
element or unifying themes of such vision:
i. Nigeria by the year 2020 will be a democratic, strong,
prosperous, united, dynamic and internationally
respected country. It would be the major growth
pole in Africa, perhaps the first African Tiger!
This is of course, an optimistic view, and ideal,
preferred state of affairs, but it is capable of
realization.
ii. That vision requires the recognition of the existing
strengths and weaknesses of the country and the
resolve to initiate policies, programmes and strategies
for translating that vision into living reality.
Specifically, the existing problems of macroeconomic
stability, external debt overhang, low GDP growth rate,
crime, poverty etc would have to be overcome or
48
significantly mitigated. These require the right policy
and macroeconomic environment; increased domestic
savings and investment; massive debt and debt service
reduction; enhanced external resource inflows; export
growth and diversification; more robust and reliable
economic data base; productivity enhancement;
sustained technology transfer and diffusion; human
resource development and capacity building; radical
rethinking of the public sector role and organization;
market/investor-friendly policies; a credible system of
rewards and sanctions etc. the Central Bank of Nigeria
should also be endowed with legal and operational
autonomy (instrument independence) to insulate it
from under executive and political pressure to act
against its better judgment. It should be a CBN that is
shed of the burden of retail banking and other
peripheral functions so that it could focus on its
core areas of monetary policy, banking regulation and
supervision as well as currency issue.
49
iii Any meaningful long range vision of Nigeria must
encompass broad national consensus, mass participation
and involvement-social mobilization - the design of that
vision and its enthusiastic pursuit. How this could be
done is a matter of good governance and social
engineering-to mobilize and channel the vibrancy and
energy of our people in aid national development. This
requires sustainable policy measure which, while
challenging our people to be disciplined, to work hard
and make sacrifices also deliver in good time tangible
benefits that are equitably distributed. The emphasis
should be on redistribution with growth.
iv The issue of policy stability is crucial. We need to design
policies that endure. The conditions for an enduring
policy regime include; strong political will and
commitment to economic reforms, technical soundness,
comprehensiveness and credibility of the policy
framework, internal consistency, right policy mix
coordination and sequence, wide consultation with and
involvement of relevant groups in to formulation;
50
inclusion of social safety nets or poverty reduction
measure, financial stability and liability, substantial
inflow of external resources to give reform measures a
growth orientation manifestation of tangible results in
good time, periodic policy review , appraisal and fine
tuning, vigorous implementation etc.
v. The leadership has to take the initiative and
responsibility for the evolution of a worthwhile vision and
sell it to the country at large.
vi With the internationalization of the world economy and
the emergence of global interdependence, based on the
principle of mutual prosperity, Nigeria should strive
to participate, effectively in the evolving global linkages
and seek to maximize her share of future world growth
and prosperity. Sequel to this, there is need to move
away from the conventional typology based on
comparative advantage - a paradigm shift from a
factor driven to an investment and innovation driven
economy.
51
2.4 Definition and Concept of Small and Medium
Enterprises (SMEs) In Nigeria.
Small enterprises in Nigeria exist both in Urban and rural
setting. In the rural setting these enterprises tend to be
agricultural and un-mechanized in nature and “while those
located in the urban areas are incline towards manufacturing.
Furthermore, as we move from rural to urban settings, the size
of enterprises increases progressively to the extent that they
can be categorized as medium scale (Kpakol [2007: 3]).
Defining SMEs, is central to developing well targeted policies
and programmes either for the sector or the overall
development of the economy. Sequels to this, there are three
major reasons for appropriate definition of SMEs namely; for
inclusion in legislation, for research purposes and for
reasoning intelligently about our nation‟s economic problems.
Broom and longencker (1999) as cited in (Onuchekwa, 2003:
26). According to Andrew (1995: 33) there is no uniform
definition of Small and Medium Enterprises acceptable in
different parts of the world. Different countries, bodies,
banking institutions and researchers have found it useful to
52
define SMEs according to their problem of interest. Olaleye et-
al (1997: 3) holds that the concept of SMEs is relative and
dynamic. The definition changes over a period of time and
depends to a large extent on a country‟s level of development.
Andrew holds the view that defining characteristics run
through number of employees, sales turnover, initial capita
outlay, management, industry type, use motive power, current
capital investment, fixed assets etc. Some definitions use these
characteristics singly while others used a combination of
them. However, employees and assets are more frequently
used than others. The level of these attributes defining the
bounds of these enterprises in different countries does not
specifically interest us here. What is of interest to us is how
SMEs have been defined in Nigeria and how far such
definitions are useful for the present study?
In Nigeria, there have been series of review of the definition of
Micro, Small and Medium enterprises (MSMEs). Statistically,
MSMEs were defined as those employing 10-99 workers, hence
industrial enterprises employing less than 10 workers were
53
classified as micro and those employing more than 100
workers were classified as large enterprises. Also fixed assets,
which respond to temporal changes in the context of
inflationary effects on assets valuation, have for a long time
been employed in defining NSMEs in Nigeria (Kpakol, 2007: 4).
Real and serious attempt at formulating a nationally
acceptable definition of MSMEs in Nigeria were first instituted
by the second National Development plan (1970-1975). Under
this arrangement, the Small Industries Development Plan
(SIDP) was formulated and implemented with a view to
providing technical and financial support to the then existing
and prospective small scale industries under the prevailing
economic situation of that period, the SIDP, for the purpose of
granting loans, and extension of other technical services, first
defined the small scale industries as;
“Any manufacturing, processing or servicing industry with a
capital investment not exceeding N150, 000.00 (one hundred
and fifty thousand naira only) in machinery and equipment
alone to be treated as small scale industry in the country”
while asserting the investment ceiling, the SIDP concluded the
54
definition by adding that, no lower limit of investment has
been prescribed, to allow not only mechanized and semi-
mechanized small scale industries, including the enterprises of
self employed artisans to be brought within the scope of the
definition SID (1997) since then, so many revisions to the
definition above have been made and other criteria than
capital investment such as annual turnover, gross output and
employment of labour were all later added. According to
Kpakol (2007: 5) economists have observed that even within
Nigeria, there have been definitional variations amongst
various SMEs Stakeholders institution. Prior to 1992, different
institutions in Nigeria adopted varying definitions of Small and
Medium Enterprise to suit their individual fields of industrial
concern. Such SMEs stakeholder institutions include; the
Central Bank of Nigeria (CBN), Bank of Industry (BOI), Small
and Medium Industries Development Agency (SMIDA). The
Raw Material Research and Development Council (RMRADC),
the Small Industries Division of Federal Ministry of Industry,
the Department of Technology Acquisition and Assessment of
the Federal Ministry of Science and Technology as well as the
55
Department of Rural Development of the Federal Ministry of
Agriculture and Rural Development.
However, in 1992, the National Council on Industry (NCI)
streamlined the various definitional variations and finally
articulated as well as structured a categorical definition of
industrial enterprises to bring uniformity and provide for its
review every four years using the criteria of capital investment
and employment of labour. The definitions were small scale
enterprise are those with fixed assets above N1 million but not
exceeding N10 million, excluding land but including working
capital, while medium enterprises are those with fixed assets
excluding land but including working capital over N10 million
but not exceeding N40 million. The definition were revised in
1996 with small enterprises as those with total cost, including
working capital but excluding cost of land above N1 million
but not exceeding N40 million with labour size of between 11
and 35 workers, while the medium enterprises was defined as
those with total cost of land above N40 million but not
exceeding N150 million with a labour size of between 36 and
56
100 workers. Another revision was made in the year 2001 as
follows, small enterprise are those with total capital over N1.5
million but not more than N50 million, including working
capital but excluding cost of land and or labour size of 11-100
workers. While medium enterprises are those with a total
capital of over N50 million but not more than N200 million,
including working capital but excluding cost of land and or a
labour size of 101-300 worker (Nebo et.al [2010:6]). Recently,
the Small and Medium Enterprises Development Agency of
Nigeria (SMEDAN) working with United Nations Development
progamme (UNDP) on the draft National policy on MSMEs
2007 proposed the adoption of the dual criteria of number of
employees and assets (excluding land and building for the
classification between employment and asset criteria, the
employment based criteria will take precedence. This led to the
following classifications.
57
Table 2.1 Classifications of Micro, Small Medium and Large Enterprises.
S/N Size Category Employment Assets Excluding land and
Building Million
1 Micro Enterprises Less than 10 Less than 6
2 Small enterprise 11-49 5-less than 50
3 Medium Enterprises 50-199 50 less than 500
4 Large enterprises 200 and above 500 and above
Source; Magmus Kpakol (2007) Situating the Poverty Eradication
Strategies through MSMEs Development.
None of these criteria on its own can give us a wholly acceptable idea of
the SMEs. But, depending on the purpose of this study/ research, all or
any combination of these criteria can be useful guide to understanding
SMEs in Nigeria.
Table 2.2 Sectoral Composition of SMEs in Nigeria
S/N Sector Enterprises
1 Real Sector Agro-Allied,
Manufacturing
Construction
solid minerals
2 Service Related
Enterprises
Information, Technology and
Telecommunication.
Educational Establishment services
Tourism and leisure
Others
3 Micro enterprises Micro enterprises.
Source: F N Udechukwu (2003) Survey of Small and Medium Industries
and their potentials. CBN Seminar on SMIEIS.
58
2.4.1 FEATURES OF SMEs.
The commonest feature of small and medium enterprises is
that they are either sole for proprietorships or partnerships.
Even when they register as limited liability companies, this is
merely on paper, as their true ownership structure is one –
man or partnership. Again most SMEs have labour intensive
production processes, centralized management and have
limited access to long term capital, even their access to short
term financing is limited and sometimes attained at a penal
rate of interest and other conditionality since partnership
spirit in Nigeria is at its infancy, partner in many SMEs
pursue individualistic goal at the expense of the overall
interest of SMEs.
Consequently, mortality rate among SMEs is high as a result
of mistrust that often develops among the owners. Besides
poor partnership spirit, regulatory environment, policy
instability and reversal, inadequate infrastructure often
contribute to their high mortality rate. Another major Failures
of many SMEs is their over dependence on imported raw
59
materials and spare parts. Infact, no industrial sub- unit
under SME category is immuned from this structural
weakness. Added to this, SMEs in Nigeria suffer very poor
inter and intra - sectoral linkages and as a result loose
benefits synonymous with economies of large scale production.
Furthermore, many entrepreneurs who found and manage
SMEs lack the management skills and because of lack of
adequate capital or sheer ignorance of technological advances,
such entrepreneurs purchase obsolete and inefficient
equipment thereby setting the stage ab intio, for lower quality
with serious consequences on product output and market
acceptability. SMEs constitute the most viable and veritable
vehicle for self sustaining industrial development (Udechukwu,
2003:7).
2.5 Nigeria Economic Development Plans (Past and
Present)
Development is a relative concept which is shaped by time,
space and forces that push it. Being a term that makes some
implicit value judgment about the purpose of human life and
60
the nature of good society, the concept of development cannot
but prove problematic and differentiated with changing times.
In the 60s and 70s, the obsession was with economic growth
with particular references to quantitatively measurable
indices such as Gross National Product (GNP), Per Capital
Income (PCI), foreign exchange reserve etc. the assumption
was that economic growth will be a catalyst for other forms of
development. Policy measures were directed at institution
building namely roads, central Bank, and stock exchange
market, import substitution, industries, electricity, schools
etc. The expectations were that with enhanced enabling
environment, people‟s creative energies will be released for
development. The benefits of developments were also expected
to “tickle down” thus growth was expected to uplift living
standard.
Structural Adjustment Programme (SAP)
SAP is borne out of the frustration with the growth models of
the 60s and 70s. According to Dozie (1996: 1) in mid-1986,
Nigeria embarked on an ambitious economic reform
61
programme otherwise known as the Structural Adjustment
Programme (SAP). The SAP was introduced as a last resort to
save the Nigerian economy from imminent collapse. The
objectives were to restore macroeconomic stability, enhance
allocative efficiency and achieve fiscal viability and the
resumption of sustainable growth in the short to medium term
and to reduce the country‟s dependence on oil and imports
and thereby minimize its vulnerability to external shocks in
the long term. In the long term also, the economic base was
expected to be significantly restructured and transformed.
After ten years of SAP introduction there was an improved
allocative efficiency, there were no supply queues for essential
commodities which were typical sights on the eve of the
introduction of the SAP while we have been spared the
disaster of economic collapse. Furthermore, SAP has
engendered some innovation in a number of economic sectors
while fostering economic opportunities and the emergence of
maintenance culture. The rents and distortions created by the
pervasive trade and exchange controls and the emergence of a
largely market based system for exchange rate determination.
62
In spite of these achievements, SAP has not brought about the
economic boom that was envisaged under its auspices. For
instance, the growth of the Gross Domestic Product has on the
average in the last 10 years, been at a pedestrian rate - weak,
sluggish and inadequate. Macroeconomic stability that was
expected to have been restored in the first two years of the
programme continues to elude the country, with high and
entrenched inflation prevailing. Furthermore, there has been
increased oil and import dependence and consequent low local
value–added and minimal export diversification. The
achievement of fiscal and balance of payments viability is yet
to manifest while the external debt overhang continues to pose
serious problems arising from the diversion of a substantial
portion of the country‟s earnings from domestic use to external
debt service, at a time of insignificant investment inflow,
resulting in negative net-resource transfers from abroad.
Again, there has been a persistent decline in real income per
capital and consequent deterioration in the quality of life
arising from slow real GDP growth, rapid population growth
63
and high inflation. The country has also witnessed the
deterioration of social overhead capital and worrisome crime
wave. Finally, in spite of the recent fiscal and monetary policy
reforms intended to create a conducive environment for
investment both local and foreign and achieve fiscal and
macroeconomic stability, it should be acknowledged that both
the policy and business environment are far from optimal.
According to Onvekayah (2008:18) In the past 26 years,
successive administrations have tried to define similar road
maps for national development and economic transformation.
In 1986 the Structural Adjustment Programme was introduced
as an instrument to deliver the country from economic
underdevelopment. A major gap in Nigeria industrial
development process in the past years has been the absence of
a strong and virile small and medium enterprises sub-sector.
The little progress recorded from the courageous efforts of the
first indigenous industrialist were almost wiped out by the
massive dislocation and traumatic devaluation which took
place under the Structural Adjustment programme (SAP)
1986. The SAP policy was rooted in the neo-classical theory of
64
perfect competitive market, whose assumptions do not
adequately reflect constraints on SMEs. In developing
countries like Nigeria, during this period, the country
witnessed less than average rate of development in
communication, technological and social infrastructure.
Instability and high turnover of staff have impacted negatively
on the performance of primary institutions responsible for
policy monitoring and implementation resulting in distortions
in macro economic structure and low productivity
(Olorunshola, 2003: 23).
The resultant devaluation of Naira made it externally difficult
for SMEs to secure finance for their working capital and
investment purposes. In order to bridge the observed widening
resource gap among this class of enterprises, the federal
government set up the National Economic Reconstruction
Fund (NERFUND) effective 9th January 1990, with the Central
Bank of Nigeria (CBN) as one of the facilitating institutions. It
was aimed at providing relatively long-term loans (5 – 10
years) to SMEs at concessionary rates of interest, thereby
65
removing the most formidable handicap to SMEs development.
Between 1990 and 1998, NERFUND disbursed US $ 144.9
million (Foreign Exchange Component) to support 218
projects. NERFUND credit extension activities by the
significant impact of devaluation of the Naira and its effects on
loan servicing by beneficiaries. NERFUND was merged with
two other DFIs to form Bank of industry in 2001 (CBN [2003:
30]). In 2003, former president Obasanjo‟s administration
presented a National Economic Empowerment Development
Strategy (NEEDS), described as a vision of tomorrow‟s Nigeria.
Another past economic development plan tittled “Everything
free by the years 2000” which fizzled out with the advent of the
new millennium. There were other four (4) national
development plans that stimulate growth (Aimuwu, 2008;14).
The advent of new millennium brought about new economic
vision for development and transformation. Nigeria declared its
millennium development goals MDGs which include eight
major goals to be achieved by the year 2015, which respond to
the world‟s main development challenges. The MDGs are
66
drawn from the actions and targets contained in the
millennium declaration that was adopted by 189 nations and
signed by 147 heads of states and governments during the UN
millennium summit in September 2000.
The eight MDGs are broken down into 21 quantifiable targets
that are measured by 60 indicators.
Goal 1:- Eradicate extreme poverty and hunger
Goal 2:- Achieve Universal primary education
Goal 3:- Promote gender equality and empower women
Goal 4:- Reduce child mortality
Goal 5:- Improve maternal health
Goal 6:- Combat HIV/AIDs, malaria, and other diseases
Goal 7:- Ensure environmental sustainability
Goal 8:- Develop a global partnership for development.
2.6 The Roles of SMEs in Achieving Vision 20: 2020
Onyia (2010: 163) SMEs have an important role to play at any
level of economic development and transformation as
witnessed by the co-existence of large, small and medium
enterprises. For instance, SMEs have transaction cost
67
advantages thus enhancing efficiency in economic
environment that requires many and fast decisions that is, a
high degree of flexibility. Economies are classified as
underdeveloped due to prevalence of vicious cycle of poverty
could be truncated by empowering the poor through the inflow
of credit therefore enhancing productive capacity that would
transform to higher output. According to Eze (1999:136)
stressed that the importance of Small and Medium Enterprises
in an economic transformation cannot be over-emphasized or
estimated. He holds that the continuing growth in the
economy of an nation depends to a large extent on the start
ups and development of SMEs. Even on a recessionary
economy, SMEs are legitimate and viable components in any
strategy for reconstructing the economy. He emphasized that
SMEs make the possibility of the equitable distribution of
national income more realistic by providing employment on a
large scale. By creating employment opportunity SMEs help in
mobilizing capital and human resources that would otherwise
be left idle.
68
Sequel to this, SMEs have been recognized to be crucial for
attainment of economic development and ultimate poverty
reduction such as Nigeria vision 20:2020 whose objectives is
placing Nigeria in the league of 20 most industrialized and
developed economies of the world by year 2020. The
transmission mechanism centres on “creation” and
distribution of income and employment, utilization and
development of natural resources and structural and dynamic
factors. Stronger linkages of SMEs to agriculture can alleviate
majority pressures and contribute to a regionally balanced
pattern of development (Kpakol,2007:15). According to
Udechukwu (2003: 7) SMEs provide an effective means of
stimulating indigenous entrepreneurship create greater
employment opportunities per unit of capital invested and aid
the development of local technology. However, through their
wide dispersal, they provide an effective means of mitigating
rural - urban migration and resource utilization. By producing
intermediate products for use in large scale enterprises, they
contribute to the strengthening of industrial inter - linkages.
69
Consequently, 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.
2.7 Challenges of SMEs in Achieving Vision 20: 2020
Inspite of efforts by many successive governments right from
independence to promote SMEs in the industrialization
process, the development of the sub-sector has been
70
constrained by a number of factors both internally and
externally. These includes:-
Poor and inadequate infrastructure; power and
transportation facilities.
Poor market information and lack of market access.
Harsh business operating environment resulting in high
cost of doing business and unfair competition form
imported goods.
Non access to medium and long term credit facilities
Inadequate specialized support institutions and a
rareness for exporters on the opportunities provided by
the preferential trade arrangement scheme.
Inadequate government support.
The role of government in fashioning policies and ameliorating
the constraint of SMEs has been recognized to be very crucial
in facilitating and initiating remedial actions. This is more so
with the rapid changing global environment moving towards
deregulations, knowledge-based economy borderless trade and
investment which presents new challenges and opportunities
for SMEs in developing countries (Kpakol [2007: 16]).
71
Udechukwu (2003: 11) identifies the following as the
Challenges of SMEs in Nigeria.
1. Inadequate and inefficient infrastructural facilities which
tend to escalate cost of operation, as SMEs are forced to
resort to private provisioning of utilities such as access to
roads, water, electricity etc.
2. Lack of adequate credit for SMEs traceable to the
reluctance of banks to extend credit to them. Owing among
others to poor documentation at project proposal as well as
inadequate collateral by SME operators.
3. Incidence of multiplicity of regulatory agencies and taxes
which has always resulted in high cost of doing business
and poor management practices and low entrepreneurial skill
arising from inadequate educational and technical
background of many SME promoters.
Andrew (1995: 39) has his view that the problems confronting
SMEs are multifarious and they vary with different
enterprises. Among some of the notable challenges area:
i. Lack of capital; The SMEs are unable to save enough
money for the purpose of expanding the enterprise due to low
72
profit. The inability to meet the required collateral
security makes it difficult to raise loan. The largest percentage
of commercial bank loan is for short-term. SMEs have face a
lot of difficulties in obtaining bank loan or any other
financial assistance for expansion programme since it could
not meet the attached condition.
ii. Poor management practice and low entrepreneurial skill;
This hinders effective control and planning. Moreover lack of
relevant educational background and through business
exposure constrains their ability to seize business
opportunities that may lead to growth and expansion.
Olalege et-al (1997: 58) stated that shortage of skill is another
factor militating against SMEs. Inadequate financial resources
as well as desire to operate with limited openness on the part
of proprietors lead many unskilled SMEs to employ semi-
skilled or unskilled labour. The implication being low
productivity rate, restrains expansion or stunted growth and
hindrance to competitiveness.
Lawal (1998: 23) view the following as the challenges of SMEs
73
1. Poor Implementation of Polices; Poor policy implementation
including administration of incentives and measures aimed
at facilitating SMEs growth and development have had
unintended effects on the sub-sector. This has resulted for
instance into confession and uncertainty in business
decision and planning as well as weakened the confidence
by the SMEs on government‟s capacity to execute faithfully
its programme.
2. Restricted Market Access; Insufficient demand for the
products of the SMEs also imposes constraints on their
growth. Although SMEs produce some inputs for the large
enterprises, the non standardization of their products, the
problem of quality assurance as well as generally low
purchasing power, arising from consumers dwindling real
income, effectively restrict their markets. This is further
compounded by the absence of knowledge about the
existence of fringe market by the SMEs.
74
2.7.1 POOR AND INADEQUATE INFRASTRUCTURE;
POWER AND TRANSPORTATION FACILITIES.
The analysis of the structure of the Nigerian economy so far
shows that it is characterized by inadequate infrastructures.
The activities of small and medium enterprises are therefore
constrained by these inadequacies of basic social
infrastructures such as frequent disruption in power supply,
water supply, and poor transportation systems. The adverse
effects of the infrastructural facilities on productive activities
have thus necessitated private provisioning of such facilities.
This inevitably resulted in escalating production cost and
uncompetitive prices in the world market (Ojo et.al [1996: 79]).
Electricity
Nigeria is naturally endowed in energy resources, including
electricity which remained largely untapped. Public electricity
generation commenced in the country in 1896 with the
installation at Marina Lagos of 30 KW generating set by the
erstwhile colonial public works department (PWD). The PWD
coordinated electricity undertaking in different towns until
75
1950 when the colonial government created Electricity
Corporation of Nigeria (ECN) ECN was formed to integrate
electricity supply and make it more effective. The corporation
became the statutory body responsible for generation,
transmission and distribution and sale of electricity to all
consumers. At independence in 1960, the country inherited a
rudimentary and localized electric power generation and
distribution system. There was neither a national grid nor a
single large power station. Only after independence were
concerted efforts made in power system planning and
development. Natural electric power authority (NEPA) has the
responsibility of developing and maintaining an economically
efficient electric power system for the country. To this end,
NEPA developed new electricity generating capacity in 1980s,
including hydropower, gas turbines and steam; the partial
commercialization of NEPA in 19991 marked the latest
development in the evolution of Nigeria‟s electric power system
(Ojo et-at ,1996: 91).
76
It was equally established that Nigerian‟s powers system has
the capacity of generating electricity for the country and also
supply to the neighboring countries. Before 1994, the country
has been experiencing steady growth in this sector until 1994
when a decline of 4.0, 1.7 and 2.4 percent in 1994, 1995, and
1996 respectively. The eight major power stations of NEPA
now Power Holding Company of Nigeria (PHCN) have installed
generation capacity considered adequate to meet the
maximum demand at peak period. The existing facilities
notwithstanding, electricity supply in the country has
remained very unreliable with many areas both urban and
rural, being without electric power supply for long period of
time. Besides, the main evidence of inadequate supply of
electricity is the substantial installed capacity of private total
generators estimated to be almost half of PHCN‟s total
generation capacity, comprising numerous small units that
are expensive to operate. The incessant power shedding and
erratic supply of electricity which has persisted over years
resulted largely from lingering problems such as;
77
i. Lack of preventive and routine maintenance of PHCN
facilities which results in huge energy loses.
ii. Frequent major breakdowns arising from the use of out
dated and heavily over loaded equipments.
iii. Lack of coordination between town planning authorities
and PHCN resulting to poor over-all power system
planning and over loading.
iv. Poor funding of the PHCN.
v. Inadequate budgetary provision and undue delay in
release of PHCN fund (Ojo et.al [1996: 93]).
2.7.2 Poor Market Information and Lack of Market Access;
SMEs face difficulties in gaining access to information on the
changing global market. They face the problem of lack of
information‟s, innovations, new products, production
processes, export market and new equipment etc (Onyia,
2009: 162).
78
2.7.3 Harsh Business Operating Environment
Resulting in High Cost of Doing Business and Unfair
Competition from Imported Goods
Despite macroeconomic and growth improvement in the past
six years, poor business environment remained the principal
drag on employment creation, poverty reduction and largely,
the reason why the millennium development goals (MDGs) has
not been achieved. The harsh business environment in Nigeria
adversely affects everyone- people businesses, investors
(domestic and foreign), managers, communities and group.
On the average, news about Nigeria are typically negative
despite the country‟s problems, it has proven to be a magnet
for companies and investors. Its natural resources, skilled
workforce and robust economy make it ideal for investment.
Unfortunately, underdeveloped infrastructure and other
attendant factors frustrate business activities. Nevertheless,
investors continue to see profits in Nigeria. A good business
environment entails efficient and effective supply of public
infrastructure, institutional and regulatory services. This is a
primary responsibility of the government Nevertheless, the
79
private sector and civil society has important roles which
include advocating for public accountability in the provision of
these services. Based on a research done by the African
institute for Applied Economics, there has been general
improvement in infrastructure and utilities and regulatory
services, but the situation of business development support
and investment promotion and security has weakened.
The World Bank in the recent report of Global Doing Business
noted that the Nigeria economy, despite its need for
investment has one of the most unfriendly business
environments in the world. With the legendary infrastructural
failings in the country, entrepreneurs have to contend with
rather basic issues which are effectively provided by
government and therefore taken for granted in other countries.
The absence of facilities such as electricity, water roads and
good security make the operation of business in Nigeria
frustrating. The Nigeria business environment has been
described by some stakeholders as repelling investment
initiatives. This explains why the much talked-about foreign
80
investment drive has achieved only but a measly result. With a
population of over 140 million people, Nigeria has the largest
population in Africa. Many business opportunities exist and
many of them thrive despite economic hardships because of
massive patronage they enjoy from the local market. In
manufacturing, only consumer products thrive at the moment.
Pharmaceutical companies, Food processing companies,
Computer Assembly plants, Agro based industries plastic
making and polythene products as well as chemical making,
furniture making, shoe making and glass making all do very
well financially.
The primary challenge of most businesses in Nigeria is
electricity supply which is very poor. Most businesses provide
their own power supply mostly using diesel powered
generators and still go the extra mile to provide their own bore
holes for water supply. In addition, valuable man hours is lost
in traffic owing mainly to bad road networks, vehicular
congestion or sometimes during trade disputes between
workers unions and government, there might be fuel scarcity
81
too. Industries specializing in providing industrial or
commercial products are very few indeed and new prospects or
entrants will require assurances of a less harsh operating
environment. Most business men prefer to import used or
brand new Automobiles, electronics, computers and their
accessories or other consumer products like cosmetics,
fashion accessories, furniture, drugs, paper products and
chemicals than to invest in the local manufacture of same
because Nigerians prefer foreign brands to local brands. With
such harsh conditions, a business in Nigeria including
lucrative ones often have high over heads but are known to
have potential for quick returns.
The Thrust of BECANS
Working with stakeholders to benchmark and monitor the
business environment the motive behind the Business
Environment and Competitiveness Across Nigeria States
(BECANS) progamme initiated by the AIEA, has yielded the
benchmark which can be used to measure the Nigeria
business environment. The overall goal of the BECANS is to
82
promote evidence-based reforms of the business environment
in Nigeria, with focus on the sub-national jurisdictions. Like
every federation, the responsibility for shaping the business
environment in Nigeria is shared between the federal, state
and local governments. The logic of BECANS is that state and
local government are crucial in ensuring good business
environment and enhancing Nigeria‟s global economic
competitiveness. State and local governments have foremost
responsibility in providing and managing basic public services
and utilities such as roads and public transportation systems
water and sanitation and social welfare. State governments are
also responsible for the bulk of business regulatory services
including property registration, tax administration, industrial
and enterprise zones contract enforcement justice
administration business and construction licensing. So
without commensurate business environment reforms by state
and local governments, the macroeconomic and institutional
reforms of the federal government cannot produce the desired
impact on employment and poverty (Owonibi ,2010:3).
83
2.7.4 Non Access to Medium and Long Term Credit
Facilities;
Access to finance remained a dominant constraint to SMEs.
The support which the SMEs receive from the financial
institution is highly inadequate. Recent studies by the United
Nations Development programme (UNDP) and the Federal
Ministry of industry (FMI) revealed that 1036 of 1498 SMEs
were funded by personal savings and only 3.6% obtained
credit facilities from banks. Banks are unwilling to do
business with SMEs because they are perceived as high risk
venture (Onyia [2009: 164]). According to Olorunshola (2003:
23) SMEs have had limited access to institutionalized credit
facilities. Owing to various factors some of the major actives
include;
i. Consideration that, SMEs are very risky in view of their
vulnerability in the market as well as their mortality rate
ii. Banks and other financial institutions are operationally
biased in favour of lending large corporate borrowers, where
there is assurance of security, high profitability and faster
rates of returns.
84
iii. Owing to their nature, SMEs seeking loans are usually
unable to provide accounting records and other
documentations required by banks while most are unable to
provide acceptable collateral for their loans.
2.6.5 Inadequate Government Support.
SMEs have been generally acknowledged as the bedrock of
industrial development of any country. Apart from numerous
goods produced by SMEs, they provide veritable means of
large-scale employment, as they are usually labour intensive.
They also provide training grounds, for entrepreneurs even as
they generally rely more on the use of local materials.
Moreover, if well managed, these SMEs can gradually
transform into giantic corporations of tomorrow. These
contributions thus explain why government and its agencies
should mobilize efforts torwards the realization of sustainable
industrial growth and development of SMEs (Olususholae
[2003: 21]). The Central Bank of Nigeria (CBN) has remained
committed to the growth and development of SMEs, which
reflects in the bank policies over the years. CBN has through
85
its credit guideline over the years and until very recently
require erstwhile commercial and merchant banks to allocate
stipulated minimum of credit to the preferred sector including
SMEs. According to Olorunshola (2003: 23) in the past years,
certain schemes were initiated towards financing of SMEs in
Nigeria. Among others are;
The National Economic Reconstruction Fund (NERFUND)
The Nigeria Industrial Development Bank (NIDB)
The Nigeria Bank for Commerce and Industry (NBCI).
Udechukwu (2003: 30) in order to make SME sector move
vibrant, CBN has evolved new initiatives which are geared
towards improved accessibility and availability of credit to the
SME through the following
The small and medium industries equity investment
scheme (SMIEIS)
Nigeria Agricultural, co-operative and rural development
Bank (NACRDB).
The Bank of industry
The Economic Reforms in Nigeria need to be sustained by
ensuring the soundness and credibility of the financial service
86
industry which would help the development of SMEs in
Nigeria. The lack of proper implementation of existing legal
frame work for SMEs, adopting the establishment and survival
of SMEs that will contribute to capacity building, utilization of
local raw material etc. is still a missing link in Nigeria
government. Social infrastructures such as electricity water
roads, rail, communication etc. /and other support services in
technology, skills and marketing are crucial for SMEs
economic performance and competitiveness as well as the
provision of technology related support system which
contribute effectively to the technological capabilities of SMES.
Also providing realistic policies and ensuring proper
implementation of the instituted policies that will help SMEs
to compete in regional and global markets are yet to be
articulated by government. The role of government should be a
facilitator and promoter in the economy by providing targeted
incentives and creating enabling environment for business
through reduction policy related cost and risks.
87
2.8 Summary
Nigerian Leaders have added Vision 20:2020 to the numerous,
past and present policies, development visions, plan and
programmes and reforms agenda that should guide the
development in the country. Vision 20:2020 seeks to catapult
Nigeria into the league of the first 20 developed economies by
the year 2020. This was based on the assessment of its
abundant human and material resources and the assumption
that the country‟s resources would be properly managed and
channeled to set economic goals. The National Council on
Vision 20:2020 (NVC2020) is the apex body of the operational
and institutional arrangement for Nigeria‟s Vision. The
president and the Commander in Chief of the Federal Republic
of Nigeria is the Chairman. It is to provide leadership and
direction to galvanize the nation. To actualize this lofty dream,
Nigeria‟s Gross Domestic Product (GDP) per capita must grow
at an incalculable rate (different from the present 0.8%) from
US$752 to $30,000 at least and the GDP of those countries
(over US$29,000) Nigeria wishes to displace. Thus a strong
and viable SME sector is needed to drive this vision
88
(Onyenekenwa [2011:1]). The SMEs sector has been identified
as one of the critical elements to achieving the Nigerian vision
20: 2020. This is because a nurtured and well structured SME
sector can contribute significantly to employment generation,
wealth creation, poverty reduction and sustainable economic
growth and development. This is in line with the vision for the
SMEs sector which is “To be the engine of economic growth,
drivers of sustainable industrial development and a globally
competitiveness” (Udechukwu [2003:3]).
According to First National Implementation Plan, SMEs have
been constrained by numerous factors. Among others are;
- Poor State of Physical Infrastructure; Frequent disruption in
electricity power, water supply inefficient telecommunication
and transportation systems constitute major constrains to
SMEs. SMEs have to invest huge amount of capital to provide
alternative infrastructural facilities and such high operating
cost structure reduce efficiency thereby resulting in loss of
product competitiveness.
89
- Policy Instability and Discontinuity; Investment in SME
sector (Manufacturing) requires long range planning,
consequently stable macroeconomic policies are a pre-
requisite for high performance in the sector. However, the
increasing policy inconsistency resulting in instability in the
macro-economic environment affects the corporate planning
adversely.
- Lack of Funding and Financial Services; Funding challenges
have made it difficult for SMEs to invest in modern
machines, information technology and human resources
development, which are crucial to reducing production cost,
raising productivity and improving competitiveness. High
interest rate and the reluctance on the part of the financial
institutions to comply with laid down lending
policy/guidelines tend to frustrate corporate investment and
fail to ensure protection and growth of local industries.
- Weak Local Raw Material Supply Base; Nigeria is richly
endowed with agricultural and mineral resources, but most
of these resources are yet to be fully developed or harnessed.
SMEs depend on imported raw materials. The high tariff
90
regime discourages investment in the manufacturing sub-
sector and makes the cost of manufacturing uncompetitive.
- Unavailable and Poor Flow of Data/Information; The general
lack of detailed, reliable and timely data and information flow
is of great concern in SME sector. The fact that no data exist
for some industry is a worrisome one.
- Low Level of Technology; This is perhaps the greatest
obstacle considering productivity in Nigeria as development
in technology and innovations are the primary forces
propelling industrialization today. New processes, procedures
and automation have revolutionalized manufacturing and
helped to multiply productivity in industrialized nations. Due
to financial constraints SMEs in Nigeria are unable to
acquire modern technologies. Most manufacturing sub
sectors especially textiles, baking, leather etc, use machinery
that have been in use since 1960‟s and 1970‟s consequently,
the equipment frequently breakdown and that reduces
capacity utilization rate.
According to Onyenekenwa (2011:23) Nigeria‟s Vision 20:2020,
like most other development visions, programmes and plans,
policies and reforms agenda in Nigeria, remains a vision until
it is actualized. Thus, Government needs to focus on creating
enabling environment, which stimulates private sector savings
91
and investment. Government also needs to provide adequate
infrastructures, govern effectively in the public interest and
orient the economy towards diversified export-oriented
development based on national comparative advantage.
92
References
Abdullahi S. (2008) “A Reflection on Nigeria Vision 20:2020:
Toward Building a Culture of Continuous Improvement”,
www.Nigeriansinamerica.com
Afolabi: F.O (2008) “Vision 20:2020 and the Millennium
Development Goals”: The Guardian April 28
www.v2020.mdgs.com
Andrew, G.O (1995) Rural Small Scale Industries in Nigeria.
Enugu; Precisions printers and publishers
Dozie P. (1996) “Prospects for Development‟‟; CBN/World Bank
Collaborative study. CBN Bullion Vol 23, no 11, pp 1-
26, 62-69.
Ezeh J.A(1999) Fundaments of Small Business Management,
Enugu
Igbuzor O.(2010) Nigeria Vision 20:2020; Progress, Challenges
and the Way Forward. Robitos Alliance Publishers.
Kpakol M.L(2007) Situating the Poverty Eradicating Strategies
Through Micro, Small And Medium Enterprises
Development; The Challenges. Enugu; Optimal Publishers
93
Lawal A.A. et al (1998) Entrepreneurship Development in Small
Scale Business. Lagos Unilag Press.
Nebo and Nnolim(2009/ 2010) “Promoting SMEs in Nigeria ;
Strategic Approach”. Nigerian Journal of Marketing Vol 5,
No. 2, pp 6-9
Ogwo E.O (2008) “Marketing and Vision 20:2020; Challenges
and
Prospect”. www.vision2020.Nigeria.com
Ojo M.O et al (2000) The Challenging Structure of the Nigerian
Economy and Implications for Development. CBN
Publication.
Olaleye O.A et al (1997) Entrepreneurship. BAM Nigeria Plc.
Olorushola. J. A (2003) Entrepreneurial Challenges of the
Manufactures 0f Machinery and Spare Parts.
Unpublished MBA thesis
Onodugo and Eze (2002) Business Policy and Strategic
Management Issues and Trend, Enugu; Kinsmann
Publishers Ltd. 102 Agbani Road
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Onwuchukwa. C. (1993) Managing Small Business. Awka;
Goshen Prints and Publishing company
Onyia, C.(2010) “The Role of SMEs in Development of Nigeria‟‟.
Nigerian Journal of Marketing Vol 5, No. 2, pp 162-164
Owonibi A (2010) “Business in Nigeria: Potential
Opportunities‟‟ www.business.travel.Nigeria.com.
Onyenekenwa, C.E (2011) “Nigeria‟s Vision 20:2020: Issues,
Challenges and Implication for Development
Management‟‟. Asian Journal of Rural Development 1, pp
21-40
Oyeyinka, B (2011) “Financial System Strategy 2020
International Conference. SMEs; Issues Challenges and
prospects‟‟, www.cenbank.org
Udechukwu.F. N (2003) “Survey of Small and Medium
Industries and Their Potential‟‟; CBN Seminar on SMIEIS.
www.nsukonline.academia.edu
Nigeria Vision 20;2020. The First National Implementation
Plan (2010-2013) Vol 11; Sectoral Plans and Programs.
May 2011, www.npc.gov.ng
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Vision 20;2020 and the Challenges of Infrastructural
Development in Nigeria. www.ccsenet.org
96
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This is an exposition of the procedures and methods employed
in the collection, analysis, and interpretation of data to
address the research problem. According to Ezigbo (2011;
498), it is that part of research that deals with how the
researcher wants to execute the study. It discusses the
conduct of survey and information gathering from SMEs in
Enugu Metropolis
3.2 Area of the Study
This study was narrowed to manufacturing sub-sector of
Small and Medium Enterprises in Enugu metropolis. Though
not all the SMEs would be covered, however, a reasonable and
sizable number was covered.
3.3 Research Design
The research method used was descriptive survey method.
Structured questionnaire was used in gathering primary data
97
from the respondents (management staff of manufacturing
sub-sector of SMEs in Enugu Metropolis).
3.4 Sources of Data
It is axiomatic to mention that the major pillar of this research
work is data. Data is simply defined as facts and figures. It is
what differentiates research from guess work, imagination,
myths and other sources of knowledge. The source of data for
this study is mainly primary source.
3.4.1 Primary Source
Primary source provides first hand information originated by
the researcher in the course of the study. Structured
questionnaire was used to source the primary data. The
researcher followed a sequence of logical steps to develop a
good questionnaire that accomplished the research objectives.
Questions were formulated to obtain the needed information.
98
3.5 Pilot Survey
A pretest survey was conducted to pretest the research
instrument. The trial survey is a miniature of the main survey
in which all the operations that is intended to be used in the
main inquiry was tested to see how effective they would work
and what modifications would be needed. Thirty five (35)
respondents were used for the pilot survey. In the course of
the pilot survey, the respondents spotted some questions to be
ambiguous, while some others seek for inclusion of some
relevant questions that were found missing in the
questionnaire. The pilot survey gave the researcher an
opportunity to come up with final quality version of the
questionnaire. The pilot survey also enabled the researcher to
estimate the cost component of the main survey.
3.6 Population of the Study
The population of the study comprised of the management
staff of the Small and Medium Enterprises in the
manufacturing sector in Enugu metropolis. According to the
underlisted companies from the Manufacturers Association of
99
Nigeria (MAN) Enugu State chapter, the following companies‟
management staff is as follows:
Table 3.1 Small and Medium Enterprises (members of MAN)) in Enugu Metropolis
Source: Manufacturers Association of Nigeria (MAN) : 2012
Therefore, the total population for the study was 70.
S/N Small and Medium Enterprises in
Enugu Metropolis
Management Staff
1 Crystal chemical Ltd 1
2 Ac drugs Ltd 5
3 Innoson Technical and Industrial
Company Ltd
6
4 Juhel Pharmaceutical Nig Ltd 6
5 Hardis and Dromedals 5
6 Sharon Paints and Chemical Ind. Ltd 3
7 Pillar Poles Ltd 1
8 Nalin Paints Ltd 3
9 Dunon Furniture Industry Ltd 1
10 Eastern Plastic Ltd 3
11 Dalex Paint Ltd 1
12 Parks Ventures Ltd 1
13 Impact Pharmaceutical 3
14 Fresh and Green Field Ltd 1
15 Ranco ventures 1
16 Alo Aluminium MFG. co 3
17 Sidom Pharm Ind. Ltd 4
18 Rugal Pharm Co. Ltd 2
19 Emenite 5
20 Onytex interiors 1
21 Andy Young Alumm. 2
22 Jakes Furniture 1
23 De Ultimate Furniture 1
24 Sunchi integrated farm 1
25 Gabby Pharm. Co Ltd 4
26 Emy Holdings Nig Ltd 1
27 Burxtin paints 2
28 Sharma paint 2
Total 70
100
3.7 Sample Size Determination
The entire population of the management staff of the Small
and Medium Enterprises in Enugu metropolis that are
members of Manufacturers Association of Nigeria will be
studied since the population is small.
3.8 Instrument for Data Collection
Questionnaire was the main instrument for data collection in
this study. The questionnaire provided the primary data that
was used in the study. The questionnaire was structured in a
format that enabled the respondents have ample opportunity
of filling appropriate views from the number of opinion given.
3.10 Instrument Validity and Reliability
Ezigbo (2011:503) Validity refers to the degree to which an
instrument measures that which it was meant to measure. In
this research, questionnaire was vetted by the researcher‟s
supervisor based on the face validity in terms of relevance to
the subject matter, objective of the study, coverage of the
101
content areas, appropriateness of language usage and clarity
of purpose.
A pilot study was carried out to ensure reliability of the
instrument. Thirty questionnaires were tested for internal
consistencies of responses, using a measure of reliability
called Cronbach’s alpha.
The formula is as follows:
α=k (cov/var)
1+(k−1) (cov/var
Where K = Number of items on the survey
Cov = Average inter-item covariance
Var = Average item variance
1 = Constant
The result revealed that the Cronbach‟s alpha coefficient (α) of
0.83, indicates a very strong reliability since the value is large
and tending to one (1). Therefore, the instrument was reliable
for the study.
102
3.11 Data Presentation and Analysis Techniques
Data obtained were tested using frequency and percentages to
answer the research questions and results were presented in
tables. Hypotheses were tested using a non-parametric
inferential statistics known as chi-square (x2), at 0.05 (level of
significance). Decision rule: reject Ho if P < 0.05, accept Ho if P
> 0.05. All analysis was done using statistical package for
social sciences (SPSS), version 18.
103
References
Ezigbo, C.A (2011) Advanced Management Theory &
Applications (3rd Edition). Immaculate publication limited.
2 Aku Street Ogui New Layout Enugu
Ojih, J (1996 )Business Research Methodology. Enugu: Je-Rohi
publishers.
Osuagwu L (2002) Marketing Principles & Management (2nd
Edition). Grey Resource Limited Lagos, Nigeria.
Ugwuonah et.al (2010) Social Science Research: Principles,
Methods And Applications. Enugu; EL‟DEMAK Publishers.
76 Robinson Street Uwani.
104
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Introduction
This chapter deals with the presentation and analysis of data.
Based on the research questions and hypotheses that guided
this study, the data collected are presented, analyzed and
discussed in this chapter. Questionnaire was structured and
administered to the respondents. The entire population of the
management staff of SMEs in the manufacturing sub sector in
Enugu metropolis was studied since the population was small.
Seventy (70) questionnaires were administered to the
respondents (management staff of SMEs in the manufacturing
sub sector that are members of MAN in Enugu metropolis) and
the entire questionnaires were also returned. The analysis is
based on the 70 respondents.
105
4.2 Data Presentation Table 4.2.1 Questionnaires Distribution and Return
Organisational Respondents
Number of Questionnaires Distributed
Number of Questionnaires Returned
Percent (%)
Crystal chem Ltd 1 1 1.43
Ac drugs Ltd 5 5 7.14
Innoson Tech & Ind. Company Ltd
6 6 8.57
Juhel Pharm Nig Ltd 6 6 8.57
Hardis &Dromedals 5 5 7.14
Sharon Paints 3 3 4.29
Pillar Poles Ltd 1 1 1.43
Nalin Paints Ltd 3 3 4.29
Dunon Furnitures 1 1 1.43
Eastern Plastic Ltd 3 3 4.29
Dalex Paint Ltd 1 1 1.43
Parks Ventures Ltd 1 1 1.43
Impact Pharm. 3 3 4.29
Fresh and Green ltd 1 1 1.43
Ranco ventures 1 1 2.86
Alo Aluminium 3 3 4.29
Sidom Pharm Ltd 4 4 5.17
Rugal Pharm 2 2 2.86
Emenite 5 5 7.14
Onytex interiors 1 1 1.43
Andy young Alumm. 2 2 2.86
Jakes Furniture 1 1 1.43
De Ultimate Furniture
1 1 1.43
Sunchi integrated 1 1 1.43
Gabby Pharm. 4 4 5.71
Emy Holdings Nig Ltd
1 1 1.43
106
Source: Field survey, 2012
Table 4.2.1 reveals that a total of 70 questionnaires were
distributed to the management staff of SMEs in Enugu
Metropolis, and same 70(100%) were returned.
Table 4.2.2 Sex of the Respondents
Frequency Percent Valid percent
Cumulative percent
Valid Male
50
71.4
71.4
71.4
female 20 28.6 28.6 100.0
Total 70 100.0 100.0
Source: Field Survey (2012)
Table 4.2.2 above shows that, out of 70 respondents, 50
(71.4%) were males while 20 (28.6%) were females. Both males
and females constituted the management staff of SMEs in the
manufacturing sub sector in Enugu metropolis. Also, the table
showed that there are more males than females in the
management carder of SMEs.
Burxtin paints 2 2 2.86
Sharma paint 2 2 2.89
Total 70 70 100
107
Table 4.2.3 Age Distribution of the Respondents
Frequency Percent Valid percent
Cumulative percent
Valid 28-32
5
7.1
7.1
7.1
Above 35 65 92.9 92.9 100.0
Total 70 100.0 100.0
Source: Field Survey (2012)
Table 4.2.3 shows that of 70 respondents, 5(7.1%) were
between the ages of 28-35, while 65 (92.9%) were above the
age 35. It is shown that high number of management staff of
SMEs is above the age of 35.
Table 4.2.4 Organisational Classification
Frequency Percent Valid percent
Cumulative percent
Valid Small ent.
53
75.7
75.7
75.7
Medium ent. 17 24.3 24.3 100.0
Total 70 100.0 100.0
Source: Field survey, 2012. Table 4.2.4 shows that, 53(75.7%) are Small enterprises, while
17(24.3%) are Medium enterprises. As shown in table above,
it is clear that there are more small than medium enterprises
in Enugu metropolis.
108
Table 4.2.5 Educational Qualification of the Respondents
Frequency Percent Valid percent
Cumulative percent
Valid Secondary
13
18.6
18.6
18.6
Tertiary 57 81.4 81.4 100.0
Total 70 100.0 100.0
Source: Field Survey (2012)
Table 4.2.5 shows that of 70 respondents, 13 (18.6%) have
secondary education, while the remaining 57 (81.4%) have
tertiary education. As shown in the table above, more than
half of the management staff of SMEs have tertiary education,
while few have secondary education.
Table 4.2.6 Responses to Ownership Structure of SMEs
Frequency Percent Valid percent
Cumulative percent
Valid Sole prop.
40
57.1
57.1
57.1
Partnership 10 14.3 14.3 71.4
Private Ltd 20 28.6 28.6 100.0
Total 70 100.0 100.0
Source: Field Survey (2012)
109
As shown table 4.2.6, the ownership structure of SMEs survey
varied widely. 40(57.1%) were sole proprietorship, 10(14.3%)
were partnership and 20(28.6) were private limited companies.
Table 4.2.7 Responses to Staff Strength
Frequency Percent Valid percent
Cumulative percent
Valid 11-100
45
64.3
64.3
64.3
101-300 8 11.4 11.4 75.7
Over 300 17 24.3 24.3 100.0
Total 70 100.0 100.0
Source: Field Survey (2012)
From the above table 4.2.7, out of 70 respondents 45(64.3%)
employ between 11-100 persons, 8(11.4%) employ between
101-300 persons, while 17(24.3%) employ over 300 persons.
The table reveals that greater number of SMEs employ
between 11-100 workers.
110
Table 4.2.8 Respondents’ Awareness of Vision 20:2020
Frequency Percent Valid percent
Cumulative percent
Valid Very high
8
11.4
11.4
11.4
High 21 30.0 30.0 41.4
Normal 14 20.0 20.0 61.4
Low 13 18.6 18.6 80.0
Very low 14 20.0 20.0 100.0
Total 70 100.0 100.0
Source: Field Survey (2012)
As shown in the table 4.2.8, the degree of awareness of Vision
20:2020 varied widely amongst the management staff of SMEs
in Enugu metropolis. Out of 70 respondents, 8 (11.4%) have
very high degree of awareness to Vision 20:2020, 21 (30%)
have high degree of awareness, 20% are of normal awareness,
18.6% are of low degree of awareness, while 20% are of very
low degree of awareness to Vision 20:2020. It is clearly shown
that, greater percentage of the management staff of SMEs have
high degree of awareness of Vision 20:2020.
111
Table 4.2.9 Responses on Contributions to Vision 2020
Frequency Percent Valid percent
Cumulative percent
Valid Yes
30
42.9
42.9
42.9
No 35 50.0 50.0 92.9
undecided 5 7.1 7.1 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 The above table 4.2.9 reveals that out of 70 respondents,
30(42.9%) are aware of their contributions towards the
realization of Vision 20:2020, 35(50%) are not aware of their
contributions, while the remaining 5(7.1%) could not decide.
Table 4.2.10: Respondents’ Possibility of Competing Favourably with Other Developed Economies by the Year 2020.
Frequency Percent Valid percent
Cumulative Percent
Valid Unsure
4
5.7
71.4
71.4
Low 39 55.7 55.7 61.4
Very low 27 38.6 38.6 100.0
Total 70 100.0 100.0
Source: Field Survey (2012)
With respect to the possibility of competing favourably with
other developed economies by the year 2020, table 4.2.10
shows that out of 70 respondents, 39(55.7%) indicated the
112
possibility to be low, 27(38.6%) indicated very low, while the
remaining 4(5.7%) are unsure. Based on the above analysis, it
was observed that more respondents are of the opinion that
the possibility of SMEs in Nigeria to compete favourably with
other developed economies by year 2020 is low.
Table 4.2.11 Responses to Nigeria Vision 20:2020
Achievement
Frequency Percent Valid percent
Cumulative percent
Valid Unsure
13
18.6
18.6
18.6
Disagree 30 42.9 42.9 61.4
Strongly Disagree 27 38.6 38.6 100.0
Total 70 100.0 100.0
Source: Field Survey (2012)
Table 4.2.11 shows that of 70 respondents, 27(38.6%) strongly
disagreed as to the achievement of Nigeria Vision 20:2020,
30(42.9%) disagreed, while 13(18.6%) were unsure of the
achievement of the Vision 20:2020. The above table 4.2.11
indicates a huge gap in achieving Vision 20:2020.
113
Table 4.2.12 Responses to Finance
Frequency Percent Valid percent
Cumulative percent
Valid Agree
8
11.4
11.4
11.4
Strongly Agree 62 88.6 88.6 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 With respect to finance, table 4.2.12 shows that out of 70
respondents, 8(11.4%) agreed to have finance as a challenge,
while 62(88.6%) strongly agreed to have finance as a
challenge. As shown in the table 4.2.12, finance is a dominant
challenge to SMEs in Enugu.
Table 4.2.13 Responses on Collateral
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagre
4
5.7
5.7
5.7
Unsure 4 5.7 5.7 11.4
Agree 13 18.6 18.6 30.0
Strongly agree 49 70.0 70.0 100.0
Total 70 100.0 100.0
Source: Field survey, 2012
As shown in table 4.2.13, out of 70 respondents, 4(5.7%)
strongly disagreed that collateral is a challenge, 4(5.7%) were
unsure towards collateral as a challenge, 13(18.6%) agreed
114
that collateral is a challenge, while 49(70%) strongly agreed
that collateral is a challenge. From the above analysis, it was
observed that majority of the SMEs are challenged by lack of
collateral.
Table 4.2.14 Responses on High Interest Rate
Frequency Percent Valid percent
Cumulative percent
Valid Agree
9
12.9
12.9
12.9
Strongly agree 61 87.1 87.1 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 With respect to high interest rate, table 4.2.14 shows that, out
of 70 respondents, 9(12.9%) agreed, while 61(87.1%) strongly
agreed. This indicates that SMEs are faced with the challenge
of high interest rate.
Table 4.2.15 Responses on Multiplicity of Tax
Frequency Percent Valid percent
Cumulative percent
Valid Disagree
10
14.3
14.3
14.3
Agree 4 5.7 5.7 20.0
Strongly agree 56 80.0 80.0 100
Total 70 100.0 100.0
Source: Field survey, 2012
115
It is observed from the above table 4.2.15 that, out of 70
respondents, 56(80%) strongly agreed on multiplicity of tax,
4(5.7%) agreed, while 10(14.3%) disagreed. This indicates
greater incidence of multiplicity of regulatory agencies.
Table 4.2.16 Responses on Information Technology
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagree
4
5.7
5.7
5.7
Unsure 32 45.7 45.7 51.4
Agree 12 17.1 17.1 68.6
Strongly agree 22 31.4 31.4 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 From the above table 4.2.16, out of 70 respondents, 4(5.7%)
strongly disagreed on information technology as a challenge,
32(45.7%) were unsure, 12(17.1%) agreed, while 22(31.4%)
strongly disagreed.
Table 4.2.17 Responses on High Taxes and Tariffs
Frequency Percent Valid percent
Cumulative percent
Valid Agree
8
11.4
11.4
11.4
Strongly agree 62 88.6 88.6 100.0
Total 70 100.0 100.0
Source: Field survey, 2012
116
Table 4.2.17 shows that, out of 70 respondents, 62(88.6%)
strongly agreed on high taxes and tariffs, while 8(11.4%)
agreed. This indicates that high taxes and tariffs is a dominant
challenge to SMEs.
Table 4.2.18 Responses on Experience
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagree
13
18.6
18.6
18.6
Disagree 31 44.3 44.3 62.9
Unsure 9 12.9 12.9 75.7
Agree 4 5.7 5.7 81.4
Strongly agree 13 18.6 18.6 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 With respect to experience as a challenge, table 4.2.18 reveals
that out of 70 respondents, 13(18.6%) strongly disagreed,
31(44.3%) disagreed, 9(12.9%) were unsure, 4(5.7%) agreed,
while 13(18.6%) strongly agreed.
Table 4.2.19 Reponses on Water Supply
Frequency Percent Valid percent
Cumulative percent
Valid Agree
27
38.6
38.6
38.6
Strongly agree 43 61.4 61.4 100.0
Total 70 100.0 100.0
Source: Field survey, 2012
117
With respect to water supply as a challenge to SMEs, table
4.2.19 revealed that out of 70 respondents, 27(38.6%) agreed,
while 43(61.4%) strongly agreed. From the above table, it is
clearly shown that water supply is a dominant challenge to
SMEs in Enugu.
Table 4.2.20 Responses on Entrepreneurial Skill
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagr.
8
11.4
11.4
11.4
Disagree 12 17.1 17.1 28.6
Unsure 19 27.1 27.1 55.7
Agree 23 32.9 32.9 88.6
Strongly agree 8 11.4 11.4 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 With respect to entrepreneurial skill as a challenge, table
4.2.20 shows that out of 70 respondents, 8(11.4%) strongly
agreed, 12(17.1%) disagreed, 19(27.1%) were unsure,
23(32.9%) agreed while 8(11.4%) strongly agreed. The table
indicates that greater number of SMEs are challenged by lack
of entrepreneurial skills.
118
Table 4.2.21 Responses on Power supply
Frequency Percent Valid percent
Cumulative percent
Valid Unsure
4
5.7
5.7
5.7
Agree 5 7.1 7.1 12.9
Strongly agree 61 87.1 87.1 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 With respect to power supply as a challenge to SMEs, table
4.2.21 shows that out of 70 respondents, 4(5.7%) were
unsure, 5(7.1%) agreed, while 61(87.1%) strongly agreed. From
the table above, it is clearly shown that, power supply is a
dominant challenge to SMEs in Enugu.
Table 4.2.22 Responses on Training
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagree
4
5.7
5.7
5.7
Disagree 13 18.6 18.6 24.3
Agree 31 44.3 44.3 68.6
Strongly agree 22 31.4 31.4 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 Table 4.2.22 shows the responses of the respondents on
training as a challenge. Out of 70 respondents, 4(5.7%)
119
strongly disagreed, 13(18.6%) disagreed, 31(44.3%) agreed,
while 22(31.4%) strongly agreed.
Table 4.2.23 Responses on Road Network
Frequency Percent Valid percent
Cumulative percent
Valid Agree
26
37.1
37.1
37.1
Strongly agree 44 62.9 62.9 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 With respect to road network as a challenge to SMEs, the
above table 4.2.23 reveals that out of 70 respondents,
26(37.1%) agreed, while 44(62%) strongly agreed. This
indicates road network is a dominant challenge to SMEs in
Enugu.
Table 4.2.24 Responses on Access to Market Information
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagree
9
12.9
12.9
12.9
Disagree 4 5.7 5.7 18.6
Unsure 13 18.6 18.6 37.1
Agree 34 48.6 48.6 85.7
Strongly agree 10 14.3 14.3 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 Table 4.2.24 shows that, out of 70 respondents, 9(12.9%)
strongly disagreed on access to market information as a
120
challenge, 13(18.6%) were unsure, 34(48.6%) agreed, while
10(14.3%) strongly disagreed on access to market information
as a challenge. It is revealed that greater number of SMEs are
challenged by lack of access to market information.
Table 4.2.25 Responses on Internet
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagree
5
7.1
7.1
7.1
Disagree 8 11.4 11.4 18.6
Unsure 9 12.9 12.9 31.4
Agree 19 27.1 27.1 58.6
Strongly agree 29 41.4 41.4 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 The above table 4.2.25 reveals that, out of 70 respondents on
poor access to internet, 5(7.1%) strongly disagreed, 8(11.4%)
disagreed, 9(12.9%) were unsure, 19(27.1%) agreed while
29(41.4%) strongly agreed. The table showed wide variations in
opinion of the respondents based on access to internet.
121
Table 4.2.26 Responses on Improper Book Keeping
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagree
4
5.7
5.7
5.7
Disagree 12 17.1 17.1 22.9
Unsure 12 17.1 17.1 40.0
Agree 23 32.9 32.9 72.9
Strongly agree 19 27.1 27.1 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 With respect to improper book keeping as a challenge, table
4.2.26 shows that, out of 70 respondents, 4(5.7%) strongly
disagreed, 12(17.1%) disagreed, 12(17.1%) were unsure,
23(32.9%) agreed, while 19(27.1%) strongly agreed.
Table 4.2.27 Responses on Healthcare Delivery
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagree
4
5.7
5.7
5.7
Disagree 9 12.9 12.9 18.6
Unsure 26 37.1 37.1 55.7
Agree 31 44.3 44.3 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 Table 4.2.27 show that, out of 70 respondents, 4(5.7%)
strongly disagreed to healthcare delivery as a challenge,
9(12.9%) disagreed, 26(36.1%) were unsure while 31(44.3%)
122
agreed to healthcare delivery as a challenge. The table clearly
shows that, fewer number of the respondents strongly
disagreed to healthcare delivery as a challenge.
Table 4.2.28 Responses on Telecommunication
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagree
4
5.7
5.7
5.7
Disagree 4 5.7 5.7 11.4
Agree 35 50.0 50.0 61.4
Strongly agree 27 38.6 38.6 100.0
Total 70 100.0 100.0
Source: Field survey, 2012 With respect to telecommunication as a challenge, table 4.2.28
shows that out of 70 respondents, 4(5.7%) strongly disagreed,
4(5.7%) were unsure, 35(50%) agreed, while 27(38.6%)
strongly agreed.
Table 4.2.29 Responses on Skilled Labour
Frequency Percent Valid percent
Cumulative percent
Valid Strongly disagree
4
5.7
5.7
5.7
Disagree 23 32.9 32.9 38.6
Unsure 8 11.4 11.4 50.0
Agree 22 31.4 31.4 81.4
Strongly agree 13 18.6 18.6 100.0
Total 70 100.0 100.0
Source: Field survey, 2012
123
From the above table 4.2.29, the responses of the respondents
based on skilled labour as a challenge vary widely. The table
above shows that out of 70 respondents, 4(5.7%) strongly
agreed, 23(32.9%) disagreed, 8(11.45) were unsure, 22(31.4%)
agreed, while 13(18.6%) strongly agreed.
4.3 Test of Hypotheses
In this segment of the study, five (5) hypotheses that were
stated in chapter one will be tested using chi-square (x2)
statistical test and the analysis will be done using Statistical
Package for Social Science (SPSS). Decision rule: reject Ho if P
< 0.05(level of significance), accept Ho if P > 0.05(level of
significance).
Testing of Hypothesis I:
HO Adequate infrastructures (power, roads, water supply and
good healthcare delivery) have no significant effect on
the growth of SMEs in Nigeria.
124
H1 Adequate infrastructures (power, roads, water supply and
good healthcare delivery) have significant effect on the
growth of SMEs in Nigeria.
To test the above stated hypothesis, the researcher used data
obtained from table 4.2.19, 4.2.21, 4.2.23, 4.2.27.
Table 4.3.1: A Chi-Square Analysis of Hypothesis I Test
S/N infrastructures
SA
A U D
SD
F % F % F % F % F % df X2 cal P -
value
Decision
1 Power supply 61 87.1 5 7.1 4 5.7 - - - - 2 91.229 <0.01 Sig.
2 Roads 44 62.9 26 37.1 - - - - - - 1 4.629 0.031 Sig.
3 Water supply 43 61.4 27 38.6 - - - - - - 1 3.657 0.036 sig.
4 Healthcare 8 11.4 23 32.9 19 27.1 12 17.1 8 11.4 3 29.086 <0.01 Sig.
Source: Field Survey, (2012)
Key; SA= Strongly Agreed, A= Agreed, U= Undecided, SD=
Strongly Disagree, df= degree of freedom, Sig=
Significance.
Table 4.3.1 shows that, the 4 items (power supply, road, water
supply and healthcare) that were used in the chi-square
analysis of hypothesis I test have their P-values to be less than
0.05 level of significant (p-values<0.05).
125
We therefore, reject the null hypothesis and accept the
alternative hypothesis. Hence, we conclude that adequate
infrastructures (power supply, water supply, roads, and
healthcare) have significant effect on the growth of SMEs in
Nigeria.
Testing of Hypothesis II:
HO Capacity building will not significantly lead to the growth
of SMEs in Nigeria.
H1 Capacity building will significantly lead to the growth of
SMEs in Nigeria.
To test the above hypothesis, the researcher used data
obtained from table 4.2.18, 4.2.20, 4.2.22, 4.2.29.
Table 4.3.2: A Chi-Square Analysis of Hypothesis II Test
S/N Factors SA A U D SD
F % F % F % F % F % df X2 cal P-
value
Decision
1 Entrepre.
Skills
8 11. 23 32.9 19 27.1 12 17.1 8 11.4 4 13.000 0.011 Sig.
2 Experience 13 18.6 4 5.7 9 12.9 31 44.3 13 18.6 4 29.714 <0.01 Sig.
3 Skilled
labour
13 18.6 22 31.4 8 4 23 32.9 4 5.7 4 20.143 <0.01 Sig.
4 Training 22 31.4 31 44.3 - - 13 18.6 4 5.7 3 23.143 <0.01 Sig.
126
Source: Field Survey, (2012)
Key; SA= Strongly Agreed, A= Agreed, U= Undecided, SD=
Strongly Disagree, df= degree of freedom, Sig=
Significance.
From the table above 4.3.2, it was observed that all the 4
items (entrepreneurial skills, experience, training and skilled
labour) that were used in the chi-square analysis of hypothesis
II test have their p-values to be less than 0.05 level of
significance. We therefore, reject null hypothesis and accept
the alternative hypothesis. Hence, we conclude that capacity
building has significant effect on the growth of SMEs in
Nigeria.
Testing of Hypothesis III:
HO Access to credit facilities has no significant effect on the
sustainability of SMEs in Nigeria.
H1 Access to credit facilities has significant effect on the
sustainability of SMEs in Nigeria.
To test the above stated hypothesis, the researcher used data
obtained from table 4.2.12, 4.2.13, 4.2.14.
127
Table 4.3.3: A Chi-Square Analysis of Hypothesis III Test.
S/N Items SA A
U
D
SD
F % F % F % F % F % Df X2 cal P-
value
Decision
1 Access to
finance
62 88.6 8 11.4 - - - - - - 1 41.657 <0.01 Sig.
2 Collateral 49 70 13 18.6 4 5.7 - - 4 5.7 3 78.686 <0.01 Sig.
3 Interest
rate
61 87.1 9 12.9 - - - - - 1 38.629 <0.01 Sig.
Source: Field Survey, (2012)
Key; SA= Strongly Agreed, A= Agreed, U= Undecided, SD=
Strongly Disagree, df= degree of freedom, Sig=
Significance.
From the above table 4.3.3, the critical values of all the 3
items (finance, collateral and interest rate) that were used in
the chi-square analysis of hypothesis III test are less than 0.05
(level of significance) thus, we reject null hypothesis and
accept the alternative hypothesis. We, therefore conclude that
access to credit facilities has significant effect on the
sustainability of SMEs in Nigeria.
128
Testing of Hypothesis IV:
HO High taxation has no effect on the growth of SMEs in
Nigeria.
H1 High taxation has effect on the growth of SMEs in
Nigeria.
To test the above hypothesis, the researcher used data
obtained from table 4.2.15, 4.2.17.
Table 4.3.4: A Chi-Square Analysis of Hypothesis IV Test
S/N Items SA A
U
D
SD
F % F % F % F % F % df X2 cal P-
value
Decision
1 High taxes
and tariffs
62 88.6 8 11.4 - - - - - - 1 41.657 <0.01 Sig.
2 Multiplicity
of tax
56 80 4 5.7 - - 10 14.3 - - 2 69.371 <0.01 Sig.
Source: Field Survey, (2012)
Key; SA= Strongly Agreed, A= Agreed, U= Undecided, SD=
Strongly Disagree, df= degree of freedom, Sig=
Significance.
From the above 4.3.4, it was observed that the p-values of the
2 items (high taxes and tariffs, and multiplicity of tax) that
129
were used in chi-square analysis of hypothesis IV test are both
less than 0.05 (level of significance).
The observed critical values of the chi-square statistic are less
than 0.05 (level of significance), thus, we reject null hypothesis
and accept the alternative hypothesis. We therefore conclude
that High taxation have significant effect on the growth of
SMEs in Nigeria.
Testing of Hypothesis V:
HO ICT has no significant effect the growth of SMEs in
Nigeria.
H1 ICT has significant effect on the growth of SMEs in
Nigeria.
To test the above stated hypothesis, the researcher used data
obtained from table 4.2.16, 4.2.24, 4.2.25, 4.2.28.
130
Table 4.3.5: A Chi-Square Analysis of Hypothesis V Test
S/N Items SA A U D SD
F % F % F % F % F % Df X2 cal P-
value
Decision
1 Telecomm. 27 38.6 35 59 4 5.7 - - 4 5.7 3 43.486 <0.01 Sig.
2 Information
technology
22 31.4 12 17.1 32 45.7 - - 4 5.7 3 25.314 <0.01 Sig.
3 Market
information
10 14.3 34 48.6 13 18.6 4 5.7 9 12.9 4 38.714 <0.01 Sig.
4 Internet 29 41.4 19 27.1 9 12.9 8 11.4 5 7.1 4 28.000 <0.01 Sig.
Source: Field Survey, (2012)
Key; SA= Strongly Agreed, A= Agreed, U= Undecided, SD=
Strongly Disagree, df= degree of freedom, Sig=
Significance.
Table 4.3.5 showed that, all the four items (telecomm,
internet, market information and information technology) that
were used in the chi-square analysis of hypothesis V test, have
their p-values to be less than 0.05 (level of significance). Thus,
we reject null hypothesis and accept the alternate hypothesis.
We therefore conclude that ICT has significant effect on the
growth of SMEs in Nigeria.
131
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction
This chapter presents the summary of findings, conclusion
and recommendations. Based on the data gathered from field
survey, analysis were done using chi-square. Consequently,
summary of findings, conclusion as well as recommendations
were made.
5.2 Summary of Findings
The summary of findings from the analysis of data gathered
from field survey are as follows:
1. That adequate infrastructure (power supply, roads, water
supply and good healthcare delivery) have significant effect
on the growth of SMEs in Nigeria. Table 4.3.1 confirms
this.
2. That access to credit facilities has significant effect on the
growth of SMEs in Nigeria. This is driven by high interest
rates associated to loans, lack of collateral and improper
book keeping. Table 4.3.2 confirms this.
132
3. That capacity building has a significant effect on the
growth of SMEs in Nigeria. This is revealed in terms of lack
of entrepreneurial skills and training. Table 4.3.3 confirms
this.
4. That high taxation has significant effect on the growth of
SMEs in Nigeria; which manifest in terms of high taxes,
tariffs and the incidence of multiplicity of regulatory
agencies. Table 4.3.4 confirms this.
5. That Information Communication Technology (ICT) has
significant effect on the growth of SMEs in Nigeria. This is
revealed in terms of inadequate access to internet, lack of
market information, ineffective telecommunication and
information technology. Table 4.3.5 confirms this.
6. That majority of the management staff of SMEs are aware
of the Vision 20:2020, while only a few are aware of their
contributions towards achieving the vision. Table 4.2.8 and
4.2.9 confirm this.
133
5.3 Conclusion
Practical experience from developed and developing economies
has shown that Small and Medium Enterprises (SMEs) are
necessary catalyst for economic transformation. However,
Small and Medium Enterprises (SMEs) in Nigeria are faced
with diverse challenges which affect their contributions
towards economic growth and development with particular
reference to Nigeria Vision 20:2020.
Basic infrastructures such as power supply, water supply,
road networks, and good healthcare delivery are significant
challenges faced by Small and Medium Enterprise in Nigeria
towards achieving Vision 20:2020. Also, access to credit
facilities has significant effect on the SMEs sustainability and
growth in Nigeria; this manifest in terms of high interest rate,
lack of collateral and improper book keeping/accounting
system. In the course of this study, it was observed that the
incidence of tax multiplicity, high taxes and tariffs are
prevailing challenges of Small and Medium Enterprises in
achieving phenomenal growth in the pursuit of Vision
20:2020.
134
Beyond that, capacity building has shown to be significant in
the growth of Small and Medium Enterprises in Nigeria
towards achieving Vision 20:2020. Thus, the root cause being;
lack of entrepreneurial skill, training, and experience. More so,
Information Communication Technology (ICT) has shown to
have significant effect on the growth of SMEs in Nigeria in
attaining Vision 20:2020.
5.4 Recommendations
In view of the findings to determine the challenges of Small
and Medium Enterprises based on Vision 20:2020, the below
stated recommendations are made by the researcher:
1. Government at all levels should intensify their effort in
providing adequate infrastructures such as power
supply, water supply, road networks, and good
healthcare. This is a bold step towards creating enabling
environment for Small and medium enterprises to
operate and contribute effectively as a means of achieving
135
25% growth in the manufacture export of SMEs by year
2020.
2. Government and SMEs should consolidate effort towards
capacity building in terms of organizing vocational
training, seminars/workshops on entrepreneurial skill
and training. This is a sure way of developing the human
resource need of SMEs in Nigeria as relevance to Vision
20:2020 accomplishment.
3. Government should intensify effort in the financing of the
SME sub-sector; provide a low interest special fund that
will be accessible to SME manufacturers for the
rehabilitation and modernization of their plants during
the plan period, provide financial and incentive flow to
address the under capitalization problems of SMEs in
achieving Vision 20:2020.
4. Government should make candid effort in coordinating
the incidence of tax multiplicity by regulatory agencies to
avoid abuses on SMEs in Nigeria. Moreover, Government
should be consistent in the implementation of existing
tax policies that are relevant to the growth of SMEs in
136
Nigeria; such as Exemption of Production taxes, half of
the income taxes and tariff on key equipment, exemption
of importation taxes on significant imported projects.
This will enhance the investment and production
capacity of SMEs in realizing Vision 20:2020.
5. Government should be committed in developing a
national framework for transforming the nation into a
knowledge based economy. Access to ICT facilities such
as internet, telecommunication, R&D, will ignite
significant improvement in total factor productivity and
efficiency. Thus, there will be a resultant increase in
output, quality products, improved employment
opportunities, and security in view of Vision 20:2020.
6. In addition to the promotion of the use of modern
communication facilities such as telephone, internet, etc.
There is also need for the relevant agencies to work
continually on areas where little or no information is
available. This will enable SMEs to be well positioned to
participate in today‟s global economy, in which
businesses are largely driven by information technology.
137
7. Government should promote Research and Development
activity, subsidize high tech-equipment and internet
connectivity to stimulate and sustain innovation relevant
to the growth of SMEs in achieving Vision 20:2020.
8. SMEs should make candid effort in obtaining market
information. This will enable them keep abreast of
market trends and avoid their products being irrelevant
in the market as a result of technology obsolesce.
138
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APPENDIX A:
QUESTIONNAIRE
Department of Marketing,
University of Nigeria,
Enugu Campus.
May 21, 2012.
Dear Sir / Madam
I am an MBA student of the above named Institution carrying out a research
on “the Challenges of Small and Medium Enterprises based on Vision
20:2020”.
The accompanying questionnaire was structured by me as an instrument for
data collection on the research problem. The study is in partial fulfillment
for the award of Masters in Business Administration (MBA) in Marketing.
I therefore, crave you indulgence to supply me with appropriate information
by answering this questionnaire. All information supplied would be treated
in confidence and solely for academic purpose.
Thank you.
Yours sincerely,
Uboma Nkiru
Researcher
144
QUESTIONNAIRE FOR SMALL AND MEDIUM SCALE
ENTERPRISES
Please tick[ √ ] as appropriate
SECTION A
1. Sex male [ ] Female [ ]
2. Age (a) 18 – 22 [ ] (b) 23-27 [ ] (c) 28-32 [ ] (d) above 35
3. Educational level (a) Primary [ ] (b) Secondary [ ] (c) Tertiary [ ]
(d) None [ ]
4.. Religion (a) Christian [ ] (b) Moslem [ ] (c) Traditional [ ]
SECTION B
1. Categorize your company:
(i) Micro enterprise [ ] (ii) Small enterprise [ ](iii) Medium enterprise [ ]
(iv) Large Enterprise [ ]
2. What is the ownership structure of your company?
(i) Sole proprietorship [ ] (ii) Partnership [ ] (iii) Private limited
liability [ ] (iv) public limited liability [ ]
3. What is your staff strength?
(i) 0-10 [ ] (ii) 11-100 [ ] (iii) 101-300 [ ] (iv) over 300 [ ]
4.. How long has your company been in operation?
(i) Less than 5 years [ ](ii) 5- l0yrs [ ] (iii) 11-20yrs [ ](iv) 20yrs and
above [ ]
5.. Have you heard of Vision 20: 2020?
(i) Yes [ ] (ii) No [ ]
6. If yes in (6) how would you rate your knowledge on the Vision 20:2020?
(i) Very high [ ](ii) High [ ] (iii) Normal [ ] (iv) Low [ ] (v) Very low [ ]
145
7. Are you aware of your contributions towards achieving this Vision?
(i) Yes [ ] (ii) No [ ] (iii) undecided [ ]
8. How would you rate the possibility of competing favourably with other
top developed nations by year 2020?
(i) very high [ ](ii) high[ ] (iii)unsure[ ] (iv)low [ ] (v)very low [ ]
9. Do you agree that Nigeria Vision 20:2020 would be achieved?
(i) Strongly agree[ ] (ii) agree[ ] (iii) unsure [ ] iv Disagree [ ] (v)
Strongly disagree[ ]
Section C: Challenges of SMEs Based on Vision 20:2020
Tick [ √ ] as appropriate.
10. What level of availability are the following infrastructures to you?
Very
high
high low Very
low
i) Power supply
ii) Road
iii) Good healthcare
iv) Water supply
v) telecommunication
11. Would you agree that the inadequacy of these infrastructures in (10)
escalates your cost of production? (i) Strongly agree[ ] (ii) agree[ ]
(iii) unsure [ ] iv Disagree [ ] (v) Strongly disagree[ ]
146
12. Which of the following do you consider challenges on your business
growth?
S/n Challenges Strongly
disagree
Disagree Unsure Agree Strongly
Agree
i Lack of access to
finance
ii Lack of collateral
iii Insufficient
owners equity
contribution
iv Crime
v Insufficient
government
support
Vi High interest rate
Vii Inadequate
demand
Viii Inadequate access
to market
information
Ix Location of the
business
x Access to internet
Xi Bad credit record
Xii Multiplicity of tax
Xiii Lack of
information
technology
Xiv High transport
costs
Xv High taxes and
other tariffs
Xvi Recession in the
economy
Xvii Lack of experience relevant to the venture
147
S/n Challenges Strongly
disagree
Disagree Unsure Agree Strongly
Agree
Xviii Lack of
entrepreneurial
skill
Xix Good healthcare
delivery
Xx Shortage of skilled
labour
xxi High inflation rate
xxii High foreign
exchange rate
xxiii Poor electricity
supply
xxiv Lack of training
xxv Corruption
xxvi Poor roads
xxvii Poor water supply
xxviii Poor
telecommunication
148
APPENDIX B
Reliability Result using Cronbach’s Alpha Scale: ALL VARIABLES
Case Processing Summary
30 100.0
0 .0
30 100.0
Valid
Excluded
Total
Cases
N %
Listwise deletion based on all
variables in the procedure.
a.
Reliability Statistics
.839 34
Cronbach's
Alpha No of Items
149
