EFFECT OF ORGANIZATIONAL CHALLENGES FACING OWNERS OF SMALL AND MEDIUM SCALE ENTERPRISES IN A RECESSIVE BUSINESS ENVIRONMENT IN ENUGU METROPOLIS

CHAPTER ONE

                                      INTRODUCTION

1.1   Background of the Study

It has been a contemporary issue in the recent studies on the challenges usually faced by the owners of medium scale enterprises mainly during the time of economic recession. It is obvious that the contributions of the medium scale enterprises towards the growth of the Nigeria economy cannot by any sight of imagination be over emphasize. Medium scale enterprises are usually regarded as the engine of the economic growth and equitable development in a developing economy.

Medium scale enterprises (MSE) have been recognized as indispensable components of natural development in both developed and developing economies. This subsector of the economy is globally acknowledged to contribute substantially in enhancing employment creation or generation, poverty alleviation, equitable distribution of resources, income redistribution, technical and technological innovation, entrepreneurial skills development, more uniform industrial and economic region? Moreover, they have been touted strategic in ensuring food security and encouraging rapid industrialization andreversal of rural-urban migration.

Consequently, both the federal, state governments and local governments recently have stepped up efforts to promote the development of medium scale enterprises through increased incentive scheme, including enhanced budgetary allocations for technical assistance programmes. New lending schemes and credit institutions such as the National Economic Reconstruction found (NERFUND), World Bank-assisted medium-scale enterprises loan scheme (MES), Nigeria Export and Import Bank (NEXIM) and the Community Bank have also emerged at both the national and local levels to boost the flow of development finance of small and medium scale enterprises which have so far depended largely on personal funds and credit from informal sources for both their investments and working capital.

1.2   Statement of the Problems

Notwithstanding the immeasurable contribution of the medium scale enterprises towards the economic growth in Nigeria, there are numerous organizational challenges facing this active sector over the years without solution. It is tradition in Nigeria that most medium scale enterprises in Nigeria die within their first five years of existence.The growth and development ofmedium scale enterprises in Nigeria have been slow and in somecases even stunted, due to a number of problems and challenges confrontingthis important sector of the economy. Some of the problems highlightedinclude: deplorableinfrastructural facilities funding and financing challenges; inadequatemanagerial and entrepreneurial skills; corruption and lack of transparencyarising from government regulations and regulators; poor power supply, low capital base, inadequate market research, lack of succession plan; inexperience, lack of proper book keeping; inability to separate business and family or personal finances, lack of business strategies, inability to distinguish between revenue and profit, inability to procure the right plant and machinery, inability to engage or employ the right caliber of staff and cut-throat competition among others.

Beckman (2002) contends that most of the problems of MEs are external to it. Among them are those related to capital shortage, taxation and regulations, product liability patent and franchising abuses. The internal problems of MEs in Nigeria include: inadequate working capital, stiff competition from larger companies, difficulties in sourcing raw materials, low capacity utilization, lack of management strategies, poor educational background of operators, and huge financial problems while the external problems include: policy inconsistencies and so many others. This study then aims at looking at ways these impediments could be rectified to enable business in Nigeria, especially Enugu metropolis, flourish.