THE ROLE OF GOVERNMENT TOWARDS IMPROVING THE SUSTAINABILITY OF SMALL AND MEDIUM SCALE BUSINESS IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

          Government has done a lot toward improving the standard of small and medium scale business in Nigeria through the establishment of many ministries parastatals and agencies.  In Nigeria small scale business are falling due to some problems, like poor funding, poor infrastructural development, high taxation and others. Small and medium scale business have come to stay in this country and to some extent have increased the standard of living and economy of this country.

          Government has implemented a lot of programme and equally set up some agencies in Nigeria like the small scale industry credit scheme (SSICS).  The National Economic reconstruction fund (NERFUN) Central Bank of Nigeria (CBN), the Nigeria Export and Important bank (NEXIM), the work bank facility for the Small and Medium Scale Enterprises loan (SMEX LOAN), the National Directoriate of Employment (NDE), the Small and Medium Enterprises Development Agencies of Nigeria (SMEDAN).

          All this agencies are effort made by the government to reduce the effect of poverty in Nigeria.  But the fact still remain that some of this agencies are not doing what they are meant to do due to corrupt practices, favoritism and untrained personnel that work in those parastatals.

          Our small and medium enterprises when compared with the outside world, has a lot of discrepancy in terms of maturity, level and standard.  What we call big business in this country are been regarded as small business in other countries.

          Therefore, it will be of great interest that the government not only set those agencies but they should also provide capable and competent hands that will man it, discipline those that are corrupt and make it possible for small and medium scale business to excel in Nigeria.

          From the above study, economic analysts all over the world agree that output performance in the less developed countries is rather disappointing with little or no hope of appreciation, to a level that would engender self-reliance.  This was precisely because the major indices of economic performance rather looked downwards.  The index of manufacturing output posted losses in real terms with the bleak consequences in employment generation.  On a macro scale, the effect was disastrous with failures in macro economic planning.

          The experience in developing countries with large scale industry was worsened by financial shortage and fraud, as a result of which gigantic projects were abandoned.  In addition, the technological gap existing between the developed therefore agreed and obvious that the “big-push” theory of large scale industry cannot of finance, technology and manpower availability.

          The concentration of large industrial concerns in the urban cities has long been criticized because of the rural urban drift which has generated imbalance between the rural and the urban areas in Nigeria today, Leon (1998:132). Faced with this kind of problem and given the constraints, economic thinkers are now focusing attention on small and medium scale enterprises (SMEs).  Small and Medium scale enterprises consist of endeavours in manufacturing, handicraft and small pockets of maintenance and repair.

          In effect the definition of SMEs may vary from place, time and purpose, the commonest criteria used according to Ihyembe (2000:42), include the number of employees, sales (or turnover), financial strength (mainly in terms of capital outlay and working capital), as well as the structure of the ownership.  The SMEs concept evolves from the type of opportunities available in the market which is matched with the locally available skills and financing. This type of industry is one that is characteristically managed as a small business either by a sole proprietor or combination of small investors who have gathered their resources together.  The Nigerian economy appears to have been reaping the advantages obtainable from small and medium scale enterprises. These include stimulation of indigenous entrepreneurship, transformation of traditional industry, etc.  As would be shown later, the experiences in many parts of the world point to the director that small and medium scale enterprises can make positive impact on the economies of many nations both developed and developing.

          It is for this reason that the government of Nigeria (Federal and State) started showing interest in Small Scale Industries (SSIs) from the 70s to date.  Some of the positive actions taken by government in this regard include providing funds for some form of research into these industries, creating SSI divisions or departments as well as small scale credit schemes in the various states and at the federal level.  The implementation of the programmes that have been outlined for the development of the small and medium scale industry in the past have often been hampered by the lack of information concerning the industry, most especially with the constraints to their development, what motivates them, their economic contributions and so on.

          Hence, the need for adequate research into them to provide the basic data for planning effectively for them. Detailed and extensive nationwide research on these industries in Nigeria have generally been lacking until the pioneering work of the industrial research unit of the University of Ife now Obafemi Awolowo University Ife in the early 1970s.

           The first in the series of surveys carried out by the Ife unit on SMEs, covered the then western states, Kwara state and former mid- western state. A survey of SMEs in the former north eastern states was also carried out by the unit. The University of Zaria now Ahmadu bello University Zaria also carried out similar studies in the remaining states of the country at that time.  

          The objectives of those studies were similar and were meant to study and analyze the structures of the SMEs, the pattern of ownership management and control in the SMEs as well as the size of employment, marketing procedures as well as the level of education and training in the industries.  The studies also sought to examine the extension services available to the industries and the impact of public policies on their general performance.

           The analyses of all these factors were at assessing the role of SSIs in the nation’s economic growth. The research carried out an enumeration exercise on SME’s in the states and attempted to measure and analyze certain variables and factors that were relevant to the achievement of the set objective.

          These variables include the level and sources of capitalization, ownership structures, age, level of education of entrepreneurs, employment management practices etc, the analysis of such other factors, impacts etc.

           A few years ago, the Federal Ministry of Industry commissioned some consulting firms and other groups to carry out a nationwide survey of SMEs.  These studies were aimed at assessing the impact of the existing SMEs on the development of the economies of each state.  They were also to examine the linkage effects of outputs of small manufacturers on bigger industries and vice versa.  In addition, the studies equally determine the impact of federal government assistance to the states for the development of SMEs credit and other schemes. 

          Finally, the project was also aimed at determining the potentialities possessed by the states for the establishment, growth and development of small scale establishments in the states.  While these studies and research undertakings could have been said to have provided a very useful insight into the operations and potentials of the SMEs, they equally left some unanswered questions.

1.2     STATEMENT OF PROBLEM

          Despite the fact that there is an increase in the number of small and medium scale enterprises in Nigeria, the country still witness under industrialization.  Unemployment has been a common phenomenon with the institutions of higher learning producing fresh graduates each academic year without appropriate job opportunities for a lot of them.

          Capital is a major problem facing SMEs as well as industrialization.  Shortage of capital has induced many industries to delay their projects.  The banks and other financial institutions are often blamed for inadequacy of credit and loan facilities to this sector.  The excuse often given by banks is that he entrepreneurs do not usually repay loans as and when due.  They accuse the industrialists of being dishonest, and also not having the ability to satisfy the bank(s) with their feasibility studies.  At times loans meant for the establishment of a certain business is diverted to unprofitable ventures.

          Government on the other hand has been accused severally of not doing enough to promote and sustain programmes aimed at uplifting and enhancing the operations of the SMEs.  This is where the problem of this study lies.  It constitutes an inquiry into ascertaining the various ways through which government has been and is still contributing towards the promotion/sustenance of small and medium scale operations in Nigeria.

1.3     OBJECTIVES OF THE STUDY

          The basic objectives of the study are as follow: