ECONOMIC RECESSION AND OUR QUEST FOR SUSTAINABLE PROSPERITY IN NIGERIA: INNOVATIVE POLICIES FOR SMALL AND MEDIUM ENTERPRISES DEVELOPMENT (A CASE STUDY OF SELECTED SMALL AND MEDIUM SCALE ENTERPRISES IN

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

Economy according to Ibeabuchi (2017) is defined as the science that studies the ways to proceed to the administration and management of limited available resources in order to obtain good or services that meet the needs of individuals or organizations and it includes the processes of extraction and production of raw material, as well as marketing and distribution of products and services using limited resources.

The main feature of economy is that it has limited resources. According to Merriam Webster Dictionary (2016) economy is the management of household or private affairs especially expenses. Business dictionary (2017) sees recession as the period of general economic decline as a contraction in the cross Domestic Product (GDP) for six month or longer.

This is in line with the views of Kimberly (2017) who defined recession as when the economy declines significantly for at least six months. That means there is a drop in the following five economic indications, real Gross Domestic Product (GDP), income, employment, manufacturing and retail sales and recession occurs when the GDP growth rate is negative for two consecutive quarters or more.

However recession can quietly begin before the quarterly Gross Domestic Product reports are out. Kimberly (2017) further stated that recession is destructive. It create wide spread unemployment, sometimes as high as 10 percent (100%), that is when it affects most people.

As the unemployment rate rises, consumer purchasing power falls and business go bankrupt. In recessions, people lose their home when they can’t afford the mortgage payments. Young people cannot get a good job after which throws off their entire career.

Even if the recession is short (nine to 18 months) its impact can be long-lasting. Recession is defined as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in a real gross domestic product (crop, real income, employment industrial production and wholes sale retail sales by National Bureau of economic research (NBER 2016). McKinney (2016) defined Economic recession as a period of general economic decline and is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market.

He further outlined the factors that lead to recession. These include high interest rate, increased inflation, reduced consumer confidence and reduced real wages. Economic recession is affecting all the sectors of the economy are in Nigeria including Small and Medium Enterprises. According to Igwe (2015), small and medium scale business is generally regarded as the engine of economic growth and equitable development in developing economies.

This was in line with the views of Ayanda and Adeyemi (2011) who stated that the relative importance of Small and Medium Scale enterprise in advanced and developing countries has led and would continue to lead to a reconsideration of the role of SMEs in the economy of the nation. Much emphasis has been laid on the growth of small and medium scale industry as a means of reducing the incidence of poverty and unemployment in the country after independence in 1960.

There has been a decision shift from capital intensive and large scale industrial project based on import substitution to small scale industries with immense potentials for development domestic linkages for sustainable industrial development since the adoption of the economic programmer.

Fabayo (2014) observed that small firms are major source of employment opportunities for a wide cross section of the work force: the young and the old or part time workers” and then cyclically unemployed submitted that small scale businesses have contributed greatly to the growth of the economy through increasing employment opportunities, training entrepreneurs, generating income and providing a source of livelihood for the majority of low income households in the country.

Small and medium scale businesses are veritable engines for attainment of national objectives In terms of employment generation at low investment cost, development of entrepreneurial capabilities and indigenous technology (Umieabali, 2011 and Anya, 2013).

Small and medium businesses also reduce the flow of people from rural to urban areas and are established with mineral skills. They also contribute to the country’s gross domestic export earnings and development of employment opportunities.

However the problem is that most small and medium scale businesses die within their first five to ten years of existence while just few of them are able to survive and live to maturity.

There are factors which contribute or responsible for this premature death of small and medium enterprise in Nigeria which may include insufficient capital, poor planning, irregular power supply, poor infrastructure, lack of commitment, inadequate market research before its establishment, over concentration on only one or two markets for its finished products or services, lack of successive plan, lack of adequate experience expertise, poor bookkeeping skills, inability to separate business and family/personal finances, lack of business strategy, inability to distinguish between revenue and profit, inability to procure the right plan and machinery, inability to engage or employ the right calibre of staff and competition.

Beckman (2012) contended that most of the problem of small scale business is external to it. Among them are those related to capital shortage, taxation and regulations, product liability patent, and franchising abuse.

The internal problems of small and medium scale business in Nigeria includes inadequate working capital, staff competition from larger companies difficulties In sourcing In raw materials, low capacity utilization, lack of management strategies poor educational background of operators, and huge financial problem while the external problems includes policy inconsistency, multiple taxation, harsh regulatory requirement and trade groups. There is therefore the need to investigate the impact of economic recession on SMEs.

1.2 STATEMENT OF THE PROBLEM

In a period of recession, governments world over increasingly recognizes the severity of the downturn and the urgency to intervene in order to avoid a catastrophic collapse of the financial markets and real economy, such response usually consists of three main interventions: bailouts and injections of money into the financial system to keep credit flowing; cutting interest rates to stimulate borrowing and investment; and extra fiscal spending to shore up aggregate demand. These measures have sought to prevent further economic deterioration and ultimately keep workers in jobs where possible and help create new jobs to provide opportunities for the unemployed. Overall, this response is expected to help avoid a far more severe downturn, though effectiveness has varied considerably across countries and Nigeria is among the least of the countries where measures adopted have worked as evident in the negative GDP of -0.36% and -1.5% in the first and second quarters of 2016, (NBS, 2016) and increasing rate of unemployment. Hence the need for a review of the macroeconomic policies employed to arrest and turn round the situation in Nigeria. Presently the country witnesses more of struggling large firms are barely managing to survive due to harsh business firms while the small conditions. Based on the facts stated above, the researcher decided to determine the impact of Economic recession on small and medium enterprise in Kaduna state.

1.3 AIMS OF THE STUDY

The major purpose of this study is to examine economic recession and our quest for sustainable prosperity in Nigeria: innovative policies for small and medium enterprises development. Other general objectives of the study are:

1. To examine the extent economic recession induced problems on sustainable prosperity.

2. To examine the causes of economic recession in Nigeria.

3. To examine the impact of economic recession on sustainable prosperity and SMEs development in Nigeria.

4. To examine how to revamp recessed economy in Nigeria.

5. To examine the relationship between economic recession, sustainable prosperity and SMEs development in Nigeria.

6. To examine the innovative policies that will lead to small and medium scale enterprises development in Nigeria.

1.4 RESEARCH QUESTIONS

1. What is the extent which economic recession has induced problems on sustainable prosperity in Nigeria?

2. What are the causes of economic recession in Nigeria?

3. What is the impact of economic recession on sustainable prosperity and SMEs development in Nigeria?

4. How would economy be recovered in Nigeria?

5. What is the relationship between economic recession, sustainable prosperity and SMEs development in Nigeria?

6. What are the innovative policies that will lead to small and medium scale enterprises development in Nigeria?

1.5 RESEARCH HYPOTHESIS

Hypothesis 1

1. 1. There is no significant impact of economic recession on sustainable prosperity and SMEs development in Nigeria.

1. 1. There is a significant impact of economic recession on sustainable prosperity and SMEs development in Nigeria.

Hypothesis 2

H0: There is no significant relationship between economic recession, sustainable prosperity and SMEs development in Nigeria

H1: There is a significant relationship between economic recession, sustainable prosperity and SMEs development in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

The findings from this study will educate the government and the general public on the extent of damage done by economic recession on the development of small and medium scale enterprises in Nigeria and its effect on the sustainable prosperity with a view of resolving the crisis. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic. Thus this study will help the Nigerian government and students in further research

1.7    SCOPE OF THE STUDY 

The study is based on economic recession and our quest for sustainable prosperity in Nigeria: innovative policies for small and medium enterprises development, a case study of selected small and medium scale enterprises in Kaduna state).

1.8 LIMITATION OF STUDY       

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 DEFINITION OF TERMS      

Sustainable Prosperity: Sustainable prosperity is a concept that reflects a comprehensive, long-term vision for a community. It represents a higher and wider focus for positive change that targets the increase of true community wealth. In short, sustainable prosperity represents a healthier, happier, more prosperous future.

Development: The systematic use of scientific and technical knowledge to meet specific objectives or requirements; an extension of the theoretical or practical aspects of a concept, design, discovery, or invention and the process of economic and social transformation that is based on complex cultural and environmental factors and their interactions.

Economic Recession: A recession is a business cycle contraction when there is a general decline in economic activity. Macroeconomic indicators such as GDP, investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise.

Small and Medium Scale Enterprises: Are businesses whose personnel numbers fall below certain limits. The abbreviation “SME” is used by international organizations such as the World Bank, the United Nations and the World Trade Organization