IMPACT OF SMALL SCALE INDUSTRIES ON ECONOMIC DEVELOPMENT
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IMPACT OF SMALL SCALE INDUSTRIES ON ECONOMIC DEVELOPMENT
Chapter one
INTRODUCTION
1.1 Background to the Study
The most efficient production of products and services has long been the only feasible and dependable alternative for an economy’s development, growth, and survival.
Government and development specialists have completely recognised SMEs as the primary engine of economic development and, as a result, a key component in promoting the implementation of the Financial Systems Strategy 2020.
This is because the development of this sub-sector is an important component of the growth strategy, not only because it contributes to higher living standards, but also because it generates significant local capital and achieves high levels of productivity and capacity.
From a planning standpoint, SMEs are increasingly seen as the primary catalysts for attaining fair and sustainable industrial diversification and dispersal, with SMEs accounting for more than half of total employment, sales, and value added in most countries (Udechukwu, 2003).
This is not surprising given that Nigeria’s industrial sector has not made a substantial contribution to economic development since independence in 1960, owing to a lack of notable growth attributed to indigenous industrial entrepreneurship.
Since the early 1970s, the Nigerian economy has relied heavily on oil products. Because of the enormous amount of wealth generated by oil, little attention has been paid to the correct development of the industrial sector.
The reason for the industrial sector’s poor performance is primarily due to a lack of attention paid to the promotion and development of the small and medium-sized sub-sector
which is widely recognised as the engine of economic development and the foundation for the industrialization process of any nation seeking solid development.
This is especially true because entrepreneurship development is an important part of skill development and a pillar for economic resurgence and progress.
Furthermore, the vital role of small and medium-sized enterprises (SMEs) as the only authentic foundation for accelerated industrialization, growth, and development, as witnessed in all the Newly Industrialised Countries of South East Asia, referred to as Asian Tigers, is recognised for its accelerative effect in achieving macro-economic objectives such as full employment, income distribution, development of local technology, and stimulation of indigenous entrepreneurship.
1.2 Statement of the Problem
Several studies have identified financial constraints as the most significant impediment to the development of small and medium-sized enterprises in developing nations, including Nigeria.
For example, Adelaja (2003) claimed that access to institutional capital has always been a pandemic concern for SME development in Nigeria. He noted that a number of schemes had previously been implemented to create special credit lines/windows for SMEs, but their impact was quite limited.
The principal focus of this study stems from the fact that small-scale industry owners lack sufficient funding to continue their operations due to the poor saving culture of the people in this region of the world.
The explanation for this is simple: a low amount of income. While it is widely acknowledged that Small and Medium-Sized Enterprises confront financial constraints, no research has been performed to investigate the impact of these issues on their contribution to economic development.
Asaolu et al. (2005), as well as many other authors and researchers, have concluded that financial problems undermine the developmental role of Small and Medium-Sized Enterprises.
However, this may not be true in Nigeria, where the informal sector, primarily made up of Small and Medium Scale Enterprises, plays a critical part in the country’s economic development.
As a result, the purpose of this study is to assess the promotion of small and medium-sized enterprises (SMEs) in Nigeria, as well as their contribution to economic development.
1.3 Objectives Of The Research
The overarching goal of this research is to evaluate the promotion of small-scale enterprises (SMEs) in Nigeria and its contribution to economic development.
The precise aims include:
To investigate the increasing influence of entrepreneurship growth on the Nigerian economy.
Examine whether entrepreneurial development has a favourable impact on Nigeria’s economic development rate.
To investigate the causal relationship between small-scale industry (SMEs) and economic development.
1.4 Research Questions.
All study is intrinsically steeped in various types of questions that must be answered. Examples of such questions are:
How strong is the causal relationship between entrepreneurship and economic development?
How have enacted policies contributed to the creation of an enabling environment for Nigerian entrepreneurs?
To what extent do SMEs contribute to Nigeria’s economic development?
1.5 Research Hypothesis:
The study hypotheses, expressed in null form at the 5% critical level, are as follows:
Ho1: Entrepreneurship growth (development) does not support economic progress.
Ho2: There is no causal link between entrepreneurship and economic progress in Nigeria.
Ho3: Nigerian laws and regulations do not effectively promote entrepreneurship in Nigeria.
1.6 Significance of the Study
Small and Medium-Sized Enterprises (SMEs) in Africa rely heavily on their own savings to grow and innovate. Firms frequently require real-world services support and formal financial assistance, failing which under-investment in long-term capabilities (training and R&D) may result (Oyelaran-Oyeyinka, 2003).
Aside from finance, there are critical elements (such as staff knowledge, skills, and experience; internal facility capacity and quality; market information and knowledge; intellectual and managerial leadership; external infrastructure, and the incentive system at the micro and macro levels) that are lacking in technology support institutions.
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