ROLE OF SMALL AND MEDIUM SCALE BUSINESS AS MEANS OF ECONOMIC DEVELOPMENT
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ROLE OF SMALL AND MEDIUM SCALE BUSINESS AS MEANS OF ECONOMIC DEVELOPMENT
Chapter one
INTRODUCTION
1.1 Background of the Study
Experience has demonstrated that industrial development in any country is the best hope for generating sustainable growth, employment, savings and investment, and, ultimately, economic progress.
Nigeria, like any other developing country with a low per capita GDP, is focusing on industrialization and structural reform, which are critical in the pursuit for growth.
One of the most pressing development concerns in Nigeria is the need to develop and implement policies and strategies for an effective, competitive, and diverse industrial sector. This is especially essential when considering the country’s endowment. Olatoke (2005).
Giant enterprises create headlines in our news media, so people think less of small and medium-sized businesses, yet a thorough analysis reveals that small-scale company ventures are also vitally significant in our society growth.
Most of today’s business giants began with humble beginnings, from the dreams and dedication of perhaps one person, while the backbone of our economic system is dependent on those businesses, e.g. (oil and steel companies), but small scale industries constitute the muscle that enables such business giants.
It is obvious, however, that small and medium-sized businesses cannot compete directly with large businesses. According to experience, small business owners are most successful when they meet a demand that cannot or is not currently being met by their larger competitors.”This act to provide something better and different, gives Nigeria’s small business vitality” . (Ihekwoaba, 2007.)
Nigeria’s federal government recognises the importance of small and medium-sized companies in economic development. In her first National Development Plan (1962-1968), the federal government launches import substitution sectors.
In the second National Development Plan, issued in the early 1980s, the key industrial policy initiatives were foreign exchange policies and trade regulations, investment incentives, and specific incentives to give loans and technical help to small-scale companies. (Udi and Omorokpe, 2006).
Under the structural adjustment programmes (SAP) framework, having recognised futile expenditure with increased revenue from petroleum, a new industrial policy was launched in 1989
which re-emphasizes direct government realisation process for the first time, and the national identified small and medium-sized enterprises as the main focus and strategy for achieving the goal of economic self-reliance. (Ihekwoaba, 2007.)
The National Council of Industries defines Small and Medium Enterprises (SMEs) as business enterprises with total costs excluding land of little more than two hundred million naira (N200,000,000.00).
A lot has been said and written about small and medium-sized enterprises around the world. It has also been the topic of discussion in numerous seminars and workshops both locally and abroad.
Similarly, governments at all levels (local, state, and federal) have concentrated in some way on small and medium-sized businesses. While some governments developed policies to facilitate and empower the growth, development, and performance of SMEs, others concentrated on supporting them to grow through soft loans and other fiscal incentives.
International agencies and organisations (World Bank, United Nations Industrial Development Organisation (UNIDO), International Finance Corporation (IFC), United Kingdom Department for International Development (DFID), European Investment Bank (EIB), among others, are not only keenly interested in strengthening and revitalising SMEs in developing countries, but have also made significant investments in them.
Locally, several Non-Governmental Organisations (NGOs) such as Fate Foundation, Support and Training Entrepreneurship Programme (STEP), the Nigerian Investment Promotion Commission (NIPC), the Association of Nigerian Development Finance Institutions (ANDFI)
and individual Development Finance Institutions (DFIs) have been promoting the growth of SMEs in Nigeria through advocacy and capacity-building initiatives, and have continued to canvass for better support structures.
All of the huge attention and support given to SMEs is based on the widely accepted reality that they create jobs and wealth. (Olatoke, 2007).
In justifying the introduction of SMIEIS, the then Governor of the Central Bank of Nigeria, Sanusi (2003) said “with a concerted effort and renewed commitment from all stakeholders, this scheme will surely succeed and realise its intended goal of revamping the SMEs as engines of growth in the economy and a veritable tool for the development of indigenous technology, rapid industrialization,
generation of employment for our teeming youths and the pivot for sustainable Small and Medium Enterprises (SMEs) are a source of pride in almost every country and state.
Because of their (SMEs) important roles in the development and evolution of diverse economies, they (SMEs) have correctly been referred to as “the engine of growth” and “catalysts for socio-economic transformation of any country.”
SMEs constitute a true vehicle for achieving national economic objectives such as job creation and poverty reduction at a low cost, as well as the development of entrepreneurial competencies, including indigenous technologies.
Other intrinsic benefits of vibrant SMEs include access to the infrastructural facilities occasioned by the existence of such SMEs in their surroundings, the stimulation of economic activities such as suppliers of various items and distributive trades for items produced and or needed by the SMEs
stemming from rural urban migration, and the enhancement of the standard of living of the employees of the SMEs and their dependents, as well as those who are directly or indirectly associated (Ihekwoaba, 2007.)
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