ROLE OF SMALL AND MEDUIM SCALE ENTERPRISES (SMES) IN AN ECONOMY.
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ROLE OF SMALL AND MEDUIM SCALE ENTERPRISES (SMES) IN AN ECONOMY.
Chapter one
INTRODUCTION
1.1 Background of the Study
The expansion of small and medium-sized businesses in any economy is often recognised as a stimulant for the development of the country’s industrial sector.
Small and medium-sized businesses play an important role in supporting the social and economic well-being of the nation. This is because this sub-sector provides a practical way to employ a locally available resource.
It is also a sustainable technique of ensuring food security, creating jobs, increasing people’s earning potential, and setting the groundwork for a long-term development project.
According to Ojodu (2002), in “Reinvigorating Nigeria Economy,” the promotion of small-scale businesses is a well-known and well celebrated industrial development approach in both developed and developing countries, as is its potential to improve entrepreneurial and managerial abilities.
In industrialised economies such as the United States, Japan, Germany, and the United Kingdom, small and medium-sized businesses have been identified as the proper production units for the transformation of locally produced agricultural and other products that serve as inputs for large-scale enterprises.
Development economists believe that labor-intensive industries, such as SMEs, can increase employment, advance development goals such as improved income distribution, the generation and diffusion of technology and industrial skills, increased utilisation of local resources, improved spatial distribution of industrial activities, and reduced rural-urban population movement.
In a depressed economy, such as Nigeria, effective and efficient operation of small and medium-sized firms, as well as the creation of a favourable operating environment, is the only way to achieve industrial development.
In 1979, the Central Bank of Nigeria (CBN) defined small scale firms as those with an annual revenue of less than N500,000.
Furthermore, a small and medium industry is described in the CBN Briefs (2002-2003) edition as any firm with a maximum asset base of N200 million (excluding land and working capital) and a workforce of between 10 and 300 people.
Given Eddison Aluminium Company’s operational effectiveness as a producer of aluminium and other associated components, it is appropriate to do research on the role of small and medium-sized firms (SMEs) in the economy.
It is worth noting that the Federal Government of Nigeria has taken various steps to encourage indigenous entrepreneurship in small and medium-sized firms.
1.2 Statement of the Problem
Small and medium-sized businesses have long been recognised as the backbone of any economy’s industrial sector. However, despite the contributions made by this sector in Nigeria, SMEs continue to confront challenges, as seen by the operations of Eddison Aluminium Company in Apapa.
Oresotu (1985), in a subheading headed “Limitations and Shortcomings of Small Scale Business in Nigeria,” listed three significant challenges in small-scale industries: financing, organisation, and technology.
The finance issue stems from the fact that it is unable to raise cash through organised capital markets such as the stock exchange. Borrowing from financial entities like banks is quite tough.
This is the catastrophic situation facing Eddison Aluminium Company in Apapa. Just like Samuel Taylor Colaridge remarked in an ancient maritime rhyme, “Water, Water, everywhere, but not a drop to drink,” this is the case for most small and medium-sized businesses in Nigeria today. Today, there are several banks and financial houses throughout Nigeria’s major cities and commercial centres, but there is no fund for SMEs.
Furthermore, management issues are among the most pressing concerns for small and medium-sized businesses such as Eddison Aluminium Company in Apapa.
These issues appear as bad record keeping, poor credit management, poor inventory control, poor working capital and raw material budgeting, and poor marketing/sales management.
A tiny industry cannot afford to hire and/or retain highly skilled staff, owing primarily to budgetary restrictions. This contributes to the industry’s inefficient operations, and Eddison Aluminium Company is no exception. The scenario described above impedes the success of Nigerian SMEs.
1.3 PURPOSE OF STUDY
Small and medium-sized businesses have been seen as the cornerstone for achieving rapid economic growth and development. The study’s precise goal includes the following:
· Assessing the impact of small and medium-sized firms in Nigeria’s economy.
· Assess the positive and negative impact of SMEs on the economy.
· Examine Eddison Aluminium Company’s contribution to the Nigerian manufacturing industry.
· To analyse the challenges and opportunities for small and medium-sized businesses in Lagos.
· Evaluate government efforts to promote small and medium-sized businesses.
· Provide suggestions for enhancing the success of Nigerian SMEs.
1.4 Statement of Research Question.
· How have small and medium-sized firms contributed to Nigeria’s economic development?
· What opportunities exist for SMEs in Nigeria? How have different levels of government helped our country’s SMEs grow?
· What are the challenges for small and medium-sized businesses in Nigeria?
· What prospects do SMEs have for accomplishing their goals?
1.5 Statement of Research Hypothesis
Ho: Small and medium-sized firms play no significant significance in the Nigerian economy.
Hi: Small and medium-sized enterprises play an important part in the Nigerian economy.
Ho: There is no hope for the survival of SMEs in Nigeria.
Hi: There is hope for the survival of SMEs in Nigeria.
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