THE CHALLENGE FACING SMALL AND MEDIUM SCALE ENTERPRISES IN BENUE STATE
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ABSTRACT
This study empirically investigated the issues affecting small and medium-sized firms (SMEs) in Benue state using a case study of a selection of SMEs in Makurdi. The objectives of this study were to determine whether inadequate financing is a major challenge to the performance of SMEs in the metropolis of Markurdi, whether inadequate infrastructure is a major challenge to the performance of SMEs in the metropolis of Markurdi, and whether a lack of managerial skills is a major challenge to the performance of SMEs in the metropolis of Markurdi. The scope of the study is Markurdi city in 2020 using business owners; the theory of the firm serves as a conceptual framework. This study employs a survey research approach, and the population of interest comprises of all business owners. As a sample size, 400 business owners were selected, and cluster sampling was employed. The questionnaire is the instrument utilized in this investigation. The data acquired came from original sources. Poor financing constitutes a major challenge to the performance of SMEs in Markurdi metropolis, inadequate infrastructure constitutes a major challenge to the performance of SMEs in Markurdi metropolis, and a lack of managerial skills constitutes a major challenge to the performance of SMEs in Markurdi metropolis, according to the analysis of the data. As a result of the findings, it was suggested that financial institutions aiding the performance of SMEs in the Markurdi metropolitan area be made available, that adequate infrastructure facilities be made available, and that the management of SMEs be adequately trained to carry out their activities.
Keywords: small and medium-sized firm, obstacles, business performance, and Benue state.
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FIRST PART
INTRODUCTION
1.1. Background of the Study
Small and medium-sized businesses are without a doubt the engine of economic expansion, poverty alleviation, employment creation, and crime prevention. They form a considerable share of enterprises globally and play an important role in every economy. The Nigerian government, through its economic regulatory bodies, has acknowledged the significance of small and medium-sized businesses to the employment of its citizens.
Small and medium-sized businesses face a number of problems that threaten their long-term existence, including high manufacturing costs, an inability to develop a competitive advantage, and a dearth of entrepreneurial breakthroughs (UNCTAD, 2005). Researchers have demonstrated that the failure rate of small and medium-sized businesses in emerging nations is greater than in developed nations (Marlow, 2009). In recent years, numerous obstacles have hindered the growth of small and medium-sized businesses in Nigeria. These obstacles include unreliable electricity supply, arbitrary taxation, limited access to loans from financial institutions, and an inability to maintain accurate financial records. Low level of entrepreneurial skills, poor management practices, low access to money and capital markets, low equity participation from the promoters as a result of insufficient personal savings due to their poverty level, low return on investment, inadequate equity capital, poor infrastructural facilities, high rate of enterprise mortality, lack of skilled manpower, and multiplicitous competition are the main problems facing SMEs, according to Oluboba (2010).
For a business to achieve its goals, its capacity to achieve its key performance indicator in a sustainable manner is of utmost importance (Simerly and Mingfanf, 2000; Wan and Yiu, 2009). In order to increase the flow of financial resources to small business firms, the Nigerian government has in the past established a series of programs and policies aimed at small and medium-sized businesses (Oni and Daniya, 2012). 2003 saw the establishment of both the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) and the National Credit Guarantee Scheme. The Microfinance Policy Regulatory and Supervisory Framework (MPRSF) was created to address the lack of access to credit by small business operators, the Small Scale Industrial Credit Schemes (SSICS), the Nigeria Industrial Development Bank (NIDB), the World Bank-Assisted SME II loan project, International Financial assistance, National Economic Reconstruction Fund (NERFUND), and the Bank of Industry (BOI), among others. Although numerous programs and policies have been adopted in Nigeria, poverty, unemployment, and sluggish economic growth persist (Lawson 2007; Owenubiugie and Igbinedion, 2015; Obadeyi, 2015).
Despite the significant importance, relevance, and contribution of small and medium-sized businesses to the nation’s economy, small and medium-sized businesses continue to face numerous challenges. They encounter major obstacles that hinder their capacity to operate and contribute optimally to the economy. The operations of small and medium-sized businesses continue to be plagued by a variety of issues, including difficulty in accessing credit, short loan repayment periods, banks’ reluctance to finance small and medium-sized businesses, and excessive interest rates, among others.
Small and medium-sized businesses account for around 90% of the industrial sector in Nigeria, as well as 70% of industrial employment and 10% of manufacturing production (Ajayi, 2002). According to Anwatu (2006), 75% of the private sector in Nigeria is controlled by small and medium-sized businesses. Developing the private sector is a driver of economic growth, wealth generation, and job creation in Nigeria.
The performance of small companies in Nigeria falls short of expectations (Basil, 2005 and Abiodun, 2011). Consequently, this study explores the obstacles faced by small and medium-sized businesses in Benue state.
1.2 Description of the Research Problem
In order to alleviate poverty, unemployment, and crime and to promote economic growth, the survival of small and medium-sized businesses is regarded as essential in any economy. There is deficiency in the performance of small and medium-sized enterprises in their roles of economic growth, job creation, and poverty alleviation; hence, it is difficult for small firms to achieve their objectives.
The government is responsible for providing jobs and security for the populace, among other things. However, as the government cannot offer complete employment for the populace, it facilitates the participation of non-state actors in filling the void. These non-state actors include, among others, small and medium-sized businesses. In 2005, the federal government implemented Microfinance Policy through the CBN, which led to the establishment of Microfinance banks. Today, microfinance banks provide a partial financing solution to the poor access to capital faced by Nigerian SMBs.
It is depressing that the Nigerian government has not been able to assist the poor in growing small and medium-sized businesses over the years.
Based on evidence at our disposal
Introduced was the Small and Medium Enterprise Equity Investment Scheme (SMEEIS). The majority of micro, small, and medium-sized enterprises were not interested in equity involvement because they feared losing control of their businesses. (Peter Osalor; 2016, Vanguard)
Benue state’s abundance of natural resources makes it a region of limitless investment prospects. As a result of low levels of capital investment and a dearth of entrepreneurs, the state is generally impoverished with ample inexpensive resources and urban infrastructure.
In Nigeria, the capacity of small and medium-sized businesses to establish and maintain a competitive edge depends on the availability of acceptable strategies that would ensure the continuity of their operations. In this context, the researcher proposed an analysis of the issues affecting small and medium-sized firms (SMEs) in the state of Benue through a case study of chosen SMEs in the metropolitan area of Makurdi.
1.3. Aims of the research
The purpose of this study was to explore the issues affecting small and medium-sized businesses (SMEs) in Benue state through a case study of selected SMEs in Makurdi. The particular aims are to:
Determine if inadequate financing is a significant obstacle to the performance of Markurdi’s SME sector.
Determine whether deficient infrastructure poses a significant obstacle to the performance of small and medium-sized enterprises in the Markurdi metropolitan area.
Determine if the shortage of managerial skills poses a significant impediment to the success of Markurdi’s SME sector.
1.4. Research Concerns
The following research questions will serve as the basis for this study:
Does inadequate finance provide a significant obstacle to the performance of Markurdi’s SMEs?
Does inadequate infrastructure pose a significant obstacle to the performance of Markurdi’s SMEs?
Does the absence of managerial skills provide a significant obstacle to the performance of SMEs in the city of Markurdi?
1.5 Scientific Hypotheses
The research is based on the following hypotheses:
H0: Poor funding does not pose a significant obstacle to the performance of Markurdi’s SMEs.
Inadequate infrastructure does not provide a significant obstacle to the performance of Markurdi’s SMEs.
Lack of managerial abilities does not pose a significant obstacle to the performance of SMEs in the metropolis of Markurdi.
1.6. Importance of the Research
Given is the importance of small and medium-sized businesses to the prosperity or growth of any nation. The purpose of this empirical study is to explore the issues affecting small and medium-sized firms (SMEs) in Benue state through a case study of chosen SMEs in Makurdi, so as to mitigate the problem of low productivity encountered by SMEs.
This study is crucial to small and medium-sized businesses since it will assist them determine how to operate. It will instruct them on the necessity of business expansion and the significance of business survival. It will also assist small and medium-sized business owners in maximizing the value of their firms.
This study would be of the utmost relevance to investors, the government, and researchers, as it will provide policy suggestions to the many Nigerian stakeholders for rapid capacity investment in small and medium-sized businesses. It is envisaged that the investigation of small and medium-sized firms in Benue state will offer investors and the government with a comprehensive understanding of their activities. It will contribute to the existing literature on the subject by objectively investigating the obstacles faced by small and medium-sized businesses in the country. This research will be useful to;
Academia: Academia members will find the study relevant because it will serve as a basis for future research and a reference tool for academic publications.
This study will inform the government about the happenings in small and medium-sized businesses. Formulation and implementation of policies based on these findings would guarantee the region’s development.
This study will also be useful for investors, particularly those with a research interest, as it will inform their private investment decisions.
1.7. Range of the Research
The purpose of this study is to examine the challenges facing small and medium-sized enterprises (SMEs) in Benue state in 2020 using the owners of SMEs in Markurdi, Benue state, Nigeria.
1.8. Definition of Terms for Operations
The following terms have been operationally defined.
Small and medium-sized business enterprise: an enterprise characterized by a restricted number of employees and a limited flow of financial resources and supplies. Here it indicates SMEs in Markurdi metropolitan.
Business performance is the efficiency and effectiveness of an organization as represented in the management-established business objectives. It refers to the performance of Markurdi’s SME sector.
In this regard, obstacles are the operational difficulties encountered by SMEs in the metropolis of Markudi.
1.9. Design of the Research
This study consists of five chapters. The first chapter is the introduction, which includes the study’s context, problem statement, research questions, research hypotheses, aims, importance, scope, and constraints, as well as the study’s structure. The second chapter examines the literature review, which includes conceptual literature, theoretical literature, empirical literature, and a theoretical framework. The third chapter describes the research methodology, including research design, population of study, sample size, sampling strategy, method of data collecting, instrument of data analysis, method of data analysis, and instrument validity/reliability. The fourth chapter contains the presentation and analysis of data, as well as a discussion of the findings. The fifth chapter contains a summary, conclusion, and recommendations.
THE CHALLENGE FACING SMALL AND MEDIUM SCALE ENTERPRISES IN BENUE STATE
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