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THE EFFECTS OF GOVERNMENT INDUSTRIAL POLICY ON SMALL BUSINESS DEVELOPMENT IN NIGERIA (A STUDY OF SMALL AND MEDIUM ENTERPRISES IN ENUGU SOUTH)

Project topic for Entrepreneurial Studies department.

CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

A renowned economist once stated “that one of the principal aims of economics policies of government throughout the world is to improve the standard of living of their people. That, the standard of living of people directly depends to a large extent on the size of the National Income”. So, the resultant effect of an effective management of available resources in any economy is growth in the Nation’s Gross Domestic Product (GDP) which is directly involved in the management of resources in any economy, which are the organized private sectors, the public sector and most importantly the government (Hanson, 1966).

This invariably shows that the main aim of all these economic exercises is to better the living standard of the people, given the different economic and political environments in which they operate. The managers of these resources are guided by some rules and regulations emanating from or instituted by that environment to reduce short fall that might be experienced in the process of managing these economic resources such as inflation, deflation, and economic recession (Aliyu, 2013).

In a capital economy emphasis is placed on free enterprise while private ownership of economic resources is highly encouraged. The capital economy is also known as a market economy which allows for the inter-play of demand and supply forces. Therefore, the policies made there are directed toward the exploitation and manipulation of economic resources and the development of the citizenry in general. While in a social economy, there is government ownership of productive resources. Policy formulation and distribution of productive resources is done with some application of force by the government in a bid to equitably distribute resources amongst people in the society (Oresolu, 2009).

In Nigeria, since independence, the major aim of government that have come and gone (that is talking about military and civilian) is to achieve high degree of industrialization which will help in the adequate capitalization and resuscitation of available resources. But with Nigeria, according to Falegan (1987), writing an introduction to his book “Redesigning Nigerian’s Financial System” said “The potential economic environment is high but the political, social, and cultural conditions do not readily facilitate efficiency of resource manipulation.

As a result of these disproportional politics, economic development has been a meandering slackness on the development of productive resources. Because of these, the development of the nation industries (the large scale, middle scale and small scale industries) has been highly effected. As a measure to curb this retarding effect or add some growth incentives, the Federal Government of Nigeria had over the years been promulgating economic policies. These government economic policies are made to induce steady tool used by the federal government to regulate the economy and the fiscal and monetary policies. Government also issues other policies, such as the income policy guidelines, dividend rates to be paid to shareholders, customs tariff, and etc (Ayozie, Oboreh, Umukoro, and Ayozie, 2013).

Further, Oni and Daniya (2012) opine that government has never relented in coming with enabling policy that enhances the growth of small and medium enterprise. They further noted that there are several financial institutions in charge of microcredit and policy instruments such as Nigeria Agricultural Co-operative and Rural Development Bank (NACRDB), Nigerian Bank for Commerce and Industry (NBCI), National Economic Reconstruction Fund (NERFUND), Bank of Industry (BI) among others were established to facilitate growth of small scale enterprises. And of recent Small and Medium Enterprises Equity Investment Scheme (SMEEIS), Small and Medium Enterprises Development Agency (SMEDA) and other policy oriented institutions like Entrepreneurship Development Policy (EDP) run by the National Directorate of Employment (NDE), Industrial Development Centres (IDC) among others were introduced to offer technical and financial assistance to small scale enterprises (Oni and Daniya, 2012).

According to Austin (2010), the introducing of the Structural Adjustment Programme (SAP) which is one of the major federal government policies, a section of the industrial sector, the small scale industrialist have been having their business impinged on by these government policies. Chukuemeka (2015) noted that Enugu State government (from 2008 till date) has shown its unrelented determination in the development of Small and medium enterprise in the state. The government policy came up with Enugu SME centre located at No. 2 Market Garden, opposite Ebeano tunnel round about, GRA. Enugu. The center is fully in operation for carrying out state government policies and programmes for small and medium enterprises. The SME centre in the state has it with its goal of unleashing the potential of the private sector and entrepreneurship in Enugu State by transforming the culture of business ownership and enterprise development using micro, small and medium enterprises operating across all Enugu state. He further states that the state government gives equal access and opportunity to her Micro, Small and Medium Enterprise Development Funds (MSMEDF) to all entrepreneurs, enterprises and cooperatives resident and doing business in the State regardless of their state of origin, nationality, faith or political affiliation or interest. This brings the aim of this study to limelight, to investigate effects of government industrial Policy on Small Business Development in Nigeria (Survey of Selected Small Business in Enugu South Local Government Area of Enugu State.

1.2     Statement of the Problem

It is observed by the researcher that despite the interventions undertaken by successive governments to improve the performance of small and medium enterprises in the country, not much progress seems to have been achieved. In Nigeria, one of the greatest obstacles that Small and Medium Scale Enterprises (SMEs) have to grapple with is access to funds. This is further compounded by the fact that even where credit facilities are available, there exists little awareness as well as getting the required collateral security to access the loan. This situation has led invariably to many of them closing down, resulting in the loss of thousands of unskilled, semi and skilled jobs across the country.

The lack of access to finance due to delay in granting approval and or non-availability of information/material to enable bank process request immediately, lack of collateral security, high cost of production and over heads due to spiral inflation and non-availability of infrastructures. Poor location and currently due to fail bank problems we are experiencing in the recent time and inefficiency in the administration of incentives which discourage rather than promotes SMEs growth.

Another overwhelming challenge is the problem of environmental issues that have cause alot of collapse of businesses. This is due to the high rate of poor infrastructure facilities that could enhance smooth running of environment. It is against this backdrop that the researcher intends to ascertain government efforts so far towards addressing some of these problems.

1.3     Objectives of the Study

The main objective of this research project is to investigate the effects of government industrial Policy on Small Business Development in Nigeria. The specific objectives are as follows:

  • To ascertain the effect of SMEDAN on small and medium enterprises development in Nigeria.
  • To ascertain the effect of NERFUND on the growth of small scale enterprises in Enugu.
  • To determine the effect of government Standards and Quality regulation on the performance of Small and medium enterprise.

1.4     Research Questions

In order to realize the main aim of this study therefore answers to the following questions were sought:

  • To what extent is the effect of SMEDAN on small and medium enterprises development in Nigeria?
  • To what extent is the effect of NERFUND on the growth of small scale enterprises in Enugu?
  • To what extent is the effect of government Standards and Quality regulation on the performance of Small and medium enterprise?

1.5     Statement of the Hypotheses

Hypothesis one

Ho:     SMEDAN has no significant effect on small and medium enterprises development in Nigeria.

Hi:     SMEDAN has significant effect on small and medium enterprises development in Nigeria.

Hypothesis two

Ho:     NERFUND has no significant effect on the growth of small scale enterprises in Enugu.

Hi:     NERFUND has significant effect on the growth of small scale enterprises in Enugu.

Hypothesis Three

Ho:     There is no significant effect of government Standards and Quality regulation on the performance of Small and medium enterprise.

Hi:     There is significant effect of government Standards and Quality regulation on the performance of Small and medium enterprise.

1.6     Significance of the Study

Stakeholders: The findings of this study are expected to be of importance to the various stakeholders who are financial institutions, small and medium enterprises managers and owners, the government and community welfare organization, general public, researchers and academicians. To the financial institutions, they will be able to understand the significant impact they have on the performance of the SMEs in Nigeria and come up with products that will serve the SMEs better leading to their improved performance.

SMEs: The study would assist SMEs by enlightening them on the ways of managing the financial challenges they are faced with and also provide alternative sources of finance that would give them better chance of survival, growth and success in the global competitive corporate setting. SMEs managers will be able to learn the effect of financial access on their financial performance and the factors that hinder access to credit. This will make them more informed and hence be able to make more informed financing decisions.

Government: The government could use the this research paper to design and implement policies that are meant to enhance access to credit by SMEs and they contribute significantly to growth and development of the country. The study will come up with policy recommendations that will assist the policy makers when drawing regulatory measures and guidelines aimed at overcoming the barrier of access to finance by SMEs. The study would be of great importance to other prospective researchers and scholars who seek to understand the impact of formal and informal financial institutions on SMEs.

1.7     Justification of the Study

The subject of small business development has become regular discussion within the scholars of business management studies and economists because of the great importance it holds in any nation. The instances pointed out in this study, draws out its practical lessons from selected small business in Enugu South Local Government Area of Enugu State. Thus, this justifies that the quest to research on the subject of effect of government industrial policy on small business development in Nigeria is a welcome thought.

1.8     Scope of the Study

This has to do with the area which the researcher is concentrating on while carrying out his/her project work. It is the study place of the research exercise. The research work focused on the effects of government industrial Policy on Small Business Development in Nigeria. The research study focused on identified small and medium enterprises in three major areas in Enugu South, namely; Zik Avenue Uwani, Coal Camp and Agbani Road.

1.9     Definition of Terms

Small-Scale Enterprise is a business that employs a small number of workers and does not have a high volume of sales. Such enterprises are generally privately owned and operated sole proprietorships, corporations or partnerships. The legal definition of a small-scale enterprise varies by industry and country.

Growth: This refers to an increase in output as a result of bank loans invested in small and medium scale business. Ploughing back the profit into the business.

Capital refers to financial assets or the financial value of assets, such as funds held in deposit accounts, as well as the tangible machinery and production equipment used in environments such as factories and other manufacturing facilities. Additionally, capital includes facilities, such as the buildings used for the production and storage of the manufactured goods. Materials used and consumed as part of the manufacturing process do not qualify

SMEDAN: Small and Medium Enterprises Development Agency of Nigeria

NERFUND:

National Economic Reconstruction Fund. It was set up in 1989 to catalyze the SME sector’s growth through medium and long-term funding. Wholly Nigerian-owned businesses which engage in certain economic activities and utilize some locally sourced inputs as primary targets.


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