University essay from Blekinge Tekniska Högskola/Sektionen för management

Author: Patrick Onuorah; [2009]


Abstract: This study, the role of small and medium sized enterprises for economic growth, was undertaken to find out how SME sub-sector in Nigeria has performed and its impact on the economic growth of the country. Small and Medium Scale Enterprises (SMEs) is accepted globally as a tool for empowering the citizenry and economic growth. It has been associated with the rapid economic growth of countries in Asia and North America. In Nigeria efforts have been made by successive governments to reduce poverty and accelerate economic growth by increasing foreign direct investment, diversifying the economy, enacting policy frameworks which favour small business ownership and sometimes initiating employment and entrepreneurship programmes. Specifically this study tends to figure out: how profitable SME business is; whether infrastructural development could be attributed to the presence of SMEs; if significant number of people are employed within the SME sector; whether the SME market has attracted banks and financial institutions with increase in loans and incentives; whether there is increase in information Technology related businesses due to presence of SMEs and if there is need for the government to encourage and develop more opportunities for SMEs. A total of 200 SMEs were randomly selected from Matori, a city in Lagos state Nigeria. A questionnaire was constructed and distributed to the selected SMEs. The responses were collated and analyzed using Statistical Package for Social Sciences (SPSS) analytical tool. The study reveals that while SME businesses are profitable problems of policy inconsistency and poor infrastructural development continuously undermine the potentials of the market. Though the presence of SMEs has attracted infrastructural development, such developments in most cases are community effort or privately driven which limits the amount of developments achieved. For example their efforts could be limited to patching and maintaining existing bad road networks but not expanding or creating new road networks. The study also revealed that financial institutions like banks are attracted to areas where SMEs are established but getting funds through these institutions via loans has not been easy due to high interest rates and harsh conditions like types of collateral to present. It was also established that SMEs are good employers of labor but not without required support and facilities. SMEs will not engage more people to work for them when their businesses do not thrive. For their businesses to thrive they need government to encourage them and develop more opportunities such opportunities could be in terms of providing infrastructures like stable power supply and good transport networks (rails and roads), easy access to finance (low interest rates), stable government policies, reducing multiple taxations, ensuring availability and access to modern technology and raw materials locally etc. The result of the study confirms existing theories in the field which support the belief that SMEs remains a tool for economic growth in Nigeria. There are enormous potentials and opportunities for SMEs in Nigeria to mature and play the crucial role of economy growth, poverty reduction, employment and wealth creation. This will entail having the government provide required supports and addressing identified problems. While the SMEs also need to change their attitudes relating to entrepreneurship development, government needs to involve the SMEs in policy formulation and execution for maximum effect. There is also need to introduce entrepreneurial studies in our Universities in Nigeria in addition to emphasizing practical and technological studies at all levels of our educational system.

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