ABSTRACT
The research work aimed at examining the
role of Small and Medium Scale enterprises (SMEs) in an economy using
Eddison Aluminum Company as a case study. The main instrument used to
generate data for the study was the questionnaire, sixty (60) in number
which received 93.33% response rate.
The key issues uncovered by the research
study are that respondents agreed that small and medium scale
enterprises like Eddison Aluminurn Company have played a significant
role in the Iron, Steel and Aluminum Industry in particular and the
economy in general. Also, most of the barriers to the growth of SMEs in
Nigeria include poor managerial skill, lack of feasibility studies, lack
of timely information, inconsistent government policies and inadequate
infrastructural facilities.
Effective training can improve the
productivity of Eddison Aluminum Company. There is prospect for the
survival of SMEs in Nigeria.
However, the findings of the Study, the
following recommendations are proffered. The Federal Government should
provide enabling environment like the provision of infrastructures such
as good roads, electricity supply, water to enable the operations of
SMEs in Nigeria. Finally financial institutions like banks, finance
houses, mortgage homes should grant soft loans to SMEs without too much
rigidity on collateral security.
TABLE OF CONTENTS
Title Page Pages
Certification - - - - - - - - i
Dedication - - - - - - - - ii
Acknowledgement - - - - - - - iv
Abstract - - - - - - - - vi
Table of contents - - - - - - - - vii
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Purpose of Study
1.4 Statement of Research Questions
1.5 Statement of Research Hypothesis
1.6 Significance of the study
1.7 Historical Background of Eddison Aluminium Company Apapa, Lagos
1.8 Scope of the Study
1.9 Method of Data collection
1.10 Definition of Terms
References.
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction
2.1 Definition, Nature and Classification of Small and Medium Scale Enterprises (SMEs).
2.2 Characteristics of SMEs
2.3 Economic Importance of Small and Medium Scale Businesses
2.4 The Role of Small business Organizations in Nigeria Economy
2.5 Efforts made to Facilitate Financing and Promoting of SMEs in Nigeria.
2.6 Obstacles to Effective Funding of SMEs in Nigeria
2.7 Conclusion
References
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction
3.1 Re-Statement of Research question
3.2 Re-Statement Research Hypothesis
3.3 Research Design
3.4 Study Population
3.5 Sample Size
3.6 Data Collection Instrument
3.7 Data analysis Technique
3.8 Limitations of the Research Methodology
References
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION
4.0 Preview
4.1 Analysis of Personal Data
4.2 Presentation `
4.3 Testing of Hypothesis
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusion
5.3 Recommendations
Bibliography
Appendices
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The growth of small and medium scale
enterprises in any economy is usually regarded as a catalyst to the
development of industrial sector in that country. Small and medium scale
firms have a vital role to play in promoting the social and economic
well being of the nation. This is because this sub-sector is a viable
means of utilizing the locally available resource. It is also a
sustainable means for food security, employment generation, improving
the earning capacity of the populace and laying the foundation for a
sustainable development programme.
According to Ojodu (2002), in
"Reinvigorating Nigeria Economy" the promotion of small scale business
is a well recognized and much heralded strategy of industrial
development in developed and developing countries, and its ability to
enhance entrepreneurial and managerial skills. In advanced economies of
us, Japan, Germany, U.K. etc, small and medium scale business have been
recognised as the appropriate production units for the transformation
of locally produced agricultural and other products which serve as
inputs for large 'scale industries.
Development economists are of the
opinion that labour intensive industries like the SMEs can enhance
employment generation, advance development goals like improved income
distribution, generation and diffusion of technology and industrial
skills, increased utilization of local resources, improved
spatial distribution of industrial activities and reduction of rural
urban population movement. In a depressed economy; like Nigeria,
effective and efficient operation of small and medium scale enterprises
as well as creation of conducive operating atmosphere is the only way
for industrial development.
By definition in 1979, the Central Bank
of Nigeria (CBN) in its credit guidelines to commercial banks, stated
that small scale enterprises were those with annual turnover not
exceeding N500,000.
In addition, a small and medium industry
is defined in CBN Briefs (2002-2003) edition as any enterprises with a
maximum asset base of N200milion excluding land and working capital, and
with the number of staff employed by the enterprise not less than 10
and more than 300.
In view of the operational efficiency
of Eddison Aluminum Company, an aluminum and other related components
producing enterprise, it becomes germane to undertake a study on the
role of small and medium scale enterprises (SMEs) in an economy. It is
worthy mentioning that the Federal Government of Nigeria has made some
initiative to promote indigenous entrepreneurship in small and medium
scale businesses.
1.2 STATEMENT OF THE PROBLEM
Its has been established that small and
medium scale enterprises are the backbone of the industrial, sector of
any economy. However, despite the contributions made by this sector in
Nigeria, SMEs still face some problem which have manifested in the
operation of Eddison Aluminum Company, Apapa.
Oresotu (1985) contributing his opinion
in a sub-heading titled "Limitations and Short Comings of Small Scale
Business in Nigeria" identified the major problems of small-scale
industries as: finance, organization and technology. The finance problem
derives from the fact that it cannot raise capital from organized
capital market like the stock exchange. Borrowing from the financial
institutions like banks is very difficult. This is the critical
predicament facing Eddison Aluminum Company, Apapa. Just as Samuel
Taylor Colaridge said in the rhyme of ancient marine "Water, Water,
everywhere, but not a drop to drink" that is the case of most small and
medium scale enterprises in Nigeria to day. Very many banks and finance
houses everywhere in major cities and commercial centers of Nigeria
today, but no fund for SMEs.
In addition, management problems
constitute the most important problems for small and medium scale
business like Eddison Aluminum Company, Apapa. These problems manifest
in poor record keeping, poor credit management, poor inventory control,
poor working capital and raw materials planning, poor marketing/sales
management.
Mostly, partly due to financial
constraints, a small industry cannot afford to recruit and/or retain
highly skilled personnel. This is partly responsible for the inefficient
operations witnessed in the 'industry, which Eddison Aluminum Company
is not an exemption. The above scenario present a barrier to the wheel
of progress of SMEs in Nigeria.
1.3 PURPOSE OF THE STUDY
Small and medium scale enterprises have
been recognized as the foundation for the attainment of accelerated
economic growth and development. In specific terms the purpose of the
study include the following:
- To evaluate the role of small and medium scale enterprises in Nigeria economy.
- To evaluate the impact of SMEs both positively and negatively on the economy.
- To examine the contribution, made by Eddison Aluminum Company in the manufacturing sector of Nigeria economy.
- To examine the problems and prospects of small and medium scale enterprises in Lagos.
- To evaluate government effort toward promoting small and medium scale businesses
- To offer suggestions on how to' improve the fortunes of SMEs in Nigeria.
1.4 STATEMENT OF RESEARCH QUESTION
- What has been the role of small and medium scale enterprises in economic development in Nigeria?
- What are the opportunities open for SMEs in Nigeria? In what ways
have the various levels of government supported the growth of SMEs in
our country?
- What are the problems facing small and medium scale enterprises in Nigeria?
- What prospects do the SMEs have in achieving their goal?
1.5 STATEMENT OF RESEARCH HYPOTHESIS
Ho: Small and medium scale enterprises do not play any significant role in the Nigeria economy.
Hi: The small and medium scale enterprise play a significant role in the Nigeria economy.
Ho: There is no prospect for survival of SMEs in Nigeria.
Hi: There is prospect for survival of SMEs in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
Small and medium scale enterprises
play a key role in generation of new idea, jobs and the encouragement
of entrepreneurial skills. The relevance of SMEs can never be over
emphasized especially in a developing country like Nigeria. SMEs are
primarily ' expected to serve as bedrock of supply of promising
entrepreneurs who would be ready to take chance on ,the exploration of
new ideas or favourable market development. SMEs create more jobs. In
most developing economies, unemployment is the greatest threats to.
economic growth.
Hence, the proliferation of SMEs and development could be an antidote to large scale unemployment in these economies.
Other areas in which SMEs are of
significance are mobilization of local resources, mitigation of rural
urban migration, distribution of industrial enterprises. Thus, SMEs
would not only encourage indigenous technology but also promote the
establishment of import substitution industries. They are known to
contribute to gross domestic product (GDP), and a source of sustenance
of means of livelihood of many citizens.
Finally, they are expected to produce
for exports thereby generating additional foreign exchange that would
strengthen the Nigerian balance of payment position.
1.7 HISTORICAL BACKGROUND OF EDDISON ALUMINIUM COMPANY APAPA, LAGOS
Established in ].989 at No.3 Cardoso
Street Apapa, Lagos with an (initial capital outlay of N250,000.
Eddison, Aluminum is in the manufacturing and sale of Aluminum `profiles
accessories and glasses. In the 1990s, Edditson Market by the
production, marketing and sales of these products were booming. It had a
significant market share in the construction and sales of aluminum
doors and windows within the industry at Apapa and its environs.
The company also had a large pool of
skilled workforce including apprentice in the production department,
which had good motivational package. Today however, things have fallen
apart with the organization. In the face of economic downturn in Nigeria
especially with the devaluation of
Aluminum Company could not meet her
factory demands for basic raw materials which are imported from abroad.
This often led to her use of inferior basic raw materials which resulted
to customer complaint and loss of her most customers to competitors.
Simultaneously, most of her skillful
workers resigned because of cut or irregular payment of their salaries.
Her inability to meet other short term debts compounded the situation as
her creditors who are private lenders always besiege the company
premises asking for their repayment.
Owing to her incapability to borrow from
the banks or other financial institutions because of lack of collateral
security, but in view of the effort made by the federal government in
2001, in setting up small/medium industries equity investment schemes
(SMIEIS), the plight of Eddison Aluminum Company, Apapa could be
overcome.
1.8 SCOPE OF THE STUDY
The current study will cover Eddison
Aluminum Company at Apapa Lagos. It will embrace the operations of the
company since its inception including the role the firm had played in
the past eighteen (18) years of its existence.
1.9 METHOD OF DATA COLLECTION
The research study requires the collection of both primary and secondary sources of data.
Primary sources of data would come
mostly from the questionnaires. Also oral interview within the-company
premises would constitute another source of primary data.
The Secondary sources on the other hand include Journals, Textbooks, case study and some documented records by the organization.
1.10 DEFINITION OF TERMS
- A System: A system is simply a set of entities that interact, inter-depend and function together for a purpose.
- Capital Market: This is the market where companies raise funds on
long-term basis by issuing securities i.e. shares to the general public.
- Devaluation: This means increasing the rate at which local currency
exchanges for foreign currency – Olawale & Folorunsho (1984).
d. Effectiveness: This is the
ability to choose appropriate objectives or means for achieving a given
objective or as Peter Drucker put it "doing the right thing".
e. Efficiency: This is the ability
to get things done correctly or as Peter Drucker put it "doing things
right", it is the maximization of output to input ratio.
f. Financial Institution: This is
any institution that deals in money or money instrument. It involves the
creation, protection, transfer, lending and borrowing of money.
g. Gross Domestic Product (GDP):
This refers to the values of all the goods and services produced by
people resident in a country - Essang & Olayide (1974).
h. Market Share: The portion of total market or sales which occurs or belongs to a particular organization.
i. Working Capital: Money needed for carrying on a business -Advance Learners Dictionary.