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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The focus on economic development has shifted in recent years from
public-sector led economic development to private sector driven economic
development. In achieving this, the Small and Medium Enterprise (SME) sector is
usually relied upon because of extant scholarly knowledge of its capacity to
contribute to economic development.
In 2002, the Honourary Presidential Council on Investment (HPACI) SME sector
profile reveals that the SMEs contribute as much as 40% of GDP in developed
economies and some developing nations. The report further shows that SMEs
constitute over 90% of firms in Nigeria with a meagre 1% contribution to GDP.
This disproportionate contribution is as a result of factors within the
business environments.
Studies have adduced several reasons including access to finance,
infrastructural limitations, entrepreneurial competence of owner-managers and
the impact of multiple tax, to explain differences in SMEs contributions to GDP
(Kessides, 1993; Sule, 1980 and Anyanwu, 1994; HPACI, 2002, and Aruwa, 2004).
Foremost of these barriers are inadequate finance and lack of infrastructures.
Kessides (1993) recognises the significance of infrastructure in the process of
economic growth.
Interestingly, the Honourary Presidential Council on Investment (HAPCI, 2002),
after an in-depth study of the SME sector, gave the reasons limiting the role
of SMEs as the hub of entrepreneurship in Nigeria. Some of the reasons given
were infrastructural limitations, access to finance, access to enterprise
support services, unfavourable business environment and poor access to
information about sources of raw materials and market network. There is a
recurrence on the greater impact of limited access to finance, entrepreneurial
incompetence and inadequate infrastructure in the SME literature.
The need to improve SME development in Abuja is particularly timely given the
crises and attendant less propitious economic situation that has bedeviled the
capital since the 1980s. This manifested by way of the deplorable nature of
socio-economic infrastructure. This has the effect of imposing heavy cost and
of shifting of resources away from productive private investment since domestic
and foreign entrepreneurs would only invest where infrastructure exists and
satisfactory rate of return is assured.
Sani (2001) observes that indices of micro-economic infrastructural facilities
are inadequate and the operation of the functional ones has not been efficient.
This indeed has dire consequences for business performance. The SME sector in
Nigeria operates in an environment with very poor infrastructure, which deter
prospecting firms from entry and hinders international competitiveness (Aruwa,
2004).
1.2 STATEMENT OF THE PROBLEM
The provision of infrastructure services to meet the demands of businesses-both
small and medium scale, is one of the major challenges of economic development
in Nigeria. The provision of economic and social infrastructure can expand the
productive capacity of the Nigerian economy by creating enabling environments
for small and medium scale businesses in an economy, thereby encouraging
economic development.
This is not always the case as small businesses in Nigeria suffer from bad
roads to constant power outages. A study conducted by Ogbonnaya (2010)
demonstrated empirically that no matter how novel the policies or incentives to
drive the industrial sector are, if the infrastructural problems are not fixed,
the policy objective of accelerating the growth of the industrial sector may
not be realized.
The significance of infrastructure in the process of economic growth has long
been established. Infrastructure has been seen as the basic requirement for
business establishment and survival. The costs of acquiring infrastructures are
significantly enormous for SMEs to bear and therefore, government intervention
is inevitable. However, the depth of impact, the degree of impact or
relationship coefficient has not been established particularly in respect of
Kaduna state. This makes this paper distinguishable.
1.3 OBJECTIVES OF THE STUDY
The main aim of the study is to evaluate the role of economic and social
infrastructure in promoting business activities in Nigeria. The specific objectives
are:
1. To identify infrastructure challenges that affect business activities in FCT Abuja.
2. To evaluate the specific roles played by both economic and social infrastructures in promoting business activities in FCT Abuja.
3. To suggest entrepreneurial policies that will enhance the operations of small and medium scale businesses in FCT Abuja.
1.4 RESEARCH HYPOTHESIS
The study developed two operational hypotheses which were tested using the
one-way Analysis of Variance (ANOVA) and the Dependent t-test. Therefore, the
outlined steps will be followed:
H0:The level of infrastructural development in FCT Abuja is low.
H1:The level of infrastructural development in FCT is high.
H0: Infrastructural development does not significantly influence the performance of businesses in FCT Abuja.
H2: Infrastructural development significantly influences the performance of businesses FCT Abuja.
1.5 SIGNIFICANCE OF STUDY
Small and Medium scale Enterprises (SMEs) in Africa rely largely on own
savings, not only to grow but also to innovate, firms often need real services
support and formal finance assistance, failing which under-investment in long
term capabilities (training and R&D) may result, (Oyelaran-Oyeyinka, 2003).
Besides finance, there are critical elements (including: knowledge, skills and
experience of staff; capacity and quality of internal facilities; information
and knowledge of market; intellectual and managerial leadership; external
infrastructure and the incentive system at the micro and macro levels) that
lacking within technology support institutions themselves. These undermine the
effectiveness of their support to Small and Medium scale Enterprises (SMEs).
This study is significant because it would help to evaluate the operations of a
vital segment of the industrial sector Small and Medium Scale Enterprises
(SMEs) , which have been identified as having very high potential in promoting
economic growth and development (Oni and Daniya, 2012). The evaluation shall be
done with special focus on their financing thereby adding to the existing
literature on the subject matter.
1.6 SCOPE OF THE STUDY
This research work focuses on the role infrastructures such as economic and
social infrastructures have played in the promotion of Small and Medium Scale
Enterprises (SMEs) in Nigeria paying special attention to the impact the
government of Nigeria has on the development of Small and Medium Scale
Enterprises. The research intends to study the essential problems encountered
by Small and Medium Scale Enterprises and suggest ways by which they can be
adequately and efficiently promoted.
Most of the information and data needed for the study would be gathered from
existing literature and from some selected business owners in FCT Abuja.
1.7 LIMITATION OF THE STUDY
Limitations faced in the course of the research were accessibility to
information, difficulty in accessing the target sample during working hours due
to the busy nature of their operations, inability to use a large sample size
due to time and resource constraints, unwillingness of small business owners to
pour out their grievances for fear of victimization if found out.
1.8 DEFINITION OF TERMS
Business: The
Oxford Learner’s Dictionary defines business as a commercial activity, a
means of live hood, a trade, profession, occupation, etc.
Capital: capital
can be defined s man-made productive asset that are set aside for the
production of other assets. In other restricted cases, it is defined as money
set aside to start business.
Economic Development: it
can define as the process whereby a country’s real per capital gross national
product of income increases over a sustained period of time through continuing
increases i.e. per capital productivity.
Economic Growth: Economic
growth is the increase in the amount of the goods and services produced by
an economy over
time. It is conventionally measured as the percent rate of increase in
real gross domestic
product, or real
GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted terms,
in order to obviate the distorting effect of inflation on the price of the
goods produced. In economics,
"economic growth" or "economic growth theory" typically
refers to growth of potential output,
i.e., production at "full employment".
Economy: the
word is used to mean a particular system of organization for the production,
distribution, and consumption of all things people use to achieve a certain
standard of living. .
Entrepreneurship: The
willing and ability of an individual to seek out investment opportunities in an
environment, and an environment, and be able to establish and run an enterprise
successfully based on the identified opportunities.
Infrastructure: Infrastructure is basic
physical and organizational structures
needed for the operation of a society or enterprise, or the services and
facilities necessary for an economy to function. It can
be generally defined as the set of interconnected structural elements that
provide framework supporting an entire structure of development. It is an
important term for judging a country or region's development.
Role: according
to Merriam-Webster dictionary is defined a function or part performed
especially in a particular operation or process or major.
SMEs: Small and
medium enterprises or small and medium-sized enterprises (SMEs, small and
medium-sized businesses, SMBs, and variations of these terms) are companies whose
personnel numbers fall below certain limits. The abbreviation "SME"
is used in the European Union and
by international organizations such as the World Bank, the United Nations and the World Trade
Organization (WTO). Small enterprises outnumber
large companies by a wide margin and also employ many more people. SMEs are
also said to be responsible for driving innovation and competition in many
economic sectors.
1.9 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows. Chapter one is concern with the introduction, which consist of the (background of the study), statement of the problem, objectives of the study, research questions, research hypotheses, significance of the study, scope of the study etc. Chapter two being the review of the related literature presents the theoretical framework, conceptual framework and other areas concerning the subject matter. Chapter three is a research methodology covers deals on the research design and methods adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study.
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