EVALUATION OF THE ROLE OF SOCIAL AND ECONOMIC INFRASTRUCTURE IN THE PROMOTION OF BUSINESS ACTIVITIES IN NIGERIA
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EVALUATION OF THE ROLE
OF SOCIAL AND ECONOMIC INFRASTRUCTURE IN THE PROMOTION OF BUSINESS ACTIVITIES
IN NIGERIA (A CASE STUDY OF SOME SELECTED SMES IN ABUJA)
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 bedevilled 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
specifi objectives are:
To identify infrastructure challenges that affect business
activities in FCT Abuja.
To evaluate the specific roles played by both economic and
social infrastructures in promoting business activities in FCT Abuja.
To suggest entrepreneurial policies that will enhance the
operations of small and medium scale businesses in FCT Abuja.
1.4 RESEARCH QUESTIONS
1. What infrastructural challenges affect the smooth
operation of businesses in Abuja?
2. What role have economic and social infrastructure played
in promoting small business activities in Abuja?
3. What policies if introduced by the government will help
promote small and medium scale business activities in Abuja?
1.5 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: Â The level of infrastructural development in FCT Abuja
is low.
H1: Â The level of
infrastructural development in FCT is high.
Ho: Infrastructural development does not significantly influence the performance of businesses in
FCT Abuja.
H1: Infrastructural
development significantly influences the performance of businesses FCT Abuja.
1.6 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.
1.7 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.
1.8 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.
1.9 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.
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