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)
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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 Honorary 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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