Abstract
This study is aimed at evaluating the role of
social and economic infrastructure in promotion of business activities. The
main objective of the study was to critically examine the effects which certain
infrastructures have on the performance of small and medium scale enterprises
and to achieve this, salient issues on main infrastructures such as education,
power/electricity, technology and transportation were examined to analyse what
effects they have on SMEs using some performance measures such as; business
survival, profitability, sales turnover and product/service delivery. The
research design utilized for this study was the quantitative research design
while the population includes all the 593 registered SMEs in Ogun-State
(According to SMEDAN). A total of 239 questionnaires were administered to the
target sample to find out the effects of the mentioned infrastructures on the
performance of SMEs. Both the stratified and the simple random sampling
techniques were utilized during the course of the study. To achieve the
objectives of the study, four hypotheses were formulated and tested from the
structure of the research questions. Furthermore, ANOVA was used in testing
these hypotheses with the help of SPSS. The findings show that there is a
significant positive correlation between infrastructures and SME performance,
this implies that infrastructures play a huge role in ensuring the successful
business operation of SMEs. It is therefore recommended that government should
adequately provide these basic infrastructures for SMEs as most infrastructures
cannot be afforded by the SMEs themselves. Also, SMEs should also do more to
attract governmental attention and interest.
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 Ogun State is particularly timely given the crises and attendant
less propitious economic situation that has bedevilled the state. 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 in promoting business activities in Nigeria. The SME sector in
Nigeria operates in an environment with very poor infrastructure, which deter
prospecting firms from entry and hinders effective performance and
international competitiveness (Aruwa, 2004).
1.2
Statement of the Problem
In-adequate power supply and
bad roads are major social and economic infrastructures hindering effective
operations of small and medium scale enterprises in Nigeria. Constant power
outages for example, do not encourage business activities as most skilled and
un-skilled jobs are greatly dependent on electricity.
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 broad
objective of this research is to find out or ascertain the roles
infrastructures have on the performance of small and medium enterprises (SMEs)
in Nigeria. The specific objectives are to:
1.
determine the effect of education on business survival
2.
examine the impact of power/electricity on business
profitability
3.
determine the effect of technological infrastructures on
sales turnover examine the effect of transportation infrastructures on
product/service delivery
1.4
Research Questions
1.
What is the
effect of education on business survival?
2.
What is the impact
of power/electricity on business profitability?
3.
What is the effect
of technological infrastructures on sales turnover examine the effect of
transportation infrastructures on product/service delivery?
1.5 Hypotheses
Hypothesis 1: Ho: There is no significant relationship between
education and business survival.
Hypothesis 2 Ho: There is no significant relationship between
electricity/power and profitability
Hypothesis 3 Ho:There is no significant relationship between technology and sales
turnover.
Hypothesis 4 Ho:There is no significant relationship between transportation and
product/service delivery.
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.
This study will be of great
benefit to the following:
Government
This study highlights and
critically examines the various infrastructural challenges faced by small and
medium scale enterprises in Nigeria. The study will enable government bodies
and other stakeholders to make policies that will help fast-track the provision
of adequate and quality infrastructures to create enabling environment for
small and medium scale enterprises in Nigeria.
Students
The study will also be a great
importance to students both at basic and tertiary levels. Findings and
recommendations will guide students in research and further studies.
Manufacturing Companies
Since most manufacturing
companies depend on small and medium scale enterprises for their survival, the
study will go a long way in assessing the role manufacturing companies can play
in strengthening the operations of small and medium scale enterprise in
Nigeria.
Other Researchers
The study will provide
foundation for future studies. Based on research questions and recommendations
given in the study, further research studies can be developed from the project
work.
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 for a period of three (3)
years 2009. 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 Ogun State
1.7
Limitations 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 reveal confidential
information in fear of competitions.
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.