CHAPTER ONE

INTRODUCTION

1.1  Background of the Study

The vision 20:2020 policy was articulated during Olusegun Obasanjo administration (1999 – 2007) to make Nigeria one of the twenty largest economies in the world by the year 2020. At the inception of this policy, it was argued that the Nigerian government had no intention, strategy and execution capacity to make Nigeria one of the largest economies by 2020. On assumption of office in May 2009, the Yar’Adua Administration set up the National Council on Vision 20:2020 to develop a blue print for the vision 20: 2020 in collaboration with the National Planning Commission. In November, 2009, the Nigerian Vision 20:2020 Economic Transformation Blueprint for Nigeria was released to the public (Igbuzor, 2010:1). The SMEs sector has been identified as one of the critical elements to achieving the Nigerian vision 20: 2020. This is because a nurtured and well structured SME sector can contribute significantly to employment generation, wealth creation, poverty reduction and sustainable economic growth

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and development. This is in line with the vision for the SMEs sector which is “To be the engine of economic growth, drivers of sustainable industrial development and a globally competitiveness”. The activities of SMEs in Nigeria cut across several sectors of the economy and include manufacturing, agriculture, solid minerals, metal fabrications, ICT, culture and tourism, transportation, trade and commerce among others. The establishment of small and medium enterprises agency of Nigerian in 2003 was among some of the policies put in place by government to promote orderly development of the SMEs sector in the country.

The realization of the vision is hinged on creating the plat form for success by urgently and immediately addressing the most debilitating constraints to Nigeria’s growth as well as putting in place workable SMEs. The Nigerian Association of Small and Medium Enterprises argued that the Nigeria Vision 20:2020 may not materialize until SMEs are empowered. This is based on the view that economic goals cannot be achieved without empowering the engine of economic growth

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(Adenekan, 2011:1). Small and Medium Enterprises (SMEs) have been fully recognized by government and development experts as the main engine of economic growth and a major factor in promoting private sector development and partnership. The development of SMEs is therefore an essential element in growth strategy of most economies and holds particular significance for Nigerian Vision 20:2020. SMEs not only contribute significantly to improved living standards, they also bring about substantial local capital formation and achieve high levels of productivity and capability. From a planning stand point, SMEs are increasingly recognized as the principal means for achieving equitable and sustainable industrial diversification and dispersal which is a calling need towards achieving Vision 20:2020. SMEs account for over half of the total share of employment, sales and value added. A major gap in Nigeria’s industrial development process in the past years has been the absence of a strong and virile SMEs sub-sector. However like most less developed and developing countries, the country is witnessing a rapid population growth and this contrast with

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the less than average rate of development in communication, technological and social infrastructure. Instability and high turnover of staff have impacted negatively on the performance of primary institutions responsible for policy monitoring and implementation, resulting in distortions in macro-economic structure and low productivity. These challenges constitute hindrance to the development of SMEs which provide the critical building block for industrialization and sustainable economic growth needed for achieving vision 20:2020. More so, with the dismantling of trade and other barriers, the world has been transformed into a global village consequently, SMEs in developing countries such as Nigeria are struggling to thrive successfully under intensive competitive environment both domestic and international. For this reason, there is an urgent need to provide the required enabling environment for the development of SMEs so that they could adequately play the role expected of them in transformation and Vision 20:2020 accomplishment. Such roles include mobilization of domestic savings for investment, appreciable contribution to gross domestic product, increased harnessing of local raw material,

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employment generation, wealth creation, significant contribution to poverty reduction effort through a sustainable livelihood and enhancement in personal income, technological development and export diversification (Udechukwu, 2003:7). To attain 20:2020 in an aggressive competitive globalized world where conventional tools are made obsolete by new complexities, where past experience is inadequate for new unknown, the gap with creativity, innovation and invention must be filled to address the challenges facing SMEs which have been recognized as the engine of economic growth (Olufemi, 2008:1).

1.2  Statement of the Problem

The development and survival of viable SMEs in Nigeria is critical to the sustainability and rapid transformation of Nigeria to one of the twenty largest economies in the world by 2020. This is because SMEs hold the key to job creation, employment generation, enhance productivity and wealth creation towards launching Nigeria into the class of developed economies (Kpakol, 2007: 2). In spite of efforts by many

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successive governments right from independence to promote SMEs in the industrialization process the development of the sub-sector has been constrained by a number of factors both internally and externally such as unstable macroeconomic environment, poor implementation and coordination of efforts of SMEs, absence of sustainable institutional mechanism, poor infrastructural facilities (electricity, road, railway system, water supply), Lack of effective financial support system. The role of government in fashioning policies and ameliorating the constraints of SMEs has been fully recognized to be crucial in initiating and facilitating remedial action. This is more so with rapid changing global environment moving towards deregulations knowledge-based economy, borderless trade and investment which present new challenges and opportunities for SMEs in developing countries like Nigeria (Kpakol, 2007:16).

Nigeria as a nation has had so many development plans in the past such as Structural Adjustment Programme (SAP), National Economic Empowerment Development Strategy

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(NEEDS), Millennium Development Goals (MDGs), Vision 2010 and many other developmental plans whose objectives could not be achieved (Adebayo, 2008: 12). The causes of failure of the above stated past development plans are common and more so traceable to leadership problem, lack of enabling environment, inadequate infrastructures, and policies implementation. Chibundu (2006:42) said that the fact that has emerged from the appraisal of various past and present policy initiatives on the promotion of SMEs in Nigeria is that although finance is a major constraint to the development of SMEs in Nigeria, it is by no means the only or most important constraint. The effective utilization of substantial financial resources provided under various past programmes was constrained by such factor as lack of skills as well as absence of the enabling environment for investing in small and medium scale sector. Although attention is paid now more than ever with to the aforementioned constraints, especially the controllable factors such as managerial skills, effective cost control, working capital, management, marketing management, monetary policy etc, much are yet to be done in

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ameliorating the constraints of SMEs towards achieving vision 20:2020.

1.3  Objectives of the Study

The broad objective of this study is to determine the challenges faced by Small and Medium Enterprises in achieving Vision 20:2020. The specific objectives of this study include the following:

1.  To determine whether adequate infrastructures (power, roads, water supply and good healthcare delivery) will lead to the growth of SMEs in Nigeria.

2.  To know whether capacity building will promote the growth of SMEs in Nigeria

3.  To determine if access to credit facilities will lead to the sustainability of SMEs in Nigeria.

4.  To uncover the effect of high taxation on the growth of SMEs in Nigeria.

5.  To determine whether the Information, Communication Technology (ICT) will lead to the growth of SMEs.

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1.4  Research Questions

To give the study a sharp focus and effectively guide its prosecution, the following questions are propounded.

1.  Do adequate infrastructures (power, roads, water supply and good healthcare delivery) have effect on the SMEs growth in Nigeria?

2.  Does capacity building lead to growth of SMEs in Nigeria?

3.  Does access to credit facilities lead to the sustainability of SMEs in Nigeria?

4.   Does high taxation affect on the growth of SMEs in Nigeria?

5.  Does ICT has effect on the growth of SMEs in Nigeria?

1.5  Hypotheses

It is hypothesized in this study that:

1.           Adequate infrastructures (power, roads, water supply and

good healthcare delivery) have no significant effect on the growth of SMEs in Nigeria.

2.          Capacity building will not significantly lead to the growth of SMEs in Nigeria.

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3.          Access to credit facilities has no significant effect on the sustainability of SMEs in Nigeria.

4.          High taxation has no effect on the growth of SMEs in Nigeria.

5.          ICT has no significant effect on the growth of SMEs in Nigeria.

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