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ABSTRACT
The study investigates the impact of small and medium scale industries on the Nigerian economy, spanning from 1986 to 2010. The study adopted Ordinary Least Square (OLS) Linear Specification model. Using unit root test, the work shows that small scale industries significantly contributed to the economic growth in Nigeria despite poor funding by commercial banks. The work recommends among others that government should improve its monetary policies so as to reduce to an acceptable level, the rate of interests charged by commercial banks as well as encouraging rural based industrialization, whereby investors are encouraged to establish small and medium scale industries that would be based entirely on local raw materials, machines and equipments.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY.
In recent time, the fortune of small
scale and medium scale Industries attracted the attention of government
world-wide and thus has been the focus of general interest and research,
especially in developing Countries due to the importance of small scale
and medium scale Industries.
Their importance cannot be over
emphasized as they constitute a whole virile vehicle for the generation
of vast production of outputs and job creation. They are also act as
catalyst for restructuring and diversifying the productive base of an
economy and for the Industrial economy and for the Industrial economy
take-off and growth of such an economy. The small and medium scale
Industries are seen to hold the key to future expansion of the
Industrial sector.
In Nigeria, evidence has shown that in 1986, small
scale and medium scale Industries accounted for 70% of all firms,
employing millions of Nigerians (first Bank of Nigeria report, 1987). By
the end of 1979, over 80% of all establishments licensed under the
factory act were small and medium scale Industries (Onwuala, 1987). This
made the importance of this economic unit to be unelectable.
Small
scale and medium scale Industry in its widest sense implies the urgent
response to the challenges of developing countries, of which Nigeria is
not an exception. Small and medium scale Industries should be practiced
with due regards to the importance of available local raw materials in
its environs because the challenges facing small and medium scale
Industrialist are enormous.
The importance of small and medium scale
Industries to the economic development of any country, whether
developing or developed, have been widely acknowledged and acclaimed.
They are considered as there stimulate to private ownership and
entrepreneurial skills, generate employment, promote industrial
dispersal and rural- urban migration.
Clive carpenter (2001), said
that across the world, small businesses are crucial for economic growth,
poverty alleviation and wealth creation.
Uayatudeen (2001) said that
across the world, small businesses have such a crucial role to play in
the development of an economy and that cannot be ignored. According to
William and David, most firms and small and medium scale Industries are
compared with companies that economist usually study. But economists
have concentrated on large scale Industries. The leading textbooks in
economics have title discussions on small and medium scale business or
entrepreneurs.
The partial combinations of small and medium scale
Industries on the Nigerian economy are; creation of wealth, poverty
eradication and employment generation as encapsulated in the national
economic empowerment development strategies (NEEDS)
However small and
medium scale Industries are bedeviled by numerous challenges which have
hampered its development and growth and also its combination to
national development. To this end, government has instituted various
programs to address the challenges and constraints facing small and
medium scale industries growth. The programs and institutions Include:
a. Setting up and founding of industrial estates.
b. Establishment of national directorate of employment (NSE)
c.
Establishment of the Nigerian bank of commerce and industry (NBC), the
national economic re-construction fund (NERFUND),the Nigerian Industrial
bank (NIDB) which has merged in to one agency in the bank of industry,
the world assisted small scale enterprises loan scheme (SNEX), the
Nigerian export and import bank (NEXIN) etc.
d. Setting up a small
and medium scale enterprises development agency of Nigerian (SMEDAN); an
agency which Co. ordinates development in small business sector.
Unfortunately,
all these formal credit schemes have not been able to adequately
address the fundamental problems which have constrained small scale
enterprises access to credit; and any other enterprise establishing a
small and medium scale industry requires capital to take off survive and
eventually expand.
Nigeria’s major manufacturers produce food and beverages, cigarettes,
textiles and clothing, soaps and detergents, footwear, wood products,
motor vehicle parts, chemical products and metals while small and medium
scale manufacturing engage in leather making, poultry making and wood
carving. The smaller industries are often organized in craft guides
involving particular families who pass the skill from generation to
generation.
People have lived in what is now known as Nigeria since
at least 9000BC, evidence indicated that since at least 5000BC, some of
them have practiced settled agriculture. In the early (centuries (AD),
kingdoms emerged in the drier northern savanna, prospering from trade
with north Africa. At roughly the same time, the western and southern
forested areas yielded city- state and looser federations sustained by
agriculture and coastal trade. These systems changed radically with the
arrival of the Europeans in the late 15th century, the rise of the slave
era in the 16th Century through the 19th Century. Nigeria achieved
independence in the 1960, but has since been plagued by an unequal
distribution of wealth and inflation.
The first well documented
kingdom was the Yoruba kingdom, which was observed between the 11th
-12th centuries. Over the next few centuries, they spread their
political and spiritual influence beyond the borders of its small city
states. Its artisans were highly skilled, producing among other things,
bronze castings of heads in a very naturalistic style. Terra- cotta,
wood and Ivory were the common media instruments used.
Shortly after
the 12th century, the kingdom of Benin emerged in the mid-western south
region. Although it was separate from the Yoruba kingdoms; Benin legends
claim that the kingdoms first rulers were descendant from an Ife
prince. By the 15th century, the Benin kingdom was large, wood designing
was what sustained the city’s trade (both within the region and later
with Europe). Its legacy includes a wealth of elaborate bronze plagues
and statues recording the nation’s history and glorifying its rulers.
xvi
From
the above paragraphs, it can be noted that small and medium scale
industries are indeed necessary for the development of any economy.
Small and medium scale industries act as the major stepping stone to
economic growth. In Nigeria today, small and medium scale industries are
common but have no efficiently achieved or attained her goals.
Therefore,
to encourage local businessmen and institutions in buying small and
medium sized businesses, the government established the Nigerian bank
for industry and commerce, which had an initial operating capital of 50
million naira. There was some concern in Nigeria that Nigerians might
not be able to raise enough capital to take over the foreign owned
businesses affected by the decree and that there might not be enough
Nigerians with the technical and managerial skills necessary to replace
extricate personnel.
1.2 STATEMENT OF THE PROBLEM
The small and
medium scale Industries survey conducted in 2005 by the central Bank of
Nigeria (CBN) provides some evidence that apart from the acute short of
technology, managerial skills, poor management,
xvii
adverse
environment, and change in policy, capital is a source of great concern
to the entrepreneur in the sector. Since one of the microeconomic goals
of the Nigerian government is economic growth, we can assume that the
government aims at the expansion of small firms.
In a continent where
finance is a major constraint on development, the problem confronting
the private sector in Nigeria above all small and medium scales
Industries standout.
Most large scale industries in Nigeria have
reduced their borrowings due to high interest rates and the short term
nature of available loans. At the same time, banks are unwilling to lend
to the small and medium scale sector with its high perceived rises. In
this case, lending is not efficient to the real sector and loanable
funds are currently used to finance primary consumer imports and to
separate in foreign exchange markets. The research question from the
above experience is thus; will small and medium scale contribute much to
economic growth in Nigeria when they are not properly funded.
xviii
1.3 OBJECTIVES OF THE STUDY.
The
aim of this research work is to examine the importance of small and
medium scale industries on the Nigerian economy in order to ascertain
how small and medium scale is utilized in production using the available
raw materials and resources with a view to achieve gradual
formalization in the guest for national industrialization. Meanwhile,
the specific objectives are:
a. To determine the impact of small and medium scale enterprises.
b. To examine the effect of small and medium scale enterprises.
1.4 STATEMENT OF HYPOTHESIS.
For the purpose of this study, the research developed the following hypothesis.
Ho: Small and medium scale industries are not catalyst for economic development and growth in Nigeria.
xix
Hi: Small and medium scale industries are catalyst for economic development and growth in Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
The
significance of the study is to establish an extent of growth and
development and to expose the immense benefit derivable from small and
medium scale industries.
Also, this study will help to redress the
belief of the society that small and medium scale industries can bring
about economic and development in Nigeria.
1.6 SCOPE AND LIMITATION OF THE STUDY.
The
study encompasses the roles and contributions of small and medium scale
industries on the Nigeria economy from 1986-2010. The basis of covering
this period of time is to ascertain whether there have been any
significant impacts of small and medium scale industries on the
xx
Nigerian economy. And also, this study does not consider the medium and large scale industries.
In
writing this project, the researcher encountered some limitations,
which were; lack of information from appropriate quarter, time
constraints, transportation, lack of funds, power outrage etc. However,
in spite of all the odds, the researcher was able to come out with a
standard work. The project However, contains information which in
reliable and authentic.
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