CHAPTER ONE

INTRODUCTION

1.1        Background of Study

Indigenous Firms (Indigenous Firm) as defined by the National Council of Industries refer to business enterprises whose total costs excluding land is not more than two hundred million naira(N200,000,000.00)only. It has been argued that Indigenous Firm are an effective instrument for economic growth and development in Developed and Less Developed Countries (Beyene, 2002; Nitani, 2005). This is because Indigenous Firm contribute significantly to the Gross Domestic Product (GDP) and produce substantial amounts of locally consumed products (ECA, 2000; Wattanapruttipaisan, 2003; Tagoe et al, 2005; Saleh and Ndubisi, 2006). According to Mojmir (2000), Indigenous Firm play an important role in the economic growth of any country including industrialised countries because they account for more than half of a country‟s output and employment (Hussain et al, 2008). In the same vein, Udechukwu (2003) asserts that the development of Indigenous Firm is an essential element in the growth strategy of most economies, which holds particular significance for developing countries like Nigeria. Indigenous Firm are a vital part of any market economy because they are represented in all major branches of manufacturing and service sectors (Obokoh, 2008c). This is in addition to their role in job creation for the unemployed, provision of goods and services within and across national boundaries of countries (Saleh and Ndubisi

2006; Woldie et al, 2008).  

Due to their small size, Indigenous Firm are flexible and are more able to adapt to changes within the market environment than large firms (Mazzarol, 2000; Udechukwu, 2003; Aryeetey, 2005). However, the small size of Indigenous Firm and their small capital base also constitutes an obstacle to their access to funds for their operations (Obokoh, 2008). It is expected that Indigenous Firm, with ready and willing staffs, can succeed in an increasingly competitive world, especially if there are enabling and supportive government policies (Briggs, 2007). In this vein, Berry (2002) asserts that the flexibility of Indigenous Firm operations persuades business analysts to believe in their strategic role towards future industrial growth of developing nations. Despite this flexibility, Indigenous Firm are also exposed to external environmental risks such as government policies and competition from MNCs (Watson and Everett, 1999; Abonyi, 2003). Some of these environmental factors often hinder Indigenous Firm from gaining the necessary international exposure for achieving large scale production for the efficient utilisation of resources (Mambula, 2004).  

Given favourable policy environment and support, it is believed that Indigenous Firm can achieve an efficient production process that would enable them to compete successfully in the global market (Briggs, 2007). Therefore, government policies should be directed towards improving the economic environment in which Indigenous Firm operate (Fredland and Morris, 1976; Everett and Watson, 1998).  There is now a re-newed emphasis on the development of Indigenous Firm especially in LDCs (ECA 2001). This is in view of LDCs governments‟ formulation of policies that would create the enabling environment for the establishment and the operation of Indigenous Firm (Agboli and Ukaegbu, 2006).  

This research is thus intended to critically appraise the circumstances of Indigenous Firm in Nigeria with a view to actually identifying and assessing the bottlenecks militating against the effective performance of Indigenous Firm and also seek to investigate the reasons why programmes designed by government to boost Indigenous Firm performance are yet to fully achieve their desired objectives (Mambula 2002).

 1.2      Statement of the Problem 

Indigenous Firm enterprises play an important economic role in many countries including Nigeria. However, it appears that considering the enormous potentials of the Indigenous Firm sector, and despite the acknowledgement of its immense contribution to sustainable economic development, its performance still falls below expectation in many developing countries. This is because the sector in these developing countries has been bedeviled by several factors militating against its performance, and leading to an increase in the rate of Indigenous Firm failure. Indigenous Firm are faced with the threat of failure with past statistics indicating that most Indigenous Firm die within their first five years of existence. Another smaller percentage goes into extinction between the sixth and tenth year thus only about five to ten percent of young companies survive, thrive and grow to maturity. A 2004 survey conducted by the Manufacturers Association of Nigeria (MAN) revealed that only about ten percent (10%) of industries run by its members are fully operational. Essentially, this means that 90 percent of the industries are either ailing or have closed down. This situation has been of great concern to the government, citizenry, operators, practitioners and the organized private sector groups. 

Also it will seek to determine the key factors militating against the survival and effective performance of indigenous firm in Nigeria especially the manufacturing sub- sector. It also intend to explore and investigate the reasons why programmes designed by the government to boost manufacturing Indigenous Firm performance do not effectively achieve its role. 

1.3       The Objectives of Study

The objectives of this research is to: 

i.                    Identify and assess the key factors responsible for the relatively low performance and failure of the Indigenous Firm survival. 

ii.                 Investigate the reasons why programmes designed by government to boost manufacturing Indigenous Firm performance do not effectively achieve its role.  

iii.               Make appropriate recommendation towards alleviating the problems facing

Indigenous Firm.

iv.               Identify ways and means, which will establish and sustain the vibrancy for

Nigerian Indigenous Firm.

1.4       Research Questions 

The main interest of this research and the questions it intends to answer are;

i.                    What are the key problems militating against survival and effective performance of Indigenous Firm?

ii.                 To what extent has the government development programmes designed to boost Indigenous Firm performance effectively towards achieving its desired goals?

iii.                What can be done to curb the problem faced by Indigenous Firm and ways to improve their performance of Indigenous Firm to enable them play a major role in economic development? iv. What are the ways and means, which will establish and sustain the vibrancy for Nigerian Indigenous Firm?

1.5       Research Hypothesis 

1.                  H0:      Policies implemented for Indigenous Firm have a negative relationship of the survival of Indigenous Firm in Nigeria.

2.                  H0:       There is no prospect of Indigenous Firm in Nigeria.

1.6       Significance of the Study

The study of Indigenous Firm Problem and Prospect is of relevance or great concern to the various governments (federal, state and local), indigenous firm promoters and operators, Banks as well as the civil society; It is said that a clear and precise definition of a problem represents half the solution – hence, identifying and crystallizing the key problems of the Indigenous Firm would lay a solid foundation for mitigating if not solving them out rightly. The time is now to do something to the situation of our Indigenous Firm given the aggravating level of poverty in Nigeria and the need to meet up with the Millennium Development Goals. 

1.7       Scope of the Study

The study focuses on Indigenous Firm in the manufacturing sector because of the importance of the manufacturing sector to economic development in Nigeria. Due to budget and time constraints, the study was restricted to Ajaokuta Steel Company Limited) In Kogi State. The study traces the Indigenous Firm programme from which has affected Indigenous Firm in the manufacturing sectors with particular focus on the period of 2004 to 2011.

1.8       Definition of Terms / Acronyms

Various bodies, organizations and institutions have defined Indigenous Firm differently depending upon their purpose, objective and use. For this research, the following definitions have been adopted:

Micro Enterprise: A firm, whose total cost including working capital but excluding cost of land is not more than ten million naira (N10,000,000) and/or with a labour size of not more than thirty (30) full-time workers and/or a turnover of less than two million naira (N2,000,000) only. 

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