CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
Small and medium
sized enterprises (SMEs) are the backbone of virtually all economies of the
world because of their role in employment creation and provision of
personalized services (Wattanapruttipaisan, 2003). SMEs have strong influence
on the sustainable development process of less developed as much as developed
countries because they foster economic growth and alleviate poverty (Ayyagari,
Beck and Demirguc-Kunt, 2003). Udechukwu (2003) asserts that the development of
SMEs is an essential element in the growth strategy of most economies and holds
particular significance for developing countries like Nigeria.
The best
performing economies in Asia are heavily based on SMEs which are major sources
of dynamism in economic development. The requirements for SMEs to access the
global market and upgrade their position within the international market as a
result of trade liberalization are becoming increasingly difficult due to
competition (Abonyi, 2003). Berry (2002) suggests that the increasing
prevalence of flexibility and specialization of SMEs has persuaded many
business analysts to believe in the strategic role SMEs play in the industrial
structure of any developing nation. But he noted that SMEs are quite vulnerable
to external shocks due to the global competition from the liberalization of
trade. There is reasonable assurance that given favorable policy environment,
SMEs can successfully compete in the global market (Briggs, 2007).
Most
governments, especially in Less Developed Countries (LDCs) now recognize the
need to formulate policies that create conducive atmosphere for the
establishment and operation of SMEs. The new emphasis by various governments in
LDCs on SME development can be linked with the current global trend of economic
liberalization and the need to bridge the development gap that hitherto exists
between them and industrialized countries.
Governments in
developing countries, especially in Nigeria, provide a wide variety of programs
to develop and assist SMEs. Despite these programs, it has been observed that
their impact on the performance of SMEs has been less than satisfactory
(Manbula, 2002). This can be attributed to some factors that governments and
policy makers in developing countries have failed to put into consideration in
the design and implementation of SME development programs.
Most SMEs either
remain small, moribund or shut down within few years of operation due to some
constraints that hinder their growth, especially finance (Rodriguez and Berry,
2002). There is no available evidence in Nigeria that the situation has
improved with economic liberalization (trade and financial market) that brought
about stiff competition from well established Multinational Corporations
(MNCs). The proponents of economic liberalization claim that it improves the
situation of SMEs by giving them better access to finance and encourages
competition which will in turn reduce poverty (Tagoe, Nyarko and Anuwa-Amarh,
2005). This paper focuses on the manufacturing SMEs in Nigeria and the programs
designed by the Nigerian government for the development of SMEs.
It develops the
argument that government programs for SMEs development are not properly
implemented which has hindered SMEs competitiveness. The institutional structures upon which these programs can function effectively
are either not in place or insufficient. This has resulted in a biased economic
environment for SMEs to compete with well established MNCs under a liberalized
trade environment.
1.2
STATEMENT OF THE PROBLEM
There are a lot
of problems which this research work seeks to address. It is in agreement with
certain experiences that the inability of the management of the small scale
businesses to determine causes of failure may have led to unproductively.
Also it is
perceived that the inability of the management to develop policies for solving
the problem of small scale businesses may have reduced the profitability of
such enterprises. Indeed, nothing weakens organization more than when
management develops poor attitude to personnel training. Experiences show that
the poor attitude of the government to creation of conducive environments for
business may have reduced the chances of survival of small scale enterprises.
The inability of works to implement management policies just as experiences
have shown, may have led to unproductivity.
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