CHALLENGES FACING SMALL AND MEDIUM ENTREPRISES IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Small and medium scale enterprises (SMEs) are largely viewed as the engine wire of any nation’s economic growth and they are regarded as justifiable means that
propel development globally. SMEs are labour intensive; as much as they are capital saving business ventures. They are capable of making people self-reliant and generating billions of new jobs globally (Abeh, 2017a,b; Kadiri, 2012). They are also observed as the key drivers to economic growth and poverty reduction (Agwu & Emeti, 2014). SMEs are significant parts that links, strengthen and enhances the development of the countries. Their performance and growth in manufacturing, agriculture, services, etc., has been considered as the drivers and has contributed to the
Nigeria economy. Sustainable growth and the increase in SMEs performance create competitiveness that opens
numerous doors for employment opportunities, tangible and intangible assets (investment) in the environment (Eniola
& Ektebang, 2014). Historically, Nigeria’s independence in 1960 marked a turning point in the growth and
development of SMEs, which has created much of the emphasis on SMEs as panacea in the reduction of poverty and
joblessness or unemployment in Nigeria as a whole. The adoption of the Economic Reform Program (ERP) of 1986
indicated a pivotal shift from impressive, capital intensive and large scale industrial projects based on import
substitution to small scale industries with enormous potentials for the development of domestic linkages for
sustainable economic and industrial development (Agwu & Emeti, 2014). As such, SMEs perform very important part
of the Nigerian economy (Eniola & Ektebang, 2014). Though, SMEs have developed over the years in Nigeria in spite
of its challenges.
Dr. Ade Oyedijo, a financial expert in a paper titled “Nigeria’s Economy and its Career Promise for the Mature
Employee” affirmed that the plights of SMEs in Nigeria have to do with key variables and challenges that characterise
the nation’s economy. These include but are not limited to a very high unemployment rate, which is expected to
increase as a result of the current ongoing public sector reforms, high unemployment rate, high poverty level,
disease, hunger, etc. Dr. Oyedijo also mentioned a drastic shift from the production of non-oil traded goods (mostly
agricultural) to traded goods while about 95 million Nigerians are reported to be living below the poverty line even as
19 of her citizens are ranked among the 500 wealthiest men in modern capitalist economy as among the
characteristics of our nation’s economy which aggravate the problems of Nigerian SMEs. He also opined that since
independence, the main thrust of Nigeria’s development strategies and objectives have been the development of
industrialization, education and a self-reliant economy but regretted that the human capital which is expected to
support the industrialization process and propel other sectors to maturity has not exhibited the right mix of knowledge,
attitude and skills required to achieve this purpose.
In spite of the fact that SMEs have been regarded as the bulwark for employment generation and technological
development in Nigeria, the sector nevertheless has had its own fair share of neglect with concomitant unsavoury
impacts on the economy. In a seminar titled “Carer Crisis and Financial Distress- The Way Out”, the General Manager
of Enterprise and Financial Support Company Limited, Mr. Oluseyi Oluboba, identified in his paper the following as
the main problems of SMEs, which are however not insurmountable: low level of entrepreneurial skills, poor
management practices, constrained access to money and capital markets, low equity participation from the promoters
because of insufficient personal savings due to their level of poverty and low return on investment, inadequate equity
capital, poor infrastructural facilities, high rate of enterprise mortality, shortages of skilled manpower, multiplicity of
regulatory agencies and overbearing operating environment, societal and attitudinal problems, integrity and
transparency problems, restricted market access, lack of skills in international trade; bureaucracy, lack of access to
information given that it is costly, time consuming and complicated at times. The problems and challenges that SMEs
contend with are enormous no doubt but it is curious to know that some SMEs are able to overcome them. This gives
hope and should provide a basis for optimism that there is a way out. There must be some survival strategies, which
are not known to many SME promoters. This research is also intended to explore and unravel some of the key
business survival strategies, which have worked for a few thriving SMEs. The benefits of this could be tremendous in
that other SMEs facing threats of extermination as well as new and proposed new ones could also borrow a leaf from them.
CHALLENGES FACING SMALL AND MEDIUM ENTREPRISES IN NIGERIA