WORKING CAPITAL MANAGEMENT PRACTICES OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA
CHAPTER ONE
GENERAL INTRODUCTION
- BACKGROUND OF THE STUDY
- There exist lots and lots of business ventures that are run by individuals, group of people or association, firms, industries and government with the aim of maximizing profits. They range from small scale to medium and large firms. In the Nigerian economy the small scale enterprises are the most common form of business. The aim of any economy (either
industrialized or non industrialized) depends largely on how well organised the small and
medium scale enterprises are (for instance if we look at the standard of practices of smallscale industries in the economically developed Countries). The small enterprises in Nigeria seem too stagnant, less
adventurous than developed countries because the successive
governments have not appreciated their significance to the national economy.
Firstly, most of the small businesses are es
companies sole proprietorship business venture.
Small firms play critical roles in providing job opportunities, nurturing a culture of entrepreneurship and opening up
new business opportunities. They are recognised and acknowledged worldwide as vital and significant contributors to
the economic development, introduction and diffusion of new technology, ability in generating potential entrepreneurs
and skilled workers for the industrialization process both nationally and internationally (Ch ng Hakng Zephkee-Yun
&1986:25)Cha.
Small and Medium-Scale enterprises development can encourage the process of both inter-and intra- regional
decentralization; and they may well countervail economic power of larger enterprises.
More generally, the development of SME s is seen as accelerating economic objectives, including poverty alleviation
(cook & Nixson, 2000).
Small and Medium enterprises are new and growing business which (for any number of reasons) do not grow beyond
a certain size (Thomson & Martin 2005). The Nigerian Bureau of Statistics (NBS) consider firms with fewer than ten
employees as small -scale enterprises and their counterparts with more than ten employees as medium and large
sized enterprises. The GSS in its national accounts considered companies with up to 9 employees as SMEs.
(kayanula & Quartey 2000).
SMEs account for significant share of the economic activity in Nigeria and can play an important role in achieving the
Millennium Development Goals (MDGs). The long term
goals is for SME s to maximize their contr development with respect to production, income distribution and
employment and the closer
integration of women and people in rural areas within the national economy (NBSS, 1981).
One of the significant characteristics of flourishing and growing economy is booming small and medium enterprises
(SMEs).
Small and Medium enterprises play an important role in the development of Nigeria in various ways by creating
employment for rural and urban growing labour force, providing desirable sustainability and innovation in the
economy as a whole.
The small and medium scale enterprises have obvious advantage for a developing country like Nigeria because it
provides the means of entry for new entrepreneurial talent.
Small and medium scale business sector serve as a seed bed from which new large companies will grow but lack of
managerial know-how places significant constrains on SMEs development. Even though SMEs tend to attract
motivated managers, they can hardly compete with large firms.
The scarcity of management talent, prevalent in most countries in the region, has significant
impact on SME s (Parker The lack of et supportal,services 1995 )or their relatively. higher
unit cost can effort hamper to improve their management SME s of working capital (ibid). In
view of their sizes and complexities of their operations, most small and medium scale enterprises fail to keep proper
records of financial activities which affect their working capital. This has taxation, credit management and security
implication. The lack of proper business records makes most small and medium scale businesses become practically
constrained in managing their working capital very well.
WORKING CAPITAL MANAGEMENT PRACTICES OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA