Full Project – The effect of small and medium scale enterprise on economic development

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CHAPTER ONE

• Background of the Study

Small and medium scale enterprises in Nigeria can be traced back to 1946 when the essential paper No 24 of 1945 on “a ten year plan of development and welfare of Nigeria 1946 was presented”. Small and medium scale enterprises (SMEs) are all time necessity. It was there at the beginning; it has gain prominence today and will increase its importance tomorrow. This is simply dictated by the development needs of the Nigerian society.

In the mid-1960s, a new approach to SMEs development began to emerge due to a number of factors. First, there was growing concern over low employment elasticity of model, large-scale production. It was claimed that even with more optimal policies, this form of industrial organisation was unable to absorb a significant proportion of the rapidly expounding labour force (Chenery et al 1974; ILO, 1973). Second, there was wide spread recognition that the benefits of economic growth were not fairly distributed, and that the use of large-scale, capital-intensive techniques was partly to be blamed (Chenery et al 1974). Third, empirical diagnoses show that the causes of poverty were confined to unemployment, and that the most of the poor employed in a large variety of small scale, low-productivity activities. Thus, it was thought that one way to alleviate poverty could be to increase the productivity of those engaged in small scale production (Afab and Rahim, 1989).

This suggested a new role for small industries, what has come to be labelled “the urban informal sector” small, labour intensive industries were seen not only to increase employment, but also to increase the living standard of the poor. They were also thought to be capable of providing a new dynamics of economic growth. The new objective was not just to stop the retreat but to promote the small scale sector (Schmitz, 1982; Aftab and Rahim, 1989).

The last few decades however have witnessed a significant shift of perspectives in many developing countries towards SMEs. There is a growing view that, since it require little capital to start (unlike large-scale enterprises) will not be difficult for the needed capital to be raised.

One of the major aspects of the Millennium Development Goals (MDGs) in Nigeria has been to enhance the growth and development of the SMEs, to enable it contributes significantly to country’s Gross Domestic Products (GDP). Export and employment e.t.c., but due to poor domestic products capacity occasioned by low purchasing income, low productive output and low savings, underdeveloped financial institutions  and culture in the economy, actual investment is not adequate to spur aggregate productive activities and allows  SMEs play its vital  role as main stay of the economy which is what interest this research.

The current reform and liberalization policy of government for private sector driven economy, small and medium scale enterprises is been seen as panacea for removing the obstacle to dwindling economic growth of the Nigerian economy.

However, the establishment of SMEs is generally determined by a number of factors which includes’, the treatment and protection of such investments, the opportunities for sales and profit, the size of the market, state of infrastructure and quality of labour skill, political and social stability as well as the availability of natural resources and a host of other factors.

It is in view of these benefits that SMEs and the strategic role of SMEs in repositioning the economy of Gwer East Local Government area that this study seeks to examine the contribution of business centres to economic growth in Gwer East Local Government Are of Cross River state.

• State of the Problem

Over the years, the government have initiated a lot of programmes/policies such as granting of concession on import of raw materials, promotion of made-in-Nigeria goods. Tax exemptions and other incentives, release of N130 billion to the credit market to make for easy accessibility to credit facilities by entrepreneurs/producers, Central Bank of Nigeria (CBN) grant of N200 billion to support Small and Medium Scale Enterprises (SMEs) in order to create employment and increase productivity, infrastructural development such as roads, railways, seaports, airports and the power sector reform to reduce cost of production. Recently, President Muhammad Buhari introduced another programme for young entrepreneurs called “P Yes  programme for young entrepreneurs” to create employment for the youths and thereby increasing productivity in the manufacturing sector of the economy and a host of other programme and policies.

In spite of the government pro-industrial programmes/policies and capital inflow witnessed in the manufacturing sector and the support given to small and medium scale enterprises to engendered economic growth, the sector is not supposedly the major employer of labour contributor to Gross Domestic Product (GDP) as expected. The growth rate of GDP have been fluctuating over the years, for instance, the GDP growth rate in 2009 was 12.5%, in 2010 it reduced to 2.2%, in 2011 it increased to 7.45% and presently in 2022, it has been pegged at 8%. These figures according to analysts are mere paper work as the acclaimed GDP growth rate are not feasibly seen in the economy in terms of output and employment generation.

It is expected that small and medium scale enterprises (SMEs); using cyber cafe and business (Centres in the industrial/manufacturing sector will boost output leading to economic growth. However, it is not clear whether this is happening in the case of Cross River State and indeed Nigeria.

It is in the light of the above that the research seeks to study the actual effect of cyber cafe and business centres SME on economic growth.

• Research Questions

This research projects intends to address the following research questions:

1. What is the effect of SMEs on the economic growth in Gwer East
2. What is the contribution of business centres as SME to economic growth in Gwer East Local Government Area?

• What are the problem of SMEs that contributes to slow economic growth in Aliade township?
  • Aims and Objectives of the Study

The main objective of this study is to investigate the contributions of cyber cafe and business centres to economic growth.

This study intends to:

1. To examine the effect of SMEs on economic growth in Gwer EastLocal government Area.
2. To assess the contribution of SMEs to economic growth.

• To identify the problems of business centres as SME towards economic growth
  • Significance of the study

The challenges posed to humanity by the dwindling nature of economic growth have remained from time past to the present day and this has drawn attention of Nigerian population today. Significantly,   looking into this problem and providing a dependable solution for it is very important because this menace is evident in the study area, in this perspective, the concern of this project is to provide an action oriented report which will aid at every stage in handling and managing the problem of dwindling economic growth.

The readers of this project will find it very significantly. The findings of this project will help the generality of people to know what causes dwindling economic growth, and what to do in order to improve it. The government at all tiers particularly. Those sectors in charge of economic planning and development will find a better focus through research.

This research will reveal investment opportunities in business centres that would attract people to invest thereby, creating employment which further improve output, and the quality of life of the people.

Educational researchers will also find this research work instrumental as a tool of reference during their research and it would open up areas for further research.

• Scope and Limitations

This study will focus on small and medium scale enterprises as they affect economic growth in Gwer East Local Government Area of Benue State in Nigeria. Attention will be given particularly to  business centres.

For evaluating the effect of the establishment of SMEs on economic growth in this area to be used for the empirical study, both the staff and the owners of the enterprises under consideration will be targeted for examination for the needed data.

The major setback of this study is the insufficient availability of existing literature and the poor data system on economic growth and SMEs, inadequate funding for research project and lack of necessary equipment, facilities and materials. Unattractive working conditions, poor record keeping culture of Nigerian, the attitude of government and the society towards research and poor transportation system among other setbacks constitutes the limitation to the way forward of this research project.

1.7 DEFINITION OF TERMS

Below are brief definition key words that may seen complicated as use in the study. The definition would adhere strictly to the nature in Which these words are use in the study.

ENTERPRISE: These are business started and run by an entrepreneur for the purpose of making profit.

SMALL SCALE ENTERPRISE: This is a business marked by a limited number of employees and a limited flow of financial materials.

GROSS DOMESTIC PRODUCT (G.D.P): This is the total market value of goods and services produced by a country’s economy during a specified period of times

ECONOMIC DEVELOPMENT: This is the policies or activities that seek to improve the economic well being of the citizens in a community or country.

DEVELOPMENT: Is the process by which the economic well being and quality of life of a Nation or an individual are improve according to their targeted goals and objectives.

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Full Project – The effect of small and medium scale enterprise on economic development