EVALUATION OF THE ROLE OF SOCIAL AND ECONOMIC INFRASTRUCTURE IN THE PROMOTION OF BUSINESS ACTIVITIES
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EVALUATION
OF THE ROLE OF SOCIAL AND ECONOMIC INFRASTRUCTURE IN THE PROMOTION OF BUSINESS
ACTIVITIES
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The focus on
economic development has shifted in recent years from public-sector led
economic development to private sector driven economic development. In
achieving this, the Small and Medium Enterprise (SME) sector is usually relied
upon because of extant scholarly knowledge of its capacity to contribute to
economic development.
In 2002, the
Honourary Presidential Council on Investment (HPACI) SME sector profile reveals
that the SMEs contribute as much as 40% of GDP in developed economies and some
developing nations. The report further shows that SMEs constitute over 90% of
firms in Nigeria with a meagre 1% contribution to GDP. This disproportionate
contribution is as a result of factors within the business environments.
Studies have
adduced several reasons including access to finance, infrastructural
limitations, entrepreneurial competence of owner-managers and the impact of
multiple tax, to explain differences in SMEs contributions to GDP (Kessides,
1993; Sule, 1980 and Anyanwu, 1994; HPACI, 2002, and Aruwa, 2004). Foremost of
these barriers are inadequate finance and lack of infrastructures. Kessides
(1993) recognises the significance of infrastructure in the process of economic
growth.
Interestingly,
the Honourary Presidential Council on Investment (HAPCI, 2002), after an
in-depth study of the SME sector, gave the reasons limiting the role of SMEs as
the hub of entrepreneurship in Nigeria. Some of the reasons given were
infrastructural limitations, access to finance, access to enterprise support
services, unfavourable business environment and poor access to information
about sources of raw materials and market network. There is a recurrence on the
greater impact of limited access to finance, entrepreneurial incompetence and
inadequate infrastructure in the SME literature.
The need to
improve SME development in Abuja is particularly timely given the crises and
attendant less propitious economic situation that has bedevilled the capital
since the 1980s. This manifested by way of the deplorable nature of
socio-economic infrastructure. This has the effect of imposing heavy cost and
of shifting of resources away from productive private investment since domestic
and foreign entrepreneurs would only invest where infrastructure exists and
satisfactory rate of return is assured.
Sani (2001)
observes that indices of micro-economic infrastructural facilities are
inadequate and the operation of the functional ones has not been efficient.
This indeed has dire consequences in promoting business activities in Nigeria.
The SME sector in Nigeria operates in an environment with very poor
infrastructure, which deter prospecting firms from entry and hinders effective
performance and international competitiveness (Aruwa, 2004).
1.2 Statement of the Problem
In-adequate
power supply and bad roads are major social and economic infrastructures
hindering effective operations of small and medium scale enterprises in
Nigeria. Constant power outages for example, do not encourage business
activities as most skilled and un-skilled jobs are greatly dependent on
electricity.
The
provision of infrastructure services to meet the demands of businesses-both
small and medium scale, is one of the major challenges of economic development
in Nigeria. The provision of economic and social infrastructure can expand the
productive capacity of the Nigerian economy by creating enabling environments
for small and medium scale businesses in an economy, thereby encouraging
economic development.
This is not
always the case as small businesses in Nigeria suffer from bad roads to
constant power outages. A study conducted by Ogbonnaya (2010) demonstrated
empirically that no matter how novel the policies or incentives to drive the
industrial sector are, if the infrastructural problems are not fixed, the
policy objective of accelerating the growth of the industrial sector may not be
realized.
The
significance of infrastructure in the process of economic growth has long been
established. Infrastructure has been seen as the basic requirement for business
establishment and survival. The costs of acquiring infrastructures are
significantly enormous for SMEs to bear and therefore, government intervention
is inevitable. However, the depth of impact, the degree of impact or
relationship coefficient has not been established particularly in respect of
Kaduna state. This makes this paper distinguishable.
1.3 Objectives of the Study
The main aim
of the study is to evaluate the role of economic and social infrastructure in
promoting business activities in Nigeria. Other specific objectives are:
To identify
infrastructure challenges that affect business activities in FCT Abuja.
1.4 Research Questions
1. What infrastructural challenges affect
the smooth operation of businesses in Abuja?
2. What role have economic and social
infrastructure played in promoting small business activities in Abuja?
3. What policies if introduced by the
government will help promote small and medium scale business activities in
Abuja?
1.5 Statement of Hypotheses
The study
developed two operational hypotheses as stated below:
H0:
Infrastructural facilities in FCT Abuja is inadequate.
H1: Infrastructural
facilities in FCT is adequate.
Ho: Infrastructural facilities does not have
significant impact on
the
performance of businesses in FCT.
H1:
Infrastructural facilities have significant impact on the performance of
businesses in FCT.
1.6 Significance of Study
Small and
Medium scale Enterprises (SMEs) in Africa rely largely on own savings, not only
to grow but also to innovate, firms often need real services support and formal
finance assistance, failing which under-investment in long term capabilities
(training and R&D) may result, (Oyelaran-Oyeyinka, 2003).
Besides
finance, there are critical elements (including: knowledge, skills and
experience of staff; capacity and quality of internal facilities; information
and knowledge of market; intellectual and managerial leadership; external
infrastructure and the incentive system at the micro and macro levels) that
lacking within technology support institutions themselves. These undermine the
effectiveness of their support to Small and Medium scale Enterprises (SMEs).
This study is significant because it would help to evaluate the operations of a
vital segment of the industrial sector – Small and Medium Scale Enterprises
(SMEs) , which have been identified as having very high potential in promoting
economic growth and development (Oni and Daniya, 2012). The evaluation shall be
done with special focus on their financing thereby adding to the existing
literature on the subject matter.
This study
will be of great benefit to the following:
Government
This study
highlights and critically examines the various infrastructural challenges faced
by small and medium scale enterprises in Nigeria. The study will enable
government bodies and other stakeholders to make policies that will help
fast-track the provision of adequate and quality infrastructures to create
enabling environment for small and medium scale enterprises in Nigeria.
Students
The study
will also be a great importance to students both at basic and tertiary levels.
Findings and recommendations will guide students in research and further
studies.
Manufacturing
Companies
Since most
manufacturing companies depend on small and medium scale enterprises for their
survival, the study will go a long way in assessing the role manufacturing
companies can play in strengthening the operations of small and medium scale
enterprise in Nigeria.
Other
Researchers
The study
will provide foundation for future studies. Based on research questions and
recommendations given in the study, further research studies can be developed
from the project work.
1.7 Scope of the Study
This
research work focuses on the role infrastructures such as economic and social
infrastructures have played in the
promotion of Small and Medium Scale Enterprises (SMEs) in Nigeria paying
special attention to the impact the government of Nigeria has on the
development of Small and Medium Scale Enterprises for a period of three (3)
years 2009. The research intends to study the essential problems encountered by
Small and Medium Scale Enterprises and suggest ways by which they can be
adequately and efficiently promoted.
Most of the
information and data needed for the study would be gathered from existing
literature and from some selected business owners in FCT Abuja.
1.8 Limitations of the Study
Limitations
faced in the course of the research were accessibility to information,
difficulty in accessing the target sample during working hours due to the busy
nature of their operations, inability to use a large sample size due to time
and resource constraints, unwillingness of small business owners to reveal
confidential information in fear of competitions.
1.9 Definition of Terms
Business:
The Oxford Learner’s Dictionary defines business as a commercial activity, a
means of live hood, a trade, profession, occupation, etc.
Capital:
capital can be defined s man-made productive asset that are set aside for the
production of other assets. In other restricted cases, it is defined as money
set aside to start business.
Economic
Development: it can define as the process whereby a country’s real per capital gross
national product of income increases over a sustained period of time through
continuing increases i.e. per capital productivity.
Economic
Growth: Economic growth is the increase in the amount of the goods and services
produced by an economy over time. It is conventionally measured as the percent
rate of increase in real gross domestic product, or real GDP. Growth is usually
calculated in real terms, i.e. inflation-adjusted terms, in order to obviate
the distorting effect of inflation on the price of the goods produced. In
economics, "economic growth" or "economic growth theory"
typically refers to growth of potential output, i.e., production at "full
employment".
Economy: the
word is used to mean a particular system of organization for the production,
distribution, and consumption of all things people use to achieve a certain
standard of living.
Entrepreneurship:
The willing and ability of an individual to seek out investment opportunities
in an environment, and an environment, and be able to establish and run an
enterprise successfully based on the identified opportunities.
Infrastructure:
Infrastructure is basic physical and organizational structures needed for the
operation of a society or enterprise, or the services and facilities necessary
for an economy to function. It can be generally defined as the set of
interconnected structural elements that provide framework supporting an entire
structure of development. It is an important term for judging a country or
region's development.
Role:
according to Merriam-Webster’ dictionary is defined a function or part
performed especially in a particular operation or process or major.
SMEs: Small
and medium enterprises or small and medium-sized enterprises (SMEs, small and
medium-sized businesses, SMBs, and variations of these terms) are companies
whose personnel numbers fall below certain limits. The abbreviation
"SME" is used in the European Union and by international
organizations such as the World Bank, the United Nations and the World Trade
Organization(WTO). Small enterprises outnumber large companies by a wide margin
and also employ many more people. SMEs are also said to be responsible for
driving innovation and competition in many economic sectors.
REFERENCES:
Kessides, H.
(1993). Infrastructure and Economic Growth. Quoted In: The 2005 Annual Report
of the Ministry of Economic Development. New Zealand .
Sani, B.M.
(2001). ‘The Collapse of industries in Kano: Causes and Solutions. Paper
presented at joint Annual general meeting of manufacturers Association of
Nigeria. Kano.
Sule, E.I.K.
(1986), Small Scale Industries in Nigeria. Concepts.
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