CHALLENGES OF SMALL SCALE BUSINESS IN NIGERIA

Abstract

This study is on challenges of small scale business in Nigeria. Five objectives were raised which included; To determine the causes of failure of small scale businesses in Nigeria, to find out whether government creates a conducive working environment for small scale businesses, to determine whether workers do not implement management policies in small scale businesses, to evaluate if finance options affect small scale businesses, to ascertain if there is relationship between government policy and small scale business in Nigeria. In line with these objectives, two research hypotheses were formulated. The total population for the study is 200 staff from selected small scale businesses like agriculture and eatery was selected randomly. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up managers, cashiers, farmers and receptionists were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies.

CHAPTER ONE

INTRODUCTION

• Background of the study

The gross under-performance of small businesses has undermined their contributions to the nation’s economic growth and development (Central Bank of Nigeria, 2014). Before the advent of the colonial administration, majority of Nigerians are predominantly small business owners who engaged themselves in one form of small business or the other, majorly agriculture. During this period, agricultural produce, like cocoa from the south-west, rubber and oil palm produce from the east and groundnut pyramid from the core north were the main sources of wealth. Thus, small businesses through which the country’s wealth was generated were accorded due attention and unwavering support (Adisa, 2008). However, the post-independence period witnessed a massive transformational change. The governance of the Nigeria states and its economy seized to be in the hands of the British government, and Nigeria discovered hidden oil treasures in some part of the country. The eventual discovery of oil in Nigeria is widely consented, most especially among the lower class majority who dominated the small business in agricultural sector, as bad occurrence. This is because the sector was totally neglected and hence paralyzed hundreds of thousands of small businesses both in the rural and urban area (see Organization for Economic Co-operation and Development (OECD), 2009). Successive Nigerian government since then right up to 2008 have focused on the oil generated revenue with very little or no attention given to the small businesses at the grass root level. In 2008, the economic downturn hit so many small businesses hard that many of them went into oblivion. By the turn of the century, however, all these had combined to produce a chorus of complaint from small business owners and stakeholders at all levels across the country. The small business sector is recognized as an integral component of economic development and a crucial element in the effort to lift countries out of poverty (Wolfenson, 2001). Small- Scale businesses are driving force for economic growth, job creation, and poverty reduction in developing countries like Nigeria. They have been the means through which accelerated economic growth and rapid industrialization have been achieved (Harris et al, 2006; Sauser, 2005). Furthermore small scale business has been recognized as a feeder service to large- scale industries (Fabayo, 2009). Several studies have indicated that thousands of small businesses start up every year but significant numbers of them fail before or by the first year of their operation while majority shut down before their second year (Dickenson, 1981 Almus, 2004; Persson, 2004). This assertion is also supported by Van Praag (2003: 21) who succinctly puts it thus: Of every 100 start-ups only 50 firms survive the first three years. The rate of small businesses dissolution is alarming that researchers have enjoined authorities to come to their aid in order to reduce unemployment and boost the gross domestic product output. Consequently, White (2005) and Marlow (2005) also argue that venturing into small business is very risky and that the rate of small businesses failure in developing countries such as Nigeria is very high. Governments in developing countries, especially in Nigeria, provide a wide variety of programs to develop and assist Small scale business. Despite these programs, it has been observed that their impact on the performance of Small scale business 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 Small scale business development programs. In Nigeria in particular, despite the support and incentive programs to small scale business, Akabueze, (2002) succinctly stated that it would seem reasonable to expect that small businesses would grow and flourish, but the rate of business failure continues to increase because of the obstacles affecting business performance which include: lack of financial resources, lack of management experience, poor location, laws and regulations, general economic conditions, as well as critical factors such as poor infrastructure, corruption, low demand for products and services, and poverty. Others include: shortage of raw materials, handicap in obtaining finance, inadequate competent personnel, inability to control costs and problems of dumping of cheap foreign products and others. Despite the Inherent problems associated with the growth of Small- scale businesses, women entrepreneurs are increasingly venturing into ownership of small -scale enterprises either on their own or in partnership with male entrepreneurs (ILO, 2005). This has been made possible primarily because of ease of entry, limited access to other enterprises and lack of employment opportunities in formal sector of the economy. Also, given the growth of entrepreneurship among women, understanding the social and economic factors influencing their success performance is of critical importance. It on this view the researcher wants to investigate the challenges of small scale business in Nigeria.

• STATEMENT OF THE PROBLEM

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 unproductively.

• OBJECTIVE OF THE STUDY

The main objective of this study is challenges of small scale business in Nigeria. But for the successful completion of the study; the researcher intends to achieve the following sub-objectives;

1. To determine the causes of failure of small scale businesses in Nigeria
2. To ascertain the role of government in creating a business friendly environment.
3. To determine whether workers do not implement management policies in small scale businesses.
4. To ascertain if there is relationship between government policy and the growth of small scale business in Nigeria
   • RESEARCH HYPOTHESE

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H₀:   there are certain factors responsible for the failure of small scale business in Nigeria

H₁:  there are no factors responsible for the failure of small scale business in Nigeria

H₀²: there is no significant relationship between government policy and the growth of small scale business in Nigeria

H₂: there is a significant relationship between government policy and small scale business in Nigeria

• SIGNIFICANCE OF THE STUDY

Information gathered from the study could be used by Managers of Small and medium Scale Enterprises for planning appropriate measures for business growth and survival as well as the effective allocation of resources. To students in every higher institution of learning, it will provide them with some vital information concerning strategies for small scale business survival. Also, it will provide basis for which further research could be conducted. Finally, it is believed that this research study will be of great use to general public by expanding their knowledge on small scale business.

• SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers challenges of small scale business in Nigeria. The researcher encounters some constrain which limited the scope of the study;

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
3. c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

• DEFINITION OF TERMS

CHALLENGES: A call to someone to participate in a competitive situation or fight to decide who is superior in terms of ability or strength.

SMALL SCALE BUSINESS: Sometimes called a small business, a small-scale enterprise is a business that employs a small number of workers and does not have a high volume of sales. Such enterprises are generally privately owned and operated sole proprietorships, corporations or partnerships.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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