ROLE OF SMALL SCALE ENTERPRISES IN INDUSTRIALIZATION OF ENUGU STATE

ABSTRACT

Small Scale Manufacturing Firm, Small Firm, which is a part of small scale enterprises, under the aegis of right framework of industrialisation process, can take this country to an appreciable level of industrialisation. Evidence abound where small firm contributed much to industrialisation in other countries. This presupposes that a study of this kind, Role of Small Scale Enterprises in Industrialisation of Enugu State, is needed to highlight these roles they play in economic development especially by the Small Scale Manufacturing Firm. This study therefore sought to know whether small firm can accelerate the pace of industrialisation and dispersal of industries by (i) generating substantial employment to the grassroots, (ii) promoting industrial initiative and entrepreneurship within the populace, (iii) developing and increasing export trade and finally, (iv) highlighting the challenges that militate against small firms. The researcher adopted cross-sectional survey research design. The population of the study was 520 workers of 49 small firms selected within Nsukka metropolitan city. The study made use of only the primary data. A sample size of 226 was determined using Taro Yamane’s formula. The four hypotheses formulated were tested at 0.05% level of significance. The primary data analysis was done using simple percentage tables and tables of ranks, means and  standard  deviations.  The tests  of  hypotheses  were  carried  out  using  the following statistical techniques:  Analysis of Variance was used for hypotheses 1, 2, and4, while the Z – test was used for hypothesis 3. The findings show that there are contributions made by small firms in the area of employment generation, though not significant. It is observed too that the proprietors are relatively slow in embracing the dynamism found in today’s technology. Promotion of export is still relegated to the background. Challenges that undermine the growth of small firms are within Enugu. Though, this is not significant. In conclusion, it has been identified that the small manufacturing firms could be used as a tool that can help in advancing the pace of industrialisation in Enugu State. We therefore recommend that government support programme be intensified and a counter monitoring team be set up to follow up all the policy implementation in Enugu. Export processing zones should be used to sensitize and encourage export in all the zones in Nigeria in a more vigorous way. Finally the real industrialists should be identified and followed one on one to avoid a blanket approach of supportive programmes which had been the problem of wrong people getting the package from the government.

CHAPTER ONE INTRODUCTION

1.1 Background of the Study

Small Scale Manufacturing firm, which is a part of small-scale enterprise, has attracted a lot of attention from Nigerian economists, management consultants, the government etc., who are interested in the transition of this country to an industrialised state. Though there is phenomenal growth in the large-scale sector, small firms are known in playing a very important role in developing economies, Schafer and Talavera (2006). In fact, the small- scale sector is playing a vital role in the growth of any nation’s economy the world over and is considered to be the engine of growth in most countries. If the small scale sector of any economy has the largest share of the population, then anything that happens to the sector  positively  or  otherwise  will  definitely  be  of  either  great  gains  or  great consequences to that nation.

Tracing from history, Jegede (1990) says that the earliest attempt by the government to develop small scale enterprises in Nigeria was in 1946 when seasonal paper No. 24 of

1945 on a ten year development and welfare plan was designed. This plan was presented to the legislative council of the time on December 13, 1945, and approved by the council on February 7, 1947. This paper authorized the establishment of Nigerian Local Development Board whose functions are to:

a.   Promote  and  develop  village  craft  and  industrial  development  of  Nigerian products

b.   Set up and operate experimental undertakings for the testing or processing of

Nigerian products

c.   Approve other suitable projects by the government.

The board primarily was to encourage and develop small scale enterprises within the country, which of course will help them grow to a better and more efficient firms that will yield prospects to their proprietors as well as the development of the economy. This period was not having any coherent industrial policy but the former western and eastern governments were able to establish industrial estates at Yaba and Enugu respectively in

1958. Subsequently in 1962 and 1963, the Ford Foundation of United States of America helped eastern and northern governments to establish Industrial Development Centre (IDCs). Jegede (1990) in continuation says that by the end of Nigeria civil war, the federal government took over the leadership role in fostering the development of small scale firms in Nigeria. Firstly it established within the ministry of industry, small scale firms division and eleven other IDCs in addition to reactivating the one at Owerre and Zaria. Sequel to this, the federal government created credit and loan scheme that was known to be Small Scale Firms Credit and Loan Scheme. This was to see that those would be investors in small-scale firms should not be scared away from their intended venture for want of fund. Ayozie (2006) continued by saying that in recognition of the role played by the small-scale firms the federal government on her second national development plan included the five cardinal points: Accelerating the pace of industrialisation and dispersal of firms, generating substantial employment opportunities, promoting Industrial Initiatives and entrepreneurship among the populace, developing and increasing export trades and   complimenting large-scale firms. Primarily this will encourage the establishment and sustenance of small-scale firms, and in turn foster the process of industrialisation in Nigeria.

The federal government continued by introducing different programmes and institutions to manage the programmes for effective utilization of the resources provided. The establishment of Nigeria Industrial Development Bank (NIDB) in the 1950s for instance was to help in the development process. The aim of the colonial masters then was to use this as a platform to assist the potential entrepreneurs in agricultural exploitation of national resources, commerce and industrial production. It was expected that with the help of this bank many Nigerians would take advantage of the young economy as Nigeria’s market up to the 1960s was dominated by imported goods from Europe and develop alongside political evolution in the country. Great attempt to develop the small- scale firms in the 1970s was evident during the days of oil boom Ayozie (2006). The Second development plan of the Federal Republic of Nigeria between 1970 and 1974 had a package meant to stimulate the growth of small-scale firms by giving it active support. That brought about the creation of eleven industrial development centres in different parts of Nigeria while the ones in Owerri and Zaria were reactivated. On that same second National Development Plan period, Nigerian Bank for Commerce and Industry (NBCI)

was established with an allocation of N5.4 million. In furtherance of her effort the federal

government through the third National Development Plan (1975-1980), established three other development centres with the objective of identifying and developing small scale firms. By 1984, the number was increased by six and now the IDC is 21 in number. Subsequent establishments of public banks to help fund small and medium enterprises- the Peoples Bank, Nigeria Agricultural and Rural Development Bank (NACRDB), Bank of Industry etc. are all geared towards small and medium enterprises funding of which small scale industry is a part.

Meanwhile, on this bid to pursue industrialisation vigorously the federal government introduced indigenization Decree of 1972 and later on Nigeria Enterprises Promotion Act of 1977, which helped in creating chances for Nigerians who were interested in manufacturing and other small businesses. The decree was later amended in 1997, which encouraged Nigerians to take a cue from economic history as industrial development requires a gradual, continuous, persevering exercise. The decree as well provided that for the nation to be self  reliant it is necessary to  check  the present day giants humble beginnings, as small scale enterprises. In the following decade i.e. the 1980s, the federal government policy measure placed emphasis on the technological aspects of industrial development  of  small  scale  firms  in  Nigeria,  Ayozie  (2006).  The  government  then diverted efforts to exploration and exploitation of natural resources while discouraging capital-intensive mode of production. This became an encouragement for Nigerians to go into small-scale firms for maximum utilization of the country’s natural resources. This was necessary as Jegede (1990) rightly notes that in the 1980s the manufacturing sector was characterized by high geographical concentration due to lack of adequate infrastructures all over Nigeria, high production cost, low value-added, low capacity utilization, high import content and low level of foreign investment. All these affected the industrialisation process to a large extent. In an effort to keep being on track by the federal government a report by UNIDO was of a great encouragement. UNIDO (1989) reports that the expectation of growth in the manufacturing sector would be on annual average rate of 7.5% between 1989 to1994, and this will account for over 10% of gross domestic product by 1992 with small and medium enterprises contributing more than half of the sectors contribution to the GDP. The report says that not only will the expected

growth come from small and medium enterprises but this would be achieved by using local resources and labour. By the 1990s, the government both at federal and at the state level continued their contribution towards the growth of small-scale firms especially in the rural areas, to help in the dispersal of firms in Nigeria. Due to the fact that large scale firms within 1970s and 1980s failed in fulfilling the dynamic role of bringing about the desired growth and development of the Nigerian economy industrially, especially in the rural areas.  The federal government established Small and Medium Firms Development Agency. This establishment of the government was to help develop and harness the prospects of viable small and medium firms within the economy as the vehicle for rural industrialisation and poverty eradication, (Mahmood 2003). The agency trains interested investors, help people to secure loan, appraise and re-appraises government policies to make sure its purpose are continually being achieved. At the turn of the millennium, precisely by the year 2002 the federal government reiterated the crucial need for sound small and medium scale firms’ programme and project towards a sustainable growth and development, having propagated the paramount role of small and medium scale firms as a veritable vehicle for rapid industrialisation and the engine of growth in the nation.  Like Hamel (1997) would say,    the goal is to try imagining a future that is plausible – the future that one can create.

All these programmes and policy initiatives, were intended to transform the country from under developed state to a developed one which will guarantee a self reliant future.

1.2 Statement of the Problem

Going by the historical antecedents of small firms’ establishment and support, one would

expect Nigeria to be among the second world of industrialised nations, least to say.

However, to the chagrin of many positive minded Nigerians the fact of getting to that El Dorado is still far. One of the major problems of the developing world, is that after the independence many African countries attempted to leap directly to a modern industrial structure through public investment in large-scale firms. This venture, laudable as it may be, did not achieve the desired goal. Many of these large-scale firms never took off, while so many failed to sustain themselves and went moribund before long after their establishment. It had been identified that inadequate attention to economic viability and market prospects resulted in substantial excess capacity and this was a major problem. In Nigeria  for  example  so  many  of  the  public  owned  enterprises  failed  to  deliver  in sustaining themselves let alone establishing subsidiaries or helping the industrialisation process. The Ajaokuta Steel Company, the Aladja Steel Rolling Mill, Nigerian Fertilizer Company (NAFCON) etc have continued to be a conduit for siphoning the country’s hard-earned money. Though as they say, learning a new dance is always a difficult task, the country must continue to move on but from a different framework, as the rates at which these large firms go moribund are quite alarming. That framework is none other than achieving industrialisation with the help of small and medium scale enterprises of which small scale manufacturing is a part. However that does not mean the sector is without its challenges. One of the primary concern in a small business is the problem of risk. Many who begin the start-up process terminate it in less than one year. Of those that survive,  many are unable to  achieve sustained growth  and  profits.  Small-to-medium business enterprises (SME) have a 50% to 90% chance of failure within the first five years. It should be a cause of worry to all concerned citizens of Nigeria if we must develop.  While  there  are  measures  of  personal  risk  behavior  of  entrepreneurs,  the

literature contains no measure of risk orientation for the enterprise. This is a pointer towards some anomaly within the sector. If these numbers of small business establishments are on the line of mortality regularly, what could this mean to the economy? If this is the case what is then the fate of the expected contribution from small scale firms to industrialisation of this country as evidenced in other country’s example? While it is clear that the task of industrializing a nation is not an easy one, it is imperative that a study of this type is carried out to highlight the vital role small scale industry plays in industrialisation process, identify why the effort being made has not impacted much on the process of industrialisation. As the question remains have we been able to imagine a plausible future and work towards its creation?

1.3 Objectives of the Study

The  broad  objective  of  this  work  is  to  bring  to  the  fore  the  role  of  small  scale manufacturing in industrialization of Enugu State. However, the sub objectives are:

1.         To ascertain the effectiveness of Small Scale Manufacturing Firms (SSMF)

contribution to employment generation in Enugu State

2.         To know the extent SSMFs are promoting Industrial Initiatives and entrepreneurship in Enugu State

3.         To ascertain whether the role of Developing and increasing export trades by

SSMFs are possible in Enugu State.

4.         Highlight the challenges that face Small Scale Manufacturing Firms

1.4 Research Questions

To carryout this study the following questions were asked to help the researcher achieve the desired objective of the study. The questions are as follows:

1.   How do small-scale firms boost generation of employment opportunities?

2.   How  has  industrial  initiative  and  entrepreneurship  among  the  populace  been promoted through small-scale firms?

3.   To what extent is export trade increased and developed by the instrument of small-scale firms?

4.   To what extent have the identified challenges militate against the industrialisation in Enugu State?

1.5 Research Hypotheses

It is the aim of this research to test the hypothetical postulations formulated in the course of this work, to know if these postulations would be acceptable. Therefore, to achieve this aim, the researcher formulated the following alternative hypotheses:

HA  1. Substantial employment generation in Enugu State is significantly affected by

Small Scale Firms.

HA  2. Industrial initiative and Entrepreneurship among the populace are significantly promoted through Small Scale Firms.

HA 3. Increment and development of export trade is affected significantly by small-scale firms.

HA 4.  The issue of Funding, Basic Infrastructures, Managerial Skill, Marketing Mix and Technology  are  significant  challenges  militating  against  small  scale  firms  in Enugu State.

1.6 Significance of the Study

This work will be of use to some, individuals, organizations, government etc. Primarily the researcher will be of immense benefit as this work will help him in prosecuting the

Master of Science degree programme that he is pursuing in the department of management. The government will benefit in the area of policy development and implementation. The existing and would be investors will as well find this work very useful.  As it will highlight the prospects and challenges of small-scale firms and show case the probable opportunity there of. Finally, it will also be of great importance to researchers, students of management as well as those in related fields of study.

1.7 Scope of the Study

This research will cover some selected firms that are within the concept of small-scale industry within Nsukka, their roles in the process of industrialisation and their challenges especially in Funding, Basic Infrastructures etc as it affects small scale firms. The small firms studied are in the area of Bakery and Confectionary, Fabrication and Welding, Sachet and Bottled Water Production, Palm Kernel Oil Mills and Allied Products and Finally Furniture Making. And this study is undertaken to cover a time frame of ten years, 2003 till 2012.

This town Nsukka is the second largest city in Enugu State, which is located north of the state. The area is thickly populated and happens to be the headquarters of Enugu North Senatorial zone of the state.

The researcher chose studying about the small scale firms in the city because of its economic importance to the state of Enugu.

1.8 Limitations of the Study

The researcher would want to make this study have a statewide coverage by having to draw sample from all the seventeen local government areas of the state. However, this

feat was not possible considering some factors that were beyond the researcher’s control.

Of which these are:

1.   Uncooperative attitude of respondents, some of the respondents are in fear of giving out their business secret. They would rather not divulge any information on their business. However the researcher convinced all the respondents that their responses was only for academic purposes and should not in any way endanger their business.

2. Lastly accessibility, this last factor was also a difficult one as most of the respondents were either not available or are too busy for one to interact with as expected. The researcher repeated visits so as to get almost all the respondents, while those that are too busy the researcher patiently waited for them.

1.9 Definition of Related Terms

Domestic Demand-Driven Model: This is a theory of growth or strategy for growth that focuses attention on the consumption of the goods produced locally rather than on export. It is as well known as Consumption Driven Model.

Export Oriented Model: This is a theoretical model of industrialisation that focuses attention   on   the   production   of   goods   and   services   by   developing   countries for  export  to  highly  industrialised  nations.  Also  known  as  The  Export-led  Growth Strategy originating from the export-led growth hypothesis (ELGH), which postulates that  besides  labor  and  capital  expansion,  export  expansion  is  one  of  the  main determinants of growth. In other words it is not only prescribed for developing countries, any country desiring growth can adopt this strategy.

Industrial Development Centres:  Centres created by government in different regions of the country to oversee, and help it develop the areas under them industrially.

Import Substitution industrialisation This is another theoretical model of industrialisation which has its policy on establishment of domestic firms to produce goods that were not produced domestically while imports of some goods are discouraged. Lakhs: Units of numbering or expressing figures in the South Asian numbering system meaning a hundred thousand (100,000 or 1.0*105).

SMI: Small and Medium Scale Industry.

SSMF: Small Scale Manufacturing FirmStagflation:  An economic situation where there is high inflation but no increase in the jobs available or business activities.

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