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THE EFFECT OF SMALL AND MEDIUM SCALE ENTERPRISES ON
THE ECONOMY OF NIGERIA
CHAPTER ONE
Background to the Study
It is a matter of fact that there are a lot of things
in which large companies are experts while the small firms can better do some
things also. If both, small and large firms do their business in which they get
advantage, the welfare of the economy can be maximized and the state of
specialization can be attained. When we focus on the impact of small as well as
medium firms on the whole economy, it is difficult rather impossible for us to
segregate their impacts from the impact of large corporations.
This issue remained a hot topic for centuries.
Economists were of the view that it is a large firm, which participates
actively in the economy and also shares a large amount of foreign exchange
earnings. But their point of view changes when the countries like Taiwan, Japan
and Korea developed on their small and medium based business. It is the crystal
clear that these economies developed through the grass root level as small and
medium enterprises belong to grass root. Those who believe that the large firms
are only responsible for economic growth should keep in mind that the small
vendors and small suppliers contribute heavily in the production of large
firms. The reality on ground is that small firms are held responsible for
making large firms to attain their targets.
The progress and prosperity, which take place from the
lower level, benefit all the classes of the society. The spill over impacts of
SMEs proves to be ever lasting on the world’s economy.
The situation differs in Pakistan. It is not more that
10 years that Govt. of Pakistan has established an institution named small and
Medium Enterprise Authority (SMEDA) which is considered responsible to promote
small and medium enterprises. SME sector is being neglected in Pakistan and so
as the impacts of small and medium firms of Pakistan’s economy. Pakistan is
very potential market for SMEs and if undertaken in systematic way can prosper
economy within no time. Pakistan has a considerable advantage in some areas
which needs to be explained quickly to reap the benefits of exports. Such
benefits can increase foreign exchange rates very positively to develop a
favorable framework in all areas of progress.
The awareness like fishing, education, fruit, crops,
garments, cotton, sugar cane, dates ginning, wood, auto and many other areas
are the basic startups for many people. This research explains the
potentialities of some areas and knowledge of how these areas can contribute
towards Pakistan’s economy by increasing the foreign exchange rates with
reference to Sindh province. The high authorities and ministry of development
and product should formulate some strategies to design practical policies with
the cooperation of stakeholders, such policies will be flexible in enhancing
the SMEDA plans and flourish SMEs activities at the larger scale. This will
give a big boost to startup ideas and create cordial atmosphere of businesses.
This will aid a lot more in understanding the export of Pakistan specially
Sindh sector and improve our foreign exchange earnings.
The role of Small and Medium-Scale Enterprise (SMEs)
in the national economy cannot be underestimated. These enterprises are being
given increasing policy attention in recent years, particularly in third world
countries partly because of growing disappointment with results of development
strategies focusing on large scale capital intensive and high import dependent
industrial plants. The impact of SMEs is felt in the following ways: Greater
utilization of local raw materials, employment generation, encouragement of rural
development, development of entrepreneurship, mobilisation of local savings,
linkages with bigger industries, provision of regional balance by spreading
investments more evenly, provision of avenue for self-employment and provision
of opportunity for training managers and semi-skilled workers. The vast
majority of developed and developing countries rely on dynamism,
resourcefulness and risk tasking of small and medium enterprises to trigger and
sustain process of economic growth. In overall economic development, a
critically important role is played by the small and medium enterprises. Small
and medium enterprises advocates, firstly, it endurance competition and
entrepreneurship and hence have external benefits on economy wide efficient,
and productivity growth. At this level, perspectives are directed towards
government support and involvement in exploiting countries social benefits from
greater completion and entrepreneurship.
Secondly, proponents of SME support frequent claim
that SMEs are generally more productive than large firms but financial market
and other institutional improvements, direct government financial support to
SMEs can boost economic growth and development.
Some argued that SMEs expansion boosts employment more
than large firm growth because SMEs are more labour intensive thereby
subsidizing SMEs may represent a poverty alleviation tools, by promoting SMEs
and individual countries and the international community at large can make
progress towards the main goal of halving poverty level by year 2020 i.e to
reduce poverty by half and becoming among 20 largest World Economies (Nigeria
Vision 20:2020). Entrepreneurial development is therefore important in the
Nigeria economy which is characterized by the following heavy dependence on
oil, low agricultural production, high unemployment, low utilization of
industrial capacity, high inflation rate, and lack of industrial
infrastructural base. These constraints limit the rate of growth of
entrepreneurial activities in Nigeria. Hence, this paper seeks to investigate
Small and Medium Enterprises as a veritable tool in Economic Growth and
Development. This paper seeks to investigate Small and Medium Enterprises as a
veritable tool in Economic Growth and Development in Nigeria.
1.2Â Â Â Â Â Â
Statement of Problem
Many scholars have written widely on entrepreneurship
and its potency to generate employment, thus, underscoring the quintessence,
significance and relevance of this sub-sector in the development of any given
economy. The experiences of developed economies in relation to the roles played
by entrepreneurship buttresses the fact that the importance of entrepreneurship
cannot be overemphasized especially among the Developing Countries. In order to
highlight its significance in relation to the growth and development of a given
economy, entrepreneurship has been variously referred to as a “source of
employment generationâ€. This is because Entrepreneurial activities have been
found to be capable of making positive impacts on the economy of a nation and
the quality of life of the people (Adejumo, 2000). Studies have established its
positive relationship with stimulation of economic growth; employment
generation; and empowerment of the disadvantaged segment of the population,
which include women and the poor (Oluremi and Gbenga, 2011; Thomas and Mueller,
2000; Reynolds, 1987).
Given the importance of entrepreneurship in this
regard, it is somewhat surprising that in recent times few researches are
carried out about practical approaches in developing entrepreneurship in
Nigeria inspite of the fact that entrepreneurship is the engine that
entrepreneurship remains the main engine that will push Nigeria economy to it
destination.
However, the challenge confronting entrepreneurship in
the field of entrepreneurship is that of finding an appropriate and effective
entrepreneurial approach that could produce and assist in the nurturing and
achieving a called for change in the current approach in addressing the
problems of entrepreneurial development in Kaduna State, Nigeria.
In addition to the comparative lack of attention given
to entrepreneurship in emerging economics, particularly those in Sub-Saharan
Africa, there is also a relative lack of diversity. In theoretical and
practical approach to African entrepreneurship previous research that has
explored the variation in entrepreneurial activities in Nigeria has focus on
the standard economic and infrastructural factor as Gross Domestic Product and
Direct Fund Investment and education.
These are meaningful variable and provide scholars with a baseline knowledge
about entrepreneurship. However, this factors fail to adequately take
non-economic factors into consideration. Hence, the need to study practical
approaches that would help in addressing challenges of unemployment and
economic development.
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