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PROBLEMS AND PROSPECTS OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA. A CASE STUDY OF ENUGU EAST SENATORIAL ZONE.



ABSTRACT


The main purpose of this study is to identify
the problems and prospects of small and medium enterprise in Enugu East  Senatorial Zone. To do this, data were
collected from both primary and secondary sources. The main instrument of data
collection was the questionnaire.


The data were presented in tables as
frequency, distribution in the data analysis, the techniques of percentages
frequencies were used. The hypothesis were tested with z-test technique at 5%
significance level.


Having analysed the data the following were
the major findings;


Most of the operators of small and medium
enterprise in Enugu East Senatorial Zone make an average daily turnover of N15,000 and profit of about N15,000 
daily.


There has been a phenomenal growth in the
dimensions and nature of small and medium enterprise in Enugu East Senatorial
Zone.


The growth is mainly on account of people’s
desire to be self employed.


The problems of establishing and managing
small and medium enterprise include lack of capital, lack of managerial skills,
lack of business ideas, high cost of operational facilities, scarcity of
accommodation, lack of efficient preservation, system and poor environmental
and sanitation.





























TABLE OF CONTENTS


Approval
Page                                                                                i


Dedication                                                                                       ii


Acknowledgement
                                                                        iii


Abstract                        


Table
of Contents


CHAPTER ONE


1.1    Background of Study                                                            1


1.2    Statement of the problem                                                     4


1.3    Objective of the Study                                                          6


1.4    Hypothesis                                                                             6


CHAPTER TWO


2.0    Literature Review                                                                  7


2.1    Conceptual Framework                                                        7


2.2    Theoretical Literature                                                            11


2.2.1 Types of Small and Medium Enterprise                             15


2.2.2 Roles of Small and Medium Enterprise in Enugu State


          Metropolis in Job Creation and Poverty
Eradication                   16


2.2.3 Importance of Small and Medium Enterprise in Nigeria   18


2.2.4 Problems of Small and Medium Enterprise Enugu East 22





2.2.5 Prospect of Small and Medium Enterprise Enugu East


          Senatorial Zone                                                                      23


2.2.6  Challenges
in Facing Small and Medium Enterprise
in


Enugu
East Senatorial Zone                                                         25


2.2.7  Small
and Medium Enterprise
Credit Scheme: Case Study


Of Enugu East Senatorial
Zone                                          26


2.3    Empirical Framework                                                            30


2.3.1 Ways of Encouraging Small and Medium Enterprise to


          Enhance National Development in Enugu East Senatorial


          Zone                                                                                                 35


2.3.2  Government
Refund on Small and Medium Scale and


Means
of Administration                                                      37


2.3.3 Limitation of the Study                                                                   38


CHAPTER THREE


Research
Methodology                                                                 40


3.1    Research Design                                                                            40


3.2    Area of Study                                                                        40


3.3    Source of Data                                                                      40


3.4    Sample Size Determination and Sampling
Techniques   41


3.5    Instrument                                                                                       41


3.6    Data Collection Procedure                                                   42


3.7    Method of Data Analysis                                                      42


CHAPTER FOUR


Data
Presentation of Analysis                                                       44


4.1    Analysis and Interpretation of Data                                     44


4.2    Test Hypothesis                                                                              59


CHAPTER FIVE


Summary,
Recommendation and Conclusion                                      63


5.1    Summary of Findings                                                           63


5.2    Conclusion                                                                             64


5.3    Recommendation                                                                 64


Bibliography                                                                                    66


Questionnaire
                                                                                67


         




















LIST OF TABLES


Table
4.1   Administration of Questionnaire                                     44


Table
4.2   Distribution of Respondents                                                     45


Table
4.3   Age Distribution of Respondents                                    45


Table
4.4   Marital Distribution of Respondents                               46


Table
4.5   Educational Qualification of Respondents
                   46


Table
4.6   Number of Years in the Business                                            47


Table
4.7   What Extent Does Enugu East Senatorial Zone


                   Affect the Operation of Small
and Medium Enterprise    48


Table
4.8    Factor Responsible or phenomenal
growth of                


                   Small and Medium Enterprise                                         49


Table
4.9   Responses of Consumers Feelings                              50


Table
4.10 Nature of Competition                                                               51


Table
4.11 Problems of Setting up Small and
Medium Enterprise  52


Table
4.12 Problems of Managing Small and Medium
Enterprise    54


Table
4.13 Future prospects of Small and Medium
Enterprise                56


Table
4.14  Distribution of Daily Turnover                                        57











CHAPTER ONE


1.1       BACKGROUND


In recent years, particularly since the adoption of
the economic reform programme in Nigeria in 1986, there has been a
decisive switch of emphasis from the grandiose, capital intensive, large scale
industrial project based on the philosphy of import substitution to small scale
industries with immense potentials for developing domestic linkages for rapid,
sustainable industrial development. Apart from their potential for ensuring a
self reliant industrialization, in terms of ability to rely largely on local
raw materials, small scale enterprises are also in a better position to boost
employ raw materials, small and medium enterprise, are also in a better
position to boost employment, guarantee a more even distribution of industrial
development in the country, including the rural areas, and facilitate the
growth of non-oil exports.


In Nigeria, the definition
of small and medium enterprises also varies from time to time and according to
institutions, for instance, the Central Bank of Nigeria’s (CBN) monetary policy
circular No:27 of 1988 define small scale enterprises (excluding general
commerce) as enterprises in which total investment (including land and working
capital) did not exceed #500,000 and or the annual turn-over did not exceed
#5.0 million.


Medium enterprise
(excluding general commerce) as enterprises in which total investment and not
exceed #1,000,0000 (1 million) and the annual turnover did not exceed #1.2
million. Small scale enterprises is one of the modern strategies underdevelop
countries are employing to break into the “league” of developed countries.
Fasua (2006:85) categorized business that fall under small scale as follows
firewood supply, plantain production, restaurant services, small scale poultry
raising, operating a nursery for children, home laundry services and host of
others. Business grouped under medium scale according to fasusa are ; soap
production, hair/body cream production, chemical production, commercial
poultry, profession appractes (law, accountancy, education) food and beverage
production among others.


Consequently, both
the federal and state governments and recently, local governments, have stepped
up efforts to promote the development of small scale enterprises through
increased incentive scheme, including enhanced budgetary allocations for
technical, assistance programmes. New lending schemes and credits institutions
for technical assistance programme New lending schemes and credit institutions
such as the National Economic Reconstruction found (NERFOUND), World
Bank-assisted small-scale enterprises loan scheme (SMES), Nigeria Export and
Import Bank (NEXIM), the people’s Bank of Nigeria (PBN) and the Community Bank
have also emerged at both the national and local levels to boost the flow of
development finance of small scale enterprises which have so far depended
largely on personal funds and credit. From informal sources for both their
investments and working capital.


Unfortunately, all
these formal credit scheme have not been able to adequately redress the
fundamental problems which have constrained small scale enterprises access to
credit. The low credit rating of this class 
of enterprises, is attributable largely to their weak capital, base,
high mortality rate, low productivity and shortage of managerial skills.
Indeed, the problem of weak capital base, high mortality rate, low productivity
and shortage of managerial skills. Indeed, the problems, of weak capital base,
and poor access to finance appear to have developed into some vicious circle,
leading to slow growth, stagnation and even rapid demise of the small scale
enterprises. The impact of all existing credit scheme interms of providing
funds for meaningful and sustained development among the small scale
enterprise, had medium enterprise to serve the expected  role of catalyst for rapid industrial
development, there is need for a more innovative strategy for improved access
to development finance for the small and medium enterprise that would address
their inability to provide collateral securities for loans formal credit
institutions.


1.2       Statement of the
problem


Small and medium enterprise are mostly in managed by
owners  and relations. The financing in
most cases in normally provided by the owners. The owners fail to realize the
importance of external source of capital in order affect expansion in the
business. In most cases, the by the owner, members of the family and friends in
most cases.


In another
development, small and medium enterprise experiences difficulties in raising
equity capital from the finance houses or individuals. Even when the finance
house agrees to provide  equity  capital, the conditions are always
dreadful.  All the result to inadequate
capital available to the sector and thus lead to poor financing. This is the
bane of most cottage industries in Nigeria. About 80% of small and
medium enterprises are stifled because of this problem of poor financing and
other problems associated with it (Chukwuemeka, 2006). The problems that
emanated from poor financing include:


a)          
Lack  of competent
management which is the consequence of inability of owners to employ the
services  of experts.


b)          
Use of obsolete equipment and methods of production because
of owner’s inability to access new technology.

Excessive
competition which resulted