ROLE AND IMPORTANCE OF SMALL AND MEDIUM SCALE ENTERPRISES TO THE DEVELOPMENT OF UYO CAPITAL CITY

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ROLE AND IMPORTANCE OF SMALL AND MEDIUM SCALE ENTERPRISES TO THE DEVELOPMENT OF UYO CAPITAL CITY

ABSTRACT

This study examined  “The Role and Importance of Small and Medium Scale Enterprises to the Development of Uyo Capital City “. An exploratoryassessment design based on the use ofSurvey instruments was  adopted for the study. The target population adopted for this study comprised of fifty (50) Small and Medium Scale Enterprise in the area. The sample population for this study comprised of two hundred (200) respondentsin which four respondents were selected from each organization. Purposive and Simple Random sampling was used to choose the sample size for this study. The research employed primary and secondary sources of data. Primary data were gathered through questionnaires distributed among the Among the selected two hundred (200) respondent. The data gathered from the questionnaire were analysed and presented in frequency and percentage tables. The data were also interpreted and the chi square statistical test was used to test the stated hypothesis. The result revealed that SMEs play a vital role to the economic development of Uyo Capital City. The study recommended that newly established SMEs should be exempted from paying tax for a specified period of years in order to sustain its growth and development.

 

CHAPTER ONE

INTRODUCTION

  • Background to the Study

SMEs are important to almost all economies in the world, especially to those in developing countries. They contribute to productivity and job creation; they serve as a nursery for larger firms constitution the next step for micro enterprises(Palma and Gabriel, 2005).In addition, SMEs tend to be the primary driver for job creation as they are labor intensive and employ more labor per unit capita than larger enterprises thereby creating more jobs in the economy(Mensah and Rolland, 2004). Again according to Sowa et al (1992), even for some public employment, SMEs provide a useful supplement as a second job.Aside the creation of jobs, the SME sector also provides investment opportunities, professional training and skills and are sources of tax revenue to the government. Most importantly, they create conditions for the provision of infrastructure and other facilities such as water, roads and electricity as part of their contribution to rural development, regional growth and enhancement of  decentralization and migration policies. Again, SMEs  play an important rolein the transition from a state-led to a private-oriented development strategy (Aryeetey et al, 1994).

The role of small and medium scale enterprises in developing countries such as Nigeria  is progressively becoming significant. Significant in the sense that all available resources in any given situation in the economic wellbeing of a nation must be developed for industrialization and ultimately consumption through the small and medium scale businesses (King & McGrath 2002).Hence, the impact and potential contribution of small and medium scale businesses on a broad and diverse base as well as their accelerated effect in achieving macro economic objectives pertaining full employment, income distribution and the development of local technology, make the existence most inevitable. Therefore, the importance of small and medium scale enterprises in particular to the general economic development of any nation especially a developing one like Nigeria cannot be over emphasized.

Small and medium scale enterprises (SMES) have been recognized as indispensable components of natural development in both developed and developing economies. This subsector of the economy is globally acknowledged to contribute substantially in enhancing employment creation or generation, poverty alleviation, equitable distribution of resources, income redistribution, technical and technological innovation, entrepreneurial skills development, more uniform industrial and economic region- moreover, they have been touted strategic in ensuring food security and encouraging rapid industrialization and reversal of rural-urban migration.

1.2 Statement of the Problem

The development of major Nigerian cities is characterized by mirage of problems which has constituted a sleepless night to developmental oriented governance. The most disturbing problems are that government has not played a favourable role towards the promotion and development of small and medium scale enterprises, in the sense that government creates unfavourable fiscal policy inconsistencies and lack of the infrastructural facilities by the government, which have stunted and stagnated the growth of small and medium scale enterprises in Nigeria. small and medium scale enterprises are seen as a veritable engines of economic and national development, but the growth and development of small and medium scale enterprises in Nigeria have been slow and in some cases even stunted, due to a number of problems and challenges confronting this all-important sub-sector of the economy. Some of these problems includes: financial problems, poor management expertise, poor accounting system, lack of materials etc, which the researcher tends to find solution to them. Moreso, in Nigeria, most small and medium scale enterprises are folding up or lack competitiveness because they lack the much required financial capacity to prosecute their manufacturing concern and this as in turn stunted economic growth and national development in various Nigerian states and the country as a whole.

Since, it has been recognized that national development is basically linked to the the growth of SMEs, it therefore becomes necessary to examine their role in the development of major cities in Nigeria using Uyo Capital City as a case study.

1.4 Research Questions

1.4.1 Major Research Question

What is the role of small and medium scale enterprises to the development of Uyo Capital City?

1.4.2 Minor Research Questions

  • Are small and medium scale enterprises the engine of economic development in Nigeria?
  • How does small and medium scale enterprises create job for economic development Of Uyo Capital City?
  • Does Economic and environmental factors affect the growth of SMEs in Uyo Capital City?

 

1.4 Objectives of the Study

1.4.1. General Objectives

The main objective of this study is to determine the role and importance of small and medium scale enterprises in the development of Uyo Capital City

1.3.2 Specific Objectives

  • To find out whether small and medium scale enterprises are the engine of economic development in Nigeria.
  • Examine the role of small and medium scale enterprises in creating job for economic development of Uyo Capital City.
  • To determine whether economic and environmental factors affect the growth of small and medium scale enterprises in Uyo Capital City.

 

1.5 Research Hypothesis

Hypothesis can be defined as a tentative statement about the relationship that exists between two or more variables and such statement are conjectured that must be validated.

There are two types of hypothesis, which are null hypothesis and alternative hypothesis.

The null hypothesis is denoted by (Ho) while the alternative hypothesis is denoted by (Hi).The alternative hypothesis is accepted while the null hypothesis indicates rejected. Testing the following hypothesis will provide answers to the research questions:

  1. Ho: SMEs does not play any role in the economic development in Uyo Capital City

Hi: SMEs plays a vital role in the economic development of Uyo Capital City

  1. Ho: SMEs do not create job opportunities in the economy development in Uyo Capital City

Hi: SMEs creates job opportunities in the economy development in Uyo Capital City

  1. Ho: Economic and Environmental factors affect the growth of SMEs in Uyo Capital City

H1: Economic and Environmental Factors Affect the Growth of SMEs in Uyo Capital City

1.6 Significance of the Study

The outcome of the study will guide policy makers in government, financial institutions and other associations and organizations related to SMEs to draft policies that will help promote the SME sector. The study will also come out with recommendations that can be taken to improve the activities of the SME sectorin order to enhance economic and national development. Furthermore, it would serve as reference documents to the academics and researchers and to all those interested in the study of SMEs in Nigeria.

1.7 Scope and Limitations of the Study

The study will cover fifty SMEs in Nigeria with particular focus on SMEs in Uyo capital city in Akwa Ibom State, Nigeria. The choice of Uyo Capital City is because the area has many SMEs begging for opportunity to contribute to the development of the area. Also, because the major means of employment in the area is the public service, this thesis therefore intends to explore the role of SMEs in creating viable job opportunities in the area, thus reducing the concentration on public service employment.

Limitaions

Among the limitation of this study is the fact that only SMEs in Uyo Capital City are covered. Second is the difficulty in gathering data and information, much of which is considered sensitive. Another relates to the culture of not keeping accurate data and records by most SMEs. Many heads of SMEs had little time for interview owing to their tight schedules. The researcher was also limited by the reluctance of some respondents to complete them at all.

1.8 Definition of Terms

  1. Medium Enterprise: Company with total cost including working capital but excluding cost of land is above hundred million naira (300,000,000) and a staff strength of between seventy-one (71) and two hundred (200) full time workers and with an annual turnover of more than twenty million naira (20,000,000).
  2. Small Enterprise: An enterprise whose total cost including working capital but excluding cost of land is between ten million naira (10,000,000) and one hundred million naira (100,000,000) and workforce between eleven (11) and seventy (70) full time staff and a turnover of not more than ten million naira (10,000,000) in a year.
  3. Development: The gradual growth of something so that it becomes more advanced, stronger, etc.
  4. Capital: The most important town or city of a country, usually where the central government operates from.
  5. City: A large and important town.

 

1.9 Organization of the Study

The study is organized into five chapters. Chapter one is the introduction of the study and it includes the background description, problem definition, objectives of the study, significance of the study, scope, limitations of the study and research methodology. Chapter two is the literature review of the study and the theoretical framework. This reviews relevant literatures of authors and other researchers relating to SMEs. Chapter three deals with the research methodology which looks at methods adopted in carrying out the study. Chapter four focuses on data presentation and analysis whiles chapter five presents a summary of the study, findings and conclusions drawn from the findings and recommendations of the study.

References

Aryeetey, E., A. Baah-Nuakoh, T. Duggleby, H. Hettige, and W. F. Steel, 1994. “Supply andDemand for Finance of Small Scale Enterprises in Ghana”, Discussion Paper No. 251, WorldBank, Washington, DC.

King, K. and McGrath, S. (2002), “Globalization, Enterprise and Knowledge”: Education, Traning and Development in Africa, Symposium, Oxford.

Mensah and Rolland, (2004), Introduction to Venture Capital and Private Equity Finance, The Encyclopaedia of Private Equity

Palma, Gabriel, 2005. The Importance of SMEs in The Economy: “Four Sources of De-industrialisation and A New Concept of the Dutch Disease”

ROLE AND IMPORTANCE OF SMALL AND MEDIUM SCALE ENTERPRISES TO THE DEVELOPMENT OF UYO CAPITAL CITY

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