1.1 Background to the Study
Small and Medium Scale Enterprises (SMEs) have been fully recognized by governments and development experts as the main engine of economic growth and a major factor in promoting private sector development and partnership. This, as noted by Udechukwu (2003), is in recognition of the fact that the development of SMEs is an essential element in the growth strategy of most economies. In Nigeria, SMEs hold particular significance as they are known to contribute significantly to improved living standards and by extension, accelerated economic growth and development Onugu (2005).
However, SMEs in Nigeria have not performed to the expected level. Consequently, the continuous dwindling of SMEs in Nigeria is on the upswing (CBN, 2003). Hindered by a series of problems, SMEs are, in absolute terms, not strong and virile as to bridge, the major gap in Nigeria’s industrial development process. The little progress recorded from the courageous first generation of indigenous industrialists was almost completely wiped out by the massive dislocations and traumatic devaluation which took place under the Structural Adjustment Programme (Abiodun, 2009). Since then, government’s policies have been rooted in the neoclassical theory of perfect competitive markets whose assumptions do not adequately reflect constraints on SME in developing countries such as Nigeria (Omobolanle, 2009).
With over 140 million people (2006 Census), productive farmlands, rich variety of mineral deposits, Nigeria should be a haven for Small and Medium Scale Industries. The human and natural resource base is a significant feature that gives the country a special status in Africa. This contrasts with the less than average rate of development in the SMEs sub-sector (Udechukwu, 2003). This becomes a serious issue for thought considering what is obtainable in the developed countries where “more than 98% of all enterprises belong to the SME sector” (Olorunshola 2003:10).
Against this backdrop, the researcher has keenly taken the intellectual poise to examine the problems and prospects of these businesses. This informed zeal becomes strongly compelling as the researcher believes that, should such problems, be unveiled and solutions proffered, the SMEs will occupy their pride of place as the pillar for the overall economic growth and development of Nigeria.
1.2 Statements of the Problem
The rising failure rate of SMEs in Nigeria is strange. As a result, the performance and effectiveness of Small and Medium Scale Enterprises as an instrument of economic growth and development in Nigeria has long been under scrutiny. This intense scrutiny has been against the backdrop of the low performance and inefficiency that characterized Small and Medium Scale Enterprises particularly in assessing their role on economic growth and development (Fatai, 2011:2).
Despite governments institutional and policy supports aimed at enhancing the capacity of SMEs, SMEs have fallen short of expectation. This has generated serious concern and skepticism as to whether SMEs can bring about economic growth and national development in Nigeria. The concern is even more disturbing when comparing SMEs in Nigeria with other countries particularly where SMEs have become the harbinger of economic reconstruction and transformation (Ihua: 2009). In the case of Nigeria, SMEs have performed at very abysmal level (Abiodun, 2009). This low performance has further exacerbated poverty, hunger, unemployment and low standard of living of people in the country (Anyanwu, 2003).
The challenge of addressing the problem of hunger, poverty and unemployment is even more worrisome when considering the actualization of the Millennium Development Goals by the country in 2015. If Nigeria is to achieve the Millennium Development Goals by 2015, one of the surest ways is to enhance the capacity of its SMEs. The core issues identified such as hunger, poverty, literacy, maternal and mortality rate would not be achieved unless the problems of SMEs are tackled. However, tackling these problems entails filling the expectation gap which bedeviled the SMEs.