The Causes of Small Scale Business Failure in Nigeria
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Abstract on The Causes of Small Scale Business Failure in Nigeria
This is a research work which examine the causes of small-scale business failures in Nigeria as such the study will go a long way in identifying and improving the prospect for survival of small-scale business, consequently contributing to the economic growth of the Nigeria nation.
In conducting the research, questionnaire and oral interviews where used. The sample size for the research consist of 30 and 50 business centers and restaurant owners respectively. The data collected were tested statistically by the use of x2 (chi-square) the finding of the revealed for the following. That sex of respondents do not contribute to business failure, that there is a bearing between educational level respondents and business failure, that finance is a causative factor to business failure.
Therefore, recommendations such as: encouragement of the financial Institutes to extend loans at a less stringent condition to the small-scale business subsection sourcing of cheap and available substitutes (raw-materials) locally; consistency in government polices as it affects small-scale business, enhancement of the managerial acumum of managers of small-scale business through seminars and workshops, business owners should engage in business that are less competitive amongst others were suggested.
Conclusion was drawn following the findings that there should be more commitment when assistance inform of loans from banks and enlightment programmes like seminar are being organized by government or its agencies, what are needed therefore for an overall improvement in the performance of small-scale enterprises are better support, understanding and encouragement by all concerned.
Chapter One of The Causes of Small Scale Business Failure in Nigeria
Nigeria’s quest for national economic development have been her through several approaches. Since 1960, the year of Independence the country’s development plans have laid a great deal of emphasis on public sector control of the economy. We have a situation where the public/private sector mix has increasingly titled towards public sector donation. In the first National Development Plan (1962-68) the private sector of which small-scale business was part received 62% of the total capital expenditure while on the other hand; on the fourth plan (1981-1985) only 12% of total capital investment was accorded the private sector with the public sector controlling a staggering 88%. This apparently wrong development planning did not pass without adverse consequences for the Nigeria economy. The net effect of the unbridled government participation and control of business activities through the large scale industries and the oil boom of the 70’s which dictated the entire frivolous and wasteful attitude of the government and the people including the relegation of the agricultural sector and private initiative has now give way to hunger, squalor, spiraling inflation, disease and mass unemployment. But today the situation is changing. The current emphasis is on the development and strengthening of the small-scale business sector as the main foundation of economic self-reliance.
The unemployment situation in the country coupled with the new government initiative towards easing social tension among unemployed youths through the programmes of the National Directorate of Employment (N D E) are new luring a lot of unemployed Nigeria including graduates and others who want to be their own boss into self determination through self-employment. Graduates and school leavers are new realizing that government and the established private companies are not ready to come to their aid directly through paid employments due to the parolons state of the economy. Short of alternative, Nigerians including our graduates are therefore launching themselves into various small-scale business ventures, such as collage soap and cosmetics production, farming, publishing, writing, blocking, garri production, food processing, refuse disposal, taxi driving, cleaning, services, advertising and public relations, business centers, restaurants and other small business ventures.
GENERAL BACKGROUND TO THE SUBJECT MATTER
Small-scale businesses occupy a significant position in the economic development of Nigeria in general and Enugu in particular.
There are basically two board categories of small-scale business. The first is the business carried out by traditional craftsmen and artisans, some of whom may need assistance so as to modernize their skills, tools and techniques of production. The second is the industry out by groups of small manufacturing or service enterprise, which produce or provide services to a variety of consumers and clients. But in both cases, the scale of operations is generally too small to be of interest to a forest to a foreign investor.
In Enugu, there are thousands of business, which fall into the category of small-scale business. They include weaving, carpentry, pattery and ceramics, farming, fishing, piggery and animal husbandry, metal-works, retail trade, workshop, transport, business centers restaurants, tailoring and dress-making setting up small-scale business and managing it to fruition can be rewarding both financially and psychologically. Many of such small-scale business when established to succeed.
However, small-scale business in Nigeria today face a litrary of problems occasioned by global economic reception. A good percentage of these businesses particularly in nsome business centers and restaurant industry have been forced to wind up due to this economic situation while many others have managed to survive. According to B. Kalejaiye, an alarmingly high number of small-scale business has failed. As was also pointed out by another writer, it is generally believed that a grater number of people who start up business every year failed than succeed. It has been established that less than five out of every year twenty business established survive in the very first year of establishment. Investigation and observation indicate that a greater number of people who enter the business field every year fail rather than succeed. The researcher has also witnessed the fail of some small-scale business which has initially commenced, with high hopes of success.
It is pertinent to mention here that many of these small enterprises which go under, do so, not because their basic aims, polices and strategies when things begin to fall apart. In addition, it seems that government is yet appreciating the strategic importance of small enterprises in the National Economy. Although, it’s importance has been recognized for sometime, was not until recently, that the government felt it necessary to put in place structures focusing on small-scale enterprise development. These structures include National Directorate of Employment (NDU), National Economic Reconstruction Fund (NERFND), fund for small-scale industries (FUSSI), People’s Bank Of Nigeria, Community Banks, small and medium Enterprises Loan Facilities (SMELF) among others.
Despite these measures, the small-scale enterprises still continue to fail. It is against this background that the study sets out to look at the various causes of the alarming rate of small-scale business factures with regards to business centers and restaurants. The suggestions and recommendation to be made at the end n of this research work will definitely provide enough information to entrepreneurs both potentials and existing in managing their business ventures successfully.
PROBLEM ASSOCIATED WITH THE SUBJECT MATTER
The bane of the Nigeria Economy is the perceived unsurvivability of the small-scale industries existent in the Economic system. The fact that small scales industries is essential and an integral failures rate of small –scale industries is essential and an integral part of the economic system cannot be over emphasized. Bit having mentioned that the failure rate of small-scale industries is also alarming.
In general, various factors have contributed to the alarming rate of small-scale business failures. What are these causes? Can the sex of an individual cause failure in business? Could the literacy level affect business performance? Are small scale business in Nigeria under financed? These questions form the statement of problem of this study.
PROBLEM(S) THAT THE STUDY WILL BE CONCEMENT WITH
This study concerns the causes of small-scale business failure in Enugu. The study will be limited to two selected economic activities in the area of business centers and restaurants in the form of inadequate to meet the rising cost of research, invariability of sufficient books by Nigeria authorizes the area of research and other problem s associated with the collection of data.
The initial apathy displayed by some respondents to volunteer information posed a problem to the research. Above all time constraints constituted a major limitation. However, the research has attempted to do a good work irrespective of the aforementioned constraints.
THE IMPORTANCE OF STUDYING THE AREA
Two major roles are expected to be played by small-scale business if given adequate support in the present economic circumstances in Nigeria. The first is the role of back ward-forward linkages which in practice means the role of bridging the gap between the rich and the poor, the second role which in actual sense is partly related to the first is that of raising the over all development activities of the nation.
This study therefore is intended to expose the various, factors, which make small-scale businesses fail than succeed. If is the researcher’s strong belief that the knowledge to these various factors is the secret behind the success of those entrepreneurs that stay alive against all odds. The study will provide a quid to prospective entrepreneurs who may wish to be self-employed especially in the line of the business studied. Equally important is the fact that this study will provide materials for future research in related topic especially given the death of relevant books in our libraries. It will also enhance mains knowledge in the field to business management by raising certain issues likely to engender further research.
DEFINITION OF TERMS
The following terms are defined and explained in order to kind clarity and remove ant ambiguity as will as enhance understanding the entire text. These are: Small-scale business, Import-substitution, exported, export promotion, restaurants and business centers.
A SMALL-SCALE BUSINESS
This refers to business establishment employing less than 160 persons the self-employed workers who may not have employed other person than himself is also included. The definition is therefore based on the employment statues of business which apparently area highly capital intensive such problem are solved regarding such establishments as small-scale and not qualifying them to be grouped as large-scale in some countries, the extents of capital investment seems as capital with labour but in ours it is the employment status of establishment that forms the basis for distinguishing between the small and large scale business.
This is policy replacing imports by domestic production under the protection of high tariffs or import quotas. Import substitution reduces world trade and involves suppressing the principle of comparative advantage. To effect this policy, countries tent to use to tariffs and quotas to direct domestic
B IMPORT SUBSTITUTION
This is a policy replacing imports by domestic production under the protection of high tariffs or import quotas. Import substitution reduces world trade and involves suppressing the principle of comparative advantage. To effect this policy, countries tend to use to tariffs and quotas to direct domestic resources away from the primary products in which they had a comparative advantage into industrial manufacturing where they had a comparative disadvantage.
C EXPORT-LED METHOD
Export-led growth refers to production and income growth through exports rather than the displacement of imports.
D EXPORT PROMOTION METHOD
In contrast to export-led method, export-promotion method refers to the co-ordination of domestic price with international price and to encourage both exports and imports by setting a realistic exchange rate and removing import rustications. It is therefore a matter of setting price incentives in such a way as to ensure that the home market does not become more lucrative than the foreign markets.
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