1.1 Background of the Study
Entrepreneurship is an important factor in national development. The strategic role of the entrepreneur as an agent of economic transformation in society is noted. This has led human societies to create veritable conditions for the existence of entrepreneurs. Nigerian entrepreneurs, therefore, cannot be left out in the pursuit of the nation’s development.
Entrepreneurs are individuals who accept risks, mobilize resources, provide jobs, and introduce innovations. They create economic activities. Many scholars associated entrepreneurship with founders of businesses and firms. In a wider context, it includes all active owner-managers who buy out the founders of a firm. It also comprises another generation, where it involved family business or family members who took over an existing business.
The impact of the activities of the entrepreneurs on the socio-politico-economic life of a nation is quite obvious. For example, in Nigeria, the small and medium enterprises sub-sector have been expanding. Their impact can be felt in the areas of employment and wealth generation, stimulation of indigenous entrepreneurship, and promotion of entrepreneurial culture.
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Entrepreneurship or small and medium Enterprises gained acceptance in Nigeria in the mid-1980s. This was in response to a prolonged recession in the economy. During this period, large enterprises were forced to lay off a large proportion of their workforce. Since then, the sector accounts for 70 percent of industrial employment (World Bank, 1995). Similarly, the agricultural sector, which largely consists of SMEs, employs over 60 percent of the nation’s workforce (Salami, 2003). The Global Entrepreneurship Monitor (2008) observed that the economic growth of a country is directly correlated to its level of entrepreneurial activity.
It is in recognition of the strategic role of the entrepreneurs in national development, that the government, corporate and financial institutions are continuously creating enabling environment to enhance entrepreneurship.
1.2 Statement of Problem
Nigeria as the most populous country in Africa is endowed with enormous human resources. According to Oteh (2009),
Nigeria accounts for 15 percent of Africa’s population, contributes 11 percent of Africa’s total output and 16 percent of its foreign reserves while it accounts for half of the population and more than two-thirds of the output of the West Africa sub-region.
Moreover, Nigeria has experienced a prolonged period of economic stagnation, rising poverty levels, and unemployment. By most measures, human development indicators in Nigeria were comparable to that of other least developed countries. Noticeable is the widespread corruption that undermines the effectiveness of various public expenditure programs.
Besides, the lack of public investments in previous decades meant that there were severe infrastructural bottlenecks. This has hindered private sector activities, particularly, the poor condition of the power sector and our roads. Infrastructure has hindered investment as well as increase the cost of doing business in Nigeria.
Over the last decade, Nigeria has implemented far-reaching economic reforms aimed at:
- improving macroeconomic management,
- liberalizing markets and trade, and
- the business environment.
Amongst include far-reaching programmes such as:
- Operation Feed the Nation (OFN),
- Green Revolution (GR),
- National Agricultural Guarantee Scheme (NALDA),
- Directorate for Food, Roads and Rural Infrastructure (DFRRI),
- National Directorate of Employment (NDE),
- Better Life Program (BLP), etc
All were introduced to alleviate poverty.
In 2003, a comprehensive homegrown economic reform strategy known as National Economic Empowerment and Development Strategy (NEEDS) was introduced. The Yar’ Adua’s 7-point reform agenda covers critical reform priorities, notably;
- Essential infrastructure,
- Power & energy,
- Food security,
- Land tenure reforms and home ownership,
- National security and wealth creation,
- Transport reforms, and
- Strategic educational development.
In 2011/2012, in continuous pursuit to cultivate entrepreneurship culture among Nigerian youths, the government in collaboration with the Federal Ministry of Finance launched a Youth Empowerment Programme called YouWin! YouWin! is aimed at financing businesses of young entrepreneurs with innovative ideas in the country.
From the foregoing analysis, it can be said that the government of the Federal Republic of Nigeria has contributed immensely to creating enabling environment for businesses. But these cannot be said to have had an impact on national development.
There are numerous pieces of evidence of failed businesses, poor financing of individual businesses, high rate of unemployment, etc. In order words, wealth creation, poverty alleviation, and promotion of economic development are far-fetched.
This research, therefore, poses the question, does entrepreneurship have a progressive impact on national development? In the course of this research, we shall attempt to answer this general question.
1.3 Research Questions
Literature and studies on entrepreneurship or Small and Medium Enterprises (SMEs) agree on its importance as a tool to economic development. However, the question lies in establishing a relationship between entrepreneurship and economic growth. Therefore, this research will attempt to streamline the models of entrepreneurship with growth indicators. In an attempt to reach this, we will attempt to answer the following questions:
- Is there any significant relationship between growth in SMEs and an increase in employment?
- Is there any significant relationship between growth in SMEs and reduction in poverty?
- Is there any relationship between increases in SME’s average expenditure on increase in infrastructural development?
1.4 Objectives of the Study
This research will attempt to analyze the relationship between entrepreneurship development and how it affects the economic development of a country. The overall objective of this research is to establish a relationship between entrepreneurship and economic growth. This will form a basis for one to authoritatively say that entrepreneurship is a tool of economic development.
Specifically, this research will identify the following:
- The relationship between growth in Entrepreneurship culture/SMEs and fall in unemployment.
- The relationship between growth in SMEs and reduction in poverty.
- The relationship between Growth in SME expenditure and growth in infrastructural development.
1.5 Statement of Hypothesis
The following hypotheses will be tested in course of this research:
- Ho: There is no significant relationship between growth in SMEs and a fall in the rate of unemployment
- Ho: There is no significant relationship between growth in SMEs and reduction in poverty.
- Ho: There is no significant relationship between growth in SME expenditure and increased access to infrastructural development.
- Ho: There is no significant relationship between entrepreneurship and national development.
1.6 Significance of the Study
The second-round effects of the global financial crisis and its associated economic downturn have adversely impacted the economic outlook of Nigeria. This situation still presents tremendous macroeconomic challenges for Nigeria, as oil continues to play a dominant role in the economy accounting for over 95% of exports and nearly 80% of Government revenue. It also threatens the significant gains from reforms successfully implemented by the Federal Government of Nigeria (FGN) since 2003 and the subsequent economic performance achieved so far.
Overall, recent developments indicate that the macroeconomic framework of Nigeria is improving, as a result of past successful reforms, the FGN’s response to the global crisis, and the improving external environment. However, major constraints remain and have been exacerbated in the context of the global crisis. The challenges faced by the Government primarily consist of:
- Maintaining macroeconomic stability, particularly by containing the emerging fiscal and external deficits while stabilizing the Naira in the context of declining international reserves and capital inflows;
- Maintaining the banking sector soundness; and,
- Addressing the power sector bottlenecks, creating an enabling environment for private activities, sustaining growth in the non-oil sector, create jobs, and reduce poverty.
As a tool of economic growth and development, there is a need for the government to ascertain the extent or measure the actual impact made by SMEs on the development of the nation in general. Therefore, this research work is significant to the government in that it will provide a model that will enable the government to measure in quantitative terms the actual impact of entrepreneurship on the economic development of our nation.
1.7 Scope and Limitations of the Study
The study is expected to hypothetically analyze the impact of Entrepreneurship as a tool of national development. The study will use the SME sector to analyze the impact of entrepreneurship on the economy.
The study will tend to review the various theoretical and empirical literature on SMEs and then use the statistical model to analyze the relationship between SME’s growth and named indicators of economic growth and development. Due to the cost of coverage and the paucity of secondary data, the study will use SMEs in Abia State, using formal sector information obtained from the National Bureau of Statistics.
Because SMEs exhibit similar characteristics no matter the location, the results obtained can be easily generalized for the SMEs sectors in the country.
1.8 Definition of Terms
Micro Enterprise: A firm, whose total cost including working capital but excluding the cost of land is not more than ten million naira (N10,000,000) and/or with a labour size of not more than thirty (30) full-time workers and/or a turnover of less than two million naira (N2,000,000) only.
Small Enterprise: An enterprise whose total cost including working capital but excluding the cost of land is between ten million naira (N10,000,000) and one hundred million naira (N100,000,000) and/or a workforce between eleven (11) and seventy (70) full-time staff and/or with a turnover of not more than ten million naira (N10,000,000) in a year.
Medium Enterprise: A company with a total cost including working capital but excluding the cost of land of more than one hundred million naira (N100,000,000) but less than three hundred million naira (N300,000,000) and/or a staff strength of between seventy-one (71) and two hundred (200) full-time workers and/or with an annual turnover of not more than twenty million naira (N20,000,000) only.
Large Enterprise: Any enterprise whose total cost including working capital but excluding the cost of land is above three hundred million naira (N300,000,000) and/or a labour force of over two hundred (200) workers and/or an annual turnover of more than twenty million naira (N20,000,000) only.
Other important abbreviations, terms, and notations include but are not limited to the following:
NASME: Nigerian Association of Small and Medium Enterprises, which is an umbrella association of all SMEs
MAN: Manufacturers Association of Nigeria is the official association of manufacturing companies in Nigeria
NACCIMA: Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture is an association of various Chambers of Commerce in Nigeria
NASSI: Nigerian Association of Small Scale Industries is the umbrella association of all the Small Scale Enterprises in Nigeria
DFIs: Development Finance Institutions are companies involved in project and development finance such as the Bank of Industry (BOI)
SMEs: Small and Medium Enterprises are those firms, which satisfy the definitions given above
SMEDAN: Small and Medium Enterprises Development Agency of Nigeria
SMIEIS: Small and Medium Industries Equity Investment Scheme
BOI: Bank of Industry, which provides medium to long-term loans to enterprises
CBN: Central Bank of Nigeria, the apex bank in Nigeria, which supervises other banks
NACRDB: Nigerian Agricultural Cooperative and Rural Development Bank
NEEDS: National Economic Empowerment and Development Strategy
SEEDS: State Economic Empowerment and Development Strategy
NDE: National Directorate of Employment
YouWiN: Youth Enterprise with Innovation in Nigeria
CMD: Centre for Management Development
NAPEP: National Poverty Eradication Programme
MSME: Micro, Small and Medium Enterprises
NGO: Non-governmental Organisation
LCCI: Lagos Chamber of Commerce and Industry
2.1 Conceptual Framework
The word “Entrepreneurial” came into being in the 18th century by an authority called Richard Cantillon. Entrepreneur involved nurturing of idea, and realization of the ideal through practical application in a business endeavour. However, an Entrepreneur could fall within Micro, Small, and Medium Enterprises, generally understood as Small and Medium Enterprises (SME).
In many of the newly industrialized nations, more than 98% of all industrial enterprises belong to the SMEs sector and account for the bulk of the labour force (Sanusi, 2003). It is estimated that SMEs employ 22% of the adult population in developing countries (Kayanula and Quartey, 2000), and provide more employment per unit of capital investment than large-scale enterprises (Inang and Ukpong, 1992).
In Nigeria, SMEs account for about 70% of industrial employment (Adebusuyi, 1997) and well over 50% of the Gross Domestic Product (Odeyemi, 2003). The ability to find out the factors which improve the profitability of SMEs so that they are successful and grow into conglomerates is of considerable concern to the entrepreneurs and the Nigerian government.
2.1.1 What is entrepreneurship?
Entrepreneurship is a skill that enables one to take a risk by investing money in a business venture. It is one’s ability to visualize, develop, organize, and overseas a business enterprise with its anticipated risk to make a profit.
While entrepreneurship is an act of creating businesses and scaling them to generate profit, an entrepreneur is someone that establishes the business. Entrepreneurs are inventors that aggregate resources to ensure effective service delivery. They use their skills to play key roles in the economic development of every nation.
Entrepreneurship can also be seen as the study of how businesses are created and the process of creating new businesses. Because starting a business involves risk-taking, entrepreneurship requires a step-by-step process that should be learned to avoid failure.
Essien (2006: 18) defines entrepreneurship “as the total of self-asserting attribute that enables a person to identify business opportunity together with the capacity to organize needed resources with which to profitability, taken advantage of such opportunities in the face of calculated risks and uncertainties”. That is self-assertiveness that is born out of self-confidence, self-reliance, and optimism, being a critical attribute of entrepreneurship. To him, the push and indeed restlessness that often accompany the identification of a profitable business opportunity are some of the indications of a self-asserting spirit.
2.1.2 Characteristics of entrepreneurship
There are several characteristics of an entrepreneur. These attributes give them the doggedness and perseverance that are needed to pursue their ideas in the absence of rewards.
Onah (2004) identified several characters that Entrepreneur possess and these characters have been found to include drive, mental ability, human relations ability, communication ability, technical knowledge, and innovative ability.
Entrepreneurship has been recognized as an important aspect and functioning of organizations and economies. It contributes in an immeasurable way toward creating new jobs, wealth creation, poverty reduction, and income-generating for both government and individuals (Dickson et al, 2008). In 1934, Schumpeter argued that entrepreneurship is very significant to the growth and development of economies.
Let us break down the characteristics of an entrepreneur in the following list.
- Risk-taking: they are courageous enough to take risks, even in the face of failure.
- Creativity & innovation: they are highly creative and can generate new ideas from existing ones.
- Visionary leaders: they are visionary and have great leadership qualities to organize human and material resources to drive success.
- Flexibility: visionary leaders are open-minded who can adapt to any situation. They are open to new ideas and adjust adequately to achieve set goals.
- Passionate: entrepreneurs are passionate about their vision and are focused to achieve their goals. They love what they do, and the results of their deeds motivate them to do more.
- Persistence: they are not afraid of failure. Most entrepreneurs are open to failure. To some, failure is a source of strength to continue in their pursuit.
- Team building: They are great resource builders. They can organize human and material resources for the efficient delivery of ideas.
- Competitiveness: because of their creative spirit, resilience, entrepreneurs are not afraid of competition. Competition motivates them to create better products and services.
2.1.3 What is national development
According to Sapru (1994), development is a process of societal transformation from a traditional to a modern society and such transformation is also known as modernization. Hahn-Been (1970) defines development as a process of acquiring a sustained growth of a system’s capacity to cope with new continuous changes towards the achievement of progressive political, economic, and societal objectives.
National development is a multifaceted indicator that defines the ability of a nation to improve the overall standard. It is a measure of the national well-being of the residence of a country measured in terms of standard of living, income per capita, creation of employment, education, etc.
National development usually begins with a plan that has the interest of the citizens and residents of a nation at heart. For example, a national development plan may address poverty and inequality, unemployment and healthcare, etc.
2.1.4 National development plans in Nigeria
The government of nations uses development plans to improve the livelihood of their citizens and residents. The Nigerian government is not an exception to this. Nigeria has rolled out development plans for different periods beginning from the colonial era. In this section, we shall briefly highlight the different national development plans Nigeria has had.
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