MODERATING ROLES OF SMALL SCALE INDUSTRIES ON THE RELATIONSHIP BETWEEN JOB CREATION AND ECONOMIC DEVELOPMENT IN NIGERIA
CHAPTER ONE/INTRODUCTION
Background to the Study
From the 1960s to date, small and medium-sized enterprises (SMEs) have been given due recognition, especially in the developed nations, for playing very important roles towards fostering accelerated economic growth, development and stability of several economies. They make-up the largest proportion of businesses all over the world and play tremendous roles in employment generation, provision of goods and services, improving standard of living, as well as immensely contributing to the gross domestic products (GDPs) of many countries (OECD, 2000). In line with this, Panitchpakdi (2006) viewed SMEs as a source of employment, competition, economic dynamism, and innovation which stimulate the entrepreneurial spirit and the diffusion of skills. Because they enjoy a wider geographical presence than big companies, SMEs also contribute to better income distribution. Thus, over the last few decades, the contribution of the SME sector in the development of the largest economies in the world has beamed the searchlight on their uniqueness; and this has succeeded in overruling previously held views that SMEs were only “miniature versions” of larger companies (Al-Shaikh, 1998; Gaskill, Van-Auken and Manning, 1993). Chea (2009) noted that small industries account for about 88% of the small scale industries while 12% is credited to the medium industries in Malaysia. In Singapore alone, SMEs employ half of the working population and, consequently, contributes about a third of the total value-added, forming 92% of their total number of the industrial establishments which include manufacturing, commercial and service sectors
Ariyo (2005) explained that small and medium enterprises (SMEs) form the core of majority of the world’s economies. A study by the Federal Office of Statistics (FOS) in 2001, now National Bureau of Statistics (NBS), shows that in Nigeria, small and medium enterprises make up 97% of the economy. Although smaller in size, they are the most important enterprises in the economy due to the fact that when all the individual effects are aggregated, they surpass that of the larger companies. Over the years, small and medium enterprises have been an avenue for job creation and the empowerment of Nigeria’s citizens providing about 50% of all jobs in Nigeria and also for local capital formation. Being highly innovative, they lead to the utilization of our natural resources which in turn translates to increasing the country’s wealth through higher productivity. Small and medium scale enterprises have undoubtedly improved the standard of living of so many people especially those in the rural areas. Okpara and Wynn, (2007) affirmed that SMEs contribute about 20% to 45% full employment and equally contribute about 30% to 50% to rural income which are mostly house-holds.
However, Arinaitwe (2006) noted that it appears that considering the enormous potentials of the SMEs sector, and despite the acknowledgement of its immense contributions to sustainable economic development, its performance still falls below expectation in many developing countries. This is because the sector in these developing countries has been bedeviled by several factors militating against its performance, and leading to increase in the rate of SMEs failure. Okpara (2000) observed that these factors include the unfavorable and very harsh economic conditions resulting from unstable government policies; gross under-capitalization, difficulty in accessing credits from banks and other financial institutions; inadequacies resulting from the highly dilapidated state of infrastructural facilities; astronomically high operating costs; lack of transparency and corruption; and the lack of interest and lasting support for the SMEs sector by government authorities.
In view of the recognition accorded the small and medium enterprises in the developed, emerging and developing economies, and the need to diversify the Nigerian economy and, thus, reduce overdependence on the oil sector, this paper considered it imperative to examine the Moderating Roles Of Small Scale Industries On The Relationship Between Job Creation And Economic Development In Nigeria.
Statement of the Problem
Small businesses are saddled with the expectation of providing a sustainable road map towards achieving economic growth and alleviating the problem of unemployment.
Most people start their own small businesses out of the quest to earn income for themselves. In the process, these small businesses flourish and they are able to transition from just self-employment to creating employment for other people.
The questions are whether small businesses contribute to employment generation and its sustainability? If small businesses contribute to income creation for those individuals engaged in them in Nigeria? What are the contributions of small businesses to poverty alleviation in Nigeria? What are the contributions of small businesses to economic growth in Nigeria? The study therefore aims to identify the role of small businesses in job creation in Nigeria with a view to making recommendations.
- Research Questions
Small businesses play vital role in the policy framework of the government, particularly in creating employment which increases the GDP of a nation. To achieve clarity, this research will attempt to answer the following questions:
- Do SMES play a role on job creation to foster the GDP in Nigeria?
- Do SMEs reduce unemployment rate in Nigeria thoughs is moderate role of job creation?
Objective of the Study
The main objective of the study is to investigate on the Moderating Roles of Small Scale Industries on the Relationship between Job Creation and Economic Development in Nigeria
The specific objective of the study are to:
- Examine the role SMEs play in job creation in other to foster the Nigeria GDP
- To examine whether SMEs reduce unemployment rate in Nigeria through its moderating roles in Job creation
Statement of Hypothesis
To guide this research, the following Null hypothesis (Ho) and Alternative Hypothesis (Ha) have been formulated for testing in this study:
Ho1: SMES do not play significant role on job creation in Nigeria
Ha1: Small businesses play significant role on job creation in Nigeria
Significance of the Study:
The rationale for the study is to shed some light on Moderating Roles of Small Scale Industries on the Relationship between Job Creation and Economic Development in Nigeria. As much as this undertaking is primarily for academic purposes, its findings will serve as a guiding principle to help the relevant government authorities in policy formulation to improve the development of small-scale businesses in order to contribute to economic growth.
The paper is also of great importance, as its findings will help existing and prospective small-scale businesses.
The submissions in terms of recommendations will be vital for both practical use and future references to students, researchers and the general public.
Scope of the Study
The study investigates Moderating Roles of Small Scale Industries on the Relationship between Job Creation and Economic Development in Nigeria. Some selected SMES in Abuja was used.
Limitations of the Study
The constraint of this study includes the following:
- The researcher had limited finance to face the various travelling, printing and logistical challenges of this work
- The study has been acutely limited by lack of any research grant window
Definitions of Terms
The following terms are defined in order to lend clarity and remove any ambiguity as well as enhance understanding of the context:
- Small Business:
This is any business that is independently owned and operated, that is limited in size and in revenue depending on the industry. A local bakery that employs 10 people is an example of a small business.
- Employment:
This is the condition of having paid work.
- c. Balance of Payment:
This is the difference in total value between payments into and out of a country over a period.
- d. Economic Growth:
This an increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.
- Forward Integration:
This is a business model whereby a company takes direct control of how its products are distributed to achieve greater economies of scale or higher market share.
- Entrepreneurship:
The capacity and willingness to develop, and manage a business venture, usually with considerable initiatives and risks
- Nigeria:
This is a West African country on the Gulf of Guinea (an arm of the Atlantic Ocean): Exploited by Portuguese, British, French, and Dutch traders in the 1600s and 1700s: Nigeria was eventually claimed by the British, who consolidated the area into one colony in 1914. It became independent in 1960, a republic since 1963: member of the Commonwealth: 356,669 square miles (923,768 square kilometers). In 1991, the seat of government was moved from Lagos to the new capital, Abuja.
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