European Journal of Economic and Financial Research
ISSN: 2501-9430
ISSN-L: 2501-9430
Available on-line at: http://www.oapub.org/soc
Volume 2 │ Issue 1 │ 2017
doi: 10.5281/zenodo.255799
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE
ENTERPRISES (SMES) IN NIGERIA BUSINESS ENVIRONMENT:
THE CHALLENGES
Uchehara, Chris Chigoi
Ph.D, DBA, FCNA, FFIA, FCIA, FCMA, ACPA, ACTI
Ezychigo Worldwide Consulting Company Ltd, Nigeria
Financial, Tax, Forensic and Investigative Audit and Management Consultants
Abstract:
Small and Medium Enterprises are expected to play a vital and vibrant role in the
economic growth and development of Nigeria. Given the volatility of the Nigerian
business environment, this paper ex-ray the operations of SMEs with a view to
identifying challenges encountered in fulfillment of their expected roles. Several
literatures on SMEs were reviewed along with a survey research design that sampled a
total of one hundred and thirty-eight (138) respondents by means of self-completed
questionnaire; selected from four strategic locations in Lagos State. Data were collected
on possible issues affecting the operations of SMEs ranging from high borrowing rates,
high loan requirements, government when making policy, documentation, collateral,
entrepreneurial skills, business strategy to Infrastructural inadequacies. The data were
analysed using the descriptive and inferential statistical tools. Result on challenges
affecting SMEs operation was rated. The analysis of variances was applied to
hypothesis testing. The result revealed that SMEs are constrained by inadequate
funding and poor management. It was recommended that government should develop
a lasting solution to the state of infrastructural deterioration especially electricity along
with policies that can assist to cushion the bureaucracy in obtaining loans from micro
finance banks.
Keywords: SMEs, challenges, economic growth and development, Nigeria business
environment
i
Correspondence: email chrischigo71@yahoo.com
Copyright © The Author(s). All Rights Reserved.
© 2015 – 2017 Open Access Publishing Group
1
Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
1. Introduction
SMEs play a key role in transition and development of countries (OECD, 2002). The
emergence of small and medium scale enterprises (SMEs) is a major catalyst and a key
success factor for development, growth and sustenance of an economy. Most
government and business circles have come to recognize the importance of SMEs and
consequently agreed that their growth constitutes one of the corner stones of economic
development (Olutunla, 2001; OECD, 2004). In Nigeria, empirical studies shows that an
estimate of about 70% of the industrial employment is held by SMEs and more than
50% of the Gross Domestic Product is SMEs generated (Odeyemi, 2003).
SMEs operation has been hampered by several factors. Several studies have
identified financial constraint as the major obstacle to SMEs development in developing
countries including Nigeria. For instance, Adelaja (2003) argued that lack of access to
institutional finance has always constituted a pandemic problem for SME development
in Nigeria. Over the years, government has enacted various policies and introduced
schemes aimed at financing SMEs. However, it is worrisome to note that SME up till
date are starved of funds and the financing problems keep reoccurring.
SMEs in Nigeria have not performed creditably well and hence have not played
the expected vital and vibrant role in the economic growth and development of Nigeria
as they are constrained by inadequate funding and poor management. The
unfavourable macroeconomic environment has also been identified as one of the major
constraints which most times encourage financial institutions to be risk-averse in
funding small and medium scale businesses (Ogujiuba et al., 2004).
The traditional commercial banks which are key players in the financial systems
of nearly every economy, have the potential to pull financial resources together to meet
the credit needs of SMEs, however, there is still a huge gap between supply capabilities
of the banks and the demanding needs of SMEs (Olutunla and Obamuyi 2008). A
widespread concern is that the banking system in the sub sector (which supposed to be
the major financier of SMEs) is not providing enough support to new economic
initiatives and in particular to the expansion of SMEs (Sacerdoti, 2005). Also, the interest
rate on micro-credits is very high, due to large administrative costs in relation to their
scale of operations (Mahmoud, 2005).
Asaolu, Oladoyin and Oladele (2005) have deduced that the financial challenges
limit the developmental role of SMEs. But this may not be true especially in the case of
Nigeria where the informal sector, which is constituted largely by the SMEs play a very
important role in the development of the nation’s economy. It is against this
background that this research is poised to examine the operational challenges of Small
Medium Scale Enterprises in the Nigerian business environment to ascertain whether
there are other factors affecting the effective operations of SMEs. The objectives
European Journal of Economic and Financial Research - Volume 2 │ Issue 1 │ 2016
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
therefore of this paper are: i “scertain SMEs players’ perception on factors crucial to
operations (ii) Access how best these players believe they can improve on their
operations.
2. Literature Review
Eriki and Inegbenebor (2009) noted that the commonly adduced reasons for the
inability of SMEs to meet the expectations of government in accelerating job creation,
increasing the production of goods and services, facilitating technology transfer,
creating more opportunities for entrepreneurs and, in particular, increase the local
content component of the giant multinational companies in Nigeria is due to lack of
access to credit facilities.
Cook and Nixson (2000) observe that, notwithstanding the recognition of the role
of SMEs in the development process in many developing countries, SMEs development
is always constrained by the limited availability of financial resources to meet a variety
of operational and investment needs. A World Bank study found that about 90% of
small enterprises surveyed stated that credit was a major constraint to new investment
(Parker et al., 1995). Levy (1993) also found that there is limited access to financial
resources available to smaller enterprises compared to larger organisations and the
consequences for their growth and development. The role of finance has been viewed as
a critical element for the development of SMEs (Cook &Nixson, 2000).
Godfried and Song’s
result is consistent with Ojo 99 findings in his
investigation into the role of informal finance in the development of SMEs. From the
response to the questionnaire administered in 1993 to various small business firms in
Lagos State owner’s savings/retained earnings, friends and relatives, clubs, esusu and
money lenders the informal sources, constituted about sixty per cent of the total.
A study by Ekpenyong (1997) showed that very little financial supports have
been provided by the traditional financial institutions (the commercial banks) to the
SMEs. The reasons are that small businesses have serious inherent structural defects
that make them high risk borrowers, and the traditional banks are not structured to
cater for the type of credit demanded by the small businesses owing to the nature of
their credit assessment procedures (Hammond, 1995). The semi-formal financial
institutions defined in this study as the cooperatives and trade associations have been
able to meet the credit needs of small businesses in small scale (Ekpenyong, 1995;
Aryeetey, 1995).
A study conducted by Odetola (1997) on the sources of investment financing for
SMEs in Nigeria, found out that about 96.4 percent of the SMEs finance their enterprises
through owner-savings, 2.92 percent through relatives and friends, 0.32 percent from
banks, 0.94 percent from government institutions or agencies, 0.06 percent from
European Journal of Economic and Financial Research - Volume 2 │ Issue 1 │ 2016
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
cooperatives societies, 0.33 percent from money lenders, and 0.03 percent from NGOs in
a total of 21,950 respondents. In a similar study by Cowrie Consultants (1995) cited in
Odetola, (1997) covering Northern Nigeria, Lagos and Western Nigeria, and Eastern
Nigeria, the source of business finance from personal savings was 26.6 percent, 37.04
percent and 32.14 percent for the regions respectively. From friend sources, it was 30.59
percent, 19.53 percent and 32.14 percent respectively. From bank sources, it was 35.29
percent, 33.33 percent and 21.42 percent respectively. From government agencies, it was
8.82 percent, 7.83 percent and 3.57 percent respectively; while trade groups and
cooperatives was 5.88 percent, 11.02 percent, and 7.14 percent respectively.
Temtime & Pansiri (2004) postulates that the governments of developing
countries and private enterprises in developing countries are doing much to facilitate
participation for all in terms of the establishment and support for SMEs, but economic
forces (inflation, interest and exchange rates) are negatively influencing these efforts
and cannot be easily controlled. According to studies carried out in India, SMEs face
high interest rates and experience difficulty in raising loans or equity finance, this is as a
result of capital market imperfections. Most of the SMEs lack the drive, imagination,
managerial ability and ambition to grow and develop (Little, Mazumdar and Page,
1987). Although SMEs offer employment and income to the majority of people in
developing countries, their performance has been characterized by low contributions to
output low growth rates and the inability to graduate into larger companies (Berry et al.,
2001 & Liedholm, 2002).
Other factors which are also connected to the poor performance of SMEs in the
developing world is a shortage of working capital, institutional and infrastructural
obstacles and their inaccessibility to formal market supporting institutions and
government incentives (Liedholm, 2002; Peel & Wilson, 1996 and Kappel & Ishengoma,
2004). According to USAID (2002), the standard measure of challenges of growth and
development used in studies of SMEs firms is the change in the number of workers
since start up. This variable is relatively easy for respondents to remember and does not
need to be deflated.
In a study conducted on evaluation of funding SMEs in Nigeria by Ogboru,
(2007). It was found out that SMEs were 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. The development of the SME
sector therefore represents an essential element in the growth strategy of most
economies and holds particular significance in the case of Nigeria. SMEs not only
contribute significantly to improved living standards, employment generation and
poverty reduction but they also bring about substantial domestic or local capital
formation and achieve high levels of productivity and capability.
European Journal of Economic and Financial Research - Volume 2 │ Issue 1 │ 2016
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
SME development is hampered by a number of factors, including finance, lack of
managerial skills, equipment and technology, regulatory issues, and access to
international markets (Anheier and Seibel, 1987; Steel and Webster, 1991; Aryeetey et al,
1994; Gockel and Akoena, 2002). The lack of managerial know-how places significant
constraints on SME development. Even though SMEs tend to attract motivated
managers, they can hardly compete with larger firms. The scarcity of management
talent, prevalent in most countries in the region, has a magnified impact on SMEs.
The lack of support services or their relatively higher unit cost can hamper SMEs’
efforts to improve their management, because consulting firms are often not equipped
with appropriate cost-effective management solutions for SMEs. Besides, despite the
numerous institutions providing training and advisory services like National Board For
Small scale Industries (NBSSI) , there is still a skills gap in the SME sector as a whole
(Kayanula & Quartey, 2000). This is because entrepreneurs cannot afford the high cost
of training and advisory services while others do not see the need to upgrade their skills
due to complacency. In terms of technology, SMEs often have difficulties in gaining
access to appropriate technologies and information on available techniques (Aryeetey et
al., 1994).
Some studies have consequently shown that a large number of small enterprises
fail because of non-financial reasons. Other constraints SMEs face include: lack of access
to appropriate technology; the existence of laws, regulations and rules that impede the
development of the sector; weak institutional capacity and lack of management skills
and training (see Sowa et al., 1992; Aryeetey et al., 1994; Parker et al., 1995; Kayanula &
Quartey, 2000). However, potential providers of finance, whether formal or informal,
are unlikely to commit funds to a business which they view as not being on a sound
footing, irrespective of the exact nature of the unsoundness. Lack of funds may be the
immediate reason for a business failing to start or to progress, even when the more
fundamental reason lies elsewhere. Finance is said to be the glue that holds together
all the diverse aspects involved in small business start-up and development (Green et
al., 2002).
3. Research Methodology
The quantitative research design was chosen in carrying out this research. The
population of this study comprises of SMEs in some selected locations in Lagos State
(Amu Olorunsogo, Mushin, Ladipo and Alabi International). They form the bulk of the
entire respondents in the study. For this study, a sample size of one hundred and fifty
(150) respondents out of the entire population (SMEs) was selected for the study. In
this study, purposive sampling technique was employed. The research instrument that
was used for this study is a structured questionnaire. The validity of the measuring
European Journal of Economic and Financial Research - Volume 2 │ Issue 1 │ 2016
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
instrument was established through consultation with the supervisor and other experts
in the department. Internal consistency and content validity was established. To
establish the reliability of the research instrument, the researchers adopted a test of the
instrument through a pilot study to test the authenticity of the research instrument and
a meaningful reliability index was reached. The result (see appendix) shows that all the
variables measured are reliable. This is on the basis that all the scores acquired
surpassed/exceeded the minimum alpha value of 0.7. As indicated by the general
guidelines about Cronbach's Alpha coefficient measure, the higher the Cronbach's
Alpha, the higher the reliability coefficient. In light of the outcome, all the variables
manifest great reliability (0.966, 0.931, 0.966 and 0.968) on the grounds that they fall
under the Cronbach's Alpha scope of 0.9. Hence, it can be inferred that the research
instrument utilized for the study is reliable as it is more than the generally accepted
reliability score of 0.7. Descriptive statistic of Frequency table and simple percentage
was used to analyse the demographic data while mean score was used to analyse the
objectives of the study. Inferential statistics of Coefficient Analysis and Multiple
Regression Analysis was used to test all stated hypotheses at 0.05 alpha level of
significance with the use of Statistical Package for Social Sciences (SPSS).
4. Data Analysis and Result
4.1 Demographic Data of the Respondents
According to table 4.2 (see appendix) which represents the gender of respondents, the
result shows that 109 (79.0%), are male respondents and 29 (21.0%) are female
respondents depicting that the male gender constitutes the highest percent and this
simply implies that majority of the research questionnaire were filled by males and as
such it could be deduced that the SMEs industry is largely dominated by the male
gender presumably because of the nature of the industry. According to table 4.3 (see
appendix) which represents the age group of respondents, the result shows that
10(7.2%) of the respondents fall within the age group of below 25years, 26(18.8%) of the
respondent fall within the age group of 26-30years, 54(39.1%) of the respondent fall
within the age group of 31-35years, 35(25.4%) of the respondent fall within the age
group of 35-40years while 13(9.4%) of the respondent were above the age group of 41
years.Table . shows that 9
. % see appendix of respondent’s marital status are
single,
9. % of respondent’s marital status are married while
(5.1%) of
respondents below to issue marital status. According to table 4.5 (see appendix) which
represents the highest educational qualification of respondents, the result shows that
87(63.0%) of the respondents have SSCE/A level educational qualification, 48 (34.8%) of
the respondents have B.Sc/HND educational qualification, and 2 (1.4%) of the
respondents have M.Sc./MBA while 1(0.7) percent of the respondents declared other
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
educational qualification. it could be deduced that the respondents been educationally
inclined are believed to have an understanding of the rudiments in SMEs
industry.According to table 4.6 (see appendix) which represents the work experience of
respondents, the result shows that 27(19.6%) of the respondents have less than 3year
work experience, 65(47.1%) of the respondents have had 4-6years work experience,
37(26.8%) of the respondents have had 7-9 years work experience while 9(6.5) percent of
the respondents have had above 10years work experience. Considering the work
experience of the respondents and the efficacy of respondents in SMEs industry, the
respondents of the study having spent quite a while in the field are deemed to have an
indepth view of whaat is obtainable in the SMEs industry as regards its growth and
development of SMEs .
4.2 Multiple Regression Analysis of Ex- Raying Operation of SMEs in Nigeria
Business Environment: The Challenges
This section attempts to identify the challenges of ex-raying operation of SMEs in
Nigeria business environment. The identified challenges were measured on a 5- point
Likert scale namely: strongly disagree, disagree, not sure, agree strongly and agree. To
test this objective; descriptive statistics analysis was used to reduce the 18 challenges of
ex-raying operation of SMEs in Nigeria business environment. To determine the
validity of the result, the 18 challenges identified by the researcher as highly reliable,
were subsequently and descriptively reduced to 7 challenges ranked high from mean
score of 3.05 to 4.61. Below is a detailed interpretation of the descriptive statistics
analysis result.
Table 2: Ex- Raying Operation of SMEs in Nigeria Business Environment: The Challenges
N
Mean
Std. Deviation
Procurement of fund
138
4.61
1.480
High borrowing rates
Loan collateral
Instability in government policies
Infrastructural inadequacies (water, roads etc)
Lack of viable entrepreneurial skills
138
138
138
138
138
4.54
4.48
4.41
4.24
3.55
0.695
0.812
0.843
1.111
1.148
Lack of business strategy
Source: Developed for the research
138
3.05
1.680
The reduced 7 challenges (high borrowing rates, lack of viable entrepreneurial skills,
instability in government policies, lack of business strategy, infrastructural
inadequacies (water, roads etc.), procurement of fund and loan collateral)of ex-raying
operation of SMEs in Nigeria business environment ranked high from mean score of
3.05 to 4.61 was further subjected to another analysis. Multiple Regression Analysis was
European Journal of Economic and Financial Research - Volume 2 │ Issue 1 │ 2016
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
used to obtain further result. Below is a detailed interpretation of the Multiple
Regression Analysis result.
Table 3: Model Summaryb
Model
R
R Square
Adjusted R Square
1
.505a
.255
Source: Developed for the research
Std. Error of the Estimate
.236
.54066
a. Predictors: (Constant), Loan collateral, Infrastructural inadequacies (water, roads etc),
Instability in government policies, Lack of business strategy, Lack of viable
entrepreneurial skills, Procurement of fund, High borrowing rates
b. Dependent Variable: ex- raying operation of SMEs
Table 4: ANOVAb
Model
Sum of Squares
1 Regression
Residual
Total
Source: Developed for the research
Df
19.446
56.709
76.155
Mean Square
5
194
199
F
3.889
.292
Sig.
13.305
.000(a)
a. Predictors: (Constant), Loan collateral, Infrastructural inadequacies (water, roads etc),
Instability in government policies, Lack of business strategy, Lack of viable
entrepreneurial skills, Procurement of fund, High borrowing rates
b. Dependent Variable: ex- raying operation of SMEs
Table 5: Coefficients
Unstandardized
Coefficients
Model
1
(Constant)
Standardized
Coefficients
B
1.076
Std. Error
Std. Error
.229
-.162
.194
.136
.083
.077
.083
.028
.167
.519
.135
2.166
.032
Procurement of fund
.240
Loan collateral
.217
Source: Developed for the research
a. Dependent Variable: ex- raying operation of SMEs
.098
.079
.258
.188
3.913
2.457
.000
.008
High borrowing rates
Lack of viable entrepreneurial skills
Instability in government policies
Lack of business strategy
Infrastructural inadequacies (water,
roads etc),
European Journal of Economic and Financial Research - Volume 2 │ Issue 1 │ 2016
Beta
t
2.073
Sig.
.040
.228 3.274
-.132 -2.069
.178 2.353
.111 1.859
.001
.040
.020
.005
8
Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
The elements of independent variables are the 7 challenges (high borrowing
rates, lack of viable entrepreneurial skills, instability in government policies, lack of
business strategy, infrastructural inadequacies (water, roads etc), procurement of fund
and loan collateral) ofex- raying operation of SMEs in Nigeria business environment.
This can be determined by the following equation method as below:
Y= a + b1X1 + b2X2 + b3Xs + b4X4 + b5X5 + b6X6 + b7X7 + e
where
Y= ex- raying operation of SMEs
a = constant
X1 = high borrowing rates
X2 = lack of viable entrepreneurial skills
X3 = instability in government policies
X4 = lack of business strategy
X5 = infrastructural inadequacies (water, roads etc)
X6=procurement of fund
X7=loan collateral
b = regression of coefficient of X;, i= 1, 2, 3, 4, 5,6,7
e = an error term, normally distributed of mean 0 (usually e is assumed to be 0)
Y (ex- raying operation of SMEs) = 1.076 + 0.229 (high borrowing rates) - 0.162 (lack of
viable entrepreneurial skills) + 0.194 (instability in government policies) + 0.136 (lack of
business strategy) + 0.167 (infrastructural inadequacies (water, roads etc)) + 0.240
(procurement of fund) + 0.217 (loan collateral)
In the regression, equation has been established. Under this regression equation,
it illustrates the relationship between the high borrowing rates, lack of viable
entrepreneurial skills, instability in government policies, lack of business strategy,
infrastructural inadequacies (water, roads etc), procurement of fund and loan collateral
towards the ex- raying operation of SMEs in Nigeria business environment.
Based on the Model Summary table, the seven independent variables which are
high borrowing rates, lack of viable entrepreneurial skills, instability in government
policies, lack of business strategy, infrastructural inadequacies (water, roads etc),
procurement of fund and loan collateral are slightly correlated with the dependent
variable the ex- raying operation of SMEs in Nigeria business environment. This is
because the correlation (R) for this research is 0.505 whereas the coefficient of
determination (R2) is 0.255 for the examined regression model. From the analysis, it
means the regression line could significant account for 25.50% of the total variations in
the ex- raying operation of SMEs in Nigeria business environment.
In contrast, it shows that there is 74.50% of the variation of the ex- raying
operation of SMEs in Nigeria business environment could not be presented by the
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
equation. This means there are other additional variables that are also important in
explaining theex- raying operation of SMEs in Nigeria business environment does not
been cover in this studies. Hence, the results show that 25.50% of the variances in the
ex- raying operation of SMEs in Nigeria business environment have been slightly
significantly explained by the seven independent variables.
In general, R2 value is a statistic that will gave information regarding the
goodness of fit of the model. It will increase when there are more independent variables
add into the multiple regression models. However, for this situation, analysts should
use adjusted R2 so that it will be easy to compare the explanatory power of regression
models with the different numbers of independent variables (Hair, Money, Samouel,
Page, 2007). The adjusted R2 will bring more accurate results for this situation because it
is adjusted according to the number of independent variables in the model. In addition,
the adjusted- R square can avoid overestimating the impact of adding an independent
variable into the multiple regression model. From the table 3, it shows that the adjusted
R2 is 0.236 which indicates only a slight overestimate in this model.
In the ANOVA table, it shows that the F value of 13.305 is significant at the 0.05
level. This is because the p-value is 0.00 which is less than 0.05 (p < 0.05). In overall, the
regression model with those seven independent variables of high borrowing rates, lack
of viable entrepreneurial skills, instability in government policies, lack of business
strategy, infrastructural inadequacies (water, roads etc), procurement of fund and loan
collateral was suitable in explaining the variation in the ex- raying operation of SMEs in
Nigeria business environment.
Based on the Coefficient table, high borrowing rates have the significant positive
influence towards ex- raying operation of SMEs in Nigeria business environmentsince
the t= 3.274, p= 0.001, b1= 0.229. This means that for every one unit increase in high
borrowing rates, ex- raying operation of SMEs in Nigeria business environment will
increase by 0.167 units.
Besides, for lack of viable entrepreneurial skills, it also shows significant negative
influence ex- raying operation of SMEs in Nigeria business environment. From the
results gain, t= -2.069, p= 0.040, b2 = -0.162. Thus, it shows that for every one unit
increase in lack of viable entrepreneurial skills, ex- raying operation of SMEs in Nigeria
business environment will decrease by 0.162.
In addition, there is also positive significant influence of instability in
government policies on ex- raying operation of SMEs in Nigeria business environment.
The results shown was t=2.353, p=0.020, b3=0.194. Hence, this shows that for every one
unit increase in instability in government policies, ex- raying operation of SMEs in
Nigeria business environment will be increased by 0.236.
Furthermore, from the table, it shows that lack of business strategy also have the
significant positive influence on ex- raying operation of SMEs in Nigeria business
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
environment since the t= 1.859, p=0.005, b4 = 0.136. This indicates that for every one unit
increase in lack of business strategy, it will increase the ex- raying operation of SMEs in
Nigeria business environment by 0.194.
Nevertheless, infrastructural inadequacies (water, roads etc) also shows the
significant positive influence on ex- raying operation of SMEs in Nigeria business
environment due to t= 2.166, p= 0.032, b 5= 0.167. Hence, it can be said that for every one
unit increase in infrastructural inadequacies (water, roads etc), it shows the increase of
ex- raying operation of SMEs in Nigeria business environment by 0.229.
Also, from the table, it shows that lack of procurement of fund also have the
significant positive influence on ex- raying operation of SMEs in Nigeria business
environment since the t= 3.913, p=0.000, b6 = 0.240. This indicates that for every one unit
increase in procurement of fund, it will increase the ex- raying operation of SMEs in
Nigeria business environment by 0.194.
Finally, loan collateral also shows the significant positive influence on ex- raying
operation of SMEs in Nigeria business environment due to t= 2.457, p= 0.008, b 7= 0.217.
Hence, it can be said that for every one unit increase in loan collateral, it shows the
increase of ex- raying operation of SMEs in Nigeria business environment by 0.229.
According to the result, it shows that procurement of fund has higher beta value
(b= 0.240) compare with high borrowing rates (b= 0.229), Loan collateral (b= 0.217),
Instability in government policies (b= 0.194), Infrastructural inadequacies (water, roads
etc), (b= 0.167), Lack of business strategy (b= 0.136) and Lack of viable entrepreneurial
skills (b= -0.162). Thus, it can be concluded that procurement of fund has the strongest
influence on ex- raying operation of SMEs in Nigeria business environment.
Procurement of fund plays the most important predictor compare to high borrowing
rates, loan collateral, instability in government policies, infrastructural inadequacies
(water, roads etc), lack of viable entrepreneurial skills and lack of business strategy.
5. Conclusion and Recommendation
Based the findings of the study, it is still very obvious that SMEs are really faced with
the challenge of procuring funds coupled with other issues related to funding namely,
the interest rate, loan collateral; all revolves round funding and very key to the growth
of SMEs. Therefore, if meaningful development is to be attained in the economy of the
country, there has to be sustainable funding scheme directed at easing the funding
burden of SMEs in the country and resolving issues related to the high interest rate and
the loan collateral. By so doing, the sector is deemed to experience growth which would
at the later bring about economic development in the country at large and serve as a
means to resolving other economic issues such as job creation in the country.Base on the
findings of this paper, the following recommendations are hereby put forward.
European Journal of Economic and Financial Research - Volume 2 │ Issue 1 │ 2016
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
The Central Bank of Nigeria (CBN) and other financial institutions should
embark on extensive sensitization of entrepreneurs on the operations of the banks.
Also, high interest rate which deters people with genuine business ideas should be
reduced to a bearable level so as to make borrowing cheaper.
Moreso, the Central Bank of Nigeria should as a matter of urgency compel all
other commercial banks to adhere strictly to banking policies and regulations.
Government should develop a lasting solution to the state of infrastructural
deterioration especially electricity.
Furthermore, policies which are aimed at rural development should top the lists
of policies aimed at developing the already or semi-developed urban centers so as to
reduce rural-urban migration and there is the need for clear national development
objectives to meet the needs of the SMEs sector. Sound policies and regulations
pronouncement do not guarantee achievement of anticipated results because of what is
encountered during execution, such as inconsistency of policy implementation.
Based on the findings of the research, it was very clear that challenge of SMEs
been limited in their growth due to inadequate capital occasioned by the reluctance of
the government to formulate policies that will encourage commercial banks to relax
their restrictive regulations and operations which discourage borrowing and offer more
credit facilities for SMEs. Therefore, there is need for a study to be done from the
banking system point of view on how best the credit worthiness of borrowers can be
improved. Such a work will go a long way in complementing the present work. In
addition, more studies should also be done in the area of development of the non-banks
financial institutions and supported as a combination of both the commercial banks and
the in aiding the development of the SMEs sector. Finally, studies should also be
conducted on the area of empowerment of SMEs to access not just financial support but
entrepreneurial education that gives an effective and enduring strategy for solving the
capital problems of small-scale businesses.
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EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
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IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
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IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
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EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
Appendix 1
Dear Sir/Ma,
I am conducting a study on challenges, growth and development of Small Medium
Scale Enterprises (SMEs) in Nigeria business environment for academic. The
information required is purely for academic purpose and the questionnaire is
anonymous as all the responses will be kept strictly confidential.
You are considered important to achieving the objective of this study as your
cooperation is therefore required in filling this questionnaire. Please feel free to respond
adequately.
Thank you,
Yours faithfully,
Ogbonna
SECTION A
Demographic Characteristics of the Respondent Instruction
Please provide appropriate answers by ticking √ the option that best agrees with your opinion.
Gender:
Male [ ]1
Female [ ]2
Age as at your last birthday: below 25 years [ ]1 25 – 30 years [ ]2 31 –40 years [ ]3 41 –
50 years [ ]5 Over 51 years [ ]6
Highest Educational Qualification: OND [ ] 1
HND [ ]2 B.Sc/B.Tech/B.Eng. [
]3M.Sc/M.Tech/ M.Eng. [ ]4 Others (please specify)5.......................
How many years has your company operated in Nigeria? Less than 1year [ ] 1 1 –
5years [ ]2 6 - 10years [ ]3 Above 10 years [ ]4
What is your position in the organization? Executive Management [ ] 1 Manager [ ]2
Deputy Manager [ ]3 Supervisor [ ]4
How long have you been working here? Less than 1year [ ]1 1 - 5years [ ]2 6 - 10years [
]3 Above 10 years [ ]4
Do you own a SME business? Yes [ ]1No [ ]1
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
Section B
Challenges Affecting the Growth of Small and Medium Enterprise in Nigeria
1
2
3
4
5
Strongly agree
Agree
Not sure
S/N
Disagree
Strongly disagree
The section attempts identify and investigate challenges Affecting the Growth of Small
and Medium Enterprise in Nigeria. Please indicate each factor by ticking √ ) your
preferred answer from alternatives provided.
High borrowing rates
Managerial skills and capabilities
Procurement of fund
Poor documentation
Loan collateral
6
7
8
9
10
11
Lack of viable entrepreneurial skills
Insufficient capital
Inadequate market research
Lack of succession plan
Lack of proper book keeping
Irregular power supply
12
13
14
15
16
17
Infrastructural inadequacies (water, roads etc),
Inability to separate business and family finances
Lack of business strategy
Inability to distinguish between revenue and profit
Inability to procure the right plant and machinery
Inability to engage or employ the right caliber staff
18
Instability in government policies
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
Descriptive Statistics
Minimum Maximum Mean
N
Std.
Deviation
High borrowing rates
Managerial skills and capabilities
138
1
5
4.54
0.695
138
1
5
1.94
1.106
Procurement of fund
Poor documentation
Loan collateral
Lack of viable entrepreneurial skills
138
138
138
1
1
1
5
5
5
4.61
2.30
4.48
1.480
1.240
0.812
138
1
5
3.55
1.148
Insufficient capital
Inadequate market research
138
1
5
1.90
.998
138
1
5
1.76
1.241
Lack of succession plan
Lack of proper book keeping
138
1
5
2.02
1.270
138
1
5
1.91
1.337
Irregular power supply
Infrastructural inadequacies (water, roads etc),
138
1
5
1.56
.764
138
1
5
4.24
1.111
138
1
5
2.08
1.465
Lack of business strategy
138
Inability to distinguish between revenue and
138
profit
1
5
3.05
1.680
1
5
2.41
1.498
138
1
5
1.62
1.042
Inability to engage or employ the right calibre
138
staff
1
5
2.14
1.396
1
5
4.41
.843
Inability to separate business and family finances
Inability to procure the right plant and machinery
Instability in government policies
138
Valid N (listwise)
138
Table 4.15: Model Summaryb
Model
1
R
.505a
R Square
.255
Adjusted R Square
Std. Error of the Estimate
.236
.54066
Source: Developed for the research
ANOVA (b)
Model
1
Sum of Squares
df
Mean Square
F
Sig.
Regression
19.446
5
3.889
13.305
.000(a)
Residual
56.709
194
.292
Total
76.155
199
Source: Developed for the research
European Journal of Economic and Financial Research - Volume 2 │ Issue 1 │ 2016
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
Unstandardized
Coefficients
B
Std. Error
Model
1
(Constant)
High borrowing rates
Lack of viable entrepreneurial skills
Instability in government policies
Lack of business strategy
Infrastructural inadequacies (water,
roads etc),
Procurement of fund
Loan collateral
Source: Developed for the research
Standardized
Coefficients
Beta
t
2.073
.228 3.274
-.132 -2.069
.178 2.353
.111 1.859
Sig.
1.076
.229
-.162
.194
.136
Std. Error
.083
.077
.083
.028
.040
.001
.040
.020
.005
.167
.519
.135
2.166
.032
.240
.098
.258
3.913
.000
.217
.079
.188
2.457
.008
.
European Journal of Economic and Financial Research - Volume 2 │ Issue 1 │ 2016
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Uchehara, Chris Chigo
EX-RAYING OPERATIONS OF SMALL MEDIUM SCALE ENTERPRISES (SMES)
IN NIGERIA BUSINESS ENVIRONMENT: THE CHALLENGES
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