Perceptions of SME Growth Constraints in Nigeria

This study investigates the factors that influence the growth, performance, and development of small and medium-sized enterprises (SMEs) in Nigeria and what implications these factors have for policy. The study is justified for a number of reasons. Most importantly, since its independence, the Nigerian government has been spending an immense amount of money obtained from external funding institutions for entrepreneurial and small business development programs, which have generally yielded poor results (Mainbula 1997). Given the large domestic market and plethora of raw materials in Nigeria, there is little progress in terms of manufacturing value-added products, either for import substitution, exports, or employment creation. It therefore becomes pertinent to identify the factors that impede small business development in Nigeria. For this study, 32 small business entrepreneurs were interviewed across the country. In addition, other sources were interviewed to check and confirm the validity of the entrepreneu rs' responses. Research Methodology A mixed-method strategy is one in which more than one method of approach is used in data collection and analysis while conducting research (Romano 1989). This approach is similar to what Mikkelsen (1995) and Denzin (1978) described as triangulation. The multiple-method strategy was adopted for this study to reduce the possibility of personal bias by not depending on only one method of approach or response coming from only one firm or sector. Adopting this method of approach supports the authenticity of the study. Both qualitative and quantitative data were used in a variety of ways, including a detailed overview of survey results in terms of a general profile and a model of Nigerian small firms. Semi-structured interviews based on open-ended, flexible questionnaires and some structured interviews were conducted with several groups of people interested or involved with the small business sector in Nigeria. The idea behind this was to obtain cross-referencing data and some independent confirmation of data, as well as a range of opinions. Input from the following groups were solicited: (1) government officials who formulate and implement policies on SME promotion and industrial development in Nigeria; (2) officials responsible for raw material supply to small companies; (3) managers of other large scale businesses operating in the same sector and economy as the SMEs; (4) representatives of development banks who may be requested to give loans to small-scale businesses; (5) industrial experts and consultants who conduct research and are well-informed about the present state of the industrial sector in Nigeria; and (6) selected customers who buy and distribute products as retailers to the public or to other small businesses or larger firms. The Perceptions of Constraints on Small Business in Nigeria What the 32 small firms studied in Nigeria considered to be the main constraints on their firms' growth and overall performance are presented in Table 1. In addition, some entrepreneurs indicated that government policies and attitudes of public officials adversely affect their businesses, especially the harsh economic policy of the structural adjustment programme (SAP) implemented by the government in 1986. The policy caused the value of the national currency to decline. Most small businesses could not afford to train their workers, and manufacturers found it difficult to obtain foreign exchange to order or purchase machinery and spare parts. There is also the problem of frequent harassment by government officials who extort money from the businesses. Poor infrastructure, including bad roads, inadequate water shortage, erratic electric supply and a poor telecommunications system are additional obstacles. Lack of these facilities cost most firms higher overheads because they have to be responsible for obtaini ng such facilities at their own expense. …