Application Of Statistical Techniques In Examining The Benefit Of Small And Medium Enterprise Development Agency Of Nigeria (SMEDAN) On Entrepreneurs Across 36 States Of Nigeria

Project and Seminar Material for Statistics

Application Of Statistical Techniques In Examining The Benefit Of Small And Medium Enterprise Development Agency Of Nigeria (SMEDAN) On Entrepreneurs Across 36 States Of Nigeria

Abstract

This study was carried out on Application of Statistical techniques in examining the benefit of small and medium enterprise development agency of Nigeria. This study seeks to investigate why SMEDAN has not been able to effectively carry out these functions. The main objective of this study is to examine the extent to which SMEDAN has been able to contribute to the growth and development of the MSMEs sector in Kano and Kaduna States through the performance of its functions. Sub objectives include to examine the effect of SMEDAN’s development programmes and support services on the growth and development of MSMEs entrepreneurs in Kano and Kaduna States ; the extent to which SMEDAN has been able to link MSMEs entrepreneurs in Kaduna and Kano States to internal and external sources of finance, the extent to which SMEDAN has been able to provide industrial infrastructure to MSMEs entrepreneurs in Kaduna and Kano States, and the extent to which the efforts of SMEDAN has facilitated the productivity of MSMES entrepreneurs in Kano and Kaduna States.The hypotheses are; there is no significant relationship between SMEDAN’s development programmes and support services provided and the growth and development of MSMEs entrepreneurs in Kaduna and Kano States, there is no significant relationship between SMEDAN’s linkage to internal and external sources of finance and the growth and development of MSMEs in Kaduna and Kano States, there is no significant relationship between SMEDAN’s provision of industrial infrastructure and the growth and development of MSMEs entrepreneurs in Kaduna and Kano States. Data were collected from both primary and secondary sources. Primary data were collected through the use of questionnaires and interviews while secondary data were collected from documents of SMEDAN, and internet materials amongst others. Tables, percentages and chi-square goodness of fit were used for the presentation and analysis of the data. Findings from the study revealed that SMEDAN did not assist the entrepreneurs in securing industrial infrastructure, the workspaces are not convenient because of inavailability of infrastructural facilities such as access roads, water supply and electricity. The entrepreneurs were not able to access funds through the help of SMEDAN because the requirements of the financial institutions were too stringent. The study also revealed that SMEDAN is grossly underfunded. In view of the findings, recommendations were made that State government s should come in to assist in providing and developing workspaces which should be given to entrepreneurs who will pay back instalmentally, also, the conditions of loan from the financial institutions should be reviewed and made easier to enable the entrepreneurs to borrow .SMEDAN should be adequately funded to enable her achieve her objectives.

Chapter One

1.0 Introduction

The usefulness of statistical tools for analysis has become invaluable in recent years. Nowadays, it has become an indispensable tool of investigation and research in virtually every day of human activities. Most statistical analysis methods are concerned with making inference from the observed data. That is, drawing valid conclusion using sample information.

1.1 Background Information

The small and medium enterprises development of Nigeria (SMEDAN) is a major structure designed to provide institutional support for Small and Medium scale industries. It was established in Nigeria in 2003.

1.1.1 Responsibilities of SMEDAN
  1. Initiating and articulating ideas for SME’s policy thrust
  2. Overseeing, monitoring and co-coordinating the development of the SME sector.
  3. Promoting and providing access to industrial infrastructure such as layouts.
  4. Policy development.
  5. The dearth and paucity of credible and reliable MSME database is one of the main constraints to evolving a strategic action plan towards an efficient and sustainable MSME sector.

This survey conducted by the Small and Medium Enterprise Development Agency Of Nigeria in collaboration with National Bureau Of Statistics covers business enterprises in Nigeria employing below 200 persons (Micro, Small and Medium Enterprises). The survey was conducted in all the 36 States of the Federation and the Federal Capital Territory, Abuja. The pre-test was conducted in Lagos and Kano states. For micro enterprises (employing 1-9 persons) data were canvassed through the National Integrated Survey of Household (NISH) Schedule. Also rural and urban areas where small (employing 10-49 persons) and medium (employing 50-199 persons) enterprises are located were covered through the National Integrated Survey of Establishment (NISE) Module.

Micro, Small and Medium Enterprises (MSMEs) occupy a central place in the economic growth of nations. MSMEs have a fundamental role to play in the development of an economy and this cannot be over emphasized. MSMEs serve as training arena for local skills and entrepreneurs, and could become channels for mobilizing local savings, ensuring a more equitable distribution of income and reducing the migration of manpower from the rural to urban areas. The reduction of rural-urban migration is desirable and where the MSMEs are given the required support, this will lead to development of the rural areas in the long-run.

The MSMEs provide employment opportunities, create wealth and lead to poverty reduction in the long run. According to the World Business Council for Sustainable Development ( WBCSD, 2004 : 2) in Organization for Economic Cooperation and Development (OECD) economies, Small Medium Enterprises and Micro enterprises account for over 95% of firms , 60-70% of employment, 55% of GDP and generate the lion share of new jobs. In developing countries, more than 90% of all firms outside the agricultural sector are SMEs and microenterprises, generating a significant portion of Gross Domestic Product (GDP).Morocco is cited as an example; with 93% of industrial firms as SMEs and account for 38% of production, 33% of investment, 30% of exports and 46% of employment.

The agency SMEDAN trained a total of 16,379 existing business owners and startups under its various Entrepreneurship Development Programmes (EDPs) such as general EDP, Youth EDP, Corper‟s EDP, Women EDP and other Enterprise support services. The EDP is necessary to encourage enterprise development in the country which in turn is expected to trigger entrepreneurial activities among groups and individuals to improve and sharpen their business skills. This will ultimately provide employment for the nation‟s growing population

The Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) is the first major attempt to tackle the problems in the SMEs sector in a coordinated manner in the sense that it is not only concerned with the provision of financial services, it is also meant to take care of the non financial services required by MSMEs to enhance their development. Before this period, most government efforts in the SMEs sector have been on the financial aspect but
SMEDAN was formed with a view to facilitating access to credit, technology and market for the SMEs .The agency is meant to support and develop the SME sector in the country.

1.2 Statement of Problem

According to Gonzalez (2003), Small and Medium Scale Enterprises (SMEs) have played important roles in the development process in most of the developed economies, and have proved to be one of the most viable sectors with economic growth potentials. The successes recorded by countries generally in this sector arise as a result of the high priority considerations and future rewards from sustained investment in this sector. Due to their size these enterprises require relatively small capital investment to start, thereby offering a relatively high labour – to – capital ratio .They also demand low technology and managerial skills, which are readily available within the society. The extent to which the opportunities offered by SMEs are exploited and their contributions maximized in any economy depend on the enabling environment created through the provision of requisite infrastructural facilities. These include roads, telecommunications, Power, Ports, etc and the introduction and pursuit of policies such as concessionary financing that encourage and strengthen the growth of SMEs.( Gonzalez,2003 in Olatunji,2008).

In Nigeria, the SMEs sector has not been able to perform the expected vital and vibrant role in bringing about economic growth and development of the country.This is because the SMEs are confronted with several drawbacks and challenges they have to overcome in order to operate successfully. These obstacles include for example access to finance, competition ,access to market ,appropriate technology and lack of adequate infrastructural facility. These challenges have hindered SMEs from employing as much as they should, the SMEs are unable to generate wealth as they should and their contribution to poverty reduction is also hindered. Unemployment is endemic and more than 54% of the Nigerian population lives on less than $1 per day (Osalor,2010www.sudesca.org).The government through budgetary allocations, policies and pronouncements have shown interest and acknowledged the crucial role of SMEs in the economy and hence made policies for promoting the growth of same. One of the most notable policies geared towards the promotion of the MSMEs was the setting aside of 10% pre – tax profits of commercial banks for equity investment. In 2009, the Nigerian government announced the disbursement of $20 million in small scale industry loans (Osalor, 2010 www.sudesca.org) . There have also been fiscal incentives, grants, bilateral and multilateral agencies support and aids as well as specialized institutions all geared towards making the SME sub-sector vibrant. There were institutions like the National Economic Reconstruction Fund (NERFUND), The Nigeria Industrial Development Bank (NIDB), Nigeria Bank for Commerce and Industry (NBCI) and so on. SMEDAN is an agency that have been established with the aim of promoting the growth and development of the SME sector. It was established by the SMEDAN Act of 2003 to promote the development of the Micro, Small and Medium Enterprises sector of the Nigerian Economy. Its mission is to facilitate the access of Micro, Small and Medium entrepreneurs / investors to all resources required for their development .The establishment of SMEDAN is justified by the need to trigger the development of Nigeria‟s MSMEs in a structured and efficient manner.

The agency is to provide information on raw materials, machinery, equipment, market and the activities of agencies of governments such as Standard Organisation of Nigeria (SON),National Agency for Food and Drug Administration Control (NAFDAC), Corporate Affairs Commission (CAC). The organization is also to provide training and capacity building areas such as bookkeeping and accounts management ,preparation of business plans, quality control , computer (or IT) appreciation . It is to help in accessing finance, improved work space, mentoring, advisory services and facilitation of linkages and or cooperation with other enterprises for improved production. SMEDAN also Partners with regulatory bodies such as the Standard Organisation of Nigeria (SON), National Agency for Food and Drug Administration Control (NAFDAC), Export Promotions Council and other regulatory Agencies for the benefit of MSMEs. SMEDAN is to provide the MSMEs all the needed information to enable them fulfill the requirements of the regulatory agencies.

Inspite of the fact that SMEDAN has been in active operation since 2005, though established in 2003, with its establishment act empowering it to perform certain functions which are taken as the objectives. The functions include promoting and facilitating development programmes, instruments and support services to accelerate the development and modernization of MSMEs, linking MSMEs to internal and external sources of finance, appropriate technology, technical skills as well as to large enterprises and promoting and providing access to industrial infrastructure, such as layouts incubators and industrial parks among others. SMEDAN seem not to have been able to effectively carry out these functions so as to enable the MSMEs create wealth which leads to poverty reduction in the long run. This study therefore seeks to investigate why SMEDAN has not been able to assist MSMEs to function effectively. This is with particular reference to MSMEs sector in Kaduna and Kano States in the North-West Zone. In doing this, the following research questions were raised;

1.3 Research Questions

  1. Organize development programmes and provide support services to MSMEs entrepreneurs in Kaduna and Kano States?
  2. Provide industrial infrastructure to MSMEs entrepreneurs in Kaduna and Kano States?
  3. Link MSMEs entrepreneurs in Kaduna and Kano states to internal and external sources of finance?
  4. Has the efforts of SMEDAN facilitated the productivity of the MSMEs entrepreneurs in Kano and Kaduna States?

1.4 Objective of the Study

The main objective of this study is to examine the benefit of small and medium enterprise development agency of Nigeria using statistical techniques.

Specific objectives include to examine;

  1. The effect of SMEDAN‟s development programmes and support services on the growth and development of MSMEs entrepreneurs in Kano and Kaduna States ; ii) the extent to which SMEDAN has been able to provide industrial infrastructure to MSMEs entrepreneurs in Kaduna and Kano States.
  2. The extent to which SMEDAN has been able to link MSMEs entrepreneurs in Kaduna and Kano States to internal and external sources of finance.
  3. The extent to which the efforts of SMEDAN has facilitated the productivity of MSMES entrepreneurs in Kano and Kaduna States.

1.5 Statement of Research Hypotheses

The following hypotheses were formulated for this study

  1. Ho: there is no significant relationship between SMEDAN‟s development programmes, support services provided and the growth and development of MSMEs entrepreneurs in Kaduna and Kano States.
  2. Ho: there is no significant relationship between SMEDAN‟s provision of industrial infrastructure and the growth of MSMEs entrepreneurs in Kaduna and Kano States.
  3. Ho: there is no significant relationship between SMEDAN‟s linkage to internal and external sources of finance and the growth and development of MSMEs in Kaduna and Kano States .

1.6 Significance of the Study

This Study is significant because the SME sector occupies a vital place in the economic development of the country. If the SME sector is well developed, and is effective and efficient, it creates employment opportunities, decreases the level of poverty and reduces inequality among the citizens of the society. Considering the importance of the SME sector, the Nigerian government established the Small and Medium Enterprises Development Agency of Nigesria to facilitate the access of Micro, Small and Medium entrepreneur investors to all resources required for their development. It is therefore very important that a study of this nature be undertaken to examine if the aim of establishing the agency is being actually realized. And if not this will be brought to light. Performance assessment is very important as it gives direction in the realization of goals in every organization.That is the study will help improve the implementation of MSMEs policy in Kaduna and Kano states and the nation in general. The study will also be a contribution to knowledge.

Most studies such as Evbuomwan G.O et al (2013)focused on sources of finance for MSMEs in Nigeria, Gregory N (2013)focused on financing small and medium enterprises-its about demand as well as supply, Sokoto A.A & Abdullahi Y.Z (2013) wrote on Strengthening Small and Medium Enterprises (SMEs) as a strategy for Poverty Reduction in North Western Nigeria among others. These have focused on aspects such as SME financing; government efforts in providing financial support to the SME sector, problems of SMEs, and the role SMEs play in employment creation and the economy in general. But this particular study is an attempt to examine SMEDAN and its contribution to the growth and development of SMEs. SMEDAN is an agency whose scope of operation is wider than SMEs financing. This study is therefore much more encompassing and therefore more crucial to the advancement of SMEs and the economy at large.

SMEDAN was established to perform certain functions to assist the MSMEs sector by way of helping it to overcome obstacles and challenges confronting the sector –that is both financial and non-financial challenges . This study will benefit the government as it will help to bring out whether or not SMEDAN has been able to effectively carryout its functions or not, and if not the reason (s) will be brought to light and this will help the policy makers to see how to address the problems identified.

1.7 Scope of the Study

This Study assessed the contribution of SMEDAN to the growth and development of small and medium scale enterprises between 2005 and 2014. This time frame is being considered because the duration is long enough after the establishment of the agency to allow for evaluation on the impact it might have made on MSMEs and the consequent impact on the economy.

The Study covered two states in the North West Geo-political Zone of Nigeria, that is Kaduna and Kano States. The Study is being limited to these two States to allow for in depth study, and also because of time and financial constraints. These States are important in the North-West zone. Kano is known as a commercial city, we want to see the extent to which SMEDAN has helped its economic development. Although Kaduna is not known for commerce, it has MSMEs entrepreneurs operating there and SMEDAN had contact with some of the MSMEs entrepreneurs. This study actually focused on those that SMEDAN had had contact with. In addition the two States are among the pioneer States SMEDAN has worked.

1.8 Definition of Concepts

Managerial Skills

Managerial Skills refers to the ability required to effectively run a business. For this study, managerial skills include ability to keep proper record of all revenues and expenditures, proper financial management, relationship with customers amongst others.

Training Programme:

This is concerned with the process of learning the skills that is needed to do a job. In this context this refers to the event organized by SMEDAN with the aim of exposing the entrepreneurs to skills that will enhance their businesses.

Access to Better Work Places

This is concerned with having access to good shops, sites that have adequate space, water , light, good drainage , good road networks and all other infrastructural facilities needed for the business concerned.

Accessing Finance:

This is concerned with the ability of the entrepreneurs to be able to get financial assistance through SMEDAN. This financial assistance come in form of loans given by bank of industry or other financial institutions. The entrepreneur will be required to repay the loan over a period of time.

Increased Expansion and Productivity:

In this context, it means growth in their business and increase in their production capacity.

Small Scale:

Small Scale enterprises are those with employees between 10 and 49 with assets of between 5 and less than 50million naira excluding land and building.

Medium Enterprises:

Medium enterprises are those enterprises with employment of between 50 and 199 with assets of between 50 and less than 500 million naira excluding land and building.

1.9 Organization of the Study

The work is divided into five chapters. The chapter one is the introductory chapter which consists of the background to the study, the statement of the research problem, the research questions, Objective of the study, statement of research hypotheses, significance of the study, scope of the study, plan of the study and the definition of concepts.

The chapter two consists of the literature review and the theoretical framework. The chapter three is the methodology. The chapter four is the data presentation and analysis while the chapter five is the summary, conclusion and recommendation.

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary

Small Medium Enterprises Development Agency of Nigeria (SMEDAN) was established in 2003. This agency was established to adequately cater for the needs of the Micro Small and Medium Enterprises Sector (MSMES) of the economy. The MSMES is a very vital sector of the economy. If there is going to be economic growth and industrialization, this sector cannot be neglected in any nation, and particularly in Nigeria.

From literatures, we see that many economies such as India, Malaysia, Japan and Taiwan amongst others have been transformed through this vital sector of the economy. They were able to transform their economies because of the priority given to it. For Nigeria to experience economic growth, the development of the MSME sector should and must form one of the country‟s development objectives. The MSMES are training grounds for local skills and entrepreneurs, and could become channels for mobilizing local savings and ensuring a more equitable distribution of income and reduction of rural-urban migration.

SMEDAN as a government agency which is expected to tackle the problems in the MSMEs sector in a coordinated manner has only been able to provide non-financial support to the MSMEs. The services needed to boost the MSMES sector are both financial and non-financial . The financial services include the provision of micro credit and loans, while non-financial services incorporate a wide range of Business Development services (BDS). BDS activities refer to group training, individual counseling and advice, the development of new commercial entities, technological development and transfer, information provision, business links and policy advocacy.

SMEDAN has only been able to provide non-financial support to the MSMES sector. This non-financial support has been mainly training provided to selected clusters at some intervals and advisory services given to these entrepreneurs. Even some aspect of the nonfinancial services such as the development of new commercial entities, technological development and transfer and business links have not been carried out.

5.2 Conclusion

In conclusion, we see that SMEDAN has not been able to effectively perform some of its functions because of certain challenges confronting the agency. The agency‟s funding is inadequate, the trained entrepreneurs are unable to access finance to start or expand their operations. The provision of entrepreneurial education is not an end in itself but a means to an end. Finance is needed for them to expand and employ other people.

If there is going to be economic growth, poverty reduction and wealth creation in the Nigerian economy, the MSMEs sector must and should be given utmost priority. SMEDAN should be given all the support it needs and also monitored regularly to ensure that it is performing the functions it was established to perform so as to ensure the strengthening of the MSMEs sector in Nigeria.

5.3 Recommendations

SMEDAN as an organisation is very much relevant and important as the coordinating body for the MSMES sector in Nigeria. In line with the importance and relevance of SMEDAN, we recommend the following

  1. SMEDAN should keep organizing the development programmes from time to time and also reach out to others who are yet to benefit from such trainings. Also, SMEDAN should go beyond training programmes, advisory services, it should also engage in technological development and transfer through liaising with research intuitions to develop technology and transfer it to the entrepreneurs. According to the interview held with Ado Bello on the 17th of July 2012 at SMEDAN head office Abuja, the Department of Finance and International Development (DFID) gave one professor in Bayero University Kano money for research on an equipment to assist the processing of the leather product, but there was nothing to show.We recommend that such projects should not be solely handled by an individual, it should be given to a research institute and properly monitored to ensure results.
  2. State governments should come in to assist in the area of work space. The state governments should make available land areas which should be developed, and given to different clusters. The entrepreneurs could then be asked to make gradual payment back to the government. For instance, from interviews conducted with Ado Bello on the 17th of July 2012, at the SMEDAN‟s head office Abuja, he revealed that SMEDAN wrote to the Kano State government to give Leather Cluster a land. A land close to the modern tanneries at Chalawawas given without development, and the people said they could not develop it. SMEDAN made contact with UNIDO who donated modern tanneries equipment. SMEDAN asked the state government to help pay the port charges to move them to Kano. If such efforts can be made by the various state governments, it will go a long way in assisting SMEDAN to effectively carry out its functions.
  3. The government should step in to assist SMEDAN in enabling it to facilitate entrepreneurs access to finance. This means something has to be done about the conditionalities of Bank of industry and other financial institutions. Finance is necessary to enable the entrepreneurs transfer the knowledge they received through training into practice. Finance is needed for expansion which will consequently lead to employment of more workers. Finance is also needed to enable new entrepreneurs start. Finance is a critical issue.
  4. The Nigerian government should give SMEDAN adequate funds to enable her function effectively. The agency‟s activities have a high fieldwork, a lot of finance is required to efficiently and effectively perform its functions.

5.4 Suggestion for Further Research:

This study examined the contributions of SMEDAN on the growth and development of MSMEs in Kaduna and Kano States. In doing this, the performance of some of the functions were examined, to what extent has SMEDAN been able to carry out these functions?. The other functions could be examined to determine the extent to which they have been carried out by SMEDAN.

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