The Effect Of Information Technology System On The Growth Of SMEs In Nigeria

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The Effect Of Information Technology System On The Growth Of SMEs In Nigeria


The purpose of this project is to describe the general characteristics of (SME) Small and Medium Scale Enterprises and explore the effects of (ICT) Information Communication Technology on (SME) Small and medium scale enterprise productivity in Nigeria.

A survey research approach of the data collection was adopted to 80 respondents. Based on the sample results obtained is indicated that SMEs in Nigeria improves its processes and products with the use of Information Communication Technology and also most Small and Medium Scale Enterprises in Nigeria were operated by men within the age range of 34-40 year old and as well mostly had the least educational qualification of B.Sc.

Furthermore, Information Communication Technology enhances the production process in organizations as a monitoring technology which decreases cost, increase organizational capabilities and also assists to shape inter-organizational coordination. Hence, based on the research overviewed it is noted that Stakeholders in the Small and Medium Scale Enterprise industry agree that the introduction of Information Communication Technology in its operations changes its processes and productivity which in turn boost profitability. In the same vein, the use of Information Communication Technology by Small and Medium Scale Enterprise opens up new opportunities, reduces inventories with the use of Information Communication Technology as well as makes their services more tradable.

Chapter One


1.1 Background to the Study

A great number of organizations around the globe are currently utilizing Information and Communication Technology (ICT), not only for cutting costs and improving efficiency, but also for providing better customer services (Irefin, Abdul-Azeez & Tijani, 2012). Also governments all over the world are adopting ICT to provide better services to their citizens. The adoption of ICT by organizations requires a business environment that encourages open competition, trust and security, interoperability, and standardization and the availability of finance for ICT (UNCTAD, 2004). The effective use of ICT remains at central stage in facilitating the change and growth of enterprises. Many small and medium enterprises (SMEs) consider the creative use of ICT as a key enabler to their development (Dixon, Cambridge, Carl & Andrew 2002).

However, as the global economy became increasingly reliant on ICT to receive, process, and send out information, the small businesses within the developing countries (which form a significant portion of their developing economies) have yet to reap these benefits evenly. This is because obtaining such opportunities rests largely upon the ability of SMEs to engage in the regional and global economic business networks which, in turn demand provision of a prerequisite level of access to and use of ICT (Dixon et al, 2002). Unless these prerequisites are in place, these SMEs are set to lose out on opportunities to integrate into the global supply chain, bid for outsourcing businesses, and increase their internal productivity and efficiency.

Irefin et al (2012) made it known that the definition of small-scale enterprises (SSEs) in Nigeria has changed over the years not only in consonance with the changing fortune of the country but also in accordance with the diversity of the Small and Medium Enterprises (SMEs) supporting institutions in the country. Prior to 1992, different institutions in Nigeria adopted varying definitions of small enterprises. However, in 1992, the issues of conflicting definition was resolved with the establishment of National Council on Industry, which is now policy making organ on all matters relating to industry in Nigeria. Among the conceptual issue that was resolved is whether Small-Scale Industry definition should include all economic activities such as trading, buying and selling or whether it should be restricted to productive industrial activities especially manufacturing. Accordingly, a clear distinction was made between small-scale enterprises consisting of trading, buying and selling activities and small-scale industries engaged in manufacturing industry.

The usage of IT in SMEs, engine economic performance, and reduce unemployment rate, IT is having a significant impact in sector of small and medium size Enterprises(SMEs), especially where industries are in decline or when unemployment levels are high (Namani, 2009). Onu et al., (2014) indicate that economic literature shows that IT are important driver of productivity and growth. IT have shown a pick up growth on labour productivity from 1.5 percent to 2.4 percent, which has increased the economic performance and national income (Oliner and Sichel, 2002). Polland (2006) claims that SMEs would need high quality IT and must always provide superior value product better than competitor, when it comes to quality, price and service. Using of IT by SMEs enhance expansion and enable small and medium enterprises to compete with multinational enterprises. In a technological environment enterprise (Multinational, and SMEs) make efficiently and effectively utilize economical resources by producing standard technology goods and services, transform human effort and economic resources to produce the market needs.

1.2 Statement of the Problem

While ICT can benefit SME in multiple ways, SMEs within the developing countries such as Nigeria, have been slow to adopt ICT as they face major constraints such as poor telecommunication infrastructure, limited ICT literacy, inability to integrate ICT into business processes, high costs of ICT equipment, incomplete government regulations for ecommerce, and a poor understanding of the dynamics of the knowledge economy (Lucey, 2005). However, Okwuonu, (2013) asserts that many SME operators are unfamiliar with operating a computer and become sceptical of the benefits and value its gives to the business and have the notion that ICT is only for larger companies even when they have the will and financial resources to integrate ICT into their core businesses. SME operators are often at a loss when the need arises to choose the most appropriate and cost efficient product. Most Nigerians could not participate in the international markets from the comfort of their offices and rooms due to erratic supply of electricity, dearth of adequate ICT facilities and the enabling environment that supports e-business. Low participation in internal market means low transactions and contribution to the global economy but with the use of ICT, weak players in the economy can be empowered by providing them with information, communication and knowledge they could not access before. This enhances the competitiveness of small and medium-sized enterprises (SMEs) and can enable them establish their presence on the internet and use it to communicate with suppliers and customers, to search for business information and to advertise their products (Okwuonu, 2013).

1.3 Objectives of Study

The primary aim of this study is to describe the characteristics of SMEs in Nigeria and secondly to explore the impact of ICT on SMES in Nigeria.

Specifically the objectives of this study are;

  1. To understand the general characteristics of SMEs and these might contribute to the development of SMEs in Kwara.
  2. To explore the different areas of SMEs where the use of ICT can improve productivity of SMEs in Kwara.
  3. To suggest ways and mechanisms on how best to enhance the full potential of ICTs as an enabler of socio-economic development of SMEs in Kwara.

1.4 Research Questions

In order to achieve the objective of this study, the following questions will be answered.

Research Question 1

What are the main characteristics of SMEs in Kwara?

Research Question 2

What is the impact of ICT on SMEs in Kwara?

1.5 Justification for the Study

Quite a number of researches have been carried out related to this study such as Adewole and Akanbi (2004) in which they examined the role of information and communication technology investment on the profitability of small medium scale industries – a case of sachet water companies in Oyo state, Nigeria. Similarly, Rufai (2014) studied the impact of communication technologies on the performance of SMEs in a developing economy, a case study of Nigerian SMEs. However, this research is distinct from various similar researches such that it examines the impact of ICT on growth of small and medium enterprises. This research tends to be very beneficial to small and medium enterprises, stakeholders in the country, Nigeria economy as a whole and also adds to the existing literature concerning this topic.

1.6 Scope of the Study

Due to financial constraints, time and mostly academic workload, this research will not be able to cover the entirety of SMEs in Nigeria. Hence, this study deals with SMEs operating in Kwara state. The Ministry of Industry and Solid Minerals Development (2015) put the registered number of SMEs operating in the state at 207 in various sectors ranging from manufacturing, food processing, pharmaceutical, poultry, animal rearing and fabricators.

1.7 Definition of Terms

Small and Medium Scale Enterprises (SMEs):

The Central Bank of Nigeria defined Small and Medium Scale Enterprises in according to asset base and in number of staff employed. The criteria are an asset base of ₦5Million and ₦500Million and a staff strength base of 20 to 300 employees.

Business Growth:

This is the process of improving some measure of an enterprise’s success. Business growth can be achieved either by boosting the top line or revenue of the business with greater product sales or service income, or by increasing the bottom line or profitability of the operation by minimizing costs.

Information and Communications Technology (ICT):

This is an umbrella term that includes any communication device or application, encompassing radio, television, phones, computer hardware and software satellite systems and so on, as well as the various services and applications associated with them, such as videoconferencing and distance learning. ICTs are often spoken in a particular context such as ICTs in SMEs, ICTs in Health care or libraries and so on.

1.7 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  1. Chapter one is concerned with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  2. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  3. Chapter three deals on the research design and methodology adopted in the study.
  4. Chapter four concentrate on the data collection and analysis and presentation of finding.
  5. Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to examine the role of small and medium enterprises in employment generating in Nigeria.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations are made, which in the opinion of the researcher will be of benefit in addressing the challenges of learners beliefs and conceptions about the small and medium enterprises in employment generating in Nigeria.

5.2 Summary

The first question of the study is related to main characteristics of SMEs in Nigeria. The study indicates that the main problems of are SMEs are Poor implementation of polices, lack of continuity, poor capital outlay, poor management expertise, inadequate information base, lack of raw materials, poor accounting systems and unstable policy environment. Our results also indicate that most SMEs in Nigeria are managed by men and are between the age range of 34-40.However, the research results also shows that most stakeholders in the SME sector holds qualification in their respective fields of specialization.

The research question relives that SMEs do introduce ICT to change its process and product as this relates to the words of ”Chau, 1995 who argues that ICT enhances the production process in organizations as monitoring technologies could be used to reduce the number of supervisors required in the process”. These is followed suit by the next question which relives that SMEs uses ICT to make their services more easily tradable as ”Minton, 2003 affirms that buyers and sellers are able to share information and transfer goods across national borders with the use of ICT, which helps to increase access to global supply chain”.

In the same vein, stakeholders in the SME sector in Nigeria affirms that the use of ICT helps to reduce inventory. Hence, this supports ”Lauder and Westall, 1997 that ”ICT improves suppliers relations consequently a reduction in inventories”. The last research question also relives that SMEs uses ICT to open up new opportunities as affirmed by ”Onugu, 2005 that ICT enables organizations to decrease costs, increase organizational capabilities and also assist to shape inter- organizational coordination. Therefore the use of ICT helps to lower coordination cost and increase outsourcing in organizations”

SMEs have been fully recognized by government 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 SMEs sector with influence of ICT therefore represents an essential element in the growth strategy of most economic and holds particular significance in the case of its productivity level in Nigeria under review. SMEs not only contribute significantly to improve living standards, employment generation and poverty reduction but it also brings about substantial domestic or local capital formation and achieve high level of productivity and capability.

5.3 Conclusion and Recommendations

From the context of this study, a sound conclusion can be drawn with emphasis that ICT has a great influence on productivity in the SME industry in Nigeria. Hence, based on the research overviewed it is noted that Stakeholders in the SME industry agree that the introduction of ICT in its operation changes its process and productivity which in turn boost profitability. In the same vein, the use of ICT by SMEs open up new opportunities , reduces inventories with the use of ICT as well as makes their services more tradable.

Furthermore, ICT has the potential to improve the core business of SMEs in every step of its business process, through the use of information technology and SMEs can gain from developing capabilities for managing information, intensive resources, enjoy reduced transaction costs, develop capacity for information gathering and dissemination of international scale and gain access to rapid flow of information.

Driven by the findings in this research, SMEs in Nigeria has a long way to go for the sector to be most relevant, focused, productive enough and play the crucial role it is expected to in relation to contributing to the growth and development of the economy of Nigeria. The benefits and need to go for technology development through either technology transfer or technological innovations or inter-firm linkages should be emphasized in the light of dimensions of global competition and its negative fall outs as well as positive opportunities, to small and medium scale industries entrepreneurs through seminars and work shop, at the local level.

Hence, for the government to succeed in reinventing the future of SMEs, it has to extend the current reforms to her educational system to make it more functional , relevant ,need -oriented and driven. Emphasis should be on modern technology, practical technological and entrepreneurial studies aimed at producing entrepreneurs. There is the urgent and dire need for the government to revamp the SME sector of the economy on order to redress the growing unemployment rate in the country, reduce poverty level, enhance standard of living and stimulate economic growth and development.

Furthermore, emphasis should be made on encouraging the female gender to participate more in activities of SMEs in Nigeria and as well include the study of both ICT and SMEs development in her school’s curriculum, establish more vocational schools in both local and urban settlements of the country. The government should help through enlightenment programmes for the youths right from grassroots.

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