SMALL SCALE INDUSTRY AND RURAL DEVELOPMENT IN NIGERIA (A CASE STUDY OF FIVE SELECTED SMEs IN AWKA SOUTH LGA OF ANAMBRA STATE)

ABSTRACT

The study examined small scale industry and rural development in Nigeria. The sample used for this study consisted of 50 staff of the 5 selected SMEs in Awka South LGA. Research instrument was Questionnaire developed by the researcher and validated by the supervisor. A response rate of 50 (100%) was recorded during the administration of the research instrument. Data collected were analysed using frequency counts, mean, standard deviation and ANOVA. The findings revealed that the role of small scale industries in rural development include creation of employment, manpower training, promotion of competition, encourages the use of local resources, introduction to big business, encourages industrialization and reduction in urban rural imbalance. The researcher then concludes that there is no major or weighty difference in the responses given by the respondents on the role of small scale industries which confirms that small scale industries will help in rural development and employment generation. It was also recommended that government of this country should take a far reacting measure aimed at encouraging mass acceptance of made in Nigeria goods and services.

 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Small and Medium Enterprises (SMEs) have been discovered to be a key driver for a country’s rural development (Schmiemann, 2009) hence, SMEs cannot be overlooked in the rural development in any country. Okongwu (2001) argues that SMEs are recognized as the main source of economic growth and a major factor in promoting private sector development and partnership, in developed and developing countries. SMEs help to create employment and are often seen as very important for the growth and innovation of dynamic economies (Mutula and Brakel, 2006). Therefore, economic growth and development in Africa can be achieved through the emergence of strong SMEs, which will later grow to become major players in the developing economy. SMEs help to diversify economic activities that have significant contributions to imports and exports, they are flexible and can adapt quickly to changing market demands (Ongori, 2009). Thus, SMEs contribute more and more to the national and international economies of the world.

Some time ago, Ablert Hirschman (1958) said that development is like a jigsaw puzzle, it is easier to fit in a particular piece when the adjoining pieces are already in place; the pieces that are hard to find are those with only one neighbour in place. This clever analogy evokes two very important economic principles that both researchers and policy makers are rediscovering as Nigeria moves from the decade of adjustment to a new period of reform and growth. The first one is that during the early phases of development, when an economy is no more than a collection of fragmented markers and regions, the establishment of government institutions, the construction of infrastructure, and the direct participation of the government in some areas of the economy are not only desirable but indispensable preconditions for the growth process.

The importance of small and medium scale industries to the rural development of any country, whether developing or developed, have been widely acknowledged and acclaimed. They are considered as there stimulate to private ownership and entrepreneurial skills, generate employment, promote industrial dispersal and rural- urban migration. Clive carpenter (2001), said that across the world, small businesses are crucial for rural development, economic growth, poverty alleviation and wealth creation. According to Wattanapruttipaisan (2003), the significance of SMEs for growth, productivity and competitiveness of the economies in both developed and developing countries is acknowledged universally, since SMEs bring about substantial local capital formation, contribute to improved living standards and achieve high levels of productivity. SMEs are identified as a major means of achieving equitable and sustainable industrial diversification.

The contributions of small scale businesses to Nigeria’s economy are not contestable as about 10% of the total manufacturing output and 70% of the industrial employment are by small scale businesses (Aina, 2007). Through the utilization of local resources, SMEs promote industrial and economic development and are responsible for the production of intermediate goods and the transformation of rural technology (Aina, 2007). Nigerian SMEs not only provide employment and income for majority of its citizens but are also recognized as the breeding ground for domestic entrepreneurial capabilities, technical skills, technological innovativeness and managerial competencies for private sector development (Aina, 2007).

The assistance of SMEs to any economy are obvious, as SMEs are known to contribute to the development of several economies in terms of output of goods and services and creation of jobs at relatively low capital cost (Apulu and Latham, 2010). SMEs also improve forward and backward linkages between economically, socially and geographically diverse sectors of many economies (Aina 2007, 2005). Thus, the development of SMEs is an essential element in the growth strategy of many economies including Nigeria.

Small and medium scale industries are necessary for the development of any rural community in Nigeria. Small and medium scale industries act as the major stepping stone to economic growth. In Nigeria today, small and medium scale industries are common but have not efficiently achieved or attained her goals.Therefore, to encourage local businessmen and institutions in buying small and medium sized businesses, the government established the Nigerian bank for industry and commerce, which had an initial operating capital of 50 million naira. There was some concern in Nigeria that Nigerians might not be able to raise enough capital to take over the foreign owned businesses affected by the decree and that there might not be enough Nigerians with the technical and managerial skills necessary to replace extricate personnel.

1.2 Statement of the Problem

In Nigeria, SMEs cover the entire range of economic activity within all sectors and share a number of common problems that hinder them from effective performance in rural communitiesin the country. At the macro level, these problems, as identified by (Aina, 2007), include low market access to credit, poor information flow, discriminatory legislation, poor access to land, weak linkages among different sectors, weak operating capabilities in terms of skills, lack of knowledge and attitudes, lack of infrastructural facilities among others.

In another study carried out at the macro-economic level by Chukwuemeka (2006), it was identified that small and medium enterprise experiences difficulties in raising equity capital from the finance houses or individuals. Even when the finance house agrees to provide equity capital, the conditions are always dreadful. All these result to inadequate capital available to the sector and thus lead to poor financing. This is the bane of most cottage industries in Nigeria. About 80% of small and medium enterprises are stifled because of this problem of poor financing and other problems associated with it. Accordingly, Osotimehin, Akinlabi and Olajide (2012) noted that the problems that emanated from poor financing of SMEs include: Lack of competent management which is the consequence of inability of owners to employ the services of experts; Use of obsolete equipment and methods of production because of owner’s inability to access new technology; Excessive competition which resulted from sales which is a consequence of poor finance to cope with increased competition in the industry; The high cost of available raw materials affects the prices of good food. This only has adverse effect on the turnover of the enterprise but also on the profitability; The availability of infrastructural facilities is grossly inadequate in the areas of access roads, electricity, water supply, etc. and Multiplicity of policies and regulatory measures such as removal of fuel subsidy, taxes, several charges on loans.

Despite the catalogue of challenges identified by previous research (Chukwuemeka, 2006; Osotimehin, Akinlabi and Olajide,2012), small scale business remain key drivers and enablers of economic growth and development. However, there seems to be a dearth of literature that worked on small scale industries and rural development at the local government level in the country, considering the geographical and socioeconomic peculiarities of Awka South, Local Government Area.

1.3 Objectives of the Study

The main objective of this study is to ascertain the effect of small scale industry in rural development. The specific objectives include:

1. Ascertain the socioeconomic characteristics of the respondents
2. Ascertain the role of small scale industry in rural development in Nigeria.
3. To ascertain the factors that militates against small scale industry in rural development in Nigeria.
4. To find out if there is a relationship between small scale industries and rural development.

1.4Research Questions

The research questions for the study are postulated as follows:-

1. What are the socioeconomic characteristics of the respondents?
2. What is the role of small scale industry in rural development in Nigeria?
3. What are the factors that militate against small scale industries in rural development in Nigeria?
4. Is there any relationship between small scale industries and rural development in Nigeria?

1.5Research Hypotheses

The following hypothesis will be tested at 0.05 level of significance.

H₀₁: There is no significant difference in the mean ratings of the respondents on the role of small scale industry in rural development in Nigeria.

H₀₂: There is no significant difference in the mean ratings of the respondents on the factors that militate against small scale industries in rural development in Nigeria.

H₀₃: There is no significant difference in the mean ratings of the respondents on the relationship between small scale industry and ruraldevelopment in Nigeria.

1.6Scope of the Study

Fives selected small scale industry in Awka South LGA, Anambra state will be chosen for the research because of their accessibility. The studywill investigatesmall scale industry and rural development in Awka south LGA of Anambra state, their role on the development of rural areas in Awka South LGA, their contributions to the development of rural communities in Awka South. These contributions are in terms of the services rendered(payment of taxes, levies, environmental cleanliness, employment profile, product availability and demand satisfaction). The study will also examine the problems small industry face in their operations. However, for the propermanagement of the study, not all the industries will be studied. The research will be based on five (5) selected small scale industriesin Awka South, LGA, AnambraState.

1.7 Significance of the Study

1. The findings will encourage federal government to allocate more funds to establishment of basic infrastructures in the rural areas.
2. The result will also encourage investors to promote the establishment of small-scale industries in our rural areas.
3. It will enhance poverty alleviation in our rural areas.
4. It will help to find solution to perennial unemployment that has bedevilled the social and economic status of the country.
5. It will lead to economic transformation, and increase in business activities in the rural areas.

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