Project Abstract

<p>               <b>ABSTRACT</b><br></p><p> Bank fraud, poor lending and credit management practices in the Nigerian banking sector forced the Central bank of Nigeria to revisit the capital structure of commercial banks in Nigeria. These among other things led the Central Bank of Nigeria (CBN) to give a directive that all banks should recapitalize from ₦2 billion to ₦25 billion with effect from 1st January 2006.This development led to various financial activities in the Nigerian financial sector with most banks initially opting for additional source of fund from the capital market via floating of shares. Most banks at this stage started inviting members of the public to acquire new shares in-order to meet up with the new minimum capital directed by the central bank of Nigeria. Notwithstanding, some banks were not capable of raising the new minimum capital by themselves, hence the need for mergers and recapitalization of banks, reducing the total number of banks in Nigeria to twenty five (25). <br></p>

Project Overview

<p><b></b></p> <b>1.0 INTRODUCTION&nbsp;</b><div><b>1.1 STATEMENT OF GENERAL PROBLEM&nbsp;</b></div><div>&nbsp;Small and Medium Enterprises (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. This situation has been of great concern to the government, citizenry, operators, practitioners and the organised private sector groups. Year in year out, the governments at federal, state and even local levels through budgetary allocations, policies and pronouncements have signified interest and acknowledgement of the crucial role of the SME sub-sector of the economy and hence made policies for energizing the same. 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. Just as it has been a great concern to all and sundry to promote the welfare of SMEs, it has also been a great cause of concern to all, the fact that the vital sub-sector has fallen short of expectation. The situation is more disturbing and worrying when compared with what other developing and developed countries have been able to achieve with their SMEs. It has been shown that there is a high correlation between the degree of poverty hunger, unemployment, economic well being (standard of living) of the citizens of countries and the degree of vibrancy of the respective country’s SMEs. If Nigeria were to achieve an appreciable success towards attaining the Millennium Declaration Goals for 2015, one of the sure ways would be to vigorously pursue the development of its SMEs. Some of the key Millennium Declaration Goals like halving the proportion of people living in extreme poverty, suffering from hunger, without access to safe water, reducing maternal and infant mortality by three-quarts and two thirds respectively and enrolment of all children in primary school by 2015 may indeed be a mirage unless there is a turnaround of our SMEs’ fortunes sooner than later. The time is now to do something surgical to the situation of our SMEs given the aggravating level of poverty in Nigeria and the need to meet up with the Millennium Declaration Goals. The decreasing level of Nigeria’s per capita income, which declined from $870 in 1981 to $260 in 1998, and $205 in2004 as well as a low level of agricultural, industrial and infrastructural development (irrigation, road and railway networks) all represent disturbing indices, which also contribute to the dismal performance and contribution of our SMEs.</div><div><br></div><div><b>1.2 THE OBJECTIVES AND RATIONALE FOR THE RESEARCH&nbsp;</b></div><div><br></div><div>&nbsp;The high degree of poverty and unemployment with their attendant high crime rate in Nigeria has been of great concern to the various governments (federal, state and local) as well as the civil society. All and sundry have been seriously agitated as to what to do in order to reduce the crippling poverty, high level of ignorance, disease, high infant-mortality rate, and the rather embarrassing high unemployment rate in Nigeria. Given the vital and salutary role and contributions, which SMEs play in other developed and developing economies, and considering the on-going reforms by the government of Nigeria, which are primarily aimed at creating wealth, reducing poverty, generating employment, re-orientating values, and stimulating real economic growth, it becomes compelling for the SME sub-sector to be revamped, overhauled and energised towards playing its expected roles. The SMEs remain a veritable vehicle for such an expected complete turnaround in the economy of Nigeria. In order words, if the governments are to realize the lofty objectives of the NEEDS and SEEDS programmes, the SME sub-sector has to be thoroughly revamped and focused on for a while. This is one of the ways that the government can be sure of realizing the objectives of the well-intended reforms and be sure of moving the economy forward to the delight of all stakeholders. This research is thus intended to identify all the problems, challenges, and constraints militating against the success of SMEs and also make appropriate recommendations for readdressing and eliminating them so that the SMEs could occupy their pride of place in the Nigerian economy and hence play the vital role they are expected to play in the economic growth and development of Nigeria. The overall objective of this research is to identify ways and means, which will establish and sustain the vibrancy for Nigerian SMEs so that they (SMEs) can play the expected vital role as the engine of growth in our economic development efforts. In order to achieve this, the research will attempt the following: i. To identify the major problems, challenges and constraints, which have militated against the SMEs from playing the vital role in the Nigerian economic growth and development; many SME promoters are claiming that the government is not doing enough to encourage, stimulate and protect the Nigerian SMEs. Some observers think that the problem is with the promoters and managers of the SMEs adding that they (SME promoters) are not only unbusiness-like in their approach but are also lacking in several aspects of managing or running a profitable business or an enterprise. ii. To find out the key causes of the low utilization or patronage by SMEs of the Small and Medium Industries Equity Investment Scheme (SMIEIS) fund currently at N28.8billion (as at December31, 2004) representing ten percent (10%) of the profit before tax, which banks have set aside for equity investment in Small and Medium Enterprises. In 1999, the Bankers’ Committee in appreciation of the government economic reforms decided to set aside 10% of profit before tax to assist SME development in Nigeria. This noble project has not yielded the desired result as only N9.3billion representing 32.3% has been invested. The latest CBN report, which puts the total pool of funds for SMIEIS at N28.8billion also noted that of the invested funds, printing and publishing took N4.3billion invested in 80 projects Both banks and SME operators have been accusing and counter-accusing each other as to who is the bad egg in the proposed transaction chain. While SME operators are saying that banks are demanding unattainable conditions and terms for approval, the banks are claiming among other things that SME operators are not presenting bankable projects. The research shall attempt to find out the true position. iii. To ascertain first hand, the opinions, feelings, and the pulse of some key SME operators as well as professionals in the SME sub-sector of the economy with respect to the unhealthy state of SMEs in Nigeria. Opinions have been as varied as the number of people one interviews as to why SMEs in Nigeria have not been thriving in spite of all incentives and support (at least on paper) policies and pronouncements by both the federal and state governments. Year in, year out, there have been a lot of emphasis on and budgetary allocations to that sub-sector of the economy. <br>&nbsp; <p><br></p></div>