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Chapter one


1.1 Background of the Study

Small and medium-sized businesses have emerged as true engines of growth, employment, poverty reduction, and innovative development in today’s global economies.

The governments of various countries, as well as world economic development and financial institutions such as the Brethonwood Institution, International Monetary Fund, World Bank, and United Nations, have all embarked on deliberate developmental policies aimed at creating a productive base for global economies in recognition of the potential of SMEs.

The educational background of an entrepreneur who works in small and medium-sized businesses is critical to the success of the business. This is because if small and medium-sized firms are owned and managed by educated persons, the consequence will be a business growth and success (Anyanwu, 2004).

According to Adeosun (2006), many businesses in Nigeria, particularly small and medium-sized enterprises, fail because their owners are not well educated and, in some cases, are complete illiterates who lack the necessary educational ability and skills to manage successful business enterprises.

According to Onyema (2007), an individual’s academic qualifications or educational level are vital for success in the corporate world. According to Onyema, in Nigeria, where unemployment is high, individual citizens

particularly school leavers/graduates from Nigerian tertiary institutions, should engage in small and medium-sized enterprises rather than hoping against hope for jobs that aren’t available.

According to Harper (1995), with the significant rise in global population (particularly in Nigeria and many developing nations), “governments cannot afford to employ many more. Furthermore, the large-scale sector has failed to absorb even a small fraction of the millions of people who are looking for work.

Small businesses may be the best hope for creating jobs in many countries, therefore it is not surprising that policymakers in developing countries and virtually everywhere else have worked so hard to support and encourage them.” The availability of effective infrastructure services is critical for private investment to take off (CBN, 2000).

SMEs employ more than half of the industrial workers in Columbia, India, Indonesia, Kenya, the Philippines, Tanzania, and Zambia, reflecting their respective countries’ experiences with small and medium-sized firms.

They are the true job creators in the European Union (EU), accounting for 99.9 percent of 11.6 million enterprises (excluding those in agriculture, fishing, and other sectors), 72% of the 80.7 million people employed by all enterprises

and 69.7% of EU turnover (Deloitte, Touche, & Tohmatsu, 1995). Small and medium-sized enterprises (SMEs) accounted for more than half of overall employment in Canada.

According to studies, SMEs have served as a mechanism in many countries to stimulate indigenous entrepreneurship, increase job possibilities per unit of capital invested, and aid in the development of local technology (Sule, 1986; World Bank, 1995).

They contribute to the mobilisation of savings for investment and encourage the use of locally sourced raw materials. Their nationwide dissemination contributes to more equitable income distribution among individuals and regions, as well as mitigating rural-urban migration.

Given these benefits, there has been a greater emphasis on promoting SMEs around the world as a strategy for poverty reduction and economic development.

Even in the most prosperous economies, such as the United States of America, small-scale businesses have played a significant part in the transition from the industrial age to the post-industrial information technology era.

In addition, in other nations such as Japan and South Korea, the use of sophisticated technology has decreased to the bare minimum efficient size of production in industries recognised for product innovation, such as electronics and computer manufacturing (Olorunshola, 2000).

In the same way, the Nigeria budget for 2003 was aimed, among other things, to alleviate poverty. According to Sanusi (2003), it is necessary “to pursue macroeconomic policies and sector growth strategy that will achieve fiscal stability, improve non-oil sector competitiveness, lower levels of inflation, fix stable and competitive exchange rate in order to engender growth and reduce poverty through increased employment” .

Specifically, attention has been focused on the development of small and medium-sized businesses with the goal of transforming them into engines of growth for the various economies.

Various obstacles impede its expansion, which is why it was established and managed as a growth engine. These include, among other things, a lack of information, managerial, and technical skills; weak ethical standards, a lack of openness;

a lack of adequate policy design and implementation; and, most importantly, a lack of quality education on the part of Nigeria’s small and medium-sized entrepreneurs.

Many Nigerian entrepreneurs have failed in their enterprises due to a lack of good education, which provides the capacity to handle and coordinate critical concerns that can lead to success in any endeavour done by an individual businessman or woman.

The majority of businessmen and women have failed in their small business operations owing to a lack of knowledge, which has resulted in poor management and growth of their businesses.

Above all, small and medium-sized enterprises have failed to achieve the anticipated economic growth due to entrepreneurs’ inadequate managerial abilities and a lack of education.

Small and medium-sized firms in Nigeria, like in other developed and developing countries around the world, confront a number of seemingly insurmountable challenges. Often, the main obstacle that SMEs encounter is a lack of educational qualification, and all other issues are subsumed under it (Agundu, 2003).

While it is acknowledged that the lack of necessary educational qualifications by entrepreneurs is a major impediment to the development of small industries, particularly in developing countries such as Nigeria, other issues such as poor transport, insufficient and inefficient infrastructure, and a lack of sufficient funds are also prevalent.

Bureaucratic and inefficient administration of incentives discourages rather than promotes SME growth. The multiplicity of regulatory authorities and levies has traditionally resulted in excessive business costs, poor management practices, and a lack of entrepreneurial competence due to many SMEs’ promoters’ inferior educational and technical backgrounds.

Weak product demand due to low and declining consumer purchasing power, as well as a lack of patronage for locally produced goods by people in positions of authority. All of these issues should be recognised as impeding the growth of SMEs (Ausbeth 2004).

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