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Chapter one


1.1 Background to the Study

One of the primary goals of a responsible government is to ensure a high level of living. The post-independence administration implemented import substitution; large-scale enterprises by investing in massive capital projects, based on the concept that “big is better” and “small is bad”.

Small and medium-sized businesses were regarded as obsolete and associated with technological backwardness. (Nnanna 2001). Even the Structural Adjustment Programme (SAP), which was implemented to restructure and diversify the Nigerian economy’s production and consumption patterns, had a negative impact on small and medium-sized businesses, forcing many to close their doors (Oni 2002).

After many years of neglect, most developing countries recognise the link between technology and the role of indigenous entrepreneurs (i.e. small businesses). In Nigeria, national and international entities help to promote this subsector.

Despite the substantial assistance provided by these institutions and the various restructuring programmes implemented by successive Nigerian governments, little progress has been made in improving the standard of living; many Nigerians have yet to escape poverty;

Nigeria’s per capita income has been growing at a 20% annual rate, implying that it would take 35 years for the capita income to double from US$400 to USD800 (Lawal 2003).

The federal government’s decision to withdraw from the International Monetary Fund (IMF) in the interests of democracy, accountability, and good governance has necessitated that the government look inward and capitalise on the opportunities provided by these indigenous entrepreneurs through various programmes initiated and supported by them.

Meanwhile, research on micro, small, and medium-sized businesses has shown that entrepreneurs in these sectors are a viable means of promoting self-reliance economic development as well as accelerating the pace of industrial technology (Anyanwu 2000; Obitayo 2001; Lawai and Kio., 2001).

According to the Federal Office of Statistics (FOS)’s 1988 Business Census, 70%4 of the 220,000 industrial entities questioned were small and medium-sized businesses, accounting for 70% of industrial employment and 10-15% of manufacturing input.

According to Fadahunsi (1992), SMEs account for 90% of all firms in ACP countries. They also provide 70% of employment chances to locals and promote indigenous technology.

Kurattko and Hodgetts (200 I) also highlighted that small businesses employ 530/0 of the private workers, accounting for 47% of sales and 51% of the private sector’s GDP.

All of this demonstrates the importance of SMEs in the economies of both developed and developing countries. This raises the question of what types of businesses should be classified as SMEs.

In the context of this study, indigenous entrepreneurs are referred to as SMEs. As a result, cottage industry could be used to describe small-scale operations. And they can be best described by some of their features:

· Few employees.

· Amount of investment and yearly business turnover

· Small scale within the industry.

According to Ogundele (2007), managers can also be business owners.

The third Nigerian National Development Plan (1975-1980) classified small scale industry as a manufacturing business with fewer than ten employees and an investment in machinery and equipment of no more than N600,OOO (six hundred thousand naira).

From another perspective, in 1995, the Central Bank of Nigeria classified Small commercial Enterprises as any commercial organisation with an annual revenue of less than NSOO,OOO (five hundred thousand naira).

Ogundele (2000) defined Small Scale Enterprises as organisations with a minimum or rive employees and a minimum initial capital investment of not less than N5000 (five thousand naira) when they were created between 1972 and 1986.

According to Osuagwu (200 I), Small Scale Enterprises in Nigeria must have a maximum of 50 employees and a financial capital outlay of N50,000.00.

The preceding definitions demonstrate that small-scale firms have been defined by many persons, institutions, or bodies, as well as countries. As a result, small scale enterprises, like entrepreneurship, are difficult to define broadly; the best one can say is that they are a business unit that is independently owned and managed and does not dominate its relevant market segment of interest.

In Nigeria, a recent economic report proposed the formation of 500,000 businesses under the assumption that if each entrepreneur employs 100 workers, a total of 50 million jobs will be produced within the time frame.

Although all of these accomplishments are great, the best approach to eradicate poverty is to grow out of it, rather than throwing money at it. The various efforts of the government (with focus on Lagos) on the development of small and medium scale enterprises through various assistance8J1ce in highly initiative and well structured programmes to encourage vocational educational centres in the state.)

with the interest of setting up those apportioned individuals as independent entrepreneurs after successful completion of the course proved abortive, the rate of survival of these newly set up enterprises is still very low.

Given this dismal condition, for the government’s entrepreneurship development efforts in Lagos State to be productive, these elements influencing the behaviour and performance of these indigenous entrepreneurs must be thoroughly investigated in order to achieve success.

However, in the context of this study, the factors will be considered on two broad levels: personality factors, which include the effects of age, work experience, and level of education, and environmental factors, which these indigenous entrepreneurs cannot manipulate, such as economic, technological, and social-cultural effects. (Ogundele 2003).

Personality Factors

The personality elements investigate those embodied factors and qualities that an individual’s has that gives a predisposition to

Indigenous entrepreneurs are distinguished by their ability to be innovative, intellectual, persistent, have an internal locus of control, tolerate ambiguity, be leaders and dynamic, have job experience, a solid educational foundation, and so on.

However, in the context of this study, we will focus on three of these personality variables that are most important and investigate how they affect performance and conduct.


Education exposes individuals to diverse acceptable societal behaviours, broadening entrepreneurs’ thinking boundaries in terms of anticipating chances and organising resources to capitalise on those opportunities.

Over the years, the degree of education has been overlooked as a major success component that can influence both behaviour and performance. For example, the documented success of Igbo businessmen in the Spare Parts industry throughout the years has been impressive.

However, given the complexity and dynamic nature of the Lagos business environment, educational exposure is not only required, but also of tremendous value and relevance in the nature of a company venture from growth to survival.

(2)The Effect of Age

Some experts have identified a specific age level as a determinant of critical success factors. Entrepreneurs’ ages should reflect both vibrancy (the capacity to be nimble and fast) and knowledgability (the ability to make good decisions).

This allows the efforts of the entire organisation to be readily coordinated and channelled towards overarching objectives. Age will undoubtedly influence both behaviour and performance.

For example, people of advanced age are thought to have good leadership skills because they use their life experience to correctly coordinate the efforts of others.


Possessing solid work experience is also a predictor of entrepreneurial success. This allows him to be aware of the issues and gaps that may affect the enterprises.

Furthermore, certain businesses are impacted by seasonal conditions; such experience will go a long way towards understanding the impact of such seasonal fluctuations and conditions on the specific business.

Furthermore, the impact of these elements on the degree of performance cannot be emphasised, particularly when technicalities are involved in production.

Environmental elements will include the following forces: economic, technological, and social-cultural. However, it is important to note that indigenous entrepreneurs cannot control environmental elements, but must operate within certain constraints to reap the benefits of these environmental aspects, which can also be turned into exploitable possibilities.


The economic determinants include the actual exchange rate, the tax system used, the inflation rate, the Gross Domestic Output, and how they affect the operation of the firm. These economic forces should be properly recognised because their impact on performance may be negative (i.e., becoming a threat).

For example, the steady decline in demand associated with low income levels, as well as the multiple tax system, are critical economic factors to consider if indigenous entrepreneurs are to succeed.

2. Technological Factors

The technical environment has an impact on the performance of indigenous entrepreneurs as well. The widely accepted diverse online modes of business transactions via the internet have also influenced the performance of indigenous businesses.

All of these modern methods of conducting business demand indigenous entrepreneurs to be aware of the most recent inventive methods of production if success is to be recorded.

3.Social and cultural factors

Socio-psychological factors and socio-psychological forces have a close relationship in terms of their influence on behaviour. The social-cultural elements evaluate the lifestyle, beliefs, conventions and traditions, and philosophical principles that influence business companies in Lagos. Over time, these elements have been linked to the success or failure of indigenous entrepreneurs, and their impact on conduct has been a key concern.

As can be seen from the preceding, certain factors influence both performance and behaviour, while others affect simply behaviour.

The primary goal of this paper is to determine the relative importance of indigenous entrepreneurs (i.e. small-scale enterprises) in Lagos State, as well as the factors influencing their behaviour and performance, and to determine how these factors can be incorporated to improve the performance and behaviour of these indigenous entrepreneurs.

1.2 Statement of Problem

Despite government initiatives to promote entrepreneurship in Lagos State, such as the National Directorate of Employment (NDE Lagos Chapter) Vocational and Acquisition Centre, success remains limited in comparison to expectations due to personal and environmental factors that influence the performance and behaviour of indigenous entrepreneurs.

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