Cause of Failure of Small-scale Industry in Nigeria

Cause of Failure of Small-scale Industry in Nigeria

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Abstract on Cause of Failure of Small-scale Industry in Nigeria

The aim of this research work is to highlight the problems facing small-scale industries in Nigeria.  I have briefly in the introductions examined the definitions and roles of small-scale industries in Nigeria and the major problem facing them. I have also endeavored to offer feasible solution to these problems.  This study has been divided into five main chapters, in chapter 1, I discussed briefly the importance of industrialization in fast growing economy like Nigeria.  The causes of failure of industries in Nigeria were highlighted. Chapter two tries to drew attention to the views of different writers, scholar as well as seasoned, and experienced industrialist who wrote or expressed their opinion on the use (causes of failure of  industries).

Chapter one on Cause of Failure of Small-scale Industry in Nigeria

INTRODUCTION

Different countries of the world have different basis of defining industry. Some define it in terms of manpower; some prescribe a limit on capital investment while others define it on the basis of management structure.   In Nigeria, various criteria are used for its definition.  The small-scale industries in 1973 defines such enterprises as those having investment capital, (i.e. land, building, machinery, equipment and working capital of up to N60,000 and employing not more than 50 persons. But according to the Federal Ministry of Commerce and Industry, to the Nigeria Bank for Commerce and Industry (NBCI)  in 1981/82 (for the purpose of the revolving loan scheme for  industries).  Such enterprise were regarded as those costing not more than N500,000 (including the cost of land but excluding working capital).  This definition has been slightly modified by NBCI.   The bank now says that resignation of industries in its guide excess N750,000 including the cost of land. But the industrial research unit of university of Ileife defines a small-scale industry as one whose total assets in capital equipment plant and working capital are less than N250,000 and employing fewer than 50 full time workers and in 1984, the Central Bank of Nigeria credit guideline to commercial and merchant banks, small-scale enterprise were resided as establishment whose turnover (sale figure) does not exceed N500,000.   
At a recent workshop on  industries held at the Administrative Staff Collage of Nigeria (ASCON) Badagry, participants agreed that a small-scale industry should be defined as an enterprises whose cost does not exceed N750,000 (total cost excluding land).  ASCON wants this definition to remain in force until 1990. Nigeria industrialist have set up business in the Agro Based and Allied Industries, Rubber Base Industries as well as Leather, Stone, Chemical, the Metallurgical, Electrical Electronics and Service Industries etc.   Industry occupies a significant place in industrial sector like Presidential Hotel. However, proper guidance is needed for and the country as a whole.  This sector provides the consumer goods and services and helped in the development of artisans and managers, given Nigerians greater opportunity to gain experience in factory works and to study the simpler machines imported from abroad.  It is evident that the quickest and most efficient method of industrialization especially in a developing nation like ours is through  industries.  Where as developed nations such as USA, Britain etc.  continue to encourage by all possible means for growth of this class of industry.  But in our own case the official attitude both in the national and state level have been lukewarm. However, the federal government is aware of awakening of Nigerians to be fully involved in managing and directing the country economy which would not be permanently left in the hands of foreigners.   Therefore, in 1972, the Nigeria enterprise promotions decree other wise known as industrialization decree was promulgated.   
The decree was aimed at affording Nigerians greater participation in economic activities especially in industrial sector of the economy, this sector in this organization –  industries in Nigeria are principally concentrates in some part of the country like here in Enugu and other places in Nigeria including some local government area’s that have a number of  units engaged in transitional  industries and it is estimated that over 5000 small-scale units are accounted to exist in this state according to the official published in 1987 by the Anambra State Ministry of Finance and Economic Development (Statistics Division) Enugu.  Industries although have received very little government assistance, occupies a significant position in the nations asset which has the greatest alteration for and is indeed the prime mover in any manufacturing industry, is the existence of a large market. The federal government and various state governments are now emphasizing the need for rural industrialization.  This is mostly because we have perceive the need to diversity our economy thereby receiving our dependence on crude oil which for sometimes now has been hit by the oil glut.   
Industries play a vital role in the economic development of this state.  The decree gave great impetus to Nigerians interested in setting up small-scale industries.  These industries include those of bakery, footwear, agriculture textile, printing, furniture and fixtures publishing and allied products, jewelry, saw milling fabricated metal product etc.  In Presidential Hotel, from 1995/2000 to my own understanding, the government are not doing well in aspect of management and funds in that organization, many official statement in the past four years consisted paying lip service without removing the encumbrances facing the small and probably medium scale industries in the state.   The small industries like Presidential Hotel apart from being hampered by finance, technical and managerial, marketing and economic problems and so on, have the problem of lack of trust among the industrialists, they are not always ready to share ownership of their business even when it involves their own relations.  We used to forget that this is the class of industries needed in our rural areas if we hope to cope with the problem of unemployment and continued population drift from the rural areas to urban cities.   
Furthermore, if given a proper environment and guidance,  industries in that are capable of accelerating the tempo of the states industrial development which eventually will make food shortage a thing of the past.    Industries in most cases make use of the local raw materials and labour rather than capital intensive, this encourage the development of local technologies and I believe that the aim of the proposed organization by our present Governor Chimaroke Nnamani will be achieved through rural industrialization. There is no guarantee of any long rang continuity of existence of a small-scale industry.  

STATEMENT OF PROBLEM 

My research work reveled that the continuous failure of these small-scale industries negates the struggle by the government to revamp the economy.  The effect of this on the economy are food scarcity, unemployment, increase in social imbalances, adverse balance of payment positions experienced by the country, reduction in per capital income tax etc.  These problems if not adequately checked may result to a total collapse of the economy.   In almost every country, small-scale industry constitutes a greater part of all industrial establishments, it has a strategic role to play in the economical development of industrialized nations.   
However, industries like Presidential Hotel are finding it difficult to grow because of the operational problems confronting them, and lack of trust financing, management deficiency, marketing etc.  These are the major problems for most small-scale industries and one that are best attacked by collective effort. For the survival of any business, what is produced must be sold and at a reasonable price.  Marketing is a managerial function and a very important tool in the operation of a business or organization. The place and role of marketing in any organization is indispensable and cannot be over emphasized.  It embraces the  activities we engaged in order to satisfy economic needs and wants.   
Nevertheless, good marketing has not always, been easy to attain in many of our small-scale  industrial organizations because there are certain internal and external factors that always militates against marketing activities.   Internal forces may include product quality, design promotions, complexity and inefficiencies of the existing distribution channels, but in the case of external forces, we have limited market, inadequate marketing structures, changing consumer life styles etc.   Some of these problems should be systematically studied so that they could be solving once and for all.  But what ever is the case, the question to be answered in this study is that problems to small-scale industries like Presidential Hotel, what factors influence them and what should be done so as to alleviate these problems.  If these problems should be properly looked into, they can provide opportunities to small-scale industries in the state in particular and country in general.     

 PURPOSE OF THE STUDY 

This study is carried out basically to probe into the causes of failure of small-scale industries in Nigeria with particular reference, like Presidential Hotel.   The study also aimed at enlightening the very many Nigerians who engage in small-scale industries and those who intend to go into these industries the right step to take for the economic survival of their enterprise.  I also wished to make some recommendations with regard to the following:- 
(a)     What could be done by government agencies or associations to help small-scale industries in the tasks facing them. 
(b)   What can be done by way of better management to help the individual small-scale industries to improve their operations and increase the productivity and profitability? 
I wish to make small-scale industrialist in the state who lack the marketing knowledge realize the problems facing them and offer some prescription for putting the ailing patient back on its feet.     

SIGNIFICANCE OF THE STUDY 

The government of this country are encouraging people to establish their own small enterprise to reduce the problem of unemployment in the country and also reduce the rate of importation of goods, more so to produce exportable products, all these would help the country earn foreign exchange.   
This study is to take care of some problems limiting the performance of small-scale industries, such as: poor management, high rate of business failure, low productivity, under capitalization, poor accounting standards, shortage of skill, indiscipline and restricted access to institutional credit etc.   
The study also will help the small-scale industrialist to look back to know whether their resources are efficiently utilized in achieving the organizational roles and the country at large. Finally, the study exposes what could be done by government agencies or associations to help small-scale industries in the tasks facing them and what can be done by way of better management to help the individual small-scale industries to improve their operations and increase the productivity and profitability.   

STATEMENT OF HYPOTHESIS 

The hypothesis that will be tested in the course of this study are mainly derived from the research questions asked. 
Hypothesis I 
H0:   Inadequate financing has not contributed to the failure of small-scale industries. 
H1:   Inadequate financing has contributed to the failure of small-scale industries. 
Hypothesis II 
H0:   Congestion’s of industries to a particular project has not contributed to the failure of small-scale industries 
H1:   Congestion’s of industries to a particular project has contributed to the failure of small-scale industries.

SCOPE OF THE STUDY 

This work is limited to the causes of failure of small-scale industry.  The scope of this study would have been unlimited but for the complex nature of the research work which ordinarily involved getting in touch with the respondent who often times are reluctant towards giving  information needed.   One can agree that a research in small-scale industries is very extensive and cumbersome hence a singular sample industry will be used to carryout the study and the result obtained is generalized since the industries operate within the same economic bounds.   

LIMITATION OF THE STUDY 

This study would have been more extensive in the absence of the following constraints from: 
(a)    Cost and finance estimates as a student I depend solely on the merger amount of money got from parent and relatives. 
(b)    Time schedule and the denial of personal comfort also the areas involved in the collectives of data and administration of questionnaires was vast and this created financial constraints as regard transport fares 
(c)    There was unco-operative attitude amongst some of the respondents and officials of the various federal and state ministries of industry. On several occasions, I had to book appointment to see one officer or the other. 
(d)    Low response rate as regards questionnaires more over, some of the questionnaires were not returned. 
(e)    I cannot claim of insufficient literature on the topic to review but I could only review the ones which I could lay hand on.   

 DEFINITION OF TERMS 

INDUSTRY Any organization that is engaged in the manufacturing of product.
MANUFACTURING The transactions of materials like new product. He transformation may be effected by machine or by manual labour in a factory or in the home. 
SMALL-SCALE INDUSTRY A small-scale industry is a manufacturing, processing or service industry involved in a factory or production type of operations, employing up to fifty (50) full time worker. 
NUMBER EMPLOYED There are employees who on the payroll of the establishments, who are part time, casual or full time workers. 
PROMOTION Is communication that informs potential customers of the existence of product and persuade them that the products have satisfying capabilities. 
WORKING CAPITAL This is the amount of liquid (cash) funds that a businessman needs to pay in the short term e.g. payment of wages and the creditors. 
MARKETING RESEARCH This is the systematic objective search for analysis of information to guide managers in making planning and problem solving.
ENTREPRENEURSHIP This simply means the willingness or ability of individual to seek out investment opportunities, establish and run an enterprise successfully.
NACCIMA Nigeria Association of Chamber of Commerce, Industry, Mines, and Agriculture. 
FINANCIAL CLINIC A department that is responsible for providing useful information to our small-scale investor on financial matters.

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