The Challenges Faced by Small and Medium Scale Enterprises in Nigeria Dissertation

The Challenges Faced by Small and Medium Scale Enterprises in Nigeria - Dissertation Example The study will therefore cover these topics and will try to determine the issues faced by the SMEs in Nigeria. 3. Aims of the dissertation To identify the issues and the challenges faced by the SMEs in Nigeria. To recognize how the SMEs of Nigeria are presently dealing with it To provide recommendations regarding how the situation of SMEs in Nigeria can be improved 4. Dissertation’s position in the existing literature Small and Medium Enterprises (SMEs) are the small firms or companies whose numbers of employees are considerably less and operate independently (Analoui and Karami, 2003). Moreover, the yearly turnover of these companies is less as and when compared with a large organization. However, in many countries SMEs outnumber large organizations by a broad margin. According to reports, every year around 600,000 new SMEs are registered throughout the world. However, only 10 % of them sustains in the market. The remaining 90 % close down within two years of operation (Teall , 2012). Throughout the world small scale and micro enterprises are considered as an instrument of driving the economic growth (Johnson and Turner, 2010). Apart from that, they also play a crucial role in creating employment opportunities in a country. For this reason, especially government of most of the developing nations have put in tremendous efforts to enhance the competences of small and medium scale enterprises. However, despite the government’s effort and cooperation from financial institutions, SMEs have fallen short of expectations in many countries of the world. Similarly, in the context of Nigeria, SMEs have failed to meet the government’s expectation and have not played a vibrant role in the economic prosperity of Nigeria. This has caused serious concerns that whether SMEs have the capacity to bring economic development in Nigeria. SMEs have to deal with several challenges which reduce their capability to function and contribute substantially to the nation al economy (Onugu, 2005). This study will identify and examine the challenges faced by small and medium scale enterprises in Nigeria. Once the challenges are identified, the study will also recommend some of the possible ways by which the challenges can be surmounted. 4.1 Characteristics of SMEs in Nigeria As such, there is no definition of an SME, as the classification of businesses into small scale and large scale is based on qualitative judgement and is also subjective in nature. in addition, different countries have set different criteria for judging and classifying a SME. In order to cite an example, countries such as UK, USA and Canada consider the number of paid employees and annual turnover to categorize businesses (Ayyagari, Beck and Demirguc-Kunt, 2005). In the context of UK, a business is said to fall under the SMEs, if it has an annual turnover of ?2 million or less and cumulative employee strength of less than 200. On the other hand in Japan, small scale enterprises are defined in terms of paid up capital, type of industry and the number of paid employees. Consequently, in Japan the manufacturing companies are tagged as SMEs if they have ? 100 million as the paid up capital and around 300 employees. The wholesalers are classified as SMEs if they have ? 30 million as paid up capital and 100 employees. The services and retail trade are considered SMEs if they