European Journal of Research and Reflection in Management Sciences Vol. 6 No.

2, 2018
ISSN 2056-5992

ROLE OF SMALL & MEDIUM ENTERPRISES IN POVERTY

ERADICATION IN NIGERIA
John-Akamelu Chitom Racheal
Entrepreneurship Studies Unit
Faculty of Management Sciences
Nnamdi Azikiwe University Awka, NIGERIA
&
Muogbo Uju, S. PhD
Entrepreneurship Studies Department
Faculty of Management Sciences
Chukwuemeka Odumegwu Ojukwu University Igbariam, NIGERIA

ABSTRACT

This study examined the role of small and medium enterprises in poverty eradication in
Nigeria. The broad objective of the study is to determine the role of small and medium
enterprises in Nigeria and its contribution towards industrialization. Three research questions
were posed for the study and three hypotheses formulated in line with the objectives. The
instrument for data collection was questionnaire which was used in analyzing the research
question while hypotheses were tested with Chi-Square(X2). The population of the study is
150. Therefore, the study revealed that small and medium enterprises provided employment
opportunities, training ground, and harness utilization of local resources. The study concluded
that a good development strategy if employed by these industrialists will grow to large-scale
capital intensive. The study recommends that SMEs should source their loans from the
financial institutions where interest rates are low.

Keywords: SMEs, Entrepreneurs, innovation, poverty eradication, Employment.

INTRODUCTION
Background of the Study

Small and medium enterprises have made great contributions in eradicating poverty in
Nigeria. SMEs are regarded as the engine of economic growth to any nation’s development.
The main advantage of the sector is its ability to employ at low capital cost. The labour
intensity of the SMEs is much higher than that of the large enterprises. SMEs as a nursery of
entrepreneurship are often driven by individual’s creativity and innovation. Besides the
growth potentials and its critical role in the manufacturing and value chains, there wide
spread in Nigeria and the multiple effects they have on the rest of the economy enable them
to be the engine of economic progress. SMEs are main drivers of innovation, job creation,
poverty reduction, wealth creation, income distribution and reduction in income disparities.
After the economic reform on 1986, the small and medium scale Enterprises are seen as a key
to Nigeria’s growth and poverty alleviation and unemployment in the country. Therefore,
there is need to promote such enterprises in developing economies like Nigeria because since
it brings about a great distribution of income and wealth, economic self-dependence,
Entrepreneurial development employment and a host of other positive economic uplifting
factors. In Nigeria where adverse Balance of payment situation is low, the growing activities
of the small scale industries sector in its export portfolio goes a long way in generating
foreign exchange and smoothening out the adverse balance of payment situation.

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Awosika (2011), Schmitz (2010) and Aremu (2010) posited that small scale enterprises
provides income, saving and employment generation. They are seen as veritable engines for
the development of entrepreneurial capabilities and indigenous technology which will
generate employment in the country. It has been estimated that SMEs employ 22% of the
adult population in Nigeria. Because of the SMEs roles in the development and growth of
various economies, they have aptly been referred to as “the engine growth” and catalysts for
socio-economic transformation of any country. The various activities of small business firms
have resulted in the mobilization of the resources of the environment and thereby improving
on the standard of living of the population or people. They have contributed a lot to the
labour market by absorbing on ever growing supply. In doing this, they have sufficiently
helped to curtail the rising unemployment rate in Nigeria. Other impacts of this sector are its
contribution to the development of indigenous entrepreneurs like Innoson Group of company,
Tummy-Tummy, Chikason Group of Company, Dozy Power flow etc.

SMEs can be said to be a good agent for disposal of industrial products and some service and
have immensely increase the production of raw-materials in the form of semi-processed
goods for use by bigger industries. It is also a base for the development of appropriate
technology and provides a veritable ground for skilled, unskilled and semi-skilled workers.
Anambra state has in recent years become an important industrial zone tool. Its prominence
has become generally recognized to the extent that the Oyeleran Oyeyinka (2000) described
it, as an emergent industrial cluster` in Nigeria Englama. Bamidele (2010) aptly summarized
the definition of poverty in both absolute and relative term as a state where an individual is
not able to cater, adequately for his/her basic needs of food, clothing and shelter, meet social
and economic obligations, lack gainful employment, skills assets and self-esteem, and has
limited access to social esteem and economic infrastructures. Small and medium enterprises
constitute over 90 percent of business operations and contribute toward over 50 percent of the
nation’s total employment opportunities and gross domestic product. Therefore, this study
tends to examine the role of SMEs in poverty eradication in Anambra State Nigeria.

Statement of the Problem

The role of small and medium enterprises in eradicating poverty cannot be over emphasized.
When you look at Nigerian economy it shows that greater consideration and encouragement
should be given to small and medium enterprises. However, little attention or none is given to
SMEs as they are left purely in the hands of individuals to initiate and run them. The essence
of this study therefore is to find out why the government has not cared to give the same level
of attention to small and medium enterprises. When this is known, it will be of paramount
importance to point out all the benefits of small and medium enterprises in eradicating
poverty. Against this back drop therefore, the study tends to find out the Lack of appropriate
and adequate managerial and entrepreneurial skills with the lack of strategic plan, business
plan succession plan, adequate organizational set up, transparent operational system etc on
the part of many founders and managers of small and medium enterprise.

Objective of the Study

The broad objective of this study is to examine the role of SMEs in eradicating poverty in
Nigeria while the specific objectives are to:
1. Determine the role of small and medium enterprise in eradicating poverty in Nigeria.
2. Examine the problems of financing small and medium enterprises.
3. Examine the contribution of SME’s towards industrialization.

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Research Questions
The following research question guided the research;
1. To what extent can small and medium enterprise be an instrument for poverty
eradication?
2. What is the major challenge encountered by small and medium enterprises in
eradicating poverty.
3. To what extent has small and medium enterprises contributed to industrialization?

Hypothesis of the Study

In order to answer the research questions posed for the study, the following hypotheses were
formulated in a null form
Ho1: Small and medium enterprise is not a good strategy for eradicating poverty.
H2: The major difficulty encountered by small and medium enterprises in eradicating
poverty is not lack of funds to finance their business and how to obtain funds for their
operation.
H3: Small and medium enterprise has not contributed to industrialization

Significance of the Study

(1) This study would be of immense interest and benefit to large scale industries if they
would adopt whatever viable recommendation that comes out of this research
assiduously in order to maximize their productivity and make a more positive impact.
(2) Entrepreneurs and business individuals shall benefit from findings of the study
particularly as it affects legal and other operational frameworks and benefits accruable
to investor. Information derived from this study will be valuable to small and medium
enterprises in the area of obtaining loans and credit facilities since these pose the
greatest problems to the industrialists.
(3) It will also be beneficial to government and the policy makers in Nigeria in policy
formulation especially on those policies that are meant to promote the performance of
small and medium enterprises.
(4) Entrepreneurs will gain valuable information regarding those numerous problems and
solutions in line with skilled management and administration and growth of small and
medium enterprises.
(5) This research work will equally portray the usefulness of small and medium
enterprises to the rural community in terms of employment. Finally by going through
this research work one can enter into SME easily as no law stops anyone from
choosing to be his/her own boss.

Scope of the Study

This research study was limited to selected firms in Anambra State Nigeria (Innoson Group
of company, Tummy-Tummy Company, Chikason Group of Companies and Dozzy Plc)
Nnewi in Anambra state a small scale industry.

REVIEW OF RELATED LITERATURE

Concept of Small Enterprises
The definition of small enterprise varies from the economic situation of one country to
another. Even from state to state and institution to institution. Ajose (2010) has defined small
and medium enterprises as an enterprise that has an asset base (excluding land) of between 5
million naira and 500 million naira and labour force of between 11and 300 in its employ. The
National Economic Reconstruction Fund (NERFUND) puts the amount as not exceeding 10
million naira while the section 376 (2) of the companies and Allied Matters Act of 1990

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defines it as one with; (a) an annual turnover of not more than 2 million naira. (b) A net asset
of not more than 1 million naira,

The National Association of small and medium scale enterprises defines small and medium
enterprises as a business that employ less than fifty (50) people and with an annual turnover
of one hundred million naira. The association further defines a medium scale enterprise as a
business with less than 100 employees and with an annual turnover of five hundred million.

Countries use different definition for classifying their small and medium enterprises sector.
More so, the parameters used by most countries in defining SME, singly or in combination
are: capital investment on plant and machinery; number of workers employed; and volume of
production or turnover of business. On the quantitative side are their internal management
structures, decision-making process, financial practice, trading styles, attendance risk factor,
etc. It has been observed that most small and medium enterprises are one man shows or are
run by two or three individuals, usually relatives, friend or business partners, who take most
of the decisions. There is no serious distinction between private and business assets,
subjective and personal factors play a large role in decision-making

The Roles of Small and Medium Enterprises in Eradicating poverty in Nigeria

Small and medium scale industries facilitate the creation and use of non-existing or unused
products and materials. It is also the main stream of economic activities in a nation and
provides the stages for industrial revolution and economic growth (Okenwa C. 2008). In a
contribution of Ekpeyoung (2009) on the place of small scale enterprises in the economy, he
states that “the role of small & medium scale enterprises in the development of the country
has been summarized in the Nigeria Third National Development Plan of 1975-80 which
dwells on generating employment opportunities, stimulating indigenous entrepreneurs,
improvement in per capita income, balanced regional development, education, empowerment
of citizens, Stimulation of indigenous companies and providing self sufficiency.

Improvement in Per Capital Income

SMEs locate and exploit opportunities. They convert idle resources like land, labour and
capital into national income and wealth in the form of goods and service. They help to
increase Net National Product (GNP) and per capital income in the country, which are
important yardstick for reducing poverty and measuring economic growth.

Generation of Employment
SMEs enhance employment generation in a place since unemployed youths and graduates can
easily engage in skills on their own. Small and medium enterprises generate more
employment opportunities on the aggregate than giant industries. Many people in this country
depend on self employment for sustenance. Many others including their relations are
provided employment in these enterprises directly and indirectly.

Education
Towards the end of the sixties, two significant contributors were made in the field of small
and medium enterprises. One was that, there is a positive linkage between entrepreneurship
and economic development and the other was regarding and emergence of a strong
hypothesis that small and medium enterprises can be developed through planned efforts.

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Provide Self Sufficiency

The small and medium enterprises not only become self-sufficient but also provide great
standards of living to its employees and the public. It provides opportunity to a number of
people working in the organization. The basic factors which become a cause of happiness
may be liberty, monetary rewards and the feeling of contentment that one gets after doing a
job.

Classification of Small and Medium Enterprises

A business organization is any economic unit which utilizes the basic economic resources to
create utility in order to achieve certain objectives. Human wants are numerous and
conflicting and the satisfaction of such want and demand is a suitable arrangement of man’s
business activities. The main types of business organization are:
a. Sole proprietorship
b. Partnership
C. Private Limited Liability Company
d. Co-operative societies.

Sole Proprietorship
Sole proprietorship is a business set up, owned and managed by just one man. This type of
business organisation that is associated closely with individual initiative, self-reliance and
handwork. Sole proprietorship is the oldest form or business organization. This kind of
business is many in developing countries due to their low per capita income.

Partnership
Partnership is a form of business organisation where two or more persons engage in a
business as co-owners. In some cases it is usually ten partners. A partnership may be based
on a written contract or simply or oral arrangement which by laws is binding on all partners.
It is an association of two or more persons who jointly establish a business for profit making.
The minimum number of member’s ranges from two persons while the maximum number is
fifty

Private Limited Liability Company

Private companies are often being operated by family members or close associates. Private
limited company are numerous in Nigeria and cheaper and simpler to form. The maximum
number for formation of a private company is fifty (50) for its members excluding workers. It
is required by law to register with the Corporate Affairs Commission in order to acquire a
legal personality and its shares are not transferable.

Co-Operative Societies
This is a business organization formed by people with low income who pool their resources
together to satisfy the interest of their members in particular and sometimes the general
public. The first co-operative movement started at Rockdale, England in 1884. Its aim was to
counter the consumer’s exploitation by the owners. They pooled their resources together in
order to benefit from the economies of scale in purchasing and sale. This type of business
organisation is formed by salary earners, subsistence farmers, petty traders and artisans.

Sources of Finance to Small and Medium Enterprises

Small scale business could be financed through the following ways: Saving: Individuals save
money for various motives. Individuals can directly set aside unexpended earning and save
indirectly when they pay life assurance premiums or purchase amenities.

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External Borrowing
An individual who wishes to start a business can borrow money from people or external
sources to expand his business. A sole proprietor or partnership may obtain funds by
borrowing from a private individual or from micro credit institution.

Trade Credit
The basic trade credit transaction involves the supplies handling over goods or performing a
service without receiving immediate payment in exchange. The customer is expected to pay
by some agreed issues.
a. The seller would be unwise to part with goods or perform the service, unless he is
satisfied that the customer will indeed pay.
b. The terms of the transaction will include some credit period which is accepted to both
parties and to which it would be to the customer advantage to adhere.
c. There must be some sanction, which the supplier can impose on the customer if he
fails to meet the agreed terms. There are three reasons for the existence of trade credit.
They are convenience, cost, and loyalty. Trade credit service as a permanent source of
loans to worth customers.

Problem of Small and Medium Enterprises In Nigeria

Lack of Access to Funding/Credits
Lack of easy access to funding credit can be traceable to the poor and inadequate
documentation of business proposals, lack of appropriate and adequate collateral, high cost of
administration and management of small loans as well as high interest rates. When an idea is
conceived, there must be fund to actualize such idea. A business opportunity in the course of
planning must first consider capital as a basis for the establishment. This is because
deficiency of fund in procuring fixed and current assets as required by the enterprises
jeopardizes the operation of the business. Lack of capital therefore is a disability to the
industrialist in the actualization of their objective which sometimes is attributed to the
rigorous bureaucratic red-tapism involved in procuring funds from the banks and financial
institution.

Government Unstable Policies

There has been an instability and inconsistency in the Nation’s government and policy
formulations. Government policies and social attitudes affect business operation
considerably. Chukwuma, (1999) noted that “in a nation of relaxed economic policies and
stable political system, the business community is seen to flourish more than one that lacks
these qualities” He further added that government policies and laws could have such an
overwhelming impact on the business arena leading to economic boom or depression. The
regulation of the Central Bank of Nigeria (CBN) over banks on both fiscal and monetary
policies coupled with inconsistencies of these policies determines the credit extension to the
small and medium enterprises.

Lack of Suitable Training and Leadership Development

Training institution abounds in Nigeria, but they rarely address the relevant needs of SMEs
especially in the areas of accounting, marketing, information technology, technological
processes and development. SMEs are left most often on their own to survive amidst the
avalanche of operational difficult inherent in the Nigeria environment as well as the
operational shortcoming, which characterize institution set up to facilitate small scale
enterprises businesses.

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Lack of Appropriate and Adequate Managerial and Entrepreneurial Skill

Some of this organisation lacks appropriate skills to operate. The lack of strategic plan,
business plan, succession plan, adequate organizational set-up, transparent operational system
etc on the part of many founders and managers of small and medium enterprises in Nigeria is
a fall out on small and medium enterprises. Many of the small and medium enterprises
promoters purchase obsolete and inefficient equipment thereby setting the stage from the start
up for lower level productivity as well as substandard product quality with dire repercussions
on product output and market penetration and acceptance.

Theoretical Framework
Below are underlying theories of this research work. We shall briefly review the theories of
poverty.

Theories of Poverty
In this section we shall consider the relevant theories of poverty, specifically the theory of
vicious circle of poverty, and the basic needs theory.

The Basic Needs Theory was propounded by Maslow (1943). The basic idea behind this
theory is that people have needs and the desire to satisfy the unmet needs motivate them to
engage in activities that will help them satisfy their needs. The theory states that different
needs are active at different times and only those needs not yet satisfied can motivate people.
The needs are arranged in a fixed order of importance called a hierarchy. The needs are
arranged in a hierarchical other starting from physiological or basic need to self actualization
needs as follows:
i. Basic needs which include food, shelter and clothing.
ii. Safety needs that is freedom from harm and deprivation.
iii. Social needs, that is friendship and team work.
iv. Self esteem needs that are acceptance of self as having value.
v. Self actualization needs, which is the need for fulfillment of potentials and
personal growth potentials. Maslow (1943) noted that the efforts and behavioral
changes observed in individuals are meant to achieve one of these needs.

The Vicious of Poverty theory was propounded by Nurkes (1953) which posits that there are
circular relationship known as the vicious circles of poverty that tend to perpetuate the low
level of development in less developed countries like Nigeria. In other words, there is a
circular constellation of forces tending to act and react upon one another in such a way as to
keep a poor country in a state of poverty. For instance, a poor man may not have enough to
eat, being hungry, he may have poor health, being physically weak, his working capacity is
low, which means that he is poor and may not have enough and so on. A situation of this sort
relating to a country can be summed up in the right proposition that a country is poor because
it is poor. The basic vicious circle stem from the fact that total productivity in low income
countries is low due to deficiency of capital market imperfections, economic backwardness
and under development and this circle operates both on demand and supply sides. Clearly, the
development of natural resources depends on the development capacity of human resources
in a country. If the people are illiterates, low skilled, lacks entrepreneurial abilities, natural
resources will remain untapped, unutilized or underutilized. On the other hand, under
developed natural resources will make people to remain economically backward in a country.
According to Jhingan (2007), poverty and underdevelopment of an economy are thus
synonymous as a country is poor because it is underdeveloped and a country is
underdeveloped because it does not have the necessary resources for promoting development.

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The basic idea behind the vicious circle of poverty theory is that poverty once started could
continue for generation unless there is outside intervention. According to Marge (2008),
breaking the vicious circle of poverty is almost impossible since poor people do not have the
requisite resources to get out of poverty and this explains why Valentine (1968) noted that it
is a pattern of behavior which cannot be easily be reverted.

Empirical Review
Aigboduwa and Oisamoje (2013) examined the historical trend in the development of SMEs
in Nigeria and identified several opportunities and competitive advantages now exclusively
reserved for Nigerian companies under the Nigerian content Act 2010. The study emphasized
the need for access to funding for development of the capital base of SMEs, and suggested
that the Act would offer a turning point in the realization of all the policy trusts formulated
for growing SMEs in Nigeria in the future.

In the study of Kadiri (2012) he examined the contributions of (SMEs) to employment

generation in Nigeria by providing an analysis of the efficacy of SMEs as a vibrant tool for
employment generation. Using Binomial logistic regression analysis as the tool for statistical
analysis, the study found that the sector was unable to achieve this goal due to its inability to
obtain adequate business finance. It was also observed that virtually all the SMES that were
sampled relied on informal sources of finance to start their business. The study therefore
recommends the integration of the activities of the formal with that of the informal financial
institutions; while the government should urgently provide the needed infrastructure such as
roads, water, electricity and the need enabling environment.

Oboro and Ighoroje (2011) examined the problems of financing small scale business
enterprises in Nigeria and the way forward. The study identified the sources of finance, types
of finance available for small business enterprises and problems inhibiting small scale
business enterprises in Nigeria in securing funds for their smooth operations. The study
concluded that adequate finance is indispensable for the successful operations of small scale
business enterprises in Nigeria and recommended among others that government should
increase loan able funds granted to small scale business, while micro finance banks should
also live up to their responsibility of granting loan able funds to small scale business in
Nigeria.

Aremu and Adeyemi (2011) examined the role of small and medium enterprises in promoting
economic growth and development in Nigeria. The study identified the major advantage of
the sector as its employment potential at low capital cost since the labour intensity of the
SME sector is much higher than that of the large enterprises. The study therefore concludes
that besides the growth potential of the sector and its critical role in the manufacturing and
value chains, it also has multiplier effect on the rest of the economy.

METHODOLOGY
Introduction
This chapter is discussed under the following headlines research design, population of the
study, sample and sampling technique, sources of data, method used in data collection,
questionnaire design, method of data analysis, and validation of instrument.

Research Design
The design adopted for the study was descriptive survey design because it concerned with
collecting data and describing systematically the characteristics of small and medium

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enterprises in eradicating poverty and to what extent has SMEs in Anambra State has helped
in poverty reduction.

Sources of Data
The study made use of primary and secondary data.

Primary Data
The study used a structured questionnaire in getting information from the respondents. The
rest were obtained from oral interview. The question was designed and administered in small
scale industrialist and the employee. Oral interview were used also as a follow up to the
questionnaire on both the industrialist and the employees of small and medium enterprises.
This is in other to elicit more information which was otherwise not included in the
questionnaire distributed to small and medium enterprises and their employees.

Secondary Data
The study collected Published or printed information from small and medium enterprises
textbooks, periodicals, article, journals, seminar papers, magazines, newspapers and previous
works of graduated students of other higher institution of learning to provide further
information on the research area.

Population of the Study

The population of the study was 150 employees of some selected SMEs in Anambra State
cutting across all cadres of workers.

Questionnaire Design
To ensure proper execution of the study, sets of questionnaire were prepared and
administered. The questionnaire was divided into two major parts. Part one was based on the
respondent’s socio-demographic characteristics while the part two dealt on the entire research
work or on general information. Furthermore, the study made extensive use of open ended
questions, close ended questions, multiple choice questions and dichotomous questions. All
these efforts were made in order to cover greater scope of the people and areas as well as
provide a wider variety of questions to the respondent, thereby enhancing the simplicity of
the question for elicitation of wide and better information from them.

Method of Data Analysis

Basically, the study adopted the tabulation and the interpretation method in analysis of data.
These methods were adopted due to heterogeneous nature of the information gotten from the
respondents. The study also used close ended and open ended method, oral interview and
multiple choice questions in his questionnaire. 100 (70%) of 150 distributed samples
indicated positive role played by small and medium enterprises in eradicating poverty. Total
of 150 copies of the questionnaire where distributed and 100 copies were properly completed
and retrieved. The study was on hand to explain certain points to the respondents.

Sampling and Sample techniques

Sample and sampling techniques is defined by Nnamdi (1996), as a limited number of
elements selected from a population which represents the population. The sample was drawn
from some of the population by the researcher, as it is difficult to reach everyone. A sample
size of 100 respondents is randomly selected. These numbers of respondents are employee of
Account/finance, administrative and service department in selected SMEs in Anambra State.

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Distribution of Respondents to Various Departments

Table 3.1

Department Distribution Percentage

Account/Finance 50 50
Administration 20 20
Service 30 30

Total 100 100

The sampling size will be generalized by using this formula Taro Yamane 1963
Ss = N
1 + N (e)2
Where N = Population
e = Tolerance error allowed (0.05)2
Ss = Sampling size
Thus N = 150
e = 5% (0.05%)2 = 0.0025
n =?
n = 100
1 + 100 (0.0025)
1.25
Ss = 80

Tools for Data Analysis

For the analysis of data, percentage and tables were used. The degree of relationships
between variables was determined by the use of chi-square statistic. Thus the hypothesis was
tested using the chi-square test statistical tools as show below.
X2 (R-1) (C-1) = ∑ (fo-ft)2
Ft

All cells where:

X2 = Computed chi-square
fo = Observed frequency
ft = Theoretical expected frequency
R = Number of rows in the contingency table
C = Number of columns in the contingency table
N = Total sample size
Ft = nRnC
N

Validity of the instruments

Content validity of a scale is qualitative (Akyol and Akehurst, 2003). Therefore, the validity
of the instrument was ascertained by test experts to ascertain its contents before its use. The
experts were three lecturers in the Department of Entrepreneurial Studies, COOU Igbariam.
Also discussion with the supervisor was adopted to ensure the content and face to face
validity. The suggestions, correction and recommendations of the experts were used to
correct the drafted questionnaire.

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Reliability of the instrument

This has to do with how reliable the information given in the research project is ok, it is to tell
the examiner or supervisor that the information or data gathered were from the company used
as case study and from the right source. It is to ensure that real field work is carried out and
unadulterated information was gathered from selected SMEs in Anambra State.

DATA PRESENTATION AND ANALYSIS

Introduction
Data obtained from the field of investigation are analyzed and interpreted in table. The
responses of the respondents were critically analyzed using sample percentage based on the
opinions of the respondents.

Socio-Demographic Characteristics of the Study

Results from the analysis of the socio-demographic characteristics of the respondents
indicated that majority of the respondents are male suggesting that most of the management
teams of this selected firms are male. Moreover, the respondents concentrated within the age
bracket of less than 35 years to 45 years and above. Those with SSCE/GCE constitute about
50% of the respondents. It implies that most of the SMEs in Anambra State are managed by
persons with first degree or its equivalent.

Socio-demographic characteristics of the respondents

Table 4.1

Variables Frequencies Percentages

Sex
Male 70 70%
Female 30 30%
Total 100 100
Age
Less than 35 years 10 10
35-40 years 22 22
41-45 30 30
More than 45 years 38 38
Total 100 100
Marital Status
Single 80 80
Married 20 20
Separated - -
Divorced - -
Total 100 100
Educational Qualification
SSCE/GCE 50 50
OND/NCE 25 25
HND 15 15
B.Sc 10 10
Total 100 100
Length of Service in the Firm
1-5 years 50 50
6-10 years 30 30
11-15 years 20 20
Total 100 100
Source: Field Survey 2016

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Analysis o Research Questions

Table 4.2: contribution of the industry to employment
Question: Small and medium enterprises has helped in the reduction of unemployment
problem on the area?

Option Frequency Percentage

Strongly agree 60 60%
Agree 20 20%
Disagree 10 10%
Strongly disagree 10 10%

Total 100 100%

The table 4.2 above indicates that out of the sampled opinion of 100 respondents 60% reacted
strongly to the view, 20% agreed while 10% proved otherwise to the view, 10% strongly
disagree to the view. The implication of this is that small and medium enterprises actually
have helped in solving unemployment problem in the state.

Table 4.3: The role of small scale enterprises in poverty reduction

Question: Do you think that small scale enterprises have played a role in poverty reduction
in Nigeria?

Option Frequency Percentage

Yes 90 90%
No 10 10%
Total 100 100%
The information in the above shows that all the 100% of the respondent used 90% answered
in affirmative while 10% reacted negatively, thus the industry has helped in reducing poverty
in Nigeria.

TEST OF HYPOTHESIS
This section deals essentially with statistical testing of the hypotheses formulated for this
study and also interpreting the results making use of Chi-Square to show the outcome.

Decision Rule
At 5% level of significance, reject the null hypothesis (Ho) if the calculated value is greater
than the table i.e. that is if X2> X table, otherwise the null hypothesis should be accepted.
All cells
Where
X2 = Computed chi-square
fo = Observed frequency
ft = Theoretical expected frequency
R = Number of rows in the contingency table
C = Number of columns in the contingency table
ft = nRnC
N
nR = Total number in row
nC = Total number in column
n = Total sample size

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European Journal of Research and Reflection in Management Sciences Vol. 6 No. 2, 2018
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Test of Hypothesis one

Ho: Small and medium enterprises has not helped in poverty eradication or unemployment
reduction.
Table 4.5: Response on small and medium enterprises in reduction of unemployment
Table -2x1 contingency table

Sex SA A D SD Total

Male 40 10 7 3 60
Female 20 10 3 7 40

Total 60 20 10 10 100

Computation for ft = nRnc

N
∑1 = 60 X 60 = 36
100
∑2 = 20 X 60 = 12
100
∑3 = 10X 60 = 6
100
∑4 = 10 X 60 = 6
100
∑5 = 60 x 40 = 24
100
∑6 = 20 X 40 = 8
100
∑7 = 10 X 40 = 4
100
∑8 = 10 X 40 = 4
100

Computation of the chi-square test statistic

For 2 X 1 contingency table
Cells Fo Ft Fo-ft (fo-ft)2 (fo-ft)2
ft
1 40 36 4 16 0.44444
2 10 12 -2 -4 0.33333
3 7 6 -1 -1 0.16667
4 3 6 -3 -9 1.5
5 20 24 -4 -16 0.66667
6 10 8 2 -4 0.5
7 3 4 -1 1 0.25
8 7 4 3 9 2.25

100 228.86
To determine the tabulated chi-square value
V = (R-1) (C-1)
= (2-1) (4-1)
(1) (3)
=3
At 0.05 level of significance (a) checking through the chi-square table, the table value 7.815
that is X2 (3) 0.05 = 7.815.

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European Journal of Research and Reflection in Management Sciences Vol. 6 No. 2, 2018
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Decision Rule
Reject Ho and accept H1 if the computed chi-square value is greater than critical (tabulated)
chi-square value otherwise do not reject Ho, since the calculated X2 (3) 0.05 = 228.861 is
greater than the tabulated value of we reject Ho and accept H1 and conclude that small and
medium enterprises has helped in unemployment reduction.

Test of Hypothesis two

Ho2: Small and medium enterprises has not played a role in poverty reduction in Nigeria.
Table 4.6: Responses from your industry, do you think that small and medium enterprises
have played a role in poverty reduction in Nigeria.

Options Frequency Percentage

Yes 90 90%
No 10 10%

Total 100 100%

2 X 2 contingency table
Sex Yes No Total
Male 50 6 56%

Female 40 4 44%

Total 90 10 100%

Computation for ft = nRnC

N
∑1 = 90 X 56 = 50.4
100
∑2 = 10 X 56 = 5.6
100
∑3 = 90 X 44 = 39.6
100
∑4 = 10 X 44 = 4.6
100
Computation of the chi-square
Test statistic for 2 X 2 contingency table
Cells Fo Ft Fo-ft (fo-ft)2 (fo-ft)2
ft
1 50 50.4 -0.4 -0.16 3.17460
2 6 5.6 0.4 0.16 0.02857
3 40 39.6 0.4 0.16 4.04040
4 4 4.6 0.6 0.36 0.07826

100 7.32183

To determine the tabulated chi-square value:

Degree of freedom V = (R-1) (C-1)
= (2-1) (2-1)
= (1) (1)
=1
At 0.05 level, of significance (a) checking through the chi-square table, table value
That is X2 (1) 0.05 = 3.841

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European Journal of Research and Reflection in Management Sciences Vol. 6 No. 2, 2018
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Decision Rule
Reject Ho and accept H1 if the computed chi-square value is greater than the critical
(tabulated) chi-square value otherwise do not reject: Ho, since the calculated X2 (1) 0.05 =
7.32183 is greater than the tabulated values, we reject Ho and accept H1 and conclude that
small and medium enterprises has played an immense role in reducing poverty in Nigeria.

SUMMARY, CONCLUSION AND RECOMMENDATION

Discussion of the Findings
The general finding of this research study centered on the achievement and role of SMEs in
eradicating poverty in the state.

(1) It was discovered that the small and medium enterprises provided employment
opportunities, training ground, harnesses utilization of local resources but also acts as a pillar
hold of a nation, Nigeria inclusive.
(2) More so, the problems of the industry were also identified as; managerial /technical
problem ,inadequate and improper utilization of funds, commercials and infrastructural
problems and instability in government policy as envisage by the various authors whose
works were cited in chapter two (2)of the research studies.
(3) Further analysis in chapter four (4) reflected these problems as major causes of failure in
the industry and more importantly in the areas of managerial capability, which encompasses
the general ideality, resources and motivation within the reach of the entrepreneurs. In other
words low productivity and inefficiency were attributed to poor managerial function existing
in small and medium enterprises.
(4) A critical view in this study revealed that 85% of the failures of these firms were due to
inadequate fund in the running of the enterprises.
However, intent objectives of the government in establishing the various credit schemes as
aforementioned in the study with a view to promoting the manufacturing industries never
materialized. Other problem as discovered by the study is infrastructural facilities especially
in the peculiar problem of inaccessible road, a major problem in Anambra state, is no
exception. There is no doubt that this problem is an impediment to the entrepreneurial
development as it deprives the SMEs easy reach to the intended consumers.
(5) The study also noted other problems which militate against the industry; they include:
irregular water and power supply, consultation services. However in spite of these
hindrances, the entrepreneurs still anticipate positive yield especially as it concerns growth
and improvement or the industry.

CONCLUSION

From the information supplied by the various related literature, regarding problem, nature,
capacity and prospect of small and medium enterprises including oral interviews and
information gotten from the analyzed questionnaire, it becomes clear that many variables
needs the attention of the small and medium enterprises and government alike such include
the provision of incentives, credit and loan facilities, provision of infrastructural facilities,
promotional campaign support programme etc the impact made by these SMEs cannot be
underestimated especially in the areas of providing employment opportunities and utilization
of local resources. Its immense contributions in providing for the general public and basic
needs of the society cannot be quantified. A good development strategy if employed by these
SMEs will grow to large-scale capital intensive.

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RECOMMENDATIONS

In line with the above premise of findings and conclusions drawn by the study, the following
recommendation if applied effectively will serve as a means of achieving economic growth
and eradicating poverty in Nigeria.
1. Firstly small and medium enterprises should source their loans from the financial
institutions where interest rates are low. Entrepreneurs should insist on revolving loan
scheme from government which should be interest free.
2. Secondly, government should introduce a revolving loan scheme for small and
medium enterprises; she can equally set up a team to monitor the use of such loan so
as to avoid its diversion. To this and Nigeria Industrial Development Bank (NIDB),
Nigeria Bank of Industry (NBI) and Nigeria Agricultural and Cooperatives Bank
(NACB) should gear up towards assisting the small and medium enterprises in
satisfying their capital needs.
3. Thirdly, the government can jointly open a data bank with small and medium
enterprises. The duty of this bank will be to furnish potentials and prospective
investors with information concerning the availability of factors of production and the
existing market potentials in the economy.
4. Finally, an improvement and reliability by the government on the infrastructural
facilities such as accessible road and regular power supply will facilitate efficient
operation of the industry; moreover, a positives thinking, concern and implementation
in the development plan and policies of the government over small and medium
enterprises will yield positively to the promotion of the industry.
5. The government therefore should protect the manufacturing industries by way of
banning and increasing tariff on import of similar goods so as to promote our
indigenous entrepreneurs. Besides, recognition of the small scale industries as a base
to industrialization will assist in achieving a maximum productivity, efficiency and
total independence in the near future.

REFERENCES

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11. Fayomi, I.O. (2012). “An Appraisal of SMEs on Poverty Alleviation in South
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