posted on 2011-01-26, 09:33authored byDanjuma A. Dabo
The objective of this study is to assess factors which affect the performance of SMEs
in Nigeria. The literature shows that economic development, growth and poverty
alleviation are vitally linked with reliable and sustainable operations of SMEs. This is
particularly relevant to Nigeria which seeks to diversify its real sector by reducing
over-dependence on the volatile oil sector. In recognition of these problems the
Nigerian government set up the Small and Medium Industries Equity Investment
Scheme (SMIEIS) for SMEs. Nonetheless, as it is the case in many developing
countries, SMEs are faced with poor access to financial resources, and little
research seems to have focused on factors affecting the performance of SMEs in
Sub-Saharan African economies including Nigeria.
The study is primarily based on an extensive mail survey of 502 SMEs in Nigeria's
two regions and three main sectors (manufacturing, business services, and trade
sectors). Accordingly, a broad range of testable hypotheses have been formulated
which tend to capture peculiarities in the Nigerian economy using correlation and
logistic regression analysis. Access to finance, difficulties encountered, financing
decisions and desire for Islamic finance turned out to be the major factors affecting
regional and sectoral performance of SMEs.
The study reveals some significant differences in the regional performance of SMEs.
Most important amongst these differences are: ease of `access to finance',
`difficulties encountered' in the process, decisions about `accepting or rejecting' bank
financing, and the regional appeal of `Islamic finance' with its different financing
modes. It also reveals significant difficulties in obtaining external finance by the
entire survey respondents. The study concludes that characteristics internal to the
SMEs (like Firm age and size, location and legal form) and their owner-managers
characteristics (like education, experience and age) seem to determine the demand
for and use of external financing. It recommends policy makers and SME
stakeholders to review the existing SMIEIS policies which unduly exclude most
SMEs from having access to such finance.