ABSTRACT
This study examined the contributions of Small and medium enterprises
equity investment scheme to Nigerian economic growth in the perspective of the
manufacturing sector in Nigeria SMEEIS. A perfect research into the role of
SMEEIS in the manufacturing sector cannot be carried out without an in-depth
analysis, contributions roles and operations of SME . This study became
necessary to the Nigerian Entrepreneurs,
who have assisted and contributed to the country’s gross national product and
have also played vital roles in the lives of the people. The Nigeria economy cannot be driven by the government
and public sector alone hence the need for SMEEIS. The
initiative was in response to the Federal Government’s concerns and policy
measures for the promotion of Small and Medium Enterprises (SMEs) as vehicles
for rapid industrialization, sustainable economic development, poverty
alleviation and employment generation. SMEEIS is a voluntary initiative
of the bankers committee approved at its 245th meeting held on 1st December,
1999. SMEEIS is acronym for the small
and medium enterprises equity investment scheme”, which requires all banks in
Nigeria to set aside annually ten percent (10%) of their profit before tax for
equity investment and promotion of small and medium enterprises in Nigeria. The objective of the study was to determine
the role of small and medium enterprises equity investment scheme in the
manufacturing sector and to ascertain the contribution of SMEEIS in
manufacturing sector. The study used both primary and secondary sources of data
collection. The statistical tools used were frequency distribution, tables,
percentages and chi-square (c2) in the analysis of data. Test of hypotheses shows That the weaknesses
and threats of SMEEIS are not greater than the strengths and opportunities;
that SMEEIS has been able to contribute meaningful to manufacturing sector;
That SMEEIS does not lack the skill to manage organizational changes that
SMEEIS does not hinder creativity and innovation. The study shows that lack critical infrastructure affected the smooth
running and operations of SMEEIS, The research made the following recommendations.
The CBN should review its policies on SMEEIS by liaising with the National
Assembly to put in place a very good legislation to support and sustain SMEEIS.
For SMEEIS to be a driving force in the Nigeria economy, critical
infrastructure such as good access roads, energy and good telecommunication
network must be in place. Moreover, the CBN should also support the banks by
putting in place a standardised policy framework on its intervention fund on
bailout, restructure and refinancing of SME especially in the manufacturing
sector through the use of banks of industries and AMCON to purchase ailing credits
that are given to the manufacturing sector from banks at a concessionary rate.
TABLE OF CONTENTS
PAGE
Certification i
Dedication ii
Acknowledgment iii
Abstract iv
List of Figures vi
List of Tables vii
CHAPTER ONE: INTRODUCTION
- Background of the Study 1
- Statement of Problem 6
- Objectives of the Study 10
- Research Questions 11
- Research Hypotheses 11
- Significance of the study 12
- Scope of the Study 13
- Limitations of the Study 13
- Definition of Terms 14
References 15
CHAPTER TWO: REVIEW OF RELATED LITERATURE
- Introduction 16
- Conceptual Frame Work 17
- Theoretical Frame Work 19
- Empirical Review 21
- Gap in Literature 24
- SMEEIS Operations Investment by Banks 24
- Withdrawal of Uninvested SMEEIS Funds by CBN 25
- SMEEIS Investment Update Total Funds Set Aside Since Inception of SMEEIS 26
- The Way Forward 29
References 35
CHAPTER THREE: RESEARCH METHODOLOGY
- Introduction 36
- Research Design 36
- Area of Study 37
- Source of Data 37
3.5 Tools for Data Collection 38
3.6 Population 38
3.7 Sampling Procedure 39
3.8 Questionnaire Design and Administration 42
3.9 Pilot Survey 42
3.10 Data Treatment Technique(s) 44
3.11 Decision Rule 45
CHAPTER FOUR: DATA PRESENTSTION AND ANALYSIS
4.1 Data Presentation and Analysis 50
4.2 Test of Hypotheses 99
CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary 106
5.2 Conclusions 108
5.3 Recommendations 109
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The Small and Medium Enterprises Equity Investment Scheme (SMEEIS) is an initiative of the bankers’ committee comprising Managing Directors and Chief Executives of Banking Institutions in Nigeria, and it requires all licensed banks in the country to set aside 10% of their Profit Before Tax (PBT) annually for Small and Medium Enterprises
The core thinking behind the scheme is the recognition of the need to assist the manufacturing sector, which is acknowledged as the veritable vehicle for economic growth by meeting their financial requirements through private equity participation. According to Ademola (2010), “despite the widely acknowledged role of small and medium scale enterprises in fostering economic growth and development, they have continued to face a variety of constraints”. some of the challenges they face are inadequate infrastructural facilities, shortage of skilled manpower, high rate of enterprise mortality, low level of entrepreneurial skills, lack of conducive operating environment, restricted market access and cumbersome regulatory requirements for those that are quoted on the Nigerian Stock Exchange.
SMEs are vital to economic growth and development in both the industrialised and developing countries, by playing a key role in creating jobs, improving living standards and contributing to the economy.
According to the Oteh (2010A), the capital market should be seen as an important alternative source of finance for SMEs, through equity debt financing, and venture capital funds. Equity financing is a strategy for obtaining capital that involves selling a partial interest in the company to investors. The equity or ownership or ownership position that investors receive in exchange for their funds usually take the form of stock in the company (Oteh, 2010B). This provides small business owners with a broader scope in terms of financing, as they gain access to multiple funding sources.
Equity financing does not involve a direct obligation to repay the funds. Instead, equity investors become part-owners and partners in the business, and thus are able to exercise some degree of control over how it is run. Venture capital firms can be key financing vehicles for SMES. Venture capital funds value the possibility of monitoring the performance of the business, giving advice when needed and following-up on such advice. Capital markets provide important exit opportunities for venture capital firms, thus enabling them to put their capital at risk to finance other SME opportunities. Venture capital has the potential of offering a valuable source of finance, complementing the more traditional credit finance provided by commercial banks.
According to www.smecapitalmarket.net Oct 6,2010, a financial system that is built on both the banking and capital markets is better than a system that is built on the banking system alone. Flowing capital to SMEs is key to economic prosperity. Policy makers in most countries recognise the economic development benefits of SMEs, and the problems they face accessing start-up capital or funds to expand their businesses. They have however, provided an alternative market for SMEs to source for funds, which the companies are really tapping into.
The scheme gives banks the opportunity of exploring ways and means of assisting especially the manufacturing sector of the economy in dire need of funds, reviving other ailing or dead projects, and sustaining the profitability of other good ones. Funding to be provided under the scheme is inform of equity investment in eligible enterprises and as such attracts zero interest. The participating banks fund the manufacturing sector and receive their returns by way of profit sharing (dividend at the end of the year towards the end of the tenor) for 5 years. These banks are expected to divest through private placement, second tier securities market or the Nigeria Stock Exchange.
In spite of the reforms and the persistent cry for increased funding of SME, The introduction of SMEEIS programme was therefore part of the financial sector restructuring processes aimed at enhancing access to banking system investment funds through equity financing programme for the promotion of micro, small and medium scale enterprises.
1.2 STATEMENT OF THE PROBLEM
