Department Of Business Administration And Management
Akanu Ibiam Federal Polytechnic, Unwana
Entrepreneurship enhances consistent production and services through innovations and processes. The economic growth cannot be operational without productive activities. Entrepreneurship is the Fourth factor of production after land, capital and labour. It creates innovation, investment and expansion in new markets, products, services and techniques. The creation of viable ideas, thoughts and imaginations are convertible into income and wealth. The investment of the input so generated can be increased and managed properly over time. It is this efficient and effective management of income and wealth that leads to enduring growth and development. The private sector is the engine room of entrepreneurial activities, as observed in developed economies. The developing nations should borrow a leaf from such practice. Entrepreneurship, therefore, enhances production in every nation’s gross domestic product, if well managed. This paper examined with meaning and overview of entrepreneur ship, gross domestic product and small scale enterprises and its relationship with gross domestic product, It went further to identify and explain the role of entrepreneurship in the Nigerian economy.
Economic forces determine the level of development of a country. In a mixed economy like ours, various factors combine to accelerate economic activities; these ranges from technological innovation, socio-political environment, technical entrepreneurship etc. The effective interplay of these facts improves the Gross Domestic Product and per capital income. All over the world, countries are assessed and classified through per capital income. A country is classified as developed if the per capital income is high; and undeveloped or developing if the per capital income is low. Thus, per capital income and Gross Domestic Product spells out the real difference between the rich and poor nation.
Adegboye (1989) posits that, per capita income and Gross Domestic Product from which it is derived are results or consequences of how production is organized in each country. The well being of a nation is known by studying the organization of production in terms of trends, ownership, control, technology, environment etc; where the production is in a relatively progressive trend, with all factors functioning effectively; per capita income and Gross Domestic Product will rise. And a changing size of G.D.P. is an indication of effective performance
of the economy.
It is universally acknowledged, that small businesses form the basic hub on which the Gross Domestic Product of a country revolves. Berko (1996), noted that small business is a term which hardly escape mention when the economy is discussed. It therefore follows that small business or entrepreneurship occupy a strategic position in every economy, whether in a technologically advanced nation or in a les:
However, our focus in this paper is to examine the performance o Nigeria Gross Domestic Product and establish in clear and specific term the contributions of entrepreneurship. Before then, it is pertinent to explaii the concept of Gross Domestic Product and entrepreneurship.
1.GROSS DOMESTIC PRODUCT (G.D.P)
Gross Domestic Product is the value of the total output of all goods and services produced in a country at a particular time; usually a year. Itmeasures the total output of goods and services for final use occurring within the domestic territory of a given country, regardless of the allocation to domestic and foreign countries.
The Central Bank of Nigeria (2003), defined Gross Domestic Product (GDP) as the money value of goods and services produced in £
During a period of time irrespective of the nationality of the people who produce the goods and services. Gross Domestic Product covers the sum of gross value added by all resident and non-resident producers in the economy plus any taxes, mini any subsidies not included in the value of the products (World Bank 2002). The Gross Domestic Product estimates in clear terms at market prices, value added in the agriculture, industry and services sector; and indirect tax less subsidies. It is calculated without making deductions for depreciation of assets. A viable economy must witness a progressive development or growth of Gross Domestic Product. It is an economic signal of effectiveness in the utilization of technological, human and national resources.
Teriba, et al (1981), stated that “one of the best indicators of the overall performance and indeed of the changing structure of the economy of a country is the Gross Domestic Product and its rate of growth” In other words, the growth of Gross Domestic Product gives a satisfactory definition of the development of an economy of a country.
In Nigeria, the growth or increase in Gross Domestic Product has been irregular. Factors such as political, social and economic matters can be adduced to it. For instance, the development process of the Nigerian economy was interrupted by the civil war.
The civil war led not only in distortions in government expenditure, but also, dislocations of productive capacities of the nation. It also led to physical damage and human displacement in many parts of the country. However, the development of Nigeria Gross Domestic Product has in sometimes been positive in every year.
GENERAL OVERVIEW OF NIGERIA GROSS DOMESTIC PRODUCT
As noted earlier, Gross Domestic Product of Nigeria over the years has been positive. Although the increase has not been uniform but it usually corresponds with economic forces prevalent in that year.
In early 160-61, the G.D.P, which was barely, N3.9 billion rapidly grown up to N7.0 billion in 1970-71, N12.0 billion in 1973-74 and N29.8 billion in 1982. This reflects an aggregate increase of 100% between 1982-83, using the World Bank Data (Onimode 1989).
The development was mainly attributed to the Agricultural, construction, and manufacturing sector. Okigbo, (1950), noted that, before this period, Nigerian economy was dominated by peasant agriculture, which is generally categorized as traditional; because of its small holdings, horticultural practices, technology and tenure. He revealed that as much as 60 of Gross Domestic product were earned by traditional agriculture. In fact, the major bulk of Nigerian exports were accounted for by traditional agriculture. This extended to late 1970s, until the petroleum sector gathered momentum to complement the huge contributions of agriculture.
Central Bank of Nigeria report in 1999 still put agriculture as the ‘ major source of G.D.P. growth. A value of N47.15 Billion representing 40.7% of the total G.D.P. was contributed by agriculture. This output was derived from crops, livestock, forestry and fishery. The industrial sector, consisting of manufacturing crude petroleum, mining and quarrying contributed N20.08 Billion representing 17.3% of the total G.D.P. (CBN1999).The small-scale business or industry was assumed to make a contribution of about 1.0% of the total G.D.P. growth.
This research has revealed that, the Nigerian Gross Domestic Product has witnessed great change recently due to accelerated economic activities in all sectors. The global oil demand upsurge, the development in tele-communication, banking and agricultural sector, the poverty alleviation scheme has Combined to increase the G.D.P. The table below shows the overall growth of Gross Domestic Product between 1999-2006.
TABLE 1: Nigerian Gross Domestic Product 1999-2006
|Year||Gross Domestic Product ($)|
Source: CIA World fact book
Table 1 shows the G.D.P. position in 1999 at 110.5 billion dollars increased by 5.9% to 117.0billion dollars in 2000.In 2001, a decrease of 0.9% bringing the amount to 105.9% was witnessed. Successive years recorded a growth rate of 6.2% in 2002, 2% in 2003 as against the previous year, 9.5% in 2004,40% in 2005 and 7.4% in 2006.
At the core of development of any economy stands entrepreneurship. It goes without saying that business is the driving wheel for human existence. Whether or not we want to be business men or women, we cannot deny that we depend on business organization to satisfy our economic and social needs. The food we eat, cloth we wear etc are all products of business organizations (Anugwom 2002). Business therefore occupies a strategic position in every economy.
Thus, various authors have explained what entrepreneurship is all about, but all point at one direction; and that is, establishment and operating of business enterprise.
Kilby (1971:6), defined entrepreneurship as “the willingness and ability of an individual to seek out investment opportunities, establish and run an enterprise successfully”
According to Stoner and Freeman (1992:156), entrepreneurship is viewed as the seemingly discontinuous process of combining resources to produce new goods or services.
Similarly, He (2001:1) sees entrepreneurship as the willingness and ability of a person or firm or an organization to see environmental change as an opportunity; and use the factors of production to produce new goods and services.
A look at these definitions shows that entrepreneurship involves a desire backed by ability to initiate business, bear the risk and emerge exceptionally in a business. It also involves exploits, resources (human and material), innovation and effective management of the scarce resources.
Schumpeter (1970:9), maintains that what counts in entrepreneurship is getting things done. It is leadership not ownership that is important. This implies that an entrepreneur must have the leadership charisma and foresight, ability to induce innovation and dare opportunities. An entrepreneur has also been seen as an individual who organizes, manages, and assumes the risks of a business. He is originator of a business.
Nzelibe (1996:11) suggested a definition that seems quite interesting, that “an entrepreneur is an employee who left his employer to establish his own business based on the knowledge he acquired in his employment or relational ties made during the employment”.
Obviously, the employer must have acquired an enviable leadership and innovative creativity, which had made the organization successful. The employee now leaves with quality leadership characteristics.
WHAT CONSTITUTE ENTREPRENEURSHIP?
Entrepreneurship involves all businesses, which fall under the umbrella of small and medium scale enterprises. This includes:
- Livestock, food and crop production, agro-allied industries, fishfarms etc.
- Wholesale and retail establishments such as provision stores, patent medicine stores, hawking etc. ill
- Consultancy/professional services of lawyers, doctors (private hospitals) and engineers.
- Industrial establishments, such as soap and detergent processing firm, cassava starch production firm etc.
- Typing, photocopying, bookbinding and bakery services.
- Private environmental sanitation agencies, housekeeping, laundry and dry cleaning services.
- Educational/day care institution such as kindergarten, nursery schools, nursing schools etc (Anugwoum, 2002).
The reality is that, determining the classification and categorization of business under small and medium scale enterprises varies from one country to another. This is so because of different economic and technological level. Perhaps, a brief discussion of small and medium enterprise will help us understand this disparity and their contribution to Nigerian Gross Domestic Product (G.D.P.)
SMALL AND MEDIUM ENTERPRISES
According to Vaughan (1981:1) enterprise employing 1-9 persons in the international perspective are regarded as micro-enterprise, while those that employ between10-99 are regarded as small-scale enterprises. Enterprises with 100-249 employees are seen as medium scale while those with 250 employees and above are referred to as large-scale enterprises.
In Nigeria, no business may fall under micro-enterprises base on this international literature. Rather any business with the least number of employees can conveniently be classified as small-scale enterprise.
The national Directorate of employment defined small scale business as any establishment that can accommodate projects with capital investment as low as N5000 and employing as few as three persons.
Similarly, the enterprise promotion decree of 1989 as amended in 1994 defines small scale business as any enterprise set up to make the owner self-employed and self-reliant; example, business centers, mechanics, panel beaters, super markets etc.
CAMD/A-company and allied matters decree or act 1990 section 37b (2) defines small scale firm as one with value of not more than N 1m.
The above definition is a pointer to the fact that no business in Nigeria can be classified as micro-enterprise.
Nevertheless, Nigeria’s SMEs is generally an umbrella term for firms with less than 250 employees. Those firms occupy a strategic position, and contribute significantly to economic development.
Notably, about 90 percent of all businesses in the non-agricultural sectors of our economy belong to the category of “small business” in agricultural sector, about 95 percent of farmers are small-scale producers (Berko: op: cit). This position seems to align with a recent study by the federal office of statistics, which shows that 97% of all businesses in Nigeria employ less than 100 employees. By this revelation, it means that97% of all businesses in Nigeria should better use the umbrella term “small business” than SMEs. Although Nigerians have been described as probably one of the most entrepreneurial people on earth (Ariyo, 2002), the problem lies on government lack of positive encouragement for establishment of enterprise.
Over the years, government has failed to formulate appropriate and lasting policies or programmes to support small business sector. The Tal Solarim led People’s Bank that gave out loans to existing small business in 1989 has since joined the league of non-functioning and moribund public organizations. It is a common knowledge today that any programme aimed at reaching the small business operators will either be foiled on the formulation stage or hijacked by the unscrupulous politicians.
In the early 1980s and 1990s the problem became so acute that Nigeria ran into stagnating industrial output and decreasing oil prices while industrialization through the production of indigenous technological development became central topics in the industrial policy debates. This led United Nations Development Programme (UNDP, 1992) and United nations Industrial Development Organization (UNIDO, 1994) to argue that if Nigeria fail to join industrialized economies, industrial activities have to converge and focus more on knowledge based production particularly in the small scale manufacturing and processing industries (Adegbite et al 2007).
While advanced economies see their SMEs sector as vital to progressive development and economic growth, Nigerian government puts it mildly. We have not indeed understood the hidden treasures and potentials that lie within SMEs. Thus, we may continue to wallow in the unknown until such understanding comes.
However, irrespective of condition of SMEs in Nigeria, the existing ones have made some meaningful contributions to the growth of the Gross Domestic Product (G.D.P.).
ROLE OF ENTREPRENEURSHIP IN NIGERIA ECONOMY
Small businesses have been described as the back bone of an economy Studies show that they are about 23 million small businesses in the United States of America. These combine to employ more than 50% of the private workforce, and generate more than half of the nation’s Gross Domestic Product.
Similarly, in the European Union, small business account for 99.8% of all companies and 65% of business turnover. They are largely seen as essential for the European employment. The figure is similar in UK where as at 1997, 3.9million businesses have 99% of them employing not less than 50 people (Ariyo: 2002:2).
In Nigeria, small businesses though cannot be equated with of the developed world, but has made substantial contributions t economy such as:
(a) Creating Employment opportunities: Small businesses play key role in the much needed employment generation. It is believed that; 50% of Nigerian’s employments are provided by SMEs. The Nig Investment promotion commission, 2003, noted that SMEs in Nigeria significantly contributed to development through employment, job ere and sustainable livelihood. It is not uncommon today to see shop outlets and small firms sited in almost all corners in Nigeria; with an average of three to four employees working comfortably. This has helped to reduce concentration on the government.
(b) Mobilization of Resources: SMEs in Nigeria help to together human and material resources needed by the I scale enterprise.
Being closest partner with the people, they help to r the need of the large-scale industries with that of the people. Thus, SMEs provide human capital and access to raw m£ to the large-scale enterprise.
(c) Provision of technical support and services to the people: Small businesses engage in services, which ordinarily will pose a challenge to the people if they absent. These include repairs and installations, handicrafts, laundry services, leatherworks, wood carving etc.
(d)Ensuring availability of Commodities: Goods or products are processed and dispersed to the nearest local markets for the consumers. This reduces the difficult of traveling a few distance to buy them.
(e)Reduction in Rural-Urban migration: Since businesses are located in the rural areas, the possibility of urban migration will reduce. People as matter of fact they needed in the rural areas.
(f)Entrepreneurship in Nigeria also helps in promoting effective domestic resource utilization; especially resources which are produced on small-scale and scatter several locations, and whose transportation to a centre location is costly and plagued with difficulties; (Berko op: cit).
In addition to the above, we have attempted in this research top specifically in numerical form the contributions of small and medium business to the total Gross Domestic Product. This is to help us appreciate the huge role of the small businesses on the economy in spite of our government mild support.
Table 2: SMALL/MEDIUM SCALE MANUFACTURING G.D.P. AT CURRENT MARKET
PRICE OF SELECTED YEARS IN NIGERIA
|Year||SMEs G.D.P. (Nb)||Total G.D.P. (Nb)|
Source: National Bureau of Statistics; 2005.
The table above shows unsteady improvement in the total Gross Domestic Product (G.D.P), as well as that of small and medium scale manufacturing. It essentially demonstrated the stagnation of the small and medium scale enterprise Gross Domestic Product. There was no radical increase of the SMEs GDP above 1 % throughout the selected years of study. Rather it has more often gone below one percent of the total Gross Domestic Product. This therefore suggests that no significant impact has been made by the government to promote the growth of small and medium scale enterprises inNigeria.
It has been shown from the foregoing discussion that entrepreneurship occupy central position in the quest for a sustainable development. The experience of other countries is a major justification of this fact. In Nigeria, the contributions of agricultural sector, large multinationals as well as banking sector to the total Gross Domestic Product growth can to a large extent be complemented by SMEs.Although, trade and investment liberalization is a step in the rightdirection, but we cannot afford to ignore the importance of enhancing indigenous small and medium scale enterprises. Government should matter of necessity reduce the bottlenecks of private individual accessing loans and credits for business. A seemingly high bureaucratic has been the major hindrance in securing loan facilities.Obviously, it is the entrepreneur that generates ecc requirements for economic growth by breaking new grounds in an endeavour. The onus therefore lies on this government to roll out p the current reform programmes to support and finance SMEs so that’ compete with the international world.
Adegbite, S. A., Ilorin, M. O.,Irefin, I. A., Abereijo, J.O. Aderemi, H.O.S. (2007), “Journal of Asia Entrepreneurship and Sustainability” Entrepreneurship Characteristic on the Performance of Small Scale Manufacturing Industries in Nigeria; May.
Adegboye,T.O. (1989), in M.O. Kayode and, YB.Usman,(ed) The Economy Since Independence, The First 25 Years, vol. II, Heinemann Education Books (Nig) Ltd.
AnugwomG. A. (2002), Entrepreneurship in Nigeria; Concepts, Theories, Practice, Enugu, Computer Edge Publishers.
Ariyo, Debbie (2002) “Small Firms are the Back Bone of the Nigerian Economy” African Economic Analysis. DMA Consulting Ltd.Arivo
Berko, S.Y (1996)’ in OLEWE BN, SLEE AIWU, UDEZE, J.O. (ed.) “Entrepreneurial and managerial Considerations for Small Business Enterprise” Administration and Management Classics. (SAMAC96), Aba,
CBN (1999), Central Bank of Nigeria Publications
CBN (2003) Statistical Bulletin Volume 14
Ile, Norbert M, (2001) Entrepreneurship Development: The Nigerian Perspective, Umuahia, Distinctive Press.
Kilby, P. (1971), “Hunting the Haffalump” in Peter Kilby (ed)
Entrepreneurship and Economic Development, New York. The free Press.
Nzelibe, G,C(1990) Entreprenueurship and management of small scale business in Nigeria, Enugu Fourth Dimension publish Co.
Okigbo, P.N.C. (1950), Nigerian National Accounts.
Onimode Bade, (1989), “The performance of G.D.P” in Kayode M.O and Usman Y.B. (ed.): The Economy. Nigeria Since Independence. The First 25 Years Vol. 11,
Schumpeter, J. A. (1970) “The Entrepreneur as Innovator” in Dale, Erne, (ed) Readings in Management (2nd Edition), New York.
Stoner, James A.F. and B.E. Freeman (1992), Management, New Dehli; Prentice Hall of India Private Ltd.
Teriba, O.E.C, Edozien; M.O. Kayoed (1981), The Structure of
Manufacturing Industry in Nigeria, Ibadan, University press.
Vaughan, Gary L. (1981), Guidelines for management Consulting Programs for Small-Scale Enterprise, Washington, D.C.
World Bank (2002), Development Data Group. World Development Indicators.