AN EVALUATION OF THE CONTRIBUTION OF SMALL AND MEDIUM SCALE BUSINESSES ON THE ECONOMIC DEVELOPMENT OF YOBE STATE

BACKGROUND OF THE STUDY

Small and medium scale enterprises (SMEs) as defined by the National Council of Industries referto business enterprises whose  total cost  excluding land   is not more two  hundred million   naira(200,000,000) only. It has been argued that SMEs are an effective instrument for economic growthand development in development as well as less developed countries (Beyene, 2002; Nitani, 2005)this is because SMEs contribute significantly to the Gross Domestic Product (GDP) and producesubstantial amounts of locally consumed products (ECA, 2000; Wattanapruttipaisan, 2003; Tagoeet al, 2005; Saleh and Ndubuisi, 2006). According to Mojmir(2000), SMEs play an important rolein the economic growth of any country including industrialized countries because they account formore than half of a country’s output and employment ( Hussain et al, 2008). In the same vein,Udechukwu(2003) asserts that the  development  of SMEs is an essential  element in the growthstrategy of most economies,   which  holds   particular    significance   for developing   countries   likeNigeria. SMEs are a vital part of any market economy because they are represented in all majorbranches of manufacturing and service sectors (Obokoh, 2008). This is in addition to their role inemployment generation, provision of goods and services within and across national boundaries ofcountries (SAleh and Ndubuisi 2006; Woldie et al, 2008)Due to their small size, SMEs are flexible and are more able to adapt to changes within the marketenvironment than large firms (Mazzarol, 2000; Udechukwu, 2003; Areetey, 2005). However, thesmall size of SMEs and their small capital base also constitutes an obstacle to their access to funds

for their operations. (Obokoh, 2008). It is expected that SMEs with ready and willing entrepreneurs,can succeed in an increasingly competitive world, especially if there are enabling and supportivegovernment policies (Briggs, 2007). In this vein, Berry (2002) asserts that the flexibility of SMEs’operations persuades business analysts to believe in their strategic role towards future industrialgrowth   of   developing   nations.   Despite   this   flexibility,   SMEs   are   also   exposed   to   externalenvironmental risks such as government policies and competition from multinational corporations(MNCs) (Watson and Everett, 1999; Abonyi, 2003). Some of these environmental factors oftenhinder   SMEs   from   gaining   the   necessary   international   exposure   for   achieving   large   scaleproduction for the efficient utilization of resources (Mambula, 2004)Given favourable policy environment and support, it is believed that SMEs can achieve an efficientproduction process that would enable them to compete successfully in the global market (Briggs,2007).   Therefore,   government   policies   should   be   directed   towards   improving   the   economicenvironment in which SMEs operate (Fredland and Morrris, 1976; Everett and Watson, 1998).There is now a renewed emphasis on the development of SMEs especially in LDCs (EA 2001).This   is   in   view   of   LDCs   governments’   formulation   policies   that   would   create   the   enablingenvironment for the establishment of and the operation 0f SMEs Agoboli and Ukaegbu 2006. Thisresearch is thus intended to critically appraise the circumstances of SMEs in Nigeria with a view aview   to   actually   identifying   and   assessing   the   bottlenecks   militating   against   the   effectiveperformance  of  SMEs  and  also   seek  to  investigate  the   reasons  why  programmes   designed  bygovernment to boost SMEs performance are yet to fully achieved their desired objectives (Mambula2002)