Preface The book has been compiled bearing in mind a variety of needs from business peoples that practice small scale business and the language and style of the book is consciously made simple so as to effectively cater for the multiplicity of interest groups highlighted. I must add here that the bulk of materials in this book had come in the main from a compilation of field surveys and Focus Group discussions, Interviews, questionnaire and literature reviews on the subject matters. The field of economics is wide and characterized by tortuous terrain. Although there are several texts and publications in economics, books which focus on the adaptation of economics principles to the entrepreneurship system are not very common. Traders, government, students of economics and business management therefore face the trauma of adapting principles of entrepreneurship to economic systems. These gap which this present book along with its precursors attempt to bridge. In order to fulfill this objective, the structure of the book is design to present an expose of entrepreneurship principles and small scale business in Nigeria.

1.1. Definition of Small-scale Enterprises According to Shonekan’s keynote address at the Faculty of Business Administration Conference (1992), captured with the theme: “Management of Small and Medium Scale Enterprises in Nigeria.” He said, “While it is difficult to have one universal definition of SMEs since there are usually many non-constant factors and variables, the spin-off industries are usually small or medium scale. In practical terms, SMEs constitute the bedrock of our national economy. They are our industrial feedstock, the engine of production for the bigger industries. The thriving economies of the world have a record of carefully structured SMEs. In Japan for instance, the bulk of manufacturing is at the small and medium scale levels. This situation also obtains in the ‘Asian Tigers’ (i.e. Malaysia, Taiwan, South Korea, Singapore, etc).”

2.1. Place of SME in Remeding The Nigerian Economic Paradox This can best be explained by the two-gap economic model. The Two-Gap Models of development are contained in the Post-Keynesian growth models designed by Harrod and Domar. They tried to identify the pre-conditions for the economic growth of market economies. These two preconditions are es- sentially rooted in the Nigerian economy and these are (1) Internally: inad- equate savings would definitely translate to investment. The GAP between these two is called saving constraints (SAVING GAP). Closing this gap re- quires SME-financing. (2) Externally: inadequate foreign exchange arising from inability to export vis-à-vis high importation will lead to short fall in foreign exchange. The GAP between these two is called foreign exchange constraints (TRADE GAP) which can be corrected by facilitating the establishment of indigenous enterprises through a national embrace of the SME-initiatives. Ni- gerian leaders resorted to foreign aid assistance from developed countries, multilateral and bilateral international organizations to salvage the economy from total collapse; but, we can’t continue to carry the begging bow as our benefac- tors only give us fish and don’t teach us how to catch fish.

3.1. Approaches for Promotion Entrepreneurship Programmes in Nigeria This book used the following typology of approaches: 1. Start: Stimulating local business start-ups that enter into new local markets, there - by avoiding the trap of yet another ‘me-too’ enterprise with low revenues. Promote business start-ups as a way of creating additional jobs and incomes, and promoting competition and structural change. However, these startups often lack innovative business ideas. Instead they enter sectors with a low entry threshold, but with high competition from other companies. Stimulating local start-ups that apply IB models could encourage players to enter new markets that are not yet saturated with competitors, while at the same time serving development goals. Possible target groups for this approach include university students, NGOs or experienced business people who create a spin-off company or leave their company to engage in a totally new business. In a country or sector where IB models are still rare, the first questions that arise are why this is the case, and whether potential markets exist for the use of IB models. Questions to ask include

4.1. Issues in Employment 4.1.1. What is employment? Employment is a relationship between two parties, usually based on a contract, one being the employer and the other being the employee. (a) Employee An employee contributes labor and expertise to an endeavor of an employer and is usually hired to perform specific duties which are packaged into a job. In most modern economies, the term “employee” refers to a specific defined relationship between an individual and a corporation, which differs from those of customer or client. Other types of employment are arrangements such as indenturing which is now highly unusual in developed nations but still happens elsewhere.

Enterprises 5.1. Worldview on the Issue of Small and Medium Enterprises Research on successful and unsuccessful new and young growing enterprises can aid understanding of growth processes and barriers to growth. Research on how the growth of new enterprises can be better supported, particularly through education at colleges and universities also would be useful. Hence, all over the world increasing attention is being paid to the potential of university education to facilitate high growth enterprises. For example, research has demonstrated that a high-growth entrepreneur in Europe is better educated than other entrepreneurs and the general population. In Europe, most founders of technology based enterprises have a university degree. Research carried out in Germany has shown that enterprises started by individuals with university degrees tend to grow faster than enterprises founded by n on -academics (Egeln, 2000). (Ley, 2006) states that, Research is also needed on how to motivate and nurture the entrepreneurial potential of female students who traditionally may be less inclined to found and manage innovation-oriented high-growth firms. Another group of specific interest is ethnic and immigrant entrepreneurs, who - though often not innovative in the beginning - may introduce novel business practices and subsequent product and service innovations within established communities.

Nigeria: Economic and Non-Economic 6.1. Issues in Growth and Development in Nigeria Nigeria has attempted through various reform programmes to better the lots of her citizens by providing dividend of development, such as education, health, social infrastructure. Broadly speaking, the features of an underdeveloped economy create obstacles in the way of economic development, and hamper economic progress. These features emerge out of economic, social, political, religious and institutional factors. It would be wrong however to conclude that only economic factors are responsible for poverty or economic backwardness of a country. Non-economic factors are equally responsible for the under development of an economy. The factors discouraging economic development may be classified into economic and non-economic factors which are:

7.1. Rural Poverty in Nigeria The Federal Republic of Nigeria has a population of more than 160 million - the largest in Africa - and a fast-growing economy. Agriculture is the mainstay of the economy, contributing about 40 per cent of GDP. The agriculture sector employs approximately two-thirds of the country’s total labour force and provides a livelihood for about 90 per cent of the rural population. Nigeria is the world’s largest producer of cassava, yam and cowpea - all staple foods in sub-Saharan Africa. It is also a major producer of fish. Yet it is a food-deficit nation and imports large amounts of grain, livestock products and fish. Nigeria’s huge agricultural resource base offers great potential for growth. Recent government policies have started to show results: The agricultural sector reportedly grew by 7 per cent a year between 2003 and 2007, and at a slightly lower rate in recent years. Still, the area of land under cultivation could be doubled. Of an estimated 71 million hectares of arable land, only about half is presently under production. And there is substantial scope for an increase in irrigation, which now covers only 7 per cent of irrigable land. Irrigation and other inputs would substantially increase average yields for major staple crops, which are below those in other developing countries. Despite Nigeria’s plentiful agricultural resources and oil wealth, poverty is widespread in the country and has increased since the late 1990s. Some 70 per cent of Nigerians live on less than US$1.25 a day. Poverty is especially severe in rural areas, where up to 80 per cent of the population lives below the poverty line, and social services and infrastructure are limited. The country’s poor rural women and men depend on agriculture for food and income. About 90 per cent of Nigeria’s food is produced by small-scale farmers who cultivate small plots of land and depend on rainfall rather than irrigation systems. The poorest groups eke out a subsistence living but often go short of food, particularly during the pre-harvest period. The productivity of the rural population is also hindered by ill health, particularly HIV/AIDS, tuberculosis and malaria.

8.1. Major Obstacle to Nigeria Economic Growth In Nigeria, high transport prices are rightly seen as a major obstacle to economic growth of the region. This has been documented in several studies. One of them (Amjadi and Yeats, 1995) even concluded that, in Nigeria, transport costs are a higher trade barrier than import tariffs and trade restrictions. In this paper, it is analyzed, identified and quantified the factors behind Nigeria’s high prices of road transport, with the purpose of helping policy-makers adopt appropriate actions to reduce transport prices to domestic and international trade. Before the presentation of the results, a distinction has to be made between logistics costs, transport prices, transport costs and vehicle operating costs in order to avoid the usual confusion. This distinction is useful because prices may or may not reflect transport cost:

9.1. Challenges for Nigeria Nigeria, at independence in 1960, was largely a producer and net exporter of primary products. The six major agricultural products then were cocoa, rubber, palm oil, groundnut, cotton and palm kernel. Although there existed mining and quarrying activities, these were of negligible percentage and never counted for the economy as a whole. In other words, agricultural produce and raw materials constituted the sole foreign exchange earner for the country. Specifically, the Nigerian state as an exporter of agricultural goods had 69.4% of its total GDP for the year 1963/64 comprising the six aforementioned agricultural commodities (Olaloku, 1979:8). The trend of having agriculture as the main foreign exchange earner for Nigeria stopped in the early 1970s when the country was suddenly awash with petrol dollars arising from the quadruple increase in the price of oil in the world market. From 1972 onwards, oil gained ascendancy over all other commodities as the largest contributor to the GDP, and also as a major foreign exchange earner. There was substantial increase in oil production accompanied by a sharp increase in the global market price of high-grade crude oil from low price of $3.8 per barrel in October 1973 to a skyrocketing price of $14.7 per barrel in January 1974. This trend continued till 1981 when the price of crude oil attained a high level of $38.77 per barrel. Within the same period, total revenue from oil rose correspondingly from ? 1 billion to ? 4 billion while external reserves increased from ? 180 million to ? 3.7 billion in 1975 (Osaghae, 1998:96).

10.1. Challenges and Opportunities in SMEs The Nigerian transport system faces great challenges and also offers several opportunities. The predisposing factors include: • The size of the country: With area coverage of 923,768.64 km2, spanning longitude 30E-160E and latitude 40N-140N Nigeria is a comparatively large country. It is inhabited by over 140 million people. Transportation is a crucial instrument for linking the country economically, socially and politically. • Nigeria’s vast natural resources: Nigeria is endowed with petroleum, gas and solid mineral resources. The country is also blessed with abundant agricultural and forest resources, which vary by the three ecological zones of the country. The country is endowed with a highly productive open sea with abundant and diverse marine resources within her coastline of 852km bordering the Atlantic Ocean in the Gulf of Guinea and her maritime area of 46,000 km. This variation is a factor in spatial interdependence. Transport plays an important role in the exploitation and distribution of these resources and in the reduction of spatial inequality and in poverty alleviation.

11.1. Support for Start-Up Finance Access to finance for start-ups is always difficult due to the problem of asymmetric information. Start-ups lack the kind of financial history which banks use to infer the pay back behaviour and the business capacities of the entrepreneur. Innovative start-ups face the additional problem that it is difficult to assess the viability of their business ideas or the prospects of the markets. In addition, banks and other potential investors often decline to get involved when the relatively small amount of capital requested by a new business is out of proportion with the efforts that the investors must make to screen and evaluate the start-up project. These problems are even greater for companies engaging in IB models, as doing business with the poor is usually riskier - or perceived as more risky - due to BoP customers’ low ability to pay and the greater vulnerability of value chains. Support for start-up finance is therefore essential. Local IB start-ups often lack funding at all stages of the start-up process: the idea stage, when business opportunities are identified, the seed stage, when the market is assessed and the business model developed, and the start-up stage, when the company is formally set up and all the necessary equipment is procured. Different kinds of financial support will be necessary at all stages.

12.1. Practice of SMEs in Africa-Critical Review Previous studies in Kenya have focused on the role of entrepreneurship education in job creation, enterprise management and economic development (Simiyu, 2010; Mwangi, 2011; Warren, 2011); hardly any have addressed the process of delivering entrepreneurship education. Research provides new knowledge to guide educational practice, by making an initial foray into the teaching of entrepreneurship education in Kenya. The envisaged entrepreneurially empowered TTI graduate is a product of the training function. This book examines factors which affect implementation of entrepreneurship education programme in TTIs in Kenya. The variables investigated were teaching methods, assessment methods, teacher’s network, and availability of training resources. The findings show that teachers do not accord entrepreneurship education t he appropriate pedagogical approach that it deserves; they seem resigned to using ineffective traditional pedagogies. Meanwhile, the subject is inadequately resourced by TTI administrations. The results of this research invite the attention of entrepreneurship educators, practitioners and stakeholders to employ effective strategies for dev eloping entrepreneurial key competencies in TTI trainees.

13.1 Internal and External Factors Affecting Small and Medium Enterprises Margi Lévy and Philip Powell argued that growth is determined by a combination of the entrepreneur, strategy and the firm organization. The author also defined key influences on SMEs growth, internal factors that reveal how decisions and features effect the growth of a firm. (a) Entrepreneurial influences A firm’s growth is dependent on the managerial knowledge (Macpher son & Holt 2007, 172-192). Training is crucial for the productivity and quality as well as it influences the effectiveness, efficiency and motivation of the employees (Thassanabanjong et al., 2009). The SME owner has considerable personal influence over a firm’s strategies, tactics and operations to engage in decision process across the firm. As a result, although a flat, informal organizational structure is likely to exist, decisions making tends to be quite centralized around the owner. The entrepreneurs’ personality and behavior are to be causal factors for or against growth - orientated achievement. It is characteristic of small business that power decision are centralized at the level of owner - manager, so his or her personality, skills, responsibilities, attitude and behavior will have decisive influence on business strategy. (Levy and Powell, 2005). Market competition has a larger affect for SMEs chance of survival and uncertainty is high as most of the smaller companies tend to have smaller share of the capital. This leads SMEs to have one or two major customers and are do not have big influence on prices. Larger companies with higher market share usually determine prices. (Levy & Powell, 2005).

14.1. Characteristics of Social Entrepreneurs Compared to Corporate Entrepreneurs Prior research has found many parallels between social and commercial entrepreneurs when it comes to personality and behavioural traits (Drucker, 1989; Gitman & McDaniel, 2008; Gordon, 2006). There are some essential personal characteristics of these entrepreneurs that contribute to the success of the venture. A recent empirical study conducted by Sharir and Lerner (2006) identifies eight variables that contribute to success of a social venture. Out of these eight variables, five are directly related to the qualities of the entrepreneur, namely, the entrepreneur’s social network , commitment , previous management experience, ability to integrate the vision and to establish strategic alliances . Similarly, a study of the characteristics of social entrepreneurs in the United States found that social entrepreneurs are more likely to have high social capital (Ryzin, Grossman, DiPadova-Stocks & Bergrud, 2009). Although such studies of the personal characteristics of social entrepreneurs provide useful information about the leadership and organisational skills of such individuals, they do not explain the essence of these traits, why they are important and how social entrepreneurs use them to achieve their social mission and create and sustain social change. More research is required to understand what values, motives and behavioural repertoires distinguish a social entrepreneur from a corporate entrepreneur.

15.1. General Barriers and IB Strategies to Overcome There are extensive barriers when it comes to doing business with people at the base of the pyramid. This is because of the market inefficiencies and high transaction costs that can render businesses unprofitable, particularly in the short run. For instance, customers in remote rural areas are hard to reach as the necessary infrastructure is not available. General barriers to IB models include: • Shortages of adequate infrastructure such as roads, energy, water etc., particularly in rural areas and urban slums. • The need to create a market (i.e. encourage demand): many goods and services are known as ‘push’ products (e.g. waste management and preventive healthcare). It is necessary to raise awareness about them in order to stimulate demand; new distribution channels must also be created. • The lack of knowledge and skills among the poor, to act either as clients or as suppliers and employees. • Complex or hostile regulatory or legal environments, affected by weak institutions and insufficient enforcement of rules and contracts. IB models overcome these barriers through innovation and by employing additional, targeted measures. Indeed, the strategies they use to overcome barriers to doing business with the BoP are one of the main defining features of IB models. These measures can be categorised as follows.

16.1. Overview of Medium and Small Enterprises (MSE) Growth In most developing countries, MSEs constitute the vast majority of firms, generating a substantial share of both overall employment and output. Given their significant economic role, one might expect MSE growth to drive overall increases in output and income levels. In many cases, however, their largest economic contribution appears to be one of maintaining, rather than generating new, employment and income for the poor. At an aggregate level, MSEs demonstrate impressive growth, 3 especially when compared with larger firms. However, many individual MSEs grow slowly or not at all, in some cases, due to a conscious decision on the part of the business owner. Overall growth rates are often fueled by the rapid expansion of a narrow group of highly performing MSEs. In dev e loping as well as in developed countries, there appears to be a small group of “gazelles”, firms that outperform their peers and drive aggregate employment and productivity growth for the small business sector. Why do some MSEs expand rapidly, while others stagnate? What factors account for the wide variation observed in MSE growth trajectories? This paper explores a wide array of specific factors, but it is first useful to consider a broader conceptual frame work of opportunities and capabilities. Clearly, opportunities for profitable business activities shape the ability of an entrepreneur to expand his or her firm.

17.1. The Nigerian Unemployment Milieu: Control Measures taken by the Government At this juncture, the little efforts that have been made by the government to control unemployment to an extent shall be examined. Records from the Central Bank of Nigeria (1987), show the following efforts made by the government: 1. Youths Empowerment/ employment and skills programme. This was done in terms of provided minor jobs or ‘white-colar’ jobs. 2. Agricultural programmes such as the ‘Operation Feed the Nation’ by the Obasanjo Military Administration. 3. Provision of small scale industries and graduates employment. 4. Special public works (which were temporary). Some of these efforts are still in place while others are forgotten. For example, on the pages of the Businessday Newspaper, on August 4th (pg 13), 12th (pg 49), 21st and 27th, 2009 were the following headings revealed:

18.1. Basic for Government Intervention in the Economy One of the most powerful arguments to justify government intervention in the economy in the economy is the so-called concept of market failure. In a typical free enterprise system where demand and supply forces operate, the efficiency which results only relates to economic welfare. The social cost implications of economic activities tend to be ignored. Governments therefore intervene in the economy with the social welfare objective in mind. One popular way by which governments have intervened in the economy is through ownership of particular industries or outright nationalization of some private enterprises. The advantages usually claimed for such an action are as follows:

19.1. Remedies to Combat Unemployment in Nigeria (a) Rural development One way of stemming the rural-urban drift, and thus control the resulting unemployment in our urban centers, it for the government to develop the rural areas. Not only should amenities be provided, but jobs should be created in the rural areas to stem the exodus. Fortunately, the Babangida administration seemed to have realized this with the huge amount allocation for the development of rural areas in the 1986 and 1987 budgets. (b) Population control Government must intensity the effort to control population growth Nigeria already has a huge population and with an estimated growth rate of about 3 percent annually, this can only compound the unemployment in the face of inadequate resources. It is therefore advocated that the government should renew the family planning campaign to check the population growth.

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