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Se h eking the Trut VERITAS INTERNATIONAL JOURNAL OF ENTREPRENEURSHIP DEVELOPMENT (V IJ ED)
Published by DEPARTMENT OF ENTREPRENEURIAL STUDIES COLLEGE OF MANAGEMENT SCIENCES VERITAS UNIVERSITY, ABUJA (The Catholic University of Nigeria) ABUJA, NIGERIA
Volume 1 Number 1, March 2018 Veritas International Journal of Entrepreneurship Development (VIJED)
Copyright © 2018 Department of Entrepreneurial Development Studies.
All rights reserved. This journal is a copyright to the Veritas International Journal of Entrepreneurship Development (VIJED). Except for the purpose of peer reviewing, this book, or part thereof, may not be further reproduced by any means, electronic or mechanical including photocopying and recording, or by any information storage or retrieval system, without a proper written permission of the Editorial Board or the publisher and copyright holder(s).
ISSN: 2635-3911
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ii Veritas International Journal of Entrepreneurship Development (VIJED)
EDITORIAL NOTE
The Veritas International Journal of Entrepreneurship Development (VIJED) is the spectrum journal of Entrepreneurship Development Centre programme (EDCP) in Veritas University, Abuja. The EDCP, among other objectives is dedicated to promoting entrepreneurial research opportunities and openness in the conduct of research, ease of access to research works worldwide and make research outcome user-friendly. In light of this mandate, the EDCP, through this journal publishes well structured original theoretical and empirical studies on contemporary issues in Entrepreneurship and its associated fields.
VIJED is an international reference journal. All research articles in this journal undergo rigorous internationally peer review, based on initial editor and anonymous refereeing by at least two anonymous referees. This journal welcomes both theoretical and empirical contributions, especially theoretical papers on Entrepreneurship that can yield novel testable implications as well as articles that are theoretically well motivated. Contributions are also sought from diverse contributors locally and internationally.
We welcome manuscripts on all aspects of entrepreneurship in the areas of creativity and innovations in Small and Medium Enterprises (SMEs), leadership and management practices among entrepreneurial firms, business development management and leadership, entrepreneurial institutions and innovation clusters, entrepreneurship educations, governmental policies on entrepreneurship and innovation, entrepreneurship and economic development, disruptive management and leadership technologies, and agro managements, university – industry collaboration, information and communication technology and SME competitiveness, human resources management practices for promoting innovation for SMEs, technology transfer and social entrepreneurship, social networks and entrepreneurship development, entrepreneurial marketing practices among SMEs, entrepreneurial culture and motivations, entrepreneurial financing and financial management, corporate entrepreneurship and international entrepreneurship, and so forth. However, all expressed views and interpretations in this journal are those of the authors and do not necessarily represent the views and policies of the Veritas University, Abuja as an institution. The editorial board does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequences of their use.
Professor Michael Kwanashie Editor-in Chief March, 2018
iii Veritas International Journal of Entrepreneurship Development (VIJED)
EDITORIAL POLICY
This journal is published, at least, twice a year. This journal considers all articles from entrepreneurial diverse disciplines and its allied fields.
The journal's Editorial Board receives articles, then arrange for their review by editors which consists of scholars of different background and expertise. Any article submitted to editorial board is assumed not have been published or submitted anywhere for publication. It is consequently subjected to a very thorough blind editorial review and assessment by the editorial board before publication.
Articles are accepted for publication if appropriate advice is given by a minimum of two reviewers. A decision on publication or otherwise of an article, rests entirely upon the editorial Board members. Contributors should send soft copy of their manuscript, typed 1-5 line spacing via a provided email address. All written manuscripts including all references should conform to the APA styles.
Finally, all manuscripts and correspondence about articles should be addressed to:
THE MANAGING EDITOR Department of Entrepreneurship Development Studies Veritas University Abuja, Nigeria [email protected] or [email protected]
iv Veritas International Journal of Entrepreneurship Development (VIJED)
EDITORIAL BOARD
Editor-in-Chief Professor Michael Kwanashie
ASSOCIATE EDITORS Rev. Fr. Dominic Shimawua, PhD., Department of Public Administration Veritas University, Abuja.
Chika E. Duru, PhD.. Department of Entrepreneurial Studies, Veritas University, Abuja.
Daniel Oguche, PhD. Department of Business Administration, Veritas University, Abuja.
Musa Success, PhD. Department of Accounting. Veritas University, Abuja.
Marcus Garvey Orji, PhD., Department of Business Administration, Veritas University, Abuja.
Henrietta Okoro, DBA., Senior Lecturer – Colorado Technical University, Colorado, USA.
Adedapo Oluwaseyi Ojo, PhD., Faculty of Management Sciences Multimedia University, Cyberjaya, Malaysia.
Jade Williams, PhD. Faculty of Administration and Management. Malaya University, Malaysia.
Modestus C. Nsonwu, PhD. Department of Economics. Veritas University, Abuja.
v Veritas International Journal of Entrepreneurship Development (VIJED)
EDITORIAL ADVISERS
Professor Michael Kwanashie. Vice Chancelor. Veritas University, Abuja.
Professor Raj Singh, PhD. President, University of Riverside, Riverside, California, USA.
Professor Tony Ogiamien. President. American Heritage University of Southern California, Ontario, California USA.
Professor Benjamin Akanegbu. Department of Economics. Nile University, Abuja.
Professor Mathias O. Ngwudioha. Department of Accounting. Nile University, Abuja.
Professor Samuel B. A. Tende, Director/HOD- Entrepreneurship Development Studies. Nasarawa State University, Keffi, Nasarawa State, Nigeria
Professor Uche Joe Uwaleke, PhD, ICAN., CIBN., (HOD-Banking and Finance. Nasarawa State University, Keffi, Nasarawa State, Nigeria.
Associate Prof Gabriel Egbe, PhD., Dean-Humanities. Senior Special Advisor to the VC on Academics, Veritas University Abuja.
Associate Professor Charles Nwekeaku. Department of Public Administration. Nasarawa State University, Keffi, Nasarawa State, Nigeria
MANAGING EDITOR Chika E. Duru, PhD Department of Entrepreneurship Development Studies Veritas University Abuja, Nigeria [email protected] or [email protected] vi Veritas International Journal of Entrepreneurship Development (VIJED)
PREFACE
This is our first and special edition that comprises Entrepreneurial Research paper presentation at our departmental seminar of the Department of Entrepreneurship Development Studies, Veritas University, Abuja.
We thankfully acknowledge all article contributors to this first edition of Veritas International Journal of Entrepreneurship Development (VIJED). To all our article reviewers spread all over the world, we appreciate all your great work in bringing quality to this journal.
Thank you so very much for your relentless support Dr Gabriel A. Egbe – The Senior Special Adviser (SSA) to the Vice Chancellor on Education. Your support started from the formation stage of VIJED till date. We appreciate you very much.
Our profound gratitude to Professor Michael Kwanashie the Vice Chancellor, Veritas University, Abuja for his support which has resulted to the success of VIJED.
vii Veritas International Journal of Entrepreneurship Development (VIJED)
LIST OF CONTRIBUTORS
1. Dele Ishaka Corruption, Conflict and National & Ogbanji Ike Joseph Development in Nigeria.
2. Sunday Alewo Omale, Ph.D Strategies For Deposit Mobilization In The 21st Christian Oriaku Centuries Financial Institution: The Nigerian & Olaniyi Kizito Babatunde Experience.
3. Dominic Shimawua Ph.D The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency in Nigeria: An Assessment
4. Daniel Oguche Ph.D Entrepreneurship Contribution to The Development And Growth of The Nigerian Economy (2005 – 2015).
5. Adeyemi Omolade Sunday Product Portfolio Matrix, Generic Strategies Adeyemi Oluwatoyi Damilola and Organizational Performance in Unilever Adeyemi Kayode Samuel Nigeria Plc. & Lawal Olabisi Oluwaseyi
6. Chika Ebenezer Duru Ph.D The Impact of Cultural Factors on Entrepreneurial Performance.
7. Stella Nkechi Emechebe Ph.D Youth And Usefulness in An Entrepreneur & Rev. Fr. Bakwaph Peter K Ph.D Oriented Society.
8. Dominic Shimawua Ph.D The Role of Corporate Social Responsibility (CSR) in The Growth of Multinational Companies in Nigeria.
9. Anyanwu Christiantus Izuchukwu Entrepreneurship As A Road Map To Political & Ejimonu Chizowa Emmanuel Stability: Evidence From Nigeria.
10. Akhator Akhere Peter Ph.D Financial Deepening and Economic & Marcus Garvey Orji Ph.D Development of Nigeria: An Empirical Investigation.
11. Anyanwu Christiantus I. Nigerian Federalism and the Application of & Ejimonu Chizowa E. African Attitude of "eat and Give Your Brother": An Appraisal.
viii Veritas International Journal of Entrepreneurship Development (VIJED)
12. Marcus Garvey Orji Ph.D Managing Employees Resistance to Enobun-nwidi Patience E. Organisational Change in Nigeria Higher & Abba Solomon Boman Educational Institutions.
13. Anyanwu Christiantus I. Herdsmen and Farmers Conflict: An & Ejimonu Chizowa Emmanuel Impediment to Political Development in Nigeria.
14. Solomon Jeresa Overcoming Financial Challenges of Small Marcus Garvey Orji Ph.D and Medium Scale Enterprises in Nigeria. & Esther Ali Baba
15. Musa Success Jibrin Ph.D Estimating Economics Growth Via Value Added Success Blessing Ejura Tax and Personal Income Tax in Nigeria. & Blessing Anaja
16. Hanmaikyur Tyoapine J. Ph.D Effect of Entrepreneurship Education on The & Diaka-tingir Hembadoon Development of Entrepreneurial Marketing Practices In Public Enterprises in Benue State, Nigeria.
17. Chris AC-Ogbonna Ph.D An Econometric Analysis of The Impact of Small and Medium Scale Enterprise Capital Finances on The Nigerian Economy.
18. Charlie Nwekeaku, PhD An Appraisal of Public Private Partnership in & Peter Anadi, M.Sc Financing of Infra Structural Projects in Federal Capital Territory, Abuja, Nigeria.
19. Hanmaikyur Tyoapine J. Ph.D Entrepreneurial Marketing Practices and & Diaka-tingir Hembadoon Poverty Reduction in Nigeria.
20. Musa Success Jibrin Ph.D Relationship Between Economic Growth, Success Blessing Ejuru Petroleum Profit Tax and Value Added Tax in & Nwachukwu Mary Nkeiruka Nigeria.
21. Charles Nwekeaku, Ph.D Corporate Governance And The Development of Small and Medium Enterprise, (SMES) in Nigeria.
22. Chika Ebenezer Duru, PhD. The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa: A Case Study of Bwari Area Council, Federal Capital Territory (FCT), Abuja, Nigeria.
23. Ayadi, Folorunso Sunday Ph.D Resource Exploitation, Corruption and Economic Growth in African Continent
ix Veritas International Journal of Entrepreneurship Development (VIJED)
TABLE OF CONTENT
1. Corruption, Conflict and National Development in Nigeria.: - - - - 1-14 Dele Ishaka & Ogbanji Ike Joseph
2. Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience.: - - - - - 15-25 Sunday Alewo Omale Ph.D, Christian Oriaku & Olaniyi Kizito Babatunde
3. The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency in Nigeria: An Assessment.: - - - - 26-40 Dominic Shimawua Ph.D
4. Entrepreneurship Contribution to The Development And Growth of The Nigerian Economy (2005 – 2015).: - - - - - 41-55 Daniel Oguche Ph.D
5. Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc.: ------56-68 Adeyemi Omolade Sunday, Adeyemi Oluwatoyi Damilola, Adeyemi Kayode Samuel & Lawal Olabisi Oluwaseyi
6. The Impact of Cultural Factors on Entrepreneurial Performance.: - - - 69-90 Chika Ebenezer Duru Ph.D
7. Youth And Usefulness in An Entrepreneur Oriented Society.: - - - 91-97 Stella Nkechi Emechebe Ph.D & Rev. Fr. Bakwaph Peter K Ph.D
8. The Role of Corporate Social Responsibility (CSR) in The Growth of Multinational Companies in Nigeria.: ------98-116 Dominic Shimawua Ph.D
9. Entrepreneurship As A Road Map To Political Stability: Evidence From Nigeria.: - 117-126 Anyanwu Christiantus Izuchukwu & Ejimonu Chizowa Emmanuel
10. Financial Deepening and Economic Development of Nigeria: An Empirical Investigation.: ------127-139 Akhator Akhere Peter Ph.D & Marcus Garvey Orji Ph.D
11. Nigerian Federalism and the Application of African Attitude of "eat and Give Your Brother": An Appraisal.: ------140-148 Anyanwu Christiantus I. & Ejimonu Chizowa E.
12. Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions.: - - - - - 149-174 Marcus Garvey Orji Ph.D, Enobun-nwidi Patience E. & Abba Solomon Boman
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13. Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria.: ------175-187 Anyanwu Christiantus I. & Ejimonu Chizowa Emmanuel
14. Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria.: ------188-195 Solomon Jeresa, Marcus Garvey Orji Ph.D & Esther Ali Baba
15. Estimating Economics Growth Via Value Added Tax and Personal Income Tax in Nigeria.: ------196-206 Musa Success Jibrin,Ph.D Success Blessing Ejura & Blessing Anaja
16. Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices In Public Enterprises in Benue State, Nigeria.: ------207-220 Hanmaikyur Tyoapine J. Ph.D & Diaka-tingir Hembadoon
17. An Econometric Analysis of The Impact of Small and Medium Scale Enterprise Capital Finances on The Nigerian Economy.: - - - 221-235 Chris AC-Ogbonna Ph.D
18. An Appraisal of Public Private Partnership in Financing of Infra Structural Projects in Federal Capital Territory, Abuja, Nigeria.: - - - 236-247 Charlie Nwekeaku, PhD & Peter Anadi, M.Sc
19. Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria.: - - 248-263 Hanmaikyur Tyoapine J. Ph.D & Diaka-tingir Hembadoon
20. Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria.: ------264-275 Musa Success Jibrin, Ph.D Success Blessing Ejuru & Nwachukwu Mary Nkeiruka
21. Corporate Governance And The Development of Small and Medium Enterprise, (SMES) in Nigeria.: ------276-282 Charles Nwekeaku, Ph.D
22. The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa: A Case Study of Bwari Area Council, Federal Capital Territory (FCT), Abuja, Nigeria. ------283-308 Chika Ebenezer Duru, PhD.
23. Resource Exploitation, Corruption and Economic Growth in African Continent. - 309-324 Ayadi, Folorunso Sunday Ph.D
xi Veritas International Journal of Entrepreneurship Development (VIJED)
CORRUPTION, CONFLICT AND NATIONAL DEVELOPMENT IN NIGERIA
DELE Ishaka Department of Political Science And International Relations, University of Abuja [email protected]
And
OGBANJE IKE JOSEPH Department of Political Science And International Relations, University of Abuja [email protected]
Citation: Ishaka, D. & Ogbanje, I. J. (2018). Corruption, Conflict and Development in Nigeria. Veritas International Journal of ______Entrepreneurship Development (VIJED). Veritas University Abuja. 1(1) 1-14 ABSTRACT The paper takes a critical look at the nexus between corruption, conflict and national development. The impact of corruption on the socio-political and economic development in Nigeria has caused a monumental damage to national development of the country. Indeed, the effect of corruption is felt in the economic, political and social spheres either directly or indirectly. Although the direct costs of corruption may be high in terms of lost revenue or funds diverted from their intended use, which has a bearing with most conflicts experienced in the nation, the indirect costs in terms of the economic distortions; inefficiencies and waste resulting from corrupt practices are more problematic over a long-term and thus making it more difficult to address. The paper is located within the framework of elite theory and the work was carried out using qualitative research particularly through content analysis method. The finding is that Nigeria has lost an estimated fifty percent (50%) of what it has generated since independence to public office looters. The most frustrating reality is that these looted funds are not invested in Nigeria to develop the youths that are readily available for use during crisis but are dumped in foreign accounts for the betterment of the economies of those states. The paper recommended that peace scholars, individuals, organizations and the government should be proactive in addressing the monster of corruption and establish good governance in order to prevent conflict and strengthen national security which is a precondition for national development.
______Key Words: Corruption, Looted Funds, Conflict, National Development.
1 Corruption, Conflict And National Development in Nigeria
INTRODUCTION The genesis of corruption in Nigeria might not really be associated with a particular period. Nonetheless, Aije and Wokeroro (2012) asserted that corruption can be traced back to the colonial era when Nigerians were bribed with different foreign goods in exchange for local products. Aside this, various regimes have also been associated with certain corrupt practices. The illegitimate taking over of government by the various military regimes via coup d'état were often justified by pervasive corruption. This tends to use corruptly armed measures to check and making the economy worse off; abolition of the constitution by replacing it with decrees, abuse of fundamental human rights among others. Shuaib (2016) argued that the history of corruption in Nigeria is strongly rooted in the over 29 years of the military rule, out of 57 years of her statehood since 1960.
Corruption has gone so bad and it is worrisome as several but unsuccessful measures have been put in place to halt the menace. The menace of corruption in Nigeria is endemic and on the increase despite several attempts even by successive governments to quail it. The issue is global and it is without a uniform definition. In Nigeria, corruption has become the order of the day happening among the young and the old, the politician and the non-politician as well as military and the non- military. Corruption has been identified as one of the factors responsible for poverty which has pushed many youths into all kind of criminal activities. The devastated effect of corrupt practices in Nigeria can be linked to the various conflicts associated with the Nigerian state. As such, it is safe to assert unequivocally that corruption is inextricably intertwined with conflict. According to a World Bank Report, more than ten (10) million children of school age are not in school particularly in the Northern part of Nigeria. The implication of this is that in the next ten to twenty years, these children will grow up into adults who inadvertently will become societal misfits. This category of restive people will go into all kind of criminal activities which will ultimately culminate into all kind of conflicts and violence. The various conflicts in Kaduna, Jos and Kano including the Boko Haram terrorism that is currently plaguing the nation are fuelled by these restive youths. These people are from local governments, state governments, and they are all represented at the federal level of government. The neglect of these set of people is largely due to corruption and embezzlement of funds meant to provide the enabling environment for them to thrive and be productive. The southern part of Nigeria which is divided into east and west is also not exempted from the negative impact corruption has on the society. This is evident in the increasing rate of kidnapping, armed robbery, cultism, militancy, separatist agitation and so on. The question to ask is that why is corruption still ripe in the country despite scholastic solutions, government policies to stem the tide and the massive awareness? Could it be that not enough has been written about it or enough reasons have not been adduced for its continuation? Or is it that enough strategies have not been suggested for its reduction or elimination? This paper would therefore be an additional resource to the issue of corruption, as it seeks to give some analytical expositions as to the nexus between corruption, conflict and national development in Nigeria and recommendations for its elimination or mitigation.
2 Corruption, Conflict And National Development in Nigeria
THEORETICAL FRAMEWORK Arguably, corruption in Nigeria is a pandemic that the major perpetrators are the elites. To examine the role of the elites in corruption, the elite theory is used as a tool of analysis. The elite theory according to Vilfred Pareto (1858-1923), Gaetano Mosca (1858-1941), Michels (1876-1941), and Wright Mills as quoted by Henry (2001), is based on the conception that the society is divided in to two classes. According to the two the Italian sociologists that the theory has its origin in their works, Vilfred Pareto (1858-1923) and Gaetano Mosca (1858-1941) their frame of analysis is to explain the nature of power relations in the society. They both agreed that every society is divided into two classes, the class that hold power and the class that do not. Nigeria presents a typical example of an elite controlled society. In Nigeria, the elites belong to an organized minority group and are found in virtually all sectors of the society. There are political, economic, social, individual, financial, religious, military, academic and traditional elites. The attention here majorly is on the political elites because they are the ones who have unfettered access to public funds. They are saddled with the responsibility of using public funds to better the lots of the Nigerian people but what has happened over the years is that instead of using these funds to implement policies that will positively transform the lives of the people and move them out of economic underdevelopment, they have looted these funds and stashed them in foreign accounts. This no doubt is one of the major factors that have precipitated abject poverty in Nigeria that has bred several belligerent groups like the Boko Haram Sect, Niger Delta militants, Indigenous People of Biafra (IPOB), cattle rustlers, marauding herdsmen, armed robbers, kidnappers and so on. These monies that have been looted and saved in foreign banks would have helped the economy a great deal if it is within but the reverse is the case and the effect is obvious.
CONCEPTUAL FRAMEWORK Corruption The word corruption is derived from the Latin word corruptus, meaning “to spoil, pollute, abuse, or destroy”. Corruption refers to what is morally reprehensible and an act of impurity. It always involves a failure to conform to some social standards. The concept of corruption has changed over the centuries and varies somewhat across cultures. It has been used in broad terms to describe any deviation from the norm that is considered improper, most especially improper behaviour linked to one's official position (Salisu, 2000). The World Bank (1996) defined corruption as “the abuse of public power for private benefit”. The Transparency International (2005) defined it as “the abuse of entrusted power for private gain”. However, corruption is not just about those in public office or those in power but it also involves all in the society. Corruption includes bribery, smuggling, fraud, illegal payments, money laundering, drug trafficking, falsification of documents and records, window dressing, false declaration, evasion, underpayment, deceit, forgery, concealment, aiding and abetting of any kind to the detriment of another person, community, society or nation.
3 Corruption, Conflict And National Development in Nigeria
Khan (1996) elucidates that corruption is an act which deviates from the formal rules of conduct governing the actions of someone in a position of public authority because of private - regarding - motive such as wealth, power or status. Otite (2000) contends that corruption is perversion of integrity or state of affairs through bribery, favour or moral depravity. It takes place when at least two parties have interacted to change the structure or processes of society or the behaviour of functionaries in order to produce dishonest, unfaithful or defiled situations. In other words - corruption is a systematic vice in an individual, society or a nation which reflects favoritism, nepotism, tribalism, sectionalism, undue enrichment, amassing of wealth, abuse of office, power, position and derivation of undue gains and benefits. Windsor and Getz (2000) disagreed slightly with Khan and Otite because he argued that corruption is socially impermissible deviance from some public duty or more generally some ideal standard of conduct. Corruption in Nigeria also could be youth based among which includes cybercrime (yahooyahoo), thuggery, permutation, pilfering, drug peddling, paid assassins, kidnapping, prostitution, militancy, BokoHaram and 419 syndromes, plagiarisms among others.
Conflict Etymologically, the word conflict was derived from a Latin word called confligere, which means to clash or to engage in a fight or a battle over certain things, goals, or values. It is a battle between or among individuals and groups of individuals, due to perceived incompatible goals (Best, 2004). Conflict is a disagreement, quarrel, fight, violence, terrorism and any act targeted at causing pain, hardship and unpleasantness in the society.
According to Coser (1956), conflict is the struggle over values or claims to status, power, and scarce resources, in which the aim of the groups or individuals involved are not only to obtain the desired values but to neutralize, injure or eliminate rivals. Conflict emerges when parties compete over perceived or actual goals, values, or interests. Thus, it occurs when the contenders confront one another with opposing actions and counter-actions. Sometimes, conflict serves as an indicator of change or the need for change. It is an interaction that aims at beating or defeating opponents.
Weeks (1994) enthused that conflict is an outgrowth of the diversity that characterizes our thoughts, our attitudes, our beliefs, our perception, and our social systems and structures. It is as much a part of our existence as its evolution. In the same vein, Maoz (1982) asserts that conflict is a stage of incompatibility among values, where the achievement of one value can be realised only at the expense of some other values. Specifically, conflict has been ignorantly seen as a negative factor or an issue that needs to be avoided or ignored, which is a typically wrong perception. Rather, the context in which it occurs needs to be considered because conflict can also bring progress, development and mutual understanding, if it is managed constructively or positively.
4 Corruption, Conflict And National Development in Nigeria
Interestingly, Dokun (2005) argued that in the Chinese language conflict means, an opportunity or chance for change as well as “risk of danger”. In essence, to the Chinese, conflict is neither positive nor negative, it is the response to the conflict that determines its outcome. The background or context, attitudes, perceptions and environment among other things influence the response to conflict situations. The people with negative connotations of conflict tend to handle conflict in a destructive way. Otherwise, having a positive attitude to the conflict situation helps in managing it constructively, and in such a way that it yields positive results like development, change, friendship, improvement, communication, progress, peace and love. More importantly, the costliest peace is cheaper than the cheapest wars; the differences in man's nature otherwise make conflict an inevitable phenomenon and a recurrent fact of life. Conflict although good, can be bad. In Nigeria, conflict is seen as a negative phenomenon and as such it is treated with regimented mentality of crushing and destruction. The Niger-Delta militancy that was transformed from conflict to dialogue would have resulted in the grounding of the economy of the nation if it was allowed to fester.
Development Development as a concept has myriad of definitions. For Rodney (1969), it is a many-sided process. At the level of individual it implies increased skills and capacity, greater freedom, creativity, self- discipline, responsibility and material wellbeing. One thing which could be deduced from this definition is that development goes beyond economic growth and man is at the center of development. In order words, development is about the improvement of people's lives and not solely about increment in things.
Todaro (1985) asserts development is a multi-dimensional process involving the reorganization and reorientation of the entire economic and social system. This involves in addition to improvement of income and output radical changes in institutional, social and administrative structures as well as in popular attitude, customs and beliefs. The main argument of Todaro is that development is both a physical process and or state of the mind. The transformation of institutions is one aspect. The other aspect is that the thinking of the people must change. Again, according to Todaro (2003), the concept of development implies improvement in productivity, income, attitudes, customs and belief and putting in place better institutional structures. This improvement is necessary condition for improving mass living standard. So, development is about improvement in every aspect of man in relation to his environment. In his contributions to the debate on the meaning of development, Dudley Seers (1969) observed that the questions to ask about a country's development are therefore: What has been happening to poverty? What has been happening to unemployment? What has been happening to inequality? If all three of these have declined from high levels, then beyond doubt, there has been period of development for the country concerned. If one or two of these problems have been growing worse, especially if all three have, it would be strange to call the result development, even if per capital income doubled. Seers' definition is important for the understanding of development because it is concerned with the improvement in the living condition of the people. The implication of his argument is that the economy could grow without development.
5 Corruption, Conflict And National Development in Nigeria
Nigeria is a nation in dire need of development but because the elites have paid lip service to the phenomenon, it has remained elusive to Nigerians. It is unfortunate that even with all the potentials in both human and natural resources, the country has remained a sleeping giant in terms of development.
National Development National development simply means the development which belongs to a nation. It is the progressive transformation of the economic, social and political structures of a society from relatively less complex, less efficient and less desirable forms to relatively more complex, more efficient and more desirable forms (Obasi 1987). The imperative of national development stems from the recognition that besides what the whole world has professed to achieve in the MDGs, SDGs and other such global developmental programmes, each nation has devised home grown mechanism to improve the quantity and quality of lives of their citizens. It is also built on the understanding that all countries of the world do not share the same needs. In national development each country focuses on what it considers important in the improvement of lives of its citizens.
The components of national development irrespective of the country applying it must have political, economic, social and cultural improvement of the entire nation. National development is about the citizens' welfare and the upliftment of their lives from poverty, crudity, and backwardness to an improved one. Development generally is about people and not about things. As such, any development that has a national outlook must be tailored towards the betterment of the lives of people it is meant for. From the definition of national development above, national development is not a destination. Thus, there is no point which a country will reach and it will conclude that it has attained national development. We rather say that national development is a process, a continuous process. The phrase 'progressive transformation' incorporated in the definition above captures the soul of national development. It means that there is no destination, and that national development consists in transcending attained destinations for higher destinations, which will also be transcended. With the above in mind, when we talk of national development we talk about a number of objectives which a country intends to achieve. One of the major encumbrances to national development in Nigeria is widespread corruption exhibited in crass and brazen looting of public funds which are supposed to be meant for the implementation of the government's objectives that will catapult the country to its desired height. There have been several beautiful development plans, strategies, goals, objectives and blueprints that have been worked out as springboards for national development for Nigeria. Unfortunately, virtually all of them have not seen the light of the day because of the monster called corruption.
6 Corruption, Conflict And National Development in Nigeria
THE NEXUS BETWEEN CORRUPTION, CONFLICT AND NATIONAL DEVELOPMENT IN NIGERIA There are five major scholastic works which focused on the features and impact of corruption on national development in Nigerian. One is Olaniyan's book, titled: “Corruption and Economic Development” written in 2004 which dealt on the issue of corruption and its consequence on the Nigerian economy. However, the problem of corruption is not in any way is Agedah's “Corruption and the Stability of the Third Republic” (2001) which pointed out the “inordinate, selfish, reckless and hyper-excessive accumulation of wealth by Nigerian rulers”. The book also focused on the role of politicians, the military, the judicially, the police, and the Nigerian people in ensuring the stability of the then Third Republic. While the book highlighted quite a number of the historical cases of corruption in Nigeria, it did not address the underlying causes of corruption in the country. Also reviewed is Olopoenia's “Political Economy of Corruption and Underdevelopment” written in 2000. The book tried to evolve a durable solution to the anti-developmental stance of corruption in Nigeria. Olopoenia proffered political and economic equity in Nigeria, as well as an efficient legal system, as the panaceas for solution to corruption in the country. These strategies are rather limited.
The forth work which focused on corruption in Nigeria is Professor Chinua Achebe's book titled: The Trouble with Nigeria”. The work dwells on the issue of corruption and its catastrophic consequence on the Nigerian nation. According to Achebe, corruption in Nigeria reached a “fatal stage” and the country would die” if no concrete action is taken to stem its pervasiveness. However, the book did not particularly address the issue of corruption and its impact on national development in Nigeria. Lastly, there is Onyeka Onwenu's Television documentary in 2001, “A Squandering of Riches” which focused on the socio-economic mismanagement and corruption the permeated the second Republic of President Shehu Shagari's era, though as would be seen later, no regime in Nigeria has been free from corruption. There is an imprecise anecdote of when corruption started in Nigeria. However, one might not be too far from the truth to join the polemic that the menace of corruption started with the emergence of the entity called Nigeria. From the period of colonial administration through the military regimes of Ironsi, Gowon, Murtala, Obasanjo, Buhari, Babangida, Abacha and Abdusalam to the civilian administrations of Balewa, Shagari to the interim reign of Shonekan, the civilian administration of Obasanjo, Musa Yar Adua, Goodluck Jonathan and the present President Buhari, corruption has pervaded Nigeria, spreading from the cities and urban centers to the hinterland.
The corrupt practices that pervaded most of these regimes are reminiscent in the continual breaking of the entity called Nigeria into protectorates, to regions, and to the present thirty-six states plus Abuja (FCT). These regions and states' creations were the result of agitations from people requiring a government nearer to them. It may be important to note, however, that these agitations are most often laden with some selfish undertones. Such selfish undertones impact national unity, integration, and development. Bryce (1921) reasoned that the absence of a strong sense of national community often results in conflicts and corruption. Often, advocates of state creation turn out to manifest behaviours characteristic of people who are materialistically obsessed, encompassed with a mentality of a short cut to affluence and desiring glorifications and approbation of ill-gotten wealth 7 Corruption, Conflict And National Development in Nigeria by the general public. This is the precinct of all states and local governments created in Nigeria because those who clamoured for their creation are now the clique of individuals who parade themselves and cringe on the government at state and local government levels for money, materials and recognition. It is pertinent to accentuate that corruption is at its peak in Nigeria because most Nigerians measure good life by flamboyant and grandiose affluence and conspicuous consumption. An individual, in Nigeria, whose age ranges between 18 and 45 years and yet has no house(s) and car(s) of his own is rather perceived as cursed and doomed for life. An attempt to prove to the world and Nigerians that one is not cursed, and, or doomed, accounts for why many Nigerians engage in dubious activities to cut corners to affluence. This accounts for the brazen looting of public funds by public office holders and those who do not have access to the public treasury either pray to get their some day to 'cause their own havoc' or take to all sort of things like kidnapping, armed robbery, assassination, ritual killing and cheating. Instances of ritual killings and cases of fraud, forgery, embezzlement and abuse of office; are issues of loss of moral reasoning, moral values, and moral judgment. All these are indices of corruption. Other factors, no doubt, include those of poor reward system and greed. Greed as noted by Dike (2002), Harrison (1985) and Onalaja (1997) is a product of peer community, extended family pressures and polygamous households. In the words of Harrison (1985), extended family system is effective as a clinical setting for therapy and social support. No wonder, even when you try to be upright and be incorruptible in Nigeria, the first set of people that will crucify you are your kinsmen. This is because they will put it to you point blank that your being in that position is the only opportunity they have to enrich themselves, their people and develop their place at the detriment of others. Nonetheless, Harrison (1985) noted further that corruption posses a big obstacle for development owing to the long familial chains that must be socio-economically attended to if one would not want to be ostracized and negatively labelled. The socioeconomic care for the family members may inadvertently affect the growth and development of the carer while even possibly inducing corrupt practices and acts. In Nigeria, our greatest undoing is the 'feeding bottle mentality' where once a person is appointed or elected in to a public office, his house in his country- side becomes a pilgrimage of some sort because of people that will be trooping there for one favour or other which all boils down to putting pressure on the public office holder to loot public fund to meet the need of his people.
That corruption permeates through the cities to the hinterlands is evident in the observations of Akande (2013:50) who wrote that: Glancing through any of Nigerian newspapers, one is often than not starred in the face by the numerous and ever increasing cases of fraud, swindling and theft and other forms of dishonesty and corrupt practices in Nigeria. At a second thought, one wonders what type of citizens Nigeria is breeding and what will be the ultimate end of a dishonest country.
Akande (2013) further observed that in many villages where there had not been any direct administrative contact with the western civilized countries, corruption has never been an issue
8 Corruption, Conflict And National Development in Nigeria because there are established traditional administrative ways of dealing with individuals who contravene established social rules. Suffice it to say therefore that corruption is an 'evil', a social vice exacerbated by western civilization. Corruption and corrupt practices sometimes bring about war within, and even between, nations. No warring nation will boast of a healthy socio-political and economic development. This is evident in the words of Mauro (1997) who, argued that corruption affects a nation's economic growth by reducing public spending on social and human capital formation. Lipset and Lenz (2000) corroborated Mauro's submission by arguing that the government spends relatively more on items to make room for 'graft' rather than spending more on education and social security.
Social Impact of Corruption Socially, the effect of corruption is enormous. It is quite sad that almost all social facilities in Nigeria are not working. The educational system for instance, particularly the tertiary institutions are ravaged by incessant strikes and the other components are plagued by myriads of problems. The health sector is comatose and dilapidated because they are manned by people who not happy doing the job due to lack of enabling environment. This is evident in the recent outburst by the Wife of the President Aisha Buhari family on the poor state of the Aso Clinic that is supposed to cater for the first family in Nigeria. The security sector also is another worrisome area that the country is suffering a big blow. This is due to the insecurity that pervades the land and because people are not even sure of their safety anymore owing to the volatile nature of the country.
Nigeria is a country that social security and welfare for all classes of people; the young, old, women, children, workers and students is an illusion. This is not because the country is too poor that it cannot afford them but the monster of corruption won't let a larger number of the citizens enjoy their God- given gift of rich natural and human resources the nation is blessed with. It is good to mention that conflict is assured in a country like Nigeria that its status is nearing that of a failed state. The Boko Haram issue is a classical case of a boomerang of bad governance in a country. Apart from linking the Sect to extremist belief system, the remote reasons of Boko Haram are fallouts like the ever widening gap between the rich and the poor, illiteracy, unemployment to mention a few.
Political Impact of Corruption Politically, corruption destabilizes and leads to social revolution and military take over. It might be pertinent to recall the many excuses usually given during military takeover especially in Nigeria. One of such is the words of Brigadier J. Dongoyaro at General Buhari's post-coup broadcast to Nigerians in 1983. Dongoyaro, in the broadcast, emphasized that the toppled Shagari administration has grossly been corrupt. One may be apt to say, however, that the incursion of the military in Nigerian politics on the excuse that Nigerian politicians are corrupt may no longer be tenable if lessons from the past military leaders are anything to go by. It is evident that many of the past military leaders in Nigeria were more corrupt than the civilian politicians and a great number of these past military leaders are even turning to civilian politicians.
9 Corruption, Conflict And National Development in Nigeria
According to the former President Olusegun Obasanjo, corruption is the greatest single bane of our society and no nation can achieve anything near its full potential if it allows corruption to become the full blown cancer it has become in Nigeria. He enumerated the cost and consequences of corruption to include: (a) It causes the undermining of Nigeria's national development and it effects her economic potentials and her political stability (b) It leads to an un-quantifiable damage to all facets of the country's corporate existence or life. (c) It makes government to lose enormous revenue. (d) It leads to erosion of efficiency, effectiveness and productivity of Nigeria's public sector. (e) It causes tainting of our national image all over the world, resulting in loss of investor's confidence, development and progress.
The points enumerated by the former president provide an adequate platform from which to view the effects of corruption on development in Nigeria.
Economic Impact of Corruption On the economic front, corruption is seen as the primary driver of Nigeria's economic underdevelopment, unfulfilled government pledges, poorly executed and abandoned projects, lack of human infrastructure and the disconnect between the wealth of the nation and the through disempowerment of the citizen. Corruption is also seen as a regular source of drain on government finance and the single most important factor in the inability of the sate to meet or surpass set developmental objectives and targets.
In its Annual Report for 2012, the Economic and Financial Crimes Commission (EFCC) observed that: Corruption in the public sector remains a sore spot in Nigeria's quest to instill transparency and accountability in the polity. The failure to deliver social services, the endemic problem of power supply and the collapse of infrastructure are all linked with corruption. Unfortunately, the will to combat corruption in all tiers of government is still very weak. In some cases, especially in the states and local governments, the political will to fight corruption is non- existent, as the workings of the polity are intricately connected with corruption activities … It is no surprise therefore that most of the predicate offences to money laundering are connected with corruption within the officialdom.
To buttress this, findings by a PWC (2016) study shows that corruption in Nigeria could cost up to 37% of GDP by 2030 if it's not dealt with immediately. This cost is equated to around $1,000 per person in 2014 and nearly $2,000 per person by 2030.
10 Corruption, Conflict And National Development in Nigeria
MEASURES FOR PREVENTING CORRUPTION IN NIGERIA Good Governance More open and representative governing systems that allow for a high level of civic participation typically have more vibrant civil society organizations that can publicly reveal the abuses of corrupt officials and put their political futures at risk. A strong civil society can protect individuals and groups against intrusive government and influence government behavior, protecting the marginalized and furthering the interest of the governed. Public accountability remains one of the most important mechanisms to control corruption in Nigeria. Can public officials in Nigeria (elected or otherwise) be exposed to public scrutiny and criticism for not meeting standards and for wrongdoing? Or, perhaps more importantly, can they lose their jobs or be put in jail? Rose-Ackerman (1999) notes that “limits on the power of politicians and political institutions combined with independent monitoring and enforcement can be potent anti-corruption strategies.
Rule of Law Rule of law can be seen as a constitutional doctrine which emphasizes the supremacy of law over all subjects and the people in the society. In a system where the rule of law has broken down, there is little transparency in government operations and public officials have a lot of discretion in the way that they carry out their duties. It is more likely that public funds in Nigeria will be used for personal benefit, that services will be disrupted and that the citizens will have few avenues of recourse to lodge complaints or receive justice. In such circumstances, the citizens may revolt (violently or non- violently) or perhaps protest in other ways, like evading paying taxes- believing that there in no point in doing so when they expect the money to go into the pockets of corrupt officials and not to the services that they use (like roads, hospitals or schools). Tax evasion remains a big problem in Nigeria where economic uncertainty after the fall of the fuel subsidy led to poverty, corruption, new waves of crime and a growing distrust of authorities. Tax evasion is also prevalent where there is no rule of law because too often tax collection is either not enforced impartially or equitably.
Professionalizing the Civil Service The civil servants like those in the core ministries are poorly paid, they may be particularly prone to taking bribes. Sometimes, the extra income from a bribe can mean the difference between being able to feed one's family or not. Engaging in bribery, in other words, may be a survival strategy. In these cases, improving wages, working conditions and merit-based promotions may eliminate the need to engage in corruption, not to mention attracting more qualified personnel.
Legal Reforms The strengthening of the freedom of information law which enhances Nigerian citizens access to information and the transparency of government operations; requiring public officials to declare their assets and incomes; open and transparent budgets of government income and expenditures; and ensuring that there are competitive, open bidding processes for obtaining government contracts. These reforms take time to be implemented in a nascent democracy like ours and can reflect how well the traits of good governance in are put into practice.
11 Corruption, Conflict And National Development in Nigeria
Separation of Powers The principle of separation of power emphasizes that the powers of government should be divided among the three separate body or organs of government such that the legislature is concern with the law making, the executive with the administrative and implementation of the law why the judiciary should be concerned with the interpretation of the law and punishment of the offenders.. Ensuring that any one branch of government does not exert too much power and that the branches can check the power of the others helps to keep corruption in check. A dominant executive branch, for example, can operate with impunity if there is not strong oversight by a legislative body. The judiciary too needs independence from the other branches. Judicial independence is a key element of rule of law efforts everywhere because judges and prosecutors must be able to decide cases impartially and be free from political influence.
CONCLUSION/WAY FORWARD It is pertinent to submit at this juncture that individuals are influenced both by innate tendencies, personality dispositions and the environment. Thus, a normal non-corruptive behaviour will require an absence of corruptive cues in the environment, social organization, and orderliness in the environments. These will invariably influence people's moral development and perception, vis-a-vis a stable personality development and a resultant non-corruptive behaviour. Where the reverse, in the environment, is the case, corruptive behaviours from persons evolve. Successive Nigerian governments must wake up to their responsibilities of providing essential services for her citizenry, ensuring a safe haven for peaceful co-existence, and punishing corrupt individuals and other sociopaths adequately, to prevent others from performing other or similar criminal acts. We must not also lose sight of the fact that a learnt act can equally be unlearned. Therefore, through reinforcements and public enlightenment campaigns, Nigerians can learn to appreciate social values and change their orientation through moral value judgments. Again, if corruption is allowed to fester in Nigeria, national development can be difficult to establish and social and economic development will be hindered. With respect to the implications of corruption on sustainable development and peace, leaders must learn to wrestle with making difficult choices on when and where to tolerate corruption. Certainly, peace scholars foreign and domestic; individuals, organizations and governments have very important roles to play in addressing corruption and establishing good governance in order to prevent conflict and strengthen national security which is a precondition for national development.
REFERENCES Ageda, E. (2001), Corruption and the Stability of the Fourth Republic. Ibadan: University Press. Ajie, H. A. and Wokekoro O. E. (2012) The impact of corruption on sustainable economic growth and development in Nigeria. International Journal of Economic Development Research and Investment 3.1
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Akande, O. C. S. (1953). Nigerian Tribune. January 13:2. Best, G. S. (2004). “The Conflict Analysis,” In Best, G. S. (ed) Introduction to Peace and Conflict Studies in West Africa (National Universities Commission). Ibadan: Spectrum Books Limited. Bryce, J. (1921). Modern Democracies. New York: Free Press. Chinua, A. (1979), The Trouble with Nigeria. Enugu: 4th dimension publisher. Coser, H. S. (1956). Corruption: Its Nature, Causes and Functions. Aldershot: Avebury. Dike, V.E. (2002) Corruption in Nigeria: A new Paradigm for effective Control. African Economic Analysis. www.africaneconomicanalysis.org. Dokun, O. P. (2005). Conflict and Context of Conflict Resolution. Ile-Ife: Obafemi Awolowo University Press. EFCC (2005). Effect of Corruption on Nigeria's Economy. Nigeria EFFC Information Communication Technology Department. Abuja Getz, K. J. (2000). The Political Economy of Regulation: The case of Insurance. New York: Sunny Press. Harrison, L.E. (1985). Underdevelopment is state of mind: The Latin American Case. Cambridge: Cambridge University Press Henry, S. O. (2001). The Significance of Culture on Human Development in Nigeria. International Journal of Governance and Development, 1 (20):107-116. Khan, M.H. (1996). “A Typology of Corrupt Transactions in Developing Countries” IDS Bulletin Lipset, S. M. and Lenz, G. S. (2000). Corruption, Culture and Markets. Cambridge: Cambridge University Press Maoz, M. (1982). What can be done about entrenched corruption? Paper prepared the Annual World Bank Conference on Development Economics, Washington, D C. Mauro, P. (1997). The effects of corruption on growth, investment, and Government expenditure: A cross-country Analysis. The American Political Science Review, 2:417-427. Mosca, G. (1933), The Ruling Class. New York: London House. Obasi, V. C. (1987). Democratic Governance and Crisis of Development in Nigeria. American Journal of International Politics and Development Studies, 1 (1): 129-137. Olaniyam, O. (2004), Corruption and Economic Development. Ibadan: Evans Publisher Ltd. Olopoenia, A. (2000), Political Economy of Corruption and Underdevelopment. Ibadan: Evans press. Onalaja, T. (1997). How Polygamy Wrecks Nigeria, Africa. UK: CAPWONA books. Onyeka, O (2001), “A squandering of Riches” Television Documentary. Otite, O. (2000). “Corruption against the Norms of African life” in O. Femi (ed.) Effective and efficient Implementation of Nigeria's Recent Anti-corruption legislation. Ibadan: University press. Pareto, W. (1923), The Elite Theory. Oxford: Oxford University Press. PWC (2016) Impact of Corruption on Nigeria's Economy, www.pwc.com/ng Rodney, W. (1974). How Europe Underdeveloped Africa. Washington D.C.: University Press. Seers, D. (1972).' The Meaning of Development' in N.T Uphoff and F. Ilohman (ed), The Political Economy of Development. Wallmen, S., Perceptions of Development. Cambridge: Cambridge University Press. Rose-Ackerman, S. (1999). Corruption and government: Causes, consequences, and reform. New York: Cambridge University Press.
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Shuaib, E. O. (2016) Impact of Corruption on the Growth of the Nigerian Economy-1960-2012: Error Correction Mechanism (ECM), Journal of Scientific Research & Reports 9(5): 1-13. Todaro, M. P. (1985). Economics for Developing Nations. London: Longman Group L i m i t e d . T r a n s p a r e n c y I n t e r n a t i o n a l , ( 2 0 0 5 ) . http://www.transparency.org/policy_research/surveys_indices/cpi/2005/cpi Weeks, J. T. (1994). A psychological analysis of corruption in Nigeria. Journal of Sustainable Development in Africa, 1(2): 1-15.
14 Veritas International Journal of Entrepreneurship Development (VIJED)
STRATEGIES FOR DEPOSIT MOBILIZATION IN THE 21ST CENTURIES FINANCIAL INSTITUTION: THE NIGERIAN EXPERIENCE
SUNDAY Alewo Omale, PhD. Department of Business Administration Veritas University, Abuja (The Catholic University of Nigeria) E-mail Address: [email protected]
CHRISTIAN Oriaku Department of Business Administration Veritas University, Abuja (The Catholic University of Nigeria) And OLANIYI, Kizito Babatunde Department of Entrepreneurial Studies Veritas University, Abuja (The Catholic University of Nigeria)
Citation: Omale, A. S., Oriaku C. & Babatunde, O. K. (2018). Strategies for Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University ______Abuja. 1 (1) 15-25 ABSTRACT This investigation explored strategies for deposit mobilisation in the 21st century's financial institution: the Nigerian experience. Bankers have one common anxiety: to get and keep deposits as interest rates go up. Financial institutions wish to generate a stable and secure brook of new customers and one of the easiest and most stable sources of new business and related revenue is to reach out to current and potential customers for deposit mobilisation in this 21st century. Secondary method of data collection was adopted by the researchers in the review of related literature with specific reference to management journals and internet, while information was sourced from key informants in the selected Nigerian Banks. Findings revealed that stumpy interest rates continue to put pressure on confined revenue growth and net interest margins continued to decline. Retrenchment is on the increase and competitive pressure on deposit rates is on the high side preventive improvement in the profit margin. Second, financial institutions are simply unable to charge for services that are once common sources of profit due to Central Bank of Nigeria regulation, and maintaining steady revenue growth is the core issue facing the banking sector in Nigeria. This calls for new measures to enhance success. High interest rate on personal loans and hidden charges destabilises customer. It therefore, also slices away savings and makes deposit mobilisation difficult. Thus, financial institution should reduce high interest rate on personal loan and eliminate hidden charges that may discourage customers, and customers should be trained on how to calculate interest rate on their saving adequately, and how regularly it is rewarded. The proximity of banks to people is a matter of concern to potential customers. The establishment of banks in each of the local government Area in Nigeria for easier transaction is suggested to help build the competiveness among other banks that are yet to cite their banks in the locality.
st ______Key words: Strategies, Deposit, Mobilisation, 21 Century's and Financial Institution
15 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience
INTRODUCTION Financial institutions wishes to generate a stable and secure brook of new customers and one of the easiest and most stable sources of new business and related revenue is to reach out to current and potential customers for deposit mobilization in this 21st century. Regulators and bankers have one common concern: to get and keep deposits as interest rates go up. Sounds easy, but it has not been easy to get deposits when rates have been low, and getting better instantaneously is vital in achieving banking sector performance in Nigeria in the face of economic meltdown.
Strategy is a high level plan to achieve one or more goals under conditions of ambiguity. In the sense of the "art of the general", this includs several subsets of skills, including “tactics”, the term came into use in the 6th century C. E. in East Roman terminology, and was translated into Western vernacular languages only in the 18th century. From then until the 20th century, the word "strategy" came to denote "a comprehensive way to try to pursue political ends, including the threat or actual use of force, in a dialectic of wills" in a military conflict, in which both adversaries interact.
Mintzberg (1996) from McGill University defines strategy as a pattern in a stream of decisions to contrast with a view of strategy as planning, while McKeown (2011) argues that "strategy is about shaping the future" (p. 3) and is the human attempt to get to "desirable ends with available means" (p. 3). Strategy is significant in much respect because the resources available to achieve these goals are usually limited. Strategy generally involves setting goals, determining actions to achieve the goals, and mobilising resources to execute the actions. A strategy describes how the ends (goals) will be achieved by the means (resources). This is generally tasked with determining strategy. Strategy can be intended or can emerge as a pattern of activity as the organisation adapts to its environment or competes. It involves activities such as strategic planning and strategic thinking.
The basic question commonly asked is how firms achieve and sustain competitive advantage in regimes of rapid change. Several theories have been advanced over the past decades about the sources of competitive advantage; many clustered around just a few loosely structured frameworks or paradigms. For instance, the dominant paradigm in the field during the 1980s was the competitive forces approach developed by Porter (1980). This approach, rooted in the structure-conduct- performance paradigm of industrial organisation (Mason, 1949; Bain, 1959), emphasizes the actions a firm can take to create defensible positions against competitive forces.
Shapiro (1989) emphasizes that strategic conflict approach is closely related to the Porter in its focus on product market imperfections, entry deterrence, and strategic interaction. The strategic conflict approach uses the tools of game theory and thus implicitly views competitive outcomes as a function of the effectiveness with which firms keep their rivals off balance through strategic investments, pricing strategies, signaling, and the control of information. Both the competitive forces and the strategic conflict approaches appear to share the view that rents flow from privileged product market positions.
16 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience
Emmerich ( 2015) maintains that it is a legitimate concern, especially for those who have struggled over the last several years to get deposits in a market when it could not have been easier compared to what is about to unfold. He gives five Must-Do-Now strategies that have to happen immediately to make sure that bankers get the deposits they need to weather the coming deposit storm: understanding how to bring in million dollar checking accounts, changing the deposit mix to grow one's core deposits, newest deposit accounts should not be rated sensitive, segmenting the team into specialists and go to war to address the upcoming mobile bankers.
Make sure that your commercial bankers understand how to bring in million-dollar checking accounts: They are out there. They share the same firm graphics and psychographics as those in your current portfolio with those balances, which make them easy to identify. The problem is, most bankers do not even know where to start looking. And because they do not know, they are not looking.
Make massive shifts now to change the deposit mix to grow your core deposits: Easier said than done, I know. But it would not happen at all if your team does not know where those deposits are, how to get them, and how to get the entire cross sales that come with them to make sure those core deposits stay sticky. If those core deposits do not have the cross sales, they are also vulnerable to walk at any time. Unfortunately, most people in retail departments have no idea how much more valuable a checking account is and they also do not know how to find those accounts unless they stumble on the sidewalk and end up falling into the bank. This situation has to change. The bank of the future is proactive instead of reactive in finding checking accounts, and it masters the fine art of poaching them from the competition.
Make sure your newest deposit accounts are not rate sensitive: Most people think it is given that all customers are rate sensitive. In fact, the more affluent the customers the more they value services that save time and protect them from risks. If a customer values their time at $1000 per hour, as many who have large checking accounts do, do you really think that they are going to care much about pricing when they have a team of crackerjack bankers who can minimise risks to their business of cyber security, make sure they are locked down on employee embezzlement practices, and offer other valuable structures? If you can save that person eight hours a year in time and protect from the potential of a $250,000 loss—even if that potential of a loss is fairly remote, a really sharp business person does not even want to be bothered with talking about the pricing.
Segment your team into specialists: The bank of the future will have specialists who can call on business accounts and regularly pop one million-dollar checking account after another. Another type of specialist will be masterful at cross sales and understanding financial planning, taxes, and asset protection. They will focus on wealthy mom-and-pops to add value in protecting their wealth and serve as private bankers to your top 100/1000 most profitable retail accounts. And then there will be the beginning personal bankers who will have the bar raised high as they move from “service” folks to proactive financial consultants.
17 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience
Go to war to address the upcoming “ravages of mobile banking: In the world of mobile banking where any bank that is not already achieving six to seven cross sales on new accounts, bankers should be shaking in their boots about the lack of preparedness that they are facing. Strategies are philosophical process and approach to business. Top management has to think strategically for effective implementation of the process as all stakeholders must understand the strategy. However, Nigeria banking sector is a hostile financial sector environment with complexity to attract savings from poor clients when political chaos and high annual inflation rates is common. There is uncertainty about the expectations of people and mobilising savings is challenging when wide government intrusion exists through interest rate controls. One of the quickest ways to lose clients is not to have an effectual business strategy in place for customer service delivery. Increase programme for following up on customers, and for staying in touch constantly when customers call in with problems, and addressing their needs through an established and efficient customer service strategy that reduces customer anxiety and complains is challenging.
Though, personnel reputation in today's marketplace is also a thing of concern particularly in competitive environment like Nigeria. Creating a business strategies that exploit resources to help give firm a competitive advantage over their competitors, and creating a better way for service delivery in the business and giving proprietary control over advance technology in the industry can cost the firm funds. It is against this backdrop that the researchers seek to examine strategies for deposit mobilisation in the 21st century's financial institution: the Nigerian experience with the view of recommending ways by which the present practice can be improve.
1. OBJECTIVES OF THE STUDY The objectives of this paper are as follows: (I). To ascertain the extent to which the strategies for deposit mobilisation in use in the 21st century's financial institution in Nigeria influence customer retention and commitment in Nigerian Banking sector. (ii). To find out whether strategies in use by the bank create a competitive advantage for the firm and as well facilitate growth and development of the 21st century financial institution.
2. LITERATURE REVIEW In 1981, Henderson reports that strategy depends upon the ability to foresee future consequences of present initiatives. He further observes that the basic requirements for strategy development include, among other factors: 1) extensive knowledge about the environment, market and competitors; 2) ability to examine this knowledge as an interactive dynamic system; and 3) the imagination and logic to choose between specific alternatives. Henderson observes that strategy was valuable because of finite resources, uncertainty about an adversary's capability and intentions; the irreversible commitment of resources; necessity of coordinating action over time and distance; uncertainty about control of the initiative; and the nature of adversaries' mutual perceptions of each other.
18 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience
Strategy typically involves two major processes: formulation and implementation. Formulation involves analyzing the environment or situation, making a diagnosis, and developing guiding policies. It includes such activities as strategic planning and strategic thinking. Implementation refers to the action plans taken to achieve the goals established by the guiding policy.
Porter's (1980) modern business strategy emerged as a field of study and practice in the 1960s; prior to that time, the words "strategy" and "competition" rarely appeared in the most prominent management literature. Porter defines strategy as the "broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals", and the "combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there" (Porter, 1980, p. 46).
However, Mintzberg (1998) provides five useful definitions in an attempt to define what strategy is all about: ·Strategy as plan – a directed course of action to achieve an intended set of goals; similar to the strategic planning concept. ·Strategy as pattern – a consistent pattern of past behaviour, with a strategy realised over time rather than planned or intended. Where the realised pattern was different from the intent, he refers to the strategy as emergent. ·Strategy as position – locating brands, products, or companies within the market, based on the conceptual framework of consumers or other stakeholders; a strategy determined primarily by factors outside the firm. ·Strategy as ploy – a specific maneuver intended to outwit a competitor. ·Strategy as perspective – executing strategy based on a "theory of the business" or natural extension of the mindset or ideological perspective of the organisation.
Rumelt (2011) opines that three essential aspects of strategy include "premeditation, the anticipation of others' behaviour, and the purposeful design of coordinated actions" (p.14). He described strategy as solving a design problem, with trade-offs among various elements that must be arranged, adjusted and coordinated, rather than a plan or choice. Rumelt (1984 p. 561) notes that the strategic firm is characterised by a bundle of linked and idiosyncratic resources and resource conversion activities. Similarly, Teece (1984 p.95) notes that successful firms possess one or more forms of intangible assets, such as technological but do not attempt to explain the nature of the isolating mechanisms that enable entrepreneurial rents and competitive advantage to be sustained. The leading model in strategy was the competitive forces approach pioneered by Porter (1980).
The competitive forces approach views the essence of competitive strategy formulation as 'relating a firm to its environment. The key aspect of the firm's environment is the industry or industries in which it competes.' Industry configuration or structure strongly influences the competitive rules of the game as well as the strategies potentially available to firms. In the competitive force models, five
19 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience industry level forces-entry barriers, threat of substitution, bargaining power of buyers, bargaining power of suppliers, and rivalry among industry determine the inherent profit prospect of a business or sub-section of an industry.
Porter (1980 p. 4) argues that this approach can be used to help the firm find a position in an industry from which it can best defend itself against competitive forces or influence them in its favour. This 'five-force' framework provides a systematic way of thinking about how competitive forces work at the industry level and how these forces determine the profitability of different industries and industry segments. The competitive forces framework also contains a number of underlying assumptions about the sources of competition and the nature of the strategy process (Porter, 1980).
Competitive strategies are often aimed at changing the firm's position in the industry in relation to competitors and suppliers. Industry structure plays a central role in determining and limiting strategic action. Some industries or subsectors of industries become more 'attractive' because they have structural impediments to competitive forces for instance, entry barriers that allow firms better opportunities for creating sustainable competitive advantages. While there is some recognition given to firm specific assets, differences among firms relate primarily to scale. This approach to strategy reflects its incubation inside the field of industrial organisation and in particular the industrial structure school of Mason and Bain (Teece, 1984).
In competitive environments characterised by sustainable and steady mobility, these forces may become the determinants of industry-level profitability. However, competitive advantage is more complex to ascertain in environments of rapid technological change where specific assets owned by varied firms can be expected to play a superior role. The market environment is all factors that control market outcomes (prices, quantities and profits) including the beliefs of customers and of rivals firms, the number of potential technologies employed, and the costs or speed with which a rival can enter the industry among other.
3. STRATEGIES FOR DEPOSIT MOBILISATION Marous (2015), co-publisher of the financial brand and publisher of the digital banking, reports that most efficient investment of marketing funds is to market to customers that already bank with you. He identifies seven relatively easy techniques to achieve these needs: i. Start with the lowest hanging fruit The easiest sales that can be made to current customers are engagement services that help a customer use an account they already own. These 'sticky services,' that are also part of most financial institution on boarding programmes, include a debit card, online banking, mobile banking, direct deposit, bill payment, automatic savings transfer, personal line of credit and security solutions such as privacy protection. These services help to ensure that customers use the products on their own more frequently, will significantly improve retention, and will in addition help to improve the
20 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience overall customer experience. Without customer engagement on the most basic product level, a relationship will have a difficult time growing. ii. Stay connected While some banks have very successful on boarding programmes to help stay connected with new customers, a surprising number of banks still rely on the customer to onboard themselves. And unless the customer expands their relationship, their bank may never include them in a model-driven cross-sell programme. To succeed in cross-selling services to customers, a bank or credit union needs to keep the conversation going. This should be through email, direct mail, statement messaging, and SMS texts and as part of the online and mobile banking platforms. Remember, however, that these messages must be personalised and highly targeted. iii. Continually evaluate up-sell opportunities Rather than using product-driven programmes that are done seasonally, customers consider funding more customer-focused programmes that evaluate each customer's propensity to open one or more of the products and services you offer at the time they would like to buy. At many financial institutions, each customer's transactional, product ownership and even behavioural characteristics are evaluated continuously. This is done to determine the most likely next purchase at any given time and whether the propensity to purchase is high enough to make an offer. In some of most successful programmes, this evaluation of opportunities is done monthly, with smaller mailing universes, but much higher response rates. Some organisations are also using advanced analytics to provide contextual messages in real time. Customers want to be provided suggestions of services that will help them with their finances. Having the timing right is part of a great customer experience. iv. Empower your customer-facing employees For most customer contact employees, their primary responsibility revolves around efficient processing of transactions and/or customer service. To leverage the thousands of customer engagements each customer has in a year, you need to provide easy ways for them to extend their conversations to include relationship expansion opportunities. The best programmes do not stop there, but include tools for the customer to take advantage of the offer. This may be an immediately generated custom printed sales document, a follow-up email, SMS text or sales call or a referral form. Adding to the power of branch-based sales is the increasing use of tablet-assisted employees who can have all of the tools at their fingertips at the branch level. v. Ask for referrals One of the easiest ways to generate new business and increase loyalty of current retail or business customers is to ask (and possibly incent) for referrals. If a customer is happy with the way they are treated at your organisation, they usually want others to know. This is especially true with satisfied small businesses, private banking customers and with retail customers that are part of a bank-at- work programme. And it does not hurt if you provide an incentive to your current customer in
21 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience addition to the prospect. At a time when new customer acquisition offers often exceed $100 and when the overall cost of acquisition is more than $250, offering a 'bounty' of $50 would be far less expensive and would most likely generate a more loyal customer. A referral programme, supported throughout the organisation is a great way to engage employees as well. vi. Leverage offline and online channels Never assume that customers understand all that your organisation offers or absorb communication the same through all channels. Remind your customers continuously that you know who they are and you understand their needs, looking out for them and that you are willing to reward them for their loyalty. Using as many direct channels as possible to reach out to your current customer base is part of a strong multichannel marketing plan. This includes direct mail, email, statement inserts, banner ads on your website, ATM messaging, outbound calling efforts, among others. And do not forget the use of the powerful online and mobile banking sites of the customer. vii. Measure and reward what you want done By providing ongoing measurement of the cross-selling objectives you want to achieve and paying for this achievement of these objectives, you have a much better chance of reaching your goals. This continuous reinforcement of your cross-sell mission allows your team to be focused on what is important. You can also turbocharger your results by communicating how you are assisting in their efforts. Provide “opportunity reports” of the customers where they may have the greatest opportunity for success. As part of these reports, it is also helpful to provide background as to why the customer is being selected for a specific offer.
4. MATERIALS AND METHOD Methodology comprises the general research strategy that outlines the way in which research is to be undertaken and, among other things, identifies the methods to be used in it. Thus, the researchers adopted secondary method of data collection in investigating the strategies for deposit mobilisation in the 21st century's financial institution: the Nigerian experience. The method used for sourcing data was secondary method. Information was sourced from management journals, text books and internet. However the main tool for data collection was the interview guide.
6. DISCUSSION OF RESULTS The discussions revolved around the objectives of the study. The findings made in this paper were compared with findings made in other related studies and efforts were made to reconcile them where necessary. For ease of reference, the relevant objectives are presented first, before the discussion.
Research objective one To determine the extent to which the strategies for deposit mobilisation currently in use in the 21st century's financial institution in Nigeria influences customer retention and commitment in Nigerian Banking sector. From the data reviewed, it was observed, that the customer retention and
22 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience commitment to a large extents depends on deposit mobilisation strategy and level of service delivery by the banks. The above result is further supported by the participant's oral interview with some key informants who are believed to be a representative sample (not in the numerical sagacity) of the banking firms in Nigeria. Most of the informants believed that effective and functional strategy facilitates customers' retention and commitment, as this progression makes possible a higher level of confidence between customers and the management team of the banks. Miss Gloria Amadi of customer service unit once said that, “competition is high particularly in this era of economic recession thus; customers retention and commitment to a large extent depend on functional strategy and effective service delivery”.
The respondents' view confirmed that the strategies currently in use by Zenith bank Bwari branch influences customer retention and commitment in Nigerian Banking sector. Also, the respondent's opinions revealed that growth of the sector depend on the levels of fairness, customer satisfaction, and functional strategy in the relationship. The finding is in line with the finding of Rumelt (1984) who demonstrates that the strategic firm ''is characterised by a bundle of linked and idiosyncratic resources and resource conversion activities'' (p. 42). The result therefore, agrees with Teece (1984) who suggests also that successful firms possess one or more forms of intangible assets, such as technological, although he does not attempt to explain the nature of the isolating mechanisms that enable entrepreneurial rents and competitive advantage to be sustained. All the same, strategies for deposit mobilisation in the 21st century financial institution appears to be significant in the development of banking sector in Nigeria and it comparative effect on growth and development of the sector.
Research Objective Two Find out whether strategies in use by the bank create a competitive advantage for the firm and as well facilitate growth and development of the 21st century financial institution. To achieve this objective, the oral interview with a key top management team also revealed that strategies in use by the bank does, not to some extent, create a competitive advantage for the firm neither does it facilitate growth and development of the 21st century financial institution. The informants point out that, having a competitive advantage and keying into modern days technology and services that drives the sector, requires determination and hard work. They hope to contribute to equipping management with the information necessary for improving their competitive advantage.
7. FINDINGS Finding reveals that growth of the sector depends on the levels of fairness, customer satisfaction, and functional strategy in the relationship. Also, stumpy interest rates continue to put pressure on confines revenue growth and net interest margins continued to decline. Retrenchment is on the increase and competitive pressure on deposit rates are on the high side, preventive improvement in the profit margin. Having a competitive advantage and keying into modern days technology and services that drives the sector requires determination and hard work. Financial institutions are simply unable to charge for services that were once common sources of profit due to Central Bank of
23 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience
Nigeria regulation. Maintaining steady revenue growth is the core issue facing the banking sector in Nigeria and this calls for new measures to enhance success.
8. CONCLUSION Financial institutions in Nigeria are in dear need for expansion, famished for new clients, for deeper and more gainful relationships with existing customers and for better alignment of expense against profits opportunities. However achieving the growth is a difficult challenge considering the downturn in Nigerian economy. Strong offer will not only produce a better answer to this challenge and communication issues, but also will remind the customers of the value of doing business with your firm. Customers like to be rewarded for their faithfulness. One of the best ways to reward customers is to remember to include an offer that will benefit them. Doing just that, may be perceived as simply approaching the desired point without denting the relationship value already in place.
9. RECOMMENDATIONS Saving money is not easy; it takes discipline, dedication and willpower, bankers should get serious knowing exactly what their customers want and make it available to them. These require deciding in advance and setting some goals knowing exactly what their potential customers want and when they want it. The clearer the goal the easier it will be to accomplish. High interest rate on personal loans and hidden charges destabilises customers, slice away savings and makes deposit mobilisation difficult. Thus, financial institution should reduce high interest rate on personal loan and eliminate hidden charges that may discourage customers, and customers should be trained on how to calculate interest rate especially as regard to their different accounts. Customers would find it rewarding if they are occasionally engage in calculating the interest rate by themselves.
The proximity of banks to people is a matter of concern to potential customers. Banks should therefore, establish branches in each of the local government of Nigeria as a target place where people want to go and perform their transaction. This strategy can help build their competitive edge, particularly when other banks are yet to do so in the locality. It is very important also for commercial banks in Nigeria to adopt realistic strategies and technology in mobilising deposits at slighter cost in order to continue to stay buoyant as poor households save in various forms and for various purposes.
REFERENCES Argyres, N. (1995). Technology strategy, governance structure and interdivisional coordination, Journal of Economic Behavior and Organization, 28, 337-358. Argyris, C. & Schon, D. (1978). Organizational learning. MA: Addison-Wesley. Chandler, A. D. (1966). Strategy and structure. New York: Doubleday, Anchor Books Edition. Chandler, A. D. (1990). Scale and scope: The dynamics of industrial competition. Cambridge: Harvard University Press.
24 Strategies For Deposit Mobilization in The 21st Centuries Financial Institution: The Nigerian Experience
Freedman, L. (2013). Strategy. London: Oxford University Press. Mintzberg, H. & Quinn, J. B. (1996). The strategy process, context, concepts, cases. New York: Prentice Hall. Porter, M. E. (1980). Competitive strategy. New York: Free Press. Rumelt, R. P. (1984). Towards a Strategic Theory of the Firm. In R. B. Lamb (ed.): Competitive Strategic Management. Englewood Cliffs: NJ Prentice-Hall. Rumelt, R. P. (2011). Good strategy/bad strategy. London: Crown Business. Shapiro, C. (1989). The theory of business strategy. Journal of Economics, 20 (1), 125-137. Teece, D. J. (1984). Economic analysis and strategic management. California Management Review, 26 (3), 87-110.
25 Veritas International Journal of Entrepreneurship Development (VIJED)
THE ROLE OF CIVIL SOCIETY GROUPS IN THE ADVOCACY CAMPAIGNS AGAINST BOKO HARAM INSURGENCY IN NIGERIA: AN ASSESSMENT
DOMINIC Shimawua Ph.D Head of Department, Public Administration, Veritas University Abuja (The Catholic University of Nigeria)
Citation: Shimawua, D., (2018). The Role of Civil Society Groups in the Advocacy Campaigns Against Boko Haram Insurgency In Nigeria: An Assessment. Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 26- ______40 ABSTRACT During crisis, it is always incumbent on civil society groups to advocate, mediate, sensitize and spur parties involved to necessary actions in order to restore peace. Nigeria is no exception to this ideal. However, since the emergence of the dreaded Boko Haram sect, the role and impact of Civil Societies both within and outside the country toward a lasting peace has come under intense scrutiny by observers, commentators and the general public; and as such, present perplexing complications and ambiguity as to how they perform their functions and to what extent their impact is felt. Against this backdrop, this paper evaluated the role and influence of Civil Societies in the current fight against the Boko Haram insurgency in Nigeria. In doing so, this paper examined the challenges that impact on the activities of Civil Societies and the existing state of affairs. The paper concluded that despite their performances, the Civil Society Organizations have ever remained dedicated to humanitarian service in Nigeria; however, much is still expected from them. Finally, the paper recommended among others, that the Nigerian Government in collaboration with Civil Society Organizations must embark on effective poverty alleviation, peace education and human capital development programmes in order to empower its large youth population who are most vulnerable to recruitment and radicalization for violent extremism and terrorism.
______Keywords: Civil Society Groups, Advocacy Campaign, Boko Haram Insurgency
INTRODUCTION The outcome of the security challenges imposed by the activities of the Boko haram sect has compelled the civil societies to respond to the disorder created by the Sect. The civil society organizations function in a bid to tackle every form of social pathology that threatens the peaceful coexistence of the populace and the stability of government. As a social change actor, therefore operating autonomously as different from individual, family and the state (Kurfi 2013), the responsibilities of the civil society organizations are crucial and noteworthy. Ultimately, the role of civil society is best understood from the view point of a mediator, although, during crisis, it is always 26 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria incumbent on Civil Societies such as Non Governmental Organizations (NGOs); Community Based Organizations (CBOs); and Faith Based Organizations (FBOs) to advocate, facilitate, sensitize and pacify parties involved in misunderstanding or conflict, to necessary actions in order to restore peace. Nigeria is no exception to this ideal. The spread of violence perpetrated by the group, Jama'atuAhlis-SunnahLidda'AwatiWal Jihad, Known the world over as Boko Haram has however placed an unprecedented demand on the civil society groups. No doubt, the Transparent Nigeria (2015) observed that the civil society in its various categories have made significant contributions in the nation's fight against insurgency and insecurity in the nation with plethora of activities to improve community engagement, social healing, and a culture of peace in Nigeria.
Several scholars like Kurfi (2013) have offered various explanations as to what they consider as measures of NGO/civil society success, but the levels of the recorded success made so far have appeared uncertain and largely misconstrued. For instance, in a recent report posted by Adebowale (2015), an umbrella body of civil society organizations in Nigeria under the aegis of Coalition of Civil Society Groups challenged openly the reports of the Amnesty International which indicted notable officers in the Nigerian Armed Forces for war crimes in the North. The reports and the counter reports trading between differing Civil societies as far as the Boko haram insurgency is concerned further complicates scholarly ability to measure the degree of success attained so far. Additionally, since the emergence of the dreaded Boko Haram sect, the role and impact of Civil Society both within and outside the country toward a lasting peace has come under intense scrutiny by observers, commentators and the general public; and as such present perplexing complications and ambiguity as to how they perform their functions and to what extent their impact is felt. Thus, the purpose of this paper is to evaluate the role of civil groups in the advocacy campaigns against Boko Haram insurgency in Nigeria.
The Emergence and Activities of the Boko Haram Sect in Nigeria There is no single account that has been adjudged credible as to theorigin and true founder of Boko Haram, as there are conflicting opinions on the origin of the dreaded sect. However, some scholars traced the origin of the sect to 1995 with Lawan Abubakar as its founder. At the period Abubakar left for further studies in Saudi Arabia, the neo-militia sect known then as “Sahaba” appointed Muhammad Yusuf as the group's leader, who took over the affairs of the sect. Others traced the sect founder to Shehu Sanni, a civil right activist in the Northern Nigeria. Apart from the above, numerous expositions on the origin and founder of Boko Haram abound (Adibe, 2012; Babatunde, Unwana-Obong & Olanrewaju, 2014; Bumah & Abimbola, 2009; Danjjibo, 2009; Langmang, 2011; Uzodike & Maingwa, 2012;). The Boko Haram Movement founded by Ustadh Muhammad Yusuf in the North-Eastern part of Nigeria is officially recognized by its members as Jama'atuAhlis-sunnah Lid-Da'watwal Jihad, meaning people committed to the propagation of the Prophet's teachings and Jihad. Boko Haram as an ideology is premised on extreme Islamic teaching that rejects most western ideas and institutions as un-islamic (Onuoha, 2012). It is for this reason that they advocate abolition of democratic governance and any man-made laws, as well as institutionalizing “Sharia Law” in the
27 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria northern region. The movement became militant and rebellious in 2009 soon after Muhammad Yusuf was captured,and allegedly killed by theNigerian security operatives for an attempt to escape from police custody. In views of Babatunde, Uwana-obong and Olanrewaju (2014) from 2009 till date, the Boko Haram sect, in pursuit of their ideology, have engaged in arson, bombing, shooting, stabbing with disdain and impunity, targeting important national events, public institutions, markets and sometimes Christian places of worship and Christian festivals and most recently the mosques. Commenting on their nature and pattern of attacks, Babatunde et al (2014) aver that they sometimes engage in sporadic bombings of the major Northern towns and cities, as it did happen in Kaduna, Zaria, Jos, Kano, Maiduguri and Damaturu among others. They have killed both Muslims and Christians alike. They have killed the rich and the poor, young and old, males and females, weak and strong, elites and commoners, northerners and southerners alike. Thus, Abimbola and Adosote (2012) argued that, it was under the leadership of the slain Mallam Muhammad Yusuf that Boko Haram became radicalized and enjoyed foreign collaboration especially with the Al-Qaeda in Islamic Maghreb.
Since 2009 the radical rampage and bloodletting activities of the Boko Haram sect has grown from being a localized problem to a national and regional threat. According to Onuoha (2012), the sect has evolved into a more dynamic and decentralized organization, capable of changing and combining tactics as well as expanding or reordering targeted selection. Its terror campaign assumed an alarming dimension from 2010 till date. However, until June 16, 2011, the onslaught was restricted to the North-East geo-political zone. The first attack outside the zone was the bombing of the Nigeria Police Headquarters in Abuja. That attack was triggered by the utterances of Hafiz Ringim, the then Inspector General of Police who threatened to smoke Boko Haram out in a press statement on his duty tour to Maiduguri, where the sect launched an attack. The attack on the Police Headquarters, according to Aloejewa (2012) was followed up with the suicidal bombing of the United Nation House, also in Abuja on August 26, 2011. According to the Crisis Group Africa Report (2014) “Boko Haram has opportunistically tapped into Islamic revivalism globally, and, [sic] while it has local roots and origins, it is part of a broader, global ideological current”. In some cases, this includes ties to organizations outside Africa. Boko Haram members reportedly have links with a number of radical groups, including al-Qaeda and the Afghanistan Taliban. For instance, Shuaibu, Salleh and Shehu (2015) observed in November 2013 that Boko Haram and the Ansarufaction were characterized as Foreign Terrorist Organization (FTO) by the United States Security Department. Ansaru was the faction that earlier in 2013 kidnapped and executed seven foreigners who were working with international construction companies. The United Nations Committee on Al Qaeda sanction blacklisted the group as one of the world terrorist organizations on 22nd May, 2014. According to Reuters (2014) the United Nation listing entry describes Boko Haram as an affiliate of Al-Qaeda and also one of the organizations of Al-Qaeda in the Islamic Maghreb (AQIM).
28 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria
The activities of the sect intensified on 14th April, 2014 when the sect kidnapped over 250 female students from the Government Girl's Secondary school, Chibok in Borno State (Zenn, 2014). Subsequently, since the aforementioned kidnapping attack, there have been other recent records of loss of life and properties worth millions of naira destroyed by the rebellious sect.According to Amnesty International (2015) Boko Haram has killed more than 4,000 people in 2014, although the true figure is almost certainly higher. In the first three months of 2015, Boko Haram fighters killed at least 1,500civilians. The group bombed civilian targets across Nigeria, raided towns and villages in the north-east and from July 2014 began to capture major towns. By February 2015, it controlled the majority of Borno state, as well as northern Adamawa state and eastern Yobe State. These rates are comparable to the conflict in Iraq. Also, the National Emergency Management Agency reported that a quarter-million people had been displaced from the Kanuri-speaking northeast area of Borno State that far in 2014, however, the UN High Commission for Refugees estimates nearer half-a-million displaced and predicts a food crisis in Nigeria (Reeve, 2014).Therefore, the increase in terrorism in Nigeria can be attributed to the rise of Boko Haram sect (Global Terrorism Index, 2014); nevertheless the nature of terrorism in Nigeria is different to Iraq, Afghanistan and Pakistan. Terrorist activity in Nigeria has more in common with the tactics of organized crime and gangs, focusing on armed assaults using firearms and knives than the bombing or suicide tactics of other large terrorist groups. It is against this backdrop that the citizenry may begin to ponder and question the role of civil societies in fighting against Boko Haram insurgency, as their role is very crucial in ensuring that lasting peace is restored back in the country. Thus, it is imperative to delve into the concept of civil society.
Civil Society Groups The term civil society should not be equated to non-government organizations (NGOs). Although NGOs are a part of civil society, they play an important and sometimes leading role in activating citizen participation in socio-economic development and politics and in shaping or influencing policy. Civil society is a broader concept, encompassing all organizations and associations that exist outside the state and the market (Ghaus-Pasha, 2004). Too many scholars have attempted to define civil society from various perspectives, but there is no globally accepted definition of civil society. To define civil society thus, John Locke (1632-1704) was the first in modern times to stress that civil society is a body in its own right, separate from the state. He opined that people form a community in which their social life develops and in which the state has no say. To him, this sphere is pre- or un- political. According to John Locke, the first task of this civil society is to protect the individual—his/her rights and property—against the state and its arbitrary interventions (Merkel and Lauth 1998, p. 4; Schade 2002, p. 10). However, the term civil society is generally used to classify persons, institutions, and organizations that have the goal of advancing or expressing a common purpose through ideas, actions, and demands on governments (Cohen and Arato, 1992). Subsequently, otherprofound scholars like Bratton (1994) describes civil society as social interaction between the household and the state characterized by community cooperation, structures of voluntary association, and networks of public communication. Judge (1996) views civil society as all organized activity not associated with major institutional systems: government and administration, education and health delivery, business and industry, security and organized
29 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria religion. They include religious/faith based organizations, cooperatives, trade unions, academic institutions, community and youth groups. Civil society according to Gemmill and Bamidele (2002) is quite diverse, ranging from individuals to religious and academic institutions to issue-focused groups such as not-for-profit or non-governmental organizations.
Moreover, Diamond (1999), defined civil society as “the realm of organized social life that is open, voluntary, self-generating, at least partially self-supporting, and autonomous from the state, and bound by a legal order or a set of shared rules”. Osahgae (1997) identifies three key elements important in the definition and conceptualization of civil society: autonomy from the state, public character (setting a normative order for the state) and furtherance of common good. Roniger (1994) also aver that the primary function and significance of civil society is to provide a platform for citizens to express their interest, passion, preference and ideas; to exchange information; to achieve collective goal; to make demands on the state, and to hold the state officials accountable. In the broadest sense, Meidinger (2001) avert that civil society has been characterized as a sphere of social life that is public but excludes government activities. In addition, CIVICUS Civil Society Index (2007) defined civil society as “arena outside the family, the state, and the market. It is where people associate to advance common interest. Put succinctly, Olukhosi in CIVICUS clarified this by viewing civil society as a sphere that is made up of associationsthat are voluntary, autonomous, consisting of professionals and non-professionals which have risen out of self-organizational efforts of various social forces. From the foregoing definitions, it can be deduced that, civil society is viewed to be independent from the state, but it is oriented toward and interact closely with the state and political sphere. In the light of the above, the definitions of civil society however are not sufficient enough to fully clarify its roles, especially in terms of fighting against Boko Haram insurgency in Nigeria. Reviewing the literature, therefore, makes it clear that the concept of civil society is highly diverse, complex and, above all, contentious— some politicians and thinkers see civil society as a solution to social, economic and political problems. Some even ask as observed by Glasius (2004, p.4) whether it is this very fuzziness that explains the present popularity of civil society—“it can be all things to all people”.
Efforts of Government in the Fight against Boko Haram Terrorists The Nigeria Government has neither neglected the capability of Boko Haram terrorists nor treated the effects of their attacks with laxity. Heather (2013) observed that some Nigerian leaders have realized that the battle can never be over unless all parties are ready for some level of compromise. Following a series of debates by the leaders on how to end the whole peril, common answers have favoured crushing the Boko Haram terrorist group with military might or finding a way to address the group's grievances.
Military Approach The Nigerian Army, in 2009, was directed to reinforce the Police in neutralizing the Boko Haram terrorist group when it became obvious that the task could not be handled by the police alone. As a
30 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria result, a Joint Task Force (JTF), comprising of the Army and other security agencies was formed to bring a solution to the BH insurgency. According to Niyi (2010) the first phase of the task seemed successful as the group's activities drastically reduced after some military actions. Surprisingly however, not long after the initial suppression of BH attacks, the group recommenced its attacks and at this time, in a bigger way. Unarguably, Niyi further opined that JTF in Maiduguri and other northern States where the BH thrives has been tremendously successful in the fight against this terrorist organization. However, these achievements have not been gained without occasional setbacks.
Diplomatic Approach During the initial stages of the Boko Haram attacks, the Nigerian Government attempted to negotiate with BH in order to address their grievances. This request did not succeed as the group consistently declined the offer. The Nigerian President confirmed to Nigerians in a televised interview in November 2010 that though he was still ready for talks, there was no dialogue with Boko Haram. However, in August 2011, Obinna (2013) avert that Nigeria began indirect negotiations with the group to seek a resolution of their problems. This indirect method was based on recommendations by a panel tasked to negotiate with the group and provide amnesty for those who would renounce violence. The meeting included a dialogue to end Government arrests and killings of the group's members, and payment of compensation to families of the members killed by security personnel. Notwithstanding the dialogue, just a day after the former president left Maiduguri, Boko Haram terrorists killed the host that organized the meeting between Mr. Obasonjo and the group. According to Aruga (2011) this could be one of the reasons why the Nigerian Government did not adhere to the meeting report at the time.
Another reason for non-implementation of the report was that the President understood it to possibly be a play by some politicians to dupe the Nigeria Government. This therefore makes it difficult for the indirect method of negation to succeed. According to Alechenu and Attah (2013) a new development seemed to spring up in November 2012 when a letter was allegedly released by the BH, requesting a dialogue with Nigeria Government. That the letter came barely 72 hours after a twin bomb attack which killed over people in a church at the Armed Forces Command and Staff College, Jaji, Kaduna State portrays insincerity. Additionally, Alechenu and Attah (2013) the letter was released just three days after the military promised a reward of $1.813 million to anyone with information that will lead to the arrest of 19 kingpins of the group. As anticipated, not much was heard from the Government since the president had mentioned on November 18, 2012 that there were no discussions with the group.
However, on April 17, 2013, the Federal Government took a fresh measure in search of an end to BH activities. The President constituted a 26 man Presidential Committee on Dialogue and Peaceful Resolution of Security Challenges in the North, to handle BH terrorism. This Committee was tasked to develop a framework for granting amnesty to BH members; it was also to design another
31 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria framework through which the group would be peacefully disarmed within 60 days and the causes of their grievance addressed. Additionally, the Committee was to develop a programme through which victims of Boko Haram attacks could be supported. According to Nick (2013) worthy of note is that when the proposal for the amnesty was being deliberated upon (one week before the constitution of the Committee), the Boko Haram was reported to have rejected the offer of amnesty from the Federal Government. The group based its refusal on the grounds that it had not done anything wrong to qualify for amnesty. This notwithstanding, the government constituted the Committee, which is yet to submit its report as at the commencement of this research. Nigeria Government continues to employ several means in the fight against Boko Haram terrorists.
Nigerian allies like the U.S. and Great Britain have in one way or the other offered assistance in the fight. Their help has come in the form of training, equipment donation or diplomatic advice. The Nigeria Government has made some achievements in the fight against Boko Haram terrorist group. The situation could have been worse if the Federal Government had not intervened in the ways it did so far. The group persistence and ever evolving attacks on civilians and security agents require that more effort is needed if the Boko Haram is to be neutralized. Consequently, the need to consult other literature on how to combat terrorism in Nigeria can only yield fruitful results. However, combating terrorism should not only be about the use of force; instead appropriate intelligence efforts should be applied. According to Chile (2013) counterterrorism should be focused on three areas: organizations, environmental conditions and perception. Attacking the terrorist organization and their members as well as degrading their functional capabilities are major contributing factors to a successful counterterrorism in Nigeria. There is the need to address in detail, how the functional capabilities of Boko Haram could be degraded. It is also necessary to consider Nigeria's neighbouring countries in the North as potential contributors to the peace process. There is the need to influence these neighbouring countries into supporting Nigeria in the fight. Indeed, IIA is an inevitable tool to help neutralize the BH terrorist group in Nigeria.
Another study suggests that there are three solutions to BH terrorism. According to Femi (2013) the first, is that the religious and political leaders should talk with Dr. Datti Ahmed who is trusted by the BH group. The second is that leaders of different Islamic Sects in the North should, in one voice, reach out to BH for a long lasting cease fire. A third option is the use of force which comes with its own consequences since the military and other security agencies may not always live up to expectations. Talking with the Islamic Leaders in 5the Northern part of Nigeria to assist in the fight against BH is a good idea. However, it should be understood that they may not be the only people that could influence BH members. It is a good point to mention the use of force in neutralizing BH terrorism, but this could be better when people and organizations are influenced to support the military in the fight.
32 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria
Role of Civil Societies in Fighting Against Boko Haram Insurgency in Nigeria Like the great Titanic ship, Nigeria currently is drowning in the sea of several precarious situations. One of them is the issue of insecurity. The insurgency in the northern Nigeria is a security concern not just for Nigeria but for the broader Sub-Saharan region and the international community. Boko Haram insurgency is both a serious challenge and manifestation of more profound threats to Nigeria's security. The heinous activities of the Islamist sect have put the country in a state of topsy- turvy. However, Nigeria's strategic importance in Africa cannot be underestimated. With a population of over 180 million, Nigeria is the most populous country in Africa and home to the continent's largest economy, yet an average Nigerian lives below $1 dollar of the United Nation's wealth of nation's standard. Most Nigerians are poorer today than they were at independence in 1960; they have become victims of the resources curse and rampant, entrenched corruption. It is against this backdrop, that the Boko Haram sect seems to pursue and champion the cause of checkmating western education and its institutions in northern Nigeria. As Ezenagu (2013) have it, Boko Haram's more than four-year-old insurgency has pittedneighbour against neighbour, cost more than 4,000 lives, displaced close to half a million, destroyed hundreds of schools, worship places, government buildings and devastated an already ravaged economy in the North East, one of Nigeria's poorest regions. As virulent as it is all over the country especially in the Northern part, people now go to bed with one eye closed due to Boko Haram insurgency.
Although, the newspapers, magazines, radio and television programmes report that the Federal Government in collaboration with the Nigeria security operativesare contending to bring insurgencyto a halt,especially since the upsurge of attacks on civilians in public places by Boko Haram, but the expected result remains elusive. For example, Former President Goodluck Jonathan declared a state of emergency in Borno, Yobe and Adamawa states in May 2013, and deployed additional troops that with the help of vigilantes drove Boko Haram from most cities and towns in the northern Nigeria. He also established a committee to negotiate a settlement with its leadership, but with little success. On 18th March 2014, National Security Advisor Mohammed Sambo Dasuki announced a “soft” approach to addressing the root causes of terrorism, but it was never implemented. These and other attempts made by the Federal Government are yet to be realistic in addressing the problem.But in a country like Nigeria, where the citizenry are not sure of or confident in the Government for their security or even trust the efficiency of the military on this situation, one may be clever to ask, what role does the civil society groups play in curbing insurgency?
According to the United State Government Counterinsurgency Guide (2009, p.2) insurgency is the organized use of subversion and violence to seize, nullify or challenge political control of a region. It is primarily a political and territorial struggle in which both sides use armed force to create space for their political and economic activities within the region. Insurgency is not always conducted by a single group with a centralized, military style command structure, but may involve different actors with various aims, loosely connected in networks (Counterinsurgency Guide, 2009, p.2).With over a thousand civil society groups in existence in Nigeria since 1990s, they have played crucial role and
33 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria championed so many struggles that have brought about change in governance and restored democracy after twelve years of military rule. They have also, in the past staged massive movements and protests that influenced governmental policy, such as the popular Anti-fuel subsidy of 1st January, 2012. Significantly also the impact of the non-profit organizations was felt during the nation-wide protest hash-tagged #BringBackOurGirls, staged by some prominent individuals and human right activists via the social media, during the outrageous and contemptuous abduction of over 250 girls by the Boko Haram, on the 14th April, 2015 in Government Girls School Chibok, Borno State.
According to Amnesty International (2014), the abduction quickly became international news and the #BringBackOurGirls initiative campaign received worldwide support. Several countries, including the UK, USA and France, offered to assist Nigeria to locate and rescue the girls. Three regional summits were held, in Paris, London and Abuja, where states pledged to share intelligence and develop a regional counterterrorism strategy in order to oppose Boko Haram (Amnesty International, 2014). Other non-governmental organizations such as the Nigeria Safe Schools initiative also took to the chase with the aim of fighting insurgency and making the school environment, especially in northern Nigeria conducive and safe for learning without fear for or attack by armed faceless men. Going by these performances, it is clear that the CSOs have ever remained dedicated to humanitarian service in Nigeria. But there is more to the hydra-headed problem of insurgency. The role of civil society groups in the fight against insurgency in Nigeria cannot be over emphasized. This is because they have the ability to organize themselves into self- sustaining social, professional or rights groups to advocate on behalf of their personal interest, those of their communities and or those of others. Put succinctly, Barnes (2006) opined that, CSOs often combine formal legal strategies with approaches that aim to foster public awareness and the transformation of conflict attitudes and relationships. They can bear witness to violations and undermine the moral authority and legitimacy of abusers. For instance, civil society activists can manifest both the 'power to resist' oppressive forces - typically through mobilizing effective mass movements for change - and the 'power to expose' oppression and thereby de-legitimize the authority of the oppressors. The very act of public disclosure and or denouncing conflict can make the truth evident in ways that are very difficult to ignore and may empower people to take action to change the situation. They can also dissuade the wider public from accepting or participating in acts that enable abuse and oppression (Barnes, 2006).
Furthermore, they have the 'power to persuade' both popular opinion and decision-makers of more constructive ways to respond to specific conflict situations and to address the structural problems that give rise to conflict. This point to the importance of resolving conflict through peaceful processes, that is capable of delivering constructive change. Also, civil society actors can help shape peace policy by identifying overlooked problems and policy gaps, analyzing issues and recommending solutions. In short, they can identify the central agenda of issues that need to be addressed in responding to a conflict situation and dealing with peace and security issues more widely. They can analyze the situation, formulate recommendations, develop policy options and engage in policy dialogue to
34 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria address conflicts. They can also mobilize advocacy campaigns to generate political will amongst decision-makers and implement strategies to achieve the desired results. It is often said that those involved in armed conflict often justify their actions on the basis of their authority as governments or by claiming to represent popular causes. Civil society actors may challenge these assertions by demonstrating that public opinion rejects military approaches and supports alternatives (Barnes, 2006).While they can facilitate dialogue between the primary protagonists in armed struggle, CSO- led processes are often focused on enabling ordinary people to articulate what they really need and then working to find a common ground from which they can work to establish peaceful coexistence. Instead of the use of force, civil society actors generally rely on their creativity by stimulating a new sense of what is possible and how it can be achieved. This capacity is rooted, ultimately, in a sense of agency: the ability to act together with others to change the world.
Lastly, CSOs can as well help to create a climate conducive for talks; civil society actors sometimes have a direct peacemaking role. They can help open channels of communication between parties in conflict. Using their unofficial and low-key status, they can provide confidential 'back channels' to convey messages between opponents. CSOs can also facilitate unofficial dialogue processes, involving those close to government leaders and armed opposition groups. This method provide parties the opportunity to engage in the communication necessary to determine whether political negotiations may be viable, build relationships and deepen understanding of the others' perspectives on the conflict and explore options for its resolution. It is likely, however, that efforts to achieve peace and to prioritize prevention over insurgency will be sustained only when there is widespread awareness amongst the general public around the world that common security cannot be obtained through the barrel of a gun; instead, we can best work towards sustainable peace through collective efforts at meeting basic human needs and strengthening systems for managing differences peacefully. However, the main thrust of the paper will consider the civil society organizations or groups like the mass media in the fight against Boko Haram.
The Mass Media as Civil Society Groups in the Fight against Boko Haram Boko Haram, like other terrorist groups all over the world, needs publicity and depends on the media to publicize their messages and goals. There is hardly any terrorist action without the media being involved because of publicity which the media provide. Without involving the media, there would be no effect on a wide audience which the terrorists need. The terrorists always want to communicate their revolutionary or divine messages to a very wide audience and they have recognized the potentials of mass communication. This is where the media come in. Boko Haram wants attention. They commit violent acts to cause fear, tension and disrupt normal life all in the hope of gaining attention for a course. According to Omego (2015, p. 90) without the media, Boko Haram would have a very limited largely local impact. It is the media that spread the terrorist's message and help give it publicity which is a form of communication. The mass media through television, in particular, have proved an effective tool for terrorists because of the images and pictures they broadcast to the public. For instance, in 2013, the sect used the electronic media, the internet, to be precise, to warn the Nigerian government to release their family members, and in several occasions also they have spoken to the 35 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria government and the Nigerian masses concerning their plans and next line of action. The sect's (Boko Haram) several messages sent through the media to the federal government and society were recorded in video clips of hostages being held by the sect. The sect has also made demands from federal government in threatening modes, through the media. The sect members who are hiding know about the activities of the Government and country through the media. The Nigerian government have also replied through the media for possible dialogue and discovered that they were faceless.
Omego (2015, p. 91) have written on the issue of terrorists' use of the media to achieve their goals and objectives. Hoffman (2006, p.174) explains that without the media's coverage, the acts' (terrorist's) impact is arguably wasted and remains narrowly confined to the immediate victim(s) of the attack, rather than reaching the wider 'target audience' at whom the terrorist violence is actually aimed. Nacos (2008) agrees with Hoffman that without massive news coverage, the terrorist acts would resemble the proverbial tree falling in the forest: if no one learned of the incident, it would be as if it had not occurred. The fight against terrorism and the instrumental use of women in Boko Haram insurgence in Nigeria would, therefore, be futile in the absence of the media. The mass media have as one of their traditional roles, the dissemination of information. Dissemination of adequate information by the mass media can aid the women to fight for their course and enlighten the public of various forms of violence against women and the girl-child, especially the use of women and girls as instruments of destruction by Boko Haram. According to Mcquail (1961) in Omego (2015, p. 90) “the media have the power and ability to shape our opinion and belief, change life habits and actively mould behaviours. The media have already been accused of not under-reporting cases of Boko Haram's use of women and girls as instruments to carry out their acts. This has been credited to the assumption or perception on how women are viewed in the society—as weak, feeble, as well as flimsy in nature. As the proverbial watch dog of the society the role the media can play in containing the Boko Haram insurgency is very vital. The media can contribute immensely to the containment and ultimately the defeat of the dangerous Boko Haram sect by reporting current cases of Gender Base Violence (GBV) and following up such cases in the law court. They can link up with various women groups, like FIDA, etc., in the fight against GBV. There are many women organizations that have been vocal in this fight— many have carried placards protesting and appealing for the release of the abducted girls. The media should also lend voice to the cries of these women and publicize their activities with the aim of putting an end to this societal problem. The media can also adopt advocacy journalism that may put an end to the abduction, killings and rape of our girls and women thereby achieving the much needed peace in the society. They can think of the possible ways of bringing the Boko Haram group and government close for possible dialogue that might help in containing the activities of the sect. The media should be involved in the whole thing. They should monitor and give prominence to the activities of this group.
Challenges Confronting the Civil Societies in Nigeria Although civil societies in Nigeria have been resonant, yet they are overwhelmed by numerous problems. Obviously, these problems as Ikelegbe (2003) puts it could be explained partly by the cloud of cynicism covering the political landscape and the magnitude of state apparatus ranged 36 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria against the civil society groups. CSOs are characterized by proliferation, duplication, factionalism, personal differences, ethnic, cultural and regional sentiments, poor organization and management etc. Among the numerous problems also include; lack of moral authority, identity, legitimacy, mandate, accountability, limited national outlook, authentic legal authority, undemocratic nature, transparency, unhealthy competition for access to resources, promoting narrow agendas, fragmentation, collective actions, confidence, questionable leadership, suspicion, politicization of leadership, government tyranny, rivalries for space and funds, tension, conflict, tumult, confrontation of differences, identities and intents, cleavages, disloyalties, lack of solidarity, contention between and within interest groups (Ikelegbe, 2003). In addition, Uadiale (2008) also highlighted few other problems such as; wild passion, violence, exclusiveness, manipulation of foreign donors, suppression by authoritarian states, lack of influence, creativity, unity, clientelism, restrictive to privileged few, consensus, egalitarianism also cause the failure of civil society in Nigeria. Uadiale (2008) added that the lack of global vision of development, poor institutional and organizational capacity, inadequate professionalism and chronic dependence on external funding are contending issues also confronting the CSOs.
Conclusion With the rate of mishap and rampant suicidal bombing and maiming of lives almost at close intervals, it is clear that insurgency is not restricted to a particular part of the country. It is not a north- East or Northern problem but rather a trans-border intercourse between Boko Haram and foreign collaborators. Since the beginning of the four- year old insurgency, the number of casualty is estimated at 20,000. Therefore the situation calls for an immediate action, not by the Federal Government alone but every other stakeholder such as the civil society groups, the private sector and well-meaning Nigerians.
Recommendations i. It is obvious that the counterterrorism may not attain the desired success without a deliberate assistance from the governments of Republic of Niger, Chad, and Cameroun. It is necessary that these countries are influenced into helping Nigeria in the fight against BokoHaram terrorist group. Being that some BH members have been noticed to always flee to these countries means that the group may have been granted safe haven by some citizens of the countries. The issue of porous borders between Nigeria and these countries also cannot be overemphasized. There is the need for all the countries involved to jointly and effectively secure these borders in order to weaken and subsequently neutralize the terrorist group. ii. Consequently, the Nigeria Government should improve comprehensively, its relationship with these countries, especially in the area of security. With that, securing the borders between Nigeria and its neighbors will be more effective and relatively easier. The Nigeria Government should also consider assisting these countries economically, with the aim of enhancing the social welfare of the inhabitants of those areas were Boko Haram activities are suspected. These may ultimately influence the people into supporting their respective government and Nigeria
37 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria
Government by extension in the fight against Boko Haram terrorist group. As a result, the terrorist will be denied the possibility of supports and recruitment from these countries. iii. Nigeria Government is committing much effort in the counterterrorism operation in the country, more should be done in the area of IIA. This is necessary in order to ensure that the Boko Haram terrorist group is successfully neutralized and prevented from re-emerging.
REFERENCES Abimbola, J. O. & Adesole, S. A. (2012). Domestic Terrorism and Boko Haram Insurgency in Nigeria Issues and Trend: A Historical Discourse. Journal of Arts and Contemporary Society (4)Pp 12-29 Adebowale, S.(2015). Boko Haram: Civil Society Coalition slams Amnesty International over report. Retrieved from http://the eagleonline.com.ng/book-haram-civil-society-coalition- slams-amnesty-international-over-report/ Adibe, J. (2012). “Boko Haram: One sect, conflicting narratives.” African Renaissance, 9(1). Alechenu, J. and Attah, D. (2012). “Boko Haram writes FG asking for dialogue,” Punch, November 28, Aloejewa, S. H. O. (2012). Contending Theories on Nigeria's Security Challenge in the Era of Boko Haram Insurgency. The Peace and Conflict Review Amnesty International (2014). 'Our job is to shoot, slaughter and kill' Boko Haram Reign of Terror in North-East Nigeria. United Kingdom, Amnesty International. Babatunde, M. M, Unwana-Obong, U. D, & Olanrewaju, M. K., (2014). Historical Antecedents of Boko Haram Insurgency and Its Implications for Sustainable and Educational Development in North Central Nigeria. Journal of Education and Practice5(22).Retrieved from htt://www.iiste.org Barnes, C. (2006). Agent for Change: civil society role in preventing war and building peace (Issue paper No. 2). Netherlands: European Center for Conflict Prevention/ International Secretariat of the Global Partnership for Prevention for the Armed Conflict. Bratton, M. (1994). Civil Society and Political Transition in Africa: Institute for Development Research. Boston, MA Bumah, J &Abimbola, A. (2009). The Boko Haram Tragedy and other Issues. The punch. Chiles, N. (2013). “After Rejecting Nigeria's Amnesty Offer, Boko Haram Continues to Kill,” Atlanta Black Star, April 23 Civicus Civil Society Index (2007). Contributing to positive social change. \Cohen, J. L. &Arato, A. (1992). Civil Society and Political Theory. Cambridge, MA: MIT Press. Daily Trust, “Global action targets Boko haram funding”, 4 September 2014. Diamond, L. (1999:221). Developing Democracy: Towards Consolidation. Baltimore: Johns Hopkins University Press.
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Ezenagu, R. N. (2013). The Role of Civil Societies in the Fight Against Boko Haram Insurgency in Nigeria: An Assessment of Non-Governmental, Community Based and Faith Based Organizations. Unpublished Paper Postgraduate School, Department of Sociology/Anthropology and Social work, University of Nigeria, Nsukka. Femi, A. (2012).“Federal Government must Parley Now with the Boko Haram,” Sahara Reporters, May 7. Gemmill, B. & Bamidele-Izu, A. (2002). Role of ngos and civil society in global environmental governance. Ghaus-Pasha, A. (2004,). Role ofcivil society organizationsin governance. Paper presented at the 6th Global Forum on Reinventing Government Towards Participatory and Transparent Governance 24 – 27 May 2005, Seoul, Republic of Korea. Glasius, M. (2004). “Civil Society.” On: www.fathom.com (January 10, 2006). Global Terrorism Index (2014). Measuring and understanding the impact of terrorism. Institute for Economics and Peace. Heather, M. (2013). “Nigeria Weighs War, Amnesty for Boko Haram,” Voice of America, July 2 Hoffman, B. (2006). Inside terrorism. New York: Columbia University Press. Ikelegbe, A. O.(2003). Civil Society and Alternative Approaches to Conflict Managements in Nigeria, in T. A. Imobighe, Civil Society and Ethnic Conflict Management in Nigeria, Ibadan: Spectrum Books Limited pp 36-37 Judge, A. N. (1996, October). Interacting fruitfully with un-civil society: the dilemma for non-civil society organizations. Paper presented at a World Bank workshop on civil society in the FSU and East/Central Europe, Washington. Kurfi, M. H. (2013). A sociological analysis of civil society success in international development project. Global Journal of Human Social Science Sociology and Culture, 13(5), 39-44. Langmang, J. (2011). The Upsurge of Religion Fundamentalism: A Critical Reflection in the light of the Boko Haram Phenomenon in Northern Nigeria in Best G.S (ed) Religion and Post Conflict Peace Building inNorthern Nigeria. Ibadan: John Archers Publishers Ltd. Meidinger, E. (2001). “Law Making by Global Civil Society: The Forest Certification Prototype.” Baldy Center for Law and Social Policy, State University of New York at Buffalo, Buffalo, NY. Merkel, W., & Lauth, H. (1998). “Systemwechsel und Zivilgesellschaft. WelcheZivilgesellschaftbraucht die Demokratie?” AusPolitik und Zeitgeschichte, 6 (7), 3-12. Niyi, A. (2013). “Chief of Army Staff Has Not 'Slept' Since 2010 Over Boko Haram,” Information Nigeria, July 1 Nnabueze, C. A. (2013).“Justification for the declaration of state of emergency in the three states in North Nigeria,” Federal Ministry of Information, May 28. Olukoshi, A. (1997: 474). “Associational Life” in L. Diamond, A. Kirke-Greene and Oyediran, eds. Transition Without End. Ibadan: Vintage Press. Omego, C. (2015).The role of the mass media in the fight against terrorism and the instrumental use of women in Boko Haram insurgence in Nigeria. An International Journal of Language, Literature and Gender Studies, 4(2), p.78-96.
39 The Role of Civil Society Groups in The Advocacy Campaigns Against Boko Haram Insurgency In Nigeria
Onuoha, F. C. (2012) Boko Haram: Nigeria's extremist Islamic sect. A report of Aljazeera centre for studies, 29 February, 1-6 Osaghae, E. (1997:15). 'The Role of Civil Society in Consolidating Democracy: An African Comparative Perspective', Africa Insight, (27) (1). Paris Summit for Security in Nigeria – Conclusions” 17 May 2014; Presidential Address By President Goodluck Jonathan On The Declaration Of A State Of Emergency In Borno, Yobe and Adamawa States, full transcript on Sahara Reporters, 14 May 2013. Reeve, R. (2014). The internationalization of Nigeria's Boko Haram Campaign. Oxford Research Group Special Global Security Briefing. Roniger, L. (1994).' The Comparative Study of Clientelism and Changing Nature of Civil Society in the Contemporary World” in L. Roniger and Gues-Ayata, (eds.) Democracy, Clientilism and Civil Society. Boulder, Colorado: Lynne Rienner Publishers. Schade, J. (2002). “Zivilgesellschaft. EinevielschichtigeDebatte.” InstitutfürEntwicklung und Frieden der Universität Duisburg Report Nr. 59. Duisburg: INEF Shuaibu, S. S., Salleh, M. A., & Shehu, A. Y (2015). The Impact of Boko Haram Insurgency on Nigerian National Security. International Journal of Academic Research in Business and Social Sciences, 5(6) 254-265. Transparent Nigeria (2015, February). The Rise of Boko Harm and the Response of Civil Society. Retrieved from http://www.transparentnigeria.com/news_entries/11590/The-rise-of-Boko- Haram-and-the-response-of-civil-society Uadiale, M. (2008). Aims and Objective of Civil Societies/NGO's in our Society. (Being a paper presented at a Seminar organized by the office of the Special Assistant to Edo State Governor on CSO's/NGO's, Governor's Office, Edo State. 14th August), pp.11 – 13 UK Foreign and Commonwealth Office, “London Ministerial on security in Nigeria: communique”, 12 June 2014. United State Government (2009). Counterinsurgency Guide http://www.state.gov/t/pm/ppa/pmppt Uzodike, U.O &Maiangwa B. (2012) Boko Haram Terrorism in Nigeria: Causal Factors and Central Problematic. African Renaissance Vol. 9 No 1 Pp 41-49. Zenn, J. (2014). Boko Haram and the kidnapping of the Chibok schoolgirls. CTC Sentinel, 7(5), 1-8.
40 Veritas International Journal of Entrepreneurship Development (VIJED)
ENTREPRENEURSHIP CONTRIBUTION TO THE DEVELOPMENT AND GROWTH OF THE NIGERIAN ECONOMY (2005 – 2015)
DANIEL Oguche, Ph.D, Department of Banking and Finance, Veritas University, Abuja. (The Catholic University of Nigeria). [email protected]
Citation: Oguche, D., (2018). Entrepreneurship Contribution to the Development and Growth of the Nigerian Economy (2005 – ______2015) . Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 41-55 ABSTRACT This paper discussed entrepreneurship, development and growth of the Nigerian economy. Many researcher's and policy makers in developed economies of the world emphasize entrepreneurship as the way to a sustained living standard of their nationals, Though Nigerian government has made some interventionist contributions to entrepreneurship development, the effect has not been felt positively. The methodology adopted was the narrative-textual case study (NTCS) method which is preferred because of the absence of sequential data related to entrepreneurship, development and growth of Nigerian economy. The paper used simple percentages in tables, graphs, and charts to analyze and interpret the collated secondary data. The paper found that Nigeria's economy continues to be driven by the non-oil-sector albeit at a slower pace. Unemployment and underemployment in Q4 2015 rose from 104.3million to 105.02million. It was found that entrepreneurship can enhance economic growth and development by generating employment and foster the growth of micro, small, and medium enterprises in Nigeria. It also recommends that there should be proper policy coordination and policy stability; reforms in educational curriculum to prepare students for self- reliance and fixing the power sector for the good of Nigeria. The paper opines that if Nigeria has functional micro, small and medium enterprises (MSMEs), gainful employment will be created, wealth created will be distributed evenly, economy is developed and we are happy.
Key words: Entrepreneurship Contribution, Development and Growth, Nigerian Economy, Narrative – Textual case study (NTCS) and Micro, Small and Medium Enterprises (MSMES). ______
INTRODUCTION God has blessed African continent with both human and natural resources resulting in the evolution and involvement of differing participatory systems of government for socio-economic and political development. European contact with Africa in the 15th century to augment cheap farming labour in their country had a dual advantage for Africa. It had exposed us to their knowledge economy and partially their system of governance which we adopted in the past colonial era. Since Nigerian Independence on October 1, 1960 both military and democratic systems of government at the three
41 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015) tiers promised to focus on entrepreneurship development across the board. Though Nigeria is naturally endowed with entrepreneurship opportunities, the realization of the full potentials of those opportunities was thwarted by the adoption of inappropriate industrialization policies at different times. There were policy interventions that would have stimulated entrepreneurship development through small and medium scale enterprises promotion based on strategic technology transfer but failed to achieve intended goals as it led to most indigenous entrepreneurs becoming distribution agents of imported products as opposed to building internal entrepreneurial capacity for manufacturing, mechanized agriculture and expert services(Thaddeus,2012).
LITERATURE REVIEW Afolabi (2015) reported studies by UNIDO-Nigeria, 2012 which showed that Micro, Small and Medium Enterprises (MSMEs) have the propensity to drive the Nigerian Economy and data revealed that they were over 17 million MSMSEs employing over 31 million Nigerians. It says that MSMSEs Accounts for over 80% of Enterprises that employ about 75% of the Nigeria's total workforce. Therefore, formulating and effectively implementing MSMSEs friendly policies represent innovative ways of building the capacity to engage in entrepreneurial activities and creating job opportunities, thus, playing a central and invaluable role in helping Nigeria realize its quantity advantage. In addition, the 2012 global entrepreneurship monitor (GEM) has empirically identified Nigeria as one of the most entrepreneurial countries in the world. The studies show that 35 out of every 100 Nigerians (over a third) are engaged in some kind of entrepreneurial activities or the other. The hypothesis that entrepreneurship is linked to economic growth finds it's most immediate foundation in simple intuition Common sense and pure economic observation activities to convert ideas into economic opportunities lie at the very heart of entrepreneurship. Entrepreneurship is a source of innovation and change and as such spurs improvement in productivity and economic competitiveness (UNCTAD, 2004).
Entrepreneurships are not synonymous with small business. Certainly, small firms are an outstanding vehicle for individuals to channel their entrepreneurial ambitions. The small firm is an extension of the individual in charge (Lumpkin and Dess, 1996). However entrepreneurship is not restricted to persons starting or operating an (innovative) small firm. Enterprising individuals in large firms, the so-called 'entrepreneurs' or corporate entrepreneurs; undertake entre-preneurial actions as well. As at 2015, it was reported that Nigeria's Gross Domestic product (GDP) for ten years showed the country was one of the fast growing economies in the world. The implication then was that any good business established was capable of generating unusual and above average returns. It was then one of the few countries with the highest returns on investment anywhere in the world –money market, capital market, mutual funds, real estate and property, entrepreneurship cetera (Popoola, 2014 ). Furthermore, for entrepreneurs to play an appropriate role, the role of the state remains important if not more than before. Strong states as regulators and gate keepers play a vital role. In the absence of appropriate 'rules of game' entrepreneurship may result in undesirable social outcomes including corruption, crime, speculation and financial crises, and may worsen the vulnerabilities of people during natural disasters (UN Report, 2011).
42 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
Entrepreneurship suggests a drastic or revolutionary change but does it promote wealth creation and job opportunities? Although there are researches and studies on the relationship (link) between entrepreneurship and economic growth and development, there is still the need to assess the case of the Nigerian economy. The question we may ask is what is the contribution of micro, small and medium enterprises (MSMSEs) to the nation's Gross Domestic Product (GDP) or better still, how has the multiplicity of the so called MEMEs bettered the living standard of the over 170 million Nigerians. In Nigeria, most textile industries spread across the length and breadth of the country has since gone moribund due to corruption and managerial insensitivity to financial discipline.
Recent Development of Entrepreneurship The role of government in entrepreneurship development in Nigeria became significant only after the Nigeria civil war (1967-70). Afolabi (2015) opines that since the mid 1980s, there has been an increased commitment of government to entrepreneurship development, especially after the introduction of the structural adjustment program (SAP) in 1986.Added to this was the establishment of the National Directorate of Employment (NDE), National Open Apprenticeship scheme (NOAS) and the Small and Medium Enterprise Development Association of Nigeria (SMEDAN) (Thaddeus, 2012). Fundamentally, the Nigerian government promotes entrepreneurial culture through initiatives that build business confidence, positive attitude, pride in success, support and encouragement of need ideas, social responsibility, providing technological supports, encouraging inter-firm linkages and promotion of research and development.
The data below show the Number of Trained Youths that has been provided with tools and equipment to establish and run their own business by State, 2005-2015:
43 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
44 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
45 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
46 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
Nwachukwu (2012) opined that in the past forty years or so the government has established various support institutions specially structured to provide succor and to assist SMEs to contend with some of the hurdles along their growth path. Some of these specialized institutions include the Nigerian Industrial Development Bank (NIDB).The Nigerian Bank for Commerce and Industry (NBCI), the National Economic Reconstruction Fund (NERFUND),The Nigerian Export Bank (NEXIM).The National Directorate of Employment (NDE), Industrial Development Coordinating Centre (IDCC), Peoples Bank (PB), Community Bank (CB), Construction Bank, Family Economic Advancement Programme (FEAP),State Ministries of Industry SME schemes, The Nigerian Agricultural and Cooperative Development Bank (NACDB],Bank of Industry (BOI) among others. These support institutions and other incentives created by the government notwithstanding, policy instability and reversals in addition to high turnover and frequent changes in government have impacted negatively on the performance of the primary institutions responsible for policy formulation, monitoring and implementation resulting in distortions in the macroeconomic structure, low productivity and dismal performance of SMEs. There were also limited access to long term capital, high cost of even short term financing, poor partnership spirit, dearth of requite managerial skills and capacity, illegal levies, street “urchins” harassments, over dependence on imported raw materials and spare parts, poor inter and intra-sectorial linkages that make it difficult for the SMEs to enjoy economies of scale production, bureaucratic bottlenecks and in efficiency in the administration of incentives that discourage rather than promote SME growth, weak demand for products arising from low and dwindling consumer purchasing power, incidence of multiplicity of regulatory agencies and taxes that have always resulted in high cost of doing business and poor corporate governance and low entrepreneurial skills arising from inadequate educational and technical background for many SME promoters (Nwachukwu2012).Literature records that there has been a decline in percentage of total loan portfolio advanced to SMEs by banks. Alamode (2007) In Ikechukwu (2014) disclosed that In 1992 total loan from banks to SMEs declined in 2006. Percentage of bank total loan to SME declined from 39% to 32% .At the then 100% it was more than 22% in South Africa and 20% in India. The financial inadequacies above notwithstanding, there is still the difficulty in accessing these loans by the entrepreneurs because most of them are unable to prepare good and bankable business plans/feasibility reports.
Entrepreneurial Environment A nation's environment has a significant impact on the level of entrepreneurship activities. An unconducive environment for entrepreneurial development can mar economic growth (Zaki, 2007).In Nigeria, social-economic problems; political instability and religious intolerance have been identified as the major challenges of entrepreneurship development. This class of problem has heightened political aberrations in Benue, Plateau, Niger Delta regions, Lagos and in almost the entire country giving birth to violent armed robbery, arson, vandalization of oil pipelines and most recently kidnapping by Niger Delta militants. Under this condition, entrepreneurs suffer as their properties are destroyed. In northern states of Nigeria, there are religious attacks, looting and burning down of shops as well as killing of human beings. These actions have discouraged many entrepreneurs that survived the mayhem while those that are aspiring to start a small business in such areas have relocated or completely changed their businesses.
47 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
Relationship between Entrepreneurship and Economic Growth or Development The idea that entrepreneurship and economic growth are very closely and positively linked together no doubt has made its way since the early works of Schumpeter. An increase in the number of entrepreneur leads to an increase in economic growth. This in effect is a result of the concrete expression of their skills, and more precisely, their propensity to innovate. Schumpeter has already described this innovative activity,” the carrying out of new combinations (Schumpeter, 1963). Through this innovative activity, the Schumpeterian entrepreneur seeks to create new profit opportunities. These opportunities can result from productivity increases, in which case, their relationship to economic growth appears quite clearly. In terms of how entrepreneurship has been a stimulant in economic growth, there exists enormous discussions and debates but it is however eminent to realize the importance of constant innovations and rivalry enhancement (Todtling and Wanzanbock, 2003). There has been a problem in defining and measuring entrepreneurial factors and this has further complicated the exact contributions to economic development and growth. In addition, Career and Thurik (2002) explained that the concept of entrepreneurship is multidimensional and largely ill-defined. Understanding the role of entrepreneurship in the process of economic growth will therefore require a framework because of the nature of intermediary variables and connections which exist (Grave and Minniit, 2000). The best examples of these intermediate variables include innovation, competition mainly characterized by exit and entry of firms, variety of supply and particular energy and efforts invested by entrepreneurs. Other conditions of entrepreneurship also add up when it comes to their contributions to economic growth (Robbins et. al., 2000). In addition, ASC (2006) and Alriauzu (2010) assert that there is a positive relationship between entrepreneurship and economic growth while Henderson (2007) explained that entrepreneurship is increasingly being recognized as a primary engine of economic growth. By combining existing resources within innovative ideas, entrepreneurship adds value through the commercialization of new products, the creation of new jobs, and the building of new firms. The global economic monitor indicates that nations with higher level of entrepreneurial activities enjoy strong economic growth. In short, entrepreneurs are the link between new ideas and economic growth. Figure 1: A Frame work linking entrepreneurship to economic growth
Levels of conditions for crucial elements of impact of Analysis entrepreneurship
Psychological Attitudes skills Self realization Individual endowment ACTIONS personal wealth level
Culture Start ups entry Firm institution into new markets performanc innovations e Firm level Business culture incentives Competitiven Culture Variety Macro level ess economic institutions competition growth selection Source: Adapted from Naude (2013) 48 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
Furthermore, Naude (2013) posited that entrepreneurship will, in the light of the above contribute to growth and employment creation in advanced, emerging and least developed economies alike. Entrepreneurship creates jobs and we know that unemployment is a major and significant cause of unhappiness. We also know that goods that entrepreneurs provide, such as health and experimental activities, raise happiness levels.
METHODOLOGY OF THE STUDY This study used both descriptive and explanatory analyses. The methodology used is Narrative- Textual Case Study (NTCS) method which is considered preferable in the absence of sequential data related to entrepreneurship, development and sustainable economic growth in Nigeria. NTCS is a social science research method that employs intensively information, data and academic materials made available and easily accessible by information and communication technology facilities such as intranet, internet worldwide web, online databases, e-libraries cetera. The choice of this method is informed by the fact that NTCS combines the use of quantitative and qualitative observation, text content analysis and available official statistics in different proportions for problem solving or problem identification on the objectives of the research. According to Ahonsi and Soyombo (1996), a research is cross sectional if the data to be utilized have been gathered at one point in time and relates to the phenomenon being studied in its present or current state. This research study is non- empirical but rather descriptive since information was collected without changing the environment. We used appropriate statistical techniques consisting of simple percentages in the analysis for the role of entrepreneurship on economic growth and development in Nigeria; charts were also used to present the data for more meaningful understanding. The return of democracy in 1999 ushered in a period of economic reforms and a renewed focus on enterprise development as the only viable means to sustainable growth. Nigerian leaders then initiated a massive programme of disinvestment and financial deregulation aimed at boosting business development across the Micro, Small and Medium Enterprises (MSMEs) space. Progress has been hampered by institutional deficiencies and widespread bureaucratic and political corruption (Osalor, 2010).
Analysis and Results Analytical Performance of Nigerian economy. National Bureau of Statistics (2004-2013) report showed that Nigeria rebased its GDP from 1990 to 2010 resulting in 89% increase in the estimated size of the economy. As a result, the country then boasted of having the largest economy in Africa with an estimated nominal GDP of USD 510 billion, surpassing South Africa USD 352 billion. The exercise revealed a more diversified economy than perilously thought. Nigeria maintained its impressive growth over the past decades with a record estimated 7.4% growth of Real Gross Domestic Product (GDP) in 2013, up from 6.5% in 2012. This growth rate was higher than the West Africa Sub Regional level and far higher than the Sub Saharan Africa level. Economy continued to be underpinned by favourable improvement in the non oil sector with real GDP growth of 5.4%, 8.3%, and 7.8% in 2011, 2012 and 2013 respectively. Agriculture, particularly crop production trade and services continued to be the main drivers of non
49 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015) oil sector growth. The oil sector growth performance was not as impressive with 3.4%, 2.3% and 5.3% estimated growth rates in 2011, 2012 and 2013 correspondingly. Growth of the oil sector was thwarted throughout 2013 by supply disruptions arising from oil theft and pipeline vandalism, and by weak investment in upstream activities with no new oil finds. The key indices required to adequately assess an economy include the real GDP growth rate, unemployment and inflation rate
Table 2: Analytical Performance of Nigerian economy (2004-2013) Indices 2004 2005 2006 2007 2008 2 009 2 010 2 011 2 012 2 013 Real GDP 7.1 6.2 6.9 5.3 6.4 5.3 6.8 5.4 8.3 7.8 growth (%) Unemployment 13.4 11.9 13.7 14.6 14.9 19.7 21.1 23.9 2 4 22 rate % Inflation rate 15.4 17.9 8.4 5.4 11.5 12.6 13.8 10.9 1 2.2 8 .5
(%)
Source: National Bureau of Statistics
The Trend of Entrepreneurship Development in Nigeria: Government Interventions
50 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
Nigeria as a country is blessed with business and investment potentials due to the abundant vibrant and dynamic human and natural resources it possesses. Tapping these resources requires the ability to identify potential useful and economically viable fields of endeavour's .Nigerians have made their marks in diverse fields such as science, technology, academics, business and entertainment (Nkechi et. al., 2012). Thus entrepreneurship activities and innovation ingenuity in Nigeria have developed enterprises in the following areas; agricultural agro allied activities where there are foodstuffs, restaurants and fast food vending etc. In spite of the fact that entrepreneurship development has been regarded as the bulwark for employment generation and technological development in Nigeria, the sector nevertheless has had its own fair share of neglect with concomitant unpleasant impacts on the economy. From this premises, entrepreneurship when and if gallantly developed in Nigeria will take its pride of place in quelling unemployment and thus generating employment among Nigerian youths especially the graduates and once again place the economy on a proper footing (Nkechi et. al., 2012)
Overview of Recent Data on the Nigerian Economy.
1. 2.
3. 4.
51 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
5.
6.
However, the small and medium enterprises development Agency of Nigeria (SMEDAN) was established to promote the development of the MSMES sector of the Nigerian Economy. The public works and women/Youth Empowerment scheme (PW/WTE) was launched by the Federal Government to create immediate employment for women and local governments and the private sector. The scheme it was explained would generate 50,000 skilled jobs and 320,000 unskilled job opportunities. It is a component of the subsidy re-investment and empowerment programme (SURE-P).
The youth enterprise with innovation in Nigeria (You Win) programme is a collaboration of the Federal Ministries of Finance, communication Technology and Youth Development to organize an annual Business plan competition (BPC) for aspiring young entrepreneurs in Nigeria. Expectedly, the programme will provide a one-tune Equity grant of one-million-ten million naira to 1,200 selected aspiring entrepreneurs to start/expand their business concepts and mitigate start up risks; and to further generate some 80,000-110,000 new jobs for unemployed Nigerian Youths over a three-year period.
52 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
DISCUSSION OF FINDINGS Below is the summary of findings based on the interview conducted during the study: A. What is the level of entrepreneurship contribution to Nigeria's economic development? 1. Entrepreneurship has contributed significantly to Nigeria's economic development because it has created some employment for job seekers. 2. The present economic condition of recession has not allowed entrepreneurship development to promote Nigeria's economic development. 3. Corruption, religious and ethnic clashes have negatively affected government efforts to promote entrepreneurship development, hence no significant contribution has been made. 4. The large scale unemployment that bedevils the economy shows that no significant improvement has been made in the area of entrepreneurship development in Nigeria. 5. The contribution of entrepreneurship to Nigeria's economic development is marginal due to lack of access to capital. B. Do we have entrepreneurs that can power Nigerian economy? Over 60% of the respondents strongly believe that there are no enough entrepreneurs that can power the economy. This simply implies that although there are numerous micro, small and medium scale enterprises (MSMEs) across the nation, their size and capacities are largely negligible compared to the Nigerian economy as a whole. C. Has entrepreneurship brought wealth creation and employment opportunities to Nigerians 1.Entrepreneurship has fostered wealth creation and created employment in Nigeria extensively 2. It is true that entrepreneurship is a laudable and veritable tool for wealth creation and creation of employment opportunities. 3. It will require a transformation and a revolution for entrepreneurship development to significantly promote wealth creation and solve Nigeria's unemployment problem.
CONCLUSIONS Although Nigeria has to some extent enjoyed economic growth, the rate of unemployment and inflation over a period have been disturbing, because of the lack of data to measure the level of entrepreneurship development in Nigerian empirical analysis may be impossible. However, critical narrative textual case study, such as the one done in this research work can provide a degree of confidence to make a conclusion. The framework and policy for entrepreneurship with consistency is fundamental and enabling infrastructural developments are prerequisites for any impactful entrepreneurship development. Until sufficient jobs are created and wealth created, entrepreneurship has a long way to go in Nigeria. In summary, the paper found that; 1. Entrepreneurship plays a crucial role in the economic growth and development of any nation. There is, therefore, a verifiable link between entrepreneurship development and economic development. 2. Nigerian business environment and prevailing government policies and programs are quite unstable and turbulent to allow for any significant impact on entrepreneurship development. 3. Entrepreneurship can foster economic growth and development by generating employment and foster the growth of micro, small and medium enterprises in Nigeria. 4. Wealth creation and poverty
53 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015) reduction are key benefits when entrepreneurship is taken seriously by the Nigerian government since unemployment will be curbed gradually.
RECOMMENDATIONS The paper recommends that policy makers should recognize the essence of entrepreneurship to economic development and growth. Entrepreneurship deserves equal emphasis as is being placed on science and technology. D. However, it is important to first of all provide the way for proper policy coordination and policy stability. There have several government interventions and programmes aimed at promoting entrepreneurship and fostering Micro, small and medium enterprises (MSMEs) and yet no significant impact on Nigeria's economic development. E. A sustainable approach to poverty reduction is through encouraging youth, particularly those with identified business development. As result, there is need for reforms in educational curriculum to prepare students for self-reliance. F. Fixing Nigeria's basic infrastructure can do magic in reviving entrepreneurship development in Nigeria and promoting the Micro, small and medium enterprises sector to facilitate economic growth and development.
REFERENCES ACS, Z. (2012). How is entrepreneurship good for economic growth? Innovations. IMT press Journal innovation, Governance and Globalization Winter. Vol.1(1). PP. 97 – 107. Afolabi, A. (2015). The effect of Entrepreneurship on Economic Growth and Development in Nigeria. Article downloaded on Friday, 6th April, 2017 from www.eajournals.org at 4pm, Nigerian time. Ahonsi, B& Soyombo, O. (1996). Social Research Methods and Applications. Ibadan: Caltop publications Nigeria Ahiauzu, A. (2010). Entrepreneurship and economic development in Nigeria: the way forward. In A. Ahmed and S. Nwankwo (Eds.) Achieving sustainable development in Africa (pp. 278 – 296). London: WASD. Carree, M. & Thurik, A.R (2002). The impact of entrepreneurship on economic growth. InZoltan ACs and David B. Audretsch (2003), International Handbook of Entrepreneurship Research, Boston/Dordrecht: Kluwer Academy Henderson, J (2007). Understanding rural entrepreneurs at the country level: data challenges. Paper presented at the frameworks for entrepreneurship research in food, agriculture, and rural development workshop, Kansas City, October 18. Nkechi, A. , Ikechukwu, E. & Okechukwu, U. F (2012). “Entrepreneurship development and employment generation in Nigeria: problems and prospect”. Universal journal of education and general studies. Vol. 1 (4), 88 – 102.
54 Entrepreneurship Contribution to The Development and Growth of The Nigerian Economy (2005 – 2015)
National youth corps and national bureau of statistics (2016) overview of recent data on Nigerian economy. NBS annual publication. Naude, W. (2013). “Entrepreneurship and Economic Development: Theory, Evidence and Policy”. Discussion paper. Institute for the study of lab Osalor, P. (2010). “Understanding Entrepreneurship and its Relevance to Nigerian Society”. Vanguard Newspaper, April 4, 2010. Popoola, T. (2014). “Entrepreneurship and self-reliance: Building an Entrepreneurial Economy”. A conference paper-in the Nigerian Accountant. Journal of the Institute of Chartered Accountants of Nigeria. Vol. 47 (3). July/Sem. Schumpeter, J.A. (1934). The theory of Economic Development: An inquiry into profits, capital, credit, interest and the Business cycle. Cambricge, MA: Havard University Press. Thaddues, E. (2012). Perspectives: Entrepreneurships Development and Growth of Entrepreneurial Practice Review, Vol. 2(2). 31 – 3 UNCTAD. (2004). Entrepreneurship and Economic Development: The Empretec show case. May, 2004 – A publication of United Nations Conference on Trade and Development. United Nations Report (2011). “Entrepreneurs and Economic Development”. In Economic Development, United Nations University Online Publication. Retrieved on September 2, 2014 from http://unu.edu/publications/articles/are-entrepreneural-societes-also-happi Wennekers, S. & Thurik, R. (1999). “Linking Entrepreneurship and Economic Growth”. Small Business Economics, Vol.13, (1). PP. 27 - 56
55 Veritas International Journal of Entrepreneurship Development (VIJED)
PRODUCT PORTFOLIO MATRIX, GENERIC STRATEGIES AND ORGANIZATIONAL PERFORMANCE IN UNILEVER NIGERIA PLC
ADEYEMI Omolade Sunday Department of Business Administration Oduduwa Universty, Ipetumodu [email protected]
ADEYEMI Oluwatoyin Damilola LEAD CITY UNIVERSITY,IBADAN Department of Business Administration [email protected]
ADEYEMI Kayode Samuel Department of Business Administration Ododuwa University, Ipetumodu [email protected]
And
LAWAL Olabisi Oluwaseyi Oduduwa University,Ipetumodu [email protected]
Citation: Sunday, A. O., Damilola A. O., Samuel, A. K., & Oluwaseyi, L. O. (2018). Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc. Veritas International Journal of Entrepreneurship Development (VIJED). ______Veritas University Abuja. 1 (1) 56-68 ABSTRACT This research study focus examined the effect of product portfolio matrix, generic strategies and organizational performance with particular reference to Unilever Nigeria Plc. It sought to identify the nature of product portfolio matrix, generic strategies and organisational performance in Unilever Nigeria Plc, to examined the factors influencing the effect of product portfolio generic strategies on organisational performance in Unilever Nigeria Plc, and also to analyze the current main challenges of product portfolio management faced by Unilever Nigeria Plc. To achieve these objectives, both Primary and Secondary data were sourced using well structured questionnaire administered to the selected three levels of management: top level managers, middle level managers and operational level managers in Unilever Nigeria Plc. Data collected were duly analyzed using descriptive and inferential statistics. From the data analyzed, the result showed that 55 (45.8%) of the respondents strongly agreed that new products are seen vital for securing a company's
56 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc competitive position in the market, 54 (45.0 %) agreed, 3 (2.5%) disagreed, while 8 (6.6%) of the respondents do not respond to the question. The result also showed that 53 (44.2%) strongly agreed that a wide product offering is seen to allow reaching many customer segments and a larger market share, 44 (36.7%) agreed to this, 10 (8.3%) disagreed, 11 (9.1%) strongly disagreed, while 2 (1.7 %) of the respondents did not respond. Furthermore, the result showed that 53 (44.2%) of the respondents strongly agreed that product at high growth rate of the matrix contributes to the profit of the company, 48(40.0%) agreed, 7(5.8%) disagreed, while 12(10.0%) strongly disagreed. The study concluded that there are significant factors influencing the effect of product portfolio generic strategies on organisational performance and also there is significant challenge facing product portfolio management in Unilever Nigeria Plc. The researcher further recommends: that Unilever Nigeria Plc should use more of the focus strategy than the other strategies of cost leadership and or differentiation. The use of a company logo is more recommended than the use of company colors.
Keyword: Product, Strategies, Performance, Product portfolio matrix, Generic Strategies and Organizational ______performance.
INTRODUCTION Products are vital resources for securing a company's competitive position in the market (Balachandra, 2007; Poolton and Barclay, 2008; Lynn, 1999), while development of new products is strongly driven by various customer requirements. However, there are also several other drivers that initiate product development (Majava et al., 2012). Aside new product development, also existing products are upgraded frequently to achieve cost reductions and improve product performance (Hänninen, 2012). Today, also company mergers and acquisitions are meaningful ways to enter new markets and widen a company's product portfolio without conducting new product development. This kind of environment leads easily to widening product portfolios has occurred in several industries during the recent decades (DenHartog, 2012).
Statement of the Problem Many product portfolio related challenges have been presented in Hewlett-Packard's portfolio management and operations research (Ward et al., 2010). According Ward et al. (2010) the following challenges have been identified for offering multiple similar products:- increase of overall demand volatility, reduced forecasting accuracy, impact to revenue and cost of the product over life cycle, increase in inventory-driven costs and order-cycle time, increased liabilities to channel partners, increased cost for operations, R&D, marketing and administration, and complexity of product lines that confuses customers, sales representatives, channel partners and even driving business to competitors. Without effective motivational packages and procedures the said vices are likely to continue and retard the achievement of the organization as has been suggested, the average business firms place more remises on profit, especially in a capitalist economy as ours. It is against this backdrop that the study examines the effect of product portfolio matrix generic strategies and organizational performance.
57 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc
Objectives of the Study The general objective study is to examine the effect of product portfolio matrix generic strategies and organizational performance with particular reference to Unilever Nigeria Plc. The specific objectives are to: i. identify the nature of product portfolio matrix generic strategies and organisational performance in Unilever Nigeria Plc; ii. examine the factors influencing the effect of product portfolio generic strategies on organisational performance in Unilever Nigeria Plc.
Research Questions The following are the research question for the study: i. What are the nature of product portfolio matrix generic strategies and organisational performance in Unilever Nigeria Plc? ii. What are the current main challenges of product portfolio management faced by Unilever Nigeria Plc?
Hypotheses of the Study The following are the hypotheses for the study
1. H0: There is no significant factors influencing the effect of product portfolio generic strategies on organisational performance
H1: There is significant factors influencing the effect of product portfolio generic strategies on organisational performance
LITERATURE REVIEW This section surveyed and reviewed the literature related to the topic: product portfolio matrix, generic strategies and organizational performance in Nigeria. It focused on the various strategies that are available to an industry to gain a competitive edge over its competitors.
Conceptual Review The Concept of Strategy The word strategy comes from the Greek word Strategos which refers to military generalship and combines stratos (the army) and ago (the lead). The history of strategic planning has its roots in, and is a heritage of the military (David, 2003). The Webster's New World Dictionary alludes to this militarism, defining strategy as the science of planning and directing large scale military operations of maneuvering forces into the most advantageous position prior to actual engagement with the enemy. Clearly, the key aim of both business and military strategy is to gain competitive advantage or combat superiority over competitors or foes as the case may be. What business strategy is all about is, summed up in two words 'competitive advantage' … the sole purpose of strategic planning is to enable a company gain, as efficiently as possible, a sustainable edge over its competitors. Competitive strategy is therefore an attempt to alter a company's strength relative to that of its
58 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc competitors in the most efficient way and also to mould actions and decisions of managers and employees in a coordinated, company-wide game plan (Ohmae, 2003).
Concept of Product Portfolio Management Portfolio management approach can be applied in various areas to manage a set of activities conducted by the same pool of resources (Vähäniitty, 2006). The main objectives of portfolio management can be defined as 1) maximizing the value of portfolio, 2) balancing the portfolio, and 3) linking the portfolio to business strategy (Cooper et al., 2007a). In addition, portfolio management can be seen as a higher management level decision making process for managing uncertainty, dynamic opportunities, strategic goals, and interdependencies between portfolio items to obtain clear decisions based on agreed criteria (Cooper et al., 2001).Products can be evaluated based on their strategic importance and ability to become top class products. Also, resources should be allocated to products according their business value. (Ward and Peppard, 2002).
The Concept of Competitive Strategies A company has competitive advantage whenever it has an edge over its rivals in terms of attracting customers and defending against competitive forces. A firm's competitive strategies consist of the business approaches and the initiative it takes to attract customers with stand competitive pressure and strengthens its market share. Thus the firm has to focus in creating tomorrow's competitive advantages faster than competitors mimic the ones it poses today. The strategy for gaining competitive advantage combines both offensive and defensive actions. Competitive strategies have a narrow scope than business strategies; competitive strategy deals exclusively with management's action plan for competing successfully and providing customers with more superior value. According to Porter (1980), there are five business strategies that can be adopted by organisations to gain competitive advantage. The five strategies relate to the extent to which the scope of a business' activities are narrow versus the broad and the extent to which a business seeks to differentiate its products. Type of competitive advantage being pursued.
Generic Competitive Strategies The idea underlying the concept of generic strategies is that competitive advantage is at the heart of any strategy, and achieving competitive advantage requires a firm to make a choice (Porter, 1985). A firm cannot be all things to all people as this will mean that the firm has no competitive advantage at all. The firm must thus make a choice about the type of competitive advantage it seeks to attain and the scope within which it will attain it. The generic strategies are mainly; cost leadership, product differentiation and customer focus. Under cost leadership, a firm seeks to become the lowest cost producer in its industry (Porter, 1985). This can be achieved by the pursuit of economies of scale, implementation of cost cutting technology, stress reduction in overhead and administrative expenses and preferential access to raw materials. If a firm can achieve and sustain cost leadership, then it will be an above –average performer in its industry provided it can command prices at or near the industry average. The products of the cost leader must however be acceptable by the buyer otherwise
59 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc he will have to sell them at a discounted price. Pearce and Robinson (2005) notes that a low-cost leader is able to use its cost advantage to charge lower prices or to enjoy higher profit margins. By so doing, the fir m can defend itself in price wars, attack competitors on price to gain market share and be dominant in the industry thus gaining exceptional returns. Porter (1985) notes that in the differentiation strategy, a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely position itself to meet the needs. The firm is in turn rewarded for its uniqueness with a premium price. Differentiation can be based on the product itself, the delivery system by which its sold, the marketing approach and a broad range of other factors. Differentiation extends beyond the characteristics of the product or service to encompass every possible interaction between the firm and its customers (Kitoto, 2005).
According to Poddar & Gadhawe (2007), focus is a generic strategy that emphasizes a particular group, geographical location, a particular age group or income level, profession or on the basis of sex. The underlying assumption that hovers around focus is that a firm should be able to serve a narrow strategic target group effectively and efficiently. The customers are further assumed to have different needs and wants with a bias for different type of product or differentiated product. In other words, there must be a valid basis for differentiation and existing competitors are not meeting those needs and wants. According to Porter (2005), focus strategy has two variants. In cost focus a firm seeks a cost advantage in its target segment, while in differentiation focus a firm seeks differentiation in its target segment.
Figure 2.1: Porter's Concept of Generic Competitive Strategies Source: Reed, 2002, p.98.
Organisational Performance Performance is a recurrent theme in most branches of management, including strategic management, and it is of interest to both academic scholars and practicing managers. While prescriptions for improving and managing organisational performance are widely available (Nash, 2003), the academic community has been preoccupied with discussion and debates about issues of terminology, level of analysis (i.e., individual, work unit, or organization as a whole), and conceptual bases for assessment of performance (Ford and Schellenberg, 2002). The performance concept and the broader area of organisational effectiveness, and its importance has been widely recognized by several scholars (Connally et al., 2000). The treatment of performance in research settings is perhaps one of the thorniest issues confronting academic research today. With the volume 60 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc of literature on this topic increasing, there appears to be little hope of reaching any agreement on basic terminology and definitions (Venkatraman and Ramanujam, 2006). Several authors have argued the importance of organisational or business performance along three dimensions namely: (i) theoretical (Cameron and Whetten, 2003), (ii) empirical (Ginsberg and Venkatraman, 2005; and (iii) managerial (Nash, 2003). The narrowest conception of business performance centers on the use of simple outcome based financial indicators that are assumed to reflect the fulfillment of the economic goals of the firm and is referred to as the financial performance, which has been the dominant model in empirical strategy research (Hofer, 2003; Venkatraman and Ramanujam, 2006).
Theoretical Review Cost Leadership Strategy Theory This is Porter's generic strategies known as cost leadership (Malburg, 2000). This strategy focuses on gaining competitive advantage by having the lowest cost in the industry (Porter, 1987, 1996; Cross, 1999). In order to achieve a low-cost advantage, an organization must have a low-cost leadership strategy, low-cost manufacturing, and a workforce committed to the low-cost strategy (Malburg, 2000). The organization must be willing to discontinue any activities in which they do not have a cost advantage and should consider outsourcing activities to other organizations with a cost advantage (Malburg, 2000). For an effective cost leadership strategy, a firm must have a large market share (Hyatt, 2001). There are many areas to achieve cost leadership such as mass production, mass distribution, economies of scale, technology, product design, input cost, capacity utilization of resources, and access to raw materials (Malburg, 2000).
Empirical Review Cost leadership Strategy and its effects on performance A research done by Gakumo (2006) showed that most commercial banks in Kenya based their cost leadership strategy on high level of capital investment and streamlined organizational structure. The process engineering, skills and volume sale techniques were the least emphasized aspects of the cost leadership strategy applied by the commercial banks. According to Njoroge (2006), keeping lower overheads than competitors was more preferable than keeping same overheads as with the competitors, this would in turn translate to offering products at lower prices than the competitors. A research done by Gitonga (2003) found that cost leadership is one of the strategies applied by the hospitality establishments in Nairobi, Kenya. In a study carried by Kariuki (2006) the preference of cost leadership strategy was not much, with 72% of the respondents in the hotel industry not preferring to use the strategy. That research was in the service industry, it will be of importance to compare the results of this research project in the dairy industry that deals with tangible goods. According to Chepkwony (2008), cost leadership is a strategy that is aimed at reducing the cost without altering positively or negatively the quality of the product. Business firms following this type of strategy seek competitive advantage based entirely upon achieving low cost production. According to Dulo (2006) manufacturing firms pursuing a cost leadership strategy follow policies of purchasing materials in large volumes to get low cost of inputs, mass production of a limited range of products, marketing non branded or privately branded goods or services (to avoid advertising costs), making extensive use of 61 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc automation to maximize economies of scale, locating any manual production in low wages areas of the world and aggressive pricing to build and maintain market share.
METHODOLOGY This section gives a description of the methodology adopted for this study. It entails the method that will be used for data collections, procedure for analyzing data collected, the research instruments, the population of study, the sampling method and of course the limitation of the methodology adopted for the study.
Research Design This research was a descriptive survey study that was aimed at establishing the effects of product portfolio matrix generic strategies on organizational performance in Nigeria. A descriptive study is concerned with finding out what, where and how of a phenomena. According to Valdez (2009) descriptive study is concerned with the description of data and characteristics about a population, the goals of this study is acquisition of factual, accurate and systematic data that can be used in averages, frequencies and other similar calculations. Descriptive studies seldom involve experimentation as they are concerned with naturally occurring phenomena than with the observation of controlled situations.
Sources of Data Collection The data used for the purpose of the study will be gathered through primary and secondary sources.
Study Population, Sample Size and Sampling Procedure Study Population Respondents will be selected from administrative department of the Unilever Nigeria Plc in Lagos State. The reason for this is that, if not narrowed down to a specific environment, gathering of information becomes more difficult as influencing factors are different. Unilever Nigeria Plc in Lagos State was choosing because among the manufacturing industry in Lagos State is one of the most effective and efficacy industry compare to other industry. The population was distributed for the study are as follows: Junior staff - 85 Senior - 52 Management - 13 Total 150
Sampling Procedure The sample size of the research work is 120 employees. The sampling techniques used are stratified random sampling techniques. The total population of employees was stratified into three levels of management-low, middle and top management. The number of employees included in the sample size from each stratum was selected through the use of systematics random sampling techniques.
62 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc
Even numbers are assigned to each of the employees on random bases. All employees with even numbers formed the sample size. This technique ensures the randomness of the sample size. Junior staff - 65 Senior - 44 Management - 11 Total 120
Data Analysis The data gathered from both primary and secondary sources will be analyzed using descriptive statistic, such as frequency distribution, percentages and tables etc. The descriptive statistics will be utilized to analyze the data obtained with a view to achieving the objective of the study. After the data collection, then the processing will take place; Responses in the questionnaire will be coded and used to carry out various statistical analyses. In order for the research to be useful, a descriptive approach of data analysis will be applied. The researcher has decided to use percentage and chi- square statistical technique to test the reliability of dependent variable over independent variable.
The Chi-Square formula is given below:
63 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc
ANALYSIS OF RESEARCH OBJECTIVE The Nature of Product Portfolio Matrix Generic Strategies and Organisational Performance in Unilever Nigeria Plc Table 4.2 below item 1, showed that amidst the 120 respondents interviewed 55 (45.8%) of the respondents strongly agreed that new products are seen vital for securing a company's competitive position in the market, 54 (45.0 %) agreed, 3 (2.5 %) disagreed, while 8 (6.6%) of the respondents do not respond to the question. This shows that new products is strongly driven by various customer requirements. However, there are also several other drivers that initiate product development.
Item 2, indicated that 53 (44.2 %) strongly agreed that a wide product offering is seen to allow reaching many customer segments and a larger market share, 44 (36.7%) agreed to this, 10 (8.3 %) disagreed, 11 (9.1 %) strongly disagreed, while 2 (1.7 %) of the respondents did not respond. This implies that the common belief is that a diverse product portfolio will have a positive effect on a company's sales volumes
Item 3, revealed that 73 (60.8 %) of the respondents strongly agreed that a high product variety is thought to stimulate sales by segmenting customers and attracting variety-seeking shoppers, 34(28.3%) agreed, 7 (5.8%) disagreed, 4 (3.3 %) strongly disagreed while 2 (1.7 %) did not respond. This means that internal product variety and complexity usually reduce sales per product variant.
Item 4, showed that, 37 (30.8 %) of the respondents agreed that product variety has emerged as a source of competitive differentiation responding to the requests for increasingly customized products and services, when the variety is even desired, 67 (55.8 %) strongly agreed, 6 (5.0 %) disagreed, 3 (2.5 %) strongly disagreed, while 7 (5.9%) did not respond. This implied that today, companies are often too focused on managing single products instead of managing the entire product range. Consequently, companies could benefit from considering several product families rather than separately optimizing each product.
Item 5, showed that 55 (45.8 %) of the respondents agreed that products can be evaluated based on their strategic importance and ability to become top class products, 51 (42.5 %) strongly agreed, 6 (5.0%) disagree, 2 (1.7%) strongly disagree, while 6 (5.0%) did not respond. This implied that portfolio management can be seen as a higher management level decision making process for managing uncertainty, dynamic opportunities, strategic goals, and interdependencies between portfolio items to obtain clear decisions based on agreed criteria.
64 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc
Table 2: Frequency Distribution of Respondent on the Nature of Product Portfolio Matrix Generic Strategies and Organisational Performance in Unilever Nigeria Plc
5 4 3 2 1 ITEMS Total SA A D SD NS F % F % F % F % F % 1 New products are seen vital for 55 45.8 54 45.0 3 2.5 - - 8 6.6 120 100 securing a company’s competitive position in the market
2 A wide product offering is seen to 44 36.7 53 44.2 10 8.3 11 9.1 2 1.7 120 100 allow reaching many customer segments and a larger market share 3 A high product variety is thought to 34 28.3 73 60.8 7 5.8 4 3.3 2 1.7 120 100 stimulate sales by segmenting customers and attracting variety- seeking shoppers 4 Product variety has emerged as a 37 30.8 67 55.8 6 5.0 3 2.5 7 5.9 120 100 source of competitive differentiation responding to the requests for increasingly customized products and services, when the variety is even desired 5 Products can be evaluated based on 55 45.8 51 42.5 6 5.0 2 1.7 6 5.0 120 100 their strategic importance and ability to become top class products.
Source: Field Survey; 2017
Table 3: Frequency Distribution of Respondent on Factors Influencing the Effect of Product Portfolio Generic Strategies on Organisational Performance in Unilever Nigeria Plc
5 4 3 2 1 ITEMS SA A DG SD NS Total F % F % F % F % F % 1 Product at high growth rate of the 48 40.0 53 44.2 7 5.8 12 10.0 - - 120 100 matrix contributes to the profit of the company. 2 Bottling company in Nigeria 55 45.8 51 42.5 6 5.0 2 1.7 6 5.0 120 100 operates in competitive environment. 3 Motivation does not enhance 72 60.0 30 25.0 10 8.3 8 6.7 - - 120 100 productivity and performance of employees in Unilever Nigeria plc 4 High market share product 40 33.3 51 42.5 19 15.8 10 8.3 - - 120 100 contributes to company performance. 5 Differentiation strategy can lead to 62 51.7 53 44.2 3 2.5 2 1.6 - - 120 100 company profitability . 6 Should company use focus strategy 9 7.5 4 3.3 56 46.7 51 42.5 120 100 to achieve performance. 7 The three generic strategy h ave 62 51.7 29 24.2 25 20.8 4 3.3 120 100 profound effect in the performance of your company .
Source: Field Survey; 2017
65 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc
Hypothesis Testing Hypothesis 1
H0: There is no significant factors influencing the effect of product portfolio generic strategies on organisational performance
H1: There is significant factors influencing the effect of product portfolio generic strategies on organisational performance
Table 5: Frequency Distribution on Significant Factors Influencing the Effect of Product Portfolio Generic Strategies on Organisational Performance Responses Observed Frequency (Oj) Expected frequency (Ej) Agree 44 24.0 Strongly agree 59 24.0 Disagree 6 24.0 Strongly disagree 8 24.0 No response 3 24.0 Total 120
Calculating the expected frequency (Ej) = 120/5 = 24
Computation of Chi Square Statistical test Responses Oj Ej Oj-Ej (Oj –Ej)2 (Oj-Ej)2/Ej Agree 44 24.0 20 400 16.7 Strongly agree 59 24.0 35 1225 51.0 Disagree 6 24.0 -18 324 13.5 Strongly disagree 8 24.0 -16 256 10.7 No response 3 24.0 -21 441 18.4 Total 110.3
Degree of freedom = (R – 1) x (C -1) = (5– 1) x (2 – 1) = 4 x 1 = 4
Level of Significance = 5% (0.05) 2 Therefore, Xe (X-tabulated) = 9.488 2 2 Since the computed X (110.3) is greater than the tabulated Xe 9.488, the null hypothesis (H0) would be rejected and the alternate hypothesis (H1) accepted. It can therefore be concluded that there is significant factors influencing the effect of product portfolio generic strategies on organisational performance.
66 Product Portfolio Matrix, Generic Strategies and Organizational Performance in Unilever Nigeria Plc
Summary of Findings The study examined the effect of product portfolio matrix generic strategies and organizational performance with particular reference to Unilever Nigeria Plc. It sought to identify the nature of product portfolio matrix generic strategies and organisational performance in Unilever Nigeria Plc, to examine the factors influencing the effect of product portfolio generic strategies on organisational performance in Unilever Nigeria Plc, and also to analyze the current main challenges of product portfolio management faced by Unilever Nigeria Plc. The results further show that all the three competitive strategies have a positive and a significant relationship with the performance of manufacturing firms. The focus strategy was found to have the strongest and most significant relationship with performance. Cost leadership strategy and differentiation strategy both had significant relationship with performance.
Conclusion Based on the above findings the study concluded that there are significant factors influencing the effect of product portfolio generic strategies on organisational performance and also there is significant challenge facing product portfolio management in Unilever Nigeria Plc. The results of empirical research suggest there are significant differences in the configuration of variables by organizations adopting different generic strategies. There are also significant performance differences across generic types. However, our results do not support Porter (1980, 1985) since they suggest those combination strategies under certain circumstances are more successful than those organizations dedicated to single strategic thrust.
Recommendations The following recommendations are proffered based on the findings of the study: I. It is recommended that Unilever Nigeria Plc should use more of the focus strategy than the other strategies of cost leadership and or differentiation. ii. The use of a company logo is more recommended than the use of company colors. iii. From the study findings it is also recommended that Unilever Nigeria Plc should meet the delivery cost of their products to the clients as this is a good way of building customers loyalty. iv. In light of the study findings it is also recommended that Unilever Nigeria Plc offer
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Bossidy, L., and Charan, R. (2002), Execution, The discipline of getting things done, Crown Business, New York, New York. Buzzell, R.D., Gale, B.T., Sultan, R.G.M., (2005). Market share—a key to profitability. Harvard Business Review, January–February, 97– 107. Cameron, K.S., Whetten, D.A., (2003). Organisational Effectiveness: A Comparison of Multiple Models. Academic Press, New York. Chepkwony (2008) Marketing Strategies Adopted by Micro and Small entrepreneurs in Eldoret, Kenya. Unpublished MBA Project, School of Business. Kenyatta University. Connally, T., Conlon, E.J., Deutsch, S.J., (200). Organisational effectiveness: a multiple- constiuency approach. Acadenmy of Management Review 5, 211–217. Cooper, J. and Griffiths, J. (2004), “Managing Variety in Automotive Logistics With the Rule of Three”, International Journal of Logistics Management, Vol. 5, No. 2, pp. 29 –40. Cooper, RG.,Edgett, SJ., and Kleinschmidt, EJ. (2001), “Portfolio Management in new product development: Results of an industry practice study”, R&D management, Vol, 31, No. 4, pp. 361-380. Cooper, R. G., Edgett, S. J., and Kleinschmidt, EJ. (2007),” Portfolio management in new product development: Lessons from the Leaders-I”, Research technology management, Vol. 40, No. 5, pp. 16-28. Cowling, K. (2002). Market Structure and Corporate Behavior. Gary Mills, London. DenHartog, E. J. (2012). Reducing complexity at Procter & Gamble -complexity approach towards product portfolio management”, Master Thesis in Industrial Engineering & Management, University of Twente. Douglas, S.P. and Rhee, D.K. (2009). Examining Generic Competitive Strategy Types in U.S. and European Markets, Journal of International Business Studies, Fall, pp. 437–463. Drazin, R., (2000). Professionals and innovation: structural–functional versus radical–structural perspectives. Journal of Management Studies (UK) 27 (3), 245–263. Dulo, G.A. (2006). The sources of competitive advantage and the performance of firms in the Kenya sugar industry. Unpublished MBA Project. School of Business University of Nairobi. Fine, C. H., (2003). Quality control and learning in productive systems.Unpublished doctoral dissertation, Stanford University, Graduate School of Business, CA. Ford, J. D., Schellenberg, D. A. (2002). Conceptual issues of linkage in the assessment of organisational performance. Academy of Management Review 7, 49–58. Gakumo, D. N. (2006). Application of Porter's Generic strategies by commercial banks in Kenya. Unpublished MBA Project School of Business. University of Nairobi. Galbraith, C., Schendel, D. (2003). An empirical analysis of strategy types. Strategic Management Journal 4, 153–166
68 Veritas International Journal of Entrepreneurship Development (VIJED)
THE IMPACT OF CULTURAL FACTORS ON ENTREPRENEURIAL PERFORMANCE
CHIKA Ebenezer Duru, PhD. Department of Entrepreneurship Studies Veritas University Abuja (The Catholic University of Nigeria) [email protected]
Citation: Duru, C. E. (2018). The Impact of Cultural Factors on Entrepreneurial Performance. Veritas International Journal of ______Entrepreneurship Department (VIJED). Veritas University, Abuja. 1 (1) 69-90 ABSTRACT This research study focused on examining culture as it affects the performances of entrepreneurs. Firstly, the prominent cultural constrain that encroach upon the operations of entrepreneurs or enterprises in the understudied and secondly, it should be established how these salient cultural constraints meet in one way or the other in the performance of firms. In addition, socio-cultural variables also have impact on planning and control as well as the various production functions of these enterprises such as research development, production, marketing and finance. This study will attempt to access the various cultural factors that affect entrepreneurial operations in the understudied environment and also determine how these cultural factors affect the performance of entrepreneurs in the said environment. In an effort to accomplish this objective, primary data were collected using questionnaire while the secondary data were generated from various author's contribution which were analyzed with the aid of table and simple percentages. The hypotheses formulated were tested using the chi square. The findings revealed that the belief system, norms and values of the people have significant influence on the business performance of an entrepreneur. However, it has been recommended among others that the entrepreneur should take into consideration these cultural factors in other to increase his/her performance in business. Also, Nigerian educational institutions should from secondary school introduce entrepreneurial development education into the school curricula. This will enable our youths to acquire knowledge and skills required for entrepreneurial development early which will in turn enhance economic development.
______Key words: Entrepreneurs, Entrepreneurship, Business, Culture, Business Environment, Norms, Myth.
INTRODUCTION Entrepreneurship practices exist in most countries of the world including Nigeria. In Nigeria, the development of entrepreneurship has gone a long way to achieve industrialization and economic development. Management scholars agree that although management theory and practices have universal applications, the individual and groups with which it must interact and the external
69 The Impact of Cultural Factors on Entrepreneurial Performance environment differs in some ways. It is acknowledged by management scholars also that there are many deviations in management theory all over the world. The attempt to discover the determinants of managerial success of entrepreneurs has always been a heart-throb among researchers of various fields of studies. More so, being in business is not only about knowing how to make sales and generate great profits but also involves understanding the environment you intend establishing your business (Gartner, 1988). This author further asserted that a complete business person ensures that he or she studies the social – cultural attributes of the people that live in the environment they intend starting their business during the feasibility studies (Gartner, 1988). Socio – cultural is a combination of two words social and culture. Socio-cultural factor is dynamic in nature but cannot be changed mechanically rather could be modified to suit a given environment. Almost every perception and behavior is guided by the human invention we call culture. Each culture shapes perception and behaviours by paving relative attention to some details of reality and ignoring others or by permitting some actions and forbidding others.
Culture which forms parts of the complex education, sociological, cultural, political, legal and economic that interact and affect that performance of productive entrepreneurs is often the less treated and less emphasized amongst these foregoing factors by business people (Congregado, 2008), this notwithstanding the fact that it forms the bedrock on which the other factors operate. Speculations dealing with the supposed effects of cultural factors of an environment on the performance of productive enterprises in that environment are on the rife. However, empirical studies and a careful analysis of this situation in the context of entrepreneurship operating in developing countries remains to be exhaustively and satisfactorily treated. Though, it can clearly be said that cultural factors have a substantial impact on managerial or entrepreneurial effectiveness and productivity measured in a given instance owing to the fact that sociological and cultural constraints are difficult to measure in quality.
Statement of Problem The fact that entrepreneurs contribute to the development of less developed countries is irrefutable. The issue that a nation culture and primary socializations produce several constraints which impinge upon the operation of productive entrepreneurs operating in developing countries like Nigeria ought to carryout in depth analysis on the socio-cultural factors inherent in the environment before they proceed with that venture. The firm once it is established is constrained by various factors inherent in the environment. Here, dealing with people oriented with strange custom and values usually present a problem. The above issue is reflective of the Nigeria situation as experts have posited that cultural constraint are the bottom line when considering the issue of inefficiency and poor performance of enterprises in Nigeria. This may not completely be true because whenever one is dealing with human attitudes and values, it is often hard to distinguish popular misconception from the realities of the situation. There arises therefore a need to determine (empirically) whether the cultural constraint in Abuja is significant enough to affect the performance of entrepreneurs operating therein.
70 The Impact of Cultural Factors on Entrepreneurial Performance
Objectives of Study The objective of this study is to identify the impact of cultural factors on entrepreneur's performance in Nigeria, other objectives of the study include: i. To identify the present effect of cultural factors on entrepreneurial performance. ii. To access the relationship between Entrepreneurial Development in Nigeria and Culture iii. To examine the challenges of Entrepreneurship Development in Nigeria.
Statement of the Research Questions Research questions are testable inquiries into a specific concern or issue. It is the initial step in a research project which guides and centers one's project. In order to meet these objectives, the following testable research questions are developed: i. To what extent does belief system relate with entrepreneurs performance of some selected private firms in Abuja? ii. Are there any challenges faced by entrepreneurial development in Nigeria? iii. Is there any relationship between Entrepreneurial Development in Nigeria and Culture?
Statement of Hypothesis The hypothesis is an informed guess or prediction that indicates what the researcher thinks the result will be before the study is carried out (Duru, 2016). The hypothesis testing ensures whether there is correlation between these research questions and the study concerns in forms of Null and Alternate Hypothesis (Babbie, 1983). It is in Duru (2016) statement of testing, supporting Patton (1990) that the researcher will infer from the study if there is indeed a relationship between the research questions and the research study concerns.
LITERATURE REVIEW Social system and culture of people are what mix-up to form the Socio-cultural business environment and consequently, the entrepreneurs become molded by it (Congregado, 2008). Culture is the complex whole knowledge, belief, arts, values, moral habits custom and any other capability acquired by man as member of society. According to Faltin (2001), culture affects the way people make decision, think, feel and net in response to opportunities and threats. It also influences the selection of people for particular jobs which in variably affects behaviour unconsciously. He showed in his model that culture is a central driving force with a people's motivations and priorities of a society. Culture which forms parts of the complex education, sociological, cultural, political, legal and economic that interact and affect the performance of productive entrepreneurs is often the less treated and less emphasized amongst these foregoing factors by business people (Faltin, 2001); this notwithstanding the fact that it forms the bedrock on which the other factors operate. Speculations dealing with the supposed effects of cultural factors of an environment on the performance of productive enterprises in that environment are on the rife. However, empirical studies and a careful analysis of this situation in the context of entrepreneurship operating in developing countries remains to be exhaustively and satisfactorily treated. Though, it can clearly be said that cultural
71 The Impact of Cultural Factors on Entrepreneurial Performance factors have a substantial impact on managerial or entrepreneurial effectiveness and productivity measured in a given instance owing to the fact that sociological and cultural constraints are difficult to measure in quality.
THEORETICAL FRAMEWORK. The Expectancy Theory The expectancy theory by Hofstede (1984) explains that the propensity to act in a certain way is contingent on the expectation that the act will be followed by certain outcome and the relation between that outcome and the goals of the individual. This theory suggests that the owner-manager would engage in growth seeking behaviour if: (i) growth is consistent with his/personal goals, (ii) he/she believes growth-seeking behaviour will lead to growth and (iii) he/she believes in her/his ability to yield growth. Mathematically, the propensity to engage in growth oriented behaviour is the weighted sum of expected outcomes of growth. The relevance of this theory to the current study is that business will thrive in Abuja if their goals are favoured with the socio-cultural environment in which they operate.
The Theory of Planned Behaviour (TPB) The TPB was proposed by Orbell, Hodgkins and Sheeran (1997) which describes that the intention to create a firm is influenced by different beliefs grouped in three categories. The first one is personal attitudes toward the enterprise creation behaviour which refers to whether people have a positive or negative perception about this behaviour. The second is subjective norm which consist of the perceived social pressure to carry out or the entrepreneurial behaviour including parental role modeling, parental support and opinions of important others. The third one is perceived control (self-efficacy or ability to perform the behaviourof interest). This implies that a high sense of self- efficacy will indicate a higher probability to take the decision to start an entrepreneurial process. Generally, the theory gives emphasis on the role of intention, which is assumed to capture the motivational factors that influence behaviour. Gregson (2014) opined that intentions are indications of how hard people are willing to try and how much of an effort they are planning to exert to perform the behaviour (Congregado, 2008). Therefore, the intention of entrepreneurs in Abuja aim higher performances on their business will be determined by society or individual beliefs and attitudes toward business growth aspiration.
Classical Motivation Theory According to Maslow (1971), an individual's level of motivation to achieve goals will slacken as the goals are achieved. Maslow's hierarchy of needs theory posits physiological and safety needs are lower needs which are mainly satisfied extrinsically (money being one way of satisfying them) while esteem and self-actualization needs are considered higher order needs that are satisfied intrinsically. This theory would suggest that an owner manager's survival and security needs will have to be substantially met before status or self-actualization needs are activated. When applied to
72 The Impact of Cultural Factors on Entrepreneurial Performance firm growth, the theory would suggest that growth motivation will depend on the survival, security, status or self-actualization. The relevance of this theory to the current study is that the motivation of entrepreneurs to undertake entrepreneurial ventures will be the function of goals achieved. This motivation will depend on security of their business funds, status and support given by the society. From the Maslow & Lowery (1998) above, it is recommended that the Theory of Planned Behaviour (TPB) should be put into consideration as it relates to the subject matter which suggests that the intention of entrepreneurs in Abuja aim higher performances on their business will be determined by society, or individual beliefs and attitudes toward business growth aspiration.
CONCEPTUAL FRAMEWORKS Culture and People Nigeria society is replete with cultural configurations and patterns that not only shape individual behaviour but those of organizations as well. The word culture has several definitions attached to it. According to Faltin (2001), culture is a collective programming of the mind which distinguishes one group of people from another in terms of norms and values. He also discovered that these value shared by members of a group are especially important. Faltin (2001) further forwarded that culture can be the historically developed and learned pattern of belief and customs of a people which forms the basis for formulation of attitude from which the people pattern of social behavior emerges. In all these, we discover that man is as well the product of culture. Culture is that complex whole which includes knowledge, belief, arts, values, moral habits, custom and any other capabilities acquired by man as member of society. Culture is the way of life which members as a society learn, share and pass down through the generation. In Low (1991), it is asserted that the vital issues involved in cultural variables can be summarized. Cultural variables address the issue of the general and dominant social attitudes toward industrial and business managers of all sorts and the way the managers view this profession. Culture of the people in the other hand is identified as “what is valued and acceptable and held strictly to, by the concerned some of these cultural elements he identifies as language, religious practices and anti-facts. Culture could be modified but not eradicated. In talking about there is no point shying away from values (Low, 1991).
Culture and Business Culture is a vital element in both strategy creation and strategy implementation. The culture, values and norms of behaviour affect the implementation of strategies and the management of change in the organization. Faltin (2001) observed that visionary strategy leads and communicate their views of the future and their main values for business throughout the organization thereby influencing the culture. Their values concern is customs and services people management within the organization and systems and procedures. Not every manager will readily share the perspective and values of the strategic leader and so any potential conflict must be dealt with if organization is to be cohesive and benefit from shared values. Culture is discovered to be generally show and difficult to change culture also helps to determine the freedom and the willingness reluctance of managers to make changes as they spot opportunities and threats. But the organization structure is designed by the strategic leader
73 The Impact of Cultural Factors on Entrepreneurial Performance and the styles of management, communication and decision making that he/she encourages will become part of the culture. Faltin (2001) asserts that culture affects the way people make decision, think, feel, and act in response to opportunities and threats. It also influences the selection of people for particular jobs which invariably affects behaviour unconsciously. He showed in his model that culture is a central driving force with a people motivations and priorities of a society; one must understand their religion, thought and actions that help people deal with the difference between what they want to do and what society expects them to do. Culture belief for managers therefore should include instructions on the impact of specific beliefs that will affect the manager's task. Every religion has its holidays which vary in number and significance. Fridays is Moslem, Sunday is for Christians, Saturday for Sabbaths and so on. When members of different religious groups work side by side, differing holiday schedules can pose problem to the entrepreneurs in any organization. The month of Ramadan with its daylight fasting and the Easter lent fasting periods are noted for their negative impact on productivity. Religion has basic advantages that are beneficial to the firm. When members of the same religions belief make together, there is always the confidence of mutual trust and unity among them in a bit to preserve their identity because of the common interest shared.
REVIEW OF RELATED EMPIRICAL STUDIES Hofstede (1980) defines culture as “the collective programming of the mind, which distinguishes the members of one human group from another. Culture, in this sense, included systems of values and values are among the building blocks of culture (Hofstede, 1980). The influence of culture on economic activities of different societies has been investigated since beginning of the 20th century. Faltin (2001) further related the influence of religion (as component of culture) on the economic performance of the society. More so, the author also provides evidence that social capital (especially interpersonal trust among the members of society) is a major determinant of the society welfare and prosperity. Linan (2008) investigates influence of the numerous factors that shape the world value system on the sample of the 65 societies. He found evidence that economic differences are linked with large and pervasive cultural differences, as well as, that culture zones are persistent and long lasting. The main point derived from the studies mentioned above is that culture has a profound impact upon the society's welfare. The cultural orientation of a society reflects the complex interaction of values, attitudes and behaviours displayed by its members (Maslow, 1971). These values, in turn, affect the attitudes of individuals which again form their behaviour choices in any given situation. The continually changing patterns of individual and group behavior eventually influence the society's culture and the cycle begins again. More specifically, other studies support the notion that culture has a profound influence on the entrepreneurial capacity of a society, and that societies usually do not have homogenous cultural setting. Linan (2008) suggests that entrepreneurship is culture embedded and therefore researches on entrepreneurship should be more interested in the cultural distinctions of the entrepreneurship phenomena and differences in how values, beliefs, attitudes, shared norms and particularity of conditions, influence what they do. Socio-cultural factors are the larger scale forces within cultures and society that affect the thoughts, feelings and behaviour of individuals. Such factors include: values, language and norms.
74 The Impact of Cultural Factors on Entrepreneurial Performance
LITERATURE ON THE SUBJECT MATTER. Being in business is not only about knowing how to make sales and generate great profits but it also involves understanding the environment you intend establishing your business. A complete business person ensures that he or she studies the social – cultural attributes of the people that live in the environment they intend starting their business during the feasibility studies. social – cultural factors are the lifestyle of a group of people, their customs and their value system. Predominantly, the socio – cultural factors of a group of people is influenced by their religion. Other factors that can influence the socio – culture of a people are their language, the law of their land, politics and the economic status of the people.
The following ten effect of social cultural factor to entrepreneurial performance: Means of Communication Every community has means of communication and the ability for you to key into their style of communication will go a long way to positively impact your business. Much more than the language that is being spoken by a group of people, there are other salient and unspoken words that carry great importance. For instance, some cultures frown at a younger person that present his hand first for a handshake with an elderly person.
Purchasing Power It is very important that you know the purchasing power of the people that live in the area where you intend establishing your business. There are some kind of businesses that can thrive in places where the people that live there are poor and there are some other businesses that cannot survive such environment. For example, if you start your 'Diamond Retail' business in the ghetto part of town, there is the high possibility that you might struggle with such a business because there would be low patronage. However, if you start a consignment shop in the ghetto, you can be sure that your business would surely flourish.
Days Set Aside for Worship (Holy Days) As a business person looking toward starting your business, you should consider the fact that the days set aside for worship can affect your business. For instance; the Jewish people don't joke with the Sabbath day. So, you must ensure that you are aware of the days of worship of the people that live in the place where you want to establish your business.
Advertising Preference Advertising preference is another socio – cultural factors that affects businesses globally. The truth is that the advertising model that may sell in the United States of America might likely not sell somewhere in the Middle East. Hence, the wise thing for any business owner to do before putting up advert for his or her business is to understand what appeals to the people that dwell in the community where the business is to be sites and then design their advert to conform to the language of the people.
75 The Impact of Cultural Factors on Entrepreneurial Performance
Family Setting Family setting is another socio – cultural factor that influences businesses. For instance, in most developed countries anybody above 18 years could make decision for himself or herself while in some countries or societies, as long as you still live under the roof of your parents, they may continue to take decisions for you. So, if you intend establish a business that appeals to young adults, then it is important you consider the role of parents in the society you intend starting your business.
The Law of the Land The law of that governs a people is considered to be one of the major socio – cultural factors that can influence businesses. For example, if the law of the land forbids the sale of alcohol, there is nothing anyone can do other than to steer clear from that line of business. Civilization has rendered many laws obsolete especial laws that place limits on the kind of business a female is supposed to own and the position they are to occupy.
The Religion that is Practiced in the Society Religion is perhaps one of the top factors that characterize the socio – culture of a people. For instance, some religions do not permit their people to eat pig meat (pork) so if you start your pig farm in such an area, you would not make sales. That is why it is important that you do your feasibility studies before planting your business in any location.
Myth Myth is also another social cultural factor that influences a business. The myth that is generally accepted by a group of people that live in an area goes a long way to impact the kind of businesses that can survive in such communities.
Education The importance placed on education by a group of people that live in a particular area can also determine the kind of business that can thrive in that area. There are societies where the average person have only high school diploma and also there are societies where the average person have a second degree. The level of education of the people that live in the area where you intend establishing your business helps you with your choice of business, your advertising and your marketing approach.
Social Organization Most communities are organized in such ways that place some people over other people. For instance, in an ideal local community (villages in Africa), you would have kings, chiefs, subjects and even slaves. So if for instance, you own a business in such communities, you must endeavour to always be in the good book of the king or even the chiefs in the community if you intend to continue to be in business. This is so because the words of the traditional ruler of a society are treated as a law by his or her subjects. If you have a proper understanding of the socio – cultural factors that exist in the society where you aim to establish your own business, you can be rest assured you would excel in your business. 76 The Impact of Cultural Factors on Entrepreneurial Performance
CHALLENGES TO ENTREPRENEURSHIP DEVELOPMENT IN NIGERIA The challenges faced by entrepreneurs in developing countries are monumental and quite similar. The challenges are as follows:
1. Inadequate Credit Facilities Potential Nigeria entrepreneurs go through many hardships when trying to access credit for their businesses. Though there is a wide range of financial institutions that offer business loans, they usually charge high interest rates deterring aspiring entrepreneurs. For instance, major banks have pegged their lending rates to as much a 28% deterring potential entrepreneurs who are mostly low income earners. Other obstacles faced by our entrepreneurs include severe collateral conditions set by banks and other lending institutions.
2. Corruption Widespread and all present corruption that makes the procurement of licenses, permits, goods and services from government agencies and even the payment of taxes and levies difficult without playing the game, i.e. paying bribes and kick-backs.
3. Inconsistent Government Policies Government inconsistency is really a challenge an entrepreneur will have to tackle if he must succeed in Nigeria. Governance is something entrepreneurs have no control over. All entrepreneurs can do is to influence government's policy with respect to enacting favourable business laws but he must have political clout and massive resources to be able to influence government laws. Now, he may not have the political clout or financial muscle to influence government's policy so the best strategy to combating the ever changing policy of the government is to keep a keen eye on government laws and swiftly adjust your business to align with the policies.
4. Multiple Taxation One other sensitive challenge that is encountered by majority of Nigerian entrepreneurs is multiple taxations. Although, entrepreneurs in a country have a responsibility of funding the government through paying taxes, most of the taxes charged on entrepreneurs are not lawful and have the effect of increasing the cost of doing business. Although Nigeria's Companies Income Tax Act (CITA) has approved only 39 taxes and levies. There are over 500 various levies and taxes that are imposed by state and local government agents. These taxes are questionable and in the case where they are genuine, they are mostly duplicated and this has the effect of increasing the cost of doing business.
5. Poor State of the Country's Infrastructure The state of Nigeria's infrastructure can be deemed to be a nightmare to both entrepreneurs and the rest of the country's population. With the existing infrastructure deteriorating and in some places it is non- existent; the cost of doing business has tremendously gone up. The state of the country's road network makes it hard for entrepreneurs in the agricultural sector to transport harvested produce from farms to
77 The Impact of Cultural Factors on Entrepreneurial Performance processing factories. According to a report released by the World Bank, Nigeria's pace of socioeconomic development and growth is way below what we can achieve. This is mostly because of the erratic supply of electricity which has negatively affected many businesses. The outcome of power problems has prompted entrepreneurs to generate power through expensive ways that have in turn increased their production costs and made their products uncompetitive due to high prices.
6. Failure to Adapt to the Changing Business Environment Majority of those who venture into MSMEs (Micro, Small and Medium Enterprises) do so because of their need to make money and in almost all cases, such entrepreneurs lack relevant and adequate information about the businesses they engage in. In the event where problems arise, most of these business owners lack sufficient problem solving skills and in the end they find it hard to survive. With the growth in the telecommunications sector since the introduction of GSM in 2002, Nigeria has become one of the most advanced nations in sub-Saharan Africa.
METHODOLOGY In research projects, methodology, according to Duru (2016), is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. In it we study the various steps that are generally adopted by researcher in studying his research problem along with the logic behind them. It is necessary for the researcher to know not only the research methods/techniques but also the methodology. Researcher need to know the assumptions underlying various techniques and the need to know the criteria by which the can decide that certain techniques and procedures will be applicable to certain problems and other will not. All this means that it is necessary for the researcher to design his methodology for his problem as the same way may differ from the problem to problem. For example, an architect, who designs a building, has to consciously evaluate the basis of his decisions, i.e., he has to evaluate why and on what basis he selects particular size, number and location of doors, windows and ventilators, uses particular materials and not others and the like. Similarly, in research the scientist has to expose the research decisions to evaluate before they are implemented. He has to specify very clearly and precisely what decisions he selects and why he select them so that they can be evaluated by others also.
Research Design A research design is a plan or blue prints which specify how data relating to a given problem should be collected and analyzed. It is concern with the fundamental question on how the subject matter of this study will be brought into scope of the research and how the will be employed within the research setting to yield the required results (Babbie, 1983). For the purpose of this study, the research design adopted is the survey research design which refers to the process of eliciting data from a targeted population through either questionnaires or interview instrument and subjecting such data to statistical analysis for the purpose of drawing conclusions (Babbie, 1983). However, the study designs to cover the impact of cultural factors on entrepreneurial performance in Nigeria.
78 The Impact of Cultural Factors on Entrepreneurial Performance
Sample and Sample Size In this research, random sampling was employed; in this case, each subset of the population has the same probability of being selected..
Sources of Data Collection. The followings are the sources of data collection that was employed by the researcher: ? Primary source and ? Secondary sources of data collection
The primary source of data: Questionnaire This comprises a set of questions designed for the purpose of gathering information from the respondents that are relevant to the study. To use the questionnaire for option result, the instrument will be designed in such a way as to make it easy for the respondents to understand the questions asked and to express their own opinion or ideas will be necessary. Thus, both the close and open ended question formats of questionnaire designs will be used. The formats will limit or restrict them to the listed options while the latter is going to allow them (respondents) to have freedom to make comment where necessary.
The Secondary method of data collection Publications and documentation: The researcher collected and read relevant materials from text books, periodicals, journals and internet that are relevant to the study.
Questionnaire/ Instrument To successfully implement the research plan, a total of 75 copies of questionnaire will be administered to cover the 5 representing firms. The sample of 75 copies was determined based on the total population of employees in the 5 companies as shown below: NAMES OF COMPANY Sample size Gardens Avenue Guest Inn 15 Dana Airlines Limited 15 Halogen Security Company 15 Chamton Global Investment Limited 15 Balvinci Global Investment Ltd 15
The formula for the chi-square is: X2 = ∑( Fo - Fe) Fe X2= chi-square Fe = expected frequency Fo=observed frequency ∑= summation
79 The Impact of Cultural Factors on Entrepreneurial Performance
To get the expected frequency, the formula is: E= RT x CT GT Where: E= expected frequency RT= row CT= column total GT= grand total
To get the degree of freedom, the below formula is used: Degree of freedom (DF)= (r-1) (c-1) DF= degree of freedom R= number of row on the X2 table C= number of column on X2 table The hypotheses were tested at 5% (0.05) level of significance.
Decision Rule: If calculated X2is greater than the value of X2 tabulated using the value of Degree of freedom (DF) at 0.05 level of significance, the null hypothesis is rejected and the alternative is accepted. On the other hand, if the value of X2 calculated is less than the value of X2 tabulated using the value of DF at 0.05 or 5% level of significance, the alternative hypothesis is rejected and the null hypothesis is accepted.
Method of Data Collection Data collection is “process of gathering and measuring information on variables of interest, in an established systematic fashion that enables one to answer queries, stated research questions, test hypotheses, and evaluate outcomes.” Data collection is a component of research in all fields of study including physical and social sciences, humanities, and business (Patton, 1990). The choice of method is influenced by the data collection strategy, the type of variable, the accuracy required, the collection point and the skill of the enumerator. Links between a variable, its source and practical methods for its collection. The method adopted here are questionnaire and personal observations. This is because it Provides direct information about behavior of individuals and are relatively inexpensive to use (Patton, 1990).
Variable A variable is empirically applicable concept that takes on two or more values (Duru, 2016). It is a property that takes on different values''. Patton (1990) opined that variable can be dependent or independent in nature. An independent variable is the hypothesized cause of a dependent variable and the dependable variable is the expected outcome of the independent variable. Supporting the author above, Duru (2016) asserts that variable is divided into two forms: the independent variable represented as culture (having dimensions as: norms belief system and attitude) and the dependent variable represented as entrepreneurial performance.
80 The Impact of Cultural Factors on Entrepreneurial Performance
DATA ANALYSIS, INTERPRETATION AND PRESENTATION OF RESULTS Patton (1990) asserted that the need for clarity in the presentation of data can only be fully appreciated when one recognizes that a proper generated data which is free from common problem of unreliability and inaccuracy, cannot serve a useful purpose, if poorly analyzed and presented. What is the various useful method of presenting data? And what are the available statistical tools for analyzing data? These and other question from the focus of this chapter.
Data Presentation and Analysis In the direction, this section covers the discussion/analysis of questionnaire respondents as well as the table of responses. The total numbers of seventy five questions were administered to cover the sample size of which was determined from the population of the study and the same were retrieved from the five selected firm.
TABLE OF RESPONSES Table 1: Age of Distribution. Age Frequency % of Responses 21-30 15 20 31-40 40 53 41 and above 20 27 Total 75 100 Source: Field Survey, 2017 Table 1 revealed that a total number of 15 respondents representing 20% are within the age of 21-30, 40 representing 53% are within the age range of 31-40, and 20 representing 27% are within the age of 41 and above representing 36%. This therefore implies that majority of staffs are young intellectual adult going by the huge number of 40 of 40% who fall within the range of 31-40.
Table 2: Gender Distribution Gender Frequency % of Respondents Male 41 55 Female 34 45 Total 75 100 Sources: Field Survey, 2017. Based on the result obtain from the above table 4.2, the number of 41 representing 55% are male 34 respondents representing 45% are female. This revealed that most of the staffs are male.
Table 3: Marital Status Distribution. Marital Status Frequency % of respondents Single 26 35 Married 45 60 Divorce 4 5 Total 75 100 Source: Field Survey, 2017. 81 The Impact of Cultural Factors on Entrepreneurial Performance
Based on the result obtained from the above table 3, the total numbers of 26 respondents representing 35% are single, while 45 respondents 60% are married people, and 4respondent representing 5% are divorce people. This shows that most of the staffs are married.
Table 4.4: Distribution According to Educational Qualifications Alternatives Frequency Percentage (%) SSCE 21 28 OND/NCE 34 46 HND/B.SC 10 13 OTHERS 10 13 TOTAL 75 100% Source: Field Survey, 2017. The above table shows that 21(28%), 34(46%), 10(13%), and 10(13%), from the various educational background. This shows that respondents used for the study are educated people, hence qualified for this study as majority have OND, and some are graduates. It implies that they have knowledge of the effect of cultural factors on entrepreneurial performance in Nigeria.
Table 5: which type of business or trade do you do? Alternative Frequency % of Responses Estate Management 15 20 Distribution 15 20 Service 15 20 Production 15 20 Hotel management 15 20 Total 75 100
Source: Field Survey, 2017 Table 5 shows the nature of business and type of respondents used for the study which are into wholesaling, services, production, hotel management and distribution with each with equal frequency and responses.
Table 6: Do you know what cultural factors is all about? Alternatives Frequency % of Respondents Agree 15 20 Strongly Agree 60 80 Disagreed 0 0 Strongly Disagree 0 0 Total 75 100
Source: Field Survey, 2017. Table 6 shows that respondents have the prior knowledge of cultural factor. Going further both 15 respondents representing 20% and 60 respondents representing 80% agree the statement above, and therefore the quality choice of respondents are used to research as the respondent are aware of cultural facture and how it affect the performance of an entrepreneur.
82 The Impact of Cultural Factors on Entrepreneurial Performance
Table 7 Do you understand what culture is all about? Alternatives Frequency % of Respondents Agree 22 29 Strongly Agree 33 44 Disagree 15 7 Strongly Disagree 5 7 Total 75 100
Source: Field Survey 2017 Table 7 shows respondents opinion on whether they understand what culture is all about. 22 respondents representing 29% agree with the statement, 33 respondents representing 44% strongly agreed, 15 respondents representing 20% disagree and 5 respondents representing 7% strongly disagreed with the opinion. This indicates that they respondent understand the meaning of culture.
Table 8: What cultural factors mostly affect entrepreneurial performance in business? Alternatives Frequency % of Responses Family Setting 0 0 Purchasing Power 0 0 Means of communication 0 0 All of the above 75 100 Total 75 100 Source: Field Survey 2017. Table 8.above shows that family setting, purchasing power, means of communication respectively affects the performance entrepreneur in business in Abuja as all the respondents representing 100% attested all of the above.
Table 9: Do you think entrepreneurial practice have failed due to government policy inconsistence? Alternative Frequency % of question Agree 50 67 Strongly Agree 10 13 Agree 8 11 Strongly disagree 7 9 Total 75 100
Source: Field Survey 2017. The table.9 shows that entrepreneurial practice have failed due to government inconsistence policy. 50 respondents representing 67% agreed, 10 respondents representing 13% strongly agreed, 8 respondents representing 11% disagreed and 7 representing 9% strongly disagreed with the statement.
83 The Impact of Cultural Factors on Entrepreneurial Performance
Table 10 Do you think the level of infrastructure development is not high enough to support the development of entrepreneurship in Nigeria? Alternative Frequency % of respondents Agree 38 50 Strongly Agree 30 40 Disagree 2 3 Strongly Disagree 5 7 Total 75 100
Source: Field Survey 2017 Table 10 shows that the level of infrastructure development in Nigeria is not high enough to support development of entrepreneurial in Nigeria. 38 respondents representing 50% agreed. 30 respondents representing 40% strongly agreed, 2 respondents representing 3% disagreed and 5 respondents representing 7% strongly disagreed with the statement.
Table 11: Do you think that government encouragement of entrepreneurship through her recent policies will eventually encourage entrepreneurial growth? Alternative Frequency % of responses Agree 23 31 Strongly Agree 38 51 Disagree 10 13 Strongly Disagree 4 5 Total 75 100
Source: Field Survey 2017 Table 11 shows respondent view on whether government encouragement of entrepreneurship through her recent policies wills eventually encourages entrepreneurial growth. 23 respondents representing 31% agreed to that, 38 respondent representing 51% strongly agreed, 10 respondents representing 13% disagreed with the statement and 4 respondents representing 5% strongly disagreed. This clearly shows that governments' recent policies will eventually encourage entrepreneurial growth.
Table 12 Do you believe cultural factor has positive impact on business performance? Alternatives Frequency % of Reponses Agree 20 27 Strongly Agree 50 66 Disagree 5 7 Strongly Disagree 0 0 Total 75 100
Source: Field Survey 2017 Table 12 show the views of respondents on whether cultural factors has positive impact on business performance. 5o respondents representing 66% strongly agree, 5 respondents represntingn7% disagree with the statement. The result shows that the cultural factors have positive impact on business performance.
84 The Impact of Cultural Factors on Entrepreneurial Performance
Table 13. Are there any specific events on activities that you know of which are capable of bringing about a positive change in entrepreneurship in Nigeria? Alternatives Frequency % of responses Agree 11 15 Strongly Agree 45 60 Disagree 12 16 Strongly Disagree 7 9 Total 75 100
Source: Field Survey 2017 Table 13. Shows respondent's view whether any specific events or activities that they know are capable of bringing about positive change in entrepreneurship development in Nigeria. 11 respondents responses representing 15% agreed while 45 respondents representing 60% strongly agreed, 7 respondents representing 16% disagreed with the statement and 7 respondents representing 9% strongly disagreed. This implies that specific activities that they know are capable of bringing about a positive change in entrepreneurship in Nigeria.
Table 14. Do you think that there is a relationship belief system and entrepreneurial performance in Nigeria? Alternatives Frequency % of Responses Agree 20 27 Strongly agree 50 66 Disagree 5 7 Strongly disagree 0 0 Total 75 100 Source: Field Survey 2017 Table 14 shows that 20 respondents agree with the statement that there is a relationship between the belief system and entrepreneurial performance, 50 respondents representing 66% strongly agreed, 5 respondents representing 7% disagreed and 0 respondents representing 0% strongly disagreed with the statement.
Table 15. Are there any significant relationship between attitude and the productivity of some selected private firms in Abuja? Alternatives Frequency % of responses Agree 18 24 Strongly agree 47 62 Disagree 5 7 Strongly disagree 5 7 Total 75 100
Source: Field Survey 2017 Table4. 15 revealed that there is a significant relationship between attitude and the productivity of some selected private firms in Abuja as 18 respondents representing 24% agree with the statement, 47 of the respondents representing 62% strongly agreed, 5 respondents representing 7% disagreed and 5 respondents representing 7% strongly disagreed with the statement. Therefore with the huge number
85 The Impact of Cultural Factors on Entrepreneurial Performance of the respondent that strongly agreed with the statement, if can be asserted that there is a significant relationship between attitude and the productivity of some selected private firms in Abuja.
TEST OF HYPOTHESIS: Hypothesis is a tentative answer to testable research questions. It is usually presented as null hypothesis (Ho), which refers to the common view of something, and the alternative hypothesis (H1) which is what the researcher really thinks is the cause of a phenomenon (Duru 2016) Base on the problems and objectives of the study, the hypotheses stated are: Ho: There is no significant relationship between belief system and the productivity of some selected private firms in Abuja.
H1: There is a significant relationship between belief system and the productivity of some selected private firms in Abuja. The chi-square statics tool was implored to test the hypothesis, the formula is given below.
X2= ∑((Fo - Fe)
Fe W here X2= chi-square Fo = Observed Frequency Calculation of Chi-square (X2) 2 2 Alternatives Observed Expected (Fo- Fe) (Fo-Fe) (Fo-Fe) Frequency Frequency Fe Fe A=g Erexe pected Fre20q uency and1 8∑.75 = Summa1ti.2o5 n 1.56 0.08 Strongly 50 18.75 31.25 976.56 52.08 Agree Disagree 5 18.75 -13.75 189.06 -10.08 Strongly 0 18.75 -18.75 351.56 -18.75 Disagree Total 75 X2=? (Fo-Fe)2 Fe = 23.33 Source: Field Survey 2017
The data used for above were answer to question (Table 4.14). Level of significance is 0.05 Chi-square (X2) calculated is 23.33 Chi-square rom the table is 5.991 The degree of freedom can be calculated as thus: DF=(r-1) (c-1) Where df = of freedom R=row C= column Therefore, df= (r-1) (c-1) = (2-1) (3-1) =1x2 = 2.
86 The Impact of Cultural Factors on Entrepreneurial Performance
Decision Rule Looking from the chi-square distribution table, 2df against alpha value 5.991 will indicate critical value for accepting or rejecting the test of the hypothesis. The calculated value of chi=square (x2) of 23.33 is higher than the critical value of 5.991 and as such, the null hypothesis that say “There is no significant relationship between belief system and the productivity of some selected private firms in Abuja” is rejected and therefore the alternative hypothesis which say that “There is significant relationship between belief system and the productivity of some selected private firms in Abuja” is accepted.
Hypothesis 2 Ho: There is no significant relationship between attitude and the productivity of some selected private firms in Abuja Hi: There is a significant relationship between attitude and the productivity of some selected private firms in Abuja.
Calculation of Chi-square (X2) Alternatives Observed Expected (Fo-Fe)2 2 Frequency frequency (Fo-Fe) (Fo-Fe) Fe Agree 18 18.75 -0.75 -0.56 -0.03
Strongly 47 18.75 28.25 798.06 42.56 Agree Disagree 5 18.75 -13.75 -189.06 -10.08
Strongly 5 18.75 -13.75 -18.06 -10.08 Disagree Total 75 X2=? (Fo-Fe)2 Fe =22.37 Source: Field Survey 2017
The data used for above were answer to question (Table 4.15). Level of significance is 0.05 Chi-square (X2) calculated is 22.37 Chi-square from the table is 5.991 The degree of freedom can be calculated as thus: DF=(r-1) (c-1) Where df = of freedom R=row C= column Therefore, df= (r-1) (c-1) = (2-1) (3-1) =1x2 = 2. 87 The Impact of Cultural Factors on Entrepreneurial Performance
Decision Rule Looking from the chi-square distribution table, 2df against alpha value 5.991 will indicate critical value for accepting or rejecting the test of the hypothesis. The calculated value of chi=square (x2) of22.37 is higher than the critical value of 5.991 and as such, the null hypothesis that say “There is no significant relationship between attitude and the productivity of some selected private firms in Abuja” is rejected and therefore the alternative hypothesis which say that “There is a significant relationship between attitude and the productivity of some selected private firms in Abuja” is accepted.
DISCUSSION OF FINDINGS The study revealed that cultural factors have significant influence on entrepreneurial performance in Nigeria as there exist a positive correlation between culture and entrepreneurial performance in Nigeria. It is on this note that the influence of culture on entrepreneurial performance in the nation cannot be over emphasized. This is in general with the findings of Babbie 1983) who asserts that culture affects the way people make decision, think, feel, and act in response to opportunities and threats; it also influences the selection of people for particular jobs which invariably affects behavior unconsciously. However, much attention are needed by the government to tackle the issue of inadequate credit facilities, corruption, multiple taxation, poor state of the country's infrastructure, inability to adapt to changing environment by creating good policy and an enabling environment for entrepreneurs to operate in other to enhance better performance. In-line with the Theory of Planned Behavior (TPB) as proposed by Orbell, Hodgkins and Sheeran (1997) which describes that the intention to create a firm is influenced by different beliefs grouped. Generally, the theory gives emphasis on the role of intention, which is assumed to capture the motivational factors that influence behaviour. Intentions are indications of how hard people are willing to try, and how much of an effort they are planning to exert to perform the behaviour (Orbell, Hodgkins and Sheeran, 1997). Therefore, the intention of entrepreneurs in Abuja aim higher performances on their business will be determined by society, or individual beliefs and attitudes toward business growth aspiration.
SUMMARY AND CONCLUSION 1. The study centered on the Impact of Cultural Factors on Entrepreneurial Performance in Nigeria. It focused on finding the relationship between culture and entrepreneurial performance. In an effort to accomplish this, primary data were collected using questionnaire while the secondary data were generated from various author's contribution which were analyzed with the aid of table and simple percentages. The result of the analysis revealed that cultural factors have great impact on the performance of entrepreneur in Nigeria.
2. The study also revealed that the major factor that accounts for this high acceleration of entrepreneurial activities is because of unemployment of our graduates and school leavers.
88 The Impact of Cultural Factors on Entrepreneurial Performance
3. It was observed that social organizations have contributed immensely towards the development of entrepreneurship, through organization of workshops, seminars, building of shops and providing funds for school leavers to be self-reliant.
4. It was observed that some socio- cultural factors are affecting entrepreneurial development.
5. Security was observed as a significant factor for entrepreneurial development.
6. The findings revealed that the belief system, norms and values of the people have significant influence on the business performance of an entrepreneur.
The concept of entrepreneurship has assumed greater significance for accelerating economic growth both in developed and developing countries. It promotes capital formation and creates wealth in the countries. It reduces unemployment and poverty and is a path way to prosperity. Entrepreneurship is the process of searching out opportunities in the market place and arranging resources required to these opportunities. Thus, it is a risk of business enterprise. It may be distinguished as an ability to take risk independently and to make utmost earnings in the market. It is a creative and innovative skill and adapting response to the environment of what is real. In view of the importance of entrepreneurship to economic development, this work has tried to establish the impact of socio cultural factors on the development of entrepreneurial activities. Socio cultural factors, which are factors relating to society and culture were looked into. Culture which was seen as all the values, norms and customs that people share with one another was also looked into. It was discovered that some cultural values have effect on entrepreneurial development (LinanParker, 2004).
RECOMMENDATIONS Based on the findings of this study, the following recommendations are hereby made: 1. Our communities should look at some aspect of our culture that is against entrepreneurial development for necessary modification. 2. Those cultural values that impact positively on entrepreneurial development should be encouraged tremendously by our government. 3. Nigerian educational institutions should from secondary school introduce entrepreneurial development education into the school curricula. This will enable our youths acquire knowledge and skills required for entrepreneurial development early, which will in turn enhance economic development. 4. Government should use tariff and other incentive schemes to attract investors and encourage entrepreneurial activities. 5. The issue of security of lives and property should no longer be regarded solely as Government business.
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REFERENCES Babbie, E. (1983). Practice of Social Research (3rd edition). Belmont: Wadsworth Publishing Company; p 20-21. Congregado, E. (2008). Measuring Entrepreneurship; Building a Statistical System. New York, US: Springer Science-I-Business Media, LLC. Duru, C. E. (2017). Thesis and Dissertation Writing: “A Practical and Quick Project Writing Approach” Third Edition Faltin, G. (2001). Creating A Culture of Entrepreneurship” Journal of international business and economy, 2, (1), 123- 140. Gartner, W. B. (1988). Who is an entrepreneur? Is the wrong question” Entrepreneurship, theory and practice. 23 (45) 47-68. Gregson, G. (2014). Financing New Ventures: An Entrepreneur's Guide to Business Angel Investment (1st ed,). Babson College Entrepreneurship Research Conference Collection. Eastern Michigan University. Business Expert Press. ISBN: 1606494732, 9781606494738 Hofstede, G. (1984). Culture's consequence: International differences in work related values. Sage Publications: Beverly Hills, CA, 1984. Linan, F. (2008). Skill and value perceptions: how do they affect entrepreneurial intentions?” International Entrepreneurship Management Journal, 4 (10) 257—272 LinanParker, S. C. (2004). The Economics of Self-Employment and Entrepreneurship. Cambridge. UK; Cambridge University Press. Low, B. S. (November 1991). Reproductive life in nineteenth century Sweden: An evolutionary perspective on demographic phenomena. School of Natural Resources and Evolution and Human Behavior Program, University of Michigan, Ann Arbor, Michigan, USA.Volume 12, Issue 6, Pages 411–448 Maslow, A. & Lowery, R. (1998). Toward a psychology of being (3rd ed.). New York: Wiley & Sons. Maslow, A. (1971). The Farther Reaches Of Human Nature. New York: The Viking Press. Orbell, S., Hodgkins, S. and Sheeran, P. (1997). Implementation Intentions and the Theory of Planned Behavior. SAGE Journals. Patton, M. Q. (1990). Qualitative Evaluation and Research Method, 2nd Ed. Newbury Park, CA: Sage
90 Veritas International Journal of Entrepreneurship Development (VIJED)
YOUTH AND USEFULNESS IN AN ENTREPRENEUR ORIENTED SOCIETY
STELLA Nkechi Emechebe Ph.D Department of Educational Foundation, College of Education, Veritas University, Abuja [email protected]
And
Rev. Fr. BAKWAPH Peter Kanyip Ph.D Department of Educational Foundation, College of Education, Veritas University, Abuja. [email protected]
Citation: Emechebe, S. N. & Kanyip, B. P. (2018). Youth and Usefulness in an Entrepreneur Oriented Society. Veritas International ______Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 91-97 ABSTRACT This paper demonstrates the constraints youths face in trying to be effective and useful to themselves and the society. Youth are the best agents of change in the world because they hold the key to the lifestyle of the world. They possess a spontaneous zeal for values like love, unity, peace and justice. They are the real 'today' and 'tomorrow,' our future leaders, politically and religiously. Unfortunately, young people in Nigeria have long been overlooked and misunderstood. Youth of our day live in a practical world of life and its problems, work and difficulties with intense experience be it sadness or joy, love or hatred, they are deeply affected by it, very often vacillating from one to the other. However, they have the productive capacity and income generating activities to contribute to the economic development of any nation but they are constraint by lack of functional and job oriented education, corruption and mismanagement of public funds by those in authority which has caused dislocation of the development of the nation. This work which is an opinion paper suggests and recommends ways of empowering the youths for economic development in order to enable the youth become useful to themselves and the nation.
______Keywords: Youth, empowerment, quality education, constraints, national development.
91 Youth and Usefulness in an Entrepreneur Oriented Society
INTRODUCTION Youths occupy a strategic position in any country's developmental process. Their productive capacity and income generating activities contribute to the economic development of any nation. Ironically, youths are ill-equipped due to lack of admission to higher institutions of learning to obtain gainful employment. The youths are mostly noted for their involvement in many types of crimes because of their vulnerability. Today youths are not fully integrated and mobilized for economic development due to the following: lack of a functional and job oriented education, corruption and mismanagement of public funds by those in authority which has caused dislocation of the development of the nation. This paper suggests ways of empowering the youths for economic development in order to enable the youth become useful to themselves and the nation.
WHO ARE YOUTH? WHY FOCUS ON YOUTH Youth is generally perceived as the time of life between childhood and adulthood (Macmillan Dictionary 1981). The age range that constitutes youth varies from one society to another because an individual's actual maturity may not correspond to their chronological age. However, the United Nations define youths as persons between the ages of 15 and 24 (UNESCO, www.unesco.org – 61-4- 17). The United Nations recognize the fact that young people are heterogeneous group in constant evolution and that the experience of being young varies across regions and within countries. There are some characteristics of youths that make them most vulnerable for development; the most important of which is their vigor and the spirit to achieve if an enabling environment is created for them. They are young, agile, and virile and are expected to be innovative. Most of the Bishops' conferences refer to youth as youngsters starting from 18 to the age of 30-35. Beyond all these definitions, youth are the most dynamic section of any society and the most fascinating stage of life. When we think of youth, we think of all that is beautiful in life such as fashion, sports, arts, media, new technologies, fun, adventure, relationships, idealism, creativity and great dreams. It is thus imperative that youth be seen not just as an age, but a state of mind and an attitude (Manoj, 2010).
WHY FOCUS ON YOUTH? A CLOSER LOOK TODAY'S YOUTH According to the US Census Bureau, there are three billion people aged under twenty-five on this planet. Youth is the most generous time and so targeted by all and if approached well, it is the best time in a person's life to be molded for good or for bad. Youth are the best agents of change. They hold the key to the lifestyle of the world. It is a time of never ending newness and learning, about themselves and the world around. They possess a spontaneous zeal for values like love, unity, peace and justice. They are the real 'today' and 'tomorrow,' our future leaders, political and religious, priests and laity, are all there among them (Manoj, 2010). Unfortunately, young people in Nigeria have long been overlooked and misunderstood. In diverse avenues the contemporary world attributes great significance to youth, their life and their contributions to society. In our technology driven world, children or youth mostly have the final say where problem solving, gadget buying and decision- making are concerned. Youth and their trends are of great significance to the society, to the business sector, to religion and politics. Major industries observe youth trends to decide on what to
92 Youth and Usefulness in an Entrepreneur Oriented Society manufacture, while marketing organizations constantly evolve new styles in youth marketing. Consequently, research on youth trends and perspectives has assumed great significance today (Manoj, 2010). Today the Church needs to search for and rediscover the world of young people, afresh. It is indeed a fast changing world and hence continuous effort for greater understanding will keep the Church young and relevant. They form a complex reality, ranging from highly urbanized and westernized to the most backward and rural, with a diverse spectrum of economic and social conditions in between. Being youth is a great joy and a burden. There is a common world that they share. Understanding and drawing near to them is the first step in the Church's mission concerning youth (Manoj, 2010).
The youth of our day live in a practical world of life and its problems, work and difficulties with intense experience be it sadness or joy, love or hatred, they are deeply affected by it, very often vacillating from one to the other. The world of friendship is everything to them and one of the key words in the youth world is 'Networking.' They cannot survive without being connected to one another, they want to be equipped to reach others 24/7 and they need to be reached too. Many of them are in the grip of the mesmerizing world of the media and technologies. There is a growing trend towards Westernization / Globalizatio because they are still trying to make sense of a complex, multi- level world and are often very confused. The whole of society is in a cauldron of rapid change and the group that is melted and molded the most in this transforming pressure is the young generation. In former times there were better props in the family, society and the Church to assist the youth to find their bearings and get a foothold in this most confusing stage of life. But today, more than ever, society is at a loss to provide relevant support and guidance to the growing generation of the day.
CHALLENGES AND CONSTRAINTS FACING THE NIGERIAN YOUTHS 1. Restricted access to functional and qualitative education Despite enormous progress made in educational outcomes, there are still many young people who lack basic skills needed to support their post-school life. Though high enrolment are reported in many States under the UBE scheme, early dropouts, grade repetition and poor education quality mean that many enter adolescence poorly prepared and ill-equipped for work and life which may prepare them for leadership position (Nigerian youth blogspot, 2008).
2. Grossly limited access to employment Transition from school to work remains a major challenge, such that many young persons end up either unemployed or underemployed in the informal sector with little or no protection and prospects (UNECA, 2006). Currently, the expansion of employment opportunities is far below the growth in the youth population, partly because of lack of commensurate investments and appropriate technologies (Nigerian youth blogspot, 2008).
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3. Lack of access to business support funds and migration Aggravated by lack of economic opportunities like soft loans or grants to start businesses, most ill- prepared youths migrate to urban areas or to other countries at great risk, even untimely death, to seek often elusive greener pastures. Dashed hopes easily propel most vulnerable ones to crime, prostitution, drugs, robberies, cult-related activities, militancy etc.. (Nigerian youth blogspot, 2008).
4. Lack of access to reliable health support As in most developing countries, youths in Nigeria are vulnerable to debilitating diseases and various health problems associated with inadequate national healthcare services, poverty and promiscuity. The high incidence of HIV/AIDs among Nigerian youth is a matter of national concern. This poses one of the greatest challenges to sustainable development
5. Over exposure to the culture of greed and corruption Today's youth are the real victims of Nigeria's resource-curse dilemma. They were born and raised during the darkest era of Nigeria's economic history, characterized by greed, misrule, recklessness in the management of national resources, deprivation marginalization in the name of quota system and unbridled poverty in the midst of plenty. They were indeed born into a culture of institutionalized corruption in every facet of the national life and were psychologically sedated to imbibe the lifestyle of greed, selfishness, fraud, examination malpractice, a get-rich-quick-at-all-cost mentality, disrespect for law and order. These are Nigeria's endangered youth population, to who Nigeria must restitute to secure its future.
Youth Education and Empowerment for National Development
What is the way forward for Nigeria? If youths are well trained and empowered amidst socio- economic constraints society can that bring a better leadership and governance in the country? The Central Bank of Nigeria (CBN), in its 2011 report on youth unemployment in the country, put the unemployment figure at 41.6 % that about 59 % of the country's youths are unemployed.The World Programme of Action for Youth (WPAY), adopted by the UN General Assembly in 1995 and expanded upon in 2007, provides a policy framework and practical guidelines for national action and international support to improve the situation of young people.
In 2009, the General Assembly called upon Member States to: Recognize young women and men as important actors in conflict prevention, peace building and post-conflict processes; Strengthen the participation of young people, as important actors in the protection, preservation and improvement of the environment. For Nigeria to attain and retain sustainable development, the government should make tangible efforts to promote the interests of the youth, while nurturing them to become good leaders in the future.
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This is because youths are generally believed to be the agents of change and growth in the society, if they are well-prepared, well-mentored and well-equipped.However, the government is not unmindful of the pivotal roles it has to play in initiating and implementing youth-development plans and schemes especially in the following aspects: 1. Education: to improve admission into higher institutions of learning which 70% are unadmitted 2. Employment: create and initiate job opportunities for the 59% of youth that are unemployed 3. Hunger and poverty: better economic to curtail high rate of robbery and prostitution 4. Health: improve health sector to prevent deadly diseases like HIV, cancer, diabetics, hyperthietis breaking down youth 5. Drug abuse: create youths awareness to prevent them from becoming addicted to drugs and alcohol 6. Youth and violence: to be educated in order not to be deceived by the politicians into instrument of violence and destruction.
A onetime minister of Youth Development, Malam Bolaji Abdullahi, once said that Nigeria's youth population constituted a critical resource for economic growth. Youths, who constituted about 50 per cent of Nigeria's population, ought to be groomed for sustainable development and national transformation. The contributions of young Nigerians to nation building had been compromised by challenges such as lack of admission to higher education, unemployment, hunger and poverty, health issue, drug abuse and youth involvement in violence. Most of the country's youth had consequently become cynical, disoriented, dysfunctional and alienated despite the fact that Nigeria is blessed with abundant youth population. The youths, given their size, energy, passion and creativity, ought to be a critical resource for Nigeria's economic growth, sustainable development and national transformation. Nigeria's youth population could either turn out to be a demographic dividend or a demographic disaster, knowing that it is very imperative to harness the potential of the youth. Government policies and programs should strive to remove the perceptible constraints to youth development, while scaling up investments to fully harness the potential of youths (Ogunshola, 2011).
Alhaji Idi Farouk, the Director-General of National Orientation Agency (NOA), at a seminar on youth development and security management, stressed the need for decision makers to engage the youth in development projects. Nigerian youths had vital roles to play in facilitating sustainable development; the rights of the youth must be protected, deliberately provided with the enabling environment to allow them to get directly involved in decision making processes, especially those that affect their lives and the development of the nation. They should be adequately educated, trained, exposed and empowered with the right skills, so that they could meaningfully lead and contribute to the national development (Ogunshola, 2011).
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Conclusion This work showed that Nigerian youths are facing some socio-economic constraints and they can be kept from various challenges facing them and from being idle. It is necessary for them to be relevantly and productively engaged in rewarding activities. This will lead to their development thereby being relevant not only in this country but all over the world. The paper did an overview of some of the challenges facing Nigerian youths with the result that majority of the youths are incapacitated. The youths' inclusion in any government is imperative as no nation can prosper without its youths making contributions in government and for this to happen, challenges facing the youths must be removed. The study revealed that a lot of challenges are being faced by the Nigerian youths which subsequently have led them to being indulged in various criminal activities, drug abuse, prostitution and violence of one kind or the other. The Federal Government appears well- positioned to address some of the challenges facing Nigerian youths. The National Youth Fund (NYF) should enable youths to have access to finance for self-development projects. Government should determine to protect the interests of the youth, by combating crime, youth restiveness, political violence and Boko Haram terrorists. To help the youths out of the negative impact of media, there is need for managers of organizations and wealthy individuals to invest more in the human capital development and employment generations in various communities. It should be our responsibility to make our youths especially the unemployed productive, to make sure that the youths genuinely learn skills, vocational and entrepreneurship education so that they will not only be useful to themselves but also to the community in order to build servant leaders. Finally the Youth that are already in leadership position should in turn make sure they bring alienated and marginalized youths back into the economic mainstream and give them a sense of meaning and belonging to prepare them for leadership role.
Recommendations Education: Youth should struggle and get higher education as a weapon for economic independence and readiness for leadership positions Employment: They should build their talents and skills into self-employed entrepreneur Hunger and poverty: Youth should work hard with sacrifice to overcome poverty in their lives Health: Maintain good health and go for periodic checkup and be conscious of their health Drug abuse: Avoid taking drugs, excessive alcohol and being in company of bad groups
Youth and violence: Youth should not give room for anybody to lure them into agent of destruction in the name of politics or religion rather, they should participate in active politics to take away injustice, corruption, economic impoverishment, political marginalization and social deprivation. On the other hand, Government and private sectors should provide an enabling environment for youth development to solve the problem of hunger and poverty, improve health sectors, control drug abuse, and youth involvement in violence. Nigerian youths too should develop their capacity, to enable them to become useful to themselves and the nation at large. Youth can also initiate innovative self- development schemes based on their talents, since government alone cannot provide jobs for every
96 Youth and Usefulness in an Entrepreneur Oriented Society citizen. Federal Government should also look beyond job creation for the youth and focus its attention more on skills acquisition programs. The youths have suffered a lot of neglect, in terms of economic empowerment and integration into national development schemes, thereby compelling them to engage in all kinds of vices. State and local governments should set up youth empowerment activities, so as to engage the youths and make them useful agents in the nation-building process.
Unemployment and lack of admission ought to be tackled seriously because the growing unemployment has been the source of provoking serious violence and security problems. If the youths are educated and productive and engaged in a more meaningful way, some of the crises bedeviling the country could have been avoided (the people who are used as cannon fodder in fomenting troubles are youths who probably didn't go to school; those who are school dropouts and are probably doing nothing). There is need to tackle the growing menace of insecurity in the country, youth development ideas and strategies should be put in place to combat it.
REFERENCES Bakwaph, P.K. (2013). Leadership Styles in the Bible and Nigeria: Aquestfor moral and credible leaders in Nigeria. Kaduna: Raph Printing Production Dike, V. E. (2009). Governance and Nigeria's weak institutions: Is the 2020 project achievable? http://www.triumphnewspapers.com/gov522009.html Kukah, M. H. (2007). The Church and the Politics of Social Responsibility. Lagos: Sovereign Prints Nig Ltd. Manoj, S. (2010). Youth Pastoral Ministry and Youth Evangelisation. Retrieved from www.laici.va Ogunshola, F. (October 27, 2011). The youth, national development and security.News Agency of Nigeria (NAN). Odey, J. O. (2001).The Dawn of Democracy Tyranny. Enugu: Snaap Press Ltd. Odey, J. O. (2001).The rape of democracy. Enugu: Snaap Press Ltd. Ubochi, T. C. (January 15, 2009). The failure of governance and leadership in Nigeria: AbiaState as a pictorial case study. http://nigeriaworld.com/feature/publication/ubochi/011509.html)
97 Veritas International Journal of Entrepreneurship Development (VIJED)
THE ROLE OF CORPORATE SOCIAL RESPONSIBILITY (CSR) IN THE GROWTH OF MULTINATIONAL COMPANIES IN NIGERIA
DOMINIC Shimawua Ph.D Head of Department, Public Administration, Veritas University Abuja (The Catholic University of Nigeria)
Citation: Shimawua, D. (2018). The Role Of Corporate Social Responsibility (CSR) in the Growth of Multinational Companies in Nigeria.______Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 98-116 ABSTRACT Studies have revealed divergent views on corporate social responsibility (CSR), especially, with regard to its meaning and the way it is practiced by organisations around the globe. While, while a lot of studies have been done to reveal how CSR is understood and practiced in the developed world, not much is known on how companies in the developing countries engage in CSR. It is in view of this fact that this paper sought to find the role of corporate social responsibility in the growth of multinational companies in Nigeria. The paper went further to find out the impact of corporate social responsibility on the growth of multinational companies and the community at large and the paper found out that social responsibility has a great impact on the society by adding to the infrastructures and development of the society. This can be seen from the points of view of showing concern for the welfare of the community in order to reap peace, competent and cheaper manpower, a platform for a better community; by making the host community worthy of livelihood in terms of infrastructural development; and by boosting their image, reducing advert cost, gaining an edge over competitors, and making your name as a firm, a household name in the society. Social responsibility also benefits companies by enabling them to recruit a high quality labor force because the reputation of the firm and the goodwill associated with socially responsible actions attract talented prospective employees. Although, some factors such as inability of Nigeria Government to enforce CSR into Law, corruption and selfishness, lack of interest in implementing CSR, political and social insecurity poses as a serious obstacle to companies to implement CSR effectively and efficiently in Nigeria. However, the paper recommended that organizations should endeavor to communicate their CSR initiatives to all stakeholders, irrespective of which stakeholder group the CSR package is meant for.
______Keywords: Corporate Social Responsibility, Growth, Multinational Companies
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INTRODUCTION In the past, businesses existed without having much pressure or expectations from the society but instead, organizations were seen as entities of profit maximization for shareholders. According to Onwuegbuchi (2009) today, events point to the fact that such trend has changed and businesses are expected to be socially responsible and to think beyond profit maximization, if they must survive. Globally, more companies have continued to adopt corporate social responsibility (CSR) as a worthwhile business practice. Meanwhile, despite wide acceptance of CSR, there are divergent views about its potential benefits and how it should be practiced, as would be seen later in this study. Various studies conducted in different countries, have shown that CSR is practiced differently, in different countries. Also, the idea of companies engaging in corporate social responsibility has been attacked by some scholars, with Milton Friedman, at the forefront of the group. According to Friedman (1962) cited in Ahaotu (2014, p. 13) in his book, Capitalism and Freedom, written in 1962, Friedman condemned the view that companies should have a social responsibility that goes beyond serving the interest of their stockholders. In his opinion, managers should concentrate on making as much profit, as possible, for shareholders. He further argued that the claim that businesses should contribute to the support of charitable activities, is an “inappropriate use of corporate funds in a free enterprise society and a fundamental subversive doctrine.
Popular amongst those that believe in the spirit and principles of corporate social responsibility of companies is Kenneth Dayton, Chairman of Dayton Hudson Corporation. In his 'Seegal-Macy Lecture', delivered at the University of Michigan, 1975, Anderson (1981, p. 1) argued “we are not in business to make maximum profit for our shareholders but to serve society. Profit is our reward for doing it well. If business does not serve society, society will not tolerate our profits or even our existence”. There is also the argument that most social problems industries face today are contributed by business growth. Therefore, organisations are expected to contribute in solving them and failure to do this may cause the problems to get worse and organisations might not survive. Also, failure of corporations to be socially responsible may cause society to change business conditions, maybe through law changes or activities of pressure groups and this may make survival difficult for organisations
Chiu and Hsu (2010), in a study, maintain that the early stage of 21st century experienced corporate scandals such as Enron and WorldCom in the U.S.; the infamous Rebar Group and Zanadau case in Taiwan, and such activities brought doubt to the credibility of companies. The study also notes that the increase in productivity by machinery automation has led to environmental destruction and increased resource consumption, which has attracted more attention to corporate social responsibility (CSR). Also, Dima and Ramez (2007); Parker (2005) and Rahul (2008) in their argument observed that increased interest in CSR in recent years has been as a result of globalization and international trade, which have reflected in increased business complexity and new demands for enhanced transparency and corporate citizenship . As noted earlier, scholars and practitioners are yet to agree on a consensus definition and practice of the CSR concept. However, for the purpose of this study, we shall subscribe to the definition provided by the World Business Council for Sustainable Development (WBCSD). According to WBCSD (2001, p. 1) CSR is "the commitment of business to contribute to sustainable
99 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria economic development, working with employees, their families and the local communities". Therefore, according to Clarkson (1995) and Waddock (2002) the core idea of CSR is that organisations have an obligation to meet certain needs of their various stakeholders. Multinational companies, no doubt has become an integral part of our day-to-day life, mainly due to its convenience and value to life. Interestingly, Nigeria is included in the league of the largest multinational companies market in Africa. The deregulation of Nigerian telecommunications industry for example by the Federal Government in 2001, brings the ending NITEL's monopoly over the sector and marking the entrance of private players. However, Chiu and Hsu (2010) state that while consumers benefit from the use of mobile telecommunication, they also experience health and safety risks associated with base stations, exposure to electromagnetic fields, noise and air pollution etc. In view of the above mentioned negative implications of the Global System for Mobile Communication (GSM) operations in the society, it is expected that service providers should carry out their business responsibly, while contributing in ameliorating the effects of their operations on the society. This sector was chosen for this study because the growing rate of GSM use in Nigeria, and its attendant health and environmental concerns are always in public debate. Most CSR studies found in the course of literature search for this study were done in developed countries. It is in the light of this that Belal (2001) suggests the need for more research on CSR practices in the ex- colonial, smaller, and emerging economies. Also, Dima and Ramez (2007, p. 244), reveal a “lingering academic curiosity about diverging CSR understanding and practice in the light of vastly different economic, social, and cultural conditions”. He concludes that “there is value added in exploring CSR conceptions and perceptions in a developing country context, and gauging the extent to which CSR practice in developing countries has matured beyond the boundaries of compliance and public relations. It is on the heels of the foregoing that this paper examined the role of corporate social responsibility (CSR) in the growth of multinational companies in Nigeria.
Conceptual Clarification Corporate Social Responsibility (CSR): Corporate social responsibility (CSR) can be defined as the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time. The concept of CSR means that organizations have some measure of moral, ethical, and philanthropic responsibilities in addition to their responsibilities to earn a fair return for investors and comply with the law. A traditional view of the corporation suggests that its primary; if not sole responsibility is to its owners, or stakeholders. However, CSR requires organizations to adopt a broader view of its responsibilities that includes not only stockholders, but many other constituencies as well, including employees, suppliers, consumers, the local community, local, state, and federal governments, environmental groups, and other special interest group. Corporate social responsibility (CSR) according to Hashmi and Ango, Nuhu (2012) is defined as operating a business in a manner that meets or exceed the ethical, legal, commercial and public expectations that society has of business.CSR is seen by leadership companies as more than a collection of discrete practices or occasional gestures, or initiatives motivated by marketing, public relations or other business benefits. Rather, it is viewed as a comprehensive set of policies, practices and programs that are
100 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria integrated throughout business operations, and decision making processes that are supported and rewarded by top management” (Business for Social Responsibility,2006). CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large (World Business council on Sustainable Development, 1998). The World Business Council for Sustainable Development (WBCSD, 2001) defines CSR as: achieving commercial success in ways that honour ethical values and respect people, communities and natural environment. We also say that CSR means addressing the legal, ethical, commercial and other expectations society has for business and making decisions that fairly balance the claim of all the key stakeholders.
Also, the World Business Council for Sustainable Development (WBCSD) cited in Malik (2008, p. 18) defines CSR as: CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.
Bowen (1953) refers CSR to the obligations of business to pursue those policies, to make those decisions or to follow those lines of action which are desirable in terms of the objectives and values of our society. Frederick (1960) social responsibility in the final analysis implies a public posture towards society's economic and human resources and a willingness to see that those resources are used for broad social ends and not simply for the narrowly circumscribed interests of private persons and firms. Friedman (1962) there is one, and only one, social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game which is to say, engage in open and free competition without deception or fraud. According to Davis and Blomstrom (1966) Social responsibility refers to a person's obligation to consider the effects of their decisions and actions on the whole social system.
Andrews (1973) CSR is a balance between voluntary restraint of profit maximization, sensitivity to the social costs of economic activity and to the opportunity to focus corporate power objectives that are possible but sometimes less economically attractive than socially desirable. Arrow (1973) firms 'ought to' maximize profit according to their social obligation since business profit represents the net contribution that the firm makes to the social good. On this basis, profit should be as large as possible and only be limited by law and ethical codes. Sethi (1975) social responsibility implies bringing corporate behaviour up to a level where it is congruent with the prevailing social norms, values and expectations of performance. Carroll (1979) the social responsibility of a business encompasses the economic, legal ethical and discretionary expectations that society has of organizations at a given point in time. Jones (1980) corporate social responsibility is the notion that corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law and union contract.
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Wood (1991) the basic idea of corporate social responsibility is that business and society are inter- woven rather than distinct entities.Bloom and Gundlach (2000) CSR is the obligation of the firm to its stakeholders – people and groups – who can affect or who are affected by corporate policies and practices. These obligations go beyond legal requirements and the company's duties to its shareholders. The fulfillment of these obligations is intended to minimize any harm and maximize the long run beneficial impact of the firm on society.
Baker (2003) CSR is about how companies manage business processes to produce an overall positive impact of the firm on society. Van Marrewijk (2003) CSR is associated with the communion aspect of people and organizations, whilst corporate sustainability (CS) is associated with the agency principle. Therefore, CSR relates to phenomenon such as transparency, stakeholder dialogue and sustainability reporting, while CS focuses on value creation, environmental management, environmental friendly production systems, human capital management and so forth. Crowther and Rayman (2004) CSR in its broadest definition is concerned with what is – or should be – the relationship between the global corporation, governments and individual citizens whilst in its more local context it is concerned with the relationship between a corporation and its local society in which it resides or operates, or with the relationship between a corporation and its stakeholders.
From the above definitions, one identifies that certain scholars, Friedman (1962) and Arrow (1973), are in favour of profit maximization of the business, while a majority hold the business responsible to not only shareholders but all the stakeholders. Moon (2002) in Malik, (2008) states that CSR comprises of three waves of activities namely 'community involvement', 'socially responsible production processes' and 'socially responsible employee relations'. Carroll (1991) contributed to the search for a solution to the definition issue when he developed a four-part conceptualization of CSR, - economic, legal, ethical and philanthropic - which portray the idea that corporations do not only have economic and legal obligations but also ethical and philanthropic responsibilities. This is to say that while companies strive to create goods and services at a profit, they should do so within the ambits of the laws of the society, while also meeting other expectations from various stakeholders. At the same time, the companies should be ethical by performing in manners consistent with societal mores and norms. The philanthropic function in Carroll's model means that organizations are expected to be good corporate citizens, actively engaging in programs to promote welfare of the society. Olanrewaju (2012, p. 21), sees CSR as “the concept that an organization needs to consider the impact of their operations and business practices on not just the shareholders, but also its customers, suppliers, employees, members of the community it operates in, and even the environment; a way of saying thank you and expressing appreciation to all stakeholders in the business. According to Macmillan (2005) cited in Olanrewaju (2012:21), “CSR is a term describing a company's obligation to be accountable to all of its stakeholders in all its operations and activities.” Macmillan, further states that “socially responsible companies will consider the full scope of their impact on communities and the environment when making decisions, balancing the need of stakeholders with their need to make a profit”.
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From the foregoing discussion, it is clear that each of the definitions of CSR are designed to fit different individual organizations. Also, issues in a company's CSR, in some cases are determined by size, sector where the company operates and geographical location. However, despite the differences, one could find a common ground between them.
Multinational Companies: The term multinational companies(MNC) can be defined and described from differing perspectives and on a number of various levels, including law, sociology, history, and strategy as well as from the perspectives of business ethics and society. Hill (2005) defines Multinational Enterprise as any business that has productive activities in two or more countries. Certain characteristics of Multinational Corporations should be identified at the start since they serve, in part, as their defining features (Frances, 2008). Often referred to as “multinational enterprises,” and in some early documents of the United Nations they are called “transnational organizations,” Multinational Corporations are usually very large corporate entities that while having their base of operations in one nation, the “home nation” carry out and conduct business in at least one other, but usually many nations, in what are called the “host nations.” Multinational Corporations according to Kim (2000) are usually very large entities having a global presence and reach. Multinational corporations (MNCs) according to Litvin (2002) can spur economic activities in developing countries and provide an opportunity to improve the qualities of life, economic growth, and regional and global commons. At the same time, they are often also accused of destructive activities such as damaging the environment, complicity in human rights abuses, and involvement in corruption. Whether these accusations are fair or not, many MNCs are now attempting to manage these complex set of issues in the host countries by implementing corporate social responsibility (CSR) strategies because such issues may risk the success of their operations. However, CSR can be an ambiguous tactic because it is often unclear what a corporation can and cannot be held responsible for, particularly when weak governance and institutions are involved.
The multinational companies include big companies which extract raw materials such as the oil and other minerals. They also include such companies as SHELL- B.P and Coca Cola Company and similar others which produce consumer good, while there are some other engaged in the manufacturing of products. There are different categories of multinational do to their parent countries, and then do they not bear double costs of operation. The example of I.T.T. is said to be an exception, and whether this is true or not, only the governments of the less – developed nations can tell. As in the case of shell Nigeria port Harcourt. In Nigeria, foreign firms by comparison, are rivals only to the government. Both the people and their government are bound to be jealous of these large foreign corporations, as centers of wealth, power and influence. The growth in the economies of various nations have also led to the involvement of the multinationals have also been involved in getting sources of raw materials and semi-manufacture of goods for the industries of their countries. For example, the American Multinational Corporations go out to Asia, Latin America and Africa to get petroleum, bauxite and other minerals as well as wood-pulp and news-print, primary models and other industrial commodities which could be get mostly in the third world. The multinational
103 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria companies account for the majority of the inflow of the foreign investment in the countries of the third word. They are also responsible, to a large extent, for certain events, which take place within these countries. Multinationals can move personnel and skilled labour from one country to another and this could result in disrupting the labour situation within a particular host country.
THEORETICAL FRAMEWORK The paper is anchored on stakeholder theory. The stakeholder theory originated from R. Edward Freeman in his 1984 book named, Strategic Management: A Stakeholder Approach. In an attempt to address the "Principle of Who or What Really Counts”, the theory identifies the various groups which are stakeholders of a corporation, recommending ways management can give due regard to the interests of the groups (Freeman, 1984). Freeman states that it is a theory of organizational management and business ethics that addresses morals and values in managing an organization.
The stakeholder theory is managerial in nature, according to Freeman Wicks and Parmar (2004, p. 364) it “reflects and directs how managers operate rather than primarily addressing management theorists and economists” and begins with the assumption that values are necessarily and explicitly a part of doing business. Freeman (1994) notes that two core questions articulate the focus of the stakeholder theory. According to him, the first question is; what is the purpose of the firm? The second question is; what responsibility does management have to stakeholders? The first question urges managers to articulate the shared sense of the value they create and what brings its core stakeholders together. Here, Freeman maintains that this propels corporations forward, so as to generate outstanding performance, determined both in terms of its purpose and marketplace financial metrics. The second question motivates managers to articulate how they want to do business, specifically, the kinds of relationships they want and need to create with their stakeholders to achieve their purpose. There are however, some schools of thought that tend to oppose the stakeholder theory, especially those in favour of the “maximizing shareholder value” view. They see the economic view of business as the most useful one. In other words, they feel that the goal of “maximizing shareholder value” is the only appropriate goal for managers. In contrast, Freeman, Wicks and Parmar, (2004, p. 365), argue that “at its worst, this view involves using the prima facie rights claims of one group—shareholders—to excuse violating the rights of others”. They maintain that the rights of Shareholders are not absolute, regardless of how much economists talk about the corporation as being the private property of the shareholders.
Furthermore, supporting stakeholder theory, as against the late Milton Friedman's shareholder theory, David and Mark (2009) say that Suppliers, customers, labor, and other stakeholders are moral beings, with the full range of moral rights that anyone we deal with in our everyday lives also has and for that reason, we must not artificially elevate the moral standing and interests of shareholders. Doing so would amount to exploiting other stakeholders, something that would both compromise their autonomy and deny them their intrinsic dignity (David, & Mark, 2009). In the light of that contention between the stakeholder and shareholder views, it is necessary to note that the
104 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria stakeholder view is not saying that shareholders are not important constituents or that profits are not a critical feature of the business activity. It rather says that profit is the result of doing it well, instead of being the motivation for business. In fact, according to Jones, Freeman, Wicks and Parmar (2004), it has been argued that there is no need to posit that stakeholder theories and shareholder theories are in opposition. This is because Shareholders are stakeholders, and it is believed that creating value for stakeholders, in the long run, creates value for shareholders.
On this note, Freeman, Wicks and Parmar (2004:366) pose the following question: “How else could managers create shareholder value other than by creating products and services that customers are willing to buy, offering jobs that employees are willing to fill, building relationships with suppliers that companies are eager to have, and being good citizens in the community?. Thus, Shreyans (2008:15) if firms have the capability to 'balance the interests of the firm,' as companies such as P&G claim to do in their mission statement, they could utilize acts of CSR to further the interests of the firm while still benefiting their communities. While upholding the stakeholder theory, Shreyans (2008), makes reference to the late London Business School Professor Sumantra Ghoshal, who believed that the corporate scandals of some years ago in the U.S. were offshoots of the shareholder theory of capitalism that were being proposed by economists and emphasized at business schools. Sumantra, believed that corporations are not solely profit-generating robots reacting to market forces but are managed by and for humans, and have a symbiotic relationship with the world around them. Stakeholder Theory recognizes the dynamic and complex relationships between organisations and their stakeholders and that these relationships involve responsibility and accountability (Gray et al: 1996).
Different flavours of this theory - instrumental or normative stakeholder theory – have been identified. Instrumental stakeholder theory as observed by Garriga and Mele, Jamali (2008) sees the corporation as an instrument for wealth creation and CSR conceived as a strategic tool to promote economic objectives. On the other hand, according to Brickson (2007) Normative stakeholder theory on the other hand identifies philosophically based moral obligations towards stakeholders. The normative version seeks to remind corporations that they are fully moral institutions, with a full range of moral obligations, in everything they do (David & Mark, 2009).Its attention is channeled towards the ethical factors that smoothens the relationship between business and society. Who then is a stakeholder? Weiss (2006, p. 52) defines a stakeholder as “any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of the organization”. He identifies different kinds of stakeholders – the focal stakeholder; primary stakeholder; and the secondary stakeholder. He notes that the focal stakeholder is the group ororganization in question, while the Primary Stakeholders include owners, customers, employees, suppliers, and others crucial to the organization's survival and the Secondary stakeholders are “all other interested groups, such as the media, consumers, lobbyists, courts, governments, competitors, the public, and society. The stakeholder theory is found relevant to this study because it is in tune with today's economic realities. As noted in the introduction to this study, in the past, there were not much pressures or expectations on business from the society, beyond efficient resource allocation and maximization. But today, the trend has changed and businesses are expected to be socially responsible and think beyond profit 105 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria maximization, if they must survive (Onwuegbuchi, 2009). Instructive here is the warning by Kenneth Dayton, Chairman of Dayton Hudson Corporation, that “business must change its priorities. Rather than make maximum profit for our shareholders, we are in business to serve society and profit is our reward for doing it well. If business does not serve society, society will not tolerate our profits or even our existence” (Anderson 1989).
Furthermore, the theory is found fit for the research because of its belief that economic value is created by various stakeholders who voluntarily come together and cooperate to improve everyone's circumstance. Therefore, managers of the multinational companies are expected, by the spirit of this theory, to develop relationships, inspire their stakeholders, and create communities where everyone strives to give their best to deliver the value the firm promises. In a nutshell, this theory fits this work because it explains the reasons why business, today, is considering the interests of not just the shareholders, but also that of customers, employees, communities, fellow businesses and the local environment that are affected by business practices. It is relevant because organizations are expected to consider the social and environmental implications of their business activities, and the theory advocates the integration of CSR into core business processes, as a way through which organizations can achieve their goals.
CORPORATE SOCIAL RESPONSIBILITY PRACTICE IN NIGERIA In Nigeria, just like in many other parts of the globe, there is increase in the CSR movement. The study of Rahul (2008), Parker (2005) and Adebiyi and Awolaja (2012) have shown that organisations embark on CSR in different ways and for varied reasons, which include corporate reputation and brand management, competitive advantage, profit and industry trend. Nigeria, not too long ago, began to give attention to CSR and make efforts to form our own vision of CSR, taking into account our economic, political, cultural and social peculiarities.
Amaeshi (2006) in a study titled, 'Corporate Social Responsibility (CSR) in Nigeria: Western Mimicry or Indigenous Practices?' explored the meaning and practice of CSR in Nigeria. They traced the history of what they call 'organised' CSR to the practices in the oil and gas industry, which was driven by western multi-national companies. According to the study, the companies in this sector pay attention to remedying the effects of their extraction activities on the local communities, often investing in social projects or providing social amenities like pipe-borne water, hospitals, schools, etc. They, however, argue that these provisions have often been on an ad-hoc basis and often not sustained. The researchers cited a report on the activities of Shell, by Christian Aid (2004), which confirmed that some of the schools, hospitals and other social amenities the companies claimed to have provided were abandoned or did not meet the needs of the communities (Amaeshi, 2006). In the study, Amaeshi (2006) found that CSR is perceived and practiced by indigenous organisations as corporate philanthropy aimed at addressing socio-economic development challenges in the country. They argued that the meaning of CSR was framed to reflect local realities on ground. In their reckoning, the overwhelming conception of CSR as philanthropy could be linked to traditional
106 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria socio-cultural heritage of the indigenous firms. They argue that philanthropy is conceived within the moral economy of kin-based solidarity and reciprocity. According to the scholars, kinship pattern of production, as a characteristic of agrarian mode of livelihood is the governing order of most indigenous firms. Furthermore, Amaeshi et al (2006) note that CSR as philanthropy in Nigeria could also be tied to some religious influences. Their opinion is that because of the fact that Nigeria is a theistic country, it can be argued that since gifts and sacrifices are core to religion, the same beliefs could have found an expression in the understanding and practice of business-society relations in the country. Furthermore, Amaeshi et al (2006) propose that CSR in Nigeria would be aimed towards addressing the peculiar socioeconomic development challenges of Nigeria (e.g. poverty alleviation, health care provision, infrastructure development, education, etc) and would be informed by socio- cultural influences (e.g. communalism and charity).
Osemene (2012) assessed the impact of Corporate Social Responsibility (CSR) practices in the Nigerian telecommunication industry between 2006 and 2011, through the evaluation of the factors influencing CSR adoption, and arrived at the conclusion that CSR impacted positively on the environment, telecommunication staff and stakeholders. The study reveals that factors that influenced CSR practices were competition, subscribers' demands, pressure from civil and human right group, service quality, legal requirements, and infrastructural decay. However, Pederson and Huniche (2006), in Osemene (2012) observed that economic responsibilities are accorded the highest priority by organizations in Africa, while others such as philanthropic, legal and ethical follow respectively.
Amole, Adebiyi and Awolaja (2012) examined the relationship between corporate social responsibility and profitability in the Nigerian banking sector and reached the conclusion that there is positive relationship between CSR activities and profitability. The study therefore recommends that organisations should demonstrate high level of commitment to CSR based on stakeholder theory in order to enhance their profitability in the long run. According to the study, the support lent to the society through CSR makes the business environment more friendly and habitable for organization survival. Olanrewaju (2012) explored the benefits of CSR in the Nigeria society, revealing a strong and significant relationship between CSR and societal progress, in terms of environmental and economic growth of the country. The study went further to say that there are well formulated corporate social responsibility policies in virtually all the firms in the banking and the telecommunication sectors in the country, and the policies are strictly adhered to. These policies are also made to comply with the directions of regulatory authorities including government policies (Olanrewaju2012, p. 42). Pedersen and Huniche (2006), in the book, 'Corporate Citizenship in Developing Countries' also quoted in Olanrewaju (2012) made a case about revisiting Carroll's CSR pyramid from a Nigerian perspective, since most of the research on Carroll's CSR pyramid has been in an American context. According to Olanrewaju (2012), the report states that in Nigeria, economic responsibility gets the most emphasis while philanthropy is given second highest priority, followed by legal and then ethical responsibilities. On the other hand, a study by George, Kuye and Onokala (2012), reviewed the activities of Multinational Companies (MNCs) mainly in the oil sector in Nigeria that invariably initiated or contributed to the civil unrest of the Niger Delta. The study concludes that the MNCs have behaved
107 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria irresponsibly towards the host communities through their philanthropic gestures rather than behaving responsibly by genuinely holding and treating the communities as real stakeholders. The scholars also observe there are corrupt practices perpetuated by Nigerian government officials, community leaders, in collaboration with the multinational oil companies, a factor which they said made the companies become corporate social irresponsible. In a similar study, Vertigans (2011) examined the impact of oil and gas companies in Nigeria under the umbrella concept of CSR. He observes that though there is great emphasis on socially responsible policies, they are nevertheless limited in scope and ambition and the energy sector continues to create social, environmental, cultural and political problems in the Niger Delta region.
Argument for and Against Corporate Social Responsibility (CSR) The argument against the concept of CSR typically begins with the classical economic argument championed by Milton Friedman. Friedman Cited in Kaplan, 2012) contends that there is only one social responsibility of business, which is to use its resources for maximizing the profit of the shareholders. Friedman argued that if the free market cannot solve the social problems that exist, then it falls upon the government and not upon business to do the job. Hayek (1969), Davis (1973) and Bernstein (2000) averts that the antagonists to CSR argue that a key demerit of CSR is that it dilutes the primary objective of businesses because it requires businesses to sacrifice some profit in order to serve all stakeholders. According to Davis (1973) the antagonist to CSR also argue that businesses are not equipped to handle social activities and at such salient demerit of CSR is that it steers businesses into an area in which they do not have the necessary expertise in. There is a resonating argument that one of the demerits of CSR is that it can make businesses less competitive globally, where CSR is undertaken at such a significant cost disadvantage that can reduce business profits and impair business plans to expand its operations globally.
The argument in favour of the concept of CSR starts with the belief that if businesses are to have a healthy climate in which to function in the future, then it is in their long-term self-interest to be socially responsible. Kuruczet, Corbert and Wheeler (2008) believed that the merit of CSR is that it can win new business, increase customer retention, develop relationships with suppliers, make an organisation an employer of choice, differentiate an organisation from its competitors, improve business reputation, reduce risk, and provide access to investment and funding opportunities. Carroll and Buchholtz (2009) o contend that proacting is more practical and less costly than reacting to social problems once they have surfaced (Carroll and Buchholtz 2009). Therefore, costly social problems such as employee turnover and customer boycott can be avoided by actively pursuing CSR activities. There is a belief that CSR activities can enhance long-term shareholder value by reducing employee turnover and absenteeism; and reducing the costs of complying with environmental regulations; and attracting tax benefits; and enhancing business efficiencies (Smith, 2005). It has been argued that a salient merit of CSR is that it can attract key customers because the public strongly supports companies that are involved in CSR activities. According to UK Small Business Consortium (2006), 88% of consumers surveyed in a CSR study, mentioned they were more likely to
108 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria buy from a company that supports and engages in activities to improve the society. Today, the public believes businesses should be responsible to their workers, communities and other stakeholders, even if may require companies to sacrifice some immediate profit in doing so (Bernstein 2000). Having identified that one major merit of CSR is that it can win new businesses, the next key question that should be evaluated should be that of whether there is a scientific proof that CSR has actually won new businesses to companies that had actively pursued it. This inquisition sets the tone for evaluating the validity of the CSR concept.
Corporate Social Responsibility (CSR) and the Growth of Multi-National Companies (MNCs) The governance of MNCs' global activities is a major issue within the CSR movement that has been the subject of heated and polarising policy and academic debate. In particular, the pressing demands to regulate MNCs has gained momentum and mainstream credibility in the light of huge environmental disasters such as Union Carbide's gas leak and explosion, which killed more than3,000 people in Bhopal in 1984, the Exxon Valdez oil spill off the Alaskan coast in 1989, and the Ogoni crisis in Nigeria in 1996. This has forced MNCs to centre stage in the CSR movement and has led to increased interactions with civil society, state and international organisations.
The increasingly high profile of MNCs has essentially been based on the increasing recognition that environmental risks are not predominantly produced by MNCs, whereas the state has lost most of its regulatory power vis-a-vis the powerful MNCs, particularly in the developing world (Strange 1996, 1997). The standard argument holds that a globalising economy integrated only by the market and transnational capital is eroding the power of nation states to address problems of public concern adequately (Beck, 1995). In this view, the concept of sovereignty and the resulting national economic policies are being undermined while nation states have become unnatural and even dysfunctional as actors in a global economy (Ohmae, 1985). It has been further suggested that the state-based system of global governance is struggling to adjust to the expanding reach and growing influence of transnational corporations (Ruggie 2007). States, in the organisational form of government, according to Korten, 1995; Hertz, 2001) are less and less capable of regulating the activities of business actors within their territories due to processes of de-nationalisation and de- territorialisation. However, others have partially dismissed the above as sheer alarmism, while arguing that although the balance between states and transnational economic actors has shifted considerably, states still hold the fundamental powers to restrain business activities (Rugman, 2000; Weiss, 1998) and do possess the capacity to adapt to changing economic circumstances. Gilpin (2001) and Doremus et al. (1998) argued that the 'global corporation' is in fact a myth. The authors point out that just as the Pax Britannica provided a favourable international environment for the overseas expansion of British firms and investors in the late 19th century, so American leadership following World War II provided a similar favourable international environment for the overseas expansion of American and other capitalist firms. While MNCs depended on their home countries then, Doremus (1998) argues that they still heavily depend on their respective home economies. Rwabizambuga (2008) assert that what has changed is the advantage that corporations hold vis-a-vis
109 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria states, created by the free-market environment, de-regulatory statepolicies, welfare state dysfunctional ties and the power structure within the interstate system (Bemauer and Achini, 2000; Scott 1997). Fuchs (2004) pointed out that there is a risk that undifferentiated claims of a global political rule of corporations may not capture the complexities of current developments in the political role of business. His study of the different dimensions of power that business actors possess in the global economy suggests that claims of a lack of business influence on politics or severe limits to such influence should be met with scepticism. As outlined in the next section, the above issues are also reflected in the heated debates over the governance of MNCs in developing country contexts.
CHALLENGES IN IMPLEMENTING CORPORATE SOCIAL RESPONSIBILITY (CSR) IN NIGERIA The challenges in implementing CSR in Nigeria will be discussed in details in the sub-headings below. Inability of Nigeria Government to Enforce CSR into Law: According to Ijaiya (2014) since the emergence of CRS in Nigeria, there is no law in place by the Nigeria Government in the area of CSR. CSR is still at the discretion of the companies. Companies alone cannot be said to be responsible for social responsibilities to the communities in the region. The government should traditional be responsible for the welfare of its citizens. These include ensuring law and order, security, provision of public infrastructure and other basic amenities. Thus while companies have a social responsibility to the communities they operate, the framework within which this is to effectively work have to be provided by the government.
Corruption and Selfishness: Nigeria is a country blessed with abundance of natural and human resources, as a result attracts the activities of multinational companies who explore these resources to increase the wealth of the nation as well as transform the economic and social environment for the betterment of the common. Apart from increasing the wealth of the nation, most of these companies enshrine in their policy the responsibility of providing some social services to the society they directly affect through their CSR. It is quite pathetic when the level of corruption in Nigeria poses a major challenge to these companies in implementing CSR. Without regards for morals and humanity, when the resources meant to be used for implementing CSR to improve the lives of people in the society gets to the hands of the leaders of these communities, they are siphoned and used for their selfish and personal aggrandisement. This is why Achebe (1998)stipulated that, corruption in Nigeria has passed the alarming and entered the fatal stage, and Nigeria will die if we keep pretending that she is only slightly indisposed.
Lack of Interest in Implementing CSR: Foreign and Local companies in Nigeria lack the necessary drive and impetus to effectively carryout CSR because they are not mandated by the laws of the Nigeria to do so, as a result, these companies see CSR as not a responsibilities or obligatory which they must implement, but do it out of their own volition. It is only when CSR is backed by the laws of Nigeria that companies that tap its resources will then see it as obligatory, or otherwise faces the consequences of the law.
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Negligible or Non-Existent Benefits: Social responsibility should result in positive outcomes for both the business and the community. However, often the results falls heavily in favour of the business involved. Businesses invest a comparatively small amount into community projects and then use their effort to promote their brand and gain access to markets all around the country. The public relations and brand building they receive far outweighs their investment in socially responsible projects.
Political and Social Insecurity: One of the fundamental factors that motivate companies (whether a foreign or local) to do business in Nigeria is the availability of political as well as social security. Suffice to state that the rate of social and political insecurity in the country manifested in the Boko Haram insurgency has done more damage than good to the economy of the nation. In fact the insurgence has eaten so deep into the fabrics of the society to the extent that fear of bombing and kidnap has become the other of the day. Foreigners doing business in Nigeria sleep with one eyes open and do their business with fear, while does who intend coming into the country have totally jettisoned the idea into thin air. With this pathetic and horrible situation on ground, companies will find it very challenging to engage in CSR for fear of not maximising profit which is to the detriment of its stakeholders and the organisation as a whole.
CONCLUSION Multinational Companies in Nigeria and developing economies focusing on the external stakeholders (customers and community) necessitate the quantitative approach and the rationale behind this study. It is obvious that stakeholders are necessary components of a business, and the relationship between business and its stakeholders should be cordial, mutual, reciprocal and balance at all time. The paper has revealed that the customers and community are poorly managed ethically. Strong ethics is vital because it is the conscious reflection on the integrity, credibility, and trustworthiness of that which is being assessed. Due to the highly competitive nature of today's market, companies must maintain high moral integrity in order to survive since strength in ethical values have drastic impact on employees, consumers, and society ratings, which will inevitably effect reputation and business. Businesses are an integral part of the communities in which they operate. Good executives know that their long-term success is based on continued good relations with a wide range of individuals, groups and institutions. Moreover, the general public has high expectations of the private sector in terms of responsible behavior. Consumers expect goods and services to reflect socially and environmentally responsible business behaviour at competitive prices. Shareholders also are searching for enhanced financial performance that integrates social and environmental considerations, both in terms of risk and opportunities. Even companies which may have a good reputation can risk losing their hard-earned name when they fail to put systematic approaches in place to ensure continued positive performance. The effect of a tarnished reputation often extends far beyond that one firm: entire sectors and, indeed, nations can suffer. Hardly a month goes by without some example of a major corporation suffering a reduced market position as a result of questionable behaviour, with many others subsequently finding themselves to be a part of the collateral damage. These firms frequently expend considerable time and money attempting to regain their reputation, with mixed results. 111 The Role of Corporate Social Responsibility (CSR) in The Growth f Multinational Companies in Nigeria
Recommendations Based on the reliable findings of the research, the following recommendations are proffered: 1. There should be interactive sessions on regular basis between the Multinational companies and their customers to proliferate understanding and enhance harmonious business relationship especially on moral and ethical ground. Such interactions would impact positively on the ethical performance of both the companies and the customers thereby improving transparent business transactions.
2. The Companies should fully integrate themselves with the host communities; this can be realized through performing their social responsibilities adequately and to the best of their abilities. The need for harmonious relation between the companies and host communities is absolutely inevitable for smooth business operations and reciprocation of gesture.
3. Representative of all stakeholders (employees, customers, society, government etc) should be appointed as members of the Board of Directors of the companies, for direct representation and participation in the decision making process of the companies.
4. The Companies should subject themselves to the dos and don'ts of their host communities, and see to the consistent growth and development, and wellbeing of these communities while doing their business operations and recording stable profit as well.
5. Government should set up functional mechanism that will constantly check the state of customers' and community management by Multinational Companies in Nigeria. Equally, the publication of top ethical/social responsible Companies by a government institution charged with the responsibility should be done annually.
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116 Veritas International Journal of Entrepreneurship Development (VIJED)
ENTREPRENEURSHIP AS A ROAD MAP TO POLITICAL STABILITY: EVIDENCE FROM NIGERIA.
ANYANWU, Christiantus Izuchukwu Department of Political Science And Diplomacy, Veritas University, Abuja [email protected]
And
EJIMONU Chizowa Emmanuel Department of Political Science And Diplomacy, Veritas University, Abuja [email protected]
Citation: Izuchukwu, A. C. & Ejimonu, C. E. (2018). Entrepreneurship as A Road Map to Political Stability: Evidence From Nigeria. ______Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 117-126 ABSTRACT Unemployment is one of the greatest obstructions to political stability. Public and Private sectors are falling in short of the capacity to engage the large number of unemployed. In Nigeria, the experience is painful as it was exacerbated by the economic recession. It is against this background the paper underscored entrepreneurship as a road map to political stability, and recommended further steps to follow. Frustration-Aggression Theory was adopted as the theoretical framework for analysis. The methodology largely involved secondary sources, as Text books, Journals, Periodicals and Internet materials were used.
Keywords: Entrepreneurship, Political Stability, Entrepreneur, Unemployment, Under-employment,Public and Private ______Sector, Job Creation, and Frustration-Aggression Theory.
INTRODUCTION It is widely said that 'an idle mind is a devil's workshop'. This African idiom tries to explain the danger inherent in joblessness. A nation that has a larger number of unemployed people is said to be sitting on a time bomb. Nigeria has the largest population in Africa, a population of about 180 million. Out of this population, the age bracket of 15-45 has the highest number of unemployment and under-employment. It is one of the major issues that give worry to every concerned Nigerian. The rate has increased during last few years due to the fallout from the economic challenges (Uzom, 2016). According to report from Nigerian Bureau of Statistics, 38% of the population that falls within the employable age is unemployed and 65% of Nigerian youths face unemployment as at
117 Entrepreneurship As A Road Map To Political Stability: Evidence From Nigeria.
September 2016 (NBS Report, 2016). This is one of the most dangerous situations any country can experience. Unemployment of such magnitude is mainly witnessed in situations where there is little or no emphasis on entrepreneurship. In such scenario, the majority of the citizens lack entrepreneurial skills to get themselves engaged and add value to the economy. This situation of economic decline has made Nigeria to be seriously drifting towards political instability. Many agitation groups that are made of young Nigerians are speedily springing up. This ranges from Boko Haram, Niger Delta Militants (in their numerous groups), Movement for the Actualization of the Sovereign State of Biafra (MASSOB), Oodua Peoples' Congress (OPC), Indigenous People of Biafra (IPOB), etc. The political instability in the country has led to the steadily outrageous increment in the Nigeria's annual Defence Budget. Olumide (2015) maintains that the government is voting whopping amount of money to security than developmental projects.
The recent economic recession has exacerbated the unemployment crisis in the country. Akasi (2017) argues that the economic recession has made many industries and factories to close down, many embarked on scaling down their workforce thereby leaving many Nigerians unemployed. Such economic situation has tremendous rippling effects on the political stability of the country. The security threats it creates result to the political instability, owing to the fact that many Nigerians will be vulnerable to recruitment for political insurgencies and illegal business. This is evident in the seizure of containers of arm riffles by the Nigerian Custom Service 4 times within the space of 8 months in 2017; thus, these are the uncovered and impounded ones. It is job creation and massive employment that can arrest the political fragility of the country. This can only be achieved through emphasis on entrepreneurship; hence the public and private sectors are incapacitated by economic realities. It is against this background that the paper sets out to identify entrepreneurship as a key to political stability.
CONCEPT CLARIFICATION Entrepreneurship Entrepreneur as a concept originated from French, and was first used in 1723. Today, it implies qualities of leadership, initiative and innovation in new venture design (Kolarov, 2013). He further holds that historically the study of entrepreneurship can be traced back to the work in the late 17th and early 18th centuries of Richard Cantillon.
Entrepreneurship is described as the ability, capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. The definition of entrepreneurship not only focuses on launching and running of business, but rather has expanded. Grill (2010), captures this as - in the 2000s, the definition and explanation of the term was expanded to capture how and why some individuals or teams identify opportunities, evaluate them as viable and then decide to exploit them, where as others do not, and in turn, how entrepreneurs use these opportunities to develop new products or service, launch new firms or even new industries and create wealth. Entrepreneurs act as managers and oversee the launch and growth of an enterprise.
118 Entrepreneurship As A Road Map To Political Stability: Evidence From Nigeria.
This is why entrepreneurship is widely seen as the process by which individuals or group of individuals identify a business required for its exploitation. The exploitation of entrepreneurial opportunities include: a) Developing a business plan b) Hiring human resources c) Acquiring material and financial resources d) Providing leadership e) Being responsible for both the venture's success or failures, (Katila, 2012). This reflects in Joseph Schumpter's explanation that entrepreneur plays the role of 'Creative destruction' - launching innovations that simultaneously destroy old industries while ushering in new industries and approaches, (cited in Burton, 2010). It shows that entrepreneurship attracts development in a country, and entrench healthy competition among the citizenry.
Political Stability Political stability is a status every government wishes to attain. It is a state where agitation groups are not sporadically springing up, and no proliferation of small arms among the citizens. Furthermore, it is where members of the government can change without violence, either by democratic election or some other means of succession and the citizens are economically engaged towards achieving their basic goals. Lamberts (2014), sees it as the ability of a people's government to share, access, or compete for power through non-violent political process and to enjoy the collective benefits and services of the state. For him, this rests on four necessary conditions: provision of essential services, stewardship of state resources, civic participation and empowerment, political moderation and accountability. Political stability reflects on situations where the citizens are economically engaged, dependently or independently with the state providing essential services as a steward of the state resources (Breden, 1999). In such a state, the government is accountable to the people and the people participate in governance through the civil society organization and public institutions.
Political stability is determined based on the amount of violence and terrorism expressed in the nation and by citizens associated with the state. A stable society is one that is satisfied with the state. A stable society is one that is satisfied with the system of operations of the government, characterized by the meaningful economic engagement of the citizens. In such environment, the government is favoured by the population and does not experience strong indications of social unrest; while there are problems within any nation, and times of war or hardship are common, a stable political system withstands these problems without major societal upheaval, (Idowu, 2017).
This notwithstanding, poor economic performance may lead to government collapse and political unrest. Such situation breeds unfriendly environment for investments and growth. Business operates according to forecasts and scenarios about the future that comprise surprises as well as certainties. No matter the type of surprises that may spring up, the one thing that should be avoided is the instability in macro environment that results from political gridlock, extremism and political dysfunction.
119 Entrepreneurship As A Road Map To Political Stability: Evidence From Nigeria.
THEORETICAL FRAMEWORK Frustration-Aggression theory is adopted for analysis of this work. The theory was developed by John Dollard. The theory explains what causes violence and instability within a state. It argues that frustration causes aggression, but when the source of the frustration is not traced and solved, it creates a hyper instability in the system. Thus, frustration starts the moment the basic target or goals of man are interrupted from being achieved. The response to this frustration is always aggression when not properly handled. This overtly reflects in the state of instability within the system (Klopp, 2010).
However, the theory has been accused of weaknesses - first, there is little empirical support for it, even though researchers have studied it for many years, secondly, the theory suggests frustrated and prejudiced individuals should act more aggressively towards out group they are prejudiced against, but studies have shown that they cannot say why some out groups are chosen to be scapegoats and why others are not (Yaund, 2007). What seem to be the shortfalls of the theory notwithstanding, it has established a correlation between interference or disruption of basic human goals and frustration, and the possibility of leading to aggression. This is evident on how high rate of unemployment has interrupted the actualization of basic needs of the aggrieved against the entire Nigerian system which is witnessed in the range of insurgence and agitations across the country. To trace and solve the causes of this frustration as the theory acknowledges, is by solving the issue of unemployment by practically laying emphasis on entrepreneurship.
ISSUES OF UNEMPLOYMENT IN NIGERIA Unemployment rate is always determined by dividing the number of unemployed by all individuals currently in the labour force. It is said to be high when the number of unemployed are far more than the employed in the labour force. In such situation the economy of such country is threatened, in extension the stability of the system. In Nigeria, the increasing rate of unemployment and under- employment has been a great concern. The National Bureau of Statistics (NBS) holds that the unemployment rate in the country rose from 13.9 percent in the 3rd quarter to 14.2 percent in 4th quarter 2016, and 20 percent in 2017 (cited in Uwaja, 2017). The report further shows that the total number of unemployed rose from 27.12 million in 3rd quarter to 28.58 million in the 4th quarter alone. It indicates the total number of under-employed as 15.9 million (19.7%) in 3rd quarter and 17.03 million (21.0%) in 4th quarter. This development puts Nigeria in a worry state. Such situation breeds frustration and aggression among the citizenry, which threatens the stability of the system.
The cause of this ugly situation is not farfetched. Olawale (2017) identifies this as follows: a) The industrial friction which makes people not to fill job vacancies as they lack skills and are unaware of the existence of the jobs. This is mainly due to ignorance, shortage of raw materials and breakdown in machinery. b) The high and rapid population growth which results in the increment of the growth of labour force, along with the inadequate supply of jobs. The rapid population growth has been coupled with rural-urban migration. This has increased the population in cities thereby raising the level of joblessness. 120 Entrepreneurship As A Road Map To Political Stability: Evidence From Nigeria. c) The unstable and corrupt political environment has contributed immensely in unemployment. The failure of government to perform their constitutional duties has resulted in the high level of unemployment. Also the high level of corruption in Nigeria among politicians has resulted in the mismanagement of funds and resources supposed to be used for the creation of job opportunities for the people. d) Lack of quality education has contributed to unemployment. Most employers believe that Nigerian graduates are unemployable. This is the result of the educationalprogramme which usually include theories and lack of practical use of knowledge. Also most tertiary educational courses lack entrepreneurial training. For example, a graduate of agriculture course knows the theory but lacks necessary practical agricultural skills. e) Lack of infrastructural development contributes to unemployment. Lack of good roads, steady and sustainable power supply has made the economy hostile to investors. The lack of infrastructurehas led to the high cost of production. The absence of investors influences the number of available jobs. The operating companies also use fewer people because of the high cost of production. f) Unemployment in Nigeria has been worsened by the recent decline in the country's economy. A lot of people have been laid off, while new jobs were not created. Most companies lay off employees because they cannot afford lot workers.
As many workers have been laid off, adding to the increasing number of unemployed continues to destabilize the economy and threaten the political system. The consequences continue to reflect in the reduction of national output of goods and services, increase in the rural-urban migration, high level of poverty, increase in number of dependence and the worse is the rate of crime, which very dangerous to heterogeneous country like Nigeria.
Job Creation: A Primary Function of Public and Private Sectors Unemployment is defined by the Bureau of Labour Statistics (BLS) as people who do not have a job, have actively looked for work, also people who were temporarily laid off and are waiting to be called back (cited in Idumange, 2015). Statistics on unemployment is important to every government as it helps it to gauge the health of the economy. If unemployment gets too high (around 6% or more), the government has to respond intensively to stimulate the economy and create jobs. The case of Nigeria has been that for the past 25 years and more, successive administrations had not taken deliberate steps and made sacrifices required, especially in the reduction on cost of governance (Terve, 2017).
The current administration led by President Buhari has approached the issue of unemployment through economic reforms, emphasis on micro, small and medium enterprises mainly captured in the Economic Recovery and Growth Plan (ERGP) 2017-2020. This, it has identified as a way of delivering the dividends of democracy and thereby stemming the tide of restiveness and insecurity in the country. Umor (2017) posits that in realizing this, the government needs to establish structures to ensure that business environment is conducive for the private sector to thrive and create jobs. For this effort to yield positive result as expected, the entrepreneurs and MSMEs must be encouraged to drive the process of job creation as they are known all over the world as aggregate generators of employment.
121 Entrepreneurship As A Road Map To Political Stability: Evidence From Nigeria.
With the recent economic recession (2016/2017), coupled with the poor infrastructural development, the private sector are deeply incapacitated to lead in job creation. This is an unfortunate situation as the prospect of job creation is much better in the private than public sector. It underscores the imperative of public-private partnership and the need for the creation of enabling environment for investors. With this in place, much emphasis should be laid on quality entrepreneurial skills which are very crucial for the establishment and management of enterprises in any economy.
Entrepreneurship and Tertiary Institutions Countries that take into consideration the importance of entrepreneurship entrench it in their academic curriculum. By this, it becomes part of the courses that is offered in the tertiary institution. Lin the developed countries, there are institutions that are established as centers for acquiring entrepreneurial skills and knowledge. This has helped them to break through in innovations on Science and Technology. In Nigeria, the Federal Government in 2006 made the study of entrepreneurship compulsory in Universities and other tertiary institutions of higher learning which took effect from 2007/2008 academic session, as a response to the issue of unemployment and socio- political instability in the country. The move by Federal Government is in line with the global best practices of institutionalizing entrepreneurship development. This policy has helped in discouraging Nigerian graduates from craving for non-existing 'white-collar job, but condition their mindset on establishing and running their own independent businesses.
There appears to exist a consensus among scholars that entrepreneurship education and training has a vital role to play in the development of entrepreneurial attitudes, abilities and related skills. According to Erkilla (2000), about 93 percent of scholars are of the opinion that entrepreneurial skills can be developed via education and training. Thus, the establishment of entrepreneurial education is seen as a possible measure to promote entrepreneurship, healthy economy and political stability. Oghojafor, Kuye, Sulaiman and Okonji (2009) hold that entrepreneurship education is a programme or part of the programme that prepares individual to undertake the formation and acquisition of small business. Thus, entrepreneurship development programme/education is a planned, systematic and sustained effort at inculcating and nurturing the entrepreneurial spirit among Nigerians so as to produce a pool of willing, able and successful entrepreneurs.
It suffices to maintain that, entrepreneurial education is the purposeful intervention by the teacher or trainer in the life of a learner to impact entrepreneurial qualities and skills to enable the learner survive in the world of business and declining employment. Nnazor (2005) posits that it aims at equipping learners with skills, knowledge and dispositions that can help them develop or implement innovative social or business plans; and research has established that individuals attending entrepreneurship courses have tendency to establish their own businesses at some point in their career than those attending other courses. The skills traditionally taught in business schools are necessary but not sufficient to make a successful entrepreneur, while students need to develop their business skills and understanding, more attention is required to the development of their entrepreneurial skills, attributes and behaviours (Rae, 1997). 122 Entrepreneurship As A Road Map To Political Stability: Evidence From Nigeria.
To achieve this, there should be a long term strategy that should focus on developing a set of programmes at different stages of the enterprise education drive. Such enterprise education programmes could offer a progression from awareness increase to real activities to develop entrepreneurship and entrepreneurial skills, culminating in a desire to own and run a business. The results of the study carried out by Thomberry (2003) also revealed that many managers can indeed be trained to act like entrepreneurs and that these actions can result in significant new value creation. This clearly shows that entrepreneurship training is vital for the firms that are rarely satisfied with the status quo, firms that are always looking forward to creating new values. The importance of placing entrepreneurship education in tertiary institutions of high learning cannot be over emphasized; through this, the students are exposed to the concepts, principles and theories of entrepreneurship, their entrepreneurial spirits and minds are fired to spur them into thinking scientifically on how to create jobs for others instead of being job seekers.
Entrepreneurship and Political Stability There is straight line connection between entrepreneurship, jobs and political stability, just as joblessness is the single biggest cause of political unrest and violence. And the single way out is job creation through entrepreneurship. Koltai (2000) holds that huge rates of unemployment generally drives people, especially young people to desperation, frustration and aggression which results in destabilization of the state. For him, countries that invest and encourage entrepreneurship can be create wealth much faster than those who do not, both on an individual and national economy basis. This in extension will help in ensuring political stability in the country.
Entrepreneurial forces are gradually becoming strong in Nigeria as lack of jobs and a rise in poverty leave few other options for the Nigerian people. However, there are constraints on this, mainly due to a lack of resources, though there are few non-profit organizations that are dedicated to promote entrepreneurship (Ojonugwa, 2013). Apart from the information about Nigeria that is often negative, majority of the citizens are very industrious and ready to establish their own little enterprise. In the past few years, there have been the start ups of internet cafés, new internet service providers, and computers in some schools and connectivity hubs that provide access to information at high speed. The Nigerian government makes policies that aim to appreciate the importance of such enterprises. There are policies that tend to promote the use of technology in education, the Nigerian Economic Policy 1999-2003, which is a compendium of policies and guide lines for national development (Unchenna, 2015). However, a clear distinction between developed and developing countries often lies in the wide disparity between policy pronouncements and policy implementation. Often, developing nations adopt excellent policies and guidelines that could, if well implemented, change the future of their citizens, but unfortunately they are very often not followed. If Nigeria had followed its laws and policies guiding education and technology, Small and Medium Scale Enterprises with good implementation, and the people attain their educational goals, professional and entrepreneurial skills with the tools available to the world today, she would have witnessed the transformation of what is presently a third world giant into an emerging economic giant.
123 Entrepreneurship As A Road Map To Political Stability: Evidence From Nigeria.
The entrepreneurial activities have been found to be capable of making impact on the economy of a nation and quality of life of the people through economic growth; employment generation and empowerment of the disadvantaged segment of the population, which include women and the poor- entrepreneurial development, will encourage entrepreneurs to create new enterprise, new commercial activities and new economic sectors. They will generate jobs for others, produce goods and services for the society, introduce new technologies and improve or lower cost outputs, and earn foreign exchange through export expansion or the substitution of imports. In line with this, Adekunle (2014) maintains that entrepreneurial development mobilizesdomestic savings and utilization of local resources; the SMEs will serve as good agent for disposal of industrial products and some services and contribute immensely to production of raw materials in the form of semi-processed goods for use by bigger industries. As a base, entrepreneurship helps in the development of appropriate technology which will provide a veritable ground for skilled, unskilled, semi-skilled workers; it also provides productive self-employment to a number of educated and less educated young men and women. It is uncontestable that entrepreneurship has many multiplier effects on any economy, spurs innovation, and foster investments in people, which is better of competitive advantage than other natural resources which can be depleted.
Entrepreneurial activity in Nigeria today is primarily based on circumstance, instead of being a deliberate planned venture in the light of its importance. How many years than the line, the majority of entrepreneurs are operating in Lagos, the former capital, showing the level of attention the government pays to the development of entrepreneurship. The economic decline since 1980s has created a hostile environment to entrepreneurial activities, coupled with the lack of infrastructure that has continued to place a barrier to its effectiveness. It has led to cost of doing business, making it impossible for both local and foreign investors, and continue to stifle entrepreneurial activities. According to Idoko (2008), the some of the policies of government are barriers to the success of large- scale entrepreneurs; the government is plagued by corruption and greed, and systematically stamped policies and laws that promote free enterprise. This discourages entrepreneurs from commercializing their ideas and inventions, instead lead to brain-drain. Adetola (2016) highlights the major challenges of entrepreneurship in Nigeria: a) Difficulty in securing loans from financial institutions is the one of the major challenges being faced by entrepreneurs in Nigeria. This is because the banks see it as risk owing to the uncertainty that surrounds the Nigeria economy. In addition, the banks tend to frustrate aspiring entrepreneurs with some of their ridiculous requirements in a bid to discourage young entrepreneurs from obtaining loans. b) Poor state of the country's infrastructure is another challenge to entrepreneurship in Nigeria. Epileptic power supply has forced so many business to shut down. No good road to transport the products to the available markets. All these lead to high cost of production. c) Inconsistency in the policies of government put many potential entrepreneurs off balance. The incessant change in the policies of government affects the business sector; with good and consistent business policy, every investor or entrepreneur will be able to plan and fit into the environment with the prospect of expanding and being futuristic. 124 Entrepreneurship As A Road Map To Political Stability: Evidence From Nigeria.
The persistence of these challenges continues to widen the rate of unemployment. It becomes obvious that it behooves on government to address these challenges, not only will it attract local entrepreneurs but also foreign investors and entrepreneurs.
Conclusion It is a well known fact that there is a sharp connection between economy and political activities in a state, especially in today's world where the economy fortunes of a nation are dependent on its production strength. A decline in production results to decline in economy, which increases unemployment and become consequential on political instability. In this scenario, as the experience in Nigeria, there is disruption in the efforts of the citizens to at least achieve their basic goals, which has led to frustration and aggression, and in extension political instability. To have a departure from this is for the state to practically place premium on entrepreneurship education and entrepreneurial skills acquisition. To achieve this, the following should be carried out: a) Tthe government should make loans accessible to trained entrepreneurs b) The government should ensure infrastructural development, more importantly roads and power supply c) There should be formulation and promotion of business friendly policies to encourage entrepreneurs d) entrepreneurial centers in various institutions should be adequately equipped.
REFERENCES Klopp M. (2010). Frustration-Aggression Theory. New York: Athenton Press. Yaund L. (2007). Frustration Aggression Theory:AnExplanation. Belmount, CA;Cengage Learning Press. Olawale J. (2017). Unemployment in Nigeria: Causes, Effort and Solution. Retrieved from http://www.naij.com 12/09/17 Uwaja B. (2017). Statistics on Unemployment in Nigeria. Enugu: Kland Publishers. Koltai S. (2017). Entrepreneurship and Stability in Nations. New York: Grand Press. Idumange P. (2015). Unemployment in Nigeria. Ilorin: Kotak Press. Terve O. (2017). Nigerian Economy and Unemployment.Makurdi: Global Press. Umor C. (2017). The Need for Small Scale Businesses. Retrieved from http://www.naij.com Ojonugwa M. (2013).Entrepreneurship and Nigeria Economy. Lagos: Ventures Publishers Uchenna K. (2015). Obasanjo's Policies on Educational Development.Owerri: Printex Press Idoko P. (2008). Constraint of Entrepreneurship in Nigeria.Retrieved from http://www.naij.com Adekunle E. (2014) The Need for Entrepreneurship in Nigeria Economy. Ibadan: Centers Publishers Adetola A. (2016). Challenges and Prospects of Entrepreneurship in Nigeria. Lagos: Prime Publishers Erkilla K. (2000). Entrepreneurial Education. New York: Garland.
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Nnazor R. (2005). Adult Education in Nigeria: The Consequences of Neglect and Agenda of Action. International Educational Journal. 6, 530-536 Rae D. M. (1997). Teaching Entrepreneurship in Asia: Impact of Pedagogical Innovation on Entrepreneurship, Innovation and Change.Journal of Entrepreneurship. 6, 193-227. Thomberry, N. E (2003). Corporate Entrepreneurship: Teaching Managers to be Entrepreneurs. Journal of Management Development. 22, 87-110. Oghojafor B. E. A, Kuye O. L, Sulaiman A. A, and Okonji P. S (2009). Empowering Nigerian Youths for National Economic Development: The Role of Entrepreneurship Education. Journal of Research in National Development. 7, 77-98. Uzom O. (2016). Unemployment Challenge in Nigeria. Enugu: Dextrex Publishers. Burton F. (2010). Entrepreneurial Success: Differing Perceptions of Entrepreneurs and Ventures Capitalists. The International Journal of Entrepreneurship and Innovation. 11. 189-200. Olumide K. (2015). Issues with Governance in Nigeria. Ibadan: Ventures Publishers. Akasi U. (2017).Genesis of Nigerian Economic Recession.Makurdi: Greens Press. Kolarov S. (2013). Entrepreneurship. Hamburg: McGraw-Hill. Grill M. (2010). Entrepreneurial Ambition.Routledge: Routledge Katila O. (2012). The Concept of Entrepreneurship. London: Macmillan Lambert U. (2014).Political Instability in Africa.Akure: Emiks Press Brenden K. (1999). Democracy and Political Stability. Retrieved from http://www.naij.com Idowu L. (2017). Political Instability. Retrieved from http://www.naij.com
126 Veritas International Journal of Entrepreneurship Development (VIJED)
FINANCIAL DEEPENING AND ECONOMIC DEVELOPMENT OF NIGERIA: AN EMPIRICAL INVESTIGATION
AKHATOR Akhere Peter, PhD. Department of Business Administration, Ambrose Alli University Ekpoma, Edo State, Nigeria
And MARCUS Garvey Orji, PhD. Department of Business Administration Veritas University, Abuja, Nigeria Email; [email protected]
Citation: Akhator, A. P. & Orji, M. G. (2018). Financial Deepening and Economic Development of Nigeria: An Empirical Investigation.______Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 127-139 ABSTRACT This empirical study examined financial deepening and economic development in Nigeria between 1986 and 2015.The central focus is that a high level of financial deepening is a necessary condition for accelerating growth in an economy. This is because of the central role of the financial system in mobilizing savings and allocating same for the development process. The study made use of secondary data, sourced for a period of 29 years. We specified 5 explanatory variables for the study based on theoretical underpinnings. We sought to establish a relationship between these variables and financial deepening index. The two Stage Least Squares analytical framework was used in the analysis. A trend analysis was also done in the study. At the end of the study, we found that financial deepening index is low in Nigeria over the years. We also found that the five explanatory variables, as a whole were useful and had a statistical relationship with financial deepening. But four of the variables; lending rates, financial savings ratio, cheques/GDP ratio and the deposit money banks/GDP ratio had a significant relationship with financial deepening. We concluded that: the financial system has not sustained an effective financial intermediation, especially credit allocation and a high level of monetization of the economy. Thus the regulatory framework should be restructured to ensure good risk management, corporate governance and stemming systemic crisis in the system.
Key Words; Financial Structure, Corporate Governance, Financial Reforms, Financial Savings, Financial Market, ______Gross Domestic Product, Financial Deepening
127 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation
INTRODUCTION The reforms in the financial system in Nigeria which heightened with the 1986 deregulation, affected the level of financial deepening of the country and the level relevance of the financial system to economic development(Nnanna&Dogo1998). However, the rapid globalization of the financial markets since then and the increased level of integration of the Nigerian financial system to the global system have generated interest on the level of financial deepening that has occurred.
According to Nzotta (2004) the financial system serves as a catalyst to economic development through various institutional structures. The system vigorously seeks out and attracts the reservoir of savings and idle funds and allocates same to entrepreneurs, businesses, households and government for investments projects and other purposes with a view of returns. The financial system plays a key role in the mobilization and allocation of savings for productive use, provides structures for monetary management proves the basis for managing liquidity in the system. It also assists in the reduction of risks faced by firms and businesses in their productive processes, improvement of portfolio diversification and the insulation of the economy from the vicissitudes of international economic changes. Additionally, the system provides linkages for the different sectors of the economy and encourages a high level of specialization expertise and economies of scale. Since 1986, the monetary authorities have adopted various measures aimed at deepening the financial system and reducing the level of financial repression in the system. In terms of flow of funds, the banking system, clearly dominates and has an important impact on the level of economic development. Thus, we can make a distinction between bank-based and market-based financial systems (Stiglitz, 1985, Levine, 2002). These issues have been the focus of theoretical debate for decades. Attempts have also been made to examine whether one type of financial system better explains economic growth in a country than another (Arestis&Luintel2004). Empirical studies on financial structure and its effects on economic growth have concentrated on the developed economies, especially the United States of America and United Kingdom, which are market based while Germany and Japan are essentially bank-based (Olofin&Afangideh2008).
Financial reforms have been a regular feature of the Nigerian financial system. The reforms have evolved in response to the challenges posed by developments in the system such as systemic crisis, globalization, technological innovation, and financial crisis. The reforms often seek to act proactively to strengthen the system, prevent systemic crisis, strengthen the market mechanism, and ethical standards. Financial reforms in Nigeria date back to 1952 when the Banking Ordinance was enacted. The deregulation of banking in 1986 provided the impetus for the Structural Adjustment Programme. The 1986 reform of the financial system saw a policy shift from direct control to a market based financial system, especially as regards monetary management, risk management and asset holding capabilities of the institutions. A number of other reforms followed including the consolidation policy in banking 2005 and insurance 2007. The capital market has also experienced a lot of reforms over the years, especially as regards the capital requirements of the operators, the operational and ethical standards of the institutions and the modalities of the market mechanism.
128 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation
The reforms in the system impacted positively on the growth of the financial system. The system metamorphosed from a rudimentary one at inception to a more sophisticated one in 2009 accommodating with diverse institutions and operators, diversified financial assets and an enhanced regulatory framework. The reforms have also tried to address the financial gaps in the system, remove rigidities in the system of credit allocation and control and achieve positive real interest rates and greater efficiency in the intermediation process.
Financial sector reforms seek to develop an efficient framework for monetary management. This encompasses efforts to strengthen operational capacities of the banking system, foster efficiency in the money and securities markets, over-haul the payments system and ensures greater autonomy for the Central Bank in formulating and implementing macroeconomic policies. Thus, there is the need to deepen the financial sector and reposition it for growth and integration into the global financial system in conformity with international best practices. One of the most important policy concerns in most countries is the effect of consolidation of financial institutions on financial system growth and development. Consolidation could alter the credit allocation of the financial system by fostering the creation of larger banks having better access to the funds market. It also affects the availability and pricing of loans in response to changes in the market dynamics and the level of economic development. The study essentially seeks to examine in an empirical manner, the nature of financial deepening in Nigeria since the onset of financial reforms in 1986 till date. Within the finance-growth nexus literature, some have argued that financial intermediaries mobilize, pool and channel domestic savings into productive capital and contribute to economic growth. On the other side of this debate is an argument that financial deepening is a consequence, and not a cause, of economic growth. In this view, economic growth increases demand for sophisticated financial instruments, which in turn leads to growth in the financial sector (Ardic&Damar, 2006). However, there are studies, which have argued that a bi-directional causality exists between financial intermediation and economic growth (Odhiambo; 2011) with many of these studies applying causality test and error correction mechanism (Shittu, 2012 and Odeniran&Udeaja, 2010). Well-functioning financial institutions enhance overall economic efficiency, create and expand liquidity, mobilize savings, promote capital accumulation, transfer resources from traditional (non-growth) sectors to the more modern growth-inducing sectors, and also encourage a competent entrepreneur response in these modern sectors of the economy (Nieh, Chang, Russel& Hung, 2009, Islam & Osman; 2011, Shittu, 2012).
Influenced by the preponderance of such theoretical reasoning, along with repeated recommendations of key world organizations like the World Bank and the International Monetary Fund, the government of Nigeria has paid a great deal of attention to expanding the breadth and depth of its financial market. Examples of such financial developments include continuous deregulation of bank lending and deposit interest rates, rapid use of credit and debit cards, increasing use of payment technologies like Automated Teller machines(ATM) and electronic transfer of deposits, expanding internet banking services, e-banking, and mobile banking technology etc.
129 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation
The present study departs from previous studies in that we investigated the extent of financial deepening on economic growth considering the fact that Nigeria still experiences high level of unemployment, high poverty level, high inflation rate, wide disparity between the lending and deposit rates.
LITERATURE REVIEW Khalil (2014) has remarked that the measures of financial deepening have positive impact on economic growth in context of developing countries and negative impact in context on developed countries. In their study of 10 Sub Saharan countries Anthony and Tajudeen (2010) show evidences of unidirectional causality of financial deepening to economic growth for some countries and also the other way round for some other countries. However there were countries where they found bidirectional causality between financial deepening and economic growth. Onayemi (2013) in the attempt to find the relation between the output growth, economic openness and financial development, concluded that financial deepening and trade openness do not cause changes in output growth. But under some structural era the economic growth granger cause financial deepening and trade openness. Azra (2012) in his research work about estimating the relationship between financial deepening and poverty alleviation has found positive impact of money supply and bank credit to private sector on poverty alleviation.
Various studies investigated the relationship between financial system structure and development and the level of economic growth in Nigeria. These studies include Akinlo and Akinlo (2007) Ayida, (2007), Ndebbio (2004),Oyejide (1998), Edo (1995), Ogun (1986). The studies relied on money market indicators and established a positive and significant relationship between financial development and economic development. Financial deepening is often used in development studies and refers to the increased provision of financial services with a wider choice of services geared to the development of all levels of society. The World Bank (1932) further contends that financial deepening encompasses the increase in the stock of financial assets. From this perspective, financial deepening implies the ability of financial institutions in general, to effectively mobilize financial resources for development. This view accepts the fact that a financial system's contribution to the economy depends on the quality and quantity of its services and the efficiency with which it performs them. Popiel (1990) conducted one of the most elaborate studies on financial deepening. According to him, financial markets are deep from a qualitative standpoint when: 1. They offer savers and investors a broad range of financial instruments which differ in terms of liquidity, yields, maturities and degree of risk including debt instruments, equity instruments and in between quasi-equity instruments. 2. They encompass a diversity of sub-markets, trading in different financial instruments. 3. Mature anddomestic financial markets are integrated into the international financial markets. 4. Are linked together through financial instruments. 5. Finally, the markets are linked together through various financial institutions which function as market makers and financial intermediaries.
130 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation
The conclusions of Popeilare intandem with the views of Shaw (1973) who contends that financial deepening is an outcome of the adoption of appropriate real finance policy and the broadening of the markets. The attempt to effect this in Nigeria resulted in the deregulation of the financial system in 1986 and the various reforms in the financial system since then. Financial deepening implies the ability of financial institutions to effectively mobilize savings for investment purposes. The growth of domestic savings provides the real structure for the creation of diversified financial claims. It also presupposes active operations of financial institutions in the financial markets, which in turn entail the supply of quality (financial) instruments and financial services (Ndekwu, 1998). The views above conform to the conclusions of a study by Nnanna and Doga (1998) that financial deepening represents a system free from financial repression. Their findings in this study showed that policies of financial repression aimed at encouraging domestic investments through suppressing interest rates produced negative results. Here, negative real interest rates did not encourage greater investments but rather encouraged the banks to be more risk averse and more hesitant to lend. On the other hand, when interest rates are more market oriented and less negative in real terms, bank lending increases and same to domestic investments and national savings. Financial deepening generally entails an increased ratio of money supply to Gross Domestic product (Popiel, 1990;Nnanna&Dogo, 1998 and Nzotta, 2004). Financial deepening is thus measured by relating monetary and financial aggregates such as M1, M2 and M3 to the Gross Domestic Product (GDP). The logic here is that the more liquid money is available to an economy, the more opportunities exist for continued growth of the economy. How does this come about? Deep and mature financial markets are indispensable for economic development Olofin and Afangideh (2008), Arestis (2001) and Levine (2002). It is also instructive to note that the study by Nnanna and Dogo found that the depth of the Nigerian financial market remained fairly shallow up to 1983. The financial deepening index grew between 1987 and 1997. The results of their study showed a positive serial correlation between financial deepening and six explanatory variables. From the literature, we can summarize the reasons why financial deepening is poor in developing countries as including the low level of foreign direct investments, shallow capital market, distortions in interest rate, and weak association between financial openness and financial deepening (Ju& Wei, 2007). The low level of corporate governance in financial institutions has also sustained poor financial deepening in the system, (Nzotta, 2004). Moreover, in a world of friction less capital markets and various levels of country risks, the least developed financial system is completely bye-passed by international investment flows. Thus, a developing country with poor financial infrastructure may experience large outflows of foreign capital, Yan (2007). These issues perhaps explain why financial deepening is not accelerating at an appreciable ratein Nigeria and most of the poor countries of sub-Saharan Africa and South East Asia.
EMPIRICAL LITERATURE Darrat and Al-Sowaidi (2010) assess the role of information technology and financial deepening in Qatar, a fast growing economy. The study employs vector-error-correction modeling technique with its attendant short-run causal dynamics and found that real economic growth in Qatar is robustly linked over the long-run to both financial deepening and information technology and concluded that financial development, rather than IT, is more critical for enhancing economic growth over the short-run horizon.
131 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation
Ardic and Damar (2006) analyze the effects of financial sector deepening on economic growth using a province-level data set for 1996-2001 on Turkey. The period covered was associated with a weakly regulated and relatively unsupervised expansion of the banking sector which led to the 2001 financialcrisis. The results indicate that a strong negative relationship between financial deepening, both public and private, and economic growth exists. In Nigeria, Nzotta&Okereke (2009) examine financial deepening and economic development inNigeria between 1986 and 2007. The study made use of time series data and two stages least squares analytical framework and found that four of the nine variables; lending rates, financial savings ratio,cheques/GDP ratio and the deposit money banks/GDP ratio had a significant relationship with financialdeepening and concluded that the financial system has not sustained an effective financialintermediation, especially credit allocation and a high level of monetization of the economy.
Agu and Chukwu (2008) employ the augmented granger causality test approach developed by Toda &Yamamoto (1995) to ascertain the direction of causality between “bank-based” financial deepeningvariables and economic growth in Nigeria between 1970 and 2005. Their co-integration results suggestthat financial deepening and economic growth are positively co-integrated. In the Toda-Yamamotosense, the study finds that the Nigerian evidence supports the demand-following hypothesis for “bank-based”financial deepening variables like private sector credit and broad money; while it supports thesupply-leading hypothesisfor “bank-based” financial deepening variables like loan deposit ratio andbank deposit liabilities. Thus, the study concludes that the choice of bank-based financial deepeningvariable influences the causality outcome.
Okoli (2010) examines the relationship between financial deepening and stock market returns and volatility in the Nigerian stock market for the period 1980-2009. The study employs the popular GARCH (1, 1) model. Four modeled equations were estimated and analyzed. Financial deepening was represented by two variables, the ratio of the value of stock traded to GDP (FD1t) and the ratio of market capitalization to GDP (FD2t). Empirical results revealed that financial deepening (FD1t) measured as the ratio of value of stock traded to GDP do not affect the stock market and there is no news about volatility. But financial deepening (FD2t) measured as the ratio of market capitalization to GDP affect the stock market. It indicated that financial deepening reduces the level of risk (volatility) in the stock market. Result also recorded that the conditional volatility of returns is slightly persistent. Sulaiman, Oke, &Azeez (2012) critically explore the effect of financial liberalization on the economic growth in developing nations with its assessment focusing on Nigeria with annual time series data from 1987-2009. The study employs co-integration and error correction model (ECM) by making GrossDomestic Product as a function of lending rate, exchange rate, inflation rate, financial deepening (M2/GDP) and degree of openness as its financial liberalization indices. Co-integration result confirms the existence of long run equilibrium relationship while the ECM results show a very high R2 in both theover-parameterized model (95 percent) and parsimonious model (91 percent). The study therefore concludes that financial liberalization has a growth-stimulating effect on Nigeria. The relationship between the availability of financial
132 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation instruments and financial deepening has been studied empirically by a number of researchers on developing economies. For instance, Atukorala&Rajapathirana (1993) tested the McKinnon-Shaw hypothesis using Sri Lankan time series data on an annual basis for the period 1960-1987 with a dummy variable to represent policy changes in 1977. They found a positive relationship between interest rate and financial deepening.
Pradhan (2009) estimated models based on the McKinnon-Shaw paradigm and Keynessian paradigm on the Sri Lankan economy. In the McKinnon-Shaw model, he specified M3/Y (which he referred to as broad money supply to GDP ratio) as the dependent variable while inflation, real income, nominal interest rate and the lagged values of broad money supply to GDP ratio were all specified as the independent variables. The results from the regression the author performed showed that nominal interest rate positively influenced broad money supply to GDP ratio and that inflation negatively affected broad money supply to GDP ratio while real income had mixed effects on broad money supply to GDP ratio. In the Keynesian model, he specified broad money supply to GDP ratio as the dependent variable while he added more variables to the ones he specified as independent variables in the McKinnon-Shaw model. These new variables are government expenditure as a ratio of GDP or the deficit which is believed to increase the demand for money and external reserves as a ratio of GDP. His regression results showed that government expenditure also had a positive influence on broad money supply to GDP ratio.
Odhiambo (2009) also utilized the McKinnon-Shaw framework to determine the factors that influence financial deepening in the Republic of South Africa. In the model, he specified M2/GDP (which he referred to as financial depth variable) as the dependent variable. Real income, nominal deposit rate, expected inflation and financial depth variable lagged once were specified as the independent variables. The results of the cointegration and error correction model (ECM) regression performed showed that all the independent variables showed a long-term movement with financial depth variable. However, the ECM regression performed showed that the coefficient of the deposit rate was positive and statistically significant while the coefficient of the error term was negative and statistically significant. The coefficient of financial depth variable lagged once was also positive and significant. The coefficients of the other independent variables were statistically insignificant.
METHODOLOGY, ANALYSIS AND FINDINGS For assessing the impact of financial deepening on the economic development, we have employed five variables. GDP per capita is proxy for economic development. Remaining four variables are the representation of financial deepening in the economy. The description of all the variables is as follows- LY= GDP per capita. LM= ratio of broad money (M2) to GDP. LMC= is the indicator of stock market development. This is measured as the ratio of stock market capitalisation to GDP.
133 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation
LCR= is the ratio of credit to private sector to GDP, representing the banking sector development. LT= ratio of Total trade (Import plus export) to GDP representing openness of the economy. All the variables are in the natural logarithmic form. We have used the time series data for the period starting from 1985 to 2015The data were sourced from Central Bank of Nigeria (CBN) statistical bulletin. As far as the empirical investigation of the data is concern, keeping the prime objective into consideration we have tried to develop the following model. Economic Growth = f (Financial Deepening)………….……………….....(1) The econometric form of the above model is as follows-
Table1. Descriptive Statistics LY LMC LM LCR LT Mean 6.467779 3.785775 4.045926 3.474216 3.410619 Median 6.40127 3.555942 4.079121 3.386652 3.321037 Maximum 7.060473 4.934812 4.353049 3.947871 4.002455 Minimum 5.98978 1.907926 3.724651 3.096609 2.723859 Std. Dev. 0.350086 0.849819 0.233609 0.323985 0.421132 Skewness 0.266303 -0.12551 -0.00121 0.291073 0.062518 Kurtosis 1.792501 2.134232 1.417706 1.401886 1.575918 Jarque- 1.741723 0.812569 2.503659 2.892863 2.043643 Bera Probability 0.418591 0.666121 0.285981 0.235409 0.359939 Sum 155.2267 90.8586 97.10222 83.38119 81.85486 Sum Sq. 2.818882 16.61043 1.255178 2.414228 4.079097 Dev. Source: Own estimates
Unit Root Test In order to obtain credible and robust results for any conventional regression analysis, the data to beanalyzed must be stationary. This is because estimating regressions using non-stationary variables basedon ordinary least square lead to spurious and inconsistent results. Similarly, it is also difficult to conducthypothesis testing in non-stationary variables as the classical assumptions on the property of thedisturbance term is violated (Rao, 1994), stationarity is therefore achieved by applying appropriatedifferencing called 'order of integration'. The augmented Dickey and Fuller tests are thus
134 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation
Cointegration Test This study employs VAR based approach of Johasen (1988) and Johasen and Juselius (1990) test which proposes the use of two likelihood ratio tests.
The Trace Test:The trace statistic for the null hypothesis of cointegrating relations is computed as follows:
Analysis of Results Table 2: Stationarity Results Augmented Dickey-Fuller(Trend & Intercept) Phillips-Perron (Trend & Intercept) Variable Level 1st Di ff 2nd Dif f Level 1st Diff 2nd Diff LY -1.1635 -2.3383 -3.3076 -1.2271 -3.4348 -6.7227 LM -2.0818 -3.6180 -5.1476 -2.4046 -4.9230 -8.2652 LMC -2.2408 -4.51254 -5.3813 -1.9759 -4.5418 -7.1721 LCR -1.9885 -3.8340 -5.1176 -1.7399 -4.0659 -6.9249 LT -3.3602 -5.3189 -6.8487 -4.4328 -7.4617 -10.5929
Critical Values 1% -4.3942 -4.4147 -4.4415 -4.3738 -4.3942 -4.4167 5% -3.6118 -3.6219 -3.6330 -3.6027 -3.6118 -3.6219 10% -3.2418 -3.2474 -3.2535 -3.2367 -3.2418 -3.2474
Source: Extracted from Eview
The ADF results of the stationarity test show that the series are none stationary at conventional level while the Phillips-Perron (PP) test revealed stationarity at level for gross capital formation and prime lending rate. However, at first and second differencing, all the variables became highly stationary at either 5 or 1 percent confidence level for both the ADF and the PP tests.
Table 3: Estimated Long Run Coefficients Through Cointegration Variables C oefficient T statistic s Probability C 1.8144 2.6 203 0.021 LM 1.7115 3.3 792 0.005 LMC 0.4554 3.0142 0.010 LCR -0.88521 -2. 7973 0.015 LT -0.17565 -0.488 53 0.633
135 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation
Table 4: Results of Cointegration Null Alternative Statistical 5% Critical 1% critical Eigen Value hypothesis hypothesis value value value Trace Statistics r=0 r>0 201.8 124.2 133.6 0.9662 r<1 r>1 120.5 94.2 103.2 0.8493 Max-Eigen Value Statistics r=0 r=1 81.3 45.3 51.6 0.9662 r<1 r=2 45.4 39.4 45.1 0.8493
Source: Extracted from Eview The above variables on unit root testing in table 1 shown that all of them are non stationary at level but attain stationarity after first difference. Result shows that the coefficients are significant for the variables M (M2 to GDP ratio), MC (Market capitalization to GDP ratio) and CR (Credit given to private sector to GDP ratio) but insignificant for T (Total Trade to GDP ratio). This indicates that while the variables, money supply and stock market capitalization have a positive and significant impact on the Economic growth in the long run. The variable Credit to private sector by banks and the total trade to GDP ratio have no significant impact on economic growth.
CONCLUSION AND RECOMMENDATIONS The result confirms at least unidirectional causality (From Financial deepening to economic growth) among the variables. Conclusively it can be said that the promotion of financial sector and increasing the financial deepening surely adds on to the financial development. Hence the government should employ all the measures which can foster development of the financial sector. This would increase the economic growth in the long run in the short run as well. These measures can include increasing growth of banking sector, relaxing the norms and making the process of credit disbursement to the private sector easy, launching more financial product, increasing the financial institutions not only in numbers but also making the services more diverse. Financial integration should also be promoted. Also the development of the stock exchanges plays a vital role for the promotion of economic growth. Thus for increasing the market capitalization, stock markets should be made more reliable to the investor. The interest of the investor should be protected. The growth of trade is also important to the economic growth hence measure should be taken to foster and engender the trade volume.
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136 Financial Deepening and Economic Development of Nigeria: An Empirical Investigation
Anthony, E.N. &Tajudeen,R.G. (2010). Financial sector development and economic growth: The experience of 10 Sub-Saharan African countries revisited. The Review of Finance and Banking, 2(1): 17–28. Arestis, L.&Luintel, K. (2005). Financial Development and Economic Growth: The Role of Stock Markets.Journal of Money, Credit, & Banking, 33(1): 16-41. Ardic, O. P. and Damar, H. E. (2006).“Financial Sector Deepening and Economic Growth: Evidence from Turkey” www.google.com.ng. Ayida, O.E. (2007).Structural Adjustment, Financial Development and Economic Prosperity in Nigeria, International Journal of Finance and Economics, Vol. 19.Central Bank of Nigeria Annual Report and Accounts, Various Issues Statistical Bulletin, Various Issues. _ Azra, (2012). Financial Development and Poverty Alleviation: Time Series Evidence from Pakistan. World Applied Science Journal, 18(11): 1576-1581. Darrat, A. & Salah, A.(2010).Assessing the Role of Financial Deepening in Business Cycles: The Experience of the United Arab Emirates.Applied Financial Economics, 15(7): 447-453. Edo, S. E (1995).An Estimation of a Model of Long-term Securities Investment in Nigeria, Economic and Financial Review Vol. 1 (12) December. _ Goldsmith, R.W., (1969). Financial Structure and Development. New Haven, Conn: Yale University Press. Harris, R. &Sollis,R. (2003). Applied Time Series Modeling and Forecasting. West Sussex: Wiley. Islam, M. and Oslam, J. (2011); Development Impact of Non-Bank Financial Intermediaries on Economic Growth in Malaysia: An Empirical Investigation, International Journal of Businessand Social Sciences, Vol. 2 (14), pp.187-198. Johasen, S. (1988). “Statistical Analysis of Cointegration Vectors”.Journal of Economics Dynamic and Control, 12, 231 – 254. Ju, M & Wei, P. (2007) A Solution to the Two Paradoxes of International Capital Flows. Levine, R. (2002) Bank-based or Market-based Financial Systems: which is Better? Journal of Financial International 11 (4): 398-428 _ Khalil, M., (2014). Financial development and economic growth: A dynamic panel data analysis. International Journal of Econometrics and Financial Management, 2(2): 48-58. Levine &Zervos, (1998).Stock Markets, Banks and Economic Growth.American Economic Review, 88(3): 537-557. Levine, R., (1997). Financial Development and Economic Growth: Views and Agenda. Journal of Economic Literature, 35(2): 688-726. Levine, R. (2002). Bank-based or Market-based Financial Systems: which is Better? Journal of Financial International 11 (4): 398-428 _ Luintel, K.B. & Khan, M. (1999). A Quantitative Reassessment of the Finance—Growth Nexus: Evidence from a multivariate VAR. Journal of Development Economics, 60(2): 381-405. MacKinnon, J.G., (19960. Numerical distribution functions for unit root and cointegration tests. Journal of Applied Econometrics, 11(6): 601–618.
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McKinnon, R.I., (1988). Financial Liberalization in Retrospect: Interest Rate Policies in Ldcs, in G. Ranis and T.P. Schultz (eds.), TheState of Development Economics. Oxford: Basil Blackwell. Nieh, C., Chang., Y., Russel, P. & Hung, K. (2009).“The Asymmetric Impact of Financial Intermediaries Development on Economic Growth”, International Journal of Finance, Vol. 21 (2), pp.6035-6079. Ndebbio, J.E.U. (2004). Financial Deepening, Economic Growth and Development: Evidence from Selected Sub-Sahara African Countries, AERC Research Papers No. 142 African Economic Research Consortium, Naira. Ndekwu E.G. (1998). The Financial Systems Role in Resource Mobilization and investment: An Analysis of Financial Deepening in Nigeria's Financial Sector. Nnanna, O. J. &Dogo, M. (1998).Structural Reform, Monetary Policy and Financial Deepening: The Nigerian Experience, Economic and Financial Review, Vol. 36 No. 2, June.Pp 1-29. Nzotta, S. M. (2004). Money, Banking and Finance, Theory and Practice Owerri. Hudson Jude Publishers. Nzotta, S.M. &Okereke, E.J. (2009). “Financial Deepening and Economic Development in Nigeria: An Empirical Investigation” African Journal of Accounting, Economics, Finance and BankingResearch, Vol. 5(5): 52-66. Odeniran, S. O. &Udeaja, E .A. (2010). “Financial Sector Development and Economic Growth: Empirical Evidence from Nigeria” Central Bank of Nigeria Economic and Financial Review,Volume 48/3 September 2010. Odhiambho, N.M. (2004).Financial Development and Economic Growth in South Africa.Department of Economics, University of Fort Hare, South Africa. Ogun, O.D. (1986) A Note on Financial Deepening and Economic Growth: Evidence from Africa, Nigerian Journal of Economic and Social Studies,28 (2) Olofin, S.&Afangideh, U. J. (2008). Financial Structure and Economic Growth in Nigeria, Nigerian Journal of Securities and Finance Vol. 13 No. 1 pp 47-68 Okoli, M. N. ( 2010). “Evaluating the Nexus Between Financial Deepening and Stock Market in Nigeria”European Scientific Journal vol. 8, No.15, July Onayemi S. O., (2013). Output growth, economic openness and financial deepening in Nigeria: A structural differential and causality analyses. European Journal of Humanities and Social Sciences, 26(1): 1381-1395. Oyejide, T. A. (1994). The Financial System and Economic Growth: Evidence from Africa, Nigerian Journal of Economic and Social Studies. 28 (2). Pradhan, R.P., (2009). Nexus between financial development and economic growth in India: Evidence from multivariate VAR model. International Journal of Research and Reviews in Applied Sciences, 1(2): 141-151. Popiel, P.A. (1990). Developing Financial Markets International Finance Corporation, Washington. Singh, A., (1997). Financial liberalization, stock markets and economic development. Economic Journal, 107(442): 771-782.
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Shaw, E. (1973).Financial Deepening in Economic Development, London, Oxford University Press. Shittu, A. I. (2012).Financial Intermediation and Economic Growth in Nigeria.British Journal of Arts and Social Sciences, Vol.4 No.2. Soludo.C. (2004).Consolidating the Nigerian Banking Industry to meet the Challenges of the 21st Century.Being an Address Delivered to the Special Meeting of the Bankers' Committee, held onJuly 06, 2004 at the CBN Headquarter, Abuja. Sulaiman, L.A., Oke, M.O. &Azeez, B.A. (2012). “Effect of Financial Liberalization on Economic Growth of Developing Countries: The Nigerian Experience” International Journal ofEconomics and Management Sciences,Vol 1(12): 16-28 Stiglitz, J. E. Manfon U. (1966) Financial Markets Public Policy and East Asian Miracles1, World Bank Research Observer, 11(2), 249-276. Vipin G, Pokhriyal, A.K., &Arvind Mohan, M. (2015). Impact of Financial Deepening on Economic Growth in Indian Perspective; ARDL Bound Testing Approach to Cointegration. Asian Development Policy Review, 3(3):49-60. Yan, E. (2007). Why Isn't Financial Deepening Happening in Developing Countries? www.worldbank.org.
139 Veritas International Journal of Entrepreneurship Development (VIJED)
NIGERIAN FEDERALISM AND THE APPLICATION OF AFRICAN ATTITUDE OF "EAT AND GIVE YOUR BROTHER": AN APPRAISAL
ANYANWU, Christiantus Izuchukwu Department of Political Science & Diplomacy Veritas University, Abuja [email protected]
And
EJIMONU Chizowa Emmanuel Department of Political Science & Diplomacy Veritas University, Abuja [email protected]
Citation: Anyanwu, C. I. & Ejimonu C. E. (2018). Nigerian Federalism and The Application of African Attitude of "eat and Give Your Brother": An Appraisal. Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. ______1 (1) 140-148 ABSTRACT The practice of federalism is usually a way-out for countries with issue of heterogeneity. It is a path- way through which nationhood and issues of Fiscal federalism are achieved. Nigeria as a multi- ethnic country has toed this path without yet achieving nationhood, but is engulfed with the issues of fiscal federalism. To wriggle out of this quagmire, Nigeria has applied the African attitude of "Eat and give your brother" through various means. The paper examined the application of this African attitude in its effort towards solving the issues surrounding fiscal federalism, as it arrives at a conclusion. Data was sourced from secondary materials, while Federalism Theory constitutes the theoretical framework.
______Keywords: Federalism, African attitude of "Eat and give your brother", Fiscal federalism, and Federalism Theory.
1. INTRODUCTION No country exists without facing one political challenge or the other. Countries that are heterogeneous exist amidst mutual suspect, fear of domination, struggle over power and resource control etc. However, Federalism always serves as a solution to heterogeneity. This is owing to the fact that it provides a platform for accommodation and recognition of all ethnic enclaves including the minorities.As a form of government, it is mostly adopted by African countries as modern African states are product of colonial partition. Nigeria is one of the African countries that were victim of the colonial partitioning. This singular act leaves Nigeria as a multi-ethnic state. As a result, the nearest suitable option to administer such a country by colonial masters was federalism. Ejiakor (2000, p.4)
140 Nigerian Federalism and The Application of African Attitude of "eat And Give Your Brother": An Appraisal narrates the history of federalism in Nigeria as he traces it to Governor Bernard Bourdillion in 1939, who recommended the replacement of the Provinces by Regions, which Arthur Richard's Constitution later implemented in 1946, and further more through his constitution gave a practical implementation of federalism. The full fledge federalism was however enforced by Lyttleton's Constitution of 1954. This clearly saw Nigeria as a complete federal state, practicing federal system of government, which is sequel to the 1953 constitutional conference that was held in London.
The introduction of federalism created the platform for application of the African traditional attitude of "Eat and give your brother" in Nigeria which saw to the de-monopolization of power, as each region governed themselves and made economic contribution to the center for equitable redistribution. The intervention of the military into politics jettisoned this arrangement, following the decree on centralizing power and economic resources and the forceful creation of states shortly before the civil war. All these created a peculiar arrangement under the Nigerian federalism. This peculiarity in the practice of federalism has made most federating states lose faith in the federal arrangementor structure of the country. The words of Adetola (2010: p.25) most capture this as he holds that the unity of Nigeria is under threat since the failure to practice a true federalism. Many issues and agitations have risen since the practice of the current 'peculiar federalism'. These issues and agitations amount to serious threat to the most desired unity of Nigeria. They continue to deter the attainment of nationhood and national development. However, attempts have been made to arrest these issues and agitations through the application of the African attitude of "Eat and give your brother" in various ways. This paper, discusses the issues surrounding Nigerian federalism and critically evaluates the application of the African attitude of "Eat and give your brother".
2. CONCEPT CLARIFICATION 2.1.Federalism This is a system of government in which governmental powers are shared between central government and the federating units.Adigwe (1974: p,12) holds that federalism generally connotes the existence of two levels of government, each constitutionally or jurisdictionally empowered to make decisions independent of each other within the legislative sphere assigned to it. This indicates the level of independence that constitutionally accrued to the federating units. It is much clear in the assertion by Wheare (1967: p,25) that federalism is a system of government in which sovereignty is divided between the central and state governments. In this system of government each level is constitutionally expected to be limited to its own sphere and, within that sphere, should be independent of the other. This should not be devoid of cooperation that has to exist between the central government and the federating units, and amongst the federating units. By this understanding, the states or provinces as the case may be are constitutionally empowered by the virtue of such system of government to exercise control over both human and material resources, (natural resources inclusive) domiciled within her sphere.
141 Nigerian Federalism and The Application of African Attitude of "eat And Give Your Brother": An Appraisal
Federalism is widely seen as a political solution to countries that consist of heterogeneity. With the huge difference in ethnic composition, linguistic, culture, religion, ideology, etc; the federal system serves as a welding mechanism that connects and melt all these disparities together and they coexist and share nationhood. However, against this background, the federating units in Nigeria are far from being autonomous, with the federal government dictating and implementing policies that perpetually subjugate the federating states, and having full control over the resources domiciled in the federating states.
2.2 African Attitude of "Eat and give your Brother” This is embedded largely in African Socialism. It is the basic theme and understanding in the philosophy of African Socialism. It is a phrase that portrays African socialism beyond social egalitarian principle in African society but the nature of Africa's humanist tendencies. Ikemeh (2009: p,67) holds that African socialism is the typical life style of Africans where communalism is the means of survival. ‘Eat and give your brother' is therefore a principle in African Socialism that that portrays that cultural attitude in the African society which brings out the caring nature of a typical African, creating an inclusive environment in the society where no one feels neglected or relegated in the scheme of affairs. It can be seen as the main thrust of African Socialism where every action and inaction is hinged on "I am because we are, we are because I am". This creates harmony, mutual acceptance and cordiality in the community life. The communalistic pattern of living in African society shows the interconnectedness that exists not only among individuals but amongst communities. It is a belief that goes deep to the extent of one may not be able to exist unless his brother does. Therefore for one to exist, his brother must exist, hence the attitude of eat and give your brother. According to Kwasi (1980, p.16), African philosophy is centered on the peculiarity that characterizes African way of life which is communalism. This explains the understanding of acquisition of wealth in African society, where what one acquires is practically assumed to being acquired by his brother. He exist because the community exist, and verse versa. In this belief, an individual is inseparable from the community and the community is glued to the individual. It is a case of " I am because you are, and you are because I am". There is an overwhelming wish of not only having an extended family but extended community. This is an African belief and life pattern that has proven non-practicable in Nigeria due to the unfertile ground provided by the peculiar federal arrangement of the country.
2.3.Nationhood The word "Nation" emanates from the Latin word "Natio" which means "people, tribe, kin, genus, class, or flock. James (1996) defines the word "Nation" as a people, or aggregation of men, usually inhabiting a particular portion of the earth, existing in the form of an organized society, speaking same language, using the same customs, possessing historic continuity and living under same government.
142 Nigerian Federalism and The Application of African Attitude of "eat And Give Your Brother": An Appraisal
Starlin (2013) sees nationhood beyond speaking same language and practicing same culture. For him, it is a historically constituted community of people, sharing same political and socio-economic experience. Here, the historical struggle and common effort to strife give the people a common unity of purpose of survival. The common historical experience makes the people of different descendants come together to see themselves as one, form one set of people with a common purpose with the view of being one nation (Harper, 2001). The process of achieving nationhood must be all inclusive without any ethnic group being excluded or feel marginalized; this is possible when all the sets of people are in control of their welfare and development (Dekha, 1999). This is the aspect that is being clamoured for by majority of Nigerians as a key to the attainment of nationhood. The effort towards achieving nationhood remains futile unless the system becomes all inclusive where every individual nation within Nigeria is in charge of its growth and development (Jerinde, 2014).
2.4.Fiscal federalism This is a branch or part of broader public finance discipline. The concept or term was introduced by a German-born American economist, Richard Musgrave in 1959 (Naim, 2001). Every federalist country has its arrangement on how resources are shared. Fiscal federalism is the financial relations between federating units and the central government. It deals with the division of governmental functions and financial relations among levels of government. Adewale (2003) holds that fiscal federalism assumes that a federal system of government can be efficient and effective at solving problems faced by government, such as just distribution of income, efficient and effective allocation of resources, and economic stability; to ensure effective and efficient use of the allocated resources, it goes with conditions in such federal arrangement. A conditional transfer from a federal body to a state or province involvesa certain set of conditions, where if the federating states are to receive the allocations, they must agree to the spending instructions of the federal government (Brenden, 2014). He further holds that an unconditional grant is usually a cash or tax point given to federating states without conditions on how to spend is attached. This however, makes the concept open to not only being applicable to the state declared to be a federation but also to other forms of government. This is captured by Naim (2001) as he maintains that fiscal federalism is not to be associated with only fiscal decentralization in a known federation, it can be found even in non-federal states, in the sense that they encompass different levels of government which have de facto decision-making authority. Apart from the arrangement where the central government allocate resources or funds to the federating units to carry out their functions or responsibilities, fiscal federalism can as well be arranged where the federating units have fiscal autonomy to generate and control their own resources and possibly remit some percentage to the central government, which is the practice in most federal states. Dogan (2006) corroborates this as he argues that the application of fiscal federalism can be from bottom-top arrangement, where the provinces or units initiate the fiscal relation with the central government for its effective functioning. Abeni (2016) identifies this as a type of fiscal federalism that majority of Nigerian citizensclamour for, as it has continued to be an eternal problem of the country.
143 Nigerian Federalism and The Application of African Attitude of "eat And Give Your Brother": An Appraisal
3. THEORETICAL FRAMEWORK The Trinomial Theory of Federalism expounded most consistently by Max Huber was adopted to analyze this work. The theory holds that for a heterogeneous country to attain political stability and realize its potentials, political, economic and legal power must be shared among the federating provinces or units in equality with the Central Government (Cited in Frenkel: 1986). The function and responsibility to ensure oneness must lie not only on the central government but on all the federating states. The legal system as a whole lies the sovereignty of the country. This consists of two co-ordinate legal systems - the federating states co-coordinate to maintain and exercise their sovereignty through the central government. The Trinomial Theory of Federalism relegates the member states as well as the central state out of supremacy in favour of an encompassing joint state. This shows a union without subordination between the central state and the member states. It is through this that nationhood is collectively achieved and the traditional African attitude of "eat and give your brother" is spontaneously practiced, hence no member state including the central government is in position to control or marginalize any unit. The mutual existence of co-ordination emphasized by this theory encourages brotherly relation among the federating states. The theory presents and analyzes an ideal federating system through which a country like Nigeria can realize nationhood and African attitude of eat and give your brother, among others, without coercion by the central government. It is through such federal arrangement devoid of subordination and subjugation that Nigeria can realize mutual cohesion.
4. FACTORS THAT NECESSITATED FEDERALISM IN NIGERIA The essence individual nations cooperate and choose to form a federation is to maintain and strengthen their viability and protection, and form a united force for survival in spite of the differences that exist among the diverse nations that have agreed to fuse. It is against this background that the Nigerian nationalist leaders continued with the adoption of federal system of government. Adeboye (2009, p.12) captures this as he highlighted the factors as follows: 1) To protect the interest of minority groups 2) To control the large population and wide geographical area of Nigeria 3) To ensure rapid and even development of all part of Nigeria 4) To bring government closer to the people of Nigeria 5) To expand the local market 6) To accommodate the differences in culture, religion, language, custom, tradition among different ethnic groups 7) To make it possible for diverse law that will suit the diverse communities in Nigeria 8) In order to preserve the local independence or autonomy of every ethnic group in Nigeria 9) In order to form a common and stronger government to secure the sovereignty of Nigeria
144 Nigerian Federalism and The Application of African Attitude of "eat And Give Your Brother": An Appraisal
4.1. Issues with Nigeria Federalism Nigerian federalism has witnessed many challenges which has led to the interrogation of the country as a nation. These challenges have resulted to the argument of whether Nigeria practices true federalism, and what true federalism ought to be. The challenges are identified among others as follows: 1) Minority Issues and State Creation: the multi-ethnic nature of the country brought about the issue of minorities which has constituted one of the problems militating against the development of the country. Some ethnic groups lament against marginalization. For a long period of time, there has been agitation over creation of additional states. Ikeme (2014, p.15) pointed out that the refusal of Federal Government to create additional state in order to effect equity and justice is an attempt to minoritize some ethnic groups.
2) Revenue Allocation: this basically means the sharing of revenue resources generated by the country among the federal, state and local governments. The parameters used in sharing revenue among states have been contentious. This has gone a long way in heating up the polity that has resulted in a call for restructuring the federal system.
3) Inter-Ethnic Rivalry: there have been multiple clashes between and among ethnic communities. The federal system that is adopted in order to address such crisis is being accused as a catalyst to the problem. Ikeme (2014, p.16) argues that the major issue that brings about rivalry is the question of leadership of the country; none of the three major ethnic group wants to concede leadership of the country, for them, whoever captures political power is guaranteed of controlling every other thing.
4) Issue of Secession: some ethnic groups in the country have clamoured for secession at one point or the other. All of these pockets of agitations are being blamed on the peculiar type of federalism Nigeria practices. Ugbor (2007, p.7) holds that the nature of federalism Nigeria finds herself into has created the ground for unwarranted agitations and movements.
4.2. The Application of African Attitude of "Eat and Give your Brother" in Nigerian Federalism The effort made in using various means/ways to apply what could be understood as the African attitude of "Eat and give your brother" was targeted at responding to what is seen as 'national question'. The multi-ethnic and pluralistic nature of Nigeria has instead of beinga plus but turned to be a thorn in the process of nationhood and national development. When the Northern and Southern Protectorates became amalgamated in 1914 forming a unified colony of the British Empire, many issues arose. With the amalgamation, regions with cultures that have no similarities, no resemblance and no agreement to live together were forced into a state called Nigeria. One of the founding fathers of Nigeria, Chief ObafemiAwolowo is quoted to have said that the North is for North and the West is for West while the centre is for all (cited in Okeke, 2011). This undoubtedly paved way for ethnicity to flourish against nationhood of a nation in the making. It draws boundary lines for the ethnic
145 Nigerian Federalism and The Application of African Attitude of "eat And Give Your Brother": An Appraisal entities of the country, thereby encouraging an environment where everyone will only care for his immediate ethnic enclave at the expense of the other. Contrary to this, Enahoro (2002) holds that he strongly believe the diversity among the nationalities of Nigeria can be reconciled to realize the dream of a voluntary federal union of indigenous peoples to build the greatest country in Africa and to promote perhaps the greatest internationality enterprise of the black race.
It has proven so hard to harness the socio-cultural, political and ethnic diversity to realize nationhood. Many years down the line as a country, the fundamental problem is still overwhelming. Nwankwo (1989, p.1) maintains that since the inception of Nigeria in 1914, the affairs of the state have been conducted as if the primary unit of political action was ethnic formations. This has created dichotomy in the ethno-political relations, thus, led the constituent ethnic units to behave as if they constituted autonomous states in and of themselves. With such attachment to ethnicity, one would wonder who is a Nigerian. It is this fundamental problem that the application of "eat and give your brother" attitude has made effort to solve. This has been applied in the following ways;
1) Establishment of Federal Character Commission: the federal character is a principle that was evolved through a search for national integration, given the heterogeneous nature of the Nigerian state with its attendant divisions, disagreements and ethnic promotions. With the presence of all these negativities, it became difficult to realize unity, cooperation and consensus. The adoption of federal character principle in 1979 by ShehuShagari administration was viewed as what would have accelerated the realization of nationhood, but rather was far from being a means to this end. Jerinde (2004, p.18) captures this as he holds that the Federal Character Commission was established to administer the Federal Character Principle, but both the Commission and the Principle which aimed at ensuring equal representation and participation to promote national unity, foster national loyalty and give every citizen a sense of belonging irrespective of the diverse ethnic origin, culture, language or religion have not been able to achieve its objective. This is evident in the continuous agitation over formula for federal financial allocation, allocation of federal projects and other resources by various ethnic enclaves.
2) Power Sharing: there is a general understanding about power sharing amongst political elites and across political parties capturing the North and South composition of the country. Power sharing is the principle (informal) that aims at ensuring that there is equity and fair representation of the various ethnicities in the state elective institutions. To this end, political elective offices at the federal level are distributed among the elites of the regions or Geo-Political Zones.
3) Revenue Allocation: this establishes an inseparable relationship in a political system through the sharing of Fiscal Resources for the development and implementation of programmes between and amongst levels of government. Elazar (1962, p.305) considers this a necessary collaboration among the various political units and the inherent autonomy of the political units through collaboration. It means that revenue allocation goes beyond sharing of fiscal resources, but encourages inter-
146 Nigerian Federalism and The Application of African Attitude of "eat And Give Your Brother": An Appraisal governmental relations, bringing about interaction, cooperation, collaboration and decision making between and amongst federating states. On the contrary however, the policy on revenue allocation has been a central issue in the affairs of government and politics. The protracted nature of controversy over revenue allocation has made it to be seen as part of Nigeria history. This has led to establishment of commissions and committees to examine and re-examine the fiscal, ethnic, religion and political issues surrounding revenue allocation. Onyema (2014, p.26) enumerates the commission as follows: a) The Phillipson Commission 1946 b) The Hicks-Phillipson Commission 1951 c) The Raisman Commission 1958 d) The Binns Commission 1964 e) The Chicks Commission 1968 f) The Dina Interim Committee 1968 g) The Aboyade Technical Commission 1977 h) theOkigbo Commission 1980 i) The Revenue Mobilization Allocation and Fiscal Commission 1989 and various Military Decrees (revisions) particularly in 1970, 1971, and 1992.
Akujuru (2015, p.19) holds that with the exception of the Revenue Mobilization and Fiscal Commission, all were adhoc in nature. This shows the controversy surrounding revenue sharing. The Commissions and Committees end up recommending equitable revenue sharing formular, with the sole aim of ameliorating agitations. Despite all the efforts being made to allay all these agitations, it is still far from being solved. This is evident as the current commission is faced with overwhelming demands for the review of revenue sharing formular.
5. Conclusion It is obvious that controversies generated by the current structure and operation of Nigerian federalism have remained a denial to the actualization of Nationhood, and furthermore, have continued to threaten the unity and existence of the country. The persistent agitations by various federating states/units in spite of the efforts made to solve the issues that premised these agitations through the application of the African attitude of "eat and give your brother" clearly shows that it has failed. The failure not being as a result of its inefficiency on its own but as a result of the various coercive means through which it is applied, this is contrary to what is obtainable in African Socialism.
It therefore leaves no one in doubt that the persistent nature of the issues surrounding Nigeria federal system calls for adjustments hence one cannot continue on a particular thing and expects a different result. Such amendments will create an environment where African attitude of "Eat and give your brother" will spontaneously be applied without force or coercion, as it should aim at contextualizing federalism where: (1) sovereignty lies on the federating states but exercised by the central government
147 Nigerian Federalism and The Application of African Attitude of "eat And Give Your Brother": An Appraisal
(2) federating states will possess and control her natural and economic resources with more developmental responsibilities, and remit an agreed percentage to the central government.(3) rotationalzoning of elective political positions at the central level will be constitutionalized. (4) codified percentage of appointees or representatives of the federating states in each of the federal Agencies and Ministries will be established.
REFERENCES beni M. (2016). Fiscal federalism in Nigeria: Challenges and Prospects. Enugu: Oxland Publishers. Adeboye C. (2009). Federalism in Nigeria. New York: Payer Publisher Adetola O. (2010). Issues & Prospects of Fedralism in Nigeria. Ibadan: Light Publishers Adigwe G. (1974). Essentials of Government of West Africa. Ibadan: Grids Publishers Adewale (2003).Issues with Nigerian Federalism. Lagos: Tracks Publishers. Akujuru C. (2015). Revenue Allocation in Nigeria and the Dependency on Oil: The Need for Alternative Solutions.Global Journal of Arts, Humanities & Social Sciences. Vol.3 No.2 P.19 Brenden L. (2014). Federalism and Fiscal Fedralism. Oxford: Oxford University Press. Dakha O. (1999). Nationhood Beyond 21st Century. Accra: Kings Press. Dogan K. (2006). The Concept of Fiscal Fedralism. Munich: Dextrex Press. Elazar D.J (1962). Inter-Governmental Cooperation in the Ninetieth Century. Chicago: University of Chicago Press. Ejiakor O. (2000). Colonial Era of Nigerian History. Lagos: Tonard Publishers. Frenkel M. (1986). Federal Theory. Canberra: The Australian National University Press. Harper D. (2001).The Nation.Retrieved from http//:www.etymonline.com On 12August, 2017. Ikeme O. (2014). Issues with Nigerian Federalism. Enugu: Jacks Publishers Ltd. Ikemeh L. (2009). African Socialism Revisited. California: Stanford University Press. James K. (1996). Nationhood. Cambridge: Cambridge University Press. Jerinde N. (2014). The Issue of Nationhood in Nigeria.Kwara: Dalongs Publishers. Jerinde G. (2004). Fiscal Federalism and Agitations in Nigeria. Lagos: Chuks Publishers Naim K. (2001). Fiscal Federalism. Retrieved from http//:www.naij.com Nwankwo A. (1989). The National Question in Nigeria. Ibadan: Dimension Publishers Okeke J. (2011). The Foundamental Issues with Nigeria. Retrieved from http//:www.vanguardngr.com On 4th April, 2017. Onyema L. (1963). Inter-governmental Relations. (3rd Edition) Grove: brooke-Cole press. Stalin J. (2013). Marxim and The National Question. Retrieved from http//:www.marxist.org On 24th July, 2017. Ugbor E. (2007). The Journey to Nigerian Independence. Benin: Ambik Press. Wheare K.C (1967). Federal Government (4th Edition). London: Oxford University Press.
148 Veritas International Journal of Entrepreneurship Development (VIJED)
MANAGING EMPLOYEES RESISTANCE TO ORGANISATIONAL CHANGE IN NIGERIA HIGHER EDUCATIONAL INSTITUTIONS
MARCUS Garvey Orji, PhD. Department of Business Administration Veritas University, Abuja, Nigeria [email protected] [email protected] ENOBUN-NWIDI Patience Enyiamaka Department of Business Education Federal College of Education, Zaria, Nigeria [email protected]
And
ABBA Solomon Boman Department of Business Administration Ahmadu Bello University, Zaria, Nigeria
Citation: Orji, M. G., Enobun-nwidi P. E., & Abba, S. B. (2018). Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions. Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) ______149-174 ABSTRACT Resistance to change by employees is a serious challenge confronting many organizations. Severalfactors have been suggested to explain why employees resist change at workplace. Some of the factors include job autonomy, self-efficacy and transformational leadership style. The main objective of this study is to assess the factors that determine employees' resistance to change and how to manage them in Nigerian Higher Educational Institutions, with particular emphasis on Federal College of Education FCE), Zaria. The study used field survey research design. The population of the study was 660 academic staff of FCE, Zaria.as at 2017, and the sample size of 323. Convenient sampling technique was used to identify the sample. Questionnaire instrument was used to collect primary data. Correlation and regression analysis techniques were used to analyse the data collected. The study revealed that; job autonomy has significant negative effect on employees resistance to change, self efficacy has significant positive effect on employees resistance to change, and transformational leadership has significant positive effect on employees resistance to change. The study concluded that academic staff of higher institutions in Nigeria accepted change when it occurred, and recommended among othersthat they should not be given total freedom or control over their jobs to avoid negligence of duty. The study also recommended that the management (leaders) of Nigerian higher educational institutions should realize that instead of motivating their employees by punishment or rewards, they should create a vision and inspires subordinates to strive beyond required expectations. ______Keywords: Employees Resistance to change, Job Autonomy, Self Efficacy and Transformational leadership style
149 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions
1. INTRODUCTION The world today is changing at an unprecedented rate, and the environment within which organizations operate is characterized by instability resulting from increased global competition, technological innovation and change, limited resources, deregulations and privatization. Change is an unavoidable phenomenon arising from the dynamics of environment and it is inevitable for an organization that desires to grow, achieve its mission, vision and objectives. Organizations have to adapt to the environment to become competitive and stay ahead or at least keep afloat. Work processes and rules are revised, new equipments are introduced, product lines are dropped and added, and workforce is adjusted as internal and external conditions change. Resistance to change represents refusal to give in or accept change. It is an effort to maintain the status quo. Resistance to change are barriers arising from organizational politics, inappropriate use of power, lack of understanding, inappropriate timing, inadequate resources, incorrect information or employee suspicion of management intentions.However, there are several reasons why employees resist change. Such reasons include fear of the unknown ,fear of loss of job, lack of required skill for the change and threat to status.
Employees' resistance is categorised into psychological, systems, institutional and cultural types of resistance to changeGraetz, Rimmer, Lawrence& Smith, (2006). The psychological type of resistance claims that individuals by nature challenge any type of change. The central idea here is that sources of resistance to change reside in basic human characteristics, such as perceptions, and needs. Also,systems type of resistance involves reflection of organizational members' discomfort with the process modifications that are likely to disadvantage them. This implies that what people resist is not change per se but losing something they like, such as status, money or comfort. In addition, institutionalized resistance to change focuses on behaviours that have become embedded in an organization's legitimate structures, decision making processes and resources allocation. Organisations by their very nature are conservative and actively resist change. This means that organizational members resist change that they perceive as unnecessary. Organization's culture on the other hand is a pattern of beliefs and expectations that are common to members of an organisation.However, because culture is inflexible and has influence on behaviour, any attempt to change its core assumptions might be met with resistance. Additionally, Resistance to change can manifest itself ranging from quite harmless manifestation like rumour, gossip, a wait and see policy, foot dragging, protest letter to the management and trade union activity to harmful manifestation like, withdrawal, material sabotage andaggression against the managementand strike.This implies that, as organisational change is conceived of asdesirable and inevitable, therefore, resistance should be managed and overcome.
Indeed, several factors determining employees' resistance to change at workplace have been explained. To date, some of these factors considered include, job autonomy, self-efficacy and transformational leadership style. Job autonomy involves the degree of freedom or control a worker has over his job (i.e. work method, the pace of work, work goals, evaluation and workinghours. This
150 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions implies that employees who have autonomy in their jobs are perceived capable and more resourceful in performing their tasks. Also, self efficacy is described as the confidence of individuals in their own abilities.This means self-efficacy serves a motivational purpose, directing task persistence and behaviour. In addition, transformational leadership is all about leadership that creates positive change in the followers whereby they take care of each other's interests and act in the interests of the group as a whole. Transformational leadership enhances the motivation, morale, and performance of followers through a variety of mechanisms in order to reduce resistance to change. Other factors that determine employees' resistance to change are communication, training, coaching,supervision, among others.
Generally, previous researchers have carried out empirical works on the factors determining employees resistance to change in organisations.For example, communication (Boohene and Asamoah, 2012: Seyyedeh, Mousa& Ali , 2013)), training (Anam, Rashid, Rab, Mizna, Anam&Rida, 2013), job autonomy (Adalgi, Battistel, Francesco &Odoardi, 2013), self-efficacy (Kura, Shamsudin&Chauhan, 2013), transformational leadership style (Faghihi&Sayyed, 2012)among others. Despite these aforementioned empirical studies, however, it is surprising that most of them were conductedmainlyin the content of information technology industry,hospital industries, banking sector, manufacturing sector and hotel industries, there by paying less attention in educational settings, particularly higher educationalinstitutions. To fill this gap, this study intends to investigate the factors determining employees' resistance to change inNigerian higher educational institutions, with particular emphasis onFederal College of Education(FCE), Zaria.
Federal College of Education, Zaria like other higher educational institutions in Nigeria, is a service delivery organisation. The college has introduced different types of organisational change like, policy change and technological change to ensure commitment, effectiveness, efficiency and high productivity in order to reduce employees' resistance.This is evidenced in their training and retraining through government sponsorship, prompts salary payment and fringe benefit, prompt promotion of deserving staff, granting and giving housing loans and prompt payment of gratuities to retirees. Despite all these benefits stated above, some employees still arrive at work late and leave early, failure to accept responsibilities and a manifestation of high rate of absenteeism. They show lack of interest in their jobs, attend to personal matters most often than official matters during official hours. It is against this background that the study is conducted toinvestigate the factors determining employees' resistance to change amongst the academic staff.
1.2 Research Questions In an attempt to find solutions to the above problems, this research study seeks to provide answers to some questions; i. To what extent does job autonomy determineemployees' resistance to change in Nigerian higher educational institutions, particularly FCE, Zaria?
151 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions ii. To what extent does self-efficacy determineemployees' resistance to change in Nigerian higher educational institutions, particularly FCE, Zaria? iii. To what extent does transformational leadership determineemployees' resistance to change in Nigerian higher educational institutions, particularly FCE, Zaria?
1.3 Study Objectives The main objective of this study is to assess the factors that determine employees' resistance to change among the academic staff of Nigeria higher educational institutions, with particular emphasis on the FCE, Zaria. However, the specific objectives of this study are to: I. Determine the effect of job autonomy onemployees' resistance to change in Nigerian higher educational institutions, particularly FCE, Zaria ii. Examine the effect of self-efficacy onemployees' resistance to changein Nigerian higher educational institutions, particularly FCE, Zaria, iii. Assess the effect of transformational leadership on employees' resistance to changein Nigerian higher educational institutions, particularly FCE, Zaria.
1.4 Study Hypotheses Based on the objectives of the study, the following hypothetical statements were formulated in the course of the research.
HO1: Job autonomy has no significant effect onemployees' resistance to change in Nigerian higher educational institutions, particularly FCE, Zaria.
HO2: Self-efficacy has no significant effect on employees' resistance to change in Nigerian higher educational institutions, particularly FCE, Zaria..
HO3: Transformational leadershipstyle has no significant effect on employees' resistance to changein Nigerian higher educational institutions, particularly FCE, Zaria.
LITERATURE REVIEW AND THEORETICAL FRAMEWORK 2.1 Concept of Employees Resistance to Change Many researchers have tried to define and review literature on resistance to change, which resulted in different conceptualizations. For instance;Folger&Skarlicki(1999)in Boohene&Asamoah, (2012) define resistance to change as employees behaviour that seek to challenge, or disrupt the prevailing assumptions, discourses, and power relations. Boohene&Asamoah, (2012), also gave a work-related definition of resistance to change as employee action or inaction that is intended to avoid a change and/or interfere with the successful implementation of a change in its current form. More so, Oregand Berson (2011) define resistance to change as negative attitude towards change.This study supports definition by Oregand Berson (2011). This is because any unfavourable reaction, opposition, or force that prevents or inhibits change, is resistance. Therefore, such resistance needs to be overcome or eliminated. Other authors, however, believe that resistance to change sometimes is good, because it prevents some of the more positive aspects and intentions(Piderit, 2000).
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2.2 Concept of the Independent Variables Organisational Change Schmid(2010) defines organizational change astheprocessthatoccursin organizations asa resultofexternalconstraintsimposedonitorasaresultofinternalpressuresthatcausealterations andmodi?cationsintheorganization'scoreactivity,goals,strategies,structures,andservice programs. Additionally, Organizational change has to do with rightsizing, new development and change in technologies, rescheduling operations and major partnerships (Agboola&Salawu, 2011). Also, organizational change refers to the reconfiguration of components of an organization to increase efficiency and effectiveness(Boohene&Asamoah, 2012). This study sees organizational change as a change which occurs when an organization makes a transition from its current state to some desired future state to ensure effectiveness and efficiency.
Job Autonomy Autonomy refers to authorising one's actions at a higher level(Naqvi, Ishtiaq, Kanwal& Ali, 2013). Job autonomy is defined as the amount of job-related independence, initiative, and freedom either permitted or required in daily work activities (Myung&Mi, 2012). Also, Dude, (2012) defines job autonomyas the degree of control or discretion a worker is able to exercise with respect to some work elements. This study therefore, supports the definition by Dude, (2012). This is because employees who have autonomy in their jobs are perceived capable and more resourceful in performing their tasks. Psychologically also, employees will be more motivated to do their best, thus reduce resistance. More so, professionals can be successful if they are talented and they have ability to compete in their professions, they must use a body of knowledge which supports their work and they must possess autonomy to make decisions in their work, thus reduces resistance (Naqvi, et al, 2013).
Self Efficacy Bandura (1997) defines self efficacy as a construct which describes the confidence of individuals in their own abilities. Also, Iroegbu, (2015), defines self-efficacy as a social learning which refers to a person's self-beliefs in his or her ability to perform specific task.This means that individuals with higher self-efficacy in the context of a change implementation will be more likely to believe that they can deal with change in roles and responsibilities, and thus, will have more positive reactions to the change in general. Also, self-efficacy serves a motivational purpose, directing task persistence and behaviour. Individuals who have high self-efficacy for a specific change will be more likely to commit to making the change a success (Jacob & Jolly 2013).According to Bandura (1995) in Iroegbu, (2015) sources of efficacy beliefs come from four main influences: (1) Mastery (2) Vicarious Experiences, or modelling, obtained through social models, i.e. through coaching or seeing people similar to themselves succeed by perseverant effort, (3) Social persuasion, which strengthens one's efficacy belief, and (4) Physiological and emotional state, in which positive mood enhances perceived self efficacy, while negative mood diminishes it. Therefore, Scholz, Gutiérrez-Doña, Sud, &Schwarzer
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(2002) stated that self efficacy, or "can do"-cognition, or in other words, perceived competence, mirrors a sense of control over one's environment. It reflects the belief of being able to control challenging environmental demands by means of taking adaptive action in order to reduce resistance. Generally, self-efficacious people are prepared to take responsibilities and face challenges, will persevere in the face of difficulties and possess sense of control over environment in which they function, thus reduce resistance.
Transformational Leadership A transformational leader is a person who stimulates and inspires (transform) followers to achieve extraordinary outcomes (Odumeru&Ogbonna, 2013). He/she pay attention to the concern and developmental needs of individual followers; they change followers' awareness of issues by helping them to look at old problems in a new way; and they are able to arouse, excite and inspire followers to put out extra effort to achieve group goals (Cavazotte, Valter Moreno & Bernardo (2013). Transformational leadership is all about leadership that creates positive change in the followers whereby they take care of each other's interests and act in the interests of the group as a whole (Warrilow, 2012). Transformational leadership enhances the motivation, morale, and performance of followers through a variety of mechanisms in order to reduce resistance to change. These mechanisms include connecting the follower's sense of identity and self to the project and the collective identity of the organization; being a role model for followers that inspires them and makes them interested; challenging followers to take greater ownership for their work, and understanding the strengths and weaknesses of followers, so the leader can align followers with tasks that reduces resistance (Nahavandi (2012).
2.3 Review of Related Literature Job Autonomy and Employees Resistance to change A number of researches have been conducted on the relationship between job autonomy and employees resistance to change. For example, Hornnung&Roussean (2007) and Adalgi, Battistel, Francesco &Odoardi (2013).The findingstates that job autonomy has significant positive effect on employees' resistance to change. This implies that employees who have control over their jobscarry out their duties effectively, thus, are less likely to resistancechange.
Self-Efficacy and Employees Resistance to Change Several researches have been carried out on the relationship between self efficacy and employees resistance to change. For example, Kura, Shamsudin&Chauhan (2013), Moran & Hoy (2013), Kumar &Uzkurt (2011) and Rodda (2010). The findings of the study showed a significant positive relationship between self efficacy and employees' resistance to change. This implies that self efficacy has positive effect onemployees' resistance to change due to its ability to motivate action and increase confidence in performance, thus, reduces resistance to change.
154 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions
Transformational Leadership and Employees Resistance to Change Many researches have also been conducted on the relationship between transformational leadership style and employees resistance to organisational change as seen in the works ofOreg&Berson (2011), Dubs, Eriksson, Felldin& Hanson (2012), Carter, Achilles, Armenakis, Hubert, Feild&Mossholder (2012) and Faghihi&Sayyed (2012). This implies that transformational leadership style has positive effect on employees' resistance to change.
2.4 Review of Empirical Studies Several researches have been conducted on organizational change and other related factors. Each of the researchers employed some form of variables peculiar to his or her focus region and established a relationship. A study was conducted by Kanika, Ravi and Sanjay (2015) on Organizational Change and Organizational Commitment in India. The purpose of present study is mainly to understand organizational change initiatives taken in IT companies under study and to examine employees' perception and their commitment towards their organizations. The population of the study was 212 employees in 6 major IT companies in Northern India. The questionnaire was used to collect the primary data. Correlation and regression were used for analysis of data. The findings from the correlation and regression analysis state that the appropriateness regarding the reasons and manner in which organization change initiatives were taken and managed in the IT companies under study have a positive association with organization commitment. The study recommends that the impact of organizational change initiatives on the organization commitment should be managed properly so as to increase the commitment of the employees and make the change process a success.
Ahmed, Rehman, Asad, Hussain and Bilal (2013) carried out a research on the impact of organizational change on the employees performance in banking sector of Pakistan. The sample size for thisresearch is 252, hence descriptive statistics and correlation analysis techniques were used for the analysis of data in SPSSsoftware. The result shows that there is positive relationship between communication and employee performance, Leadership and employee performance, Procedural justice and employee performance, Employee Development and employee performance and Tolerance to change and employee performance. The results reveal that organizational change has a positive significant impact on employees performance in banking sector of Pakistan. The study recommends that increasing factors of organizational change in order to observe the overall impact of organizational change towards employee performance should be encouraged.
Seema (2011) carried out a research on Empirical Study on Employees' Acuity Towards Organisational Change at B.H.E.L, TRICHY. The studywas conducted to determine the perception of the employees on change situations, to study the level of acceptance of new roles and responsibilities by the employees, to assess the level of technological changes introduced and employees perception towards it. The descriptive-cum-diagnostic study has been adopted for the study. The universe of the study included 245 respondents. Random sampling method was applied with the sample of 50 respondents. Both primary and secondary data for the study were collected.
155 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions
The primary data collected was with the help of the questionnaire and the secondary data was collected from the books, journals, magazines and from unpublished dissertations. To analyze the data the statistical tools like Chi-Square test ÷² and Karl Pearson?s correlation co-efficient were used. It was found from the study that there was no significant association between educational qualification of the respondents and the dimensions of organizational change. The respondents' professional training and the trade union membership did not have a significant association with organizational change. As change is inevitable and attitudes are important in determining the response to change and employees' perception about the likely impact of change depends upon his attitudes, the study recommends that the study can be done in any type of organization to understand the attitudes and perception of employees' towards change.
Faghihi and Sayyed (2012) conducted a research on Investigating the Influence of Employee Attitude towardChange andLeadership Style onChange Readiness bySEM(Case Study: Isfahan Municipality). The sample size of the study is 105employees. Data collection was carried out through personal administration of survey instruments at municipalitiesand through dispersing randomly within organizationsamong employees. A structural equation model and AMOS 18.0were used to test the data and check the hypotheses. The study found that employee attitude is a good predictor of change readiness in organization. The study also found that leadership styleis another predictor of change readiness. The study recommends that, for successful change, initially employees' attitudes should be assessed and then prepared for change. The study also recommends that employeesin municipalities can be either the key to achieving effectivechange, or the biggest obstacles to success. The price of failed change efforts can behigh, including widespread loss of credibility on the part of leaders and managers andentrenchment of employee opposition to future change efforts. Managers who attempttoachieve organizationalchange will be well served by paying attention to the need tocreate readiness for change –at bothendsthe individual employee andwhole- of-organizationlevel –and the ways in which this may be achieved.
Rizwan, Yasin, Asifa, Momnaand Nida (2014) carried out a study on Impact of OrganisationalChange, Culture and Organizational Politics on Organizational Learning in organisations.Data collected from multiple industries in Pakistan. The sample size of the study is 264. Pearson's moment correlation, descriptive statistics and linear regressionwereapplied in analyzing the data. Thefindings revealed that there is a significant association between organizational change and organizational learning, there is significant association between organizational culture and organizational learning and there is insignificant association between organizational politics and organizational learning. The study recommends that Managers should pay more attention on organizational change and organizational culture and less on organizational politics to enhance organizational learning.
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Boohene andAsamoah(2012) conducted a research onResistance to Organisational Change: A Case Study of OtiYeboah ComplexLimited. Descriptive survey design was adopted to collect information using stratified sampling and self-administered questionnaires. Descriptive statistics, bi-variate correlation, regression analysis and t-test were used to analyse the data. The results indicated that less employee participation in decision making and lack of trust in management contributed highly to resistance at Oti-Yeboah Complex Limited. In addition, factors such as lack of motivation, poor channels of communication, and information exchange also contributed to resistance. The study suggests that management should encourage employee participation in decision making, build confidence, accept constructive criticism, be transparent and communicate clearly the need for change to employees.
Swarnalatha (2014) carried out a research on Employee Resistance towards Organizational Change with Special Reference towards Prosper Exports, Tirupur,India. The population of the study was 670, while the sample size was 150 employees. Data was collected from both primary and secondary sources.Convenient sampling technique was used for this research. The collected data was analyzed using Chi-square test. The findings of the study show that there is no significant relationship between Self Development and Experience, between experience and decision making. And there is a significant relationship between the Age and Forces for change. The study recommends that the management should take steps to improve the level of performance and to involve employees in decision-making process in an organization. The company should create awareness before they implement any change in order to cope up with the employees. Workers feel that changes being introduced will benefit the organization or the employees rather than themselves or the general public. The organization should have adequate financial resources for giving training to change agents and for offering rewards to those who support change.
The findings of the previous studies reviewed may not be generalized in other parts of the world because of the limited scopes and variables. Thus, this study is unique and tends to contribute to knowledge by investigatingthe factors determining employees resistance to organizational change at Federal College of Education, Zaria.
2.5Theoretical Framework for the Study An attempt was made to hinge this study on transformational leadership theory which was proposed by Burns (1978) inSosik& Jung, 2010). Transformational leadership theory states that leaders who create positive change in the followers through idealized influence, inspirational motivation, intellectual stimulation, and individualized considerationencourage work autonomy. And, work autonomy promotes the nurturing of self-efficacy belief in employees.Benson & Lawler (2005) stress that the positive effects of employees involvement on organizational change come from the increased utilization of the knowledge and skills of employees, which then increases efficacy of workers, and subsequently motivates them to exert extra effort, resulting in less resistance to change.
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3. Methodology 3.1 Research Design, Population, Sample Size and Sampling Technique This study adopted field survey research design by administering a questionnaire instrument in sourcing for primary data. The population of this study is 660 academic staff of FCE, Zaria (FCE, Zaria, 2017). The convenience sampling technique was used in this study because it surveys whoever is available and it ensures quick diagnoses of situation (Araoye, 2004)..The study also used the sampling technique, in conduction with Yamane sample selection formula as cited in Israel (1992) which is stated as follow: N n = 1 + N(e)2
Where n = Sample size N = Finite Population e = Level of precision usually fixed at 5%
After applying this formula, a representative sample size of three hundred and twenty three (323) were chosen from a population of six hundred and sixty(660) academic staff of Federal College of Education, Zaria.
3.2 Data Analysis Technique The study reduced the quantity of data obtained by presenting it in a tabular form with a content analysis using descriptive statistics. Pearson correlation was used to test the relationship between dependent and the independent variables under study and regression analysis was used to determine the strength of relationship between the variables. . The appropriate level of significance of (0.05) was used to accept or reject the null hypotheses.Therefore, the decision rule is that; i. The null hypothesis is rejected if the P Value is at or less than 5% (0.05) level of significance from the regression output. ii. The null hypothesis is accepted if the P Value is more than the 5% (0.05) level of significance from the regression output.
3.3 Measurement of Variables and Instrumentation In this study, questionnaire was administered to the academic staff of Federal College of Education, Zaria. The questionnaire consists of five sections. PART A consists of 7 demographic variables, including gender, age, rank, work experience, educational qualification and geo-political zone, among others.PART B consists of 10-items that measure job autonomy. PART C consists of 10-items that measure self efficacy. PART D consists of 10-items that measure transformational leadership. While, PART E also consists of 10-items that measure resistance to change. The dependent variable is employees' resistance to change at FCE, Zaria. On the other hand the independent variables are, job autonomy, self-efficacy and transformational leadership style.
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4. Data Presentation and Analysis 4.1 Data Analysis The table below showed how the copies of questionnaire were administered to the various cadres of academic staff of FCE, Zaria out of the chosen sample size of 323. The table further showed the number of copies of questionnaire administered, retrieved and their percentages.
Table 4.1.1:Administration of Questionnaire Category of Staff Number of Questionnaire Number Percentage (%) Administered Retrieved Doctorate Degree 14 6 2.1% Masters Degree 143 1 33 45.5% First Degree 166 1 53 52.4% Total 323 2 92 100%
Source: Field Survey (2017)
4.2 Reliability and Inferential Analysis In an attempt to determine the internal reliability of the instruments used, cronbach alpha co- efficient were used. Table 4.2.1 shows that the cronbach alpha co-efficient for job autonomy, self efficacy, transformational leadership scales and employees resistance to change scale were 0.957, 0.952, 0.911 to 0.933 respectively. According to )Tabachnick& Fidell, 1996(, a Cronbach'salpha co-efficient greater than 0.7 is deemed to be acceptable. Thus, we conclude that the instruments adapted in this study were reliable since the Cronbachalpha for each variable is greater than 0.7.
Table 4.2.1: Cronbach alpha co-efficient for job autonomy, self efficacy, transformational leadership and employees' resistance to change scales Name of Instrument No.of Items Cronbach Comment Alpha Job Autonomy Scale 10 .957 Reliable Self Efficacy Scale 10 .952 Reliable Transformational Leadership Scale 10 .911 Reliable Employees Resistance Questionnaire 10 .933 Reliable Source: Field Survey, 2017. 4.3: Pearson Correlation and Simple Regression Analysis Pearson correlation and simple regression were both utilized to test the relationship between job autonomy, self efficacy, transformational leadership and employees resistance to change respectively. Correlation analysis was employed to test hypotheses 1, 2 and 3. Therefore, correlation is only used to indicate the relationship between the independent variables. In the course of
159 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions conducting correlation and regression analysis, we transformed all the items for each construct using SPSS version 16. Subsequently, we utilised the Pearson correlation and simple regression analysis separately. The interpretation of correlation coefficient was based on Cohen (1988) guideline as follow;
4.3.1 Table: Correlation Matrix Variables ERC SE TRL JA ERC 1
SE .736** 1
TRL .514** .562** 1
JA -.439** -.559** -.743** 1
Source: Field Survey, 2017
The results of the Pearson correlation analysis are shown in table 4. 3. 1 stated that there were three (3) significant correlations as follow: 1. Self efficacy and employees resistance to change. 2. Transformational leadership and employees resistance to change. 3. Job autonomy and employees resistance to change.
The correlation between self efficacy and employees resistance to change was a moderate positive correlation at the level of 0.736. Hence, the null hypothesis is rejected while the alternate accepted. This predicts that employees who have self confidence over their jobs tend to resist change less and verse versa.
Similarly, the correlation between transformational leadership and employees resistance to change was moderate at the level of 0.514. Hence the result supported the alternate hypothesis which predicted that there is a positive relationship between transformational leadership and employees resistance to change. This means that transformational leadership style inspires followers to share a vision and empower them to attain the vision by providing the necessary resources to develop their full personal potentials thereby reducing resistance to change by employees.
On the contrary, there was a negative correlation between job autonomy and employees resistance to change at the level of -.439. Hence, the result supported null hypothesis one (H01) which states that there is no significant relationship between job autonomy and employees resistance to change. In other words, employees who have freedom or control over their jobs, who decide on the order in which they work have more tendency of resisting change in the organisation and verse versa.
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Table 4.3.2. Simple Regression Result among Predictor Variables and Employee Resistance to Change Unstandardized Std. Standardized Beta Error Beta T Sig. (Constant) 7.246 0.235 30.846 0.000 Job Autonomy 0.078 0.056 0.079 1.382 0.168 Self-Efficacy -0.256 0.059 -0.258 -4.355 0.000 Transformational Leadership -0.65 0.048 -0.638 13.658 0.000 R 0.764 R-square 0.584 Adjusted R2 0.579 F 134.558 Note. Significance at< 0.05 Source: Field Survey, 2017
Ho1: Job autonomy has no significant effect on employees' resistance to change. Simple regression was used to examine the strength of the relationship between job autonomy and employees resistance to change. As can be seen from Table 4.3.2, Job autonomy has nosignificant butpositive effect on employees' resistance to change. (B= 0.078, t=1.382, p<0.168.This means that the null hypothesis is accepted while the alternate is rejected. However, this is not surprising because if employees are given freedom (autonomy) over their jobs, they will abuse the opportunity: thus, increasing the level of resistance any time change is introduced in the organisation. Therefore, this study established that job autonomy has no significant positive effect on employees' resistance to change.
H02: Self-efficacy has no significant effect on employees' resistance to change. As can be seen from the table above, self efficacy has significant negative effect on employees resistance to change (B=-0.256, t= -4.355, p<0.000). Therefore we fail to accept the null hypothesis. This implies that the higher the self efficacy in employees the less the resistance.
H03: Transformational leadership has no significant effect on employees' resistance to change. The hypothesis postulates that transformational leadership has significant negative effect on employees resistance to change (B=-0.65, t= -13.658, p<0.000. therefore, we fail to accept the null hypothesis. This implies that the more effective the transformational leaders, the less the resistance to change by employees.
Finally, Table 4.3.2 also shows that R2 was 0.584, which indicates that 58.4% of the variance in employees' resistance to change can be explained by employees' perception of job autonomy, self efficacy and transformational leadership. On the other, the remaining 41.6% of the variance is unexplained.
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4.4 Discussion ofFindings On the basis of the simple regression analysis, this study found that job autonomy has no significant, but positive effect on employees' resistance to change (table 4.3.2). The implication of this finding is that if the employees are given freedom or control over their jobs, there will be high degree of resistance to change since they are allowed to take decisions over their jobs and vice versa. This finding contradicts the works of, Adalgi et al (2013) and Hornnung&Roussean (2007) which demonstrates that employees are less likely to resist change when they think that they can freely determine the way they perform their jobs. They assert that job autonomy enhances the workers confidence in accepting broader job role and their willingness to behave in novel and innovative ways, thus reducing resistance to change.
Table 4.3.2 also shows that self efficacy has significant negative effect on employees' resistance to change. This implies that the higher the self efficacy the lower the employees resistance to change and vice versa. This finding confirms the work of Kura et al (2013), Moran and Hoy (2013), Kumar and Uzkurt (2011) and Rodda (2010), which established that self efficacy is highly related to employees resistance to change due to its ability to motivate action and increase confidence in performance. Consequently, efficacious people are likely to deal effectively with difficulties and persist in the face of challenges and subsequently reduce resistance to change from employees.
More so, Table 4.3.2 shows that transformational leadership style has significant negative effect on employees' resistance to change. This implies that transformational leadership is one of the most significant predictors of employees resistance to change. This finding confirms the works of Dubs et al (2012), Carter et al (2012), Faghihi and Sayyed (2012), Oreg and Berson (2011), Tseng and Kang (2008) andNahavandi (2012) which state that transformational leaders inspire followers to share a vision and empower them to attain the vision by providing the necessary resources to develop their full personal potentials thereby reducing resistance to change by employees and vice versa. They also established that transformational leaders have stronger focus on intellectual stimulation. Transformational leaders are concerned about enhancing employees innovation and creativity. They are willing to take risks to attain organisational success and eliminate ineffectiveness in processes and systems. It would be recalled that this study reported 58.4% R2 indicating that the remaining 41.6% of the variance is unexplained. This implies that there are some other variables that were not captured in this study
5.1 CONCLUSION This study concludes that the factors that determine employees' resistance to change in organisations equally have effect on employees' resistance to change in Nigeria higher educational institutions, particularly FCE, Zaria, as revealed by R2 which is the coefficient of multiple determinations. Thus, Job Autonomy has no significant but positive effect on employees' resistance to change. On the other hand, self-Efficacy and transformational leadership style have significant negative effect on employees' resistance to change.
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5.2 RECOMMENDATIONS On the basis of the above findings, the following recommendations are made: i. Academic staff of Nigerian higher educational institutions should not be given total freedom or control over their jobs to avoid negligence of duty and resistance. ii. The management of Nigerian higher educational institutions, particularly FCE, Zaria should always provide adequate incentives for the employees to boost their efficacy belief. This is because the higher the self efficacy on employees the less the resistance. iii. The study also recommends that the management (leaders) of Nigerian higher educational institutions, particularly, FCE, Zaria should realize that instead of motivating their employees by punishment or rewards, they should create a vision and inspires subordinates to strive beyond required expectations.
REFERENCES Adalgi, S. A, Battistel I. A., Francesco M.A &Odoardi C.O. (2013). The Impact of Feedback from Job and Task Autonomy in the Relationship Between Dispositional Resistance to Change and Innovative Work Behaviour: European Journal of Work and Organizational Psychology, 22(26-41). Agboola, A. A &Salawu R. O. (2011). Managing Deviant Behaviour and Resistance to Change.International Journal of Business and Management, 6(1). Ahmed, Z., Rehman , Z.U., Asad, A., Hussain, N. and Bilal, A. (2013). The impact of organizational change on the employee's performance in banking sector of Pakistan. Ethiopian International Journal of Multidisciplinary Research, 2013; 1(1): 1-12. Anam A., Rashid S., Rab N. L., Mizna S., Anam I. &Rida-e T. (2013). The Impact of Employees Training on the Job Performance in Educational Sector of Pakistan. Middle-East Journal of Scientific Research 17 (9): 1273-1278, 2013. Araoye M. O. (2004). Research Methodology wth Statistics for Health and Social Sciences. First Edition, Nathadex Publishers, Odo-Okun, Illorin. Bandura, A. (1997). Self-Efficacy: The Exercise of Control. New York: W. H. Freeman and Company. Bandura, A. (1995). Exercise of Personal and Collective Efficacy in Changing Societies.In A. Bandura (Ed.), Self-Efficacy in Changing Societies (1-45). New York: Cambridge University Press. Benson, G. S. & Lawler, E. E. (2005). Employee Involvement: Utilization, Impacts, and Future Prospects. In D. Holman, T. D. Wall, C. W. Clegg, P. Sparrow, & A. Howard (Eds.), The Essentials of the New Workplace (153-172). West Sussex: John Wiley & Sons. Boohene R &Asamoah A. W. (2012). Resistance to Organisational Change:A Case Study of OtiYeboah Complex Limited. International Business and Management,4(1),135-145 Carter M. Z., Achilles A. Armenakis, H., Hubert S. F. &Mossholder K. W. (2012). Transformational Leadership, Relationship Quality, and Employee Performance during Continuous Incremental Organizational Change.Department of Management and Marketing, Troy University, Troy, Alabama, U.S.A. and Department of Management, Auburn University, Auburn, Alabama, U.S.A. Cavazotte F., Moreno V. & Bernardo J. (2013). Transformational Leaders andWork Performance: The Mediating Roles of Identification and Self efficacy. Brazilian Administrative Review.10(4), Pp. 490-512. 163 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions
Dubs J., Eriksson M., Felldin S. & Hanson F. (2012). Leadership and Organizational Change: Leading Organizational Change at SAAB Support and Services -With a focus on communication and resistance. A Thesis, Linköping University, Dude, D. J. (2012). Organizational commitment of principals: The effects ofjob autonomy, empowerment, and distributive justice." Ph. D (Doctor of Philosophy) thesis, University of Iowa.http://ir.uiowa.edu/etd/2863. date accessed 27/03/2016 Faghihi A. &Sayyed M. A. (2012). Investigating the Influence of Employee Attitude toward Change and Leadership Style on Change Readiness by SEM (Case Study: Isfahan Municipality) .International Journal of Academic Research in Business and Social Sciences.2, 11 ISSN: 2222-6990. Federal College of Education (FCE), Zaria Chronicle.A New Magazine of Federal Collegeof Education, Zaria. 3. March 3rd 2015-February, 2016. Federal College of Education, Zaria Staff Nominal Roll as at 31 March, 2017. Graetz, F., Rimmer, M., Lawrence, A. & Smith, A. (2006).Managing Organizational Change.(2nd ed.). Australa: Wiley and Sons, Sidney and Melbourne. Hornung, S. & Rousseau, D. M. (2007).“Active on the Job-Proactive in Change: How Autonomy at Work Contributes to Employee Support for Organizational Change”, The Journal of Applied Behavioural Science, 4, 401-26. Iroegbu M. N. (2015). Self Efficacy and Work Performance: A Theoretical Framework of Albert Bandura's Model, Review of Findings, Implications and Directions for Future Research. P s y c h o l o g y a n d B e h a v i o r a l S c i e n c e s ; 4 ( 4 ) : 1 7 0 - 173(http://www.sciencepublishinggroup.com/j/pbs). Isreal G. B. (1992).Determining Sample Size. University of Florida: IFAS Extension. Jacob C. & Jolly J. (2013).Impact of Self Efficacy on Motivation and Performance of Employees.International Journal of Business and Management; Vol. 8, No. 14; ISSN 1833- 3 8 5 0 E - I S S N 1 8 3 3 - 8 1 1 9 . d o i : 1 0 . 5 5 3 9 / i j b m . v 8 n 1 4 p 8 0 U R L : http://dx.doi.org/10.5539/ijbm.v8n1 Kanika, S., Ravi K, & Sanjay K. (2015).Organizational Change and Organizational Commitment: An Empirical Study of it Organizations in India. Global Journal of M a n a g e m e n t a n d Business Research: Administration and Management. Volume 15 Issue 6 Version 1.0. Kumar, R. &Uzkurt, C. (2011).Investigating the Effects of Self Efficacy on Innovativeness and theModerating Impact of Cultural Dimensions.Journal of International Business and Cultural Studies.2, 1-15. Kura, K. M., Shamsudin, F. M.& Ajay, C. (2013).Modeling the Influence of Group Norms and Self- regulatory Efficacy on Workplace Deviant Behaviour.Asian Social Science; 9, 4; 2013. Moran, M. T. & Hoy A. W. (2013).The Differential Antecedents of Self Efficacy Beliefs of Novice and Experienced Teachers. Asian Social Science; 9, 4;ISSN 1911-2017 E-ISSN 1911-2025. Myung H.J. &Mi Y.L. (2012).The Effects of Autonomy, Experience, andPerson-Organization Fit on Job Satisfaction: The Case of Public Sector. The International Journal of Social Sciences. Vol. 6, No. 1 Nahavandi, A. (2012). The Art and Science of Leadership. Person Education, Inc., Upper Saddle River, NJ. Naqvi R, Ishtiaq M, Kanwal N. &Ali M. (2013). Impact of Job Autonomy on Organizational Commitment and Job Satisfaction: The Moderating Role of Organizational Culture in Fast Food Sector of Pakistan.International Journal of Business and Management, 8(17). Odumeru J. A. &Ogbonna I. G (2013). Transformational Vs Transactional Leadership Theories: Evidence in Literature.International Review of Management and Business Research.2(2).
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Oreg, S. &Berson, Y. (2011).Leadership and Employees' Reactions toChange: The Role of Leaders' PersonalAttributes and Transformational Leadership Style.Personnel Psychology.64, 627–659 Piderit, S. K. (2000). Rethinking Resistance and Recognizing Ambivalence: A Multidimensional View of Attitudes Toward an Organizational Change. The Academy of Management Review, 25(4), 783-794. Rizwan Q. D., Yasin M., Asifa K., Momna J. and Nida M. (2014).Impact of Change, Culture a n d Organizational Politics on Organizational Learning.Review of Contemporary Business Research. Vol. 3, No. 1, pp. 115-126. Rodda, J. (2010). A Multi-Level Examination of Employee Reactions to Organizational C h a n g e . T h e s e s a n d D i s s e r t a t i o n s . P a p e r 5 9 . D e P a u l University,http://via.library.depaul.edu/etd/59. Schmid,H.(2010).Organizationalchangeinhumanserviceorganizations:Theories,boundaries,strateg ies,andimplementation.InY.HasenfeldS(Ed.),Humanservicesascomplexorganizations(2nde d.,pp.455–479).ThousandOaks, CA:Sage. Scholz, U., Gutiérrez-Doña, B., Sud, S. &Schwarzer, R. (2002). Is General Self-Efficacy a Universal Construct?: Psychometric Findings from 25 Countries. European Journal ofPsychological Assessment , 18 (3), 242-251. Seema, H. M. (2011). AN EMPIRICAL STUDY ON EMPLOYEES' ACUITY TOWARDS ORGANISATIONAL CHANGE AT B.H.E.L, TRICHY.Research Journal of Social Science & Management.Vo. 01, Number, 07. Seyyedeh F. M., Mousa R. C. & Ali M. S. (2013). The Relationship between Communication Skills and Job Performance of the Employees, Fire Managers of Rasht City. International Journal of Business and Behavioral Sciences Vol. 3, No.2. Sosik, J. J., & Jung, D. I. (2010).Full Range Leadership Development: Pathways for People, Profit and Planet. New York, NY: Routledge. Swarnalatha, V. (2014). A Study on Employee Resistance towards Organizational Change w i t h Special Reference towards Prosper Exports, Tirupur,India. Research Journal of Management Sciences.Vol. 3(1), 1-5. Tabachnick, B. G. & Fidell, L. S. ) 1996(. SPSS for Windows Workbook to Accompany Large Sample Examples of Using Multivariate Statistics. Third Edition,Harper Collins College Publishers, Warrilow.S (2012).Transformational Leadership Theory - The 4 Key Componentsin Leading C h a n g e & M a n a g i n g C h a n g e . [ R e t r i e v e d 1 5 / 0 4 / 2 0 1 6 ] . http://EzineArticles.com/?expert=Stephen_Warrilow.
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APPENDIX I PART A INSTRUCTION: Please read and tick as appropriate in the provided boxes your exact assessment of the following demographic information: 1. What is your gender? Male ( ) Female ( ) 2. What is your age? 21-30 ( ) 31-40 ( ) 41-50 ( ) 51 & above ( ) 3. What is your present rank? Chief Lecturer ( ) Principal lecturer ( ) Senior Lecturer ( ) Lecturer I ( ) Lecturer II ( ) Lecturer III ( ) Assistant lecturer ( ) 4. How long have you been in the present job? Less than 1yr ( ) 1-5yrs ( ) 6-10yrs ( ) 11yrs and above ( ) 5. Highest Educational Qualification
Doctorate degree ( ) Master Degree ( ) First Degree ( ) 6. What is your marital status? Married ( ) Single ( ) Widowed ( ) Divorced or Separated ( ) 7. What is your ethnic group? Yoruba ( ) Hausa/Fulani ( ) Igbo ( ) O t h e r s P l e a s e Specify ______
PART B INSTRUCTION: The following questions are designed to ask you about the amount of control you have over your job (JA=Job Autonomy) in your workplace. Use the scales provided below to indicate your level of agreement or disagreement with each statement.
Strongly Disagree Disagree Neutral Agree Strongly agree 1 2 3 4 5
JA01 My job allows me to decide on the order in which I do things. 1 2 3 4 5
JA02 My job allows me to decide when to start a piece of work.
JA03 My job allows me decide when to finish a piece of work.
JA04 I do set my job own pace of work
JA05 I can control how much I produce.
JA06 I can vary how I do my work.
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JA07 I can plan my own work
I can control the quality of what I produce. JA08
JA09 I can decide how to go about getting my job done.
JA10 I can choose the methods to use in carrying out my work.
PART C INSTRUCTION: The following questions are designed to ask you about how self efficacy (SE=Self Efficacy) builds confidence in your abilities to deal with change in the college. Please indicate as honestly and as objectively as you can about yourself. Use the scales provided to indicate your level of agreement or disagreement with each statement.
SE01 I can always manage to solve difficult problems if I try hard enough
If someone opposes me, I can find the means and ways to get what I SE 02 want
SE03 It is easy for me to stick to my aims and accomplish my goals
SE04 I am confident that I could deal efficiently with unexpected events.
Thanks to my resourcefulness, I know how to handle unforeseen SE05 situations.
I can solve most problems if I invest the necessary effort. SE06
I can remain calm when facing difficulties because I can rely on my SE07 coping abilities.
W hen I am confronted with a problem, I can find several solutions. SE08
SE09 If I am in trouble, I can think of a solution.
SE10 I usually handle whatever comes my way.
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PART D INSTRUCTION: Transformational Leadership Scale The following questionsask you about your immediate Supervisor, Head of Department or Management of your college (TL=Transformational Leadership). Please use the scales provided to indicate as honestly and as objectively your level of agreement or disagreement with each statement. Strongly Disagree Disagree Neutral Agree Strongly Agree 1 2 3 4 5
TRL01 My Head of Department re -examine critical assumptions to questions to determine whether they are appropriate 1 2 3 4 5
TRL02 My Head of Department talks about the ir most important values and beliefs TRL 03 My Head of Department seeks differing perspectives when solving problems.
TRL04 My Head of Department really feels as if this organization’s
problems are hers
TRL05 My Head of Department beli eves the organization deserves her
loyalty TRL06 My Head of Department suggests new ways of looking at how to
complete assignments TRL07 My Head of Department talks enthusiastically about what needs to be
accomplished
TRL08 My Head of Department considers the moral and ethical
consequences of decisions
TRL09 My Head of Department heightens my desire to succeed
TRL10 My Head of Department is effective in meeting organizational
requirements
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PART E INSTRUCTION: The following questions requires your perception of changes in the college (ERC=Employees Resistance to Change). Please use the scales provided to indicate your level of agreement or disagreement with each statement. Strongly Disagree Disagree Neutral Agree Strongly Agree 1 2 3 4 5
ERC01 I do not think this change is fair ERC02 I am so irritated about this change.
ERC03 I am less motivated at work because of this change ERC04 I feel frustrated with the new situation. ERC05 I am really worried that this change will have a bad outcome for me. ERC06 I refuse to support this change
ERC 07 I try to avoid doing things at work the new way.
ERC08 I am experiencing high anxiety because of this change.
ERC09 I? ve had lots of headaches, backaches, or other aches and pains since
this change was introduced. ERC10 Since this change began, I see m to have less energy to do things I would
normally do.
Thank you once again.
169 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions
APPENDIX II
Gender Age Rank Experience Qualificatio n N Valid 292 292 291 290 292 Missing 0 0 1 2 0 Mean 1.32 2.28 5.20 2.62 2.51 Std. Deviation .465 .784 1.693 .992 .540
Statistics
Status Ethnicity N Valid 292 291 Missing 0 1 Mean 1.49 2.65 Std. Deviation .655 1.157
Frequency Table Gender Frequency Percent Valid Perce nt Cumulative Per cent Valid Male 200 68.5 68.5 68.5 Female 92 31.5 31.5 10 0.0
Total 292 100.0 100.0
Age Frequency Percent Valid Percent C umulative Percent Valid 21-30 years 42 14.4 14.4 14.4 31-40 years 138 47.3 47.3 61.6 41-50 years 103 35.3 35.3 96.9 51 years and 8 2.7 2.7 99.7 above 7 1 .3 .3 100.0 Total 292 100.0 100.0
170 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions
Rank Cumulative
Frequency Percent Valid Percent Percent Valid Chief Lecturer 5 1.7 1.7 1.7 Principal 16 5.5 5.5 7.2 Lecturer
Senior Lecturer 37 12.7 12.7 19.9
Lecturer I 44 15.1 15.1 35.1 Lecturer II 35 12.0 12.0 47.1 Lecturer III 63 21.6 21.6 68.7 Assitant 91 31.2 31.3 100.0 Lecturer Total 291 99.7 100.0 Missing System 1 .3 Total 29 2 100.0
Experience Frequency Percent Valid Percent Cumulative Percent Valid Less than 1 year 33 11.3 11.4 11.4 1-5 years 119 40.8 41.0 52.4 6-10 years 63 21.6 21.7 74.1 11 years an d 75 25.7 25.9 100.0 above Total 290 99.3 100.0 Missing System 2 .7 Total 29 2 100 .0
Q ualification Frequency Percent Valid Percent Cumulative Percent Valid Doctorate 5 1.7 1.7 1.7 degree
Masters degree 133 45.5 45.5 47.3
First degree 153 52.4 52.4 99.7
4 1 .3 .3 100.0
Total 292 100.0 100.0
Status Frequency Percent Valid Percent Cumulative Percent
Valid Married 173 59.2 59.2 59.2
Single 99 33.9 33.9 93.2
Widowed 17 5.8 5.8 99.0 Divoce d/Separate 3 1.0 1.0 100.0 d Total 29 2 100 .0 100 .0
171
Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions
Ethnicity Frequency Percent Valid Percent Cumulative Percent Valid Yoruba 59 20.2 20.3 20.3 Hausa/Fulan 87 29.8 29.9 50.2 i Igbo 43 14.7 14.8 64.9 Others 102 34.9 35.1 100.0 Total 291 99.7 100.0 Missing System 1 .3 Total 292 100.0
Reliability Scale: JA Case Processing Summary N % Cases Valid 290 99.3 a Excluded 2 .7 Total 292 100.0
a. Listwise deletion based on all variables in the procedure.
Reliability Statistics
Cronbach's Alpha N of Items .957 10
Reliability Scale: SE
Case Processing Summary N % Cases Valid 292 100.0 a Excluded 0 .0 Total 292 100.0 a. Listwise deletion based on all variables in the procedure.
R eliability Statistics Cronbach's N of Alpha Items .952 10
172 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions
Reliability Scale: ERC Case Processing Summary N % Cases Valid 292 10 0.0 a Excluded 0 .0 Total 292 10 0.0 a. Li stwise deletion based on all variables in the procedure.
Reliability Statistics
Cronbach's N of Alpha Items .911 10
Reliability Scale: TRL Case Processing Summary N % Cases Valid 290 99.3 Excludeda 2 .7 Total 292 100.0 a. Listwise deletion based on all variables in the procedure.
Reliability Statistics Cronbach's N of Alpha Items .933 10 Regression ANOVA b Model Sum of Mean Squares Df Square F Sig. 1 Regression 129.489 3 43.163 134.558 .000a Residual 92.384 288 .321 Total 221.873 291 a. Predictors: (Constant), TRL, JA, SE
173 Managing Employees Resistance to Organisational Change in Nigeria Higher Educational Institutions
Coefficientsa Model Unstandardized Standardized Coefficients Coefficients B Std. Error Beta T Sig. 1 (Constant) 7.246 .235 30.846 .000 JA .078 .056 .079 1.382 .168 SE -.256 .059 -.258 -4.355 .000 TRL -.650 .048 -.638 -13.658 .000
Correlations JA SE TRL ER C JA Pearson Correlation 1 .736** .5 14** -.4 39** Sig. (2-tailed) .000 .000 .0 00 N 292 292 292 2 92 SE Pearson Correlation .73 6** 1 .562** -.5 59** Sig. (2-tailed) .000 .000 .0 00 N 292 292 292 2 92 TRL Pearson Correlation .51 4** .562** 1 -.743** Sig. (2-tailed) .000 .000 .000 N 292 292 292 2 92 ERC Pearson Correlation -.4 39** - .559** -.7 43** 1 Sig. (2-tailed) .000 .000 .000 N 292 292 292 2 92 **. Correlation is significant at the 0.01 level (2-tailed).
174 Veritas International Journal of Entrepreneurship Development (VIJED)
HERDSMEN AND FARMERS CONFLICT: AN IMPEDIMENT TO POLITICAL DEVELOPMENT IN NIGERIA
ANYANWU, Christiantus Izuchukwu Department of Political Science and Diplomacy Veritas University, Abuja (The Catholic University of Nigeria) [email protected]
Citation: Anyanwu, C. I. (2018). Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria. Veritas ______International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 175-187 ABSTRACT Every country strives to attain Political Development. This is owing to the fact that Political Development is characterized by political equity and stability. It provides enabling environment for national development. It is a factor that guarantees continuous existence of heterogeneous countries like Nigeria. The paper identified and examined how Herdsmen/Farmers conflict is an impediment to the attainment of Political Development in Nigeria. Achieving this, the paper defined and explained the concepts, types of conflict, and causes of conflict, Herdsmen/farmers conflict - the Nigerian factor, political implications, and conflict resolution. Human Need Theory was adopted as a guide and succinctly analyzed the study. It basically holds that every human has a basic need to fulfill, and in the quest to achieve this, there is clash of interest which leads to conflict. The paper therefore concluded and gave recommendation with steps to follow.
______Keywords: Conflict, Political Development, Human Need, Herdsmen, Farmers
INTRODUCTION Nigeria has had crises that affected her stability since Independence. In portraying this, Allswell (2014, p.14) identified these crises as follows: election violence, military interference, declaration of Niger Delta Republic, the Civil War, Movement for the actualization of the Sovereign State of Biafra (MASSOB), Movement for the Emancipation of the Niger Delta (MEND), Oodua People's Congress (OPC), Northern Arewa Groups, series of religious crises, Jama'atu Ahlil Sunna LidawatiWal Jihad (Boko Haram), Jama'atu Ansaril Muslimina fi Biladis Sudan (Ansaru). Activities or crises perpetrated by these groups have given rise to Internal Displacement, thereby undermining the country's political development. Herdsmen are found all over the country, with incessant clash with famers of the host communities. These clashes result to destruction of properties and especially lost of lives. Those who managed to escape become internally displaced. This has led to numerous IDPs camps in the country.In such situation, attainment of political development becomes only a mirage hence constant loss of life, and painful life experience to escapees. In the event of this Displacement, they become people who have no homes, food, shelter, security, even hope of
175 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria. survival. In some cases, many lose their families or are delinked from families and communities in the whole of their life time. Omenihu (2016, p.12) maintains that Internal Displaced Persons live in very poor conditions; a large majority number of Nigerians are housed in overcrowded camps across the disturbed areas, and these camps which are mainly school facilities and empty government buildings with few basic amenities. This shows picture of what majority of Nigerians are passing through. These are supposed to be citizens whom through their active participation in political processes would yield attainment of political development. Any country whose almost half of her citizens are in such state of living, has no business with attaining Political Development. Moreover, owing to the fact that Nigeria is a democratic nation, citizens' relation to public activities becomes a huge criterion and yardstick in attaining and measuring political development. From observation, Nigeria is currently at the brick of anarchy, chaos and eventual collapse.
This is owing to the fact that Herdsmen/Farmers' conflict is increasing geometrically, and no state in the country can be seen as exception. Consequently,Internal Displacement is unprecedentedly increasing day-by-day. Adding to this menace is the unconvincing manner in which Nigerian Security Agencies are handling the deterrent measures in foiling these attacks. Nigeria being a multi- ethnic and religious country, still struggling for compatibility, trust and stability should nip such menace at the bud. Every concerned Nigerian would imagine what the fallout could be should drastic measures are not taken. It is very sad that while many countries are concerned and focused on advancing technological developments, breaking into new discoveries, Nigeria is still battling with Fulani-herdsmen and their cattle at this 21st Century. One may ask, is Nigeria the only country in the world that consumes cows? In one of the media interviews of the current Minister of Information, Culture and Tourism, Chief Lai Mohammed, he maintains that Fulani-herdsmen/Farmers current crisis is at the result of climate change. One may wonder if Nigeria is the only country that experience climate change. This therefore, poses a question; can Nigeria still attain Political development? It is good news that Internal Displaced persons caused by Boko Haram insurgency are gradually returning home as a result of successful war against the insurgents. This should be a sigh of relief on the issue of Internal Displacement in Nigeria, but that seem not to be the situation owing to the increment of Internal Displaced Persons as a result of incessant attacks by Herdsmen. Almost every state is beginning to establish IDPs Camps due to Herdsmen/Farmers' conflict. According to Charles (2016, p.18), Fulani-herdsmen have launched attacks in many states in the country more especially Taraba, Ekiti, Benue, Nassarawa, Plateau, Adamawa, Enugu, Imo and Abia among others. However, focus is placed on how Herdsmen/Farmers' conflict poses an impediment to attainment of Political Development in Nigeria.
CONCEPT CLARIFICATION Herdsmen: Herdsmen are also known as Pastoralists who are nomadic or semi-nomadic; whose primary occupation is raising livestock. Herdsmen move around with their livestock as a way of grazing them. Ayodele (2014, p.13) holds that Herdsmen engage in random movement of cattle while the semi-nomadic makes trans-human migration and return to their camps or homes.
176 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria.
Herdsmen normally reside in bushes where they made hunts. Their movements take off from there, and after grazing their livestock they return to their hunts. Herdsmen were originally known for residing in Sahara before they arrivedSavaha and down main South. According to Steve (2002, p.4), Herdsmen are largely located in the Sahel and semi arid parts of West Africa but due to changes in climate patterns, many have moved further South into the Savannah and Tropical forest belt of West Africa. Herdsmen are largely found in countries such as Nigeria, Niger, Senegal, Guinea, Mauritania, Mali, Burkina-Faso, Benin, and Cameroon. In Nigeria, the livestock supplied by Herdsmen provide a bulk of the beef consumption. The sale of cattle, goat, sheep and dairy products such as milk constitute the primary source of income and livelihood of the herdsmen. Their wealth and riches are mainly measured by the size of the cattle being the most treasured animal. This explains why Herdsmen value their cattle a lot even to the point of sacrificing for them. Their conflict with farmers became very unbearable since the high number of influx to the South. Abbass (2012, p.8) holds that historically, Fulani herdsmen have grazed in lands around the Arid and Sahel regions of West Africa partly because of the environmental conditions that limit the amount of land for agricultural purposes leading to less intense competition for land between farmers and herdsmen;but however, after recurrent droughts in the Arid and Sahel regions, the Herdsmen have gradually moved Southwards to the Guinean Savanna and the tropical parts which results in competing with Farmers for grazing routs.
Farmers: Farmers are those who engage in agriculture, which involves raising living organisms for food or raw materials. They are known for raising either field crops, orchards, vineyards, poultry, other livestock or combination of any. According to Abbass (2012, p.12), a farmer might own the farmed land or might work as a labourer on land owned by others, but in advanced economies, a farmer is usually a farm owner, while employees of the farm are known as farm workers, or farmhands. In major developing nations, most farmers practice meager subsistence agriculture - a simple organic farming system employing crop rotation, seed saving, slash and burn, or other techniques, aiming at maximizing efficiency and production while meeting the need of the households and communities. In developed nations however, a person using such techniques on small patches of land might be called a gardener and may be considered a hobbyist. Such practice might be as a result of poverty or, ironically - against the background of large-scale agri-business Just like Herdsmen, Farmers equally have unions. Frederick (2000, p.12) maintains that farmers are often members of local, regional or national Farmers' Unions or Agricultural Producers' Organizations and can exert significant political influence. As a union, they promote their interest and make profit. Farmed products might be sold either to a market, in a farmer's market, or directly from a farm. In a subsistence economy, farm products might to some extent be either consumed by the farmer's family or by the community.
Conflict:Conflicts are commonly seen as relational disputes between two or more parties. This does not mean that for conflict to erupt there must be more than one party involved, hence one can be in conflict with himself. Here, we are concerned with the conflict that involves more than one party,
177 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria. which is inter-personal conflict. In this, there exists friction, disagreement, or discord arising within a group or individuals when beliefs or actions of one or more members of the group are either resisted by or unacceptable to one or more members of another group. Conflict however, can arise between members of the same group which is generally known as 'Intra-group conflict'. In other words, once conflict involves another group, it is known as 'Inter-group conflict'. This is the nature of Herdsmen/ Farmers' conflict. Rahim (2010, p.7) identifies four major elements in inter-group conflict: i) There are recognized opposing interests between parties in zero-sum situation ii) There must be a belief by each side that the other one is acting or will act against them iii) This belief is likely to be justified by actions taken iv) Conflict is a process, having developed from their past interactions.
Building on this, Rahim therefore sees conflict as an interactive process manifested in incompatibility, disagreement or dissonance within or between social entities. In inter-group relations and conflict, there is key player. This is a collective sentiment a person's own group (in- group) feels toward another group (out-group). These inter group emotions are usually negative, and range in intensity from feelings of discomfort when interacting with a member of a certain other group to fall on hatred for another group and its members. Fischer (2012, p22) identifies four basic emotions that could be directed toward the out-group as follows: i) Envy: results when the out-group is perceived to have high competence, but low warmth. Envious groups are usually jealous of other group's symbolic and tangible achievements and view that group as competition. ii) Contempt: The out-group is taken to be low in both competence, and warmth. This is one of the most frequent inter group emotion. In this situation, the out group is held responsible for its own failures. In-group members also believe that their conflict with the out-group can never be resolved. iii) Pity: out-groups that are believed by the in-group to be high in warmth but low in competence are pitied. Usually, pitied groups are lower in status than the in-groups, and are not believed to be responsible for their failures. iv) Admiration: this occurs when an out-group is taken to be high in both warmth and competence. However, admiration is very rare because these two conditions are seldom met. An admired out- group is thought to be completely deserving of its accomplishments. Admiration is likely to arise when a member of the in-group can take pride in the accomplishments of the out-group, and when the out-group achievement does not interfere with the in-group.
178 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria.
Theoretical Framework (Human Need Theory) The theory adopted is Human Need Theory. It holds that all humans have basic human needs which they seek to fulfill. An attempt to deny or frustrate them from achieving these needs by other groups or individuals affects them immediately or later, thereby leading to conflict. Burton (1990, p.17) holds that Basic human needs in this sense comprise physical, psychological, economic, social and spiritual needs. Therefore, to provide access to one (example, food), and deny or hinder access to another will amount to denial and could make people to resort to violence in an effort to fulfill and protect these needs. Here, one of the groups in search of fulfilling these basic human needs are Herdsmen, the other group are Farmers. The Herdsmen through their grazing of cattle are able to provide food and earn a living. Farmers as well provide food and earn a living through their crops. Therefore, attempts to deny or hinder Herdsmen from grazing their livestock frustrate them and as a result, lead to conflict, and vice versa.
TYPES OF CONFLICT Every conflict, notwithstanding its nature can be detriment to the society, and therefore requires attention. There are different types of conflict. Brenden (2009, p.39) articulates them as follows: i) Relational Conflict: this is a personal perspective and can arise when one person behaves in a negative manner or another person has skewed the perception due to things like stereotypes and rumours. The relationship between people is affected negatively, and in the workplace, performance is eroded due to poor team cohesion. ii) Value Conflict: this arises when two people or groups have dissenting views on normal values - that basic understanding of what is naturally right or wrong. Relationship and value conflicts are the most subjective conflict types, because they are based totally on what someone "feels" about a person or situation. iii) Interest Conflict: This ensues when one person's desired outcome is in conflict with another person or group's interests. Typically, this occurs when one person believes that another person's desires, if enacted will prevent his or her own interests from being met. This type of conflict can be experienced when two people who have relationship conflict are required by a team manager to work as a part of a team.
The Herdsmen/Farmers' conflict involves value and interest type of conflicts. This is evidenced in a situation where the Herdsmen value their cattle, and is not that of Farmers', who attach much value to crops. In such situation there will be conflict of interest. An attempt to realize this interest leads to denial of another's, which will result to conflict.
CAUSES OF CONFLICT There is no society that is not confronted by one conflict or the other. Identifying factors that contribute to conflict might lead to helping in resolving it. It has been argued that causes of conflict
179 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria. are subjected to the factors within the immediate society. However, Judy (2003, p.27) discusses common factors that lead to conflict irrespective of the immediate environment. He portrays these factors base on individual-level core and group-level worldview: i) Superiority: individual-level core - This core belief revolves around a person's ending conviction that he or she is better than other people in important ways. The cluster of attitudes commonly associated with this belief includes a sense of specialness, deservingness, and entitlement. Group- level worldview - Many of these elements are also present in the superiority worldview at the group level. This worldview encompasses shared convictions of moral superiority, closeness, entitlement and special destiny. Several joint working committees of the American Psychological Association have identified "belief in the superiority of one group's cultural heritage (history, values, language, traditions, arts and crafts, etc). Over another's as a defining characteristic of the phenomenon they termed ethnocentric mono-culturalism. ii) Injustice: Individual-level core belief - The perceived mistreatment by specific others or by the world at large. This mindset can lead the individual to identify something as unfair which is merely unfortunate, and thereby to inappropriately engage in retaliatory acts. Group-level worldview- The injustice worldview reflects the in-groups conviction that it has significant and legitimate grievances against another group. This mindset can mobilize powerful and violent collective insurgencies, especially because shared perceptions of injustice typically heighten the identification and allegiance that individuals feel towards their group. Further, these assessments of mistreatment are particularly common across cultural divides because different cultures tend to have different definitions for what constitutes justice, and different norms for how it should be achieved. iii) Vulnerability: Individual-level core belief - The vulnerability core belief revolves around a person's conviction that he she is perpetually living in harm's way. Vulnerability involves a person's perception of him in harm's way. Vulnerability involves a person's perception of him or herself as subject to internal dangers over which control is lacking; or is insufficient to afford him or her a sense of safety. Group-level worldview- Importantparallels to this individuals-level core belief are present in a collective vulnerability worldview that again appears to be widespread among ethnic groups. Fears about the future are the most common cause of ethnic conflicts and often produce spiraling violence. The vulnerability worldview is catastrophic thinking in which a group's imagined worst case scenarios take on the inexonerable logic of inevitability. iv) Distrust: Individual- level core belief - This core belief focuses on the presumed hostility and malign intent of others. The critical role played by issues of trust in individual psychological development has long been recognized. The expectation that others will hurt, abuse, humiliate, cheat, lie, or take advantage usually involves the perception that harm is intentional or the result of unjustified and extreme negligence. People who consistently assume the worst about the intentions of others prevent truly collaborative relationships from developing. Group-level worldview- As an
180 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria. extension of this individual-level core belief to large groups. The distrust worldview focuses specifically on perceptions of out-groups and revolves around beliefs that the other is untrustworthy and harbours malign intentions toward the in-group. v) Helplessness: Individual-level core belief - The conviction that even carefully planned and executed actions will fail to produce desired outcomes. In some cases, the individual may perceive him or herself as lacking the ability necessary to attain a goal. Regradless of the extent to which helplessness is a matter of distorted perception or objective reality, this core belief tends to be self- perpetuating because it diminishes motivation. Group-level worldview - The helplessness worldview describes a collective mindset of powerlessness and dependency. The extent to which a group perceives itself as helpless reflects assessments not only of its capabilities, but also of whether the environment is rich or poor in opportunities for group advancement.
CONFLICT RESOLUTION Conflict is easily resolved once the root cause is traced and identified. This will not only lead to solving the conflict but addresses it at the root thereby foiling subsequent occurrences. There are several suggested steps in resolving conflict. David (1992, p.42) identifies and discusses five (5) steps as follows: i) Identify the source of the conflict: the more information you have about the cause of the conflict, the more easily you can help to resolve it. To get the information you need, use a series of questions to identify the cause, like "when did you feel upset? Do you see a relationship between that and this incident? How did this incident begin? As a mediator, you need to give both parties the chance to share their side of the story. It will give you a better understanding of the situation, as well as demonstrate your impartiality. As you listen to each disputant, say, "I see" or "Uh huh" to acknowledge the information and encourage them to continue to open up to you. ii) Look beyond the incident: often, it is not the situation but the perspective on the situation that causes anger to fester and ultimately leads to a shouting match or other visible - and disruptive - evidence of conflict. The source of the conflict might be a minor problem that occurred months before, but the level of stress has grown to the point where the two parties have begun attacking each other personally instead of addressing the real problem. In the calm of your office, you can get them to look beyond the triggering incident to see the real cause. Once again, probing questions will help, like, "what do you think happened here? Or "when do you think the problem between you first arose? iii) Request solution: after getting each party's view point on the conflict, the next step is to get each to identify how the situation could be changed. Again, question the parties to solicit their ideas - "How can you make things better between you? As a mediator, you have to be an active listener, aware of every verbal nuance, as well as a good reader of body language. Just listen, you want to get the disputants to stop fighting and start cooperating, and that means steering the discussion away from finger-pointing and toward ways of resolving the conflict.
181 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria. iv) Identify solution both disputant can support: you are listening for the most acceptable course of action. Point out the merits of various ideas, not only from each other's perspective, but in terms of the benefits to the organization. For example, you might point to the need for greater cooperation and collaboration to effectively address team issues and departmental problems. v) Agreement: the mediator needs to get the two parties to shake hands and agree to one of the alternatives identified in number iv (4). Some mediators go as far as to write up a contract in which actions and time frames are specified. However, it might be sufficient to meet with the individuals and have them answer these questions: what action plans will you both put in place to prevent conflicts from arising in future? And what will you do if problems arise in future? All these steps are targeted at resolving conflict permanently. Broadly, there are two major forms of conflict resolution, namely: Mediation and Arbitration. The steps mentioned above are found in mediation. However, one of the basic results achieved in resolving conflicts is political development. This is owing to the fact that conflict is a sharp contrast to Political Development.
POLITICAL DEVELOPMENT Political development is commonly considered a more elusive concept than economic development. For Williams (2008, p24), it is more controversial in normative terms and more difficult to measure in empirical and operational terms. The concept is frequently used by both normative and non- normative or existential thinkers.At this, it is accepted that political system develops as it approaches the good political order. Pye (1975, p.387) sees part of this political order as existence of political equality with absence or minimal conflicts. For him, political development revolves around the relationship between the political culture, the authoritive structure, and the general political process which must be rooted in political equality. Such system creates sense of belonging and makes the citizens stakeholders in decision making process. In modern world today, political development is a target countries wish and strive to attain. A system characterized by justice, centered on cognizance of human value and dignity, without any part or group of persons feeling grossly marginalized especially, over means of satisfying his/her basic needs. Such system minimizes conflict and promotes attainment of political development. With minimum level of conflict, there exists political order which gradually ushers in political development. A state with such system is not associated with 'political decay'. Political decay portraits the length of chaos and disorder in a political system. According to James (1924, p.43), political instability and conflict retards political development of a nation. Here, political development is seen as an increase in national unity, political participation and drastic decrease in conflict within a nation.
HERDSMEN/FARMERS' CONFLICT IN NIGERIA: THE IMPACTS ON POLITICAL DEVELOPMENT Herdsmen and Farmer's clash is not a new incident in Nigeria. But the incessancy is what every concerned Nigerian is worried about. The conflict has engulfed almost every state of the federation. Currently, every clash ends up in claiming many lives and properties. This indicates involvement of
182 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria. ammunitions owned and handled by the herdsmen who were initially known for handling sticks. This phenomenon has created high level of insecurity, plunging the country to the path of political decay. This has contributed to the continuous call for restructuring the country.
The attacks are commonly blamed on Fulani-herdsmen. This could be owing to the fact that, they are widely known for rearing cattle. As a result, there exist suspicion and accusations of attempts by the Fulani extract to dominate and Islamize the country. In such a system that is characterized by conflict and suspicion impedes political development. According to Naziru (2014, p.4), clashes between different groups of Fulani herders and Farmers have killed thousands of people in Nigeria for the past two decades, which has seriously threatened the survival of the country. In 2014, more than 1,200 people lost their lives according to Global Terrorism Index 2015,this made Fulani armed Herdsmen the world's fourth deadliest militant group (cited in Mikailu, 2016, p.2). The most recent deadliest conflict was the February massacre of about 300 people in Agatu, Benue State, and Nimbo, Uzo-Uwani in Enugu Sate where over 50 people were killed. Villages and communities were sacked, properties worth millions were destroyed. Children became orphans, women became widows. IDPs Camps were hurriedly created, and people languishing in pains, trauma, hunger and diseases,children witnessing and growing in pains and bitterness.
The conflict has led to anti-herdsmen sentiments in many parts of the country. State governments are under pressure by their people to enact anti-grazing laws. Under intense pressure, the President, MuhammaduBuhari (a Fulani extract) has ordered Security Forces to crack down on Cattle raiders. However, the issue is much more than this. Apart from clashes with farmers, there are reports that armed herdsmen are equally involved in armed robbery, rape and communal violence especially in North-Central part of the country. This saw ethnic, political, economic and religious overlap and the consequences are still seen with deep distrust, Farmers and community members seeing herdsmen as invaders who are at a mission to claim their lands.
There is no doubt to the fact that these conflicts are rooted in disagreement over the use and control of essential resources such as farm lands, grazing areas and water between Herdsmen and local Farmers. Herdsmen travel hundreds of miles in large numbers with their cattle in search of pasture. Against what they are known for, they often move around with fire-arms with the excuse of defending their cattle. Under such situation, they are already prepared for conflict. Any conflict at this point becomes colossal, having direct negative impact on Political development of the country. The recent and most deadly attacks by Herdsmen on Agatu and Nimbo, Uzo-Uwani Communities threatened the unity of the country. Security breaches which led to the successful invasion of Nimbo in Uzo-Uwani Local Government Area of Enugu state created large number of Internally Displaced persons (IDPs) which consequentially has political implications. This poses a threat against Nigerian Federation. This is owing to the fact that the threats it poses are not limited to Nimbo community alone but contagiously affect wider Nigerian community.
183 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria.
The negligence and indifference attitude exhibited by the security agencies in forestalling the herdsmen bloody attack on the people of Nimbo amounts to loss of public confidence in security agencies not only by the people of Nimbo community but in extension other Nigerian communities who mostly have interaction with herdsmen. According to Omenihu (2016, p.2), the broad-day-light murder of defenseless indigenes of Nimbo under the watch of Nigerian security agencies is a sign that it is now a waste of time and will be suicidal for ordinary citizens of this country to depend and rely on the protection of this same security agencies. As was initially stated, this implication may be contagious in nature, as a result leads to fear of ethnic insecurity and domination. It is no doubt about the fact that active, functional and diligent security operatives breed hope and confidence in both majority and minority ethnic groups that constitute every federation including Nigeria, and therefore, reduces the feeling of insecurity and domination. This is far from being realized in a situation where there is security intelligence about impending attack on a community or ethnic group by another ethnic extract, and the security agencies fail to put up deterrent measures against such attack. Worst of it all is when some security personnel are accused of leading such a genocidal attack. Against the attack in Nimbo, the OhanezeNdi Igbo has expressed fear over security of Igbo Race in the Nigeria project, after reviewing the circumstances that brought about the bloody attack. Similarly, the Tiv and Idoma nations raised alarm over an attempt of domination by Fulani Race, (Omenihu, 2016, p.3). Such fears mitigate the unity of the country.
The follow up of these political implications is a resort to self defense and reasons for agitation of secession. Owing to the fact that there is loss of confidence in the security agencies, coupled with records of connivance of security personnel in perpetration of such attacks, it will naturally be expected that such communities or ethnic groups would go all out to defend themselves. Akobundu (2016, p.1) holds that Governor Ugwuanyi has held a serious security meeting comprising all the traditional rulers and Local Government Chairmen in the state, after which indigenes of Nimbo community and beyond were asked to arm themselves and provide self security, also the creation of internal security body. Similarly, Ikenna (2016, p.2) maintains that Enugu state has established a well armed 'Vigilante group' as a follow up to Nimbo massacre, in extension, other Igbo speaking states have stepped up on internal security arrangements. It is close to be widely accepted that herdsmen attack is contagious, after being heard in North East, in no distant time it is heard in South West, South East and then South-South of the country. However, a resort to self defense against these attacks and invasion is a big threat against the fragile unity of the country, and such scenario depicts chaos, anarchy and a failed state status.
Political uncertainty and failure breeds division and mutiny in the security sector. As every personnel in all the security agencies have root and belong to a particular ethnic extract. The natural tendency to sympathize and even empathize with his people or ethnic nation is very obvious. This is a worst situation every country should avoid to experience. Security agencies, more especially the Military have been widely seen as an intervening agency. Conflict or division may ensue in any sector of the country and it is arrested by the intervention of the military, but when such ensued
184 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria. within the security sector, then the Carmel's back is broken. Such situation could be attributed to what led to the collapse of the First Republic of Nigeria which subsequently led to the Civil War. According to Shola (2009, p.21), ChukwumaNzogwu was not happy with the attempt of domination and subjugation exhibited by Sir, Ahmadu Bello and other Northern Political Chieftain which he perceived as impeding the development of the Nation, considering the level of their education, had to put a stop to that through the first military coup of 1966. There is therefore need to be conscious of the fact that these political implications occur chronologically, in other words, one leads to another. It is therefore pertinent to nip these political implications at the bud, otherwise may result to colossal damage. This could start by preventing and avoiding the resurgence and reoccurrence of internal displacement caused by herdsmen invasions. It will help to heal the old wounds. In attempt to achieve this, the Federal Government under President MuhammaduBuhari should not hesitate in condemning such attacks, thereby, not giving room for any form of allegation, linking him of ignoring the attacks just because he is of Fulani extraction. Such effort will gradually restore feeling of protection by every ethnic group both majority and minority.
CONCLUSION Political Development indicates political stability. This is a priority to what countries strive to attain. The fragile and heterogeneous nature of Nigeria makes Political Development primary in her existence. But, this is far from being realized, owing to incessant Herdsmen/Farmers conflict. The Federal and State governments should make a concerted effort towards legalizing the Grazing Reserve Policy. Clothing the policy with a legal framework will ensure certainty to its implementation across board. Though there has been controversy surrounding the adoption of this policy. Some individuals and groups accuse government of injustice, wondering why public fund would be injected to profit driven cattle business of the herdsmen. A failure on government from investigating and eventual arrest and prosecution of the perpetrators of these attacks will not restore confidence in the Internally Displaced Persons and their communities. This will undoubtedly make them not to feel valued and reintegrated into the system including the entire communities or ethnic groups. Such scenarios breed chaos and political decay in a country which totally impedes Political Development.
It is therefore recommended that providing a lasting solution to this conflict establishes a basic step towards attaining Political Development. In resolving this conflict the following steps should be observed: i) Enact anti-mobile grazing legislation by the National Assembly ii) Formalizing grazing activities in Nigeria. Here, government is expected to establish a system that regulates and has ability to give statistics of how many individuals or groups graze flocks, and where they are grazed in the country. iii) In conjunction with State governments, the Federal Government should establish Ranches in all the federating states. iv) Government should create social amenities (including accessible roads) within the Ranches
185 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria. v) There should be intensive enlightenment/awareness programme to educate the masses and parties involved. To allay protest that may erupt from other business sectors, the government should collect revenue in form of taxation from the Ranches, (this is similar to Motor Parks established by States and Local Governments where individual motorists conduct their businesses and pay remuneration to the government). This approach will undoubtedly assuage the controversy that may surround the policy. vi) Government should establish special markets for the products which provide an interface for primary buying and selling activities.
REFERENCES Abbass M. (2012). No Retreat No Surrender Conflict For Survival Between Fulani Pastoralists And Farmers in Northern Nigeria.European Scientific Journal.Vol8, Pp 7-14 AllswellO. (2014). Fulani Herdsmen and National Security. Retrieved from: http//:www.authorityngr.com On 4/6/2016. Akobundu C. (2016). Curtailing the Menace of Herdsmen. Retrieved from: http//:www.saharareporters.com On 13/6/2016. Ayodele O. (2014). Identifying Motivators For State-Pastoralist Dialogue: Exploring The Relationships BetweenLivestock Services, Self-Organization And Conflict in Nigeria's PastoralistFulanis. Ibadan: Spring Press Brendan D. (2009). Conflict Mediation Across Cultures. Westminster: John Knox Press. Burton J. (1990).Conflict: Human Need Theory. London: Macmillan David W. (1992).Conflict Mediation And Arbitration: Pathways And Pattern. Louisville: Westminster John Knox Press. Fischer M. (2012). Organizational Turbulence, Trouble And Trauma: Theorizing the Collapse of a Mental Health Setting. Organization Studies. Vol. 33, Pp 20-39 Frederick K. (2000). Rationality And The Analysis of International Conflict. Cambridge University Press. Ikenna K. (2016). Enugu in Agony. Retrieved from http//:www.naij.com On 12/6/2016. James P. (1924). Political Development: Essential Part of a State. Berlin: Transaction Publishers. Judy I. (2003). Dangerous Ideas: Five Believes That Propel Groups Toward Conflict. American Psychologist. Vol. 58, Pp 22-35 Mikailu O. (2016). Global Terrorism Index. Retrieved from: http//:www.naij.com On 6/9/2016. Naziru O. (2014). Making Sense of Nigeria's Fulani-Farmer Conflict.Lafia: Nicks Publishers O m e n i h u C . ( 2 0 1 6 ) . S o u t h E a s t R e j e c t s I n f i l t r a t i o n . R e t r i e v e d f r o m http//:www.vangaurdngr.com On 21/6/2016. Pye L. (1973). The Concept of Political development.Journal of Comparative political Studies. Vol. 5, Pp 382-395 Rahim A. (2010). Managing Conflict in Organization. Berlin: Transaction Publishers
186 Herdsmen and Farmers Conflict: An Impediment to Political Development in Nigeria.
Shola K. (2002). The Nigerian Civil War: Lessons for Caution. Lagos: Complex Memorial Publishers. Steve P. (2002). Fulani Pastorialists, Indigenous Farmers And The Contest For Land in Northern Ghana. Africa Spectrum.Vol.37, Pp 1-16. Williams P (2008). Political Development: Conceptual Explanation. London: Macmillan.
187 Veritas International Journal of Entrepreneurship Development (VIJED)
OVERCOMING FINANCIAL CHALLENGES OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA
SOLOMON Jeresa Department of Business Administration Veritas University, Abuja, Nigeria [email protected]
MARCUS Garvey Orji Ph.D Department of Business Administration Veritas University, Abuja, Nigeria [email protected] [email protected] And
ESTHER ALI Baba Department of Business Administration Veritas University, Abuja, Nigeria [email protected]
Citation: Jeresa, S., Orji, M. G. & Baba, E. A. (2018). Overcoming Financial Challenges of Small and Medium Scale Enterprises in ______Nigeria. Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 188-195 ABSTRACT Financing small and medium enterprises in Nigeria is one of the most significant challenges faced by many SMEs operators. This study has the objective of examining how these challenges could be overcome in Nigeria. The study is a survey research and data was collected from both primary and secondary sources, and the formulated hypotheses tested using kendal coefficient of concordance.. The results obtained from the analysis of data shows that there are no efficient accessibility sources of funds available for operators of SMEs in Nigeria and that Micro finance banks do not have adequate capacity to bridge the gap(s) of providing better funds for SMEs in NigeriaThe study therefore recommended among other things that the Nigerian government should develop financial policies in collaboration with financial institutions to sponsor SMEs in the country by granting efficient accessibility of funds to them and proper training programs should be implemented by Micro finance banks to educate SMEs on how to finance their business as well as developing accounting skills in keeping proper financial records. Also Banks should set up minimal and reasonable collateral security to encourage a sustainable payback loan system by SMEs in Nigeria.
______Keywords: Financial challenges, availability of funds, accessibility of funds, SMEs operations in Nigeria
188 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
1.0 INTRODUCTION The small and medium scale enterprises (SMEs) in Nigeria are regarded in general term as the bedrock of equitable development, industrial development and economic growth. They are responsible for providing veritable means of large scale employment and are usually labour intensive in nature (Yerima et al 2007). Since 1970?s, Nigeria have developed great interest in promoting and the financing of small and medium scale enterprises for the purpose of redistributing wealth and increase job creation and transformation of traditional or indigenous industry which is capable of yielding economic self-dependence, entrepreneurial development and a host of other positive economic uplifting factor.
Finance or credit for SMEs is a crucial input in production which acts as an enabler of the efficiency (in business) of all other production inputs. Finance is considered as the most vital ingredient in every sphere of business. It is required by all categories of business firms or organizations irrespective of their size or structure. The only distinguishing factor is seen in the amount required and its collateral or procedural application required for such credits. One of the most significant means of providing working capital to commercial enterprises is through secured credit (World Bank, 2013). Larger organizations have more access to financial aid or a resource compared to smaller enterprises and the growth and development consequences is evident (Ahiawodzi and Adade 2012). Accessing credit therefore is a key element for every business organization to remain productive, financially relevant, create jobs, and reduce poverty especially in developing nation like Nigeria and generally. The Federal Government of Nigeria spotted out the importance of credit facilities to SMEs came up with diverse policies and interventions which is aimed at providing adequate credit to operators of SMEs. Some of these polices includes the establishment of Central Bank of Nigeria Special Credit Programme (CBNSCP),Micro Finance Banks, Community Bank and Industrial Development Centre, Nigeria Industrial Development Bank (NIDB),Nigeria Bank for Commerce and Industry (NBCI), Commercial banks, National Economic Reconstruction Fund (NERFUND), Small Scale Industrial Schemes (SSIS), and Peoples' Bank of Nigeria (Ajagbe, 2012). Despite all these, they seem to be some challenges in survival and growth of small and medium scale enterprises, in the area of availability and assessment of funds. It is in the light of this that this study intends to examine how SMEs in Nigeria are overcoming financial challenges.
1.1 Statement of the problem Studies reveal that only a small percentage of SMEs survives within their first five years of operation, while a smaller percentage of some goes into extinction after. Only very few thrive, survive and grow to maturity. Many factors have been attributed to this recurrent situation of SMEs in Nigeria. Key among them is limited access to finance either due to delay in granting approval or non-availability of information needed by banks to process the request (Ajagbe, 2012). Insufficient capital and lack of collateral security create a limit to the expansion of SMEs in terms of operation as such SMEs cannot get funds or loans necessary to sustain their operation. Production cost, good location and facilities and equipment requires finance and this have been a challenge over the years.
189 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
There are several other challenges such as lack of proper financial records, inability to distinguish between profit and revenue, inability to separate business from personal finances and lack of business strategy militating against the growth and development of SMEs in Nigeria. It is against this backdrop that this study aim to examine these challenges in other to search out solutions to enhance the survival and growth of SMEs in Nigeria.
Research questions i. What are financial challenges associated with SMEs in Nigeria? ii. Are there efficient accessibility sources of funds available for operators of SMEs in Nigeria? iii. Do Micro finance banks have adequate capacity to bridge the gap(s) of providing better funds for SMEs in Nigeria?
Research Objectives. The specific objectives includes: i. To identify financial challenges associated with SMEs in Nigeria; ii. To access the efficiency level of diverse financial sources available for operators of SMEs in Nigeria. iii. To establish whether micro finance banks have develop adequate capacity to bridge the gap(s) of providing better funds for SMEs in Nigeria.
Research hypotheses
H01: There are no efficient accessibility sources of funds available for operators of SMEs in Nigeria.
H02: Micro finance banks do not have adequate capacity to bridge the gap(s) of providing better funds for SMEs in Nigeria
2.0 REVIEW OF RELATED LITERATURE 2.1 Financial Challenges of SMEs in Nigeria In emphasizing the financial challenges of SMEs in Nigeria, accessibility of the sources of fund and poor system of accounting are key factors identified. The financial problem of SMEs in Nigeria is not with limited sources of fundonly but its accessibility and poor accountability system (Mba, and Cletus, 2014). A larger percentage of SMEs have failed in Nigeria and other developing countries because of accessibility of available sources funds and poor system of accounting. The hindrances to these accessibility of funds include, strict financial conditions adopted by most financial bodies, inadequate credit information for securing collateral, and cost associated with the accessibility of funds. Most SMEs in Nigeria do not have standardized accounting system to assess their performance at specific periods of time. The aftermath effect of a poor accountability system on SMEs is mismanagement of financial resources which eventually leads to failure or death of the enterprise. The poor accountability system and fund accessibility greatly influences in the performance of operators of SMEs in Nigeria. Therefore to overcome these challenges, fund accessibility is vital as well as an efficient and effective accounting system be maintained with optimum standards.
190 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
2.2 Strategic tools for overcoming financial Challenges of SMEs in Nigeria One major area of interest for policy makers is devising mechanisms to finance SMEs because it is a vital sector that contributes significantly to a nation's GDP, economic development as well as economic growth (Jarunee, . 2015). In spite of their major role in economic growth, they are still faced with significant challenges in the area of securing access to financial support from financial institutions and even the government. Insufficient capital and poor limited access to financing SMEs are major challenges experienced in developing countries like Nigeria. However, the followingare of great impact on performance of SMEs as strategic tools for overcoming these financial challenges of SMEs; i. Strategic working capital management, ii. Strategic financial planning and, iii. Strategic financial analysisand reporting. (Hande. 2015).
Ineffectiveness and inefficiency of these strategic tools strategic tools backed up with inaccurate projection is an argument that past studies have identified as one key stimulant of failure experienced by SMEs. There are diverse functions entailed in these strategic tools. These functions include the ability to raise adequate start-up capital, managing an enterprise efficiently and effectively and formulating financial strategies necessary for a smooth operations of SMEs. Formulating financial strategies is crucial for the survival of SMEs because of the limited financial resources available as well as the risk and uncertainty involved. Therefore, the findings of Hande (2015).shows that the efficiency and effectiveness of these financial strategic tools would results that a major improvements in the performance of SMEs is guaranteed.
2.3 Contribution and Sources of fund for SMEs in Nigeria Today, the major sources funds for SMEs in Nigeria are mostly as follows according to Jarunee(2015).
Government financed policies The development of finance policies by the government to support the growth and development of SMEs and the establishment of venture capital financing needed by SMEs are two most important sources of funds for SMEs in Nigeria. Jarunee (2015) posits that bank financial based policies are major means of providing support and alleviating certain critical financial constraints faced by operators of SMEs. Some of these government policies includes establishing SME banks and development banks that have specific loan offerings which are available for SMEs.
Venture capital Venture capital on the other hand is regarded as a vital source of financing business needed for the support of SMEs. It refers to loan capital or financing that is provided by private investors (specialized financial institutions) to startups or small businesses.
191 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
Types of venture capital i. Seed money: these are low financing level of proving new idea as well as fructifying it ii. Start-up: new firms in need of funds for development iii. First-round: early sales and manufacturing funding. Venture capital also regarded as VC is a source of funds responsible for financing new or rapidly growing firms.
Implication The implication of this review is that it will provide a wider knowledge for the authors in critically carrying out this study to determine what financial factor(s) needed to be explored in other to overcome the financial challenges of SMEs in Nigeria.
3.0 METHODOLOGY Research design is the backbone of research that brings all of the factors in a research project together” (Kombo and Tromp, 2006). This study uses a survey research design and adopts both primary and secondary data as the source for data collection. Primary data entails the use of structured questionnaires and interviews that addresses the research aim and research questions as the key method of collecting such data while secondary data was gotten from books, journals and official publications. Due to the heterogeneous nature of SMEs in Nigeria, a simple random sampling was used to determine the population of the study (a group of selected SMEs). The study selected 100 respondents for the questionnaires which was drawn from a sample of selected operators of SMEs in Nigeria using the federal capital territory- Abuja as case study. Only 80 questionnaires were retrieved valid from respondents which formed the basis of the anaylsis. The techniques employed to analyses data are the simple descriptive percentagemethod and Chi-square method derived from Kendall coefficient of concordance. The percentage is for thecomparisms of respondents that responded for or against aparticular question in relation to the over all respondents expressed as a percentage in order to see the pattern ofresponse. The Chi-square derived from kendall coefficient of concordance method is used in testing a hypothesisconcerning the differences between a set of observedfrequencies of a sample and a corresponding set of expectedor theoretical frequencies.
Model specifications are as follows;
K2 (N3 – N) Where K = Number of respondent; R = Mean; N = Number of weighted questions W = kendal coefficient X2 = K (N – 1)W Where X2 = Chi square
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The Ninety – Five (95%) confidence level was used,Where computed value is greater than critical value at 0.05level of significance, the null hypothesis was rejected andalternative accepted and vice versa (Siegel, 1986).Weights were assigned as follows: Strongly Agree 4,
Agree 3, Disagree 2, Strongly Disagree 1. The method usedfor analysis of this study is justified on the reason that,Kendal coefficient of concordance allows all relevantquestions in the questionnaire to be part of the test and result(Siegel, 1986).
4.0 Results of Analysis 4.1 Table 1 kendal coefficient of concordance table S/No Strongly Agree A gree Disag ree Strongly Di sagree Weight 4 3 2 1 Question 6 30 45 3 2 Question 7 40 30 5 5 Question 8 35 40 2 3 Question 9 35 40 2 3 Question 10 35 40 3 2 Source, field survey , 2017
Table 2 kendal coefficient of concordance table
S/No Strongly Agree Agree D isagree St rongly Disagree Ri Ri - R (Ri – R )2 Weight 4 3 2 1 1 120 135 6 2 263 -5 25 2 160 90 10 5 265 -3 9 3 140 120 4 3 267 -1 1 4 140 120 4 3 267 -1 1 5 140 120 6 2 268 0 0 Total 1330 16
Source, field survey, 2017 Ri = Addition of Rows R = Mean = ∑ (Ri) N = 1330/5 =266 W = 12∑ (Ri – R)2 = 12(16) K2 (N3 – N) 42 (53 – 5) = 192 = 0.1 1920
X2 = Chi-square = K (N – 1)W = 4(5 – 1)0.1 = 16 × 0.1 = 1.6
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DECISION From the above result, the calculated X2 (1.6) is less than the tabulated (7.82) the decision rule is to accept the null hypotheses. This means that: i. There are no efficient accessibility sources of funds available for operators of SMEs in Nigeria. ii. Micro finance banks do not have adequate capacity to bridge the gap(s) of providing better funds for SMEs in Nigeria
4.2 Conclusion SMEs are major engine room for the economic sector of every nation especially developing nation like Nigeria. The consistent failure of most SMEs in Nigeria is a pointer to the lack of financial support available for their survival. This study therefore concludes that there are no efficient accessibility sources of funds available for operators of SMEs in Nigeria
4.3 Recommendation Based on the research findings of the study, the following recommendations have been deduced thus far: 1. The Nigerian government should develop financial policies in collaboration with financial institutions to sponsor SMEs in the country by granting efficient accessibility of funds to them. 2. Proper training programs should be implemented by Micro finance banks to educate SMEs on how to finance their business as well as developing accounting skills in keeping proper financial records. 3. Banks should set up minimal and reasonable collateral security to encourage a sustainable payback loan system by SMEs in Nigeria
REFERENCE Ahiawodizi, A. &Adade, T (2012) “Impact of commercial banks on Small and Medium Enterprises financing in Nigeria”, Journal of Business and Management [IOSR – JBM], 17(4) pp 23-26 Ajagbe, F (2012) “Analysis of Access to and demand for credit by Small scale Entrepreneurs; Evidence from Oyo State, Nigeria,” Journal of Emerging Trends in Economics and Management Sciences, 3(3) pp 180-183 Hande K. (2015) “Financial Management Challenges in Small and Medium-Sized Enterprises: A strategic Management Approach” Emerging Markets Journal, 5(1) pp 26-40 IEG World Bank/IFC/MIGA (2013).Evaluation of the World Bank Group's Targeted Support for Small and Medium Enterprises. Approach Paper. January 7, 2013. Jarunee, W. (2015) "Challenges of SMEs innovation and entrepreneurial financing", World Journal of Entrepreneurship, Management and Sustainable Development, 11(4), pp. 295- 311 Mba, O. & Cletus, I. (2014) “Issues, Challenges and Prospects of Small and Medium Scale Enterprises (SMEs) in Port-Harcourt City, Nigeria”, European Journal of Sustainable Development,3(1) pp 101-114
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Sunday, A. & Gloria, C. (2015) “Challenges of Finance and the performance of Small and Medium Enterprises (SMEs) in Lagos State”, Developing Country Studies, ISSN 2224- 607X (paper) ISSN 2225 – 0565 Siegel, L(1986). Non Parametric Statistics for Managers' Sage Publishers NY Yerima, W. & David, D (2007) Journal of Business and Public (ISSN: 1936 9704) Volume 1(4) (Fall 2007)
APPENDIX Questionnaire Section A INSTRUCTIONS: Please indicate your response to the following questions by ticking the appropriate box. Age: ( ) 20-30 years ( ) 31-40 years ( ) 41-50 years ( ) 51- and above Gender: ( ) Male (b) Female
Educational qualification: ( ) OND/HND ( ) B.Sc( ) M.Sc ( ) Ph.D Marital status: ( ) Married ( ) Single ( ) Separated/divorced
Section B 4= Strongly Disagree 3= Agree 2=Disagree 1= Strongly Disagree. 6. Financial challenge(s) is a major problem of Most SMEs in Nigeria. Strongly Disagree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] 7. There is no strong accessibility of the various sources of fund available by the SMEs in Nigeria. Strongly Disagree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] 8. Certain government policies on fund raising can help reduce the financial challenges of SMEs in Nigeria thereby creating fund availability. Strongly Disagree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] 9. Developing a repayable loan strategy by Micro finance banks will facilitate the running cost of most SMEs in Nigeria.Strongly Disagree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ] 10. Organizing training programs and seminars on dealing with financial challenges for operators of SMEs in Nigeria can improve their business performance.Strongly Disagree [ ] Agree [ ] Disagree [ ] Strongly Disagree [ ]
195 Veritas International Journal of Entrepreneurship Development (VIJED)
ESTIMATING ECONOMICS GROWTH VIA VALUE ADDED TAX AND PERSONAL INCOME TAX IN NIGERIA
MUSA, Success Jibrin Ph.D Department of Accounting, College of Management Sciences, Veritas University (Catholic University of Nigeria) Bwari, Abuja, FCT [email protected]
SUCCESS Blessing Ejura Department of Banking and Finance, International University, Bamenda, Camenroun. [email protected]
And
Blessing Anaja Kogi state board of internal revenue service, Lokoja, Kogi State [email protected]
Citation: Jibrin, M. S., Ejura, S. B. & Anaja, B. (2018). Estimating Economics Growth Via Value Added Tax and Personal Income Tax ______in Nigeria . Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 196-206 ABSTRACT This study sets out to empirically examine the relationship between value added tax, Personal Income Tax and economic growth in Nigeria. The study employed Gross Domestic Product as dependent variable and value added tax, Personal Income Tax as independent variable. The broad objective of this study is to empirically investigate the effect of the various tax reforms including the introduction of value-added tax in 1993 and the National tax policy of 2011 on federally collected revenue in Nigeria. with a view to specifically evaluate the effects of value added tax reform, personal income tax reforms, custom and excise Duties reforms; on federal collected revenue for the period under review. This study used secondary data of 31 years spanning between 1984 to 2015 after necessary adjustments. The data generated were subjected to different statistical tests such as descriptive statistics, cointegration test and Ordinary least squares (OLS) regression method of data analysis, was adopted to test the hypotheses and unit root test of all the selected variables for the model were carried out using Augmented Dickey-Fuller (ADF) methodology. The Value Added Tax (VAT) and Custom and Excise Duty (CED) contributed the highest value to the Federal Collected
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Revenue (FCR) during the period. These wide variations in their contribution therefore justify the need for this study, as we expect these various revenues generated from VAT, and CED to be affected by various tax reforms embarked on by the Nigerian Government over the period of this study. The result of this research is free of auto-correlation and the systematic variation is high in. Based on the result of this research, we therefore, recommend that the government of Nigeria tax reforms agenda or policies should focus more on the reform of the Value Added Tax (VAT), Custom and Excise Duties in order to derive maximum benefit from these components of tax.
______Keywords: Value Added Tax, Personal Income Tax, Custom and Excise Duties, FCR.
1. INTRODUCTION Tax Reform has been a major public policy issue in recent years. Reform in taxes occurs for several reasons. Some legislated tax reforms are passed or enacted for philosophical reasons or to reduce the budget deficit, others are passed because the economy crisis is in progress or because the economy is weak and predicted to fall further into recession. And several tax reforms in most country are not legislated at all because the factors that give rise to tax reform are often correlated with other developments in the economy, disentangling the effects of the tax reform from the effects of these underlying factors is inherently difficult. Tax Reforms protagonists have different objectives. Some seek to reduce the burden of taxation on the tax payers. While some are to make the tax system more effective and efficient. Others are to make the tax system simple; easy to understandable; transparent; effective; efficient and accountable.
Taxation is one of the means of raising revenue to finance public expenditure in both developed and developing countries (Saeed & Sheikh, 2011). Nigeria as a developing country has a very low tax to GDP ratio which is attributable to narrow tax base, inelastic tax system, complex tax laws, complex network of exemptions and tax incentives, weak tax administration and weak mobilization of provincial taxes (Taiwo, Samson & James 2015).
Omesi and Njor (2015), attributed the reasons for low tax revenue to the low rate of Value Added Tax (VAT) which according to them was the least in the world while Usui (2011), revealed that several business surveys show that a high tax rate is one of the barriers to doing business in the Philippines. Most of the researches on Tax reforms were done oversea using regression analysis, descriptive method and panel data (Omesi & Njor, 2012). However, much of the literature in Nigeria on tax reforms appear to concentrate on few independent variables mostly on value added Tax (VAT) and company income tax (CIT), Custom and Excise Duties (CED) and Petroleum Profit Tax (PPT) etc. None of the research uses Personal Income Tax as part of the explanatory variables to the best of my knowledge and most of the studies used simple regression analysis, descriptive statistical method. In this regard, Value Added Taxes (VAT), Personal Income Tax (PIT), Custom and Excise Duties (CED) are appropriate variables to use for this study.
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The research objectives we seek to pursue are therefore as follows: 1. To evaluate the effect of value added tax reform on federal collected revenue; 2. To determine the effect of personal income tax reforms on federal collected revenue; and 3. To evaluate the effect of custom and excise Duties reforms on federal collected revenue.
The rest of the research is divided as follows: section 2 provides an overview of the conceptual issue, empirical and theoretical related literatures on Value Added Taxes (VAT), Personal Income Tax (PIT), Custom and Excise Duties (CED), section 3 provides the methodology of analysis while section 4 provides data presentation and analysis, section 5 gives the interpretation of the result, provides conclusion and the policy implication.
2. REVIEW OF RELATED LITERATURES 2.1 Conceptual Review: Tax reforms are carried out to correct the weaknesses in the existing tax system to improve its efficiency. The essence of tax reforms may range from the need for additional revenue generation to economic growth. Tax reforms can lead to a new tax, a new rate, a new legal clause, a new assessment system for instances, the self assessment system introduced in 1991 or a new collection system of 2004. The basic aims of tax reforms are improvement of revenue generation to cover fiscal imbalances and weaknesses in the tax system among other. Recently the Nigerian government undertook various tax law reforms to improve tax administration and to increase tax yield. The Value Added Tax (Amendment), Act 2007; was intended to widen the value added tax base and improve the machinery for its collection and Personal Income tax (Amendment), Act 2011, which was aimed at encouraging tax compliance and increasing tax yield (Aimuyedo, 2011).
The philosophy of tax reform has undergone significant changes over the years in keeping with the changing perception of the role of the state. Tax reform became very important in Nigeria because of the makeup of its tax structure, which according to Anyanwu (1997), as captioned in (Oriakhi, D. E. and Ahuru, R. R. (2014).), was complex, inelastic, inefficient, inequitable and unfair. Besides, the country relied on import and export duties, while there were no opportunities to generate revenue through consumption-based tax such as VAT. The dependency of the country on taxes relating to foreign trade activities had made the revenue base of the country to be very unbalanced. In addition, the Nigeria's tax base was very narrow or slim while the tax rate was very high. It is against this back drop that Nigeria's government decided to reform the tax system.
THE CUSTOMS ADMINISTRATION REFORM The challenges of the 21st Century are placing massive demands on Customs administrations. Now, than ever before, there is a need for Customs administrations to be more responsive. An understanding is required of issues such as globalization, the dynamics of international trade, the technicalities of the trade supply chain, emerging policy directions and the complexities of the global landscape.
198 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
The basic strategy for modernizing Customs administration is straightforward: establish transparent and simple rules and procedures and foster voluntary compliance by building a system of self- assessment buttressed by well-designed audit policies.
Value Added Tax This was introduced by the VAT decree No. 2 of 1993, to replace the old sales tax. It is a consumption tax levied at each stage of the consumption chain, and is borne by the final consumer. It requires a taxable person upon registering with the Federal Board of Inland Revenue (FBIR) to charge and collect VAT at a flat rate of 5% of all invoiced amounts of taxable goods and services.
John and Suleiman (2014) define Value added tax (VAT) as a consumption tax, levied at each stage of the consumption chain and borne by the final consumer of the product or service. The administration of VAT is relatively easy, unselective and difficult to evade. Value added tax is an indirect tax in which a sum of money is levied at a particular stage in the sale of a product or service. Olatunji (2009) explain that the walk towards VAT system in Nigeria started with acceptance of the recommendation of a study group on indirect taxation in November, 1991. The decision to accept the recommendation was made public in the 1992 budget speech of the Head of State. This resulted in setting up the Modified Value-Added Tax (MVAT) committee on 1st June, 1992 as recommended by the study group.
Personal Income Tax This is a tax levied on employment income and any other income received by individuals (Aimuyedo, 2011). Individuals here being those in paid employment and those in self- employment, i.e. those engaged in a trade, business, profession or vocation such as lawyers, accountants, doctors, traders in shops etc. The assessment and collection of this tax in Nigeria is regulated by the Personal Income Tax Act No. 104 LFN, 1993. It is this law that gives the necessary procedures and administrative powers to impose and collect taxes from persons, individuals, partnerships, executors, trustees Family or Communities Corporation sole or body of individuals. Personal Income Tax is collected by the various state governments through the State Board of Internal Revenue (SBIR) from individuals resident in the tax territory. Taxes from certain categories of individual - members of the Armed Forces, the Nigeria Police, FCT residents, External Affairs Officials and nonresident individuals- are collected by the Federal Government via the Federal Board of Inland Revenue (FBIR), (Mohammed, 2007).
2.2 Theoretical Framework This research is anchored on optimal tax theory. Optimal tax theory still has a significant influence on academic research in tax reform. This approach is used by Newberry and Stern (1987) who apply a normative framework to investigate the tax reform process. The optimal taxation approach emphasizes the need to analyze the impact of tax reform and evaluate both its administrative costs and its effect on social welfare. The optimal taxation theory philosophizes that effort should be
199 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria geared in optimizing tax revenue and reduce the cost of collecting or generating tax revenue. In the light of the foregoing, the research topic being the effects of value added tax, personal income tax, custom and excise duties reforms on federal collected revenue in Nigeria has positive relation with optimal tax theory. The optimal tax theory can form the basis or foundation of the effect of tax reforms on federal collected revenue in Nigeria since tax reforms are those strategies, methods and techniques employed by government to widen or broaden tax base and reduce tax avoidance and tax evasion thereby increasing tax revenue generation as well as reducing the administrative cost of tax revenue collection.
2.3 Empirical Literature Review Effect of Value Added Tax on Economic Growth Adereti, Adesina & Sanni (2011). Investigated the impact of Value Added Tax on the economic growth of Nigeria by using Time series data on the Gross Domestic Product (GDP), Vat Revenue, Total Tax Revenue and Total (Federal Government) Revenue from 1994 to 2008 was collected for analysis using multiple regression technique. The findings showed that the ratio of VAT Revenue to GDP averaged 1.3 percent compared to 4.5 percent in Indonesia and indicated a positive and significant correlation between VAT Revenue and GDP. The study further revealed that no causality ran from GDP to VAT Revenue at a lag of two years. Furthermore, Owolabi and Okwu (2001) made empirical study of contribution of Value Added Tax (VAT) to the development of Lagos State economy. The analysis showed that VAT revenue contributed positively to the development of the respective sectors. However, the positive contributions were statistical significant only in the Agricultural sector. The study concludes that various sectors are yet to benefit significantly from the state government's expenditure of VAT Revenue.
Onaolapo, Aworemi, and Ajala,(2013) Assessment of Value Added Tax and its effects on revenue generation in Nigeria. The Secondary Source of data was used. Data analysis was performed with the use of stepwise regression analysis. Findings showed that Value Added Tax has statistically significant effect on revenue generation in Nigeria. The study recommends that there should be dedication and apparent honest on the parts of all agents of VAT with respect to the collection and payment and that government should try as much as possible to improve on the way of collecting value added tax.
Effect of Personal Income Tax on Economic Growth According to research carried out by Nassar and Taiwo (2005), on Impact of Personal Income Tax on Internally Generated Revenue Performance in Oyo State Nigeria. Their findings indicate that personal income taxes have systematic variation of 68.4 percent effect on IGR in Oyo state. Both taxes and Licences jointly accounted for 68.8 percent systematic variation in IGR in the state. Their study recommends an improved strategy through the use of electronic revenue assessment, collection and monitoring technique together with unique taxpayer personal identification number (UTPIN) database to attract both the self employed and salary earners into the Personal Income Tax Net.
200 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
While Onyekwelu and Ugwuanyi (2014), study Assessed Personal Income Tax Amendment Act 2011and its Effects on Revenue Generation in Nigeria. Their study exposed the possible challenges and prospects it poses to the Nigerian tax payers. Their study reveals among other things that the increase in the tax rate affected the tax payers revenue generation, and the retroactive nature of our tax laws constitutes a major problem thus: resulting in double taxation during the assessment and collection of taxes.
Muhammad (2007) did similar study on the Impact of Personal Income Tax on State Governments Revenue Profile in Nigeria and used secondary data sources. The study established a significant difference between the amount generated as internally generated revenue and the inadequacies of the internally generated revenue to cater for the states' total expenditure profiles. He also discovered that there is higher reliance on the federation account for the states revenue profile. And he recommends that the states must look inwards and develop new strategies to enhance their internally generated revenue.
3. Methodology This research will use pooled data and will adopt ex- post facto research design. An ex- post facto research design is a research design which require the use of variables which the researchers does not have the power to change its original state or direction in the course of the research (Onwumere, 2009). Ex- post facto research design will be use because of the nature and type of the data .This is because it uses documented and verifiable data that cannot be manipulated. This study covered the period 1984 to 2015. It concentrated on the use of data on federal collected revenue of Nigeria economy for the period as its dependent variables. Data on various income taxes such as value-added tax, Personal income tax; custom and excise duties; which served as its independent variables.
3.1 Model Specification To empirically examine the relationship between value added tax, Personal Income Tax and economic growth in Nigeria We have hypothesized that economic growth depends behaviorally on the value added tax and Personal Income Tax. Thus, such behavioral relationship can be given in equation below.
GDP = F (VAT, PIT) Equation above can be re-specified in a stochastic form.
GDP t = ë 0 + ë 1 VATt + ë 2 PITt + µ
Where ë 0 = constant, ë1 to ë 5 are regression coefficients of econometric equation above; µ = Error term; it is the surrogate of all other variables that influence the dependent variable which are not included in this regression equations. This model is in line with the model used by Dickson and Rolle (2014), Okafor (2012) and Ogbonna and Appah (2011).
201 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
4. Data Presentation and Analysis Data Presentation Table 4.1: Data Presentation The data collected and analysis are presented below.
Personal Gross Domestic Value Added Income Year Product (GDP) Tax (VAT) Tax (PIT) 1991 545.67 0 20.2 1992 875.34 0 24.8 1993 1,089.68 0 26.9 1994 1,399.70 7.3 38.9 1995 2,907.36 20.8 20.4 1996 4,032.30 31.0 34.1 1997 4,189.25 34.0 83.4 1998 3,989.45 36.0 11.4 1999 4,679.21 47.1 20.1 2000 6,713.57 58.5 38.1 2001 6,895.20 91.8 44.4 2002 7,795.76 108.6 68.1 2003 9,913.52 136.4 54.2 2004 11,411.07 159.5 58.9 2005 14,610.88 178.1 212.1 2006 18,564.59 221.6 33.3 2007 20,657.32 289.6 268.7 2008 24,296.33 401.7 114.0 2009 24,794.24 481.4 54.3 2010 33,984.75 564.9 65.2 2011 37,409.86 659.2 92.9 2012 40,544.10 710.2 226.7 2013 42,396.77 795.6 298.1 2014 89,043.62 794.2 289.8 2015 135,690.46 406.0 288.7
Sources: CBN Statistical Bulletin of various years.
FIRS Gauge of various years. Where: TFCR = Total Federally Collected Revenue, VAT = Value –Added Tax, CED = Custom and Excise Duties, PIT= Personal Income Tax and NA = Not Available
202 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
Table 4.2: Descriptive statistics of the data used for this study are presented below:
STD. JB P MEAN MAX MIN DEV TEST VALUE TFCR 2.940074 10.6547 1.130000 3501.887 4.854956 0.088259 VAT 1.754161 7.942 0.000000 240.2321 9.276812 0.009673 PIT 1.178258 12.073 2.800000 248.974 228.0474 0.000000 CED 1.310581 5.662 0.000000 153.3188 14.15339 0.000845 Source: Researchers Computation
Note: xx==5% Significant Level, x = 1% Significant Level Table 4.2 shows the mean (average) for each of the variables, their maximum values, minimum values, Standard deviation and Jarjue- Bera (JB) Statistics (normality test). The result in table 4.2 provided some insight into the nature of the variables used in this study. First it was observed that on the average, over the thirty- one year period (1984-2015), Federal Collected Tax Revenue (TFCR) Stood at 10,654,7000 billion, while the minimum value for the period amount to N1,130,000 billion. Note that, both our dependent and independent variables were first transformed into Log before arriving at the above result, to avoid having spurious results. Secondly, the large difference between the maximum and minimum values of Value Added Tax (VAT), Personal Income Tax (PIT), and Custom and Excise Duties (CED) respectively show that the variables used for this study were not dominated by either VAT or PIT or CED respectively. We also observed that the average Value Added Tax (Measured as Log VAT) over the period was N1.754161 billion, the maximum amount stood at N7.942 billion while the minimum value stood at zero.
This shows that VAT contributed the second highest value to the Federal Collected Revenue (FCR) during the period, while Personal Income Tax (PIT) which stood at N12.073 billion has the largest share of contribution to the Federal Collected Revenue (FCR) and Custom and Excise Duty (CED) stood at N5.662billion during the period. These wide variations in their contribution therefore justify the need for this study, as we expect these various revenues generated from VAT, PIT, and CED to be affected by various tax reforms embarked on by the Nigerian Government over the period of this study. Lastly, in table 4.2, the Jarue-Bara (JB) statistic which test for normality or the existence of others or extreme values among the variables, shows that most of all the variables are normally distributed at 1% and 5% level of significance.
4.1 Unit Root Result Augmented Dickey – Fuller (ADF) test was employed to test the stationarity of the variables. The ADF test was alone on Level Series and on first difference series. The decision rule is to reject stationarity if ADF statistics is less than the values of critical values at 1%, 5% and 10% in absolute terms otherwise, accept Stationarity when ADF statistics is greater than the critical values of 1%, 5% and 10% in absolute terms. The result of the ADF test in presented below in table 4.2.
203 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
Table 4.3: Augmented Dickey Fuller Test variable Levels 1st Difference integration Significant TFCR -2.05 -5.86 I (1) 5% VAT -5.17 _____ I (0) 1% PIT -4.70 _____ I (0) 1% CED 2.27 _____ I (0) 1%
Source: Computed from E-view 9-0 by Author
Since the decision rule is to reject stationarity if ADF statistics is less than the critical values at 1%,5% and 10% values and accept stationarity when ADF Statistics is greater, the table above reveals that Total Federal Collected Revenue (TFCR) , assume stationarity at 1st difference while Value Added Tax (VAT) , Custom and Excise Duties (CED) and Personal Tax (PIT) assume stationarity at Levels.
4.3 Presentation of the Regression Result for Test of hypotheses. To test the hypotheses formulated for this study, we employed least square multiple regression analysis. To test our model which are specified as:
TFCRt = ë 0 + ë 1 VATt + ë 2 PITt +ë 3 CEDt + µ t- Variable Coefficient Statistic Prob.
C 237.3770 0.954445 0.3483 VAT 12.79277 11.46983 0.0000 PIT -2.224534 -1.715216 0.0978 CED 5.499449 2.256817 0.0323 - - ECM 1.002312 3.42133
R -squared 0.928410 Mean depende nt var 2940.074 Adjusted R-squared 0.920456 S.D. dependent var 3501.887 S.E. of regression 987.6557 Akaike info criterion 16.74846 Sum squared resid 26337520 Schwarz criterion 16.93349 Log likelihood -255.6011 Hannan-Quinn criter. 16.80877 F-statistic 11.67167 Durbin-Watson stat 1.520599 Prob(F-statistic) 0.000000
From table 4.3, the coefficient of determination (CR2) and Adjusted R- Squared is given as 0.928410 and 0.920456 respectively. This shows that the explanatory powers of the variable are high. This implies that 92% of the systematic variation in Total Federal Collected Tax Revenue (TFCR) are being accounted for or explained by the variation or changes in the explanatory variables.
204 Overcoming Financial Challenges of Small and Medium Scale Enterprises in Nigeria
1. CONCLUSION AND RECOMMENDATION However, in order to consolidate the benefits from tax reforms, effort should be made to achieve full autonomy for the Federal Inland Revenue Service (FIRS), tackle the hydra-headed monster of multiple taxation and promote accountability and transparency in government business so as to restore the confidence of the tax payer in the tax system.
The Value Added Tax (VAT), Custom and Excise Duties are revealed as major driver of Federal Collected Revenue (FCR) based on their contribution to Federal Collected Revenue (FCR) as earlier discussed, we therefore recommend that the government of Nigeria tax reforms agenda or policies should focus more on the reform of the Value Added Tax (VAT), Custom and Excise Duties in order to derive maximum benefit from these components of tax.
REFERENCES Adesola, S.M. (2000). Tax Laws and Administration in Nigeria. Third revised edition. Ile Ife Obafemi Awolowo University Press. Abdul-Rahamoh, O.A., Taiwo, F.H. & Adejare, A.T. (2013). The analysis of the affect of Petroleum Profit Tax on Nigerian Economy. Asian Journal of Humanities and Social Sciences (AJHSS) 1(1). Adegbie, F. F. (2011). Customs and Excise Duties Contribution towards the Development and Growth of Nigerian Economy. European Journal of Economics, Finance and Administrative Sciences 29:4. Adereti, S. A., Adesina, J. A. & Sanni, M. R. (2011). Value Added Tax and Economic G r o w t h o f Nigeria. European Journal of Humanities and Social Sciences, 10(1): 455- 47. Aimuyedo, M.T, Okpo, R., Adeyemi, O .& Oluwasemire, E. (2011). An assessment of the contibution of personal income tax to the economic development of Nigeria, A term paper, Nigeria Defence Academy. Anyanwu, J.C (1997). Nigeria public finance. Joanne Educational Publishers, Onitsha. Appah, E. & Oyandonghan, J.K. (2011). The challenges of tax mobilization and management in the Nigerian economy, Business Administration. Manage, 6 (2): 128-136. Ariwodola, J. A. (2000). Personal taxation in Nigeria (4th ed.). Lagos: JAA Nigeria Ltd. Ayuba A. A. & Desmond I. E. (2016) The Impact of Tax Reforms on Government Revenue Generation in Nigeria . Journal of Economic and Social Development, Vol 1, No 1 Azubuike, J.U.B (2009). Challenges of Tax Authorities, Tax Payers in the Management of Tax Reform Processes. The Nigerian Journal of Accountants, 42(2):36-42. Brima, I.B. K & Festus, O. E (2012). Tax Elasticity reform in Sierra Leone: A Time Series Approach. International Journal of Economics and Financial Issues, Vol. 2, No. 4, pp.432-447, ISSN: 2146-4138 www.econjournals.com Central Bank of Nigeria statistical bulletin (2010). Ehtisham .A(2012) the political-economy of tax reforms in Pakistan: the ongoing saga of the GST, Asia Research Center, Working Paper No. 33, London School of Economics and Political Science, London. Gendron, P.P. (2005). Value Added Tax Treatment of Public Bodies and Non- Profit Organizations. Bulletin for International Fiscal Documentation, 59 (11): 514-526.
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Mohammed, A. N. (2007). The impact of direct assessment tax on performance of internal revenue in Zamfara state. In Msc Accounting Thesis, ABU, Zaria. Nassar,M.I and Fasina,H.T . (2005) Impact of Personal Income Tax on Internally Generated Revenue Performance in Oyo State, International Journal of African Culture and Ideas vol 5, no 1, January 2005 Odusola, A. (2006). Tax policy reforms in Nigeria. Research paper NO. 2006/03 United Nations University world institute for development economic research. Ogbonna, G.N. and Appah, E. (2012) .Impact of tax reform and economic growth of Nigeria: A time series analysis. Current Research Journal of Social Sciences 4 (1): 62-68, 2012. Okafor, R.G. (2012). The impact of tax reform in Nigeria's economic growth. European Journal of Business and management, 4 (19). 92-106. Omesi, Israel & Nzor, Nuka Peter (2015). Tax reforms in Nigeria: Case for Value Added Tax (VAT) . Africa Research Review: An International Multidisciplinary Journal, Ethiopia Vol. 9(4), Serial No. 39, September, 2015: 277-287. ISSN 1994-9057 (Print) ISSN 2070-0083 Onaolapo A. A, Fasina H. T & Adegbite, T. A. (2013). The Analysis of the Effect of Petroleum Profit Tax on Nigerian Economy. Asian Journal of Humanities and Social Sciences (AJHSS) Volume 1 – Issue 1, May 2013 ISSN: 2320-9720 Onaolapo, A. A. Aworemi, R. J & Ajala, O. A (2013) Assessment of Value Added Tax and Its Effects on Revenue Generation in Nigeria, International Journal of Business and Social Science Vol. 4 No. Oriakhi, D. E. & Ahuru, R. R. (2014). The impact of tax reform on federal revenue generation in Nigeria. Journal of policy and development studies, 9(1), 92-107. Osoro, N.E. (1993), Revenue Productivity Implications of Tax Reform in Tanzania”. AERC Research Paper No. 20. Osoro, N.E. (1995), Tax Reforms in Tanzania: Motivations, Directions and Implications. AERC Research Paper No. 38. Owolabi S.A and Okwu, A. T (2011):Empirical Evaluation of Contribution of Value Added Tax to Development of Lagos State Economy, Middle Eastern Finance and Economics, EuroJournals Publishing, 9, assessed from http:www.eurojournals.com/MEFE.htm on July 2, 2011. Saeed, A., & Sheikh, S. A. (2011). Tax reforms in Pakistan.. International Journal of Business and Social Science, 2(20), 187-194. Study Group on Tax reform. (1992). Nigerian tax reforms in 1992. Abuja. Study Group on Tax reform. (2003). Nigerian tax reform in 2003 and beyond: The Main report of the study Group on the Nigerian Tax system. Abuja. Ifurueze, M.S.K , Success, M. J. & Success, E. B.. (2012). Impact of Petroleum Profit Tax on Economic Development of Nigeria. Taiwo, O.A, Samson O.D, and James U.M (2015) Impact of tax reforms on revenue generation in Lagos State: A time series approach. Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.6, No.8, 2015. Usui, Norio (2011) Tax reforms toward fiscal consolidation: Policy options for the Government of the Philippines. Mandaluyong City, Philippines: Asian Development Bank Working Group on Tax reform. (2004). Nigerian Tax reform policy in Nigeria. Abuja.
206 Veritas International Journal of Entrepreneurship Development (VIJED)
EFFECT OF ENTREPRENEURSHIP EDUCATION ON THE DEVELOPMENT OF ENTREPRENEURIAL MARKETING PRACTICES IN PUBLIC ENTERPRISES IN BENUE STATE, NIGERIA.
HANMAIKYUR Tyoapine John Ph.D Department of Business Administration College of Management Sciences Federal University of Agriculture, Makurdi - Nigeria
And
DIAKA-TINGIR Hembadoon Department of Business Management Faculty of Management Sciences Benue State University, Makurdi – Nigeria.
Citation: Hanmaiktur T. J. & Diaka-tingir H. (2018). Effect of Entrepreneurship Education on the Development of Entrepreneurial Marketing Practices in Public Enterprises in Benue State, Nigeria. Veritas International Journal of Entrepreneurship Development ______(VIJED). Veritas University Abuja. 1 (1) 207-220 ABSTRACT This paper investigated the effect of Effect of Entrepreneurship education on the development of Entrepreneurial marketing practices in public enterprises in Nigeria. Relevant literature was revealed and needed data collected from secondary sources and analyzed qualitatively. A cross-sectional survey design was put in place for the study. The unit of analysis was organizations while the managers and very senior staff of the public enterprises studied were respondents. While a sample size of 570 was put in place for the study from a population of 1102 Respondents. Systematic, simple random sampling techniques were employed to collect the needed data for the study. Descriptive and Inferential statistics were used to empirically and statistically analyze the data collected for the study with the aid of Statistical Package for Social Science (SPSS) version 20. Regression analysis was used to test the hypotheses. The result of the analysis shows that a positive relationship exists between Entrepreneurship education and Entrepreneurial marketing practices in Nigeria and the relationship is qualitatively significant. The paper therefore concludes that Entrepreneurial Entrepreneurship education has a positive effect on the development of Entrepreneurial marketing practices in the area. Based on the research findings, the paper recommends (among others) that government and other stakeholders should put in place appropriate Entrepreneurship education to expose to the learner skills needed to formulate workable innovative marketing practices that will deliver expected results. They should also accord entrepreneurship education the attention it deserves.
______Keywords: Effect Of Entrepreneurship Education On The Development Of Entrepreneurial Marketing Practices
207 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises
1.0 INTRODUCTION As economic realities of nations is increasingly becoming very unpredictable due largely to challenging, dynamic and competitive economic environment, the capability to put in place appropriate marketing practices has long been deemed a key strategic differentiator and means of achieving high and sustained performance and leverage over competitors by firms.
Marketing, a matrix of business activities organized to plan, produce, price, promote, distribute goods, services and ideas for the satisfaction of relevant need is important for the success of any organization be it public or business and whether service or product oriented. It is the pivotal part of any business that provides essential inputs to the firm's overall strategies and is central to success in today's fast moving competitive markets just as measuring marketing's performance is critical to managing it effectively. It is an important bridge that all enterprises need to cross by practicing it appropriately if they must improve their performance, remain relevant and effectively take care of competitions (Zaefarian, 2016).
When the principles of Marketing are consistent, appropriate and feasibly carried out in a sustained period of time, they are referred to as marketing practices. For Such practices to be effective, they must adopt and utilize philosophies, strategies and activities associated with the marketing concept capable of winning competition and enhancing high performance. They must also represent a broad range of practices based on marketing principles. Ghouri, Khan, Malik and Razzaq, (2011), and Zaefarian, (2014) have suggested that sound and appropriate marketing practices are an important contributor to business performance.
Achieving long term survival and performance in all enterprises however transcend beyond putting in place general marketing practices (Dmitriy & Snyder, 2015). Though the basic principles of marketing are relevant to all kinds of enterprises, It is therefore very clear that appropriate marketing practices for today's enterprises must in addition to the general marketing principles, have the right mix of entrepreneurial mindset, innovation, characteristics and approaches which are attributes of Entrepreneurial Marketing (here after refers to as EM) (Nabamita & Deepraj, 2015).
EM practices are associated with marketing activities of firms that rely on creative and often unsophisticated marketing tactics that make heavy use of personal networks (Naelati, & SobrotulImti, 2014). This implies that EM practices are an integrative process designed to innovatively apply the collective knowledge, skills, and resources of the firm to market related needs of the business to enable the business add value to its goods and services and meet competitive demands. Nations are therefore face with the need to entrepreneurially educate their nationals to cope and confront the unfortunate development slack.
208 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises
In Nigeria as in many other nations of the world, Entrepreneurship is looked upon as a crucial factor in development (Mwangi & Namusonge, 2014). As a dynamics process of vision, change and creation (Kuratko, 2005), entrepreneurship is required to be taught for the transfer of necessary skills and knowledge from an expert to someone else. Although entrepreneurship is a concept that involves mental activities such as creativity, innovativeness and proactiveness, Souitaris, Zerbinati and Al-lahan (2006) revealed that entrepreneurial education could raise attitudes and behaviour capable of provoking entrepreneurial intentions among learners who have interest in the economic development of their nation.
As a dynamics process of vision, change and creation (Kuratko, 2005), entrepreneurship is required to be taught for the transfer of necessary skills and knowledge from an expert to someone else so as to help in formulating appropriate marketing practices although entrepreneurship is a concept that involves mental activities such as creativity, innovativeness and proactiveness. Beside, Souitaris, Zerbinati and Al-lahan (2006) revealed that entrepreneurial education can raise attitudes and behaviour that may be capable of provoking entrepreneurial intentions among learners who have interest in the marketing development of their nation. Such education programmes should be designed to prepare students for engaging in a self directed economic future such as seeking opportunities, taking risks and having the tenacity to push an idea through to reality (Adenipekun, 2004) and to communicate and inculcate competencies, skills and values needed to recognize business opportunity, organize and start new business venture.
Entrepreneurship education is considered as one of the most strategies appropriate and most suitable in today's challenging world as it put the learner in a vantage position to formulate and identify marketing practices that are not just entrepreneurial in nature but which innovatively, dynamically and creatively fit for both the current challenges in the business world and for global competition. There are existing broad evidence on the ability of entrepreneurship education to initiate and enhance creative acquisition of entrepreneurial skills needed to formulate ideas, transform them into businesses and manage such businesses successfully.
It is clear that going by the level of unemployment and poverty in the country, general education may not have adequately solved the economic problems of the nation. The only option in this regard lies in entrepreneurial education since a quality entrepreneurship education will help the learner in creating Entrepreneurial Mindset that will expose him to understand better all aspects of entrepreneurship, which shall positively influence their perception of entrepreneurship, entrepreneurial skills and attitudes that will effectively guide the formulation and implementation of relevant and appropriate marketing practices. Such a programme should also teach the learner skills in detecting and exploiting business opportunities, as well as incorporate detailed and long-term business planning.
209 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises
Based on the above background, this study is put in place to test the following hypotheses presented in its null form
HO : Entrepreneurship education has no effect on the development of Entrepreneurial marketing practices in small businesses in Nigeria
Statement of the Problem A good number of researchers have investigated entrepreneurship education in Nigeria with a little or non of such studies conducted on the relationship between entrepreneurship education and formulation of entrepreneurial marketing practices in the study area. This study therefore fills the gap. Besides, similar studies may not have used the same framework and variables. Example, Omogbolahan, (2012) examined the effect of Entrepreneurial education on the development entrepreneurial marketing practices in Benue state of Nigeria. Adegun and Akomolafe (2013) studied Entrepreneurship education and youth empowerment in contemporary Nigeria. This study addressed the core research question of the effect of Entrepreneurial Education on the development of EM Practices of public enterprises in Benue state, Nigeria.
2.0 LITERATURE REVIEW AND CONCEPTUAL CLARIFICATION 2.1 Entrepreneurship defined, Entrepreneurship is a phenomenon of tremendous societal importance. It is also an elusive phenomenon, and researching entrepreneurship is therefore fun, fascinating—and frustrating at times. It is complex and multi-faceted. It is like fire - rapid, dramatic, and powerful. Sometimes its destructive side decimates standing forests of great, old industries; sometimes its power carries innovation throughout the world like a firestorm. This explains why it is widely acknowledged that the field of entrepreneurship lacks a well-accepted definition (e.g. Shane & Venkataraman, 2000). Even worse, there is the belief that “entrepreneurship has become a label of convenience with little inherent meaning” (Gartner 1990). To put it more forcefully: “it is clear that the word [entrepreneurship] is normally used by analysts to mean whatever they like” (Stewart 1991).
Kuratko & Hodgetts, (2004) conceptualize Entrepreneurship as a dynamic process of vision, change, and creation. It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions. Essential ingredients include the willingness to take calculated risks in terms of time, equity, or career; the ability to formulate an effective venture team; the creative skill to marshal needed resources; and fundamental skill of building solid business plan; and finally, the vision to recognize opportunity where others see chaos, contradiction, and confusion. In his submission, Schumpeter (1934) identified innovation as the single function which constitutes entrepreneurship concept such as: new products, new production method, new market and new forms of organization. Wealth is created when such innovation results in new demand. These and many other different definitions of the concept seem to serve the purpose of highlighting the myriad of facets of entrepreneurship. Additionally, this flexibility of definition had resulted in the entrepreneurship literature being considered as a suitable framework for a wide array of disciplines (Baumol, 1993).
210 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises
Entrepreneurship is more than the mere creation of business. Although that is certainly as important facet, it's not the complete picture. The characteristics of seeking opportunities, taking risks beyond security, and having the tenacity to push an idea through to reality combine into a special perspective that permeates entrepreneurs. An entrepreneurial perspective can be developed in individuals. This perspective can be exhibited inside or outside an organization, in profit or not-for-profit enterprises, and in business or non-business activities for the purpose of bringing forth creative ideas. Thus, entrepreneurship is an integrated concept that permeates an individual's business in an innovative manner. It is this perspective that has revolutionized the way business is conducted at every level and in every country. The role that entrepreneurship as a catalyst for achieving economic growth and development objectives, including innovation, employment, and equity has today attracted a lot of interest from academics, professionals and policy formulators. It can manifest within an economy in a number of ways in both formal and informal economic activities just as it transcends business creation. The concept dwells well on basic concepts and precepts such as vision, change, opportunity seeking, creativity, innovation, risk taking and ability to manage activities in order to achieve specified objectives. Entrepreneurship involves more than just increasing per capita output and income, but also, it involves initiating and constituting changes in the structure of business and society.
Entrepreneurship is attributed with qualities such as creativity, flexibility, ability to find novel solutions, opportunity recognition, proactiveness, value creation and risk taking in literature (Morris et. al., 2004). As a dynamics process of vision, change and creation (Kuratko, 2005), entrepreneurship is required to be taught for the transfer of necessary skills and knowledge from an expert to someone else. Although entrepreneurship is a concept that involves mental activities such as creativity, innovativeness and proactiveness, Souitaris, Zerbinati and Al-lahan (2006) revealed that entrepreneurial education could raise attitudes and behaviour capable of provoking entrepreneurial intentions among youth who have interest in the economic development of their nation.
2.2 Entrepreneurship education Entrepreneurship education is defined as education that equips the student with an entrepreneurship mind set and skills set that will enable them to facilitate social change (positioned ontologically prior to other forms of entrepreneurial activities), to think and/or behave entrepreneurially as an everyday practice, and/or to; transform ideas and knowledge into feasible opportunities including the creation of new ventures. In other words, entrepreneurship education must transcend a focus upon new start- ups and economic benefits, etc. There is also a need to promote and develop a creative human spirit that contributes positively to all aspects of society (Timmons and Spinelli, 2008). Entrepreneurship education is the systematic development of skills, knowledge and attitudes demanded by an individual to perform adequately in a given business or occupational oriented opportunities for improved performance of a country's economy (Abdullahi, 2012). It focuses on developing understanding and capacity for pursuit of entrepreneurial behaviors, skills and attributes in widely different context. It can be portrayed as open to all since all individuals will have a different mix of capabilities for demonstrating and acquiring entrepreneurial behaviors, skills and attributes can practice, develop and learn the behaviors. From the foregoing, it is clear that all humans need to be
211 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises exposed to entrepreneurship education. Entrepreneurial education teaches and exposes to the learner, skills and attributes that are relevant to any successful entrepreneurship undertakings.
The need for entrepreneurship education comes to the surface when societies have to improve on its effectiveness, efficiency and safety of its economy for a greater economic development. The aims of entrepreneurship education therefore, are: to improve the performance of existing economy, to reduce the learning period for one to participate fully in the business environment, to help people develop their capacities so that their economy can meet most, if not all, its future requirements for the economy. A good knowledge of entrepreneurial education should ordinarily help learners and potential entrepreneurs to be able to understand how and what it means and takes to own a business, create ideas towards the achievement of desired goals and objectives. The growth and development of any country's economy has been confirmed to be possible through entrepreneurial activities and its education (Stephenson, 2005). In the views of Arogundade (2011), entrepreneurship education equip learners with the skills to be self-reliant and task the government and other education stakeholders should make sure that educational programme at all levels of education are made relevant to provide the youths and graduates needed entrepreneurial skills. Entrepreneurship education in the narrower sense follows a direct approach, developing students' competences and entrepreneurial intentions towards starting a business as a career option. Appropriate Entrepreneurship education is undeniably very useful in opening up the minds and interests of potential entrepreneurs. They stressed on the reality and hands-on approach in the business world because students need to be exposed early to this real situation for better understanding and to build up their self-confidence in business. Entrepreneurship education is a functional education which can be used as a panacea for development and sustainability. Because education has remained the major instrument for national development for many countries of the world.`
2.3 Entrepreneurial marketing practices An understanding of Entrepreneurial Marketing (EM) practices is clearer when Entrepreneurship, Marketing and Marketing practices are properly conceptualized since the concepts come together to form one (Sunday & Agbo, 2015). Kotler and Armstrong, (2016) define marketing as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. The process of marketing is therefore finding ways to provide people with products and services that they either need to function normally or desire to improve their well-being. Marketing practices refer to the adoption and utilization of philosophies, strategies and activities associated with the marketing concept. Such practices are generally broad based and are usually defined as constructs which are based on marketing principles. Onu, (2010) conceptualize marketing practices as a consistent, appropriate and feasible set of principles through which a particular company hopes to achieve its long run customer and profit objectives in a particular competitive environment. The above definitions clearly position marketing practices within the firm where innovation and creativity interact in the midst of available resources to achieve earlier stated tasks.
212 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises
Achieving long term survival of firms in today's challenging global environment however transcend beyond putting in place general marketing practices, such marketing practices must in addition have the right mix of entrepreneurial mindset, characteristics and approaches. Njau and karugu, (2014) agree that the place of entrepreneurial marketing practices in enhancing the performance and success of firms in today's competitive and technological driven business environment has been acknowledged globally. The author therefore defines EM practices as the creative and innovative methods, processes, generally accepted techniques and standards used by businesses in the pursuit of objectives to accomplish a set of outlined tasks. Such EM practices usually consist of ways of transforming business values into processes for achieving stated objectives (Mwangi & Bwisa, 2013).
Evidences abound that show that the application of the entrepreneurial concepts and tools make marketing to achieve high level of success in the marketplace. Entrepreneurs, in their character of innovativeness have found the use of marketing principles and strategies very effective in engendering success in entrepreneurial practices. Subsequently, there is a high rate of adoption of marketing principles in the entrepreneurial practices all over the world and the eventual development of Entrepreneurial Marketing (EM).
Entrepreneurial marketing (EM) seems to thrive in a highly fluctuating environment as experienced in Nigeria. Most often, before any formal marketing planning is concluded, new condition would have arisen to render the plan ineffective. Coltman, (2017) remark that EM is effective within fluctuating and changing environments which restrict opportunities for formal planning. Good marketing is inherently entrepreneurial. It is coping with uncertainty, assuming calculated risks, being proactive and offering attractive innovations relative to competitors. And good entrepreneurship is inherently marketing oriented.
Entrepreneurial marketing is a concept that explores the values, skills, and behaviors of an entrepreneur in addressing their problems and finding business opportunities. In practice, these concepts tend to be oriented to innovation and tailoring premarketing practices that are repetitive, innovative, dynamic, creative etc and which are based on marketing principles. For such practices to be effective, they must adopt and utilize philosophies, strategies and activities associated with the marketing concept capable of winning competition and enhancing high performance in Enterprises. They must also be associated with marketing activities of firms that make such firms to rely on creative and often unsophisticated marketing tactics that make heavy use of personal networks (Naelati, & SobrotulImti, 2014). EM practices are an integrative process designed to innovatively apply the collective knowledge, skills, and resources of the firm to market related needs of the business to enable the business add value to its goods and services and meet competitive demands. As opined by Itodo (2017), EM practices must in addition involve a process by which firms derive strategies to enable them anticipate and respond innovatively to the dynamic business environment, adding that such efforts inevitably improve the competitiveness of business firms and eventually their performances.
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EM practices have been identified as one of the most important key ingredients for superior performance and global competitiveness in firms (Junde, 2014). Firm performance (the strategic outcomes that organizations use to realize its goals) has therefore been established as a focal phenomenon in business studies. Firm performance is therefore a complex and multidimensional phenomenon that has been established to directly depend on efficient marketing practices. Enhancing business performance through appropriate marketing practices is of increasing interest to all businesses (Kelson, 2014). The success or non performance of any firm rests in part on the nature and types of marketing practices they put in place for their businesses (Ediri, 2014).
3.1 RESEARCH METHODOLOGY This section examined the research design, methods of data collection and analysis. The section highlighted the organization and design of the questionnaire, the data collection instrument employed in the investigation, the administration of the instrument as well as their reliability and validity. Finally, the section examined the different techniques used to test the hypotheses.
3.2 Research Design A good research should have a careful sampling, precise measurement, and sophisticated design and analysis in the test of hypotheses derived from tentative general laws (Beri, 2006). In line with the above submission, this study made use of Cross- sectional design and employed the survey method in obtaining the needed data. Given that the study focused on the Effect of entrepreneurship education on the development of Entrepreneurial Marketing Practices the survey method is considered more appropriate to realize the goal of the research exercise. The choice of the survey method is consistent with Hair, Money, and Samuel & Pages' (2007) submission that such a method is usually interested in the assessment of the characteristics of the population of study. Beside, the survey research design also helps to evaluate the implications and interrelationship of the dependent and independent variables of the study (Zever, 2013).
3.3 Study Population The population of this study consisted of the entire senior staff of public enterprises operating in study area which numbered about 1,102, (the State Ministry of Commerce and Industries (2014), offering various products/services to the general public. The population of the study therefore covers the entire public enterprises in the study area.
3.4 Sampling A sample is a smaller set of cases a researcher selects from a larger pool and generalises to the population (Neuman 2006). Crewell, (2012) defined a sample as a sub-group of targeted population that the researcher plans to study for generalizability about such a target population. In other words, a sample represents a segment out of the total whole which is selected to represent that whole. Sampling is a process of selecting a sufficient number of elements from the population so that by studying the sample, and understand the properties or characteristics of the sample subjects, it would
214 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises then be possible to generalize the properties or characteristics to the population elements (Sekaran 2003). The sampling process in this research study is divided into a number of steps: defining the population, selecting the sample frame and unit, choosing the sampling technique, deciding on the sample plan, and determining the sample size (Neuman 2006).
In line with Szirmai, Naude and Goedhuys's (2011) submission, various Small businesses were included in this sample to generalize beyond particular industries to the final population of SMEs so as to produce unbiased final results and to accommodate for the nature of this study. The respondents were management staff and other senior officers of public enterprises under study who were key informants. The decision to that effect was based on the fact that the values and philosophies of these classes of staff influence their enterprises strategic direction, marketing practices and businesses performances. Above all this class of respondents tends to provide reliable and objective data (Geroskin & Machin, 2013).
3.4.1 Sample size, The best sample size depends on the degree of accuracy required, the degree of variability and diversity in the population, and the number of different constructs examined simultaneously when analyzing data (Neuman, 2006). This study made use of 570 samples comprising public enterprises from all the sectors that operate in the study area. Reasons for sampling the study population includes; the impossibility of collecting data and information from each member of the study population. Beside, Sekaran & Bougie (2010) opine that studies using a sample rather than the entire population are likely to produce better and reliable results; fatigue is reduced and fewer error in data collection.
3.4.2 Sampling Technique and Process The sampling process in this study involved defining the population, selecting the sample frame and unit, choosing the sampling technique, deciding on the sample plan, and determining the sample size which is in line with Newman's (2006) submission.
3.4.3 Sample Size Determination To select an optimum sample size for any study, Roscoe (1975) emphasizes that between 30 and 500 will be quite suitable and appropriate. Green (1991), however, argues that an optimum sample size for any research work is based on the number of independent latent variables in the conceptual model. Bartlett, Kotrlik, and Higgins (2001), recommend that such a sample should be five to ten times more than the number of independent constructs for multivariate research. A sample size in a range of 150 to 400 is suggested considering the complexity of the model, missing data, and error variance of questions and items (Hair et al. 2011; Manning & Munro 2007). In order to assess the effect of Entrepreneurial Education on the development of Entrepreneurial Marketing practices of public enterprises in Benue State, public enterprises in the sample originate from the study area and also operate on a full-time basis.
215 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises
In determining the sample size for this study, Systematic sampling and simple sampling techniques were adopted to select 285 respondents from the total population of 1102 staff of the sampled public enterprises using Kriecie and Morgan's (1970) table for determining sample size for a finite population. However, as a deliberate effort to minimize errors in sampling, effectively take care of the non-response rate issue as well as ensure high sample size, the sample size was doubled or multiplied by two as submitted by (Aliyu, 2014). Therefore, 570 samples (that is 285 x 2) was the determining factor for the total number of questionnaires that were finally administered. This is in line with Alrech and Settle's (1995) submission that lower sample size has the tendency to attract higher errors. The author argues further that higher samples are more prone to accurate results.
Respondents views were broken down into responses of A = strongly agree, B = Agree, C = Neutral, D = Disagree and E = Strongly Disagree. The responses were made variable to create room for variations in respondents opinions as they perceive the situations put across to them.
3.5 Source and Instrument of Data collection Data needed for this study was collected from the primary sources which Valos and Bednall, (2010) defined as data gathered and assembled for a research project at hand. A self – administered questionnaire strategy also called drop off and pick procedure was then used as the data collection method for the study. The study adopted the hand delivery and collection method also referred to as drop and collect (Aliyu, 2014) to ensure effectiveness in the collection process.
3. 6 Model Specification The model specification used in this study is based on the hypotheses of the study. This statistical model is presented below:
Development of Entrepreneurial Marketing Practices is a function of Entrepreneurial Education It should be noted that Entrepreneurial Education is the independent Variable while Entrepreneurial Marketing Practices as the independent variable.
Therefore the model can be shown as below; EED = f (EMP) - - (1)
In explicit form, the above relationship can be restated thus:
EED = b0 + b1EMP + Ut - - - (2)
Where EED = Entrepreneurship Education EMP = Entrepreneurial Marketing Practices
b1 = regression coefficients
b0 = Regression intercept
Ut = Error term 216 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises
In order to examine the effect of the independent variable on the development of EM practices in public enterprises as used in the work, a second model was developed. The model EM practices of public enterprises as its dependent variable. The linear relationship between the new dependent variable and the independent variable is given as:
EED = bo + b1 + EMP + Ut A priori Expectation b1 > 0
The a priori expectation shows that the coefficient of the variable b1 is positively significant and indicates that the variable is expected to have positive effects on performance of small businesses in the study area.
Responses on the effect of ED on the development of EM practices in public enterprises varied from A – E
Where A = strongly agree B = Agree C = Neutral D = Disagree E = strongly disagree
4.1 Test of study hypothesis Using Standard error to test the study hypotheses, we have the following decision rule.
If the standard error of bi [S (bi) >1/2bi] we accept the null hypothesis, that is, we accept that the estimate bi is not statistically significant at the 5% level of significance.
If the standard error of bi [S (bi) <1/2bi] we reject the null hypothesis, in other words, that is, we accept that the estimate b1 is statistically significant at the 5% level of significance.
Ho = Entrepreneurship Education has no effect on the development of Entrepreneurial Marketing practices of in public enterprises.
Analysis of the Regression estimates for effect of entrepreneurial education on the development of Entrepreneurial marketing practices of Public enterprises in Benue state of Nigeria. EED =f (ED) The general equation to predict Performance from Entrepreneurial Orientation is predicted as below. EMP = 25.363 + (0.111 x EED)
217 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises
This is obtained from the co-efficient table, as shown below: Coefficientsa Model Unstandardized Standardized t Sig. Collinearity Statistics Coefficients Coefficients B Std. Error Beta Tolerance VIF (Constant) 25.363 2.475 10.249 .000 EO .111 .027 .193 4.121 .000 .997 1.003
a. Dependent Variable: Source: SPSS 20 output (2017)
Unstandardized coefficients indicate how much the dependent variable varies with an independent variable when all other independent variables are held constant. In the coefficients table, VIF is less than 10 which imply non-collinearity. Considering the effect of Entrepreneurial Education (EED) on the development of entrepreneurial marketing practices in public enterprises, the unstandardized coefficient, â1 for Entrepreneurial Education is equal to 0.111. The model specification for thecevelopment of entrepreneurial marketing practices establishes that a positive relationship exist between Entrepreneurial Education and public enterprises in Benue state and the relationship is statistically significant (p<0.05). The relationship is also in line with a priori expectation. This means that a unit increase in Entrepreneurship education will result to a corresponding increase in the development of entrepreneurial marketing practices in Public Enterprises by a margin of 11.1%.
5.0 SUMMARY AND CONCLUSION The aim of the study was to assess whether entrepreneurial Education can be a good predictor toward the development of Entrepreneurial Marketing Practices of Public enterprises in Benue state Nigeria. This was therefore hypothesized that; Entrepreneurial Education has no effect on the Development of Entrepreneurial Marketing Practices of Public Enterprises in Benue state of Nigeria. To effectively carry out this study, multiple linear regressions were conducted to test the study hypothesis. Result of the analysis established that a positive relationship exist between Entrepreneurial Education the development of Entrepreneurial marketing practices in public enterprises of Benue state, Nigeria and the relationship is statistically significant (p<0.05). The relationship is also in line with a priori expectation. This result has therefore established that entrepreneurial Education is a good predictor in the development of Entrepreneurial marketing practices in Public Enterprises in Benue state, Nigeria. .
5.1 RECOMMENDATIONS Based on the research findings, the study recommend (among others) that: i. Government, managers and operators of public enterprises should pay more attention to the issue and concept of entrepreneurial marketing since the analysis has established that entrepreneurial marketing is one of the best independent variable that predicts the development
218 Effect of Entrepreneurship Education on The Development of Entrepreneurial Marketing Practices in Public Enterprises
of their marketing practices. Possession of entrepreneurial qualities such as hard working, skill development, employee consultation, ability to assess their immediate environment and many more, will give managers and operators public enterprises a better opportunity to remain relevant and improve their performance. ii. Owners of public enterprises should give these firms the free hand to operate so as to effectively compete in the market. iii. Appropriate training of staff should be ensured to enhance their performance.
REFERENCES Abdullahi, S.A., (2012). Entreprenuership and Economic Growth: An Analysis of Impact of Public Policy on Entrepreneurship Development in Nigeria. International Conference on Business and Management 6 – 7 September 2012, Phuket – Thailand Adegun, O. and Akomolafe, O. (2013) Entrepreneurship education and youth empowerment in contemporary Nigeria, Scholarly Journal of Education Vol. 2(5), pp. 52-57 Coltman, T. (2017). Why build a customer relationship management capability? Journal of Strategic Information Systems, 16(3), 301-320 Ediri E. A. (2014) Entrepreneurship Development in Nigeria. Makurdi – Nigeria. SOHA Production Gartner, W. B. (1990). What are we talking about when we talk about entrepreneurship? Journal of Business Venturing, 5(1), 15-28 Hair, J.F., Money, A.H., Samouel, P., & Page, M. (2007). Research method for Business. West Susex, England: John Wiley and Sons Ltd Itodo, L.S. (2017). Marketing. Ugbokolo, Supreme printers Jeffry A. Timmons, J.A. (1999) New Venture Creation: Entrepreneurship for the 21st Century, 5th ed. (New York: McGraw-Hill, 1999), 44 Junde, A., (2014). Effective participation of small and medium industries in a developing economy; Makurdi. Satos press Keelson, A.K. (2014). The Moderating Role of Organizational Capabilities and Internal Marketing in Market Orientation and Business Success. Review of Business and Finance studies. 5 (1) Kotler, P. and Armstrong, G. (2016). Principles of Marketing, 14th Edition. Pearson Educational ltd. London Kuratko, D.F. & Hodgetts, R.M. (2004). Entrepreneurship: Theory, Process, Practice (Mason, OH; South-Western Publishers) Mwagi, H. W. and Bwisa, H. (2013) The Effects of Entrepreneurial Marketing Practices on the Growth of Hair Saloons: A case study of Hair Salons in Kiambu Township. International Journal of Academic Research in Business and Social Sciences.3 (5) Naelati Tubastuvi, N. and SobrotulImti' k. (2014) Factors affecting Business Performance the Small Medium Enterprises of Batik Pekalongan Central Jva, Indonesia. The 2nd IBEA – International Conference on Business, Economics and Accounting, Hong Kong.
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Njau, J.N. and Karugu, W. (2014) Influence of E-Marketing on the performance of Small and Mmedium Enterprises in Kenya: Survey of Small and Medium Enterprises in the Manufacturing Industry in Kenya. International Journal of Business & Law Research 2(1), 62-70. Onu, A. J. C. (2010) Foreign Direct Investment as a Market penetration and Economic Growth strategy in Nigeria, a PhD dissertation submitted to the Department of Business Administration, ABU Zaria Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. Academy of Management Review, 25(1), 217- 226. Sunday, I.L. and Agbo, P.O. (2015). Entrepreneurship. Kaduna, Nigeria. Supreme printing and publishing company Timmons, J., and S. Spinelli. 2008. New Venture Creation: Entrepreneurship for the 21st Century. McGraw-Hill: New York.
220 Veritas International Journal of Entrepreneurship Development (VIJED)
AN ECONOMETRIC ANALYSIS OF THE IMPACT OF SMALL AND MEDIUM SCALE ENTERPRISE CAPITAL FINANCES ON THE NIGERIAN ECONOMY.
CHRIS AC-Ogbonna, Ph.D Department of Economics Veritas University, Abuja (The Catholic University of Nigeria) [email protected]
Citation: Ac-ogbonna , C. (2018). An Econometric Analysis of The Impact of Small and Medium Scale Enterprise Capital Finances on the Nigerian Economy. Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 221-235 ______ABSTRACT Small and Medium Scale Enterprises (SSE's) have been seen as a critical engine of economic growth and its importance to the growth of an economy cannot be over emphasized. These enterprises have helped even the more developing economies in fighting poverty and has also gone ahead to contribute significantly to the growth of the gross domestic product (GDP) of these advance countries through greater utilisation of local raw materials, employment generation, encouragement of rural development, entrepreneurship development, mobilisation of savings and linkages with bigger industries. In this study, it took a critical look at the relationship as well as the impact of SSE's on Nigeria's economic growth from 1990-2014. It adopted the multi-regression analytical framework; the result shows that a unit increase in Small-Scale Capital finances (SSCF) leads to a 59.9% increase on economic growth, a percentage increase in Interest Rate leads to a 4.9% decrease in RGDP. All the variables are statistically significant. We therefore, concluded that SSEs have a positive impact on Nigeria's economic growth and the study further recommended that Nigeria should encourage investments in SSE's growth in the country.
Keywords: Econometric Analysis, Small and Medium Scale Capital Finances, Economic Growth. ______
1. INTRODUCTION Small and Medium scale enterprises also known as the informal sector (SME) has become a major source of employment generation and hence a means of fighting poverty by many innovative micro- entrepreneurs in developing countries. Central Bank of Nigeria (CBN 2009) said Nigeria has the largest informal sector in Africa, a predominance that stems from its massive population of over 153.9 million and decades of poor economic performance denoted by a high unemployment rate of 12.9% and soaring poverty incidence of up to 54%. An estimate in the year 2000 by Schneider 2002) put the size of Nigeria's informal sector at 57.9% of its gross national product (GNP) or an equivalent 221 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy. of US$212,6 billion. Judging by proportion, Nigeria is only exceeded by Zimbabwe (59.4% or $42,4 billion) and Tanzania (58.3% or $52,4 billion) but factoring in both the market size and population inexorably turns the table in favour of Africa's most populous country and third largest economy- Nigeria. Investigation revealed that the net worth of the Nigerian informal sector as a proportion of the GNP exceeds those of Zimbabwe and Tanzania combined. A national survey in 2000 put the number of urban and rural informal (sector) enterprises in the country at 8,604,048 enterprises, comprising a total employment generation of 12,407,3484 (CBN/FOS/NISER, 2001), (cited by Onyebueke& Geyer, 2011).
High rate of unemployment especially among the youths in developing nations is as prevalent as the rate of underemployed which is one of the factors responsible for low standard of living in developing nations. Poverty is therefore widespread both in the cities and rural areas of Nigeria and other developing nations of the world. While economic growth remains vital for reducing poverty, growth has its limits, but countries need to complement efforts to enhance growth with policies that allocate more resources to the extreme poor. "These resources can be distributed through the growth process itself, by promoting more inclusive growth, or through government programmes, such as conditional and direct cash transfers. It is imperative not just to lift people out of extreme poverty; it is also important to make sure that, in the long run, they do not get stuck just above the extreme poverty line due to a lack of opportunities that might impede progress toward better livelihood. One of the poorest of the poor among the nations of the world confronted not just with pockets of poverty, disadvantaged or marginalized areas, groups and individuals but with a situation in which most of the population exists at standards of living below those required for full development and enjoyment of individual and societal well-being.In her effort to create jobs for the unemployed and promote economic growth, the Government of Nigeria put in place a number of economic reform programmes which have very minimal impacts on employment creation, poverty reduction and growth of the national economy. Informal sector has become a major provider of employment in Nigeria and also other developing economies. Unemployment has constituted the bane of the growth and development of the modern human society. This is more so in developing economies where youths have embraced all sorts of vices and crimes ranging from armed robbery, prostitution, kidnapping, etc. as the only alternative. Job opportunities from employers like government, private entrepreneurs, industries, etc. are so saturated that most people now opt for various forms of self- employment to earn their living. Thus, people are involved in the provision of food, and services to consumers. This makes small-scale enterprises inevitable in both developed and developing economies. Small scale enterprises are businesses that employ a small number of workers and do not have a high volume of sales. Such enterprises are generally privately owned and operated as sole proprietorships, corporations or partnerships. SSEs are defined differently in different countries.
2. STATEMENT OF THE PROBLEM The poor performance of the Small and Medium Scale Enterprises (SME's) and the Nigeria economy from 1990 to date has called for more questions than answers as the Nigeria economy has
222 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy. in recent time plunged into economic recession. The performance of the informal sector aimed at stimulating economic growth despite financial injection in Nigeria has failed to justify it conceptualization. Unemployment and poverty are two major problems plaguing the Nigeria economy and many developing nations of the world. The informal sector in Nigeria has been recreated and expanded under the most diverse economic circumstances and in manufacturing, construction, mining, services, etc. however, the actual dynamics and employment structure in the informal sector have been very much affected by the nature of public policy, particularly as the latter affects the regulated sector. Some activities in the informal sector may derive from the desperate need of a worker to obtain the means of subsistence for his or her family. A similar motivation could lead a worker to accept lower wages in the formal sector. The informal sector is not a euphemism for poverty, even though most of the individuals engaged in informal economic activities are poor, particularly in the third world countries. The current crisis has altered substantially the socio- economic composition of 'actors' in the informal sector.
Traditionally dominated by artisans and small-scale commercial and service operators, the sharp decline in urban real incomes across the board since the 1980s has broadened the participation of the urban working in the informal sector activities as it has drawn in the professional classes. Access to financial credit is important for small businesses aspiring to grow and become more profitable. In Nigeria, various policies and programmes of the government have tended to skew in favour of the expansion of urban informal sector activities. The sector has had a self-reliance initiative and is dominated by small scale producers that largely employ indigenous technology. Its growth is fostered by a combination of repression and structuralism's tendencies. ( Duru, 2012). Between 1990 and 1992 the Nigerian government established Community Banks now Micro Finance Banks, on the principles of a traditional rotational credit system. These banks were to provide small loans and other forms of financial and business services for the poor and informal sector enterprises, with the whole community acting as guarantor for loan repayment. Unfortunately only about 10% of informal sector workers were aware of how to take advantage of the new facilities offered. The Central Bank of Nigeria (CBN) also provided N200b credit guarantee scheme and defined Small and Medium Scale Enterprise (SME) as follows; “an enterprise that has asset base (excluding land) of between ? 5million – ? 500 million and a labour force of between 11 and 300”. In view of the analysis highlighted above, the major problem that instigated this study is,why has the small and medium enterprises failed to stimulate production in the Nigeria economy, what are the challenges confronting Small and Medium Scale Enterprises in Nigeria despite government intervention or has the harsh economic climate in Nigeria adversely affected the smooth operation of the informal sector?.
3. OBJECTIVES OF THE STUDY The broad objective of this study is to evaluate the impact of small and Medium scale enterprises finances on the economic growth of Nigeria.
223 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy.
4. LITERATURE REVIEW AND THEORETICAL FRAMEWORK According to Jhingan (2010) economic growth is related to a quantitative sustained increase in the country's per capita output or income accompanied by expansion in its labour force, consumption, capital and volume of trade. On the other hand, economic development is a wider concept than economic growth. “It is taken to mean growth plus change”. It is related to qualitative changes in economic wants, goods, incentives, institutions, productivity and knowledge or the “upward movement of the entire social system”. It describes the underlying determinants of growth such as technological and structural changes.
GDP: This is the total market value of all final goods and services produced in a country in a given year. It is equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports (i.e. GDP = C + I + G + (X-M)). This study makes use of real GDP in determining the country's economic growth. Real GDP is an inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Unlike nominal GDP (the measurement that leaves price changes in the estimate), real GDP can account for changes in the price level, and provide a more accurate figure. It has been observed by scholars like Oyinlade (2005), that “irrespective of their level of economic activities in the real sub sector, small scale industries, if sufficiently financed and developed would bring about rural development as well as economic growth”. In Nigeria, as in most countries, these roles and functions would not be anticipated to be different noticeably, apart from dissimilarities in their scope as well as input for that matter. This results from the roles given to them (SSIs) by the nation's macroeconomic policymakers, economic planners, and the level to which they are prepared to perform these roles and functions. An unbiased appraisal of the roles of SSIs around the world, though, suffers from insufficient information to precisely do justice to the role they perform in economic growth and development.
According to a CBN report in 1999, since the 1970s, the Less Developed Countries have shown increased interest in encouraging the growth and development of SSIs for three reasons: 1. The failure of previous industrial policies to create self-sustaining growth. 2. The increased emphasis on self-reliant method to economic growth and development, which SMEs can promote. 3. The greater concern to reduce the problems of rural-urban migration, and urban-rural investment disparity.
The apex bank further indicated that development policies which are successful have emphasized the significance of SSIs in universal economic growth and development for the following reasons: a. To create considerable indigenous entrepreneurship b. To ease efficient mobilization of domestic resources such as domestic raw materials, capital, labour and technology.
224 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy. c. To decrease regional differences, brain drain, as well as rural-urban migration. An investigation by Izedomi (2011) on SSIs operations in Nigeria illustrates that, “greater part of SSIs are found in the commercial cities with service business enterprises and distribution businesses dominating”. Development essentially has to do with improvement in human well-being, elimination of hunger and poverty, and gainful and productive employment for all the citizens. According to Joshua (2007), development means “bringing a nation to an advanced or highly organized state that is utilizing all human and material potentials of a nation to bring about growth or advancement”. Therefore, national development means the ability to harness all available resources, human and material to bring out the potential of a nation. Micro and Small Enterprises are the bone of a country's economic development.
Afolabi (2013), studied the growth effect of small and medium enterprises financing in Nigeria. The study investigated the effect of SMEs financing on economic growth in Nigeria between 1980 and 2010. The study employed Ordinary Least Square (OLS) method to estimate the multiple regression model. The estimated model results revealed that SMEs output proxy by wholesale and retail trade output as a component of gross domestic product, commercial banks' credit to SMEs and exchange rate of naira vis-à-vis U.S dollar exert positive influence on economic development proxy real gross domestic product while lending rate is found to exert negative effects on economic growth. In terms of partial significance and using t-statistic as a test of evaluation, SMEs output and commercial banks' credit to SMEs were found to be significant factors enhancing economic growth in Nigeria at 5% critical level. Therefore, emanating from the findings, the study proffered that the central authority should create an enabling environment for SME development.
Eze and Okpala (2015), investigated the quantitative analysis of the impact of small and medium scale enterprises on the growth of Nigerian economy. This study is on the quantitative impact of Small and medium scale enterprises (SMEs) on Nigeria's economic growth performance for the sample period 1993 to 2011. The econometric technique adopted for the study was multiple regression method based on ordinary least squares technique. However, in order to avoid the incidence of spurious estimates, evidence from the ADF test conducted revealed that the variables are integrated of order two,1(2). The Johansen test conducted showed evidence of long run equilibrium relationship between small and medium scale enterprises and economic growth. However, in the meantime, output of SMEs (SMEO) does not make any significant contribution to Nigeria's economic growth performance. The study concludes that poor government policies, on tariffs and incentives, bribery and corruption, non-existent entrepreneurial development centres and poor state of infrastructure act as impediments to the growth and development of SMEs in Nigeria. The recommendations are that governments at all levels should endeavour to establish Microfinance institutions for easy access to credit by SMEs, introduce financial literacy in schools, establish entrepreneurial development centres for capacity building, provide enough infrastructure, especially electricity and road network, and finally establish agencies for control of bribery and corruption.
225 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy.
Eigbiremolen and Igberaese (2013), carried out a study on small and medium enterprises financing and economic growth in Nigeria. This study investigates the role of Small and Medium Enterprises (SMEs) in the achievement of economic growth in Nigeria using a linear regression model and granger causality test. The Johansen 2 likelihood ratio test statistics, the trace and maximal eigen value co-integration test statistics, reveal two co-integrating equations or vectors among the variables of interest. The co-integrating regression result indicates that SMEs are indispensable in achieving sustainable economic growth as they exhibit positive impact on the economy. This implies a boost to the economy for every increase in the operations and activities of SMEs. The granger causality test reveals a unidirectional causal relationship between SMEs and economic growth, running from the former to the latter. Moving forward, adequate and coordinated financing with relatively low interest rate should be made available and assessable to SMEs across Nigeria, as the issue of inadequate funding has remained the major bane to their successful operations. Also, government should make available needed infrastructure and incentives like regular power supply, good roads and tax holiday. These would greatly enhance and encourage the activities of SMEs and position them to play their all important role in the achievement of sustainable economic growth in Nigeria.
Kalu, Chris, Uzonwanne, Maria, Okeyika, Kene, Maduka, Olisaemeka (2015), did a research on Modelling micro, small and medium scale enterprises (MSMEs) Financing and Economic Growth. This paper examines the causality between MSMEs financing and economic growth in Nigeria during the periods 1992 to 2013. However, the analysis technique of this study differs from the previous studies as the approaches of the previous studies are not adequate in obtaining robust estimates and drawing meaningful inference given the potential impact of MSMEs financing on economic growth. Unlike previous studies that totally relied on traditional methods for unit root testing, co-integration analysis, and causality test, our study relies on the ultra-modern econometric methods such as; the Ng-Perron modified unit root test, Autoregressive Distributed Lag (ARDL) Bound testing approach to co-integration, parsimonious ECM version of ARDL model, and the Toda – Yamamoto causality procedure. The empirical results indicate evidence of a stable long – run relationship among the chosen variables. The Toda – Yamamoto causality test show evidence of a unidirectional causality running from MSMEs financing to MSMEs output, a bi-directional causality between MSMEs output and economic growth, as well as, a unidirectional causality running from MSMEs financing to economic growth in Nigeria during the periods covered. The study therefore recommends that the government through the monetary authority (CBN) should energize the MSMEs by instituting a programme that will adequately promote the financing of MSMEs with relatively low interest rate for sustainable economic growth. Eniola and Entebang (2015), carried out a study on government policy and performance of small and medium business management. The study reviews the relationship between government policies and small and medium enterprises (SMEs) performance in Nigeria.
The study offered some relevant recommendations to policy makers, entrepreneur, and SME managers to ensure the appropriate scheme to improve the SME sector in Nigeria. K l a d i o l a (2014), studied the growth factors of small and medium scale enterprises. The paper aimed to 226 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy. contribute in finding some determinant factors related to SMEs growth and performance in a transition economy. Empirical researches argue that firm growth is measured not only from traditional factors of the firm (size and age), but also from specific factors including internal financing, future business plan, factor productivity. During the last five years the economic situation has been very unclear and uncertain. SMEs have experience the most challenging crisis. Considering the importance in all economies for recovery and development, SMEs growth is a crucial issue.
Bakare and Babatunde (2014), studied prospects and challenges facing small and medium scale enterprises in Oyun local government area of Kwara state, Nigeria. This study examines the prospect and challenges of SMEs in Nigeria. They employed the Chi-square and principal component of factor analysis as the techniques of analyses. The latter technique aimed at emphasizing the priority ranking of the factors facing SMEs in Nigeria; being the gap existing in empirical studies. Reliability and validity of the research instrument was ascertained with the use of the Cronbach's Alpha tests and the Pearson Product Moment Correlation Coefficient (PPMCC). The results obtained imply that government policies towards loan advancement; multiple taxation policies and other business friendly policies would have to be properly addressed in order to facilitate the operations of SMEs in Nigeria. Also, foreign direct investments; especially those relating to consumables and semi-durable goods and services; that can hamper the survival of the SMEs should be given adequate measures and checks to curtail their excessive dominance of the market where the SMEs businesses thrive. With the importance attached to research and development, government should also invest in viable areas to address the issue of consumer behaviour, demand analysis and promotional strategies. The issue of poor capital as well as access to finance still remains imperative as loan with low interest should be provided through microfinance institutions.
Akeke, Sulaiman, Aribaba, Ogundipe and Christie (2014), carried out an empirical investigation of small and medium scale enterprises as drivers of economic growth in Nigeria. The study seeks to examine SMEs as a driver of economic growth in Nigeria using secondary data for 5 years spanning 2005-2010. Based on the econometric model, the result shows that agricultural and manufacturing sectors contribution to economic growth is negative but statistically significant, while capacity utilization has a direct relationship with economic growth. The study concludes that agricultural and manufacturing sectors are important for sustained economic growth. Hence, policy makers and government at various levels should continue to intensify attention at initiatives aimed to boosting the performance of SMEs sub-sector.
5 RESEARCH METHODOLOGY AND MODEL SPECIFICATION The study adopted the ex-post facto design because the design considers events that have already taken place. Thus, it is possible to establish an empirical evidence to show that Small Scale Enterprises (SSEs) are known to facilitate growth and development of human and capital resources towards overall economic growth. In pursuance of these roles, the Nigerian government had in the
227 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy. past promulgated policies including provision of funds to support their meagre capital outlays. In this study, we examine the quantitative impact of SSEs on Nigeria's economic growth. To achieve this, we employed the multi-regression analysis with special consideration of the neo-classical regression method. Multiple regression analysis is a powerful technique in data analysis used for predicting unknown value of a variable from the known value of two or more variables - also known as predictors. It is an advanced statistical tool and extremely powerful when one is trying to develop a “model” for predicting a wide variety of outcomes Gujarati (2004). More precisely, multiple regression analysis helps to predict the value of Y for given values of X1, X2,…, Xk. A prominent advantage of this technique is that it enables us to study the individual influence of the independent variables on the dependent. This method has been variously used by scholars in related field and has been adjudged to produce accurate results (Adebusuyi, 1997).
Multiple regression technique assumes that the relationship between the Y and each of Xi's is linear. Another important assumption is non-existence of multi-collinearity- the independent variables are not related among themselves. At a very basic level, this can be tested by computing the correlation coefficient between each pair of independent variables. Other assumptions include those of homoscedasticity and normality which we shall take into consideration in our methodology.
6. MODEL SPECIFICATION Our model follows the multi-regression analysis as widely applied in econometric analysis. The model is therefore, specified as follows:
6.1. Functional Specification RGDP = f(SSCF, INTR, INFL ) ------Equation 1
6.2. Econometric Specifications
RGDP = âo +â 1SSCF +â 2INTR+ +â3INFL + Ut ------Equation2 Where:
RGDP = Real Gross Domestic Product (a proxy for economic growth) SSCF = Small Scale Capital Finances (Proxy for commercial bank credit) INTR = Interest Rate, INFL = Inflation (introduced in the model as a control variable to contain the influence of fluctuations in general price level on the variables),
U = Error term
â0 is a constant parameter
âI , â2, â3 are parameters to be estimated. From the model, Real Gross Domestic Product (RGDP) is the dependent variable. The independent variables in the model are Small Scale Capital finances from Banks, interest rate and inflation. These variables have the ability to affect the rate of growth in the Nigerian economy negatively or positively.
228 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy.
8. METHOD OF DATA COLLECTION AND SOURCES OF DATA The relevant data for this study was obtained from the Central bank of Nigeria statistical bulletin, Journals, Internet, Text books, and previous research work. So the study adopted secondary data as information on these variables are readily available.
9. ESTIMATION TECHNIQUES To access the impact of Small and Medium Scale Enterprises in the Nigerian economy used time series data for the periods 2005 -2015. The multiple regression method and descriptive analysis were employed to establish the relationship between the variables of the study. The Coefficient of Determination (R2) was also used to determine the total variation of the dependent variables as a measure of goodness fit.
10. DATA PRESENTATION AND ANALYSIS OF REGRESSION RESULTS The result presented below is a product of the estimation of the model specified in our research methodology. The estimation procedure employed in this study is the multi regression method of estimation and the econometric software used in the Stata 11 version. The regression result is as presented and analysed below:
Table 1: Regression Result RGDP = f (SSCF, INTR, INFL)
Variables Coefficient STD. Error T-stat Prob C 5.477791 2.672733 0.252586 0.9831 SSCF 5.985434 1.460710 2.855799 0.0000 INTR -0.491221 1.162211 3.200012 0.0073 INFL -3.49221 0.750002 -4.649471 0.4370 R2 = 0.74 DW = 2.04 F-stat= 27.9
From the regression result presented above, it shows that a unit increase in Small-Scale Capital financing(SSCF) will bring about 59.9% increase in economic growth (RGDP), a unit increase in Interest Rate (INTR) leads to a 4.9% decrease in the dependent variable (RGDP).A unit increase in Inflation (INFL) decreases RGDP by 35% .
10.1. Evaluation of Results The study evaluated the empirical results here in order to know if the variables under consideration meet the necessary criteria for a good regression analysis. This is the criterion used in examining the regression parameter coefficients to check if the variable agreed with the theoretical postulations or to see if they conform to the a priori expectations both in signs and in magnitude as presented in the table below.
229 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy.
Table 2.
Variable Coefficient Signs Conclusion SSCF 5.985434 Positive Conforms to a priori expectation INTR -0.491221 Negative Conforms INFL -3.49221 Negative Conforms
From the table above, Small Scale Capital financing (SSCF) has a positive sign with the dependent variable (RGDP). This implies that an increase in (SSCF) will lead to an increase (i.e. positive) in (RGDP) and it conforms to a priori expectation of a positive relationship. Interest Rate (INTR) has a negative sign with (RGDP) which also conforms to a priori expectation of a negative relationship; meaning: increases in Interest Rate (INTR) reduces the value RGDP. Inflation (INFL) on the other hand has a negative sign each; which also conforms to a priori expectation.
F-Test
This is employed in order to test the overall significance of the entire regression model with V1 = k-1 and V2 = n-k degrees of freedom. This test follows the hypothesis stated as follows:
H0:=B1=B2=B3=B4,…, = Bk = 0 (statistically insignificant) at 5% significant level.
Decision Rule
Reject H0 If /f*/>/f/ (V1/V2) and accept if otherwise. Where V1=K-1=Number of parameters minus one and V2=n-k= Sample size minus number of parameter. The computed F-value (f*) = 27.9 and the tabulated F-value is given as f [(k-1), (N-K)] = 2.92. From table 1, since the computed (F*) = 27.9 is greater than the tabulated, F0.05 (2.34) = 2.92, we reject the null hypothesis (H0) and conclude that the overall regression is statistically significant at 5% significance level. This implies that there exists a relationship between the dependent variable RGDP and the explanatory variables under study.
10.2. Statistical Criteria (First Order Test) The statistical criterion takes account of the t-statistic, F-statistic and R2 values. A test of significance is a procedure by which sample results are used to verify the true nature of the null hypothesis. The rationale behind the statistical test has to do with testing statistical significance of parameters and sampling distribution of such a statistic under the null hypothesis and this is very vital in any empirical analysis. (Gujarati, 1995, 124). Therefore, the acceptance or rejecting of the null hypothesis is determined by the values derived from the given set of data using relevant statistical test. These statistical tests include:
230 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy.
Coefficient of Multiple Determinations (R2) The R2 measures the goodness of fit of a model. It gives the proportion or amount of total variation in the regressand (dependent variable) that is explained by the regressors (independent variable). From the empirical analysis, it is observed that the coefficient of determination (R2) value is 0.74 and this implies that about 74% of the fluctuations in RGDP (dependent variable) that are caused by the fluctuations in the regressors. Hence the total amount of variations in the regressand that is explained by the regressors is to the tune of 74%.
Students t-test This test is carried out in order to check the level of significant influence of the explanatory variables on the dependent variable. It tests the significance criteria of the estimated parameters at a chosen level of significance (i.e. = 5%). We therefore use the conventional approach of t-statistic or the rule of thumb to measure whether economic variables under study are statistically significance or not. This is based on statistical occasion and it is carried out by comparing the estimated values and the tabulated t-value. For a two tailed test at 5% level of significance with n-k degree of freedom, the tabulated t-value was given thus as 2.045.
Table 2 Variables Coeffici ent t-stat SSCF 5.985434 2.0236
INTR -0.491221 -0.9497
INFL -3.49221 -0.5494
Decision Rule
Reject Ho if t-cal > t-tab and accept if otherwise stated. The variables are statistically significant meaning its effect on the Dependent variable (RGDP), is not significant on the dependent variable (RGDP).
10.3 Econometric Test (Second Order Criteria) The second order test referred to as the econometric test is based on the satisfaction of the Classical Linear Regression Model (CLRM). The following econometric tests are necessary and vital to this research work. Hence; conducted as follow:
Normality Test The normality test was employed in this study in order to ascertain if the error term of the regression model follows a normal distribution. This test therefore follows a chi-square distribution. The hypothesis is as stated below: Ho: = 0 (Error term not normally distributed)
231 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy.
Decision Rule 2 2 Reject H0 if X computed < X tabulated at the chosen level of significance and accept if otherwise. Since the X2 computed 6.12 is greater than the X2 tabulated, 1.53 = Jarque Bera (JB) value, we reject the H0 and conclude that the error term is normally distributed.
Autocorrelation Test This is a problem usually associated with any time-series data. We employ autocorrelation in any model using Durbin Watson or the d-statistic. This according to Koutsoyannis (1997) has optimal asymptotic properties and is more efficient for all sample sizes. The Durbin-Watson (DW test is used to ascertain whether or not there exists an indication of the presence of autocorrelation. In our study, DW value is 2.04 as recorded in table 1.
Decision Rule
If 0 < d < dL, reject H0 of no positive autocorrelation.
If dL d dU, No decision on H0 of NO positive autocorrelation.
If dL< d < 4. Reject H0 of no negative autocorrelation. From the table, dL = 1.143 and du = 1.739 DW = 2.01 since Du < d < 4-d = 1.73 < 2.09 < 2.25, then we do not reject Ho of No autocorrelation, both positive and negative.
Multi-Collinearity Test Multicollinearity is used to denote the presence of near linear relationship among explanatory variables due to the nature of economic magnitude. Multicollinearity is inherent in most economic relationships. This is dictated using the correlation matrix. Once the pair wise correlation coefficients between two or more explanatory variables are in excess of 0.8 then there are bound to exist a multicollinearity problem signifying that there is an exact influence among the explanatory variables on the dependent variable. This is the case with our result.
Table 3: Multi-Collinearity Test Result Variables SSCF INTR INFL SSCF 1.0000 0.4589 0.7752 INTR 0.4589 1.0000 0.5788 INFL 0.7752 0.5788 1.0000
Unit Root Test for Stationarity Generally, it has been observed that most economic variables are non-stationary hence; the utmost need to conduct a stationarity test in order not to encounter wrong prediction and forecast of regression results. Unit root is employed to test whether the variables of the model are stationary or
232 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy. not at a given order of integration (1(d)). The Augmented Dickey Fuller (ADF) test is used to compare the chosen critical value (say 5% conventional approach). The hypothesis is formulated thus: Ho: è = 1 (Non stationary or unit root) H1: < 1 (stationary)
Table 4.
Variable ADF value 5% critical value Conclusion RGDP -3.630411 -2.8212 Stationary SSC -2.309420 -2.6167 Stationary INTR -3.217832 -2.7622 Stationary INFL -3.776167 -2.8167 Stationary
We assume there is homoscedasticity spread of variance. If the revise is the case, then, it is heteroscedasticity and this is a violation of the assumption four (4) of the Classical linear regression model (CLRM).
V1 and the hypothesis is stated thus;
H0: B0 = B1 = B2 = B3 = 0 (Homoscedasticity)
H1: B0 B1 B2 B3 0 (Heteroscedasticity)
11. SUMMARY OF FINDINGS Small Scale Enterprises (SSEs) are known to facilitate the growth and development of economies. These enterprises are receiving increasing policy attention, particularly in third world countries partly because of growing disappointment with results of development strategies focusing on large scale capital intensive and high import dependent industrial plants. Small Scale Enterprises (SSEs) have been known to impact on countries' economies through greater utilisation of local raw materials, employment generation, encouragement of rural development, development of entrepreneurship, mobilisation of local savings, linkages with bigger industries, provision of regional balance by spreading investments more evenly, provision of avenue for self-employment and provision of opportunity for training managers and semi-skilled workers. The vast majority of more developing and less developing countries rely on dynamism, resourcefulness and risk tasking of small and medium enterprises to trigger and sustain process of economic growth. Despite these observations, argument exist as to whether Small Scale Enterprises have any positive impact of economies with such arguments coming under the shade of different growth theories. In this study, we have looked at the relationship as well as impact small scale enterprises on Nigeria's economic growth. The result shows that a unit increase in Small-Scale Capital financing (SSCF) will bring about 59.9% increase in economic growth (RGDP), a percentage increase in Interest Rate (INTR) leads to a 4.9% decrease in the dependent variable (RGDP), A percentage increase in Inflation (INFL) decreases RGDP by 35% .The variables are statistically significant.
233 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy.
12.CONCLUSION Empirical investigation from all the studies reviewed in the literature, agreed that small and medium scale enterprises is a critical component of fast tracking economic growth and development. It was also observed that it has the potentials of fighting poverty through employment creation, wealth creation among others. Nigerian government has over the years devised policies and incentives for SSME's and having carefully reviewed all the studies in the literature and the econometric analysis of all variables employed in this study, the concluding result shows that SSMEs have a positive relationship with Nigeria's economic growth and have significantly impacted on the economy positively despite the harsh economic climate in Nigeria.
13. POLICY RECOMMENDATIONS With respect to the result of the study, we present the following recommendations: 1. Government should map out modalities towards protecting the growth and development of the Small and Medium Scale Enterprises in the country by tightening its import policies. 2. Government through the Central Bank of Nigeria (CBN) should create finance windows for the development of the small and medium scale enterprises in Nigeria and accessing such finances for the SME's development should not be too cumbersome for beginners with very low interest rate. The policy should have the same philosophy with the anchor borrowers schemed designed to stimulate agricultural production by the Central Bank of Nigeria.. 3. Government should create an enabling environment for the smooth operation of the small and medium scale enterprises in the country. Such enabling environments are the provision and maintenance of the existing economic infrastructures, removal of double taxation etc. 4. Government should intensify the fight against corruption as this monster is capable of damaging any policy framework designed by the government to stimulate economic growth in the country. 5. Interest Rates charged by Banks should be reduced so as to enable Micro finance Banks discharge their statutory functions effectively in empowering the growth and development of the Small and Medium scale enterprises. 6. In line with the Change begins with me campaign of the Federal Government of Nigeria, our attitude as Nigerians needs to change towards the consumption of our Made in Nigeria products in other to further stimulate economic growth in the economy.
REFERENCES Afolabi, M.O (2013). Growth Effect of Small and Medium Enterprises (SMEs) Financing in Nigeria. Journal of Africa Macroeconomic Review. Vol. 3, No. 1. Akeke, N.I. Sulaiman, L.A. Aribaba, F.O & Ogundipe, C.F (2014). Drivers of Economic Growth in Nigeria: Empirical investigation of Small and Medium Scale Enterprises (SMEs). Asian Academic Research Journal of Social Science and Humanities. Vol. 1, Issue 19. Adebusuyi, B. S. (1997). Performance Evaluation of Small-Medium Enterprises(SMEs) in Nigeria. Central Bank of Nigeria. Bullion. Vol.21 No.4
234 An Econometric Analysis of The Impact of Small And Medium Scale Enterprise Capital Finances on The Nigerian Economy.
Bakare, A.A & Babatunde, O.M (2014). Prospects and Challenges Facing Small and Medium Scale Enterprises in Oyun Local Government Area of Kwara state, Nigeria. Fountain Journal of Management and Social Sciences. Eigbiremolen, G.O & Igberaese, F.I (2013). Small and Medium Enterprises Financing and Economic Growth in Nigeria: An Econometric Analysis. Journal of Economics and sustainable Development. Vol.4, No. 19. Eniola A.A, Entebang. H, (2015). Government Policy and Performance of small and medium business management. International Journal of Academic research in Business and Social Sciences. Vol.5, No.2. Eze, T.C & Okpala, C.S (2015). Quantitative Analysis of the impact of small and medium scale enterprises on the growth of Nigerian economy. International journal of development and emerging economics. Vol. 3, No. 1. Izedomi, A. (2011). Principles of Management. Nigeria: Benin, Alfred-Joe Publishers. Jhingan, M.L. (2010). The Economics of Development and Planning, 39th Edition. Delhi: Vrinda Publications (p) Ltd. Kladiola, G. (2014). Small and Medium sized Enterprises; Growth Factors. European Scientific Journal. Special Edition, Vol. 1. Kalu, Chris U, Uzonwanne, Maria. C, Okeyika, Kene. O, Maduka, Olisaemeka, D (2015). Modeling MSMEs Financing and Economic Growth: Evidence from Nigeria. Mathematical Theory and Modeling. Vol. 5, No. 8. Oyinlade, A. O. (2005). Effective Financing of Small/Medium Scale Enterprises as an impetus for poverty alleviation in Nigeria: An analytical approach. International Journal of Economics and Development Issues, 51. Osaze. (1986). The Small Scale Enterprises and Economic Development of Nigeria. Article from ArticlesNG. Retrieved from http://articlesng.com/small-scale-enterprises-economic- development-nigeria/ Rostow, W. W. (1962). The Stages of Economic Growth. London: Cambridge University Press. pp. 2, 38, 59.
235 Veritas International Journal of Entrepreneurship Development (VIJED)
AN APPRAISAL OF PUBLIC PRIVATE PARTNERSHIP IN FINANCING OF INFRA STRUCTURAL PROJECTS IN FEDERAL CAPITAL TERRITORY, ABUJA, NIGERIA
CHARLIE Nwekeaku, PhD Department of Public Administration, Nasarawa State University, Keffi Nigeria.
And
PETER Anadi, M.Sc Department of Public Administration, Nasarawa State University, Keffi Nigeria. [email protected]
Citation: Nwekeaku. C. & Anadi, P. (2018). An Appraisal of Public Private Partnership in Financing of Infra Structural Projects in Federal Capital Territory, Abuja, Nigeria. Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University______Abuja. 1 (1) 236-247 ABSTRACT This research investigated the public-private partnership and financing of infrastructural projects in FCT. It examined the strategies adopted to check sharp practices and to ascertain the extent at which government is committed to ensuring active partnership with companies in line with the international best practices. The study employed both secondary and primary data in the analysis. The findings of the study showed that public private projects would improve infrastructural service delivery, infrastructural development and infrastructural growth. Financing of infrastructure at present is still the business of the government. The study recommends that in order to solve the perennial problems of financing infrastructural projects in FCT, Abuja Nigeria, government has to encourage public-private partnership. More so, as noted from this study, infrastructural development in the F.C.T Abuja is still in its elementary phase, as there are still deficit of infrastructure in the Federal Capital Territory.
Keywords: Infrastructure, Partnership, Financing, efficiency and service delivery ______
INTRODUCTION The role of public-private partnership in financing infrastructural projects in Nigeria, particularly in the Federal Capital Territory, Abuja is so crucial and cannot be overemphasized. Infrastructural projects, according to Jeffrey (2009) are the technical structures that support a society, such as roads, water supply, sewers, electrical national grids, telecommunications, and so forth, and can be defined as the physical components of interrelated systems providing commodities and services essential to enable, sustain, or enhance societal living condition. Nigeria as a state has limited infrastructural
236 An Appraisal of Public Private Partnership In Financing of Infra Structural Projects in Federal Capital Territory facilities. Limited access to poor quality infrastructure has been identified as the key constraint to growth in Nigeria. For instance, low quality and unreliable electricity is often cited as the biggest bottleneck to business growth in the country. Transport and telecommunication have been highlighted as major constraints that hinder connectivity between agents and markets (FGN, 2008). The adequacy of infrastructure helps to determine one country's success and another's failure in diversifying production, expanding trade, coping with population growth, reducing poverty, or improving environmental conditions. Infrastructure and its related services are critical to the operation and efficiency of modern economy. They are essential inputs in the provision of goods and services which significantly affects the productivity, cost, and competiveness of the economy. Consequently, policy decisions regarding their provision and deployment have impact on national growth and development (FGN, 2008).
The backbone for the development of any nation is its physical infrastructure, such as, roads and bridges, power generation plants, power transmission and distribution networks, water and sanitation networks, seaports, airports, and railways. These infrastructural projects are highly capital-intensive in nature and exert a strain on public finances, and for a developing country, such as, Nigeria which has limited resources at her disposal to finance these infrastructural projects. It is also important to note that public private partnership is an appendage of privatization. Even when the fund is available, the provision and maintenance of infrastructural projects have proved disappointing; investments have been inefficient; maintenance has been haphazard; services and access have been poor. As a result public sector authorities in developing countries, such as, Nigeria, are constantly on the lookout for alternative sources of fund to finance infrastructural projects, and one of such sources is investment by the private sector through the public-private partnerships.
Public- Private Partnership (PPP) has helped immensely in the execution of some infrastructural projects in Nigeria, particularly the Federal Capital Territory, Abuja. According to Osborn (2012), public-private partnership is a contractual agreement that gives a private organisation responsibility to provide a facility or a service that has traditionally been provided by a public entity, such as, state agency or a local government. Responsibilities can include design construction, renovation, operation, maintenance, or financing of practically any service or facility that benefits the public. It has become imperative that the government alone cannot muster the resources (finance and expertise) to meet its infrastructural challenges, and the involvement of the private sector is not just desirous, but necessary. It is not surprising that a majority of infrastructural projects currently executed at both the local, state and federal government levels are powered by the public private partnership. Due to the inability of the government to adequately cater for various capital-intensive infrastructural projects and maintain them properly, the framework of public private partnership has helped the government to share its infrastructural financing with the participation of the private sector, and by so doing, there is considerate acceleration in the provision of infrastructural facilities; speedy, efficient and cost effective delivery of projects; innovation and diversity in the provision of public services; effective utilization of state assets to the benefit of all users of public services; and
237 An Appraisal of Public Private Partnership In Financing of Infra Structural Projects in Federal Capital Territory greater accountability for the provision and delivery of quality public services. A good example is Garki hospital in Abuja municipal Area where service delivery has been optimal since it was handed over to private managers under Public Private Partnership arrangement. It should be acknowledged that public-private partnership plays a significant role in the financing of infrastructural projects, and it is apparent that these dynamic partnerships between the public and the private sectors have become inevitable across the globe. Therefore, any nation, with reference to Nigeria, should not expect a meaningful and accelerated national growth and development if the public private partnership approach to financing infrastructural projects is neglected. However, for any country to achieve massively in its physical infrastructure there is need to allow private sector participation in some public sector programmes and projects for improved service delivery.
Public Private Partnership as a framework is a programme meant to help governments all over the world to achieve and enhance their long term infrastructure needs. It is important to note that modern public private partnership began in Britain in 1992 when the conservative Government of John Major introduced the Private Financing initiative (PFI) which became the first systematic programme aimed at encouraging public-private Partnerships. Whereas in Nigeria the Federal Government inaugurated the infrastructure Concession Regulatory Commission in late 2008 to drive the program, and to be guided by the ICRC Act 2005 and the Public Procurement Act 2007. The overwhelming objective of the Public-Private Partnership policy is to ensure that Nigeria has the infrastructure that meets the needs of a modern economy in the 21st century (FGN, 2008:7).
Having been glowingly spoken about by its proponents, questions have arisen as to the roles PPP will be playing in financing infrastructures in Nigeria as a country in general and Federal Capital Territory, (FCT), Abuja in particular. Despite the numerous advantages inherent in this policy, such as, efficiency in public administration, effective delivery of quality products, timeliness etc., there are misperceptions about Public-Private Partnership that leads to criticism and quick dismissal without proper evaluation.
The contention of the critics on the efficacy of PPP in financing public infrastructure and service delivery in Federal Capital Territory (FCT) has been critiqued and the following are noted. a) The blueprint produced by the National Assembly set up to work out the modus operandi of PPP is cumbersome, confusing, unyielding and contains certain contradiction in terms of implementation, checks and balances. b) There is an allegation that in 1999 when the Obasanjo administration brought Pentascope to manage NITEL, such arrangement was characterized with endemic corruption and inefficiency of a monumental proportion because public funds were placed in the hands of persons not elected or appointed (Kola, nd). Worst still, those implicated for wrong doing (i.e failed management organizations) were never punished. c) Many privately managed organizations, such as, banks, public companies etc, have collapsed or involved in poor utilization of financial resource in this country.
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The above, among others, explain why people are sceptical about the functionality as well as the sustainability of public private partnership concept in FCT.
Against this background, the work desire to assess the effectiveness of public private partnership concept in infrastructural financing and service delivery in FCT. The study provided empirical evidences on the efficacy or otherwise of PPP concept in Nigeria.
Public- Private Partnership The concept of public private partnerships has been defined and viewed from different angles by various scholars, authors and institutions. These include ways of managing and governing organisations, institutional arrangement for financial relationship, development strategy, as well as language game. The concept of public-private partnership (PPP) describes an array of possible relationships established among public and private sectors for the primary purpose of execution of infrastructural projects and other services (Li and Akintoye 2003; Anvuur and Kumaraswamy 2006). The World Bank [1999] defined Public private partnerships as arrangements, typically medium to long term, between the public and private sector, whereby part of the services or works that fall under the responsibilities of the public sector are provided by the private sector, with clear arrangement on shared objectives for delivery of public infrastructure and/or public services.
Whereas, the National council for public private partnerships (2000) on its part see Public Private Partnerships as a contractual agreement between a public agency (federal, state or local) and private sector entity. Through the agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility. On the other hand, the Asian Development Bank institute ABDI (2000) defines public private partnerships as collaborate activities among interested groups and actors, based on a mutual recognition of respective strengths and weakness, working towards common agreed objectives developed through effective and timely communication.
Similarly, Van Ham and Kopperyian (2001) identified public private partnerships as cooperation of some sort of durability between public and private actors in which they jointly develop products and services and share risks, cost and resources which are connected with these products through an institutional lens. Following from the above definitions it can be inferred that public private partnership as an entity was established in order to achieve a set objective. The parties involved ought to agree before embarking on any project be it service or production based. However, the National Council for public private partnership and Van Ham and Kopperyian (2001) on their part harped on the fact that the parties share in the risks and reward potential. The ABDI on its part pointed out the need to recognize the parties respective strength and weaknesses, which will be developed through effective and timely communication. In the same Vein the National Planning Commission (2002) defines Public Private Partnerships as a formal collaboration between a public
239 An Appraisal of Public Private Partnership In Financing of Infra Structural Projects in Federal Capital Territory body, such as, a Central Government or a State Authority, and one or more private companies generally with the objective of mobilizing private capital, management, technology and other resources as a means of enhancing infrastructure service delivery. Johnson(2010) describes Public Private Partnership as government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP. On its part, the International Monetary Fund (2004), sees Public Private Partnership as an arrangement where the private sector supplies infrastructure assets and services that traditionally have been provided by the government. Public Private Partnerships are involved in a wide range of social and economic infrastructure projects, but they are mainly used to build and operate hospitals, schools, prisons, roads, bridges and tunnels, light rail networks, air traffic control systems, and water and sanitation plants. The definitions above emphasised the collaboration of government agencies and their private counterparts in order to achieve its set goal which is optimal service delivery.
Ndubuisi (2008) posits that a public private partnership is in a cooperative venture between government organ and private sector firm for the provision of infrastructure or services. This has to do with an alliance which involves the public and private sector to undertake projects and share the risks involved in order to provide infrastructure/service. The Federal Republic of Nigeria (2008) opens that Public private Partnerships (PPPs) encompass a range of contractual relationships between the public and private sectors to provide or maintain infrastructure or deliver a service, including publicly financed partnerships and partnerships involving private financing. Flexibility may apply to the precise nature of the public/private collaboration and to the potential application of both economic (transport, power, water, etc.) and social (schools, hospitals, justice facilities, etc.) infrastructure.
Blackton (2009) defines public private partnerships as a common understanding of shared goals; a willingness to repartition responsibilities for their achievement; a continuing public private dialogue on what needs to be done to promote their realisation, and a supportive policy and institutional framework. Furthermore the Canadian Council of Public-Private Partnerships (2010) sees a public private partnership as a corporate venture between the public and private sectors, built on the expertise of each partner,that best meets clearly defined public need through the appropriate allocation of resources, risk and rewards. Capital (2010) defines public private partnerships as a sustainable effort between the public and private sectors, in which each contributes to planning and resources needed to accomplish a mutual shared objective. Again an international organisation OECD in Gbande and Kighir (2010) defines public private partnership as an arrangement between government and one or more private partners according to which the private partners deliver the service in such a manner that the service delivery objectives of the government are aligned with the profit objectives of the private partners and where the effectiveness of the alignment depends on a sufficient transfer of risk to the private partners. Emecheta (2011) stated that public private partnerships refer to contractual agreements formed between a public agency and private sector entity that allow for greater private sector participation in the provision of a public service.
240 An Appraisal of Public Private Partnership In Financing of Infra Structural Projects in Federal Capital Territory
According to the OECD (2011), public private partnerships (PPPs) are ways of delivery and funding public services using a capital asset where project risks are shared between the public and private sector; it is a long term agreement between the government and a private partner where the service delivery objectives of the government are aligned with the profit objective of the private partners. In the PPP, the government specifies the quality and quantity of the service it requires from the private partner. The private partner may be tasked with the design, construction, financing, operation and management of a capital asset and the delivery of a service to the government or the government to the public using the asset.
ZarZad (2012) posits that public private partnership is the collaboration between the public and private sectors aimed at the implementation of projects or provision of services traditionally provided by the public sector. This definition is concerned about the collaboration between the public and private sectors aimed at the implementation of projects that were supposed to be coined out by government establishments (www.ppp4krakow.net).
Barlow et al., (2013) define public private partnership as a contract between a public sector authority and a private party, in which the party provides a public service or project and assumes substantial financial, technical and operational risk in the project.
Essiet (2013) sees the public private partnership as a contractual agreement between public agencies and private sector entities for faster delivery of infrastructure, projects and services. He further stated that public private partnership borders on collaboration between public authorities and the private sector to finance, construct, renovate, manage, operate or maintain an infrastructure or service, which also involves risk sharing between the public and private sectors.
Osborn (2012) defines public private partnership as a contractual agreement that gives a private organisation responsibility to provide a facility or service that has traditionally been provided by a public entity, such as, a state agency or a local government. Responsibilities can include design construction, renovation, operation, maintenance or financing of practically any service or facility that benefits the public.From the foregoing, it could be deduced that the central features in the definitions of public private partnerships above are; contractual agreement, sharing of risks, joint implementation of projects or delivery of service for the interest of the government, private sector and the target beneficiaries. In the light of the foregoing, public private partnership as defined by the public and private sectors to execute a particular project or render a certain service jointly with shared risk and responsibilities.
The Concept of Infrastructural Projects The concept of infrastructural projects lack sufficient work of literature. However, in order to understand this concept clearly, it is pertinent to know what infrastructure means on one hand, and, projects on the other hand.
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According to the Wikipedia, infrastructure is the basic physical and organisational structures needed for the operation of a society or enterprises, or the service and facilities necessary for an economy to function. Sheffrinet al., (2003) define infrastructure as the set of interconnected structural elements that provide framework supporting an entire structure of development. It is an important term for judging a country's or region's development. According to Ndubuisi (2008) infrastructure refers to those physical structures that facilitate the production of goods and services, without themselves being part of the production process; often referred to as the “stock of capital good”, they include highways, airports, harbours, utility production and distributive systems, water and sewer systems, communication networks and energy networks.
Jeffery (2009) sees infrastructure as the technical structure that supports a society, such as roads, water supply, sewers, electrical national grids, telecommunications and so forth, and can be defined as the physical components of interrelated systems providing commodities and services essential to enable, sustain, or enhance societal living condition . On the other hand, Wikipedia defined project as temporary rather than permanent social systems that are constituted by terms within or across organisations to accomplish particular tasks under time constraints (Wikipedia).
A project is defined as a unique set of co-ordinated activities, with definite starting and finishing points, undertaken by an individual or organisations to meet specific objectives within defined schedule, cost and performance parameters. From the foregoing, having discussed the concept of infrastructure and project, it becomes pertinent to know what infrastructural projects are. Thus, infrastructural projects are temporary, medium or long range projects which are carried out by individuals, Government, or collaborative effort of both to achieve massively in setting up physical infrastructures that makes life worth living.
Scholarly Perspective on the Evolution of Public Private Partnership The public-private partnership approach to financing development projects was first practised in France (in one form or the other) around the seventh century, and during the eighteenth and nineteenth centuries in Britain and the United States respectively (Grimsey and Lewis, 2004 cited in Gbande and Kighir, 2010 : 117) Emecheta (2011) on his part argued that the public-private partnership concept is related to the joint public and private-sector funding for educational programmes, which originated in the United State during the 50s and 60s.
The origin of this practice may appear blurred, but one thing is certain, that it evolved out of the recognition that government alone could not meet the increasingly complex and challenging demands of the people, and that continuous borrowing by the government towards this end is politically unpopular as well (Tunji, 2009; Gbande and Kighir, 2010). The public-private partnership approach has become popular in both developed and developing countries and is accepted as the alternative to the traditional approach-where the state provides facilities and services (Akintola, Malthies and Cliff dn).
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In Nigeria, however, two events occurred between the late 1960s and the early 1970s, thatare of interest to the growth of infrastructural investment in the country. That is, the 1967 civil war-which destroyed many infrastructures, and the oil boom of the early 1970s. The oil boom provided the federal government with so much revenue thus, leading to the initiation of the second National Development Plan. In the plan, the government planned to reconstruct and rehabilitate the damaged economy-including woods, buildings, bridges etc (Gbande and Kighir, 2010). This initiative made the government responsible for the provision of almost every infrastructure in the country. After years of abysmal results or returns on investment in national infrastructure, the Nigerian government then realized that it has spread itself too thin over many operations and could barely manage any of them well, thus, bringing to the fore the need for alternative source for financing public projects.
The Nigerian's Perspective of Public Private Partnership At independence, the Federal Government was worried of economic development initiated by the post-independence development plans which had as its priority the economic and social infrastructure development of the country (Eyiuche, 2003). These infrastructures are the facilities and services that are necessary for boosting economic activities. They included the power and water supplies, transportation, road, health, school, et cetera. In the 1960's and 1970's the public sector was fully responsible for the provision and maintenance of these facilities. By the end of 1970's and the beginning of the 1980's up to the trend, government started to deregulate, liberalise, privatize and commercialize by involving private sector participation (PSP) through PPP arrangement. According to the former President OlusegunObasanjo in 2000, the situation is not independent of the down-turn of our social, political and economic situation. The government of the late President Musa Yar'adua also inaugurated the Infrastructure Concession Regulatory Commission (ICRC) in November 27, 2008 with a clearly defined mandate to develop the guidelines, policies and procurement processes of Public Private Partnership (PPP) that would help all Ministries, Department and Agencies (MDAs) of Federal Government to enter into partnership with the private sector in the financing construction, operation and maintenance of infrastructure projects in our country. The government of former President Goodluck Jonathan quite aware of the high rate of unemployment, poverty, problems of infrastructure deficit facing the economy held a meeting with the organized private sector in Lagos in July 2011 and declared his preference to Public Private Partnership (PPP) model to drive economic development. Consequent upon this, government promised to provide all enabling environment towards initiating and sustaining the PPP scheme for economic prosperity of our time.
Theoretical Framework The postulation in this research work is that a greater level of infrastructural development can be achieved in FCT, Abuja and Nigeria in general, if there is a concerted effort by the government (Public sector, private sector and the target beneficiaries to effectively carry out public private partnership. in this regard, the systems theory of management, propounded by Easton (1965) is adopted to the study. According to Easton, every system performs the input-output functions. The input-functions consist of demands and support, while the output functions comprise policies,
243 An Appraisal of Public Private Partnership In Financing of Infra Structural Projects in Federal Capital Territory programmes and projects, which are churned into the society through the bureaucratic process. The demands are the requests, appeals, criticisms, among others, made on the system by the people through the various channels such as the mass media, parliament, and delegation. Each sub-system plays vital role for the survival of the system. The systems theory, as described by Amobi and Nnabuike (1999) can be looked at as a united whole which is made up of interrelated parts. These parts which compose the unit are called subsystems and they contribute to the effective functioning of the whole and produces output greater than would have been the output of the constituents were they perform independently. In his contribution to the systems theory of management, Okoye (1997) stated that the emphasis of the systems theory is that an organization must be seen as a total system that has interrelated parts with a single purpose. This being the case, any defect or error in any of the pasts will definitely affect the entire system. Elaborating further, Okoye stated that the subsystems objectives must be compromised in order to achieve the overall objectives of the entire organisation.
From the foregoing, the systems theory, for the purpose of the paper, can be interpreted essentially in the following ways: I. Wider consultation with the critical stakeholders (the government, private sector and the target beneficiaries of PPP projects) in the process of formulation and financing the PPP projects. II. Joint implementation, monitoring and the evaluation of the PPP projects by the critical stakeholders. III. Allowing greater liberty between the critical stakeholder to express themselves through personal and group participation in planning and implementing infrastructural projects through the PPP. Therefore, the government to be relevant to the people on the one hand and for the government to achieve comprehensive and sustainable infrastructural development, on the other hand, there is need for the adoption of roles and responsibilities for the critical stakeholders in infrastructural projects administration.
In the light of the foregoing, this study is advocating for participatory approach to financing infrastructural projects through the public private partnership. Stated differently, the government which encompasses the public sector, the private and the target beneficiaries of PPP should come together (participatory approach) with concerted effort to effectively finance and successful execute the PPP projects.
PPP in FCT In the FCT, Abuja PPP has not gained currency in concrete terms, as most of the projects are still being managed by the Federal Capital Development Authority, FCDA. We, however noted that the Garki General Hospital is under a PPP arrangement between FCDA and Niser Premier on 60 and 40 per cent, respectively management, including financing basis. Also, the FCT Water supply, waste management and some public parks are under PPP arrangement.
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We interviewed 60 respondents, comprising40 potential beneficiaries and 10 staff that were randomly selected within 10 working days. The areas of interest included prompt attention to patients, the charges to patients, availability and efficacy of drugs, satisfactory service rendered, availability of medical personnel, among others. For the others, service delivery, cost of services and satisfaction were the foci of the interviews.
The Findings This study has empirically investigated and analyzed public-private partnership in financing of infrastructural projects in FCT, Abuja Nigeria: The existing relationship between public private projects and improved infrastructural service delivery was investigated. The empirical findings and result show that a public private project has positive effects on improved infrastructural service delivery. Furthermore the study revealed that improved infrastructural service delivery can be achieved through public-private partnership in Nigeria F.C.T. In the course of the research the relationships between public private projects and infrastructural development in the F.C.T was also studied, the result showed that positive relationship existed between public private projects and infrastructural development, more so public private projects could be used to improve infrastructural development in the F.C.T. Finally, the study investigated public-private partnership in line with the international best practices and how it relate to infrastructural growth. The findings showed that a public private partnership has positive relationship on improved infrastructural growth. Furthermore, the study revealed that infrastructural growth could be achieved through public-private partnership in F.C.T.
CONCLUSION The following conclusions were drawn from the investigation: Studies regarding financing of infrastructural projects in Abuja have been conducted throughout the past years. Different approaches from government to private have been proposed and examined . The urgent need for a shift from the current traditional practices to a more practical approach of financing infrastructural projects in FCT through PPP process is advocated for. Furthermore, this study is in agreement with the fact that public-private partnership encourages efficiency and effectiveness in infrastructural service delivery in the Federal Capital Territory. More so, public- private partnership showed a significant positive relationship with infrastructural development and infrastructural growth.
RECOMMENDATIONS Based on the findings and conclusions of this paper, the following recommendations were made as strategic: In order to solve the perennial problem of financing infrastructural project ineffectiveness in FCT, Abuja Nigeria, government has to encourage public-private partnership. The operational challenges constraining improved infrastructural service delivery in the Federal Capital Territory are traceable to inadequate infrastructural, men and equipment. There is an urgency to encourage public-private
245 An Appraisal of Public Private Partnership In Financing of Infra Structural Projects in Federal Capital Territory partnership in order to achieve improved infrastructural service delivery in Abuja. As noted from this study, infrastructural development in the F.C.T Abuja is still in its elementary phase, as there is deficit of infrastructure in the Federal Capital Territory. It is at present the business of the government. Public-private partnership has the potentials to improve infrastructural development in the F.C.T since there exists significant relationship between Public-private partnership and infrastructural development in the F.C.T. Government should put in place a structure to coordinate and boost Public- private partnership for infrastructural development. The rapid growing business in the FCT is a potential platform for infrastructural growth. Increasing Public-private partnership should be used to drive infrastructural growth. The government should key into this potential of Public-private partnership a major factor for infrastructural growth in the Federal Capital Territory. Public-private partnership shows significant relationship with infrastructural growth. Therefore, government should encourage Public-private partnership, to enhance infrastructural growth in the FCT.
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247 Veritas International Journal of Entrepreneurship Development (VIJED)
ENTREPRENEURIAL MARKETING PRACTICES AND POVERTY REDUCTION IN NIGERIA.
HANMAIKYUR Tyoapine John Ph.D Department of Business Administration College of Management Sciences Federal University of Agriculture, Makurdi - Nigeria
And
DIAKA-TINGIR Hembadoon Department of Business Management Faculty of Management Sciences Benue State University, Makurdi – Nigeria
Citation: Hanmaikyur, T. J. & Diaka-tingir, H. (2018). Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria ______.Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 248-263 ABSTRACT The effect of Entrepreneurial marketing practices on poverty reduction in Nigeria was examined in this paper. Using the methodology of review of existing literature, the paper has qualitatively examined this problem and found that although poverty reduction approaches and programmes in Nigeria are bedeviled with a plethora of problems, a major missing link is the absence and non implementation of entrepreneurial marketing practices that will effectively attack the poverty virus. Based on the result of the qualitative analysis, the paper concludes that appropriate entrepreneurial marketing practices are a basic necessity to create in Nigerians the necessary entrepreneurial mindset to not only be self-reliant but possess the ability to establish businesses that could create job opportunities for the teeming mass of the unemployed and by so doing, push poverty to the background in the country. The paper recommended (among others) a review of the curriculum being used in all schools and training centers in the country to include entrepreneurship marketing practices skills training. This will help equip the graduates of the nation's technical schools and other training centers with the necessary knowledge/information to be self sustaining and to effectively participate in the local and global poverty reduction strategies.
______Keywords: Poverty, Poverty Reduction/Eradication, Entrepreneurial Marketing Practices,
BACKGROUND TO THE STUDY Poverty is a word that is very popular and common with many economies of the world especially the developing ones including Nigeria. The concept which has a good number of negative telling effects
248 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria. on individuals, organizations and countries reduces the social and psychological prestige of its victims. It is a condition in which people lack satisfactory material resources (food, shelter, clothing, housing), are unable to access basic services (health, education, water, sanitation) and are constrained in their ability to exercise rights, share power and lend their voices to the institutions and processes which affect the social, economic and political environments in which they live and work. Poverty therefore represents a broad multidimensional concept which refers to phenomena that transform themselves in space and time. Its total elimination appears to be difficult as only a good number positive strategies are effective for its reduction especially when put in place at the right time and in the right proportion. Poverty easily emanate just as it is a very stubborn virus that negates reduction and elimination. Today, a good number of nations attacked and affected by the virus are employing a good number of approaches and strategies including the application of Entrepreneurial Marketing practices to curd the menace and possibly stamp it out. Entrepreneurial marketing practices when engaged in at the right time and in the right proportion have all it takes to facilitate adjustment to change by spotting opportunities to explore in disequilibrium and poverty ravaged situations. Such practices help individuals identify positive opportunities around them and utilize same by creating and growing new business firms. They also help to manage the production function by shouldering the risks and uncertainties of production thereby attacking poverty head on.
The phenomenon of entrepreneurship has gained unprecedented importance on a worldwide scale due to being regarded as a substantial source of new employment, innovation, poverty reduction and economic growth (Morales-Gualdron & Roig, 2005). Today, so much emphasis has been given to the existing association between entrepreneurship and other economic activities. But after reviewing the history of the economic literature, researchers have discovered clear evidence of the link between the concepts of entrepreneurship with all forms of human undertaking (Itodo, 2016). It is important to note that entrepreneurship is a human undertaking that works well and is closely interconnected with any human phenomenon. Because entrepreneurship, as a part of our society, operates in societal environment, entrepreneurship and all forms of societal activities are complementary to each other. Such Entrepreneurial Marketing actions when effectively put to action innovatively apply the collective knowledge, skills, and resources of the firm to market related needs of the business to enable the business add value to its goods and services and meet competitive demands need to be practiced in attacking poverty. Entrepreneurial Marketing (EM) practices and poverty are dynamic by their nature. It is also not surprising that such practices are capable of effectively tackling any form of poverty in any nation. It is against the above background that this study investigated the effect of Entrepreneurial Marketing practices on poverty reduction in Nigeria.
STATEMENT OF THE PROBLEM Over the years, poverty has increasingly done a lot of havoc to many countries of the world wit developing nations the worst hit. Nations of the world have always put together diverse kind of strategies to attack and reduce the menace of poverty in their countries. Strategies put forward in this regard have created only a little impact as the variability of outcomes in different nations has not till date failed to produce non-linearity of transmission of sustained positive impact and the existence of threshold effects any where in the globe. In Nigeria, different approaches and strategies have been employed by
249 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria. organizations and individuals to attack the poverty virus however, no known existing work, has however examined effect of entrepreneurial marketing practices on poverty reduction in the country. The literature on the impacts of different strategies and approaches on poverty reduction in the country has produced highly diverging outcomes, both positive and negative, as well as multiple causalities on poverty reduction. The outcome of such results are said to depend on many factors including: the strategy employed, historical period, and the place considered. This study investigated effect of entrepreneurial marketing practices on poverty reduction in Nigeria. This paper present entrepreneurial marketing practices as an easy way, strategy and technique that provide a comprehensive response to the poverty reduction in the country. Entrepreneurship is a relatively young paradigm in management science it has attracted an increasing interest among scholars. Rapidly changing and challenging development in the constantly evolving world puts entrepreneurship on the as one of the most dynamic forces in the economy and society. The rapid globalization of world markets and economies has encouraged nations to foster entrepreneurship marketing practices throughout their operations and in all human endeavors. This study was therefore conceived to establish how the gap created by the inability of diverse strategies and practices to stop or reduce the menace of poverty in Nigeria will be filled by the application of entrepreneurial marketing practices.
2.0 CONCEPTUAL CLARIFICATION AND REVIEW OF RELATED LITERATURE 2.1 The concept of poverty The concept of poverty includes material deprivation (i.e. food, shelter) and access to basic services (i.e. health, education). It also comprise multiple “dimensions of deprivation that relate to human capabilities, including consumption and food security, health, education, rights, voice, security, dignity and decent work (OECD, 2001).
Poverty is a condition in which people lack satisfactory material resources (food, shelter, clothing, housing), are unable to access basic services (health, education, water, sanitation), and are constrained in their ability to exercise rights, share power and lend their voices to the institutions and processes which affect the social, economic and political environments in which they live and work. Poverty also encompasses a range of nonmaterial conditions, such as a lack of rights, insecurity, powerlessness and indignity. The combination of these two types of conditions provides a more complete understanding of poverty. It also makes it more difficult to measure poverty and to evaluate the effectiveness of poverty reduction activities. Even finding an adequate definition is difficult and many policy statements prefer to describe the nature of poverty instead of providing a specific definition. In their submission, ILO, (2003) defines poverty as a vicious circle of poor health, reduced working capacity, low productivity and shortened life expectancy. To OECD (2001), poverty is comprises multiple “dimensions of deprivation that relate to human capabilities, including consumption and food security, health, education, rights, voice, security, dignity and decent work. In their attempt to attack poverty, the World Bank (2001), accepted the view that poverty transcend beyond material deprivation (measured by an appropriate concept of income or
250 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria. deprivation) but also low achievements in education and health. It broadened further the notion of poverty, however, to include vulnerability and exposure to risk, and voicelessness and powerlessness. The notion of power and voice has also been accepted by a number of bilateral development agencies. For example, SIDA (2002), in its poverty reduction policy paper, notes that poverty “robs [people] of the opportunity to choose on matters of fundamental importance to themselves [and] the essence of poverty is not only a lack of material resources but also lack of power and choice. It is not always clear whether the lack of voice and power should be considered part of the definition or condition of poverty or, more specifically, as one of its causes. It is probably both. In attacking Poverty, the World Bank accepted the view that poverty encompassed not only material deprivation (measured by an appropriate concept of income or deprivation) but also low achievements in education and health (World Bank, 2001).
On Their part, Social Scientists recognize the need to broaden the definition of poverty which Kankwenda (2003) confirm to be a multidimensional phenomena influenced by a wide range of factors. These include poor people, lack of access to income earning and productive activities and to essential social services. The Copenhagen Declaration of 1995 seems to shed more light on what really constitutes poverty when it assets that Poverty has various manifestations, including lack of Income and productive resources sufficient to ensure sustainable livelihood; hunger and malnutrition, ill health; limited or lack of access to education and other basic services, increase morbidity and mortality from illness, homelessness and inadequate housing; unsafe environments, social discriminations and exclusion. It is also characterized by a lack of participation in decision and in civil, social and cultural life (Edoh 2003:68). On its manifestation, Adejo (2006) agrees that poverty manifests in poverty of history, poverty of intellect and poverty of ideology. But irrespective of where its manifest, the deprived are most often the poor i.e. people with insufficient income, inadequate food intake, lack basic healthcare, lack shelter and safe drinking water, poor environmental cleanliness, lack access to basic education and skills, ignorant of fundamental human rights, access to information etc. The above submission is a proof that poverty manifests itself from many sources. For the purpose of this paper, poverty will be conceived as a condition in which people lack satisfactory material resources (food, shelter, clothing, housing), are unable to access basic services (health, education, water, sanitation), and are constrained in their ability to exercise rights, share power and lend their voices to the institutions and processes which affect the social, economic and political environments in which they live and work.
2.1.1 Poverty in Nigeria The existence of Poverty in Nigeria is not in dispute as the virus is real, serious and alarming in the country. The menace is so endemic and prolonged that many Nigerians see it as part of life. Today, many studies have confirmed and exposed the high dimensional level and the extent of poverty in the country (Igbe, 2017). The development has degenerated to a level where the quality of life of the average Nigerian citizen has progressively worsened with a little or no hope in sight. In a similar submission, Obadan and Odusola (2001), affirm that the per capita income of Nigerians slipped
251 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria. from a high of over 1,280 dollars in 1980 to a low dollar in 1995. Many other studies among them Odion, (2009) have painted a grim picture of a nation trapped in a vortex of abject and abnormal poverty and declining productivity. Available statistics indicate how precarious life has become for the average Nigerian over the years in the face of suffocating levels of poverty. The Nigerian situation becomes more pathetic when compared with other less endowed developing countries in Africa and other parts of the third world (Igbe, 2017). The author confirm that the figure for Nigeria was well below those for Botswana ($3210), Cote d' Ivoire ($6600), Egypt ($1,080), South Africa ($3,500), Mauritius ($3,710).
In another submission, Vision 2010 Committee Report as revealed by Edoh (2003) shows that: v50% of Nigerians live below the poverty line. vOnly about 40% have access to safe drinking water; vAbout 85% of the urban population lives in single houses with more than 7 occupants on the average. vOnly about 62% of Nigerians have access to primary health care. vMost Nigerians take less than one-third of the minimum required protein and vitamins (Report 2010 Committee; Edoh 2003).
Poverty in Nigeria is described by Odion, (2009) as encompassing. The author has gone on to partition poverty in the country into three namely: absolute poverty, relative poverty and subjective poverty.
Absolute poverty is a situation where an individual is constrained with limited financial resources and he is unable to meet his/her basic needs of life such as food, clothes, shelter and health. In reference to the World Bank (1996) individuals, families or groups are considered to be absolute poverty oriented when they lack the resources particularly real income to obtain the types of dots needed to enjoy some fixed minimum standard of living by a given society.
Relative Poverty according to OXFAM, (2003) is a situation where an individual's income is less than the average income of the population in the society being considered. The consequence is that the individual possess goods and services lower than those other persons in the society. The third aspect of poverty most common in Nigeria is the subjective poverty which is based on the individual perception about his/her standard of living. This feeling of being poor is a subject of the absolute minimum standing of living. Having considered the salient meaning of the two terms. The poverty scourge in the country has shown a rising tendency in the past couple of decades accounting for the nations low development indicators and its ranking along side the poorest nations in the world. It is therefore true that majority of Nigeria's population lives in poverty with insufficient income to cover minimum standards of food, water, shelter, medical care and schooling. Given the Nation's rich endowment with natural resources, its poverty profile presents an unfortunate picture of a rich nation in decline (OXFAM, 2003).
252 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria.
2.2 Entrepreneurial Marketing Defined A clearer understanding of entrepreneurial marketing must start with the conceptual clarification of the concepts (Marketing and Entrepreneurship) that constitutes the term. The term entrepreneurial marketing merges two formerly distinct disciplines and is used to describe the marketing processes of firms pursuing opportunities in uncertain market circumstances often under constrained resource conditions (Collinson & Shaw, 2001).
Kotler (2014) defines marketing as a scientific process, which he defined as “a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others”. The process of marketing therefore includes finding ways to provide people with products and services that they either need to function normally or desire to improve their well-being.
A common definition promulgated by the American Marketing Association: is that Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas; goods and services to create exchanges that satisfy individual and organizational goals. When marketing and entrepreneurship are married together then entrepreneurial marketing is said to be in place. It therefore makes sense that marketing should be observed not from a single viewpoint but from several: academic, practitioner and researcher, reflecting perhaps the different applications of the discipline to suit specific proactive requirements. Entrepreneurs are typically innovative, ready to take risk, creative, adaptive and task-oriented. Entrepreneurship practice seems to weather all marketplace storms with the application of its' principles. Now, is it putting marketing concepts into entrepreneurial practice or vice versa that account for this trend? This study aims at assessing and highlighting whatever is the case among the entrepreneurs sampled for study.
Entrepreneurial Marketing as viewed by Evans and Lindsay, (2015) refers to the effectual actions or the adaptation of marketing theory for the unique needs of small businesses. These effectual actions simultaneously address many issues: opportunity, innovation, risk, and resource constraints. Entrepreneurial Marketing is therefore a departure from traditional marketing practices which is considered not adequate in this highly dynamic business environment. Recent studies propose firms to be more entrepreneurial in their marketing when dealing with market uncertainty and ambiguity. A growing collection of evidence suggests that the more successful companies over time are those that are involved in entrepreneurial activity in the higher levels (Morris, Miles and Deacon, 2013). Entrepreneurial marketing utilizes a big picture perspective and focuses on creative approaches to innovation, risk management, resource leveraging, and value creation. The term describes a range of actions and responses organizations can employ to be successful and enhance their performance (Covin, 2014). Dzisu, Smile and Ofosu, (2014) compared the marketing approach of entrepreneurs versus managers with little entrepreneurial expertise and confirmed significant differences exist when marketing under uncertainty. They found managers without entrepreneurial expertise relied on predictive marketing techniques while the entrepreneurs marketing tactics used effectual or non
253 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria. predictive logic. Entrepreneurial marketing utilizes a big picture? perspective and focuses on creative approaches to innovation, risk management, resource leveraging and value creation. The concept of entrepreneurial marketing is a framework encompassing a range of marketing activities the organization will employ, particularly in a turbulent marketing environment.
Morris, Miles and Deacon, (2013) characterize entrepreneurial marketing as an organizational orientation having seven underlying dimensions. Four of these dimension proactiveness, opportunity focus, calculated risk taking, and innovativeness build directly on research examining the entrepreneurial orientation of the firm. Together with customer intensity, resource leveraging, and value creation, each dimension can be employed to a greater or lesser extent by an organization.
Naneh, (2014) explored the construct of entrepreneurial marketing and suggest that it is "the proactive identification and exploitation of opportunities for acquiring and retaining profitable customers through innovative approaches to risk management, resource leveraging value creation", in other words, they link between entrepreneurial orientation dimensions that are mentioned by (Nwankwo & Gbadamosi, 2011) and marketing identity. Ediri, (2014) described entrepreneurial marketing as responsiveness to the marketplace and a seemingly intuitive ability to anticipate changes in customer demands. An anticipation change is the core activity of the entrepreneur because he takes advantages of collecting market information from his/her networks relationships with minimum financial resources and restrictions on the time available to engage in market research. They see the intersection between marketing and entrepreneurship lies on the change focused, opportunistic in nature and innovative in management approach.
EM transcend beyond a mere interface involving marketing and entrepreneurship. The concept is both totally marketing and totally entrepreneurship. It is also both customer-centric and entrepreneur/innovation-centric. EM is also a synergistic opportunity-driven, innovation-oriented, proactive, risk-accepting set of processes that has all that it takes for a marketer to be competitive in the market. Firms that employ EM approaches and strategies are less hierarchical and can easily adapt to any type of environment. It is an effective route to achieving competitive advantage. EM oriented firms are all the time scanning the environment to uncover those things that will assist them attain competitive edge including the discovery or exploitation of new opportunities, evaluating and developing the opportunities at the right time and in the right proportion to achieve competitive advantage. Ghouri, Khan, Malik and Razzaq, (2011) opine that EM practitioners are expected to posses' qualities that can have all it takes to identify, shape, and take advantage of an opportunity as well as customer discovery, customer validation, customer creation and company building. The author maintain that to be successful and remain relevant in the market, EM should be combined with the perspectives of the founder (opportunity-focused) and the customer (innovation-focused) in the new venture creation insisting that EM is all about building out and shaping every available opportunity including exploring, examining, exploiting, and expanding opportunities in the market.
254 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria.
2.2.2 Entrepreneurial Marketing Practices Practices are actions and behaviours that are consistent, appropriate and feasibly carried out in a sustained period of time. For Such practices to be effective, they must adopt and utilize philosophies, strategies and activities associated with the marketing concept capable of winning competition and enhancing high performance. They must also represent a broad range of practices based on accepted principles. Ghouri, Khan, Malik and Razzaq, (2011), and Zaefarian, (2014) have suggested that sound and appropriate marketing practices are an important contributor to business performance. Achieving long term survival and performance in organizations transcend beyond putting in place general marketing practices (Dmitriy & Snyder, 2015). Though the basic principles of marketing are relevant to all kinds of enterprises, public enterprises have specific features (including external controls, lack of knowledge and skills of basic marketing ingredients – marketing research, market segmentation and marketing planning and control) that differentiate them from privately owned enterprises which also subject their marketing practices to opposing forces since they are not marketing oriented and market-focused. Itodo, (2016) confirm that because of the nature of public enterprises coupled with the challenging natire of the present busiess environment, these classes of enterprises face several specific marketing challenges that cannot be dealt with by merely looking at findings from the general marketing field. It is therefore very clear that appropriate marketing practices for public enterprises must in addition to the general marketing principles, have the right mix of entrepreneurial mindset, innovation, characteristics and approaches which are attributes of Entrepreneurial Marketing (here after refers to as EM).
Marketing practice in the 21st century is a tough one for professional marketing personnel. The marketplace is so dynamic that it is not enough to acquire the knowledge of the traditional marketing concepts and tools alone. The trends are changing and the marketplace is so dynamic, marketing practices require something extra by way of entrepreneurship skills to compliment it, a mindset for opportunity driven and innovativeness. It is very clear therefore that the kind of marketing behavior appropriate for the present dynamic and challenging business environment deviates from what is stereotyped in mainstream marketing (Nabamita & Deepraj, 2015).
EM practices are associated with marketing activities of firms that must be relevant to their stakeholders in trying and difficult times as is the case at the moment, making such firms to rely on creative and often unsophisticated marketing tactics that make heavy use of personal networks (Naelati, & SobrotulImti, 2014). This implies that EM practices are an integrative process designed to innovatively apply the collective knowledge, skills, and resources of the firm to market related needs of the business to enable the business add value to its goods and services and meet competitive demands. As opined by Itodo, (2015) EM practices must in addition involve a process by which firms derive strategies to enable them anticipate and respond innovatively to the dynamic business environment, adding that such efforts inevitably improve the competitiveness of business firms and eventually their performances.
Eggers, Hansen and Davis, (2012) opine that traditional marketing practice in the present challenging times is not appropriate in enhancing competitiveness and performance, Appropriate marketing practices in the present competitive and dynamic global business world must have the 255 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria. right mix of entrepreneurial mindset, innovation, creative, etc all of which are the characteristics, approaches and attributes of Entrepreneurial Marketing (here after refers to as EM) and which deviates from what is stereotyped in mainstream marketing (Nabamita & Deepraj, 2015). Entrepreneurial marketing practices can be considered a strong and flourishing alternative to the traditional marketing practices. It reflects a strategic entrepreneurial posture or behaviour in marketing, which is represented by an individual and/or organisation (Gruber 2004). These classes of marketing practices are an integrative process designed to innovatively apply the collective knowledge, skills, and resources of the firm to market related needs of the business to enable the business add value to its goods and services and meet competitive demands.
EM practices have been identified as one of the most important key ingredients for superior performance and global competitiveness in organizations. Such firms are associated with marketing activities of firms that operate in difficult and challenging environment and which make firms to rely on creative and often unsophisticated marketing tactics that make heavy use of personal networks (Naelati, & SobrotulImti, 2014). Such practices are an integrative process designed to innovatively apply the collective knowledge, skills, and resources of the firm to market related needs of the business to enable the business add value to its goods and services and meet competitive demands. Itodo (2015) adds that EM practices must in addition involve a process by which firms derive strategies to enable them anticipate and respond innovatively to the dynamic business environment, adding that such efforts inevitably improve the competitiveness of business firms and eventually their performances. EM practices have been identified as one of the most important key ingredients for superior performance and global competitiveness in businesses (Kraus, Filser, Eggers, Hills & Hultman, 2012).
2. 3 Theoretical Framework It has been empirically established that poverty theory are woven around the objects and subjects as well as the nature of the phenomenon Tella (1997). The first theoretical linkage between the entrepreneurship and poverty reduction is the theory of capitalist entrepreneurial theory that centers on crude exploitation of the poor by means of low wages and poor condition of services which allows for possible rise savings among the entrepreneurial class. The resultant inequality could lead to vast poverty among the peasant majority. Another theory on poverty is the individual attributes theory which posits that an individual's location in the society is hierarchy of income and wealth is presumed to be determined by his own motivation, attitudes and abilities (Hagen, 1962). Other notable theory is the national circumstantial theory which identifies factors such as geographical locations and natural endowments of the environments that a person find himself and other factors that include unemployment old age, physical disabilities etc as culprit of poverty Akeredolu (1975). In addition to this theory is the power theory which recognizes the structure of political power in the society as the sole determinant of the extent and distribution of poverty among the population. And lastly, the modern theoretical approach considers the income dimension as the core of most poverty related problems. Poverty may arise as a result of change in average income and change in the distribution of income. Assuming a relationship exist between poverty line (L) and average income of the population (Y) the poverty index will either decreases or increases. And if the higher average income is above the poverty line, there will be less poverty. But with one having a wider spread of income distribution of poverty will tend to be higher. 256 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria.
3.0 METHODOLOGY 3.1 Research Design In order to investigate the effect of EM practices on poverty reduction, this study adopt a qualitative approach. This decision is grounded on the fact that it has been observed to be the dominant approach for now in investigating EM practices phenomenon. Qualitative approach is the dominant state of the art research in the EM areas (Cason & Coviello, 1996), this is because of its emergent nature, it is understandable that a majority of the work range from exploratory to explanatory papers and conceptual to contemplative. The use of cases is a recommended method for researching EM and this study has its precedent in Mankelow and Merrilees (2006) who employed case studies to illustrate how trajectories can be identifies in the dominant strategic orientations within given phenomenon as they evolve. In this study, poverty and its effects were studied looking at how the concept of marketing is taken and the traces of EM in practice. The choice of the study area is informed by the fact that the area is known for entrepreneurship operations. The study assesses the applicability of the seven dimensions of entrepreneurial marketing (opportunity-focus, pro- activeness, innovativeness, calculated risk-taking, resource coverage, customer intensity and value creation) in the study area and identified the internalized applications which activate marketing actions. In order to achieve this, the study adopts a qualitative research method and the research design is both exploratory and descriptive in line with the suggestion of Bryman and Bell, (2003).
Exploratory design was employed in this study since the concept of entrepreneurial marketing is relatively new and lacks much of empirical evidence to support its practice in poverty reduction in the study area. Beside, researches in the entrepreneurial marketing literature point out that it would be more appropriate for the issue to be handled in a qualitative way, (Stokes, 2000). Based on the aforementioned dimensions of entrepreneurial marketing prevailing in the literatures, structured instrument for personal interview and guide for focused group discussion, and questionnaire were used in line with current qualitative researches in this field, (Kocak, 2004; Miles & Darroch, 2006; Jogaratnam & Tse, 2004;).
3.3 Methods of Data Analysis Data in this study was analyzed via descriptive analysis used in qualitative researches. Relevant studies reviewed were qualitatively analyzed to ascertain problems convergence or divergence in the entrepreneurial marketing approaches to poverty reduction.
4.1 Discussion and Implications This section presents the discussion framework on how the different dimensions of entrepreneurial marketing practices can be used to reduce poverty in the study area. . 4.1.1 Innovativeness Innovativeness uses entrepreneurship as the propensity to create and/or adopt new things and ideas, processes, or business systems, positions the poor in a better position to develop new value for their undertaking. According to Davis et al. (1991), entrepreneurship plays an important role not only in products and services, but also in finding creative and unique solutions including developing new technologies that will assist in poverty reduction. In line with Miles and Darroch's (2006) 257 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria. submission, entrepreneurial marketing's innovativeness dimension practices have all it takes to create superior value. Innovation is about introducing change to an existing system in a way that will make the new idea viable and valuable. Innovation is a process in which we develop new way of doing something. It may refer to incremental or radical changes related to the products, services, or processes. Developing new ideas differently and getting them into practice within marketing practices is considered an innovation. Innovation plays a fundamental role in the survival and growth of firms, especially as the rate of change in business is increasing (Coviello et al 2012). Whatever the kind of innovation, the basic axe of innovation remains the creation and the implementation of new ideas under some conditions that should be provided such as:
Willingness: including a company's capacity to change and the extent of its knowledge that change is possible;
Opportunity: - Supply side: technology exists or could be developed; - Demand side: regulatory requirement, opportunity to save costs or add to profits, pressure from workers or public;
Capacity: knowledge about better techniques and the level of skill base at the company. Innovation and its different types is considered as a complete system in the company included in the whole managerial system. Such a system is composed of several organizational elements: inputs, technological innovation process, resources that are internal and external factors and firm's innovativeness.
1- Inputs: the basic inputs that make up the process are technology, creativity and knowledge: 2- Process: it may be achieved on two levels: the research phase and the product development phase consists of stimulation, proposal selection, problem solving and output realization: 3- Resources: both internal and external resources; 4- Outputs: represented by: products, processes and support activities, and the general outcome of the innovative process that a business creates with the innovative capacities is that business's general innovative index. Of course these outputs will be an input to the system as feedback providing a base for forthcoming innovations.
4.1.2 Pro-activeness Proactiveness might be understood as the driving capability to poverty reduction which according to Teece, Pisano and Shuen, (1997) is done by organizing, managing and planning the use of available resources to plan and invest. This is also involved the adaptation to be relevant with the external changes of environment such as recessions. Latent needs are the need of the poor and the vulnerable especially when they are unconscious of them (Naver et al., 2004). This kind of need is the key to the fulfillment of customers. According to Oliver (1997), the three conceptual interpretations for the role of satisfaction and motivation have been suggested. These three include classic need satisfaction model, classic motivation model, and hierarchical motivation model (1997). When people do not have basic things that they need or want, the needs will become dominant and powerful. 258 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria.
4.1.3 Opportunity-Driven Opportunity-recognition mechanisms are said to be directly linked to entrepreneurial behavior and practice (Hills, Hansen, and Hultman 2005). Successful entrepreneurs tend to have a long-term orientation to opportunity creation and exploitation that is focused on more fully meeting all needs by employing creativity and innovation (Collingson and Shaw 2001).
EM is fundamentally an opportunity-driven and opportunity-seeking way of thinking and acting. (However) EM is not a panacea. It is an approach to marketing that becomes more appropriate depending on the firms' circumstances. Thus, when demand is captive, competition is passive or non-existent, suppliers have little bargaining power, technology is unchanging, the firm faces a very supportive regulatory environment, and margins are high and stable, the risks inherent in entrepreneurial efforts may not be commensurate with the rewards.
It has been established that any successful opportunity driven exercise starts with a clear analysis of the environment which is usually analyzed and understood with the eyeglasses of the beholder, the entrepreneur, and is constantly reinterpreted as the entrepreneur continuously interacts with the market (Hultman, 1999). Likewise, in the same business space, two entrepreneurs rarely act the same. They may be engaged in the same business environment, but because they perceive, interpret, and identify different possibilities, the space in which they take action may be completely different. This intuitive and often rich understanding of markets derived from daily customer contact deserves consideration in marketing theory building.
Hills & Hultman, (2011) opine that people with an entrepreneurial marketing practice perspective have a better awareness in filtering and evaluating opportunities in line with their current strategies and position in the economy. Such people go beyond their existing strategies and seek for new opportunities. Morris et al. (2002) emphasized the importance of proactively locating and making use of opportunities.
4.1.4 Resource Leveraging Morris, et al. (2002) opined that at its most basic level, leveraging rebers to doing more with less. Entrepreneurial marketing oriented practices are not, constrained by the resources they currently have at their disposal, they are able to leverage resources in a number of +different ways including (i) stretching resources much further than others have done before; (ii) putting to profitable uses resources that others are unable to utilize; (iii) using other people's resources to accomplish one's own purpose; (iv) complementing one's resources with another to create higher combined value; (v) using certain resources to obtain other resources. Basically, market oriented practices usually develop a creative capacity for resource leveraging. The ability to recognize a resource not being used optionally, see how the resource could be used in a non-conventional way, and convince those that control the resource to let marketer use it, involves insight, experience and skill, (Morris, et al. 2002). The ability of individuals to make use of limited resources at their disposal will go a long way to reduce poverty. We as humans must always use sourcing and outsourcing and should make decision based on our current situation and potential benefits of this decision.
259 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria.
4.1.5 Calculated Risk-Taking Risk-taking is one of the basic elements of entrepreneurial marketing practices. Risks are opportunity in disguise and until you take it up. Risk management is consistent with the entrepreneurial marketing practices. For success to be achieved in any undertaking, all people will have to act entrepreneurially in taking calculated and predictable risk in their investment decisions. It must be stressed that risk-taking approach should be handled with a calculable balance between entrepreneur's viewpoint on risk and level of risk to be taken. Reviewed studies have shown that Calculated Risk-Taking and a more autonomous, creative and innovative opportunity-seeking marketing focus can help transform an industry and enhance a firm's ability to either shape or create new product market arenas where it can enjoy competitive advantage.
4.1.6 Customer Intensity Entrepreneurial marketing lies in the interface just as it is an overlap between marketing and entrepreneurship. Miles and Darroch (2006) findings which point out that the necessity to proactively search for opportunities, increase the customer propensity in entrepreneurial marketing are of great importance. There is need to adapt EM practices by being customer oriented and reinforcing customer focus with a proactive perspective especially since Customers' demand and needs are of crucial importance for us. To be successful, there is need to keep to customers demands and needs.
4.1.7 Value Creation/creativity Creativity is a process that involves the discovery of new ideas or concepts. It deals with the development of novel, original, and unusual ideas that can be manifested in various ways. Creative developments are usually expressed by something tangible that can be seen, heard, felt, smelled, touched or tasted. The creation and delivery of value to customers is considered asan important marketing practice and the basis of all marketing. By focusing on creating customer value, organizations are developing a meaningful marketing orientation, which eventually leads to a greater competitive advantage in the market (Kotler, 2003). Scholars are quite unanimous on the fact that organizational success is reached by meeting and exceeding customers' current and potential needs better and faster than the competition. Value can be seen as the whole bundle of benefits which satisfy the customer's needs and wants. It is the perception of the customer concerning this package, and is always subjective depending on the perceiver. The focal point of EM is innovative value creation, on the assumption that value creation is a prerequisite for transactions and relationship. The task of the marketer is to discover untapped sources of customer value and create unique combinations of resources to produce value.
4.1.8 Creativity Contemporary approach to creativity assumes that everybody has basic capacities to produce creative work in their domain and that environment can improve the level and frequency of creative behavior. Creativity is a process that results in a novel work that is accepted as useful, tenable or satisfying by significant group of people at some point in time. Although the literature offers several perspectives and interpretations, this standard definition suggests that a creative work should be useful to a group of people, thus adds a societal aspect to the actual efforts involved in creating 260 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria. something new and by that integrates the requirements for originality and effectiveness. Similar perception was presented later by other researchers that provided interpretations and explanations to this process. It can be summed up by the definition of creativity by Sternberg who argued that “creativity is the ability to produce work that is both novel (i.e., original, unexpected) and appropriate (i.e., useful, adaptive concerning task constraints). The ability to be creative is sometimes perceived as a trait that some people are born with while others miss. However, contemporary approach to creativity assumes that everybody has basic capacities to produce creative work in their domain and that environment can improve the level and frequency of creative behavior.
5.0 Summary and Conclusion Poverty an unfortunate negative wind that is ravaging many economies of the world including Nigeria is condition in which people lack satisfactory material resources (food, shelter, clothing, housing), are unable to access basic services (health, education, water, sanitation), and are constrained in their ability to exercise rights, share power and lend their voices to the institutions and processes which affect the social, economic and political environments in which they live and work. The virus encompasses a range of nonmaterial conditions, such as a lack of rights, insecurity, powerlessness and indignity. It is a condition in which people lack satisfactory material resources (food, shelter, clothing, housing), are unable to access basic services (health, education, water, sanitation), and are constrained in their ability to exercise rights, share power and lend their voices to the institutions and processes which affect the social, economic and political environments in which they live and work.
5.1 Recommendations Arising from the findings of this study and Consequent upon these and other issues examined in the study, the following recommendations are made. i) Appropriate economic regulators in the study area should always put in place policies and stable regulations that will help individuals acquire skills that will aid them in formulating and carrying out appropriate marketing practices so as to remain relevant to themselves, families, environment and nations. ii) Individuals, organizations and countries should always carry out proper planning in their operations. Sound planning is a necessary input to sound decision-making which informs putting in place appropriate marketing practices at appropriate times and hence, improved performance. They should also always consider challenging situations and be prepared to meet them with preplanned practices. Realistic and sustained performance at all levels is only possible through a systematic analysis of the problems they are facing and mapping out appropriate entrepreneurial marketing practices that will overcome them through a proper understanding of the business environment. iii) Stakeholders should always adopt strategies that will assist the utilization of their strengths to exploit opportunities while avoiding its weaknesses. They should also imbibe investment culture and practice of plugging back profits. The socio-political ambitions of some SMEs operators may
261 Entrepreneurial Marketing Practices and Poverty Reduction in Nigeria. lead to the diversion of valuable funds and energy from business to social waste which in turn will affect their performance. iv) The successful working of any individual and organization irrespective of its size of operation depends on effective and appropriate training. Proper education should be offered to all citizens to properly position them in carrying entrepreneurial marketing practices that will take them out of poverty. vii) Since the environment is not static, entrepreneurial marketing practices need to be regularly and effectively evaluated so that those that are no longer relevant are replaced with relevant ones while those that are still relevant should be given a greater attention. People should employed several combinations of marketing practice to survive in the external marketing environment that is most often unfriendly. The practices should be made to cover all four key components of the marketing mix elements namely product, price, place and promotion. These marketing mix planning is important for enterprise survival, success and performance.
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Hills, G., & Hultman, C., (2011), “Influence from Entrepreneurship in Marketing Theory”, Marketing/Entrepreneurship Interface,” Journal of Research in Marketing and Entrepreneurship 1(Dec), 54–71. ILO (2003): “Working Out of Poverty”, ILO, Geneva. Itodo, L.S. (2015). Marketing. Ugbokolo, Supreme printers Kraus, S., Filser, M., Eggers, F., Hills, G.E., & Hultman, C.M. (2012). The entrepreneurial marketing domain: A citation and co-citation analysis. Journal of Research in Marketing and Entrepreneurship, 14(1), 6–26. Morris H, Miles, M.P. and Deacon, J.H., (2013). Entrepreneurial Marketing: Acknowledging the Entrepreneur and Journal of Research in Marketing and Entrepreneurship, Vol. 13, No.2, pp. 120-125. Hultman, C. (1999). “Nordic Perspectives in Marketing and Research in the Customer-centric Interrelationship. Journal of Strategic Marketing, 24 (7) 87- 112 Morris, M. H., M. Schindehutte and R. W. LaForge (2002). “Entrepreneurial Marketing: A Construct for Integrating Emerging Entrepreneurship and Marketing Perspectives,” Journal of Marketing Theory and Practice 10(4), 1–19. Nabamita Dutta, Deepraj Mukherjee, (2015),"Cultural traits and stock market development: an empirical analysis", Journal of Entrepreneurship and Public Policy, 4 (1) 33-49 Naelati Tubastuvi, N. and SobrotulImti' k. (2014) Factors affecting Business Performance the Small Medium Enterprises of Batik Pekalongan Central Jva, Indonesia. The 2nd IBEA – International Conference on Business, Economics and Accounting, Hong Kong. Naneh, N. B. (2014). An assessment of entrepreneurial intentions among university students in Cameroon. Mediterranean journal of social sciences. Nanni, A. J., Jr., J. R. Dixon, et al. (1992). "Integrated Performance Measurement: Management Accounting to Support the New Manufacturing Realities." Journal of Management Accounting Research 4: 1. Narver, J. and Slater, S. (1990) 'The Effect of a Market Orientation on Business Profitability, Journal of Marketing, 54,.20-35. Nwankwo, S., Gbadamosi, A. (2011) Entrepreneurship Marketing Principles and Practice of SME Marketing, New York, Routledge. Nwizugbo I.C. and Anukam, A.I. (2014) Assessment of Entrepreneurial Marketing Practices among Small and Medium Scale Enterprises in Imo state, Nigeria: Prospects and Challenges. Review of Contemporary Business Research. 3. 1. Odion, W. E. (2009). Millennium Development Goals (MDGs) and the Poverty Questions in Nigeria. in Omotor, D. G and Akpotor, A. S. (eds) Millennium development Goals and Challenges Abraka: Delsu Investment Nigeria Ltd. OECD (2001): Policy statement by the DAC (OECD) High Level Meeting on endorsement of the DAC guidelines on Poverty Reduction (Paris). Pitt OXFAM. (2003). Measuring Poverty in Nigeria. Abuja. SIDA (2002): Perspectives on Poverty (Stockholm: Swedish International Development Agency). World Bank (2001): Attacking Poverty, World Development Report 2000/01. Washington.
263 Veritas International Journal of Entrepreneurship Development (VIJED)
RELATIONSHIP BETWEEN ECONOMIC GROWTH, PETROLEUM PROFIT TAX AND VALUE ADDED TAX IN NIGERIA.
MUSA, Success Jibrin Ph.D Department of Accounting, College of Management Sciences, Veritas University, Abuja [email protected]
SUCCESS Blessing Ejura Department of Banking and Finance, International University, Bamenda, Camenroun. [email protected]
And
Nwachukwu, Mary Nkeiruka Department of Accounting, College of Management Sciences, Veritas University, Abuja [email protected]
Citation: Jibrin, M. S., Ejura, S. B. & Nwachkwu, M. N. (2018). Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax In Nigeria. Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) ______264-275 ABSTRACT This study analyzes the effect of petroleum profit tax and company income tax reforms on federal collected revenue in Nigeria; with a view to specifically examine the relationship between, company income tax reforms and petroleum profit tax reform on federal collected revenue for the period under review. This study used secondary data of 31 years spanning between 1984 to 2015 after necessary adjustments. The data generated were subjected to different statistical tests such as descriptive statistics, cointegration test and Ordinary least squares (OLS) regression method of data analysis, was adopted to test the hypotheses and unit root test of all the selected variables for the model were carried out using Augmented Dickey-Fuller (ADF) methodology. The Petroleum profit tax (PPT) and Company Income Tax (CIT) assume stationarity at 1st difference. The Petroleum profit tax (PPT) contributed the highest value to the Federal Collected Revenue (FCR) during the period, followed by Company Income Tax (CIT). The result of this research is free of auto-correlation and 94% of the systematic variation in Total Federal Collected Tax Revenue (TFCR) are being accounted for or explained by the variation or changes in the explanatory variables employed
264 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria. during the period of this research. Therefore, the model is good for forecasting as the variables involved are the major determinants of federally collected revenue in Nigeria. Based on the result of this research, we therefore, recommended that the government of Nigeria tax reforms agenda or policies should focus more on the reform of the Petroleum profit tax (PPT) and Company Income Tax (CIT) in order to derive maximum benefit from these components of tax as well as effort should be made and sustained for proper integration of Petroleum profit tax (PPT) and Company Income Tax (CIT) given their large contribution to federally collected revenue as revealed by our result .
Keywords: Gross Domestic Product (GDP), Petroleum Profit Tax (PPT) And Value Added Tax (VAT) ______
INTRODUCTION Governments require revenue to augment the spending needs to maintain an adequate level of public investment and social services. Taxes are the main source of raising revenue in both developed and developing countries (Saeed & Sheikh, 2011). Nigeria as a developing country has a very low tax to GDP ratio which is attributable to narrow tax base, inelastic tax system, complex tax laws, complex network of exemptions and tax incentives, weak tax administration and weak mobilization of provincial taxes (Taiwo, Samson & James 2015). A tax is one of the major sources of generating revenue for the government for the aims of providing infrastructure need of the citizenry and running government. Azubike (2009), in Ogbonna and Ebimobowei (2012) revealed that taxation is one of the major driver of every economy. They further stated that taxation is an avenue for government to raise more revenue needed to performing its responsibility to the citizenry. Tax can also be to other purposes, for instance, monitoring the economy, stabilizing the economy and carrying out the goals of economic growth and development. Value added tax (vat) has become a major source of revenue in many developing countries especially Nigeria. Evidence shows that in these countries, Value Added Tax (VAT) has become an important contributor to total government tax revenue (Ajakaiye, 2000). Shalizi and Squire (1988) found out that VAT accounted for about 30% of total revenue. This impressive performance of VAT in virtually all countries where it has been introduced according to Ajakaiye (2000) clearly influenced the decision to introduce VAT in Nigeria in January 1994 which replaced the old sales tax. It as a sales consumption tax is relatively easy to administer and difficult to evade and it has been embraced by many countries worldwide (Federal Inland Revenue Services, 1993).
Petroleum profit tax on the other band is the largest contributor to economic growth in Nigeria which has the highest Gross Domestic Product (GDP) growth rate in Africa. Since the British discovered oil in the Niger delta in the 1950's, the oil industries has becomes the main stake of the Nigeria economy according to statistics from the central band of Nigeria as of 2000, oil and gas expert accounted for more than 83 percent of Federal Government revenue as well as generating more than 40 percent of government budgetary revenue. This has made Nigeria to be mono dependent on oil as the only source of foreign income in the country. The Petroleum Profit Tax ACT (PPTA) 1993 provides for the imposition of tax on companies that are engaged in petroleum operations in Nigeria. Personal income tax (PIT) according to Anyafo (1996) is a direct tax levied on income of a person. He further defined a person as an individual, an ordinary partnership, a non juristic body and an 265 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria. undivided estate in general, a person liable to personal income tax has to compute his tax liability, file tax return and pay tax, if any according on a calendar year basic tax is payable for each of assessment on the profit of any company accruing in derived from brought in or received in Nigerian in respect of all kinds of income that is income derived from a trade business or investment. Thus the tax of companies in Nigeria is primarily on species of income having their source or deemed or sourced within their country as well as remained from 1996 the rate of companies income tax in Nigeria has been 30percent.
Several studies have been done on taxation and economic growth in Nigeria with contradictory results. For instances, Okafor (2012); Success, Success & Ifurueze (2012); Ogbonna & Appah (2012a); Okoli, Njoku, & Kaka (2014); and Akwe (2014) etc declare that 'taxation has a positive effect on economic growth. Others Brian, (2007); Muhammad, Madhia, Khalid & Abdus, (2013); Zawadi (2013) state the contrary that taxation has a negative effect on economic growth. From the empirical literatures reviewed, the findings from the studies above are contradictory hence hard to draw policy implication from. No study has been carried out on the relationship between economic growth, petroleum profit tax and value added tax in Nigeria to the best of our knowledge. This study is therefore carried out to fill all these gaps left opened in literature.
The objective of the study is as follows: 1. To investigate if there is any significance relationship between Petroleum profit tax and economic growth in Nigeria. 2. To investigate if there is any significance relationship between Value Added Tax (VAT) and economic growth in Nigeria.
Review of Related Literature Conceptual Framework Petroleum Profit Tax By provisions of the Petroleum Profits Tax Act in Nigeria, All companies engaged in the production and transportation of petroleum products to pay tax. The taxable income of a company involved in the extraction and transportation petroleum products comprises proceeds from the sale of crude oil and related products used by the company in its own refineries in addition to any other income of the company incidental to and arising from its petroleum operations.
The income (taxable income) of a company involves in petroleum products business is subject to tax at a rate of 85 percent, but this percentage is reduced to 65.75 percent for a period of the first 5 years of operation. If the oil companies operate under production sharing contracts they tax liability will be at a rate of 50 percent.
Value Added Tax in Nigeria John and Suleiman (2014) define Value added tax (VAT) as a consumption tax, levied at each stage of the consumption chain and borne by the final consumer of the product or service. The administration
266 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria. of VAT is relatively easy, unselective and difficult to evade. Value added tax is an indirect tax in which a sum of money is levied at a particular stage in the sale of a product or service. Olatunji (2009) explain that the walk towards VAT system in Nigeria started with acceptance of the recommendation of a study group on indirect taxation in November, 1991. The decision to accept the recommendation was made public in the 1992 budget speech of the Head of State. This resulted in setting up the Modified Value-Added Tax (MVAT) committee on 1st June, 1992 as recommended by the study group.
Olawale (2014) Assessed impact of Value Added Tax on Revenue Generation in Nigeria. This research work studied the impact of value added tax on revenue generation in Nigeria. The study is aimed at the appraisal of revenue generation in Nigeria. Secondary data were used in this study, the data were collected from CBN statistical bulletin also gathered from journals and textbook that is related to the research topic, the study collected data from 1994 to 2012. The result of the analysis showed that that there is significant relationship between value added tax and consolidated revenue generation in Nigeria. At 5 percent level of significance, the F-statistics computed value is 1186.6 which are significant at 5 percent significant level, we accept the alternate hypothesis and conclude that there is significant relationship between value added tax and consolidated revenue generation in Nigeria. However, for Nigeria to attain its economic growth and development, she must be able to generate enough revenue in order to meet up with the challenges of her expenditures in term of provision of social amenities and the running costs of the Government. The result of this study indicates that if more goods and services are taxed, the revenue base of the country will increase. Also value added tax bases are widened to bring the informal sector into the value added tax net so as to stem possible evasion even by the so faithfully complying under the old rate.
Furthermore, Owolabi and Okwu (2001) made empirical study of the contribution of Value Added Tax (VAT) to the development of Lagos State economy. They employed the tools of simple Regression Models to evaluate the effect of the contribution of VAT revenue to the economic growth of Lagos State economy. Development indicators are infrastructure development, environmental management, education sector development, Youth and social development, Agricultural sector development, health sector development and transportation sector development. The state economy was disaggregated into seven strategic economy sectors and simple regression models were specified to enhance isolated analysis of each sector. The analysis showed that VAT revenue contributed positively to the development of the respective sectors. However, the positive contributions were statistical significant only in the Agricultural sector. The study concludes that various sectors are yet to benefit significantly from the state government's expenditure of VAT Revenue.
Onaolapo, Aworemi, and Ajala,(2013) Assessment of Value Added Tax and Its Effects on Revenue Generation in Nigeria. The paper examined the impact of value added tax on revenue generation in Nigeria. The Secondary Source of data was sought from Central Bank of Nigeria statistical Bulleting (2010), Federal Inland Revenue Service Annual Reports and Chartered Institute of Taxation of
267 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria.
Nigeria Journal. Data analysis was performed with the use of stepwise regression analysis. Findings showed that Value Added Tax has statistically significant effect on revenue generation in Nigeria. The study recommends that there should be dedication and apparent honest on the parts of all agents of VAT with respect to the collection and payment and that government should try as much as possible to improve on the way of collecting value added tax. Also Olaoye (2009) studied the administration of VAT revenue in Nigeria with the objective of seeking ways of improving government revenue generation base in order to improve the economy. The study among other things, recommended on the need for government to increase awareness for the people to know the existence of VAT.
Petroleum Profit Tax Onaolapo, Fasina, and Adegbite, (2013). Analyzed of the effect of petroleum profit tax on Nigerian economy. In line with the objectives of this study; secondary data were obtained from central bank of Nigeria statistical bulletin covering the period of 1970 to 2010. In concluding the analysis, multiple regressions were employed to analyze data on such variables Gross Domestic Product (GDP), petroleum profit tax, inflation, and exchange rate were all found to have significant effects on the Economics Growth with the Adjusted R2 of 86.3 percent. Following the outcome of this study, it is therefore concluded that the abundance of petroleum and its associated income has been beneficial to the Nigerian economy for the period 1970 to 2010. Income from a nation's natural resource has a positive influence on economic growth and development. It is recommended that Government should transparently and judiciously account for the revenue it generates through PPT by investing in the provision of infrastructure and public goods and services. It is expected that the more effectively and efficiently revenue is utilized by Government to create growth, employment opportunities and wealth in the economy, the more willing taxpayers would be to meet their obligations to the Government and discharge their duties in the overriding goal of achieving national development.
Okoh, Onyekwelu, and Iyidiobi (2016). Investigated the Effect of Petroleum Profit Tax on Economic Growth in Nigeria. This research investigative the effect of petroleum profit tax on economic growth of Nigeria. They used income from petroleum taxes as proxy for PPT and used Gross Domestic Product (GDP) as proxy for economic growth. The study used expos-facto research design as secondary data were used for the analysis. Data were sourced from the Central Bank of Nigeria Statistical Bulletin and the Federal Statistical Bureau. The study covered twelve year period (2004-2015). Time series data were analyzed using the simple linear regression. The results reveal that PPT had positive and significant effect on Nigerian GDP.
Ogbonna, and Appah, (2012). Carried out another study on Petroleum Profit Tax and Economic Growth: Cointegration Evidence from Nigeria. This research examined the impact of petroleum profit tax on the economic growth of Nigeria. To achieve the objective of this paper, relevant secondary data were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin and the
268 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria.
Federal Inland Revenue Service (FIRS) from 1970 to 2010. The researcher used relevant econometric tests of Breusch-Godfrey Serial Correlation LM, White Heteroskedasticity, Ramsey RESET, Jarque Bera, Johansen Co-integration and Granger Causality. The results show that there exists a long run equilibrium relationship between economic growth and petroleum profit tax. It was also found that petroleum profit tax does granger cause gross domestic product of Nigeria. On the basis of the empirical analysis, the paper concludes that petroleum profit tax is one of the most important direct taxes in Nigeria that affects the economic growth of the country and therefore should be properly managed to reduce the level of evasion by petroleum exploration companies in Nigeria.
Adegbie and Fakile (2011). Assessed the effect Petroleum Profit Tax and Nigeria Economic Development. The broad objective of this study is to investigate the relationship between petroleum profit tax and economic development of Nigeria for the enhancement of the welfare of the citizens. Primary and secondary data were used to collect the research data, while chi-square and multiple regression statistical models were used to analyze the results of the field work. The findings revealed that there is a very strong relationship between petroleum profit tax and economic development of Nigeria, tax avoidance and evasion are major hindrance to income growth in this sector, poor tax administration is a problem to effectiveness and efficiency of this source of income, and lack of corporate social responsibilities is causing unrest in the crude oil production zone. The paper recommends the need for the government to make judicious use income generated for the benefits of Nigerians, and among others the need for tax reforms to address the issue of tax evasion and avoidance.
Ifurueze, Musa and Success, (2012). Assessed the Impact of Petroleum Profit Tax on Economic Development of Nigeria. This thesis is on the Impact of Petroleum Profit Tax on the economic development of Nigeria. Its primary objective is to ascertain the Impact of Petroleum Profit Tax on the growth of Nigerian economy for the period 2000 -2010. The method of analysis used was ordinary least square method, after the analysis the research findings includes: Petroleum profit tax impact positively on Gross Domestic Product of Nigeria and it is statistically significant. Also total oil revenue impact positively on Gross Domestic Product of Nigeria and it is statistically significant. It is therefore recommended that concerted efforts should be made to improve on the effectiveness and efficiency of the administration and collection of taxes by government and overhaul of the government agency responsible for the overseeing Oil Operations to allow for correct data capture be carried out.
Economic Growth in Nigeria Ogbonna and Ebimobowei (2012) examine the Impact of Tax Reforms and Economic Growth in Nigeria using relevant descriptive statistics and econometric analysis. They found that various tax reforms are positively and significantly related to economic growth and that tax reforms granger cause economic growth. This means that tax reforms improves the revenue generating machinery of government to undertake socially desirable expenditure that will translate to economic growth in real output and per capita basis.
269 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria.
Anichebe, (2013) conduct a study on the impact of tax on economic growth in Nigeria for the periods 1986 to 2010. He found out that a significant relationship exist between tax composition and economic growth. Umoru and Anyiwe, (2013) examine the effect of tax structure on economic growth in Nigeria. They employed co-integration and error correction methods of empirical estimation with an empirical strategy of disaggregation. They found out that direct taxation is significantly and positive correlated with economic growth while indirect taxation has insignificant negative impact on economic growth.
The Methodology RESEARCH DESIGN This research will use pooled data and will adopt ex- post facto research design. An ex- post facto research design is a research design which require the use of variables which the researchers does not have the power to change its original state or direction in the course of the research (Onwumere, 2009).
POPULATION OF THE STUDY This study covered the period 1991 to 2015. It concentrated on the use of data on GDP of Nigeria economy for the period as its dependent variables and data on petroleum profit tax and value added tax served as its independent variables.
METHOD OF DATA COLLECTION In order to lend empiricism to our wok, we employed the use of regression analysis. Data on GDP regressed on petroleum profit tax and value added tax.
Model Specification We have hypothesized that federal collected revenue depends behaviorally on the components of tax reform. Thus, such behavioral relationship can be given in equation 3.1 below. GDP = F (PPT, VAT) (3.1) Equation (3.1) can be re-specified in a stochastic form.
GDPt = ë 0 + ë1 PPTt + ë 2 VATt + Er---(1) (3.2)
Where ë 0 = constant, ë1 to ë 2 are regression coefficients of equation 3.2 Er = Error term; it is the surrogate of all other variables that influence the dependent variable which are not included in this regression equations. This model is in line with the model used by Oriakhi, D. E. & Ahuru, R. R. (2014), Okafor (2012) and Ogbonna and Appah (2011). Software E-view 7.1 version was used to estimate the model for the purpose of clarity and an unavoidable manual computational error due to the precariousness nature of time series data employed for this study.
270 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria.
Data Presentation Table 1: Data Presentation The data collected and analysis are presented below. Petroleum Gross Domestic Value Added Profit Tax Year Product (GDP) Tax (VAT) (PPT) 1991 545.67 0 38.6 1992 875.34 0 51.5 1993 1,089.68 0 59.2 1994 1,399.70 7.3 42.8 1995 2,907.36 20.8 42.9 1996 4,032.30 31.0 76.7 1997 4,189.25 34.0 68.6 1998 3,989.45 36.0 68.0 1999 4,679.21 47.1 164.3 2000 6,713.57 58.5 525.1 2001 6,895.20 91.8 639.2 2002 7,795.76 108.6 392.2 2003 9,913.52 136.4 683.5 2004 11,411.07 159.5 1,183.6 2005 14,610.88 178.1 1,904.9 2006 18,564.59 221.6 2,038.3 2007 20,657.32 289.6 1,600.6 2008 24,296.33 401.7 2,060.1 2009 24,794.24 481.4 939.4 2010 33,984.75 564.9 1,480.4 2011 37,409.86 659.2 3,070.6 2012 40,544.10 710.2 4,367.5 2013 42,396.77 795.6 3,719.0 2014 89,043.62 794.2 3,439.6 2015 135,690.46 406.0 1,782.4 Sources: CBN Statistical Bulletin of various years.
FIRS Gauge of various years. Where: Gross Domestic Product (GDP) VAT = Value –Added Tax, Petroleum Profit Tax (PPT) and NA = Not Available
Table 2: Descriptive statistics of the data used for this study are presented below: STD. JB P MEAN MAX MIN DEV TEST VALUE TFCR 2940.074 10654.70 11.30000 3501.887 4.854956 0.001453 PPT 864.2935 4367.500 4.800000 1165.883 13.06811 0.009673 CIT 210.5000 1207.300 0.800000 321.7359 16.61873 0.000246
Source: Researchers Computation
271 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria.
Note: xx==5% Significant Level, x = 1% Significant Level Table 2 shows the mean (average) for each of the variables, their maximum values, minimum values, Standard deviation and Jarjue- Bera (JB) Statistics (normality test). The result in table 2 provided some insight into the nature of the variables used in this study. Firstly it was observed that on the average, over the thirty- one year period (1984-2015), Federal Collected Tax Revenue (TFCR) Stood at 10,654,7000 billion, while the minimum value for the period amount to N1,130,000 billion. Note that, both our dependent and independent variables were first transformed into Log before arriving at the above result, to avoid having spurious results. We also observed that the average Petroleum Profit Tax (PPT) over the period was N8.642935billion, the maximum amount stood at N43.67500billion while the minimum value stood at N4.800000 billion.
This shows that PPT contributed the highest value to the Federal Collected Revenue (FCR) during the period, followed by Company Income Tax (CIT) = N12.07300billion during the period. Lastly, in table 2, the Jarue-Bara (JB) statistic which test for normality or the existence of others or extreme values among the variables, shows that all the variables are normally distributed at 1% and 5% level of significance .
Unit Root Result Augmented Dickey – Fuller (ADF) test was employed to test the stationarity of the variables. The ADF test was alone on Level Series and on first difference series. The decision rule is to reject stationarity if ADF statistics is less than the values of critical values at 1%, 5% and 10% in absolute terms otherwise, accept Stationarity when ADF statistics is greater than the critical values of 1%, 5% and 10% in absolute terms. The result of the ADF test in presented below in table 3.
Table 3: Augmented Dickey Fuller Test variable Levels 1st Difference integration Significant TFCR -2.05 -5.86 I (1) 5% PPT -2.01 -4.70 I (1) 5% CIT -1.58 -4.23 I (1) 5%
Source: Computed from E-view 9-0 by Author
Since the decision rule is to reject stationarity if ADF statistics is less than the critical values at 1% 5% and 10% values and accept stationarity when ADF Statistics is greater, the table above reveals that Total Federal Collected Revenue (TFCR), Petroleum profit tax (PPT) and Company Income Tax (CIT) assume stationarity at 1st difference.
272 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria.
Table 4 : Presentation of the Regression Result for Test of hypotheses. To test the hypotheses formulated for this study, we employed least square multiple regression analysis. To test our model I which are specified as
TFCRt = ë 0 + ë1 PPtt + ë 2 CITt + Er---(1)
The results obtained are presented below: Variable Coefficient t-Statistic Prob.
PPT 2.612055 9.354852 0.0000 CIT 2.009024 2.904411 0.0672 - - ECM 1.234123 3.251678
R-squared 0.944232 Mea n dependent var 3037.700 Adjusted R-squared 0.942240 S.D. dependent var 3518.585 S.E. of regression 845.6305 Sum squared resid 20022547 Durbin-Watson stat 1.927804 Long-run variance 855897.9
The coefficient of determination (CR2) and Adjusted R- Squared is given as 0.944232 and 0.942240 respectively. This shows that the explanatory powers of the variable are high. This implies that 94% of the systematic variation in Total Federal Collected Tax Revenue (TFCR) are being accounted for or explained by the variation or changes in the explanatory variables. Using Durbin- Watson (DW) statistic which we obtained from our regression result in table 4.4, it was observed that DW statistic was 1.927804 which is approximately 2, the acceptable rule .These imply that there is no autocorrelation problem since the DW value is approximately equal to 2 and that the model is well specified. Therefore, the variables in the model are not autocorrelated and that the model is reliable for prediction.
Error correction model (ECM) based on the negative coefficient of -1.234123 and is the speed of adjustment and it shows that 3.3% of the previous year's shocks adjust the equilibrium in the current year. P - Value of 0.00 which is positive and statistically significant P- Value, these further shows that the model used for this regression is well specified and it is not over parameterized and is an indication of stable log-run equilibrium relationship between the variables. In addition to the above, the specific finding from each explanatory variable from the regression model for the period is as follows:
Petroleum Profit Tax (PPT), based on the t -value of 9.354852 and P- value of 0.00, was found to have a positive influence on Federally Collected Revenue (FCR) and this influence was statistically significant at 1% since its P- value was less than 0.01 or 1%. This result therefore, suggest that we should reject our null hypothesis which states that reforms on petroleum profit tax does not significantly affect federal Revenue generation for the period under review in Nigeria. This implies that 1% increase in PPT will lead to FCR increasing by N6.84 billion and this result conform to our a priori expectation.
273 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria.
Company Income Tax ( CIT), based on the t—statistics value on 2.904411 and P- value of 0.06, was found to have a positive effect on Federal Collected Revenue and this effect was statistically significant at 6% since its P- value was less than 10% level. This result therefore suggests that we should reject our null hypothesis which states that reforms in Company Income Tax does not significantly affect Federal Collected Revenue in Nigeria. This implies that 1% increase in company income tax reform cost will bring about 267% increases in Federal Collected Revenue, and so should be encouraged. The regression result shows that Petroleum Profit Tax (PPT) has significant positive effect on Federal Collected Revenue (FCR). This findings confirm to our a priori expectation and also agreed with the findings of Ifurueze, Success & Success )2012( , Ogbonna & Appah )2012a(, AbdulRahamoh, Taiwo & Adejare )2013(.The study revealed that Company Income Tax (CIT) has significant positive effect on federal collected revenue in Nigeria. The study further revealed that Personal Income Tax has a positive and significant effect on federally collected revenue (FCR) In Nigeria.
CONCLUSION AND RECOMMENDATIONS However, in order to consolidate the benefits from tax reforms, effort should be made to achieve full autonomy for the Federal Inland Revenue Service (FIRS), tackle the hydra-headed monster of multiple taxation and promote accountability and transparency in government business so as to restore the confidence of the tax payer in the tax system. The Petroleum Profit Tax (PPT) and Company Income Taxes are revealed as major drivers of Federal Collected Revenue (FCR) based on their contribution to Federal Collected Revenue (FCR) as earlier discussed. The results indicated that both have significant positive effect on Federal Collected Revenue (FCR). We therefore, recommend that, government of Nigeria tax reforms agenda or policies should focus more on the reform of the Petroleum profit tax (PPT) and Company Income Tax (CIT) in order to derive maximum benefit from these components of tax as well as effort should be made and sustained for proper integration of Petroleum profit tax (PPT) and Company Income Tax (CIT) given their large contribution to federally collected revenue as revealed by our result and the petroleum downstream sector should be deregulated to enable many private companies to come in, which will earn the government tax revenue and mechanism to avoid diversion of tax collected by the agency saddled with such responsibility of collection and remittance to the federation account.
REFERENCES
Adesola, S. M .(2006). Tax Law and Administration in Nigeria, University of Lagos press, p. 25 Abdul-Rahamoh, O.A., Taiwo, F.H. & Adejare, A.T. (2013). The Analysis of the Effect of Petroleum Profit Tax on Nigerian Economy. Asian Journal of Humanities and Social Sciences (AJHSS) 1(1). Alli, B.D. (2009). Managing the tax reform process in Nigeria. The Nigerian Journal of Accountants, 42 (1): 45-51. Anyanwu, J.C (1997). Nigeria public finance. Joanne Educational Publishers, Onitsha.
274 Relationship Between Economic Growth, Petroleum Profit Tax and Value Added Tax in Nigeria.
Ayuba A. A. & Desmond I. E. (2016) The Impact of Tax Reforms on Government Revenue Generation in Nigeria . Journal of Economic and Social Development, Vol 1, No 1 Ehtisham .A(2012) the political-economy of tax reforms in Pakistan: the ongoing saga of the GST, Asia Research Center, Working Paper No. 33, London School of Economics and Political Science, London. James, A. & Moses, A. (2012). Impact of Tax Administration on Government Revenue in a Developing Economy- A Case Study of Nigeria. Mahon, J. E. Bergman, M. & Arnson, C. (2015) The Political Economy of Progressive Tax Reform in Latin America—Comparative Context and Policy Debates. Woodrow Wilson International Center for Scholars Columbia, MD, USA. ISBN: 978-1-938027-43-7. Levin, J. (2001). “Taxation in Tanzania,” WIDER Discussion Paper 2001/80, UNU Helsinki Mohammed, A. N. (2007). The impact of direct assessment tax on performance of internal revenue in Zamfara state. In Msc Accounting Thesis, ABU, Zaria. Odusola, A. (2006). Tax policy reforms in Nigeria. Research paper NO. 2006/03 United Nations University world institute for development economic research. Ogbonna, G.N. and Appah, E. (2012) .Impact of tax reform and economic growth of Nigeria: A time series analysis. Current Research Journal of Social Sciences 4 (1): 62-68, 2012. Okafor, R.G. (2012). The impact of tax reform in Nigeria's economic growth. European Journal of Business and management, 4 (19). 92-106. Ola, C.S. (2006). Income Tax Law for Corporate and Incorporated Bodies in Nigeria, Ibadan: Heinemann Educational Books Limited. Oriakhi, D. E. & Ahuru, R. R. (2014). The impact of tax reform on federal revenue generation in Nigeria. Journal of policy and development studies, 9(1), 92-107. Osoro, N.E. (1995), Tax Reforms in Tanzania: Motivations, Directions and Implications. AERC Research Paper No. 38. Saeed, A., & Sheikh, S. A. (2011). Tax reforms in Pakistan.. International Journal of Business and Social Science, 2(20), 187-194. Ifurueze, M.S.K , Success, M. J. & Success, E. B.. (2012). Impact of Petroleum Profit Tax on Economic Development of Nigeria. Taiwo, O.A, Samson O.D, and James U.M (2015) Impact of tax reforms on revenue generation in Lagos State: A time series approach. Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.6, No.8, 2015.
275 Veritas International Journal of Entrepreneurship Development (VIJED)
CORPORATE GOVERNANCE AND THE DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISE, (SMES) IN NIGERIA
CHARLES Nwekeaku, Ph.D Department of Public Administration Nasarawa State University,Keffi. [email protected]
Citation: Nwekeaku, C. (2018). Corporate Governance and the Development of Small and Medium Enterprise, (SMES) in Nigeria ______Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University Abuja. 1 (1) 276-282 ABSTRACT Corporate governance is the totality of mechanisms, processes and relations which empower the principal policies of an organization to control and direct its activities, policies and programmes for the attainment of its goal. The objective of this work is to x-ray how corporate governance can facilitate the development of small and medium enterprises (SMEs) in Nigeria for quick industrialisation of the country. Secondary data, collected through document observation, were used for analyses while, systems theory as propound by David Easton, was adopted as a framework of analysis. It is discovered that most SMEs in Nigeria are yet to adopt corporate governance and other standardized formal administrative practices and norms in their operations. It is recommended that application of corporate governance will improve the operational efficiency, profit maximization and reduction of risks by the SMEs in Nigeria.
Key words: Corporate, governance, efficiency, accountability, industrialization and development. ______
INTRODUCTION Small and Medium Enterprises, SMEs, have been adopted by many advanced countries of the world as the veritable instruments for sustainable economic growth and development. Since the 1970s unprecedented oil glint and consequent collapse of its prices in the international market, successive Nigerian regimes, starting with the second Republic, have preached and promoted the growth of SMEs for the sustainable development of the country's economy. In anearlier study of the world bank on Sub-Saharan Africa (1995) it was found that the share of the top three primary products in total exports of a dozen countries had fallen since 1970s as nearly all African countries continued to rely mainly on developed country markets with OECD-Europe being particularly important and in 1991 about 80 percent of Africa's total exports went to developed countries. Wikipedia (2010) noted that the above predicament made the adoption of the SMEs as the engine of economic development of the world, as SMEs have taken central stage. In European Union, SMEs comprised approximately 99% of all forms, and employed (among them) about 65 million people. Globally, SMEs accounted for 99% of GDP.
276 Corporate Governance and The Development of Small and Medium Enterprise, (SMES) in Nigeria
In terms of employment generation, available statistics indicate that in 2003, SMEs generated 69.8 per cent, and large firms 30.2 percent in Europe, 69.9 and 33. 1 percent by SMEs and large firms accounted for 50 percent of employment opportunities in the period (Europa, 2003). Similarly, Adegbite (1995) noted that SMEs permit greater disposal of industrial activity, made more room for greater sharing by people in the ownership of industrial enterprises, minimize regional imbalances, as well as break the concentration of economic power on few hands. Apparently impressed by the above statistics and concordant gospel of the SMEs as the elixir of the national economic woes of many countries, as well as the ever willingness to emulate the west, the Federal government also adopted it (SMEs) as the engine of her industrialization and economic development.
Regrettably, however, SMEs are yet to make any appreciating impact on the industrialization and economic development of Nigeria. A number of them are closing shops, while a sizeable number of them are gasping for breath from the choked business environment. Corporate governance holds much hope of resuscitating any comatose SMEsand invigorating them for operational efficiency and profitability. The evolution of corporate governance was facilitated by the publication of a series of reports, codes of best practices and legislation, all designed to address failing in the ways in which corporate business are conducted and managed. The collapse of Enron, a U.S. based energy giant, and Robert Maxwell's Empire, among others, prompted the adoption of corporate governance as the veritable instrument for operational efficiency and profit maximization of large and medium enterprises. Corporate governance has been defined as the act of externally directing, controlling and evaluating a corporation for operational efficiency (Valentine and Zheka, 2006). Sifuma (2012) defines corporate governance as a system of law and sound approaches by which corporations are directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby mitigating agency risks which may stem from the misdeeds of corporate officers.
Corporate governance was introduced in Nigeria following the code of best practices on corporate governance (2003 SEIIEDY) issued by the Securities and Exchange Commission in 2003, which was applicable to all public companies registered in Nigeria (Corporate prof, 2015). The general objective of this work is to x-ray how the application of cooperate governances will improve the operational efficiency, accountability, transparency and profit maximization of SMEs in Nigeria.
Theoretical framework Theory is a reliable instrument for the analysis and prediction reality.The Systems theory, as propounds by David Easton, is adopted as the framework of this study.Every system, according to Easton, performs the input and output functions.The input functions consist of demands and support, while the output comprises policies, programs and projects churned out through the bureaucratic processes. Every system is made up of several sub-systems which are seeming different and divergent, but functionally related.This means that every sub-system is fundamental to the existence and effective functioning of the system. A system overload will load to stress and if not promptly
277 Corporate Governance and The Development of Small and Medium Enterprise, (SMES) in Nigeria handled may develop into crisis and eventual system breakdown which is inimical to the authoritative allocation of values in the society.Small and medium enterprises, SMES, are important sub-system whose functioning is central or key to the industrialization and economic development of Nigerian.
What is SME? There is no generally accepted definition of SMEs among parishioners and schools in the fields, as different countries adopted different definitions for the same concept. In china, SMEs are classified as business enterprise whose annual turnover is below 300 million Yearn. But in retail and accommodation industry the maximum business turnover or revenue is $15million for SMEs (Nwekadu,2013). In Germany SMEs are business enterprises with a limit of 250 employees, while Belgiumhas a maximum of 100 employees for that category.The European Union, EU, has started standardizing SMEs, and categorises companies with fewer than 10 employees as “micro”, those with fewer than 50 employees as “small”, and companies with fewer than 250 as medium (European commission, 2003:361).
There is no clear clarification of SMEs in Nigerian.The Central Bank of Nigeria CBN defines a Small Scale Enterprise, SSE, as an enterprise whose annual turnover does not exceedN500,000,00, while the World Bank sees SSE as a business enterprise whose total equity capital does not exceeed 5million naira. The Nigerian Industrial Development Bank, NDB, sees a Medium Scale Enterprise, MSE, as an enterprise whose total equity capital is between N750,000,00 and N300,000,00. This amount is no longer realistic in view of the depreciating value of the Naira, as well as the unprecedented hyper inflation in the country (Nwekeaku, 2009). For the purpose of this paper, a small scale industry should be taken as any business enterprise whose total equity capital ranges between N500,000 and N10 million and usually managed by the sole proprietor who often combines the financial, administrative and marketing functions (Nwekeaku, 2013). The promotion of SMES is in line with the government policy of encouraging active participation in economy privacy sector participation has become important policy objective designed to achieve accelerated and sustained economic growth in emerging economic (UNIDO, 1991). Apparently impressed by the divergent gospel of the SMES as the elixir of national economic woes, the Nigerian government adopted as the engine of industrialization for sustainable economic growth and development. A number of policies and programmes have been designed for the promotion of SMES in the country.
What is Corporate Governance? Corporate governance has been defined as the mechanisms, processes and relations put in place by corporations which are controlled and directed by the principal publics of the organization with a view to encouraging accountability, transparency, discipline and prudence, among others. Corporate governance practices are affected by attempts to align the interests of the stakeholders with the operations of the organizations. The interest in the corporate governance practices of modern corporations, particularly in relation to accountability, increased following the high profile
278 Corporate Governance and The Development of Small and Medium Enterprise, (SMES) in Nigeria collapses of a number of large corporations during 2001 – 2002, most of which involved accounting fraud; and then after the recent global financial crisis (GRC, 2010). The desire to prevent inefficiency, maladministration and fraud in large corporations among the management and officers compelled the government to come up with measures that increased the participation of the owners of the organization in its administration gave rise to corporate governance. The owners of the organization or its stakeholders strive to control and direct both the internal and external structures of the organization in order to enthrone efficiency, probity, accountability, transparency and profitability in its activities, policies and programmes. The Nolan Committee Report (1995) identify the major principles of corporate governance to include selflessness, integrity, objectivity, accountability, openness, honesty and dynamic leadership. It is believed that when the stakeholders compel an organization to apply the above principles, fraud, inefficiency and other maladministration practices would be reduced drastically.
In Nigeria, the foremost code of corporate governance could be traced to the code of corporate governance for Banks and other financial institutions issued by the Bankers Committee in August 2003 (corporate Prof, 2016).The code identified 11 principles which include; ·Responsibilities of the board of directors; ·structure of the board of directors; ·Separation of the office of chairman and the chief executive officer; ·Appointment of board members via due process ·Regular meeting of the board of directors. ·Specification of the remuneration of board of directors ·Formal assessment of board of director's performance ·Risk management; ·Effective relations with shareholders; ·Financial disclosure by the directors; and ·Establishment of Audit Committee
It is expected that the application of the above principles will facilitate the enthronement of efficiency, accountability and transparency in organizations, including SMEs.
SMES and Corporate Government in Nigeria This period is certainly not the best of time for SMEs the world over. The recent global financial crisis has worsened the fortunes of SMEs in most parts of the world. In US and Western Europe, the fortunes of the SMEs are worrisome to the national government, as their debt burden is becoming unbearable.In Russia, the story is not better either. The Russian military intervention in Georgia worsened the liquidity problem of the SMEs, as the flight of foreign capital and consequent dearth of credits to SMEs worsened (Global financial crisis, 2010). Similarly, the China Banking Regulatory Commission (BRC), noted that since the global financial crisis, access to finance for china's small
279 Corporate Governance and The Development of Small and Medium Enterprise, (SMES) in Nigeria enterprises generally improved in 2009, but still was not good enough (CBRC, 2009).In the same vein,Young (2010) said that in South Korea, the Financial Supervisory Services report of the country's Central Bank noted that the ability to pay back debt had been weakening in the SMEs sector, andthat an interest rise could lead to greater financial distress in the firms. In Nigeria, the SMEs have come under severe threat despite the existence of over 25 commercial banks, several microfinance and mortgage institutions, other financial agencies, such as, Small and Medium Development Agency (SMEDAN). The credit crunch is biting hard despite the subsisting Small and Medium Enterprises Equity Investment Schemes, (SMEEIS), which requires all commercial banks in Nigeria to set aside 10% of their Profit After Tax (PAT) for equity investments and credits to SMEs (Nwekeaku, 2013). The current economic recession, aggravated by non-diversification of the economy, devaluation of the Naira, insecurity, inflation, low capacity industrial utilization, high cost of doing business, among others, have worsened the fortunes of SMEs in Nigeria. A number of SMEs also still encounter technical, managerial, administrative and structural problems.
RECOMMENDATIONS The adoption of corporate governance will invigorate, resurrect, empower and sustain our SMEs for rapid growth, development and profitability. Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from moral hazard and adverse selection. There are both internal monitoring systems and external monitoring systems of the corporate governance which SMEs can adopt to improve their fortunes. Shailer (2004), identifies the internal corporate governance controls to include the following: vMonitoring by the board of directions to safeguard invested capital vInternal control procedures and internal auditors through policies implementation and audit committee etc. vSeparation of power or balance of power between chairman, board of directors and chief executive officer, vFixed and graded remuneration based on individual positions and performance; and v Regular monitoring by shareholders, banks and others stakeholders to ensure probity.
The external corporate governance controls include but not limited to the following: vSerious competitions with rival organizations vRegular demand for and assessment of performance information, such as, financial statements vGovernment regulations and control of the conducts of firms vEffective monitoring of the labour market vEffective media publicity to help moderate the conduct of officers. vTakeovers by regular government agencies when performance is below official expectations.
280 Corporate Governance and The Development of Small and Medium Enterprise, (SMES) in Nigeria
CONCLUSION The ability of SMEs to generate employment opportunities, increase per capital income of the citizens and contribute to the Gross Domestic Product (GDP), among others, compelled many countries to embrace them (SMEs) as instruments of economic development. The Nigerian government has adopted SMEs as the engine of her national industrialization for economic growth and development. Regrettably, however, the Nigerian SMEs have come under unprecedented threats, ranging from technical, managerial, structural bureaucratic, financial to administrative problems, aggravated by corruption and general economic recession in the country. The application of the internal and external control mechanisms of corporate governance will resurrect our comatose SMEs, invigorate them with new skills and experiences, as well as empower them for due process, accountability, efficiency and transparency. Since the systems theory recognizes the importance of every sub-system for the existence and survival of the system, the adoption of corporate governance will enthrone SMEs as the critical elements for Nigeria's industrialization, economic development and national transformation.
REFERENCES Adegbite, E.O (1995) “Effective Growth and Survival of Small and Medium Enterprises in Nigeria in the 1990s and Beyond”, The Role of Policy in Ojo, A.T. (ed) Management of small and medium enterprises in Nigeria, Lagos, Pumark Nigeria Ltd. Corporate Governance (2010), Corporate Governance via GRC glossary, open compliance and ethics group, April 21, Retrieved, March 26, 2017. Nwekeaku, C.E. (2005), “Strategies for Effective Financing of Small and Medium Enterprises in Nigeria” Journal of Project Management Technology, Federal University f Technology, FUTO, Owerri, Vol. 3, No.2 Nwekeaku, C.E. (2008), Modalities for Financing of small and Medium Enterprises in Nigeria, “A paper presented at a zonal workshop for entrepreneurs in South East Zone by the Raw Materials Research and Development Council, RMDC, July 10-11. Nwekeaku, C.E. (2013) “Global financial crisis and financing of small and medium enterprises (SMES) in emerging Democracies” Journal of finance and Accounting research, Nasarawa State University Keffi Vol. 5, No1, March. Shailer, Grey (2004), An introduction to corporate governance in Australia, Sydney, Pearson Education. Sifima, A.P. (2012) “Disclose or Abstain: The prohibition of insider trading on trial” journal of international banking law and regulation. The corporate Prof (2013) “Historical Development of Corporate Governance in Nigeria” thecorporateprof.com/historical-development-of-corporategovernance-in –Nigeria The Nolan Committee Report cited in Ikyuior, E.1 (2016) Corporate Governance and Organizational Productivity: A study of Nigerian National Petroleum Corporation, NNPC, Abuja, 2004-2014. MPA Dissertation, Department of Public Administration, Nasarawa State University, Keffi. The World Bank (1978) Employment and Development of small business sector: policy publication of the World Bank, Washington D.C. UNIDO with Federal Republic of Nigeria (1991) Investors Guide to Nigeria, Department of industrial promotion, Vienna, Austria.
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Valentine, Z. and Vitality, Z. (2006), “Corporate Governance and Firms efficiency: the case of transition country” Journal of productivity Analysis, 25 (1), Ukraine. Wikipedia (2010), “Small and Medium Enterprises”, Wikipedia. Org. USA. Young, L.S. (2010), “Debt Problem may hit small companies” the Korean Herald, Vol. 5, No.l, March
282 Veritas International Journal of Entrepreneurship Development (VIJED)
THE CHALLENGES OF SMALL AND MEDIUM ENTERPRISES (SMEs) IN OBTAINING CREDIT IN AFRICA: A CASE STUDY OF BWARI AREA COUNCIL, FEDERAL CAPITAL TERRITORY (FCT), ABUJA, NIGERIA
CHIKA Ebenezer Duru, PhD. Department of Entrepreneurial Studies Veritas University, Abuja (The Catholic University of Nigeria) [email protected]
Citation: Duru, C. E. (2018). The Challenges of Small And Medium Enterprises (SMEs) in Obtaining Credit in Nigeria: A Case Study of Bwari Area Council, Federal Capital Territory (Fct), Abuja. 1 (1) 283-308 ______ABSTRACT This research study highlighted the issues facing Small and Medium Enterprises (SMEs) in federal capital territory in their quest to accessing bank credit (loans) from financial institutions (banks & non– banks) to undertake various activities; be it general business operations or carrying out expansion project all in the name of fulfilling the objectives as being job creators and helping to reduce poverty. In tackling this topic, the quantitative approach was adopted. Questionnaires were circulated to 80 SMEs in the Gwarimpa and Kubwa metropolis selected through a technique of convenience sampling. Based on the responses received through these questionnaires, the following major findings came to the fore. There are institutions such as bank and non-bank financial institutions that are willing to provide funds to SMEs but Nigeria SMEs are not able to meet the requirements of these financial institutions. The man requirements is the issue of collateral, which most SMEs cannot provide. Aside this is the other issue of small equity base of these SMEs among others. Secondly, those who are able to access this credit are also faced with high interest rates and short repayment periods making it very difficult to embark on any developmental or expansion projects. Another interesting revelation with regards to the high rate of defaults in repayment of loans contracted, relates to the tight Cash flow situations of these SMEs that is mostly due to difficulties in the management of the account receivables of the respective SMEs surveyed. The study concludes with some recommendations to help free up capital or credit to the SME Among the recommendations are encouraging financial institutions (banks & nonbanks) to establish factoring services, enforcement of the credit reporting act and finally provision of tax incentives for banks that lend to SMEs to encourage others to do same.
Key words: SMEs, Fiancial Institutions, Government Policy, GDPs, Collateral, Credits, operational and investment profits, National Board of Small Scale Industries (NBSSI). ______
283 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
INTRODUCTION Small and Medium Industries (SMIs) have been widely acknowledged as the springboard for sustainable economic development. According to UNDP (2013), developing countries including Nigeria, have since the 1970s shown increased interest in the promotion of small and medium scale enterprises for three main reasons: the failure of past industrial policies to generate efficient self- sustaining growth; increased emphasis on self-reliant approach to development and the recognition that dynamic and growing SMIs can contribute substantially to a wide range of developmental objectives. These objectives include efficient use of resources, employment creation, mobilization of domestic savings for investments, encouragement, expansion and development of indigenous entrepreneurship and technology as well as income distribution, among others. The development of any nation's economy as they are an excellent, source of employment generation, help in development of local technology, and develop indigenous entrepreneurs (Kuriloff, Hemphill & Cloud, 2013). The importance of small businesses to the citizens' standard of living and the nation's general growth cannot be over emphasized. Even co-existence of large-scale industries is seen as dependent on healthy activities of small businesses. However, small businesses in Nigeria have not been able to add value to the economy due to many challenges confronting their operations. It is important to note that an increasing amount of development plans that have been inaugurated by successive government in Nigeria to empower small businesses have not lived to their expectations (Kuriloff, Hemphill & Cloud, 2013). . Wert and Henderson (2009) explains that (SMEs) are now seen as a sub-sector of the industrial sector which is playing crucial roles in industrial development. This suggests that Small and Medium Scale Enterprises are very crucial in shaping the growth agenda of countries. Small and Medium Scale Enterprises (SMEs) as academically known over the years have had a great influence on the lives of individuals of the world's economy particularly, developing economies like Nigeria. The Small and Medium Scale Enterprises market consist of many businesses in the country and in the course of the years, grown to the level of becoming business merchant and service supplier to very big businesses that involves international and intercontinental conglomerates Mainly, SMEs have lead to the growth and expansion of businesses output, lead to increasing of activities of various businesses more especially in the field of manufacturing. Aside that, SMEs have led to the creation of job openings especially in the retail sector, and also causative to lengthening Nigeria export. The best performing economies in Asia are heavily based on SMEs which are major sources of dynamism in economic development. The requirements for SMEs to access the global market and upgrade their position within the international market as a result of trade liberalization are becoming increasingly difficult due to competition (Wert and Henderson, 2009). Beck and Demirgiic-Kun, (2004) suggests that the increasing prevalence of flexibility and specialization of SMEs has persuaded many business analysts to believe in the strategic role SMEs play in the industrial structure of any developing nation. But he noted that SMEs are quite vulnerable to external shocks due to the global competition from the liberalization of trade. There is reasonable assurance that given favorable policy environment, SMEs can successfully compete in the global market.
284 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
Objectives Of The Study The general objective of this research work is to access the challenges facing small scale medium enterprise in obtaining credit the federal capital territory case study of Bwari area council The specific objectives of the study include the following: 1. To find out the source (s) of funds/finance available to SMEs in Bwari area council 2. To examine challenges SMEs face when accessing micro-credit business owners in Bwari area council 3. To examine how lack of financial support and poor funding can lead to Finance problem of small-scale business. 4. To identify the effect of poor planning to the management in small-scale business.
Literature Review The literature review describes aspects connected to the study of the challenges faced by SMEs in obtaining credit in the federal capital territory. It therefore follows a particular layout. First, some definitions relating to SMEs are given, which is followed by looking at the characteristics of the Nigerian small scale and medium enterprise. This paves the way for the discussion of their contribution to the economic development and growth and also looked at literatures on the constraints SMEs faced in accessing credit. Attention will then be focus on the type of financing available to these SMEs without forgetting to also look at the sources of credit/finance for these SMEs. In the final sub-sections, we will delve into how SME development can be promoted and the importance of financial institutions (banks) in helping the development of these SMEs.
Characteristics of SMES in Bwari Local Government, FCT Abuja, Nigeria A distinguishing feature of SMEs from larger firms is that the latter have direct access to international and local capital markets whereas the former are excluded because of the higher intermediation costs of smaller projects. In addition, SMEs face the same fixed cost as Large Scale Enterprises in complying with regulations but have limited capacity to market product abroad (Beck and Demirgiic-Kunt, 2004). SMEs in the federal capital territory can be categorized into urban and rural enterprises. The former can be subdivided into 'organized' and 'unorganized' enterprises. Organized ones tend to have employees with a registered office and are mostly solely owned by an individual whereas the unorganized ones are mainly made up of artisans who work in open spaces, temporary wooden structures or at home and employ little or in some case no salaried workers. They rely mostly on family members or apprentices. Rural enterprises are largely made up of family groups, individual artisans, women engaged in food production from local crops. The major activities within this sector include: soap and detergents, fabrics, clothing and tailoring, textile and leather, village blacksmiths, timber and mining, bricks and cement, beverages, food processing, wood furniture, electronic assembly, agro processing, chemical based products and mechanics (Liedholm & Mead, 1987; Osei et al., 1993) as cited by (Kayanula & Quartey, 2000).
285 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
SMEs Contribution to Economic Development and Growth The private sector is the engine of growth of the economy therefore they must be given the necessary tools to increase their growth” (Anyima-Ackah, 2016). Economic development is a process of economic transition involving the structural transformation of an economy through industrialization, rising GNP, and income per head. Economic growth on the other hand, contributes to the prosperity of the economy and is desirable because it enables the economy to consume and contribute to more goods and services by increasing investment, increase in labour force, efficient use of inputs to expand output, and technological progressiveness. Any nation that experiences economic development and growth will benefit from improvement in the living standards especially if the Government can assist in growth by implementing complementary and growth-enhancing monetary and fiscal policies (Beck & Demirgiic-Kunt, 2004). The SME sector is considered very important in many economies because they provide job, pay taxes, are innovative and very instrumental in countries participations in the global market. Beck and Kunt (2004) stated that SME activity and economic growth are important because of the relatively large share of the SME sector in most developing nations and the substantial international resources from sources like the World Bank group, that have been channeled into the SME sector of these nations. SMEs account for nearly 93% of the registered businesses in Nigeria and therefore play an important role in economic development by providing employment opportunities, opening up new business opportunities, enhancing entrepreneurship, and fostering creativity among many other things. Wert and Henderson (2009) recognize them as the engines through which the growth objectives of developing countries can be achieved and are potential sources of employment and income in many developing countries.
Constraints Faced by SMEs in Accessing Credit Kuriloff, Hemphill and Cloud (2013) indicates that access to bank credit by SMEs has been an issue repeatedly raised by numerous studies as a major constraint to industrial growth. A common explanation for the alleged lack of access to bank loan by SMEs is their inability to pledge acceptable collateral. In their view the current system of land ownership and transfer regulations clearly retards and to some extend limits access to formal credit. First, due to lack of clear title to much usable land in Ghana, there is a limited amount of real property that can be put up as collateral. Second, a Government embargo on transfer of stool and family land has further restricted land availability for collateral. Finally, where title or lease is clear and alienable, transfer regulation needlessly delay the finalization of mortgages and consequently access to borrowed capital (p 24). Kuriloff, Hemphill and Cloud (2013) supported the view of Wert and Henderson (2009) that from the view point of private sector, problems related to finance dominate all other constraint to expansion (p 50). They claimed that the available of collateral plays a significant role in the readiness of banks to meet the demand of the private sector. Collateral provides an incentive to repay and offset losses in case of default. Thus collateral was required of nearly 75 percent of sample firms that need loans under a study, which they conducted on the demand supply of finance for small enterprises in Ghana (p 19). The study also indicated that 65 percent of the total sample firm had at various times applied for bank loans for their business. Nevertheless a large proportion of the firm had their application rejected by banks.
286 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
In his view small and medium enterprises are unable to assess loans because of the conditions attached to the banking methodologies. This he grouped into two:
Formal bank methodologies: These consist of several techniques to pre-screen clients and concentrate on relatively few large transactions. They include; feasibility studies, collateral, track record and minimum deposits.
Informal banking methodologies include: personal relations family connections and knowledge business relations.
SMEs face more challenges in doing business than large enterprises because of the difficulties in financing start-up and expansion. Brealey and Myers (2006) found that small firms tend to experience more difficulties than medium-sized firms, which also experience more difficulties than large firms. In most countries, especially developing nations, lending to small businesses and entrepreneurs remain limited because financial intermediaries are apprehensive about supplying credit to businesses due to their high risk, small portfolios, and high transaction cost. According to Brealey and Myers (2006), cost of transaction contributes to the inability of the SMEs to access finance. They are of the opinion that “if transaction cost of lending are high the net margin banks expect from loans operation do not compare favourably against safe investment represented by treasury bonds” (p 30).
Wert and Henderson (2009) also shared the same view that if a lender face information asymmetry, the issue often becomes somewhat persuasive authority he or she holds in ensuring repayment. These push up transaction cost as the probability of default is assumed to be high and has to be contained. Thus lenders may avoid lending to smaller or lesser known clients or impose strict collateral requirements when they do. They may perceive clients in ways that would overcome the latter own perception of the difficulty in obtaining formal finance. In investigating “whether lending to SMEs in the federal capital territory was more expensive that lending to larger enterprise in terms of loan screening, loan monitoring and contract enforcement, banks estimate that screening to gather information about the applicant and project, review the feasibility study, do the credit analysis and make a decision, an average of 16 man days for large scale applicant and that of small scale applicants takes 24 man days.
Types of Financing available to SMEs Brealey and Myers (2006) and Wert and Henderson (2009), like most writers on the subject of SME financing, described two basic types of financing, namely debt and equity. Hisrich and Peters (2005) and Anderson and Dunkelberg (2013) described debt as funds borrowed to be paid at a future date and a fee, referred to as interest to be paid an at agreed time schedule. The payments of interest are supposed to be done regardless of whether the firm makes profit or loss. Equity, on the other hand, is defined as funds contributed by entrepreneurs or investors who become owners or part owners of the
287 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa: firm and whose returns are primarily based on the profits. This implies that if a firm fails to make profits its owners do not get any returns. Generally, equity funds are long-term funds but debt may be short to medium or long-term. Hisrich and Peters (2005) mentioned another basic classification of funds: internal and external funds. Internally generated funds come from a number of sources within a company and are more frequently employed. They include operational and investment profits, sales of assets, extended payment terms, reduction in working capital and accounts receivable. Another important source of internally generated funds is expediting the collection of receivable accounts. This releases funds that may be locked up with suppliers and distributors for the firm's use. Sources that are external to a firm include owners, friends and relatives, commercial banks suppliers and distributors, government and non-government agencies.
Equity versus Debt 1. It is very important to carefully evaluate the reasons for the choice of one form of funding against another or a particular mix. A number of factors must be considered and they include the following: i. Purpose of funds The choice of the type of financing, that is, whether to use equity or debt depends on several factors and one such important factor is the intended purpose of the funds. Wert and Henderson (2009) note that the suitability of funds obtained and project for which funds are obtained is very important. Long-term funds as long-term debt may not be suitable for short term projects. This will burden the firm with the cost of servicing an unnecessary debt. Similarly, short-term debts are not appropriate for financing long-term projects since the loan may have to be repaid before the end of the project. Wert and Henderson (2009) concluded that a more flexible short-term debt is more suitable for short- term projects, whereas long term funds such as long-term debt or equity are more suitable for long- term financing such as acquisition of equipment or the construction of a new plant. The phenomenon is described by Brealey and Myers (2006) as “matching maturities” ii. Leverage and Owner's Equity Borrowing creates financial leverage since payments of interests add to financing costs. Thus a percentage of increase in the earnings before interest and tax of a firm will result in a higher percentage increase in the net earnings of the firm. Consequently, the value of the owner's equity will appreciate. Similarly, a percentage reduction in net earnings before interest and tax will lead to a greater percentage reduction in net earnings, and consequently, the depreciation of owner's equity. Therefore the use of debt results in higher earnings volatility and increase the risk to owner's equity. Equity capital does not result in financial leverage (Brealey and Myers, 2006; Wert and Henderson, 2009). iii. Riskiness Apart from the increased risk to earnings and owner's equity, debt financing poses another risk. When a firm has to honour its debt obligations with difficulty or is unable to honour the obligation at all, then it is said to be in financial distress. The probability of financial distress increase as a firm's
288 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa: debt-to-equity ratio increases. So to avoid financial distress affirm must guard against excessive debt. Financial distress is costly. Investors take the potential for financial distress in the future into consideration in the valuation of firms. The attitude of suppliers towards a firm may change when a firm becomes financially distressed.
Flexibility A firm's ability to adapt to a changing economic environment, particularly, with respect to its future financing decisions, is very important. According to Wert and Henderson (2009), if a company takes on too much debt it may be forced to use equity financing at a time that the market for equity may be unattractive. Alternative options under such circumstance may be equally unattractive. For instance a firm may be forced to take more debt at very high interest rates, since lenders will demand higher returns from a firm that already has high levels of debt. Otherwise, the firm may have to forego very attractive business opportunities due to major cuts in capital expenditures.
Sources of Financing for SMEs A number of sources of capital exist but many of them may not be accessible to companies of Small and medium sizes. 1. Debt Friends and Relatives Loans and contributions from friends and relatives are common source of funds, especially for new business since the financial institutions are reluctant to providing funding for start-up business because of the risk involve. This source of funds, however, bears a potentially dangerous price. Many friends' relatives find it very difficult to stay as passive creditors or investors. They usually try to interfere with policy and operational issues (Kuriloff, Hemphill & Cloud, 2013; Beck & Demirgiic-Kunt, 2004). As a remedy to this problem, Kuriloff, Hemphill & Cloud (2013) recommended the treatment of such loans like bank loans by putting in writing all the terms including interest rates and payment schedule.
Commercial Banks Hisrich and Peters (2015) make an assertion that commercial banks constitute the most widely used source of debt financing for small companies. This assertion is also supported by Beck & Demirgiic- Kunt (2004) who claimed that commercial banks loans to small companies are mostly short-term loans, though some do offer long-term loans to small and medium size companies. According to Kuriloff, Hemphill & Cloud (2013), commercial banks usually provide loans for working capital or for the purchase of fixed assets. They demand evidence of a company's ability to pay the interest and principal as scheduled. This evidence is usually in the form of cash flows statements. They also demand some form of security. Collaterals are the most widely used form of security demanded by commercial banks. Beck & Demirgiic-Kunt (2004) classify commercial bank loans as line of credit and term loans.
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Business Suppliers Companies can enjoy some form of credit from their business suppliers. This is a very important source of credit, especially for SMEs. The suppliers allow the company some time to pay for the supplies. The credit periods varies from a few days to several years. Credit from business suppliers may be trade credit or equipment loans and leases (Kuriloff, Hemphill & Cloud, 2013). i. Trade Credit: Basically it involves the purchase of goods and services from a supplier on credit. The purchasing firm is given a few days, usually between 30 and 120 days, to settle the debt (Beck & Demirgiic-Kunt, 2004). These same authors further asserted that this type of credit is very important to SMEs for a number of reasons: ·Suppliers are more flexible in dealing with SMEs than the banks. Suppliers may only check the credit standing of an SME whereas a bank is likely to demand financial statement and cash flow budgets before extending a credit facility. ·Suppliers are more flexible regarding adherence to terms of credit. Banks required strict adherence to loan terms and monitor borrowers more closely that suppliers do. ·The amount of trade credit granted may be readily increased just as the volume of a company's purchases increases. ii. Equipment Loans and Leases: Many SMEs find it very difficult to raise funds for outright purchase of certain equipments and machinery. They resort to purchasing such equipment on installment basis. Beck & Demirgiic-Kunt (2004) noted that down payment of about 25 to 30 percent of the price of the respective equipments are usually made initially. The remainder may be amortized over 3 to 5 years. This practice is referred to as equipment loans. An alternative to this is equipment leasing. This arrangement allows firms greater investment flexibility; and smaller amounts of capital are required by the firm at any given time.
2. Equity Personal Resources Again, Beck & Demirgiic-Kunt (2004) observed that personal savings of the owners and partners of businesses constitutes an important source of funds, particularly in the formative stages of a firm. Personal contributions also help to raise additional funds from other sources. Significant financial commitments made by owners of a company tend to build a lot of confidence among potential investors. Kuriloff, Hemphill, Cloud (2013) also noted other personal resources apart from personal savings. These include borrowing using one's personal assets such as house and bonds as collateral.
Other Individuals (Business Angels) There is a category of private individuals who invest in business ventures. These individuals are referred to as 'business angels'. Many of such individual investors tend to have some experience in business and/or are affluent professionals, who may have a lot of money to invest. Business angels constitute the informal capital source. They are said to represent the informal capital because there is no formal market place where their investment transactions are carried out. 290 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
Venture Capital Venture capital, according to Hisrich and Peters (2015), is a pool of equity capital contributed by wealthy individuals, as limited partners, and professionally managed by general partners for a fee and a percentage of the gain on investments. Thus venture capital firms are investment firms. Owing to the highly risky nature of the investments they undertake, venture capitalists demand very high returns on their investments, with target returns of about 50 percent or 60 percents being considered normal (Hisrich and Peters, 2015). Galindo, Schiantarelli and Weiss (2002) noted that owing to their high expected returns, venture capital companies usually target companies that have prospects of rapid growth and above average profitability. The targeted companies must also have the prospect of going public in the foreseeable future – usually within five to seven years. Venture capital firms aim to capitalize on initial public offerings (IPOs) and cash in on their investments if prices are substantially above their initial investments in the respective companies. Apart from the provision of capital for very promising business ventures, venture capital firms also provide useful advice to these young enterprises, having acquired much more experience in business. They also provide additional financial assistance in the future if a firm they have invested in runs into financial difficulties. It will not be considered prudent to stand aside and watch their investments go to waste with a firm for lack of cash provided throwing in more cash will not amount to reckless investment. The above authors further summarized this as “future availability of funds can be an enormous boost to achieving long-term strategic goals” Galindo, Schiantarelli and Weiss (2002).
According to Brealey and Myers (2006), one of the clear weaknesses in the Nigeria financial system is the limited medium and long-term financing available to the private sector in the market place. While commercial banks are the major source of loanable funds in the market, they focus on providing only short-term financing for their clients. As a consequence, many companies inappropriately use short –term funds to finance long-term project (Brealey and Myers, 2006). The short–term nature of the loans from the banks does not support the expansion programs of SMEs. As another measure with the intended purpose of assisting SME overcomes their financing difficulties, Venture Trust Funds has been set by State and other developing partners.
Joint Venture Various forms of strategic alliances have become important and common practice in business today. One such important form of strategic alliances is joint ventures. A joint venture typically involves two or more companies coming together to form a new entity. The main objective of joint venture formation is to gain competitive advantage and become more profitable. Combining the resources of the firms involved in a joint venture most often leads to the attainment of synergy. The new company may be able to perform a service more efficiently, produce a product at a less cost or utilize a facility or funds more effectively. This ultimately results in greater profits for the firms involved than they would have achieved as separate business entities. Financing is also a common goal of joint venture. Smaller firms in particular tend to benefit from the usually better financial positions of larger firms.
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Promoting SME Development There are several institutions, programmes and government agencies that aim at promoting SME development. These were created to help SMEs in various ways such as: access to finance, training programmes and technological development. These are discussed briefly below.
Government Institution Government has implemented several programmes to benefit the SME sector in Ghana. This started in 1969 with the establishment of the Credit Guarantee Scheme, which was administered by the Bank of Ghana (BOG) to assist entrepreneurs to obtain bank credit. Shortly after this, in 1970, the Ghana Business Promotion Programme was established to provide financial assistance to newly establish SMEs. Unfortunately these schemes did not have the intended impact because of low loans repayment rates and the fact that beneficiaries were politically connected to former managers of foreign-owned enterprises (Anderson and Dunkelberg, 2013). Under an Act of Parliament in 1981, Act 434, The National Board for Small Scale Industries (NBSSI) was established to promote and develop the small- scale industrial sector because of their importance and contribution to the economic development in Nigeria. The NBSSI also has a revolving loan scheme that is intended for working capital and fixed assets acquisition by enterprises in selected sectors. It collaborates with and receives support from several NGOs and international organizations such as the Friedrich Ebert Foundation, World Bank, and UNDP. Unfortunately, according to Galindo, Schiantarelli and Weiss (2002), this institution is poorly funded thus limiting the assistance that they can offer to help SMEs develop and grow in the economy. Mircro finance bank is another financial body set by the federal government to promote small and medium scale industrialization, provide employment opportunities, improve incomes and enhances the development in Nigeria. This is accomplished through the dissemination of appropriate technologies by developing and demonstrating marketable products and processes for small and medium enterprises. The Ministry of industry and trade was also established to coordinate and harmonize inter-sectoral efforts to propel the development of private sector as an engine of growth and poverty reduction. With a majority of the working population in this sector, government is aiming at a successful reform that will have a major effect on the development of society and economy. ii. Non-Governmental Organization (NGOs) As a result of the unsuccessful nature of direct lending by government in recent past, more donor interventions in SME finance have recently used existing financial institutions to channel funds to SMEs. Examples of some of the available credit facilities are Trade and Investment program created by USAID to provide assistance to SMEs in the non-traditional export sector, African Management Services Company funded by UNDP to assist SMEs (training and secondment) (Mensah, 2004). EMPRETEC Ghana and TECHNOSERVE are other NGOs in Nigeria established to offer assistance to SMEs. The former raises funds for SMEs through venture forums where entrepreneurs are linked with potential investors. The latter on the other hand, helps entrepreneurs to build businesses that create income, employment opportunities and Economic growth for the nation. They train and mentor the entrepreneurs to identify customers' needs, employ capable managers and act strategically. 292 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
Importance of Financial Institutions in SME Development “Finance is the oil for growth. It is indeed the life-blood of the economic system. The financial system is the vessel that carries this life-blood through the economic system. Faulty vessels prevent the life- blood from reaching essential parts of the economic system”. Sowah (2003); Gockel and Akonea (2002) offered a historical account of the banking industry in Nigeria. They write that Nigeria Commercial Bank (GCB) entered the banking market with the purpose of providing credit to large indigenous enterprises since the expatriate banks refused to offer assistance. National Investment Bank (NIB), established in 1963, provided credit facilities for manufacturing and agro-based industries with Agricultural Development Bank (ADB), which was established in 1976 with the aim of providing financial assistance for the development of agricultural and allied industries. SSB (now SG-SSB) and NSCB (National Savings and Credit Bank) emphasized not only consumer credit but also finance for small-scale projects. Even though banks were established to cater for all sectors in the economy financing small businesses was still a problem therefore government started rural banking to mobilize funds and channel them to SMEs and other informal activities in their localities. As time progressed, Nigeria monetary system went from the best in Sub-Saharan Africa to the worst. According to Steel (1998), this was affected by the deteriorating economy and high inflation rates.
Nature of Management In Small-Scale Business Small business management requires business owners to provide oversight for several functions in the business. Purchasing, human resources, sales, customer service, marketing and product development are a few major departments or functions business owners must manage. Larger business organizations often have more departments or divisions to manage. Business owners in large organizations often delegate management responsibilities to employees. Delegation ensures individuals provide oversight for business functions in accordance with the business owner's management style. Management can be defined as all the activities and tasks undertaken by one or more persons for the purpose of planning and controlling the activities of others in order to achieve an objective or complete an activity that could not be achieved by the others acting independently (Mensah, 1999). Management is here simply defined as the way a commercial/business activity is organized. While it is realized that management in small enterprises normally is personalized rather than being institutionalized, still the management of small enterprises can improve their position vis- a-vis competitors by introducing management practices that give consistency and viability to the administration of the entire business. The very ownership of a business tends to create elitist attitudes and self-orientation. It imposes a monocular vision which limits the company's capacity to respond positively and aggressively to business opportunities and changing business conditions. A person who stands head and shoulders over his colleagues in perceived authority can create benefits as well as disadvantages for the business. In cases where he is a poor manager even though a good entrepreneur, his domination might prevent the enterprise from obtaining the skills and methods which are needed for further growth. A gap is thus created between the manager/owner's perception of the situation and his own abilities on the one hand and of the actual needs of the business on the other.
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Management support to the small enterprise sector covers the whole range of issues from identification/selection of entrepreneurs, initial management training, support through extension services and functional support to strengthening of small enterprise development agencies and development of national policies on promotion of small enterprises. According to Wikipedia encyclopedia, Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively. Management comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources and natural resources.
Brief History of Small-Scale Business in Nigeria Small scale industry orientation is part and parcel of Nigeria. Evidence abound in our respective communities of what successes our great grandparents made of their respective trading concerns, yam barns, iron smelting, farming, cottage industries and the likes. So the secret behind their success of a self reliant strategy does not like in any particular political philosophy, so much as in the people's attitude to enterprise and in the right to which the right incentive is adequate enough to make risk worth taking are provided. Economic history is well stocked with enough insights into the humble beginnings of present day Grand Corporation. Evidences abound that almost all of the multinational giant corporations were cottage enterprises, growing as their industry grew, and through their own sheer ability either reproduce existing products more cheaply or improve their ability. Even at the international level, in the early stages of her industrialization, Japan's economy was dominated by traditional industries, cottage firms, and by a large number of small scale firms, drawing their strength not from abundance of capital but rather from her supply or labour. Back home in Nigeria, the respective government policies accorded and gave priority to the country's small scale enterprises.
Pre-Independence Historical Development Prior to Nigerian Independence, the business climate was almost totally dominated by the Colonial and other European Multinational companies like United African Company (UAR), GB Olivant, Unilever Plc, Patterson Zechonics, Leventis, etc. These companies primarily engaged in bringing into Nigeria finished goods from their parent companies overseas. These companies have vast business experience and strong capital base, and 58 dominated the Nigerian economy. The government of those days encouraged them to become stronger by giving incentives as favourable traffics and tax concessions. Towards the tail end of the 1950s, the Nigerian Industrial Development Bank (NIDB) was founded to assist potential entrepreneurs to get involved in Agriculture exploration of national resources, Commerce and Industrial production. This time and the early 1960s saw the massive increase in Nigeria import market, while the Nigerian economy became largely dominated by very few large foreign firms. However, few Nigerians mostly the Semi- illiterates benefited from the generous government attitude of this time.
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A major/remarkable breakthrough in small scale business came about through the indigenization Decree 1972 and later in Nigeria Enterprises Promotion Act 1977. These were genuine attempts by the Federal Government to make sure that Nigerians play an active and worthwhile role in the development of the economy. In its 1970-74 National Development Plan, the Federal Government gave special attention to the development of small scale industries particularly in rural areas. This was in recognition of the roles of small and medium scale industries, as the seedbeds and training grounds for entrepreneurship.
The cardinal point of the development plan was: a) Accelerating the pace of industrialization and dispersal of industries. b) Generating substantial employment opportunities. c) Promoting individual initiatives and entrepreneurship among the populace. d) Developing and increasing export traders, and e) Complementing large scale industries. An amendment to the decree made in 1997 provided than in order to be economically self-reliant. Nigerians need to take care from economic history, which is well stacked with enough insight into the humble beginnings of the present day giant conglomerates which started as small scale industries. Within this decade, the government policy measures placed emphasis on the technological aspects of industrial development of small scale industries in Nigeria. Various Nigeria governments within this decade embarked on corrective measures to divert efforts towards the maximum exploitation or natural resources, and tried to discourage capital intensive mode of production in the light of the abundant resources available. In this regards, the industrial policy tried to focus its attention mainly on local resources utilization through various forms of incentives worked out by governments.
Some of the basic policy strategy aimed at revitalizing the industrial sector included the: (a) Encouragement in the use of more local materials in our industrial development activities. (b) Encourage greater capacity utilization in Nigerian industries.
In addition, both the third and forth national development plans, the government then tried to increase her support for and contributions on; (i) The establishment of research products development company to provide a bridge between research and commercial development of results and cooperate with manufacturing establishment to adopt imported machines to Nigerians conditions and eventually develop the capability for fabricating such machines: (ii) The federal institute of industrial research and other institutions as the project development agency, Enugu. (iii) The industrial development centres
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(iv) The provision of funds to implement feasible projects emanating from policy paper, prepared by the Nigerian Councils for Science and Technology (v) The Industrial Research Council of Nigeria to get organized for coordinating industrial research efforts.
The focal point of these policy measures as construed place a great emphasis on the technological aspects of industrial development and development of small scale industries in Nigeria. It is worthy of note that the introduction of the Structural Adjustment Programme (SAP)during the Babagida regime made matters worse for employers of labour and created a veritable ground for self- employment.
Theoretical Framework Many theories have raised the issue on the financing gap for small and medium enterprises (SMEs), meaning that there are a good number of SMEs when given access to credit could use it profitably to grow their businesses but cannot obtain credit from the formal financial system (bank), because of the inability of the SMEs to meet the stringent requirement of these financial institutions. The issue of lack of credit to SMEs can be looked at from two fronts: the financial Institutions (banks) and the SMEs operators.
The financial Institutions (Banks) Most literature states that differences in the financial institution structure and lending infrastructure affect the availability of funds to SMEs (Kuriloff, Hemphill and Cloud (2013). These differences may significantly affect the availability of funds to SMEs by affecting the feasibility with which financial institutions may employ the different lending technologies (be it transaction lending or relationship lending) in which they have comparative advantage to provide fund to different businesses. Transaction lending technologies are primarily based on “hard” quantitative data such as the financial ratios calculated from certified audited financial statement among others. Relationship lending on the other hand is based on “soft” qualitative information gathered through contact overtime with SMEs. This soft information may include the character and reliability of the SME's owner based on direct contact overtime by the financial institution.
The SME Operators Paul Derreumaux, Chairman and CEO of Bank of Africa, highlighted three main issues blocking the flow of credit from banks to SMEs. These are lack of equity in SMEs, lack of organization in terms of human resources, accounting, and administrative management among others and finally the firm's lack of forward-looking vision. For him, most firms were born on the impulse on the part of the entrepreneur, without any in-depth- analysis of the market or competition, which often leads to disillusion in terms of turnover and, consequently, in repayment capacity for bank loan. These are some theories from the perspectives of financial institution but are these really the issues from the perspective of SMEs? Having looked at the various perspectives on the issue of SMEs difficulties in accessing credit, there is a better understanding of the direction of the study.
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Empirical literature Kuriloff, Hemphill, Jr and Cloud (2013) examined the problems and prospects of management of small-scale business in Nigeria, the general objective, focus on the following objectives: To identify the effect of poor planning to the management in small-scale business, to examine how lack of financial support and poor funding can lead to Finance problem of small-scale business and to determine how Multiple and High Taxes influence the management of small-scale business. The descriptive survey method was used and the research tool was questionnaire. 9 respondents answered the questionnaire.
METHODOLOGY This chapter is organized under the following sub-headings; Research design, Area of Study, Population for the Study, Instrument for Data collection, Validation of the instrument, Method of Data collection and Method of Data Analysis.
RESEARCH DESIGN The study was purely a survey research design. According to Longman Dictionary of Contemporary English, Survey is defined as –a set of questions that you ask a large number of people in order to find out about their opinion or behavior. Hence, it focuses on finding the challenges facing small and medium enterprise using Bwari area council, in the federal capital territory of Nigeria.
POPULATION FOR THE STUDY SMEs are scattered across the length and breadth of the country with most of them located in Commercial regions of the country like Abuja, Lagos, Calabar etc. These regions were identified to have high concentration of SMEs. In adopting a case study method in a research, the selection of the research site is most important (Anyima-Ackah, 2006). With this in mind, Greater Bwari area council in the federal capital territory was selected for the following reasons. Firstly, some of the SMEs are located in this area, so are the banks and non-bank financial institution since the capital city Abuja is also located in this region. With the objectives of the study in mind, selecting this region afforded the researcher the opportunity to contact SME operators who have made numerous contacts with different banks for financial support and therefore have a lot of experience to share. Secondly, it was easier for the researchers to approach these SMEs operators since the researchers are also located in the same region. Choosing any other region would mean travelling a long distance just to make contact with the SMEs operators, which would have been very difficult considering the time frame of this Thesis. The sampling frame however for this study chose a few SMEs in Bwari region, specifically those in the Gwarimpa and Kubwa metropolis because of the easy access to these SMEs.
PROCEDURE FOR DATA COLLECTION The data for this study were gathered through the use of primary and secondary data sources. The primary data source for this study involved the use of questionnaire. The questionnaires Were distributed to SME operators and/or owners for first hand information for processing towards answering the research questions. The questionnaire was divided into three sections.
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Section A, concentrated on the bio data of the respondent firms such as: 1. Age of the firm 2. Form of ownership 3. Nature of the firm 4. Number of employees of the firm 5. Average monthly turnover of the firm
These helped us in identifying the type of SME we were dealing with, whether or not they Were Micro, Small or medium enterprise as per the definition given in Anyima-Ackah (2006) Section B of the questionnaire consisted of various questions geared towards answering the objective of the study. These questions looked at the constraints faced by SMEs when accessing credit, other financing options available to these SMEs and how cheap the cost of finance is in the opinion of these SMEs among others. The final section also looked at the future of these SMEs, whether or not they plan to remain a going concern in the foreseeable future through the expansion of their business to other regions of Ghana when assisted financially. The secondary data were obtained from reviewing journals and literature relevant to the subject matter of this research. Newspaper source and official policy documents of government of Ghana with relevance to the subject were also consulted. The electronic search site: www.google.com was employed extensively for up-to-date materials on the topic. The primary data formed the crux of this study because it afforded the opportunity in obtaining at first hand, relevant responses.
Primary Sources These are original data collected basically for the purposes of the problem under investigation. It played a very significant role in dealing with human problem in managing public sector organization. According to Beck and Demirgiic-Kunt (2004), it contains the data originally assembled by the person who actually observed the phenomenon. Primary data mainly come from direct observation of events, manipulation of variables, contrivance of research situations including performance of experiments and responses to questionnaire (Beck and Demirgiic-Kunt, 2004). The researcher sources her primary data via observation and survey methods.
Secondary Source These comprise sources of data which, though needed for the current study, were collected primarily from another study. Data from these sources were not original to the researcher; they were assembled by other people.
Sample size Following Hisrich and Peters (2015) definition of SMEs that classified SMEs into: 1. Micro enterprise – (1 to 9 workers) 2. Small enterprise – (10 to 29 workers) 3. Medium enterprise – (30 to 140 workers)
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A sample size of the 80 participants was targeted for responses. 80 questionnaires were distributed to these SMEs out of which we received responses from 68 respondents. This represented about 85% of the response rate which we deemed to be impressive for this study.
Sampling Technique The method of convenience sampling was employed in arriving at the 80 SMEs, which the researchers believe possesses the experience relevant for this study and who have sufficient time and were willing to participate. This technique, convenience sampling, involves obtaining responses within the sample frame from willing respondents and also their availability for the study. The advantage here is that respondents will participate on their own volition and not selected against their will. This technique was chosen to boost response rate because respondents in this sector are reluctant in giving out information since they believed in one way or the other, information about their business may leak through to competitors and also exposed them to tax. Authorities. Besides, the quality of responses was high as participants took their time to respond to the questionnaire.
Method of data analysis Analysis refers to breaking a whole into its separate components for individual examination. Data analysis is a process for obtaining raw data and converting it into information useful for decision- making by users. Data is collected and analyzed to answer questions. Data collected and information gathered are presented and analyzed in tabular forms and the use of sample percentage distribution for data analysis and interpretation.
Data Analysis The data collection for this study was done basically through the usage of questionnaire. We targeted a population of 80 SMEs and distributed the questionnaires among them. Out of the 80 questionnaires circulated, 68 were returned representing about 85% of response rate, which we deemed impressive considering the short time given to these respondents. A higher response rate would have been preferred, but there were many reasons for the percentage achieved. Two of the most crucial reasons were: 1 Some of the SMEs were reluctant in answering the questions because they thought the information they will provide will one way or the other fall in the hands of the tax authorities despite the assurance given in writing that all information given would be treated confidentially. 2. Others also complained about the time given them to provide answers to the questions. According to them, it was too short and as a result their inability to complete answering the questions In spite of these problems, the response rate of 85% for the purpose of this study is quite good. Below are the presentations of the details of the responses.
Characteristics of SMEs All the respondents are SMEs located in the Gwarimpa and Kubwa Metropolis in abuja, have a working force of between 8 and 53 employees with professionals in some managerial positions of
299 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa: the business. Out of the 68 respondents, 57% have had their businesses registered as Limited Liability Companies. The rest are registered as Sole proprietorships, Partnerships and Family owned as shown in table (I).
Table I Frequency Distribution of Forms of Participant SMEs Form Frequency Percentages (%) Cumulative (%) Form Frequency Percentage (%) Cumulative (%) Private ltd 39 57 57 Partnership 6 9 66 Sole proprietorship 18 26 93 Family owned 5 7 100 Others 0 100
Source: Research questionnaire
As can be seen from table I, the bulk of the respondents SMEs are registered as Private Limited Liability Companies. They accounted for 39 out of 68 respondents, representing 57%. 18 respondents, representing 26% were Sole Proprietorship with 6 being Partnership. The remaining 8% of the respondents SMEs were registered as family owned businesses. These SMEs surveyed cut across the various business area in Kubwa and Gwarimpa metropolis These SMEs surveyed cut across the various business areas in Kubwa and Gwarimpa metropolis and also have an average monthly turnover ranging between as low as 15,000 thousand naira to a maximum amount of 35,000 thousand, as shown from table (II) and (III) below.
Table II. Frequency Distribution of Nature/ Kind of Participant SME Nature Frequency Percentages (%) Cumulative (%) Nature Frequency Percentage (%) Cumulative Retail trading 32 47 47 Manufacturing 15 22 69 Service 10 15 96 Farming 27 32 128 Others 0 128 Source: Research questionnaire It is a general knowledge that SMEs cut across the various business area in Kubwa and Gwarimpa metropolis, hence the 68% responses received were fairly spread across a wide range SME' within the area, with the most concentration centered in the retail trading sector. This sector alone accounted for 47% of the total responses as can be seen from table II. The manufacturing sector accounted for 15, representing 22%, Services, 10 or 15%, farming accounted for 27 or 32%.
300 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
Table III Frequency Distribution of Average Monthly Turnover of Respondent SME Amount (Naira) Frequency Percentages (%) Cumulative (%) Turnover(naira) Frequency Percentage cumulative Less than 15,000.00 5 7 7 15000.00 to 25000.00 18 26 34 25000.00 to 35000.00 20 29 63 35000.00 above 25 37 100
Source: Research questionnaire
From Table III above, which represents the average monthly turnover for the 68 respondents, 25 of them recorded an average turnover of above 35,000 thousand naira. This gave us in terms of percentage 37% of the total responses, which happens to be SMEs mostly from the retail trading, Manufacturing and farming. 29% had a turnover ranging between 25,000.00 to 35,000.00 and 18 or 26% fell within the 15,000.00 and 25,000.00 ranges. Just 7% or 5 respondents recorded a monthly turnover of less than 15,000.00 thousand naira.
SMEs Constraints SMEs known all over the world are faced with lots of challenges in their operations and this was not different from the responses received from our target respondents. SMEs operators who took part in the study were however asked to rank the major constraint they face in operating and growing their businesses. Lack/inadequate access to finance (bank loans) were considered to be a major constraint as it recorded 75%. This means that among all the problems faced by SMEs in their operation ranging from competition, high utility tariffs, infrastructure among others, the participant SMEs saw the lack of credit facilities as the major constraint. This assertion was also confirmed from the test run in the data analysis subsection in chapter three, where P value (p* = 0.00) < the level of significance, which is á = 0.05. Table (IV) below shows the various challenges faced by SMEs in Ghana.
Table IV. Major Constraint to the growth of SME
Source: Research questionnaire
301 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
The above shows participants rankings of the major problems facing the growth of their businesses in order on importance. 50 or 74% of the participant ranked lack of finance as the major constraints to the growth of their business followed by high utility tariffs, which recorded 15%. Competition and infrastructure were ranked as the 3rd major constraint to the growth of SMEs with just 3% thinking that taxes also constrained their growth. This result reinforces the theory by Beck and Demirgiic- Kunt (2004) where they indicated that access to bank credit by SMEs has been an issue and continues to be raised by numerous studies as a major constraint to growth, which was also supported by Hisrich and Peters (2015) that from the view point of private sector, problems related to finance dominate all other constraints to business expansion. These go to also indicate that finance for SMEs particularly in Kubwa and Gwarimpa is still a major problem even though the number of banks operating in that area has increased tremendously since 1993 when Aryeetey et al. came out with their studies. With 12 banks and 24 number of non-bank financial institutions operating in that area. One expects that access to credit by these SMEs will greatly improve as competition becomes keen. But the expectation has not been met since the results confirm the numerous theories that lack of access to credit/bank loans remains a key constraint that needs attention to resolve to enhance SMEs growth. This notion was also in line with Steel (1998) who found that small firms tend to experience more difficulties than medium-sized firms, which also experience more difficulties than large firms.
Factors Contributing to SMEs Constraints The inability of SMEs in the federal capital territory to readily have access to credit from the country's financial institutions (banks) can be attributed to a lot of factors. Brealey, Myers and Marcus (2001), attributed this factors to the perceived high risk nature of these SMEs, small portfolios of these businesses and the high transaction cost that banks go through in performing credit appraisal on them before granting credit to these SMEs. Steel (1998), in finding out factors contributing to the challenges in financing SMEs attributed some of the causes to the type of lending infrastructure of nations. For them, it affects the feasibility and profitability of using the different lending technologies in SME financing. Before revealing what this study came out with, the study first tested the possibilities of these SMEs being denied credit from the country's banks. That can be referenced from the result below:
Table V Total Number of Participant SMEs granted or denied access to Credit
Source: Research questionnaire
302 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
The above pie chart shows a number of participant SMEs who in one way or the other has been granted or denied access to credit from financial institutions. From the chart above, 75% of the total respondents say they have been denied access to credit, whilst 25% of them responded No to the same question. Out of the 68 respondents sampled, 60% of them attributed their lack of access to bank loans or credit to their inability to provide the required security or collateral for the loans or credit being requested for and in situations where they are able to provide, it ends up to be inadequate, which accentuate the opinions of Abor & Biekpa (2005). For them, they attributed this factor to the inability of the SMEs to provide collateral and in some cases where they do, they are inadequate and also the SMEs asset-backed collateral are usually rated at “carcass value” thereby making it difficult for these SMEs to get access to the credit they want. The result collated from the survey in table (VI) below shows the frequencies of various factors hindering SMEs in securing loans for their businesses.
Table VI Frequency Distribution of Factors that Hinders Participants SMEs Access to Credit Factors Frequency Percentages (%) Ranking Factors Frequency Percentage(%) Ranking Default on Previous Loan 2 3 5 No Security/Collateral 41 60 1 Small Equity Base 15 22 2 Lack of Experience 7 10 3 Management Others 3 4 4 Source: Research questionnaire
60% representing 41 of the total respondents of 68 ranked lack of collateral as the major factor preventing them from accessing loans from the financial institutions. 15 or 22% ranked small equity base as factor affecting their access to credit. Lack of experience management was the opinion of 7 or 10% of the respondents with 4% thinking that other factors such as the inability to provide audited financial statement are preventing them from accessing credit with 3% relating their inability to access credit to default on previous loan. Again apart from the collateral issues and other factors as indicated above, which makes it very difficult for SMEs to access the maximum amount needed for various expansion projects, the interest rates charges on the loan facilities by the various banks are outrageous and also unattractive for most SMEs to access these credits. Almost all the respondents expressed an opinion on the level of interest rates charged by financial institutions on facilities received, to be extremely high whiles others also say the rates are just high. Table (VII) shows the figures:
303 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
Table VII Frequency Distribution of the Level of Interest rates on Loans Measure Frequency Percentages(%) Cummulative (%) Extremely High 48 71 71 High 18 26 97 Acceptable 2 3 100 Low 0 0 100
Source: Research questionnaire
The above table shows the opinion of respondents on the level of interest rates charges on loans from the bank and non-bank financial institutions. 48 out of the 68 responses received from participants saw the interest rates on loans to be extremely high. This represented 71% of the total responses. 18 or 26% of the total respondent think the rates are high with just 3% saying the rates are manageable. One significant thing is that among the respondents, none saw the interest rates charged on loans by the financial institutions to be low. The extremely high interest rate group numbering about 48 out of the total respondents of 68 pays interest between 31% and 40% per annum. 26% of the respondents, which indicated that the rates charged by the financial institution are high, also pay interest of 21% to 30% per annum, with just 3%, which we will term the “fortunate” ones servicing their loans at an interest of less than 20% per annum. This makes their businesses unprofitable as the profits made are eroded by the huge finance cost.
Alternative Sources of SMEs Financing Abor & Biekpa (2005) like most writers on the subject of SME financing, described two basic type of financing namely debt and equity, which were further classified by Wert-Jones and Henderson (2009) also into two sources internal and external. Since finance is the major constraints to SMEs development and growth, various sources ought to be explored by these SMEs to run their businesses. It came to the fore through the survey that most of these SMEs depend on mostly on external sources such as the banks, nonbank financial institution, families and friends and also personal savings the only internal source as alternative source of financing for their businesses. Table (VIII) below shows these sources.
Table VIII Distribution of SMEs Major Sources of Funding Source Frequency Percentages (%) Cummulative(%) Bank loans 17 25 25 Personal Savings 2 3 28 Retained Profit 3 4 32 Trade Credit 0 0 32 Families/ Friends 8 12 44 Non-Bank financial Institution 28 56 100 Others 0 100 Source: Research questionnaire
304 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
Among the various sources in Table VI, which is also presented in the graph, 56% out of the total respondents ranked their major sources of funding from the Non-Bank Financial Institutions followed by 25% getting their financing from bank loans. The third ranked sources of funding for SMEs operation are from families and friend with 12% and the fourth being retained profit with 3%. Personal savings was ranked the fifth with trade credit not resorted to as a source.
This goes to show that the SMEs operating in Kubwa and Gwarimpa are skewed more towards the external source of funding, which is not also easy to access thereby inhibiting their growth. From the above the only internal source of funding is just from their personal savings none of the other internally generated options of funding are being exploited. These internal sources include operational and investment profits, sales of assets, extended payment terms, reduction in working capital and proper management of accounts receivable, which are less expensive and also reliable. The kind of banks operating in the country have limited interest in funding the SMEs sector most especially those seeking funds as startup capital for their businesses because of the risk associated with new businesses where it is known that 8 out of 10 new businesses fail within the first three years (Brealey, Myers and Marcus, 2001). The limited interest of banks to finance start up businesses is also supported by the data in table (IX).
Table IX Frequency Distribution of Sources of Funds for Start-up Businesses Sources Frequency Percentages (%) Cumulative (%) Personal savings 25 12 37 Bank Credit 8 12 49 Friends and Relatives 31 46 94 Others 4 6 100
Source: Research questionnaire
The above table shows the distribution of SMEs sources of funding in establishing their businesses. It is clear from the table that 37% and 46% of the funds are generated from personal savings and relatives and friend respectively with 12% of SMEs start-ups getting their finances from the banks. The reaming 6% get their funds from other sources. This makes it extremely difficult for the SME sector to pursue growth thereby hindering their growth just to stay afloat. In spite of these challenges there is a strong desire among these SMEs to pursue the agenda of growth when the question was asked as to whether or not they would like to expand their business to other cities within the country should their financing needs be met. 60% of the respondents showed interest in that direction as indicated in Table(X).
305 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
Table X Distribution of Participants SMEs Establishing More Branches in the Major Cities in The federal capital territory. Ranking Frequency Percentages (%) Cumulative (%) Strongly Agree 41 60 60 Agree 24 35 96 Not Sure 3 4 100 Disagree 0 0 100 Strongly Disagree 0 0 100
Source: Research questionnaire This table shows the distribution on the question relating to SMEs expanding their businesses to the other cities of the country. 60% of the respondents strongly agreed to the statement, meaning that all things been equal they would like to grow their business. 24 or 36% of the same respondents also agreed to the statement with just 4% not sure as to whether they will expand or not. One critical point is that none of the respondents disagree with the statement of whether SMEs would like to establish more branches in the major cities of the country. This seems to remain a dream for them as the funds to undertake such an expansion projects are difficult to access because of the stringent criteria of the banks. The only sure way of getting such an amount to embark on these expansions is mainly through the banks and the listing onto the Nigeria Stock Exchange, which most of the SMEs are not qualified. This leaves the banks as the only viable source and even then because of the duration given in repayment of loan, which is mostly up to two years (see Table XI), such facility will not be appropriate for investing into business expansion.
Table XI Frequency Distribution of Loan Repayment Distribution Factors Frequency Percentages (%) Cummulative (%) Up to 1 year 49 72 72 Up to 2 years 19 28 100 Up to 3years 0 0 100 Above 3 years 0 0 100
Source: Research questionnaire This shows the frequency distribution of loan repayment duration by the respondents usually received from the financial institution by which time they should have repaid the loan amount. From the above record, 72% are given a repayment period of up to one year, whilst 28% or 19 of the total respondents of 68 indicated a repayment period of up to one year
Implication of Findings The findings enumerated above corroborate the opinion about the difficulty that SMEs in Kubwa and Gwarimpa faced when it comes to accessing credit (bank loan) to run their businesses. But one interesting twist in these findings is the issue of poor management of account receivables of these SMEs. However, we believe that with proper management of SMEs receivables, they should have enough cash to boost their working capital to run their operations and also meet their financial obligations.
306 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa:
Conclusion: The theme of this study which is “The challenges faced by SMEs in obtaining credit in the federal capital territory “sort to highlight difficulty faced by these SMEs in accessing credit from the financial institution to operate and grow their businesses. In achieving this, the study sort to answer the following questions: Does SMEs have challenges in accessing credit? And if yes what these challenges are. To what extent have these affected their business operations and also how viable are the alternative sources of financing for the Ghanaian SMEs. Based on the responses received through the questionnaires circulated, it became evident that SMEs in Nigeria like most SMEs in other countries are faced with major challenges in accessing credit. These challenges were revealed by the study to include, the inability of SMEs to provide collateral and other information needed by banks such as audited financial statement couple with the high cost of loan in terms of high interest rates make it extremely difficult to access bank loans. The above also support the result of Wert-Jones and Henderson (2009), which concluded that 75 percent of sampled firms that need loans under the study conducted on the demand supply of finance for small enterprises in the study area, among those that had their application rejected, lack of adequate collateral were the main reason given by the bank.
Recommendations Based on the finding as revealed by the study, we believe that when the below recommendation are well implemented will help free up credit/capital to the SME sector
Establishing of Factoring services by banks and non bank financial services. Most SMEs are finding it difficult in maintaining a good cash flow position to meet their operational needs and also their financial obligation in respect of servicing their loans as expected. Factoring as is well known will help SMEs breath in some air when it comes to the management of their account receivable because it has numerous benefits as indicated. Some of which includes: 1. Tap into unlimited cash: Factoring as known is the only source of business financing that grows with sales. As sales increase, more money becomes immediately available. Unlike the transitional bank financing, factoring has no maximum limit to restrict growth. 2. Easy process to setup: Account receivable financing does not require the documents that are generally needed to secure bank loans. Factoring account receivable gives one immediate access to cash. Presently none of the financial institutions in the country offer such services which we believe when it is up and running, the country's SMEs can discount their invoices for immediate cash that currently takes up to 30 days to have them settled. This will also enable them to embark on any growth projects they may have.
Provision of incentives for banks lending to SMEs Even though banks may be faced with constraints, Abor & Biekpa (2005) suggest that they do active banking by mobilizing resources and distributing them to needy SMEs. Sowah (2003) further suggests that bank should be urged to take “reasonable risk” in vetting loan applications from small
307 The Challenges of Small and Medium Enterprises (SMES) in Obtaining Credit in Africa: and medium enterprises, especially for business ventures in new areas and technology. In urging banks to take “reasonable risk”, we suggest that government should institute some form of tax incentives to banks involved in SME lending. This will encourage others to consider the option of lending to this sector.
REFERENCE Abor, J, and Biekpa, N. (2005). Corporate debt policy of Small and Medium Enterprises in Ghana”: University of Stellenbosch, South Africa. Anderson, R. L and Dunkelberg, J. S. (2013). Managing Small Businesses, West Publishing Company. Antwi-Asare, T. O and E. K. Y Addison (2000). Financial Sector Reforms and BankPerformance in Ghana, Overseas Development Institute, London. Anyima-Ackah, Jos (2006). Need to build capacity of local industries to accelerate economic growth”, Daily Graphic Newspaper, March 28,2006 p.32,34. Beck, T. and Demirgiic-Kunt, A. (2004). SMEs, Growth and Poverty: Do Pro-SME PoliciesWork?” Public Policy for the Private Sector, February 2004, Note No.268 Brealey, Richard A, S. C Myers and Alan J. Marcus (2001). Fundamentals of Corporate Finance, 3rd edition, McGraw-Hill Companies, Inc., Boston Brealey, Richard A, and Stewart C. Myers (2006). Principles of Corporate Finance, 5th edition, the McGraw-Hill Companies, Inc. Boston. Galindo, A., Schiantarelli, F. and Weiss, A. (2002). Does Financial Leberalisation Improve the Allocation of Investment? Micro Evidence from Developing Countries”, Inter-American Development Bank Research Research Department, Working Paper 467. Gockel, A.F and S.K Akoena (2002). Financial Intermediation for the Poor: Credit Demand by Micro, Small and Medium Scale Enterprises in Ghana. A Further Assigment for Financial Sector Policy, IFLIP Research Paper 02-6. Hisrich, R. D. and Michael P. Peters, M. (2015). Entrepreneurship: Starting, Developing and Managing a New Enterprise, 3rd edition, Irwin, Chicago. Kuriloff, Arthur H, John M. Hemphill, Jr and Douglas Cloud (2013). Starting and Managing the Small Business, 3rd edition, McGraw-Hill, Inc. New York. Mensah, S (1999). Overview of the NBFI Sector” Banking and Financial law. Journal of Nigeria , Vol1 Nos4 and 5, July 1999 –June 2000 Moyer, R. C., McGuigan, J. R. and Kretlow, W. J. (2012). Contemporary Financial Management, 5th edition, West Publishing Campany, St Pauls Minnesota. Sowah, N. K. (2003). Comments on “The Golden Age of Business: The Role of the Banking Sector”, CEPA Research Working Paper. Steel, W. F. (1998). Financial System Approach to Supporting Microfinance Development, Paper presented at the African Region/SBP/EP/Finance,Zimbabwe. Wert-Jones, E and Henderson, G. V. (2009). Financing Business Firms, 6th edition, Richard D. Irwin, Inc, Homewood, Illinois Hisrich and Peters (2015). Brealey and Myers (2006) Galindo, Schiantarelli and Weiss (2002). Kuriloff, Hemphill, Cloud (2013) Beck & Demirgiic-Kunt (2004).
308 Veritas International Journal of Entrepreneurship Development (VIJED)
RESOURCE EXPLOITATION, CORRUPTION AND ECONOMIC GROWTH IN AFRICAN CONTINENT
AYADI, Folorunso Sunday Ph.D Department of Economics, University of Lagos, Akoka-Yaba, Lagos, Nigeria. [email protected]
Citation: Ayadi, F. S. (2018). Resource Exploitation, Corruption and Economic Growth in African. Veritas International Journal of Entrepreneurship Development (VIJED). Veritas University, Abuja. 1 (1) 309-324 ______ABSTRACT Natural resources exploitation is expected to boost wealth and purchasing power in resource endowed economies. It is expected that resource utilization should be able to raise investment and consequently drive growth in these economies. However, experiences with the resource - rich countries suggest that resource endowment may not be a blessing and can actually be categorized as a curse. To this end therefore, this study investigates the relationship between resource endowment and economic growth using nine resource-rich African countries as a case study. The study used the fixed effect model with cross section as well as time dummy variables based on robustness. The paper also analyzed the impact of corruption on resources rent and consequently on growth. The study did not establish the significant positive impact of resource extraction on economic growth and therefore conclude that resource curse is indeed true in countries under the study. It also establishes that corruption is detrimental to economic growth. This paper recommend that resource – rich countries should adopt the Hartwick -Solow model which posits that constant consumption could be maintained over time if resource – rich countries could invest their Hotelling rent from natural resources extraction into man-made alternatives. In addition, Institutions should be strengthened to fight corruption in resource-rich economies among others.
Keywords: Dutch disease, natural resources, corruption, economic growth ______
INTRODUCTION Surprisingly, resource-rich developing countries of the World tended to exhibit negative growth rate and in some situations very slow growth rates. Generally, natural resources endowment is expected to boost wealth and purchasing power in these economies. It is expected that resource availability should be able to raise investment and consequently drive growth in these economies. However, negative and slow rate of growth seems to be prevalent in those economies. This condition has been named as 'Dutch Disease'. Dutch disease is a term coined after Netherlands due to its abundant mineral and natural gas resources. However growth was so slow in their economy despite these resources
309 Resource Exploitation, Corruption and Economic Growth in African Continent abundance. In any economy plague with Dutch Disease, the normal channel of growth became impotent or it produces perverse results. Trade is a positive contributor to economic growth in any normal economy. However, in a Dutch infected economy, trade causes imbalances and consequently causes low economic growth. In addition, investments by the three main sectors are expected to also aid growth, but in a Dutch infected economy, investments are poorly allocated. Dutch Disease also limits the consumption and investment in education because resource intensive business do not reward or encourage workers with advanced education (Elliot, Hartarska and Bailey, 2007).
The extent of the resource curse theory in one of African economies has been well observed by Arezki, Rota-Graziosi and Senbet (2013) when they observed that the Democratic Republic of Congo is widely considered to be among the World's richest countries in terms of mineral deposits, but the irony of it is that it also sits high on various categories of World's poorest countries. A similar condition is also prevalent in many other African countries and other parts of the World. Taking Nigeria as an example, it is well endowed with vast human and material resources that can guarantee sustainable economic growth. Nigeria has large reserves of solid minerals which include bitumen, coal, tin, topaz, lignite, columbite, iron ore, talc, barite and gypsum. Metallic minerals are mostly located in the middle belt, coal is found in the Southeast and middle belt, bitumen is predominantly in the Southwest, crude petroleum and natural gas are located in the Southern area of Nigeria known as Niger Delta region. The proven reserves of crude oil in Nigeria are well over 37 billion barrels while the reserves of natural gas stand at over 187 trillion standard cubic feet. Yet growth is stagnated in Nigeria as also in other naturally endowed countries of Africa. Figure 1 below showed the natural resources rent as a percentage of the GDP for nine mineral – rich countries of Africa.
Figure 1: Resource rent as a % of GDP in resource-rich economies of Africa
Source: Author's Compilation based on the World Bank Data Tunisia, Cameroon, Cote D'ivoire and Egypt have relatively low natural resources rent as a
310 Resource Exploitation, Corruption and Economic Growth in African Continent proportion of its GDP when compared with countries like Nigeria, Gabon, Democratic Republic of Congo, Congo Republic and Algeria, resources rent as a proportion of their GDP is high for the period under consideration in all the countries. Resources rent exhibited an upward trend throughout the period although with slight variations. This indicates the importance of natural resources in the growth potentials of these economies. Figure 2 however presents the growth in GDP per capita for the corresponding period.
Figure 2: GDP per capita growth in the resource-rich economies of Africa
Source: Author's Compilation based on the World Bank Data
The above figure showed the per capita growth rate for the nine countries under consideration. The growth rate clustered around zero with most readings falling below zero. This indicates that these economies rather than transforming their resource endowment as a channel for sustained economic growth, not much has been seen. According to De Melo et. al. (1997) the impact of natural resources on economic growth is still unclear. Some of the findings on literature claimed that there is a weak positive effect while in others it is negative. To this end, I therefore make my contributions using nine resource-rich African countries as a case study.
LITERATURE REVIEW Natural resources endowment is indeed a window of opportunity for economic growth. According to Arezki, Rota-Graziosi and Senbet (2013), in principle it is expected that revenues obtainable from resource exploitation can assist developing countries in transforming their economies, create employment and consequently boost growth. Experiences with the resource- rich countries (mostly those rich in oil and minerals) suggest that resource endowment is not a blessing and can actually be categorized as a curse. Frankel (2012) has concluded that over the past few decades, economic growth in resource-rich countries has on the average been lower than those recorded in resource- poor countries. Frankel (2012) gave some insights as to why resource exploitation could result into negative 311 Resource Exploitation, Corruption and Economic Growth in African Continent consequences for resource – rich economies. One of these is the corruption of public administrators and political class who capitalize on the weak checks and balances to mis-direct funds abroad for themselves and fuel capital flight. Another channel is the globalization and the unrestricted activities of the multinationals who have unfettered access to capital, labour, and natural resources at the expense of their host economies. The multinationals (MNCs) manipulate prices, and take advantage of taxes loopholes in their host economies. These manipulations have more daring consequences on resource – rich economies. Various studies have been conducted on the relationship between resource endowment and economic growth in resource – rich economies. On the contrary, Ding and Field (2004) natural resources abundance can bring about economic growth as they would attract entrepreneurs who will utilize resources in production and create new jobs and support industries will follow this cycle of growth and growth would be perpetuated. According to Sala-i-Martin and Subramanian (2003) the effects of shocks on resource sector and the response in other sectors have been mixed.
Ismail (2010) studied the effects of oil price shocks on manufacturing sector in a number of oil exporting countries. The study allowed for the possibility that the extent of Dutch Disease depends on capital intensity in the manufacturing sector as well as the economy's trade openness to capital flows. His results showed that a one percent increase in the World price of oil led to 0.34 percentage decline in the value added of various manufacturing sectors' productivity. The decline in manufacturing productivity is more pronounced in the more open economies than in less open economies.
Sachs and Warner (1995) investigated the trend in economic growth in economies abundance in natural resources as opposed to economies without substantial natural resources using regression analysis. They found that economies with a high ratio of natural resources exports to GDP in 1970 (base year) had the tendency to grow slowly between 1970 and 1990. This relationship holds true despite controlling for other important variables that are germane to economic growth.
Collier and Hoffler (2002) rather explored the relationship between natural resources and institutional quality on the premise that natural resources and Institutional quality on the premise that natural resources availability increases the chances of civil conflict. They concluded that the impact of natural resources on conflict is non-linear and strong. Countries with natural resources to GDP of 26 percent face a probability of 23 percent as against the 0.5 percent of country without natural resources. Civil conflict is therefore a fallout of institutional collapse.
Sala-i-Martin and Subramanian (2003) explored the role of institutional quality and growth in resource-rich countries and also explored the reality or otherwise of Dutch Disease in Nigeria and found that there is no direct impact of natural resources on growth. Natural resource is detrimental to institutional quality. Once institutions are controlled for, natural resources have no further impact on growth as its effect may be positive. It is only oil and mineral that impacts negatively on institutional
312 Resource Exploitation, Corruption and Economic Growth in African Continent quality. In the case of Nigeria however, they concluded that waste and corruption rather than Dutch Disease is the explanation for Nigeria's economic woes as Nigeria has over-invested in physical capital and suffered from poor productivity.
Ahrend (2002) did a study on economic performances in various regions of Russia. She concluded that natural resources abundance in the form of oil production, coal and natural gas production has been beneficial to growth at least in the first five years of transition as it facilitated commodity exports and also generated some streams of incomes. According to her, as at that period, World prices of natural resources were higher than the internal prices in the Soviet Union. So, resource-rich Russian regions benefitted greatly from a positive term of trade shock. This benefit helped in overcoming the overall fall in production and consequently aided economic growth.
Baghebo and Atima (2013) analyzed the impact of petroleum on Nigeria's economic growth using data from 1980 to 2011. They regressed the real GDP on foreign direct investment, oil revenue, corruption index and external debt. They utilized the cointegration tool and the error correction model to analyze the impact of oil revenue on growth in Nigeria. They found that oil revenue and corruption index negatively impacted on growth as captured by the real GDP. FDI and external debt however exerted positive impact on growth. They concluded that resource curse theory is proven to be true for Nigeria. They suggested the implementation of the proposed petroleum industry bill passage in Nigeria. So far, literature on the impact of resource endowment and growth has produced mixed results. According to De Melo et. al. (1997) the impact of natural resources on economic growth is still unclear. As a matter of fact, the variables used in capturing resource endowment are so diverse. All other explanatory variables used are also diverse. Some of them are not the determinants of growth. Studies have also lumped together countries of diverse standing. All these shortcomings this study hope to overcome by studying 9 countries in Africa.
THERETICAL FRAMEWORKO At the discovery of a tradable resource or an increase in the World price of a natural resource, this facilitated an unprecedented appreciation in the exchange rate of the resource-rich economy. This also enhances wage increases and a relocation of substantial labour force to the resource sector. Currency appreciation in the natural resources endowed country according to Krugman (1987) reduces the international competitiveness of the tradable sectors as the resource-based exports crowd-out commodity exports.
Corden and Neary (1983) broke down the theory of Dutch Disease more comprehensively. The model categorized the economy into three sectors. The first being the natural resource sector (R), the non-resource tradable sector (usually termed to be agriculture and manufacturing) (M) and the non- tradable sector (these are the construction and the non-tradable services represented as by N). The prices of non-resource tradables sector (M) as well as the natural resource (R) are set in the World market while the prices of non-tradables sector (N) are set in the domestic economy. The real
313 Resource Exploitation, Corruption and Economic Growth in African Continent exchange rate therefore is the price of non-tradables relative to the price of tradables.The theory assumes that there is perfect labour mobility among these sectors and that wages are constant among these sectors. It also assumes that both commodity and factor prices are not distorted in the economy, in addition, all goods are meant for final consumption and lastly, that trade is always balanced as output and expenditure are always equal in the economy.
Suppose there is a favourable shock such as the discovery of a large natural resource deposit or a rise in the World price of an exportable commodity which is expected to last long. This resource boom creates its impact in two ways. The first is the spending effect. The boom creates an additional income for the country. This income in turn brings about increase in import. It also raises the aggregate demand and spending by both private and public sectors. Since the prices of non-resource tradables are set at the international markets, this results into rising prices (and wages) of non- tradables relative to tradables. This causes the appreciation of the real exchange rate. In addition, this crowd-out labour and capital of the non-resource tradables sector (manufacturing sector).
The second effect is the resource movement effect. As the increase in the World price of the natural resource goes up for instance, this raises the marginal product of labour in the resource sector and pushes the equilibrium wage rate up. This causes a movement of labour from the tradables non- resource sector (manufacturing) and the non-tradable sector (services and construction) to the natural resource sector. The implication of this is that these sectors (tradables non-natural resource sector and the non-tradable sector) would be squeezed out of business. Put in another way, a boom in natural resource attracts both labour and capital from other sectors. This tends to reduce output in the rest of the economy. Specifically, reduced output in the non-tradables sector causes the price of the non-tradables to rise relative to the price of the tradables which are set at the World market (Brahmbhatt, Canuto and Vostroknutova, 2010).
The above effects produces significant economic improvements in the short run due to a substantial increase in revenues from the resource exports. The above theory runs contrarily to the theory of comparative advantage as a resource rich country is expected to be better off specializing in the extraction of its natural resources. In the practical sense however, the shift away from manufacturing can be dangerous. For instance, if the natural resources continue to run out or if there is a downward trend in the price of the natural resource, the hitherto competitive manufacturing industries do not bounce back or have a turnaround so quickly as they were initially. This is due to the fact that production requires 'learning by doing' processes and long periods of inactivity are detrimental to the survival and growth of the sector. So, when financial flows in the natural resources is negatively affected by shocks, the manufacturing sector is no more able to compete internationally and cannot replace the resource sector in driving the economy. This is highly detrimental to the long – run growth prospects of the affected economy.
The lesson to be learnt from the Dutch Disease is that resource availability gave rise to excessive
314 Resource Exploitation, Corruption and Economic Growth in African Continent reliance on resource intensive industries which had no assurance of enhancing long term stability. Long term stability however depends on the resource maintaining value and exclusivity. If however more discoveries are made of the resources elsewhere in the World, and is no longer exclusive, this lead to a price decline and the resource intensive industries in resource dependent economy fail. The alternative tradables sector are no longer able to sustain the economy as they have been neglected and are no more internationally competitive leading to a distorted growth (Elliot, Hartarska and Bailey, 2007).
Sala-i-Martin and Subramanian (2003) however showed that resource extraction/endowment and distorted economic growth are better explained by Institutional quality and corruption. To this end therefore, this study presents the economic theory of corruption and growth. Corruption has been theorized as a major cause and result of poverty globally. It impacts on every elements of the society in one way or the other and it also undermines democracy and economic growth as well as people's health, well-being and environment (Mikaelsson and Sall, 2014).
According to Transparency International (2014) corruption is an illegitimate exploitation of public power for private benefits. It is a complex activity which affects countries (especially developing countries) globally. The main problem with corruptive practices is that it demoralizes democratic Institutions, contributes to governmental instability and acts as an impediment to growth (Mikaelsson and Sall, 2014).
According to Ahmad, Ullah and Arfteen (2012) in the theoretical model of corruption, the analysis should start by treating corruption as any other crime like tax evasion and its economic treatment must be done in a manner similar to that of tax evasion model of Allingham and Sandmo (1972). In the model originated from Becker (1968) and later extended by other Authors like Polinsky and Shavell (1979, 1984). In this model, individuals contemplating on corruption take into account their expected benefit which comes in the form of bribes, favours or payment in kind. They compare the monetary equivalence of their gains from corruption with the expected costs in the form of the probability of being caught and the monetary sum or the equivalent of the punishment should they be caught and convicted. In any country where the costs of being caught are minimal compared to the benefits of corruption, corruption is prevalent.
Several authors have argued over the detrimental impacts of corruption on economic growth while others have argued otherwise. For example, Myrdal (1989), Krueger (1974), Mauro (1998) have argued that corruption modifies government goals and divert resources from public planning to private use leading to deadweight loss to the society. In addition to the above, government corruption may discourage private investment by escalating the cost of public administration. Corruption can also fuel social discontent and political unrest and this in turn may decelerate economic progress among others (Alesina et. al. 1992). Murphy, Shleifer and Vishny (1991) argue that corruption creates diversion of talent out of entrepreneurial activities towards unproductive rent-seeking
315 Resource Exploitation, Corruption and Economic Growth in African Continent activities, because, most talented people compete for the greatest payoffs available within the economy. The effects of corruption are multifaceted and not as straightforward as many of the early authors have shown. There is plethora of theories on the roles of resources, corruption and economic growth that demands empirical validation in resource-rich African countries, hence the following empirical analysis.
METHODOLOGY This study is based on the following model which in accordance with the growth theory sees productivity as a function of combined application of labour and capital. Other inputs needed for growth to exist include the natural resource endowment and utilization as well as the availability of funding..All these formed the bedrock of the study's model in (1).
RGDPGRit = á0 + ð1DCPit + ð2GCFit + ð3LBPit + ð4TNRit + µit ---- (1) Where;
RGDPGRit is GDP per capita growth (annual %) in year t for country i
TNRit is Total natural resources rents (% of GDP) in year t for country i
DCPit is the Domestic credit to private sector (% of GDP) in year t for country i
GCFit is the Gross capital formation (% of GDP) in year t for country i
LBPit is the Labour force participation rate (% Total population) in year t for country i
To avoid running a spurious regression therefore, the study conducted the stationarity test on variables using, Pesaran and Shin W-statistic, ADF - Fisher Chi-square and Phillip Perron - Fisher Chi-square to test the null hypothesis of the presence of unit root for individual country. Levin, Lin & Chu t-test was used to test the null hypothesis of the presence of unit root in the pooled (common) data. Their respective probabilities were used in making judgement.
Our Hausman's chi-square statistic was used in conducting the test. The test involve the determination whether the random effects model passes the Hausman test for the random effects being uncorrelated with the explanatory variables or not and the result concluded that random effect is wrong and inconsistent. I therefore tested for the inclusion of cross section and time in our fixed effect model and they are significant and I therefore included for analysis.
Country and Year Fixed Effect (two way fixed effect model) The study applied the fixed effects panel model where the slope coefficients are constant, but the intercept varies over country as well as time. We would have a regression model with i-1 country dummies and t-1 time dummies. The model was specified as follows:
RGDPGRit = á0 + á1 Country1 + á2 Country2 + ……+ á9Country9 + â1Year1 + â2Year2
+ ……+â26Year26 +ð1DCPit + ð2GCFit + ð3LBPit + ð4TNRit + µit ---(2) Data 316 Resource Exploitation, Corruption and Economic Growth in African Continent
All data for the study were taken from 1990 to 2012 for nine natural resource rich countries of Africa. Angola and Libya were excluded from the study because of paucity of data. The following nine African were included in the study. Tunisia, Cameroon, Cote D'ivoire, Egypt, Nigeria, Gabon, Democratic Republic of Congo, Congo Republic and Algeria. All data were sourced from the World Bank database except Congo DR whose data for domestic credit to private sector (as a % of GDP) were generated for 1996 to 1999 using a regression model DCP = 195.57 – 0.0975 Time. The corruption perception index (CPI) data are sourced from World Bank Group, CPIA database (http://www.worldbank.org/ida. 2013 data for natural resources were obtained as the average of 2005 to 2012.
RESULTS AND DISCUSSION The table below presents the results of the unit root test for variables of the study. Table 1: Panel unit root test: Summary
Individual unit root Order of Common unit root Null: Unit root (assumes common unit Integration Null: Unit root (assumes root process) common unit root process) Series IPS ADF Fisher PP Fisher LLC - t Order of Integration GCF -2.79919 36.5602 47.1133 -2.06305 I (0) (0.0026) ( 0.0060) ( 0.0002) I(0) (0.0196) DCP -4.17032 54.3806 43.9944 I(0) -4.47703 I (0) ( 0.0000) (0.0000) (0.0006) ( 0.0000) GDPGR -4.37607 55.5780 67.1866 I(0) -4.56119 I(0) ( 0.0000) ( 0.0000) (0.0000) ( 0.0000) TNR -1.01203 23.5467 23.5536 Not I(0) -2.05592 I(0) ( 0.1558) (0.1704) ( 0.1702) ( 0.0199) LBP -2.34397 36.1552 21.8029 I(0) -4.47026 I(0) (0.0095) (0.0067) (0.2409) ( 0.0000) Where, LLC-t is Levin, Lin & Chu t*, IPS is Im, Pesaran and Shin W-stat ADF Fisher is ADF - Fisher Chi-square and PP Fisher is the PP - Fisher Chi-square. All figures in parenthesis are their respective probabilities.
There are two components of the unit root presented in table 1. A section of it tested the null hypothesis of the existence of unit root for individual countries and the other section tested the existence of unit root for all the country put together. The result for Im, Pesaran and Shin W- statistic indicates the rejection of the null hypothesis of the existence of unit root at 1% for individual country and across all variables except for natural resources (TNR).ADF Fisher Chi Square also has the same result with Im, Pesaran and Shin W- statistic. Phillip Perron Fisher Chi Square rejected the existence of individual unit root for GCF, DCP, and GDPGR at 1% significance level but failed to reject the existence of unit root for TNR and LBP. Generally, all the variables as viewed individually are integrated of order zero except the TNR.
317 Resource Exploitation, Corruption and Economic Growth in African Continent
However, what is of interest is the common unit root of all variables used in the model. Levin, Lin and Chu t-statistic was employed in testing for unit root. We failed to establish the presence of unit root for all the variables as they are all integrated of order zero. We therefore used the variables to run the random effect model.
Table 2: The Random Effect Model
Dependent Variable: GDPGR Method: Panel EGLS (Cross-section random effects) Date: 10/26/15 Time: 15:04 Sample: 1990 2012 Periods included: 23 Cross-sections included: 9 Total panel (balanced) observations: 207 Swamy and Arora estimator of component variances
Variable Coeff icient Std. Error t-Statistic Prob.
C 6.231010 3.939310 1.581752 0.1153 DCP 0.031372 0.025251 1.242415 0.2155 GCF 0.018693 0.045650 0.409498 0.6826 LBP -0.129823 0.053523 -2.425573 0.0162 TNR 0.048281 0.022030 2.191611 0.0296
Effec ts Specification S.D. Rho
Cross-section random 0.834149 0.0412 Idiosyncratic random 4.025407 0.9588
Weig hted Statistics
R-squared 0.085044 Mea n dependent var 0.421127 Adjusted R-squared 0.066926 S.D. dependent var 4.268193 S.E. of regression 4.122893 Sum squared resid 3433.645 F-statistic 4.693934 Durbin-Watson stat 1.187011 Prob(F-statistic) 0.001211
Unwe ighted Statistics
R-squared 0.140027 Mea n dependent var 0.593720 Sum squared resid 3564.504 Durbin-Watson stat 1.143434 It is necessary to ascertain which of the estimation techniques (random or fixed effects) is more
appropriate before interpreting our result (if necessary). Hausman's chi-square statistic was used in conducting the test. The test involves the determination whether the random effects model passes the Hausman test for the random effects being uncorrelated with the explanatory variables or not.
Table 3: Hausman Test Result
318 Resource Exploitation, Corruption and Economic Growth in African Continent
Correlated Random Effects - Hausman Test Equation: EQ04 Test cross-section random effects
Chi -Sq. Test Summary Statistic Chi-Sq. d.f. Prob.
Cross-section random 13.902332 4 0.0076
The p-value for the test is < 5%, specifically it is less than one percent (0.8%) thus indicating that the random effects model is not appropriate and that the fixed effects specification is to be preferred. To do a robust estimate of our model, we need to conduct the joint significance test of the fixed effects estimates in least squares specifications. To test the significance of the effects we must first estimate the unrestricted specification that includes the effects of interest (cross-section fixed and period fixed). The test is predicated on the null hypothesis that the effects (cross-section fixed and period fixed). The significance of our chi-squares means that we are rejecting the null hypothesis that these effects are redundant. In the case our chi-square is insignificant, we would fail to reject the null hypothesis and conclude that there are no time/period and cross-section effects. The result for our cross section and period fixed effects is provided below.
Table 4: Cross-section and period fixed effects test's result
Redundant Fixed Effects Tests Equation: EQ01 Test cross-section and period fixed effects
Effects Test Statistic d.f. Prob.
Cross-section F 2.629728 (8,172) 0.0096 Cross-section Chi-square 23.886080 8 0.0024 Period F 2.387908 (22,172) 0.0010 Period Chi-square 55.172231 22 0.0001 Cross-Section/Period F 2.694683 (30,172) 0.0000 Cross-Section/Period Chi- square 79.749712 30 0.0000
In the above result, the cross-sectional F statistic with a probability of about 1% indicates that the null hypothesis of non existence of cross-sectional effect is rejected. The cross-sectional Chi-square of 23.89 with probability of 0.2% indicates that there is cross-sectional effect in our fixed effect model even at 1% significance level. The result of the test statistic for the hypothesis of non- existence of time/period effect is also rejected as the F – statistic is 2.39. The associated probability of this estimate at degree of freedom of 22 and 172 is 0.001 or 0.1% significance level. In addition, the Chi square statistic for the period effect is 55.17 which is significant at 1% significance level. The 319 Resource Exploitation, Corruption and Economic Growth in African Continent null hypothesis of non-existence of time and cross – sectional effects was also rejected at 1% significance level indicating the need to estimate the fixed effect model which incorporate the time/period and cross – sectional effects. The result based on this is provided below.
Table 5: Fixed Effect (with cross-section and time dummies) Result Dependent Variable: GDPGR Method: Panel Least Squares Date: 10/24/15 Time: 17:16 Sample: 1990 2012 Periods included: 23 Cross-sections included: 9 Total panel (balanced) observations: 207
Variable Coeff icient Std. Error t-Statist ic Prob.
C -9.683530 20.46271 -0.473228 0.6367 DCP -0.034408 0.040625 -0.846975 0.3982 GCF 0.093943 0.062770 1.496617 0.1363 LBP 0.134927 0.333380 0.404724 0.6862 TNR 0.038622 0.042169 0.915882 0.3610
Effec ts Specification
Cross-section fixed (dummy variables) Period fixed (dummy variables)
R-squared 0.419030 Mea n dependent var 0.593720 Adjusted R-squared 0.304187 S.D. dependent var 4.485631 S.E. of regression 3.741706 Akaike info criterion 5.629900 Sum squared resid 2408.063 Schwarz criterion 6.193404 Log likelihood -547.6947 Hannan-Quinn criter. 5.857776 F-statistic 3.648726 Durbin-Watson stat 1.420587 Prob(F-statistic) 0.000000
The above results show the determinants of growth for the affected countries. Domestic credit to private sector has a negative and insignificant relationship with economic growth. This indicates the impotence of domestic credit in improving income during the time under study. Although gross capital formation has the expected positive relationship with growth, this relationship is low and insignificant.
The proportion of labour force to the actual labour is a proxy for labour in this growth equation has a result which agrees with the a priori expectation, however the effect of labour on economic growth is also low and insignificant. The variable of interest which is the rent on natural resources as a percentage of GDP produces a very low positive result. This variable insignificantly explained economic growth in the affected country. Although, none of the variables individually explained economic growth, but jointly, they explained
320 Resource Exploitation, Corruption and Economic Growth in African Continent economic growth in the countries of study. This study did not establish the significant positive impact of resource extraction on economic growth and therefore conclude that resource curse is indeed true in countries under the study. The next question to ask is, which other variable significantly influenced growth? To answer this question, we ran another model incorporating corruption captured by the corruption perception index (CPI). The higher the corruption perception index (CPI), the less corruption is in the country of interest. Due to limitation of data on CPI therefore, the study was only able to do a panel study for 5 of the selected African countries and the CPI variable was named CORR in the model. The result is presented in table 6.
Table 6: Fixed Effect Result for model incorporating Corruption as Additional Variable Dependent Variable: GDPGR Method: Panel Least Squares Date: 02/09/16 Time: 11:06 Sample: 2005 2013 Periods included: 9 Cross-sections included: 5 Total panel (balanced) observations: 45
Variable Coeff icient Std. Error t-Statistic Prob.
C 42.18817 94.72712 0.445365 0.6588 GCF 0.312354 0.126892 2.461568 0.0189 DCP 0.067522 0.078264 0.862746 0.3942 TNR 0.046435 0.075778 0.612780 0.5440 LBP -0.880409 1.392361 -0.632314 0.5313 CORR 4.909597 2.050003 2.394922 0.0221
Effec ts Specification
Cross-section fixed (dummy variables)
R-squared 0.361084 Mea n dependent var 2.006667 Adjusted R-squared 0.196791 S.D. dependent var 2.662654 S.E. of regression 2.386322 Akaike info criterion 4.770514 Sum squared resid 199.3086 Schwarz criterion 5.171994 Log likelihood -97.33656 Hannan-Quinn criter. 4.920182 F-statistic 2.197807 Durbin-Watson stat 2.551175 Prob(F-statistic) 0.046396
The above result indicates that indeed capital formation and lower corruption level (higher the corruption perception index) significantly contribute positively to economic growth at 5 percent significant level. Therefore, endemic corruption is the reason why domestic credit utilization and rent from natural resource extraction could not contribute significantly to growth in most developing countries as seen from the result for some African countries in this study.
321 Resource Exploitation, Corruption and Economic Growth in African Continent
This study's conclusion is partly in agreement with the findings of Baghebo and Atima (2013), Alexeev and Conrad (2010), Sala-i-Martin and Subramanian (2003) and, Ismail (2010). All lend credence to the validity of Sala-i-Martin and Subramanian's finding on institutional quality and corruption of resource rich economies as being the cause of resource curse as opposed to the prevalence of 'Dutch Disease' as popularly believed in the literature. Our study did not investigate the role of institutional quality in this case due to paucity of data on institutional quality. Frankel (2012) also highlighted the roles of the multinational corporations in distorting the beneficial impact of resource extraction. This may be a major factor in resource-rich African economies as well.
RECOMMENDATIONS Based on the foregoing, this paper recommend that resource – rich countries should adopt the Hartwick - Solow model which posits that constant consumption could be maintained over time if resource – rich countries could invest their Hotelling rent from natural resources extraction into man-made alternatives.
Secondly, government could channel rent (during boom) from resource extraction via fiscal measures to the private sector since they are more efficient in fund utilization. Alternatively, Government could put up welfare programmes that ensure equitable distribution of proceeds from resource extraction. In other word, government of resource-rich countries must ensure that there is equitable distribution of economic and social benefit of resources to its citizens. In addition, when there is positive shock in the resource market, government should increase investment in social capital.
Thirdly, Governments of resource – rich countries should strengthen local Institutions and ensure accountability while also blocking leakages in resource revenue. In addition, government must monitor and regulate the activities of the multinational corporations and prevent their sharp practices. Appropriate tax laws must be initiated to prevent exploitation by the multinational corporations. Government of resource – rich countries should engage in strategic trade policy when there is a favourable shock of their product and discourage frivolous importation accompanying any positive shock. Lastly, government must initiate concerted efforts at stemming the tide of capital flight and corruption.
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Appendix: Cross – section intercepts.
CROSSID Effect 1 1 1.058168 2 2 -1.836009 3 3 -5.141758 4 4 -3.837909 5 5 -0.861455 6 6 4.351298 7 7 -2.626296 8 8 3.265240 9 9 5.628722
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