New England Journal of Entrepreneurship Volume 13 | Number 2 Article 7 2010 SMEs and Poverty Alleviation in Nigeria: Marketing Resources and Capabilities Implications Olalekan U. Asikhia Covenant University, [email protected] Follow this and additional works at: https://digitalcommons.sacredheart.edu/neje Part of the African Studies Commons, and the Entrepreneurial and Small Business Operations Commons Recommended Citation Asikhia, Olalekan U. (2010) "SMEs and Poverty Alleviation in Nigeria: Marketing Resources and Capabilities Implications," New England Journal of Entrepreneurship: Vol. 13 : No. 2 , Article 7. Available at: https://digitalcommons.sacredheart.edu/neje/vol13/iss2/7 This Case Study is brought to you for free and open access by the Jack Welch College of Business at DigitalCommons@SHU. It has been accepted for inclusion in New England Journal of Entrepreneurship by an authorized editor of DigitalCommons@SHU. For more information, please contact [email protected], [email protected]. Asikhia: SMEs and Poverty Alleviation in Nigeria Case Study SMEs and Poverty Alleviation in Nigeria: Marketing Resources and Capabilities Implications Olalekan U.Asikhia his article seeks to identify the mediating role of are already engaged in businesses such as dress sewing, vul- marketing resources and capabilities in small and canizing, car repairs, petty trading, carpentry,car washes, dry T medium enterprises (SMEs)—poverty alleviation cleaning, food selling/restaurant, etc. (Adeokun, Adedoyin, relationship. A qualitative approach of conceptualization and Adereti, 2002). Despite these diverse businesses whose of the interconnectedness of the major variables of the performance are not directly related to natural phenomenon study is undertaken.Despite several development programs like rainfall,poverty still exists in more than 75 percent of the of SMEs and poverty alleviation, the poverty level of Nigerian population (IFAD, 2007). Nigerian SMEs has dragged with incidence of high SMEs Small businesses have the tendency of increasing individ- failure. Marketing resources and capabilities are suggested ual productive capability and create wealth when the prod- as probable missing links between SMEs and profitable ucts produced or services are sold from time to time. The exchanges that lead to wealth creation, thus alleviating evolvement of small and medium enterprises helps industri- and eradicating poverty.While empirical study in this direc- al dispersal thus stemming the rural–urban drift through cre- tion is vital, the current conceptual model shows that SMEs ation and sales of goods and services that help individuals to operators would help in the elimination of poverty by directly mobilize domestic saving, which could be ploughed acquisition of necessary marketing knowledge, skills, and back into business to ensure growth and contribute to eco- capabilities to identify the customers’ needs, establish vital nomic developments. relationships with them through requisite ego drive, empa- The need for marketing resources and capabilities to sell thy, and capability to change, and thus keep them sold. goods and services cannot be underemphasized. Men and Prior research concerning SMEs and poverty alleviation in women who are supposed to have been empowered through Nigeria has been limited to finance. The findings of the the establishment of various poverty alleviation programs present research have implications for the role of market- have remained poor after setting up businesses that would ing as the ultimate source of profitable growth through help in repositioning them economically and socially. Many exchanges and wealth creation that will help in eradicat- researchers have often criticized the ineffectiveness and inef- ing poverty. ficiency of programs such as financing through Nigeria Keywords: SMEs, poverty alleviation, marketing resources, Industrial Development Bank (NIDB) and the Nigerian Banks marketing capabilities, wealth creation, Nigeria for Commerce and Industry (NBCI), establishment of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Small and Medium Enterprises Equity Investment Poverty can simply be defined as the state of being poor and Scheme (SMEEIS), and now micro credit schemes. Data show unable to provide basic human needs such as food, clothing, that many have benefitted from these programs (CBN, 2008); and shelter.Thus, poverty denotes a state of need, of not hav- meaning that a lot of businesses had been set up, yet recent ing access to necessities of life that support actual dwelling. Human Development Index (HDI) and the official estimates It is a state of helplessness. put the poverty level at 70 percent of the population.In 1980, Poverty in Nigeria is severe not just in rural areas but the poverty level was 27.1 percent; in 1992, it deteriorated to everywhere, especially where social services and infrastruc- 42.8 percent and plummeted to 65.6 percent by 1996 (Malik, ture are limited or nonexistent. However, the majority of Torimiro, and Adereti, 2003). These figures indicate that those who live in rural areas are poor and depend on agricul- despite all the progress,the incidence of poverty has not been ture for food and income. Small-scale farmers who cultivate addressed as most people look at the problems of small and plots of lands depend on rainfall rather than irrigation sys- medium enterprises (SME) from the finance point of view tems to produce about 90 percent of the country’s food (Ogunleye, 2004; Owosekun, 2001; Owualah, 2004). (Adereti and Ajayi, 2004). The literature that investigates other areas of SME) prob- Recent research shows that a high percentage of the poor lems are few or nonexistent. If those individuals who had SMES AND POVERTY ALLEVIATION IN NIGERIA:MARKETING RESOURCES AND CAPABILITIES IMPLICATIONS 57 Published by DigitalCommons@SHU, 2010 1 New England Journal of Entrepreneurship, Vol. 13 [2010], No. 2, Art. 7 been empowered through various poverty alleviation pro- SMEs in Nigeria grams like the National Economic Empowerment SMEs are recognized as catalysts in the socio-economic devel- Development Strategy (NEEDS), the National Poverty opment of any country. They are veritable vehicles for the Eradication Programme (NAPED), and the Millennium achievement of macroeconomic objectives in terms of Development Goals (MDGS) were all working together to employment generation at low investment cost and the eradicate poverty in Nigeria, then the development of small development of entrepreneurial capabilities, indigenous and medium enterprises would have experienced continu- technology, stemming rural–urban migration, local resource ous growth and would have contributed to decreasing the utilization, and poverty alleviation. poverty percentage.SMEDAN (2008) reports that 80 percent Having identified the relevance and catalytic role of the of SMEs, however, die before their fifth anniversary, suggest- SME in fostering economic development, successive govern- ing that beyond the finance supplied by the poverty allevia- ments in Nigeria since 1940 have been formulating policies tion programs and small and medium enterprises develop- favorable to the development of the subsector. Osoba (1987) ment programs, other factors could mediate between SMEs’ reports that the initial attempt of the government to develop performance and poverty alleviation in Nigeria to reduce small-scale industries in Nigeria dates back to 1946 when the the incidence of poverty in the country.This article suggests first seasonal paper dated No. 24 of 1945 on “A ten year plan marketing resources and capabilities as one of such factors of development and welfare for Nigeria, 1946”was presented or variables. Table 1. Summary of Lending Activities of Selected Financial Institution from 1988–1998 ( 000) ==N Bank 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 NIDB 170.6 73.5 636.3 543.4 1,174.5 1,105.6 566.8 565.1 351.0 0.0 64.5 Sanction Disbursement 88.5 235.1 220.8 353.0 1,294.2 635.1 612.8 436.0 925.4 105.3 85.3 NACB, - - - - 203036 436,520 696,022 34,253 47,168 No. Project 42889 31,560 3,234 4,715.5 6,104.2 415.2 410.5 491.3 443.9 Disbursement NBCI Loans & - 392.2 239.1 472.3 777.6 1,761.6 2,0061 2,179.2 14.0 13.6 1,440.3 Advances Peoples Bank Loan & - - - - 78.0 167.3 178.2 340.0 350.0 360.1 400.5 Advances Source: Eigbe and Central Bank of Nigeria, 1995, p.85. Table 2. Summary of Community Banks’ Activities (Naira million, unless otherwise stated) Activities 2002 2003 2004 2005 2006 Number of reporting 316 564 615 725.0 757 Loans and advances 4310.9 9,954.8 11,353.8 14,547.4 16,498.6 Investments 925.5 2,261.0 2,612.7 3,594.1 3,868.2 Sectoral distribution of loans and advances Agriculture and forestry 390.5 625.0 483.1 69.9 965.1 Mining and quarrying 58.8 59.5 510.6 14.7 405 Manufacturing 549.6 809.2 331.8 64.9 1,088.7 Real estate and construction 450.8 574.1 279.2 214.8 839.8 Commerce 1385.4 2,733.1 2,875.3 1,591.9 4,504 Transportation/Communication 425.4 1,727.9 1,088.1 2795.1 2087.4 Others 1,050.4 3,425.8 5,785.6 23753.4 6608.5 Source: CBN, 2006a. 58 NEW ENGLAND JOURNAL OF ENTREPRENEURSHIP https://digitalcommons.sacredheart.edu/neje/vol13/iss2/7 2 Asikhia: SMEs and Poverty Alleviation in Nigeria to the legislative council on 13 December 1945 and In 1953, however, the World Bank reported that the coun- approved with some amendment by the legislative council of try had not made any significant progress in its industrial 7 February 1946. The first stage of the development plan