BACKGROUND OF THE STUDY
Small and medium scale enterprises (SMEs) as defined by the National Council of Industries referto business enterprises whose total cost excluding land is not more two hundred million naira(200,000,000) only. It has been argued that SMEs are an effective instrument for economic growthand development in development as well as less developed countries (Beyene, 2002; Nitani, 2005)this is because SMEs contribute significantly to the Gross Domestic Product (GDP) and producesubstantial amounts of locally consumed products (ECA, 2000; Wattanapruttipaisan, 2003; Tagoeet al, 2005; Saleh and Ndubuisi, 2006). According to Mojmir(2000), SMEs play an important rolein the economic growth of any country including industrialized countries because they account formore than half of a country’s output and employment ( Hussain et al, 2008). In the same vein,Udechukwu(2003) asserts that the development of SMEs is an essential element in the growthstrategy of most economies, which holds particular significance for developing countries likeNigeria. SMEs are a vital part of any market economy because they are represented in all majorbranches of manufacturing and service sectors (Obokoh, 2008). This is in addition to their role inemployment generation, provision of goods and services within and across national boundaries ofcountries (SAleh and Ndubuisi 2006; Woldie et al, 2008)Due to their small size, SMEs are flexible and are more able to adapt to changes within the marketenvironment than large firms (Mazzarol, 2000; Udechukwu, 2003; Areetey, 2005). However, thesmall size of SMEs and their small capital base also constitutes an obstacle to their access to funds
for their operations. (Obokoh, 2008). It is expected that SMEs with ready and willing entrepreneurs,can succeed in an increasingly competitive world, especially if there are enabling and supportivegovernment policies (Briggs, 2007). In this vein, Berry (2002) asserts that the flexibility of SMEs’operations persuades business analysts to believe in their strategic role towards future industrialgrowth of developing nations. Despite this flexibility, SMEs are also exposed to externalenvironmental risks such as government policies and competition from multinational corporations(MNCs) (Watson and Everett, 1999; Abonyi, 2003). Some of these environmental factors oftenhinder SMEs from gaining the necessary international exposure for achieving large scaleproduction for the efficient utilization of resources (Mambula, 2004)Given favourable policy environment and support, it is believed that SMEs can achieve an efficientproduction process that would enable them to compete successfully in the global market (Briggs,2007). Therefore, government policies should be directed towards improving the economicenvironment in which SMEs operate (Fredland and Morrris, 1976; Everett and Watson, 1998).There is now a renewed emphasis on the development of SMEs especially in LDCs (EA 2001).This is in view of LDCs governments’ formulation policies that would create the enablingenvironment for the establishment of and the operation 0f SMEs Agoboli and Ukaegbu 2006. Thisresearch is thus intended to critically appraise the circumstances of SMEs in Nigeria with a view aview to actually identifying and assessing the bottlenecks militating against the effectiveperformance of SMEs and also seek to investigate the reasons why programmes designed bygovernment to boost SMEs performance are yet to fully achieved their desired objectives (Mambula2002)
