CHAPTER ONE

INTRODUCTION

1.1 Background of Study

In a free enterprise economy, the problem of national economic development and growth sustenance is usually the joint responsibility of the public and the private sectors of the economy. While the public sector contents with adverse challenges to development and creates an enabling environment for effective private sector participation in developing the private sector responds to the favourable environment by increasing its investment in the economy which is the necessary catalyst for economic development. Entrepreneurship plays a vital role in the economic development of nations even in a depressed. According to Onuoha (1994:16) entrepreneurship leads to the transformation of traditional industry; creates employment opportunities; has linkages effects. That is, it helps to link up the various factors of the economy: makes more efficient use of resources; (raw materials, capital and labor); generates income (locally and externally), contributes to regional activity and cooperation; helps to promote change in a gradual and peaceful manner; and provides training and learning ground for people at all levels and functions.

In recognition of the important roles of entrepreneurs in economic development, there has been a global shift of various nations’ reliance on a large corporations, and government for economic development. Various nations of the world have discovered the dynamism in small business, and are now focusing on entrepreneur development.

According to Drucker (1998:7), the United States for instance has shifted from a ‘managerial’ to an entrepreneurial economy. Small companies which were hitherto diminished during the rapid industrialization era have made a great come back. Big corporation rose to ascendancy during the period in fields where economics of scale were critical to success. Among these industries were railroads steel, automobiles, chemicals, and communications. The swift pace of technology change and fragmentation of markets are eroding the traditional economics of scale. The reaction is that these changes are erasing many of the costly entry barriers that protected these corporations from small ventures. Nigeria is not left out in this global shift. In an effort to bring about rapid industrialization, the federal government introduced various incentives to encourage the establishment of private industries.

According to Sule (1999:13), the industrialization strategy was based mainly on large scale industries, and these industries relied heavily on the important of capital equipment and technical manpower. The objective of government in setting up these industries achievement on high level local added technology did not materialize. Thus in response to the weaknesses of large scale manufacturing, government sought to promote small scale industries as a strategy for self-reliant industrialization.

The vital roles of small and medium scale industries have long been recognized, but the first service policy to encourage their development came in 1970. The first towards this was the establishment of small-scale industries division of federal ministry of industries, as well as the establishment of industrial development (IDPS) in the same year. The former idea was to initiate, and implement policy, on the promotion of small scale industries in Nigeria, while the later was to provide technical support, and manpower training facilities for industries, (Faleye,1985).

Later, the Federal Government promulgated a decree known as the Nigerian Enterprise promotion decree in 1972 (Amended in 1977 and 1989). The aim of the decree was to encourage more Nigerian in the ownership, control and management of certain enterprises (Onuoha, 1994:208). To further bring about rapid industrialization by encouraging the growth and development of entrepreneurship, the government introduced private sector mobilization agencies like small scale industries corporation (SSIC), Nigerian Bank for Commerce and Industries (MBCI), Nigerian Industrial Development Bank (NIDB), National Economic Reconstructions Found (NERFUND), Peoples Banks, Family Economic Adjustment Programme (FEAP), National Directorate of Employment (NDE) etc. One of the programmes articulated by NDE was the small-scale industries and graduate employment of potential entrepreneurs who are equipped to start and successfully manage small and medium scale industries (NDE, 1989:112).

Furthermore, Enugu state government in recognition of the very important role, small and medium, scale enterprise have played in the rapid development of other countries, particularly in the far East, has resolve to create an enabling environment for industrial development of the state, which the private investors/entrepreneurs, with their expert capabilities and profitable management style are expected to lead. Consequently, the state government is arranging the transfer of some of its interest in some government-owned industrial projects, to businessmen, and women, either by outright sale or by the sale of part of its equity in other establishments (Okafor 1995:4).

Over the years, there has been a remarkable increase in the number of ventures and the range of businesses has grown more complex. Developments through private institutions are considered to be dynamic, innovative, result-oriented, risk taking and forward looking. Entrepreneurships are essential to the maintenance of free competition in the economy. The common identity of management and ownership in entrepreneurships creates a motivational drive, and willingness to take risks which are the characteristics requirement for innovation. Despite the increase on the number of small/medium sized businesses, most of them are yet to stand the test of time. According to Aja (1991:1), the environment in which this sector operates is both challenging, and rewarding. It is challenging, because it is fraught with the dangers of risks arising from having in the first place, to invest money in entrepreneurship, and the problems of managing it in the country’s recessed economy. Moreover, there is also the challenge of government regulatory activities which may affect the performances of small and medium scale industries adversely.