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Statistical analysis of SME performance in Lagos, Nigeria

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SMEs

The Lagos State government, in collaboration with relevant agencies and through special programmes, projects and policies, is committed to confronting infrastructural challenges to SME growth. Its 14-year Lagos State Development Plan (LSDP) (2012-2025) which aims at developing the non-oil sector, where SMEs are key players, has enhanced business processes and assisted entrepreneurs in the manufacturing sector. The state governor, Akinwunmi Ambode, described SMEs as a “prime-mover” of the Nigerian economy following its 65% contribution of nationwide VAT earnings (Iroegbu-Chikezie., 2015).

Lagos has about 12,000 SME operators and more than 2000 industries, which make up over 65% of Nigeria’s industry total and account for over 60% of GDP.

Existence of efficiently-managed banks provide SMEs in Lagos with amazing prospects. In addition, the recent partnership between Ambode’s government, artisans and entrepreneurs, has created initiatives supported by Ibile Microfinance bank, Ministry of Wealth Creation & Employment, and Lagos State Employment Trust Fund which was established with ₦25bn start-up capital for the purpose of revitalizing SME activities in the metropolis as well as creating wealth, jobs, and increasing NI (Essiet., 2018). 

CHAPTER FOUR

4.1 RESEARCH METHODOLOGY

The research design adopted chi-square test (X²) at 5% significance level and other quantitative methods which proved handy in analyzing the null hypotheses against alternative statements. Data used in the assessment are presented as percentages, mean scores, and in tables. Further, the researcher employed a descriptive method for a comprehensive understanding of the nature, composition and suitability of the collated information.

Primary data used in this study were sourced from well-structured questionnaires designed for selected 150 respondents who are mainly entrepreneurs, artisans, labourers and managers in Lagos, Nigeria. The questionnaire comprised of 2 sections (A & B) which probed into the participants’ socio-political demographics.

Secondary sources of information used in this study include business journals, magazines, newspapers, books, unpublished academic materials, libraries etc.

4.2 CONCEPTUAL MODEL OF THE STUDY

The conceptual framework adopted in this research elaborates on the relationship between independent variable (SMEs) and their impact on dependent variables (Poverty Level, Politics and Standard of Living).

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SMEs function as a catalyst for economic growth, with huge impact on entrepreneurs’ standard of living and poverty level. On the other hand, government involvement in improving the SME sector encourages partisanship, sensitizes citizens on their obligatory responsibilities and rights, as well as translates to election victories though this commitment to good governance is evaluated by the level of inclusiveness, accountability, equality, quality of service delivery, probity, human rights protections, and security of lives and property, among others.

4.3 DATA PRESENTATION AND ANALYSIS

4.3.1 Socio-Demographic of Survey Participants

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Table 1 shows the gender distribution of respondents as 64 males and 86 females, an indication that there are more females in Lagos State SMEs. Findings from the study also show that more women engage in commerce and artisanship. Further, a larger percentage of these independent, enterprising women are breadwinners in their households, or generating income to support their different husbands and families.

Table 2: Classification of Respondents by Age and Education

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As shown in Table 2, respondents aged 30 to 40 years and those below 30 make up 84% of all survey participants (42% for each group). Those that fall between the age bracket 40 – 50 years are 18 (12%) while 50-year-olds and above total 6 (4%). On the other hand, the respondents’ educational qualifications are as follows: Higher Institution (65 people or 43.3%); Secondary School (49 people or 32.7%); Primary School (24 or 16%); and Uneducated (12 or 8%).

Table 3: Classification by Experience and Business Sector

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Table 3 indicates that 86 out of the 150 survey participants have engaged in SME activities below 5 years. Accordingly, 49 people (32.7%) have 5 – 10 years’ experience whereas only 15 entrepreneurs have spent over 10 years in the SME sector. Further, the respondents are categorized by type of business vis-a-vis: Manufacturing (27 or 18%), Commerce (64 or 42.7%), Agro-Allied (16 or 10.7%), and Artisan (43 or 28.6%)

Findings show that most SMEs in Lagos fail within 5 years of existence but are “most likely” to attain profitability and sustainability beyond this period. In addition, trading is most viable in the city due to its dense population and affordability of goods and services. Given the wide distribution of respondents, the researcher believes these results offer a perfect representation of SMEs in Lagos.

4.4 RESULTS AND DISCUSSIONS

In line with the hypotheses, details of research results are discussed below:

Hypothesis 1: There is a relationship between SMEs and poverty reduction in Lagos State.

Table 4: Chi-square analysis of Hypothesis 1

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As shown on Table 4, X²c = 9.964

The result above is greater than X², which equals 9.488

Further, X²c > X²t at 0.05 level of significance, which indicates acceptance of Hypothesis 1 (H01) and show that SMEs have significant influence on the poverty reduction in Lagos State. This can be attributed to the thick population, infrastructure development, low cost of living and the state government’s incentives, strategies and policies which have created numerous jobs, offered financial assistance to entrepreneurs and equitably distributed wealth.

Hypothesis 2: There is a relationship between SMES and politics in Lagos State.

Table 5: Chi-square analysis of Hypothesis 2

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Findings from the analysis show that X²c = 10.125

The outcome is greater than X²t which equals 9.488

Therefore, X²c > X²t and, at 0.05 level of significance, Hypothesis 2 (H02) is also validated. This result shows that SMEs in Lagos State play crucial roles in politics such as: pressurizing or lobbying policymakers for favourable financial/regulatory controls; encouraging members to actively participate in partisan politics; and ensuring that resource allocations from both state and federal governments are equitably distributed and effectively utilized.

Hypothesis 3: There is a relationship between SMEs and the standard of living in Lagos.

Table 6: Chi-square analysis for Hypothesis 3

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As shown on Table 6, X²c is 11.148, which a greater result than the value of X²t. Therefore, X²c > X²t when tested at 0.05 level of significance. This outcome accepts Hypothesis 3 (H03). Further, SMEs in Lagos have positive impacted on people’s living standard because of the city’s vast opportunities, infrastructure base, low cost and government incentives, particularly for entrepreneurs.

CONCLUSION AND RECOMMENDATIONS

Apathy is the most neglected problem of SMEs in Nigeria. Considering results from this study, most small and medium-scale businesses are not registered with trade unions or government agencies and this circumstance leads to unnecessary interference from officials representing these governmental bodies. In addition, this avoidable obstacle prevents entrepreneurs from tapping on numerous assistance projects sponsored by Lagos state government, FG, and local/international stakeholders.

Sustainability of SMEs therefore depend on managers’ socio-political awareness, access to ICT, proactive involvement in information gathering and dissemination activities, as well as maximization of access to government incentives through participation in meetings with relevant government agencies and unions. These will not only produce responsible, accountable and committed leadership in government and business circles but ensure that the voice of SME bodies is loud enough to be heard and revered.

The researcher therefore recommends that:

  • The government should provide capital and investment funds to existing and new businesses through less cumbersome procedures.
  • Loan facilities should be non-collateral based, with low and stable interest rates as well as tax holidays to encourage more entrepreneurs in the non-oil sector.
  • The government should invest more on infrastructure development, particularly constant electricity supply, accessible roads, high-tech healthcare facilities, improved transportation systems, including security of lives and property, among others.
  • Human capital development should be a priority for both governments and SME operators, considering that information is power and the real value of education is immeasurable.

Reference

Iroegbu-Chikezie O., 2015, “Lagos: Leveraging on SMEs for growth,” The Nation, viewed 24.11.2018, < http://thenationonlineng.net/lagos-leveraging-on-smes-for-growth/>

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