CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Many economic analysts in Particular have described government incentive schemes towards small-scale business in Nigeria and Enugu metropolis as a well development especially in this period of low level of economic activity and slow rate of growth of the economy as well as its devastating effects on the demand for labour.  Undoubtedly the slow rate of economic growth in the state explains why few job opportunities are available.  In most parts of the world, the importance of small scale business enterprise is not over emphasized in the process of socio-economic development of the country.  

It has become sufficiently clear that large scale enterprises have not and cannot alone play the dynamic role that they are supposed to play in the rapid growth and development of the economy, and prominent among these rates is employment creation and technological development.  Therefore the need for small-scale enterprises which will supplement the effects of the large scale business.  Small-scale are those business that required very little capital to set up and to produce goods that will carter for the needs of the growing population.  It is in the light of importance of small-scale business in Enugu metropolis that government incentive scheme towards small-scale business will be appreciated. Incentive in a literal sense implies that which has motivating influence and serving to incite actions.

These incentive schemes instituted by government provide other non-financial and financial assistance in the form of loans at affordable interest rate and grants.  It is in the light of the above that nation economic reconstruction fund (NERFUND) and Nigeria bank for commerce and industry (NBCI) and other development banks were created. However, small-scale enterprises have been defined by various authors in various ways but OSA20 (1984) defined small-scale business as a productive enterprise which is owned, managed and controlled by one or two persons or family which influences the decision making and a well has undifferentiated organization structure but has a small share of the market with less than fifty (5)) employees.  While central Bank of Nigeria annual report and statement of account (1975) defined small-scale business as those enterprises with annual turnover not exceeding N5,00,000.00.

Statement of the Problem

In spite of the recognition of the role of small-scale enterprises in fortering economic development through the promotion of indigenous technology, employment generating activities and bordering the production base of the economy, the impact has not been given adequate recognition. They have been restricted access to institutionalized credit  because banks see them as high risk ventures (Orji 1996) with the introduction of structural Adjustment programme (SAP) in 1986 and the inevitable devaluation of Naira, Many small-scale enterprises found it very difficult to cope with the attendant high production costs as a result of high cost of imported input and high interest rates. Therefore, to bridge this observed gap in gap in banks lending to small-scale enterprises, the Federal government set up the national Economic Reconstruction Fund (NERFUND in 1989 with aim of providing soft loans on medium and long term basis to small-scale enterprises wholly owned by Nigerians.  

The question now is, can it be said that the scheme has made desired impact on the development of small-scale enterprises in Enugu state? Since there are agencies set up to prove incentives and grants to small-scale enterprises, therefore the researcher intend to find out why small-scale business does not thrive in Enugu state.  Also to investigate whether the growth of the economic activity in the state where these agencies actually providing it only in paper work and not practically.  These are some of the critical issues, which this research work intends to evaluate; hence the topic evaluation of government incentives schemes towards small-scale enterprises is given. 

PURPOSE OF STUDY

The purpose of this research work is to evaluate government incentive scheme towards small-scale enterprises with firms in Enugu metropolis as a case study.  This work will also point out the problem encountered by the small-scale enterprises in an attempt to receive incentives or loans from banks and as well investigate whether the incentives when received are properly put to use or not.  This also evaluates the role of small-scale enterprises towards the development of the state economy.  Therefore the objectives of this work as pointed will be summarized thus:

To examine the problems encountered by small –scale enterprises in Enugu state in attempt to receive loans and incentives.

To determine whether incentives, grants or loans received are diverted or put to proper use.

To identify the government incentive scheme towards small-scale enterprises.

To evaluate the role of the small-scale enterprises towards the development of Enugu state economy.

To make recommendations on proper management of government incentives and small-scale industries. 

SIGNIFICANCE OF STUDY

This research work, which aims at evaluating government incentive schemes towards small-scale enterprises in Enugu state when concluded, will be of great benefit to the following interest groups:

THE GOVERNEMNT:  this work will be of great importance to the government of Enugu state.  This is because government has the interest of their economy at heart and equally they are the people that set up this incentive scheme and as well finance them through subventions.  Therefore they will be interested granted to the small-scale enterprises and as well will like to know whether all these incentive schemes were actually granted to the enterprises.  Also they will want to know whether the small-scale enterprises actually contributed to the growth and development of the economy.

SMALL SCALE ENTERPRISES: this is another group that will be interested in this research work. This is because they are the firm we are evaluating the incentives given to them.  Therefore, they will like to know how best to put to use the incentive received from government and as well know the best way to approach government in order to get more incentives from them and what the government expects from them when they receive such incentives.

RESEARCH STUDENTS: it will be of great importance to research scholars who may want to investigate or research further on this topic.  It will serve as a source of reference to this researcher and will help the students to know where to locate data, source of data and how to present the research work.  This implies that it will make further research very simple.

GENERAL PUBLIC: this work will equally be of great interest to the general public because they will like to know how small-scale enterprises contribute to the growth and development of the economy, which affects them.  They are potential investors who can be influenced into going into small-scale enterprises due to the incentives which government gives to help them growth.

RESEARCHER QUESTIONS

The research is translated into questions of which when Answered will provide the detail solution to the problem of study.  For this purpose of this research work, the following questions will be asked and answered. What are the problems encountered by small-scale enterprises in an attempt to receive loans and incentives in Enugu state? What are modalities of receiving grants and incentives by small-scale enterprises and are the grants put in to other uses? Is the government incentives scheme set up to help small-scale enterprises? What are the roles of small-scale enterprises towards the development of the state economy?

SCOPE/AREAS OF STUDY

This work is meant to cover the totality of the small-scale enterprises in Nigeria, but due to the fact that small-scale enterprises are scattered all over the country thereby making it difficult within the time frame, the researcher therefore decided to limit the work to some selected small-scale enterprises within Enugu metropolis.  The emphasis will be the modalities of receiving incentive grants and subventions from government incentives scheme and how the incentive were put to use towards the development of the state economy.

DEFINITION OF TERMS

INCENTIVE:  this is defined as anything capable of motivating an individual or organization into greater performance.

SMALL SCALE ENTERPRISES: This is business that is produced in small-scale, owned, managed and controlled by one or two persons with staff strength less than 50 and control a small share of the market.

NERFUND: National Economy Reconstruction Fund is one of the credit schemes that provide soft loans to small scale enterprises.

CREDIT: These are loans given to individuals, organizations, on agreed terms which boast their working capital.