Chapter One Introduction 1.1 Background of the study1 This thesis investigates the impact of economic liberalisation on the development and performance of manufacturing Small and Medium Sized Enterprises (SMEs) in Nigeria; in this specific context, the effects of trade and financial market liberalisation on the development, performance and survival of manufacturing SMEs The Nigerian government has, since independence in 1960, implemented various economic policies, such as the Import Substitution Industrialisation (ISI) Strategy, the Structural Adjustment Programme (SAP) trade and financial market liberalisation (Adenikinju and Chete, 2002; Mesike, Giroh and Owie, 2008) All these policies were implemented by the Nigerian government in an attempt to develop the country and make it economically and politically self-sufficient (Agboli and Ukaegbu, 2006) The ISI policy was meant to develop the industrial potentials of Nigeria, but some analysts believed that the programme achieved very minimal success It was believed that the ISI policy was plagued with problems ranging from policy inconsistencies and lack of commitment on the part of the government and its agencies, to initiate and conclusively implement economic programmes (Ikpeze, Soludo and Elekwa, 2004; Agboli and Ukaegbu, 2006; Ayadi, Adegbite and Ayadi, 2008) The lack of commitment and inconsistencies were linked to the inability of the government to prudently and judiciously manage the revenue proceeds from the sale of primary products with public governance immediately after independence towards sustainable economic development of the country (Akyüz and Gore, 2001) Nigeria’s gross domestic product (GDP) per capita was put at $300 per annum in 1998 and in 2007, was estimated at $1,169 The country is classified among less developed countries Some extract of this chapter is already in print as journal articles See Obokoh (2008e); Obokoh, Ehiobuche, and Madueke (2009) (LDC) of Sub Saharan Africa (SSA) under the tariff order of 2005 (IMF, 1999; UNSD, 2009) According to the World development report of 1997, LDCs are countries that their level of economic and social developments are lower than that of the advanced capitalist West due to their low industrial base and dependence on primary product export Nigeria is a major exporter of crude oil and producer of primary products such as cocoa, rubber, cotton, and groundnut It relies heavily on revenue from the sale of crude oil and the primary products (Mesike, Giroh and Owie, 2008) In the late 1970s and early 1980s, the Nigerian economy faced a serious balance of payment crisis, following the fall in the international market price for primary products, including crude oil (Mosley, 1992; Akinlo, 1996) The subsequent fall in revenue, due to the drop in demand for primary products in the international market, resulted in balance of payment problems This prompted the Nigerian government to embark on a fundamental economic reform process called SAP based on the recommendation of International Monetary Fund (IMF) and the World Bank (WB) (Okome, 1999) The SAP prepared the ground for the complete liberalisation of the Nigerian economy, with the aim of creating a competitive business environment for manufacturing SMEs and Multinational Corporations (MNCs) (Onyeonoru, 2003) It was envisaged that economic liberalisation would give SMEs the chance to exploit the domestic market and also explore international market opportunities occasioned by the liberalised business environment (Dawson, 1994; Vachani, 1994) In so doing, SMEs would then have an unhindered opportunity to contribute meaningfully to the economic development of Nigeria and help reduce the reliance on primary products (Agboli and Ukaegbu, 2006; Obokoh, 2008c) It has been argued that SMEs are an effective instrument for economic growth and development in Developed and Less Developed Countries (Beyene, 2002; Nitani, 2005) This is because SMEs contribute significantly to the Gross Domestic Product (GDP) and produce substantial amounts of locally consumed products (ECA, 2000; Wattanapruttipaisan, 2003; Tagoe, Nyarko and Anuwa-Amarh, 2005; Saleh and Ndubisi, 2006) According to Mojmir (2000), SMEs play an important role in the economic growth of any country including industrialised countries because they account for more than half of a country’s output and employment (Hussain, Matlay and Scott, 2008) In the same vein, Udechukwu (2003) asserts that the development of SMEs is an essential element in the growth strategy of most economies, which holds particular significance for developing countries like Nigeria SMEs are a vital part of any market economy because they are represented in all major branches of manufacturing and service sectors (Obokoh, 2008c) This is in addition to their role in job creation for the unemployed, provision of goods and services within and across national boundaries of countries (Saleh and Ndubisi 2006; Woldie, Leighton and Adesua, 2008) Due to their small size, SMEs are flexible and are more able to adapt to changes within the market environment than large firms (Mazzarol, 2000; Udechukwu, 2003; Aryeetey, 2005) However, the small size of SMEs and their small capital base also constitutes an obstacle to their access to funds for their operations (Obokoh, 2008d) It is expected that SMEs, with ready and willing entrepreneurs, can succeed in an increasingly competitive world, especially if there are enabling and supportive government policies (Biggs, 2007) In this vein, Berry (2002) asserts that the flexibility of SMEs operations persuades business analysts to believe in their strategic role towards future industrial growth of developing nations Despite this flexibility, SMEs are also exposed to external environmental risks such as government policies and competition from MNCs (Watson and Everett, 1999; Abonyi, 2003) Some of these environmental factors often hinder SMEs from gaining the necessary international exposure for achieving large scale production for the efficient utilisation of resources (Mambula, 2004) Given favourable policy environment and support, it is believed that SMEs can achieve an efficient production process that would enable them to compete successfully in the global market (Briggs, 2007) Therefore, government policies should be directed towards improving the economic environment in which SMEs operate (Fredland and Morris, 1976; Everett and Watson, 1998) There is now a re-newed emphasis on the development of SMEs especially in LDCs (ECA 2001) This is in view of LDCs governments’ formulation of policies that would create the enabling environment for the establishment and the operation of SMEs (Agboli and Ukaegbu, 2006) The re-newed emphasis by various Governments in LDCs on SMEs development can be linked to the current global trend of economic liberalisation and the need to bridge the development gap, that hitherto existed between LDCs and industrialised countries through private sector participation (Akinlo, 1996) The realisation of the need to encourage private sector (SMEs) participation in economic activities was borne from the balance of payment crisis of the 1980s This is because the private sector that would have provided the needed substitutes for domestic consumption was not well developed owing to defaults in earlier policies 1.2 Statement of Research Problems Prior to the liberalisation process in Nigeria, manufacturing SMEs were characterised by small capital base which constituted an obstacle to access to funds for their operations and expansion This resulted in low productivity value-added to economic growth and Gross Domestic Product (GDP) (Dawson, 1994; Ekpenyong, 2002; Mambula, 2002) The effect of SMEs low productivity, absence of a strong private sector (SMEs) and the dismal performance of the manufacturing sector to sustained economic growth in Nigeria became evident in the early 1980s, following the fall in the international market price for crude oil The revenue from crude oil sales accruing to the government dropped drastically, which led to a balance of payment deficit and the government’s inability to meet up with import bills (Adenikiju and Chete, 2002) The recognition of the vital role of the private sector and manufacturing SMEs necessitated the need for economic reform that culminated in the liberalisation of trade and financial market by the Nigerian government (Mosley, 1992; Adenikinju and Chete, 2002) The liberalisation of the financial market was aimed at creating avenues for easy and cheap access to finance for SMEs It was widely believed that the Nigerian financial market was highly repressed by the government’s regulation of the interest rates through the Central Bank of Nigeria (Akinlo and Odusola, 2003) In order to make the liberalisation of the financial market effective, the government removed the restriction on exchange rate movement to allow free flow of investible funds into and out of the country and also make market forces determine the Naira exchange rate (Obadan, 2006a) The liberalisation of the financial market that resulted in the deregulation of interest rates and exchange rates had two basic purposes The first was to maintain a positive real interest rate in order to encourage savings which would make funds available and accessible to SMEs The second purpose was to devalue the Naira exchange rate to make the import of finished goods more expensive and less attractive to Nigerians (Ikhide and Yinusa, 1998) It was also envisaged that this would provide the needed opportunity for SMEs development through the utilisation of local raw material and intermediate inputs for production (Dawson, 1994) On the other hand, trade liberalisation resulted in the abolition of import license, tariffs, and removal of import and export restrictions The liberalised trade was intended to create competition in the domestic goods market for the production and distribution of consumables, especially with the free import of finished goods In addition, it was envisaged that the competition brought about by liberalised trade would help reduce the rent seeking ability of large manufacturing firms and eliminate the inefficient ones (Söderbom and Teal, 2002; Akinlo, 2006) The liberalised trade was also meant to promote the development and utilisation of indigenous technology; generate employment and encourage the export of manufactured goods by SMEs However, the SAP policy that prompted the reform process anchored on the neoliberal policy of the Washington Consensus precluded the government from direct participation in economic activities This then confined the government to a supervisory role in order to allow market forces to determine the allocation of scarce resources The SAP policy also required the government to cut down on public expenditure and the removal of subsidies on petroleum and other items (Mosley, 1992) The reduction in public expenditure then resulted in serious cases of non-performance of public infrastructure owing to poor budgetary outlays towards their expansion and rehabilitation (Lee and Anas, 1992; Agboli and Ukaegbu, 2006) The bottom line of the economic reform in Nigeria was to create a conducive and competitive business environment for the development of private sector, especially manufacturing SMEs Financial market liberalization enabled the government to pursue positive real interest rates, as a means of inducing local savings and attracting foreign funds from abroad (Ikhide and Alawode, 2002, Obokoh, 2009) On the other hand, the devaluation of the Naira was aimed at discouraging the import of finished goods While the deregulation of the foreign exchange market, allowed the Naira to float against other major currencies It was envisaged that this would facilitate easy access to foreign exchange for the importation of needed raw material and intermediate goods Despite the perceived advantages of these actions, the outcome created obstacles to SMEs competitive performance in Nigeria These policies have put SMEs in a position where they have to struggle for survival and have even led to the failure of some SMEs against the expectation of exporting their finished products, as was promised by the liberalization policy In addition, the absence of functioning public infrastructure and the low level of technological development in Nigeria constituted a serious obstacle to SMEs competitiveness In this thesis it is argued that these problems militate against the performance and development of SMEs It also gave an insight as to why government programmes designed for the development of manufacturing SMEs have failed to achieve their desired objectives (Mambula, 2002) under an economic liberalisation policy in Nigeria 1.3 Research question In view of the perceived benefits of economic liberalisation by the Nigerian government and the opinions of the proponents of liberalisation, the main research question of this thesis is; what is the impact of economic liberalisation on manufacturing SMEs in Nigeria? The answer to this question would enable this study to assess the desirability, or otherwise, of economic (trade and financial market) liberalisation that commenced in 1987 The following sub questions would assist in answering the main research question and also help in assessing the impact of economic liberalisation policy on the development, performance and survival of SMEs in Nigeria: (i) What is the effect of interest rate liberalisation on SMEs performance and is there any link with the shut down decision of SMEs? (ii) What is the effect of exchange rate deregulation on SMEs performance and does it have any link with the failures of SMEs in Nigeria? (iii) To what extent has the liberalisation of the financial market solved the problems of access to finance for SMEs? (iv) To what extent has trade liberalisation facilitated the export of manufactured goods by SMEs? (v) To what extent has the state of infrastructure in Nigeria hindered the performance and competitiveness of SMEs in the liberalised economy? (vi) What are the constraints of SMEs after economic liberalisation and how have these constraints hindered their performance? (vii) To what extent has the government development programmes designed to boost SMEs performance achieved their desired goals under a liberalised economic environment? 1.4 Objectives of the study This study sets out to examine empirically the impact of economic liberalisation on manufacturing SMEs in Nigeria and how it has affected their profits, turnover and cost of operation The specific objectives of this study therefore are to: (i) Examine the effects of interest rate deregulation on the performance of manufacturing SMEs and to establish if there is link with the shut down decision of SMEs (ii) Analyse the effects of exchange rate deregulation on manufacturing SMEs and if it has any link with the failures of SMEs (iii) Investigate the impact of financial market liberalisation on the problem of access to finance for manufacturing SMEs and if it has solved the problem of access to finance for SMEs (iv) Examine whether the removal of trade restrictions improved manufacturing SMEs opportunities in the international market or facilitated the export of their finished goods (v) Examine the effects of the state of infrastructure on the performance and competitiveness of SMEs in a liberalised economy of Nigeria (vi) Highlight the constraints of SMEs after economic (trade and financial liberalisation) and how these constraints impact on their performance in Nigeria (vii) Investigate the reasons why programmes designed by the government to boost manufacturing SMEs performance are yet to fully achieve their desired objectives The performance of SMEs in this study would be measured in terms of cost of operations (production cost), sales/ turnover and profits 1.5 Hypothesis of the study The following null and their alternate hypothesis were formulated based on the literature that high interest rates affect working capital and output of firms which invariably also affect profits (Wijnbergen, 1985) It has also been argued that SMEs are more sensitive to interest rates shocks compared to big businesses because of their small resources (Vickery, 2008) This is on the backdrop of inadequate infrastructure in Nigeria which earlier research indicates affect the performance of SMEs due to their resorting to self provision of the needed infrastructure (Lee and Anas, 1992) These three hypotheses would be tested to find out whether they hold true for SMEs operating in Nigeria: (i) (Ho) There is no significant relationship between high interest rates and operational cost of SMEs after financial market liberalization (Hi) There is significant relationship between high interest rates and operational cost of SMEs after financial market liberalization (ii) (Ho) There is no significant relationship between high interest rates and SMEs profit levels (Hi) There is significant relationship between high interest rates and SMEs profit levels (iii) (Ho) There is no significant relationship between the state of infrastructure and the operational costs of SMEs (Hi) There is significant relationship between the state of infrastructure and the operational costs of SMEs 1.6 Motivation and Justification for the study This study is motivated by the fact that all the studies on economic globalization and liberalization in developing countries, including Nigeria, have dwelt on narrow issues of the effects of either financial market liberalisation or trade liberalisation Issues discussed in those studies revolved around the problems of access to finance by SMEs and the positive effects of market determined interest rates On the other hand, studies on trade liberalisation dwelt on problems of raw materials constraints affecting SMEs and the need for the removal of all trade restriction that encourages competition among manufacturing firms in Nigeria (see for example Mambula, 1997; Adenikinju and Chete, 2002; Ekpenyong, 2002; Mambula, 2002; Iyanda, 2003; Onyeonoru, 2003; Udechukwu, 2003; Aryeetey, 2005; Tagoe et al, 2005) None of these studies have so far investigated how the performance of manufacturing SMEs in Nigeria has been affected by the combined effects of trade and financial market liberalisation in view of the poor state of infrastructure in Nigeria That is, how the high interest rates, the depreciation of the Naira and the removal of trade restrictions as a result of economic liberalisation policy have affected SMEs in view of the poor state of infrastructure This study attempts to bridge the gap in literature with respect to these economic variables which it believes has led to the failures of most manufacturing SMEs in Nigeria It has been suggested that a private sector-SMEs led economy would contribute positively towards the realisation of the United Nations millennium development goal of the global partnership for economic development, through the eradication of poverty, hunger and job creation in Nigeria and other SSA countries (Nwankwo and Richards, 2004) Based on the recognition of the importance of manufacturing SMEs’ abilities to diversify the Nigerian economy and their potentials to contribute towards the attainment of the millennium development goals further justify the need to study how the economic liberalisation policy has affected the performance and survival of SMEs in Nigeria Besides, liberalisation has been a contentious issue that has resulted in different views from scholars due to the methodological approach applied in their studies (Sachs and Warners, 1995; Rodriguez and Rodrik, 2000; Stiglitz, 2002a, b) This study then sets out to present a different methodological approach in the study of the effects of the economic liberalisation on the development and performance of manufacturing SMEs in response to the call by Soludo’s (2003) and Winters’s (2004) for a different methodological approach in the study of the impact of liberalisation in an economy The different methodological approach and the use of ROI to investigate the combined effects of trade and financial market liberalisation on SMEs give this study its uniqueness 1.7 Methodology This study used quantitative and qualitative methods of data collection to obtain data from manufacturing SMEs operating in Lagos State of Nigeria The data obtained from these primary sources were triangulated with the secondary data from the CBN to ensure validity and reliability of the primary data The data were analysed using SPSS 16.0 and the application of return on investment (ROI) model on the transaction data of the sampled SMEs The presentation of results was purely descriptive using tables and graphs The mixed methods approach was employed to avoid the controversies trailing the use of econometric models, because of their inability to cater for some qualitative factors Some of the models include, but are not limited to, partial equilibrium model and general equilibrium model These models utilize time series and cross-country panel data to demonstrate the effects of liberalisation on economic variables in developing countries It has been argued that there are other qualitative factors such as cultural values, religious norms and people’s attitudes, that can influence economic growth which cannot be measured by economic growth models Furthermore, it has been demonstrated that it is difficult to establish causality between economic liberalisation and rapid economic growth using models (Albaladejo, 2003; Winters, 2004) That is why this thesis utilized primary data that would be able to draw on people’s perception of the effects of the policy on their businesses, in addition to using reliable secondary data from the CBN to measure the impact on the economy in general 1.8 Scope of the study This thesis investigates the impact of trade and financial market liberalisation on the development and performance of manufacturing Small and Medium Sized Enterprises (SMEs) in Nigeria and focuses on the period between 1980 and 2006 It examines the effects of the policy on manufacturing SMEs access to credit, productivity performance and also their competitiveness within the domestic and international markets Issues related to economic liberalisation discussed in this thesis focuses on trade (abolition of import license, tariffs, and removal of import and export restrictions) and financial markets (exchange rate and interest rate deregulation) liberalisation This is because the Nigerian government simultaneously pursued macroeconomic stabilisation and adjustment policies (IMF, 1999) during the period under study (Akinlo, 1996; Ikhide and Alawode, 2001) McCulloch, Winters and Cirera (2001) stressed that trade and financial market liberalisation is linked in developing countries, where macroeconomic stabilisation and adjustment 10 What is your current average output level in monetary value of your company per annum? With the current liberalised economy, what would you say about your output level since you started operation? [ ] increased [ ] decreased [ ] no changes 10 Has your company ever stopped the production of any of its products? [ ] yes [ ] no [ ] other comments -If no please go to Q 12 11 Which of the following items mention below would you say informed the decision to stop the production of the product? [ ] increasing cost of raw material [ ] availability of imported similar cheaper products [ ] availability of better quality imported similar products [ ] others, please explain -12 What percentage of your output per annum is for the Nigerian market? [ ] 1-20% [ ] 21-40% [ ] 41-60% [ ] 61-80% [ ] 81-100% 13 Does your Company export any of its products? [ ] yes [ ] no [ ] others please specify -14 If yes, when did your Company enter the International Market? [ ] 1-10 years ago [ ] 11-20 years ago [ ] 21-30years ago [ ] N/A 15 What is your company’s current average turnover per annum in monetary terms? 16 With the liberalised economy that allowed for the import of finished goods, what would you say about your turnover? [ ] increased [ ] decreased [ ] no changes 69 17 Where does your company source its raw material for production? [ ] locally [ ] internationally [ ] both 18 What percentage of your raw material is sourced internationally? [ ] 1-10% [ ] 11-20% [ ] 21-30% [ ] 31-40% [ ] 41-50% [ ] 51-80%, or [ ] 81-100% B Source of Finance 19 Has your company ever taken external loan for its operations? [ ] yes [ ] No [ ] other comments If No, please go to Q24 20 Has your company ever taken loan from any of these sources for its operation before liberalisation in 1987? [ ] Informal Money Lender (Esusu) [ ] Commercial Banks [ ] Cooperative Society [ ] Family/ Friends [ ] Not applicable 21 Has your company ever taken loan from any of these sources for its operation after liberalisation in 1987? [ ] Informal Money Lender (Esusu) [ ] Commercial Banks [ ] Cooperative Society [] Family/ Friends [ ] Not applicable 22 Which of the following items hinders your company from seeking loan from Commercial Bank? [ ] requires too many documentation [ ] Too much delay after application [ ] cannot provide collateral required [ ] high interest rate charged [ ] others, please specify 70 23 Has the liberalisation of the financial market made it easier for your company to secure loans from Commercial Banks? [ ] yes [ ] no [ ] other comments - 24 How would you rank the interest rates charged by Commercial Banks before financial market liberalisation? [ ] very high [ ] high [ ] moderate [ ] low [ ] Not applicable 25 How would you rank interest rates charged by Commercial Banks after financial market liberalisation? [ ] very high [ ] high [ ] moderate [ ] low [ ] Not applicable 26 Has your company ever taken loan from the Informal Money Lender (Esusu)? [ ] yes [ ] no [ ] [ ] other comments -If no, please go to 30 27 How can you rank interest rates charged by Informal Money Lender (Esusu) after financial market liberalisation? [ ] very high [ ] high [ ] moderate [ ] low [ ] Not applicable 28 Are the interest rates charged by Informal Money Lenders higher compared to Commercial Banks rates? [ ] yes [ ] no [ ] others comments 29 Are you experiencing any difficulties meeting the high interest rate charged by the Informal Money Lenders? [ ] yes [ ] no [ ] other comments 30 What are the effects of high interest rates on the operational costs of your company after liberalisation? [ ] increased operation cost [ ] decreased operation cost [ ] no effect on operation cost 71 31 What are the effects of high interest rates on the profit of your company after liberalisation? [ ] Profits have increased [ ] Profits have decreased [ ] no changes 32 What are the effects of high interest rates on the turnover/ sales of your company after liberalisation? [ ] Turnover/ sales have increased [ ] Turnover/ sales have decreased [ ] no changes C State of Infrastructure 33 What is the current state of infrastructure (power supply, good access roads communication facilities) available to SMEs in Nigeria? [ ] good [ ] adequate [ ] poor [ ] very poor 34 What are the effects of the current state of infrastructure on the operational cost of your company? [ ] increased operational cost [ ] decreased operational cost [ ] no effect 35 What are the effects of the current state of infrastructure on the profit of your company? [ ] increased [ ] decreased [ ] no effect 36 Does your company generate power to complement electricity supply from National Electric Power Authority (NEPA)? [ ] Yes [ ] No [ ] other comments - 37 Would you say it is cheaper for your company to generate its own power for production? [ ] yes [ ] no [ ] other comments - 38 What will be the result of your company’s performance if the state of infrastructure (power supply, good access roads etc) is improved? 72 [ ] improve performance [ ] decrease performance [ ] will have no effect The following statements reflect the economic situation that affect SMEs in the manufacturing sector in Nigeria There is no right or wrong answer Please tick one of the boxes for each question Key: SA = Strongly Agree; A = Agree; UD = Neither agree nor disagree; D = Disagree; Strongly Disagree = SD and N/A= Not Applicable) D Exchange Rate Deregulation SA A UD D SD N/A [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] The depreciation of naira has made business operation unprofitable for SMEs [] The depreciation of the naira has forced some SMEs to change from manufacturing to retail trading The depreciation of the naira has forced some SMEs to shut down operation The depreciation of the naira has drastically reduced the operational cost of SMEs The depreciation of naira makes import of raw materials cheap and abundant for SMEs The depreciation of naira made the 73 importation of capital goods cheap [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] Imports of finished goods not reduce or affect SMEs turnover/ sales volume The importation of finished goods does not reduce the profit making ability of SMEs from turnover/ sales E Interest Rate High interest rates after liberalisation has Increased operational cost of SMEs 10 High interest rates has led to the shut down of most SMEs after liberalisation [] 11 Informal Money Lenders charge excessive interest rates on their loans [] 12 The excessive interest charged by Informal Money Lenders makes it difficult for those SMEs that borrows from them to repay the loans and interest 13 Most SMEs that cannot meet their loan commitment to Informal Money Lenders may be forced to shut down 14 Most SMEs that obtains loan from Informal Money Lenders pay higher interest on loan than SMEs that obtained loans from Commercial Bank [] 74 15 SMEs that borrow from Informal Money Lenders are more likely to shut down than those who borrow from commercial banks [ ] [] [] [] [] [] SA A UD D SD N/A [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] [] F Technology and Infrastructure 16.The level of technological advancement in Nigeria is adequate to produce all the technical equipment SMEs require for efficient production process 17 The level of technological advancement in Nigeria is adequate for SMEs to create a niche and compete favourably in a liberalized economy 18 SMEs have enough financial resources at their disposal to acquire modern technology for efficient and cost effective production G Government Support Do you think SMEs in Nigeria have enough support from the Government in terms of finance and institutional policies/structure? [ ] yes [ ] no [ ] other comments - Do you think the Federal Government planned and made adequate provision for problems that may arise before embarking on liberalisation (devaluation of naira and interest rate liberalisation) of the economy? [ ] yes [ ] no [ ] other comments - 75 Please tick one of the following items you think that most likely cause Government programmes designed for SMEs development to fail in Nigeria? [ ] Lack of infrastructures [ ] Poor programme design in designing of the programme [ ] no participation of SMEs [ ] poor policy implementation [ ] others, please specify………………………………… If the state of infrastructure improves, you think that SMEs development programmes will achieve its desired objectives? [ ] yes [ ] no [ ] other comments We may like to carry out a case study of your company in future; would you grant us the opportunity? [ ] yes [ ] no Thank you for your participation 76 Appendix Text of Semi-structure Interview What is your position in the company? Does your company enjoy any/all of the following facilities: Loan Overdraft Credit facilities from supplier Is the source of your company’s loan from the formal or the informal sector? What is the rate of interest your company pay on your loan/overdraft/credit facility? How long have your company been making use of the facility? To what extent did any of the facilities assisted the overall performance of your company? Is your company still enjoying the facility? Do your company still wish to continue using the facility? How has the facility affected your operational costs? 10 For the purpose of this study, it would be appreciated if you make available the following financial data of your company: asset, sales, and costs of operation and profits figures from 1980 to date 77 Appendix Table Movement in Market Interest Rate, Exchange Rate and Inflation Rates in Nigeria Year 1980 Exchange Rate(N/$) 0.55 Interest Rate 7.5 Inflation Rate 10.0 1981 0.61 7.75 21.4 1982 0.67 10.25 7.2 1983 0.72 10.00 23.2 1984 0.76 12.50 40.7 1985 0.89 9.25 4.7 1986 2.02 10.50 5.4 1987 4.02 17.50 10.2 1988 4.54 16.50 56.0 1989 7.39 26.80 50.6 1990 8.04 25.50 7.5 1991 9.91 20.01 12.9 1992 17.30 29.80 44.5 1993 22.05 36.09 57.3 1994 21.87 21.00 57.0 1995 81.02 20.18 73.1 1996 81.25 19.74 29.1 1997 81.65 13.54 8.5 1998 83.81 18.29 10.0 1999 92.34 21.32 6.6 2000 100.80 17.98 6.9 2001 111.70 18.29 18.9 2002 126.26 20.48 12.9 2003 134.04 21.16 14.0 2004 134.73 19.47 19.4 2005 145.82 20.0 17.9 2006 148.46 18.7 12.2 Source: Extracted from Central Bank of Nigeria Statistical Bulletin (Various issue) 78 Table 2: Interest Rate Differentials (%) Year 2000 2001 2002 2003 2004 2005 2006 Nigeria 17.98 18.29 20.48 21.16 19.47 20.00 18.70 Europe 4.9 3.2 2.2 2.2 2.2 2.7 3.7 USA 6.4 2.4 1.6 1.3 2.9 4.8 5.4 Japan 0.5 0.1 0.0 0.0 0.0 0.1 0.5 United Kingdom 5.9 4.1 4.1 4.4 4.9 4.7 5.3 Source: Extracted from Adedipe (2006) and CBN various issue Figure 1: Interest and Inflation Rates Graph Source: Extracted from Central Bank of Nigeria Statistical Bulletin (Various issue), derived from Table 79 Figure 2: Rate of Naira Depreciation against US Dollars Source: Extracted from Central Bank of Nigeria Statistical Bulletin (Various issue), derive from table 80 Appendix Nigeria Total Foreign Trade (N million) Table Nigeria Total Foreign Trade (=N=MILLION) Year/Quarter Imports (cif) Oil Non-Oil Total Exports and Re-Exports (fob) Oil Non-Oil Total 1980 227.4 8,868.20 9,095.60 13,632.30 554.4 14,186.70 1981 119.8 12,719.80 12,839.60 10,680.50 342.8 11,023.30 1982 225.5 10,545.00 10,770.50 8,003.20 203.2 8,206.40 1983 171.6 8,732.10 8,903.70 7,201.20 301.3 7,502.50 1984 282.4 6,895.90 7,178.30 8,840.60 247.4 9,088.00 1985 51.8 7,010.80 7,062.60 11,223.70 497.1 11,720.80 1986 913.9 5,069.70 5,983.60 8,368.50 552.1 8,920.60 1987 3,170.10 14,691.60 17,861.70 28,208.60 2152 30,360.60 1988 3,803.10 17,642.60 21,445.70 28,435.40 2,757.40 31,192.80 1989 4,671.60 26,189 30,860.20 55,016.80 2,954.40 57,971.20 1990 6,073.10 39,644.80 45,717.90 106,626.50 3,256.60 109,883.10 1991 7,772.20 81,716.00 89,488.20 116,858.10 4,677.30 121,535.40 1992 19,561.50 123,589.70 143,151.20 201,383.90 4,227.80 205,611.70 1993 41,136.10 124,493.30 165,629.40 213,778.80 4,991.30 218,770.10 1994 42,349.60 120,439.20 162,788.80 200,710.20 5,349 206,059.20 1995 155,825.90 599,301.80 755,127.70 927,565.30 23,096.10 950,661.40 1996 162,178.70 400,447.90 562,626.60 1,286,215.90 23,327.50 1,309,543.40 1997 166,902.50 678,814.10 678,814.10 1,212,499.40 29,163.30 1,241,662.70 1998 175,854.20 661,564.50 837,418.70 717,786.50 34,070.20 751,856.70 1999 211,661.80 650,853.90 862,515.70 1,169,476.90 19,492.90 1,188,969.80 2000 220,817.70 764,204.70 985,022.40 1,920,900.40 24,822.90 1,945,723.30 2001 239,416.30 1,131,992.80 1,371,409,1 1,973,222.20 28,008.60 2,001,230.80 2002 266,738.20 1,190,353.20 1,457,091.40 1,787,622.00 95,046.10 1,882,668.10 2003 380,997.80 1,126,425.00 1,507,422.80 1,995,398.70 95,092.50 2,090,491.24 2004 303,952.80 1,334,400.90 1,638,353.70 2,963,796.12 113,735.30 3,077,531.45 2005 797,298.94 2,003,557.39 2,800,856.33 7,140,579.24 105,955.82 7,246,535.06 2006 932,495.66 CIF: cost, insurance & freight 2,479,680.89 3,412,176.55 7,191,073.99 133,594.65 7,324,668.64 FOB: free on board 81 Sources: Central Bank of Nigeria Statistical Bulletin (2004) and Central Bank of Nigeria Annual Report & Statement of Accounts for the Year Ended 31 st December 2007 Figure 3: Foreign trade: total imports (cif) of oil and non-oil products CIF: cost, insurance & freight Source: Derived from table Figure 4: Foreign trade: total exports (fob) of oil and non-oil products 82 Fob: free on board A graphic representation of total exports (oil and non-oil) derived from table Source: Derived from table Appendix Map of Nigeria (source: United Nations Office on Drugs and Crime- Nigeria) Available at http://www.unodc.org/nigeria/en/social_context.html visited 21/4/09 83 ... on Trade and Development.” In H Chenery and T.N Srinivasan, (Eds.), Handbook of Development Economics, North-Holland Amsterdam Everett, J and Watson, J (1998), “Small Business Failure and External... 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