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POWER SUPPLY AND THE PERFORMANCE OF SMALL AND MEDIUM SCALE INDUSTRIES IN NIGERIA FROM (1986-2010)

ABSTRACT

This research work centers on the power supply and the performance of small and medium scale industries in Nigeria from 1986 – 2010. carrying out this study, secondary data were collected and empirical analysis was made to achieve these objectives, multiple regression were used in anglicizing the data. In investigating this problem, the researcher introduces 2 hypotheses that power supply changes has no significant in Nigerian econometric mode were used for evaluation and testing of the hypothesis. The researcher made use of the ordering least square (OLS). The out come of the model shows and confirms that power supply changes has a negative impact on Nigerians. And that a unit change in power supply has a positive impact on both the gross domestic product and balance of payment in Nigeria. Based on the findings, certain recommendations were made which include government increasing its efforts in tackling the issue of corruption and fraud.

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The economy is a complex dynamic factor, requiring greater attention in terms of its analysis and efficient management for productivity, stability growth and increased standard of living of people operating Nigeria. Since 17th century efforts was made to promoting economic growth and have focused on the small and medium scale industries (SMIS) as the keys and the development of an economy and manufacturing sector in general. The role of small and medium scale industries in the overall growth and development of an economy‟s manufacturing sector in particular and the economy in general cannot be over emphasized. Small and medium scale industries are indeed high potentials for development in term of employment generation and wealth creation in any economy.

Empirical studies have shown that the small and medium scale industries (SMIS) have in many state has enhanced greater employment opportunities per unit of capital in vested and aided the development of local technology. This explains the deep interest which developing nation has shown in the promotion of small and medium scale industries since the 1970s. Moreover, the potentials of small and medium scale industries in contributing substantially to the economic growth and development of Nigeria has been hampered by various constraints, inducing long term capital inadequate financing unavailability of information for potential investors, poor management practices and low entrepreneurial skill, over bearing regulatory and operational environmental, unfavorable tariff policy and infrastructural deficiencies such as inadequate power supply. These constraints also limit the performance of small and medium scale industries in Nigeria.

Although, it is a widely held view that the availability of credit as the most critical to the performance of small and medium scale industries (SMIS), but some studies have shown that a large number of small and medium scale industries fail because of non financial reasons such as infrastructural deficiencies (Liedhorm et al 1994). One of the infrastructual facility affecting the performance of the SMIS in Nigeria is power supply (electricity). Due to inadequate provision of power supply constitutes one of the greatest constraints in SMIS development. The current situation whereby each investor is too provide electricity is, to say the least, tasking to the SMIS investors who generally lacks adequate capital for the business and the result of this is low return on investment due to high operations cost. Therefore, adequate power supply is necessary to ensure cost effectives in vestments in small and medium scale industries (Charles Soludo, 2005). It is however, noteworthy, there is need to objectivity access the Nigeria and impact of power supply on the performance of the SMIS sub-sector of the Nigeria manufacturing sector.

1.2 Statement of Research Problem

Small and medium scales industries in both developed and underdeveloped nations plays an important role in the process of economic development and industries. In spits of the relevance of the small and medium scale industries to Nigeria economy and industrial development, on that sector faces a lot of problems. Although there are various factors affecting the performance of small and medium scale industries sub sector ranging from inadequate capital to unfavorable tariff policy, however, the poor state of power supply in Nigeria is one of the significant factors militating against the performance of small and medium scale industries. The equality and quantity of a country‟s power supply determines its ability to create competitive industries. Since the performance of SMIS in any state is greatly influenced by the electricity supply. Given the pathetic state of power supply in Nigeria it is no wonder that the contribution of the development the state, manufacturing sector and the economy in general is very negligible or unsupported by the government.
An overview of the performance of the small and medium scale industries in Nigeria shows that past policies made limited impact on the sector for example, it is estimated that SMIS account for about 80 percent of the total industries employment in Nigeria, but only contribute 15-20 percent of total manufacturing output. Power supply has remained unreliable and power out-age load shedding and rationing have become very frequent. Power supply had been erratic and unreliable that many businesses have resorted to purchasing private generators at prohibi -ost. The substantial investment in private generating plants is estimated to be of capacity of over 250mm, which is almost half of power holding company of Nigeria (PHCN) available capacity.

1.3 Research Questions

The study would therefore provide answers to the following fundamental questions.

(1) How does power supply affect the performance of small and medium scale industries in Nigeria?

(2) Are there linkage between power supply and the performance of small and medium scale industries in Nigeria?

(3) What contributes to failure of power supply and manufacturing sector?

1.4 Objective Of The Study

The objectives of this research study are to provide a clear picture on the activities of effects of power on the performance of small and medium scale industries. The specific objectives of the study are:

(i) To examine the impact of power supply on the performance of small and medium scale industries in Nigeria.

(ii) Solutions polices options and recommendation.

(iii) To identify the problems of that might be against the effectiveness of small and medium scale industries in Nigeria.

1.5 Hypotheses

The broad objective of this study is to assess the performance of power supply to small and medium scale industries in the state. The specification objectives of the study are as follows:

(1) Ho: The performance of small and medium scale industries is not dependant on the quality and availability of adequate power supply in Nigeria.

(2) H1: The performance of small and medium scale industries is dependent on the quality

1.6 Justification of Study

This study is significant of selected growths. It will add to the available literature on the study area. Power supply is a problem to the state government and its citizens. From experiences our various industries, there is no doubt that the small and medium scale industries over the year have been at the receiving end of the economic environment in the state. Infact, the contributions of the sector has been declining over the years. Hence, this study will create awareness to the government to see the extent to which neglect of infrastructural facilities such as electricity is hampering the performance of SMIS in meeting their potentials of the providing employment per unit investment capital, facilitating the development of indigenous entrepreneurships, enhancing local resources utilization and value added expanding non oil exports at competitive prices, improving balance of payment position and bring about disagreed overall growth and development of the state economy. The lack of power supply in the state serves as external dis-economics for SMIS adversely affecting their performance, productivity and profitability.

1.7 Scope of the Study

The research work is concerned basically with the roles to lay emphasis on power supply and the performance of small and medium scale industries in the state and will cover those SMIS in state that have electricity as relevant infrastructural for their production process. The analysis covers a period of 1986-2010.

The basic limitation of this study is the completing nature of sources of statistical inputs. The data obtained from the annual bulletin, journal, and statistical data text books, magazines and seminars reports etc. consequently the information given is extracted from the CBN and others sources of secondary data.

1.8 Plan of the Project

This study will be structured into chapters. Chapter one will cover the introduction of study statement of the problem, objectives of study, hypothesis, justification of the study, scope and limitation of the study. Chapter two also will be review of the relative literature which will include the conceptualization of terms, the theoretical framework and empirical literature. Chapter three also is research methodology of the study which includes the sources from which data will be collected and the method of data collection is field survey. This chapter also highlights how the sample will be designed, in terms of the technique questionnaire as an entrustment of data. Chapter four will include the presentation of result and analysis which will follow the objectives of the study and nature of the results obtained and also the testing of hypothesis.

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