Problems of Establishing Business Centres in Nigeria

Problems of Establishing Business Centres in Nigeria ( A Study of Selected Business Centres in Agwu L.G.A)

This chapter reviews related literature relating to the problems of Establishing Business Centres. In order to do this, the researcher reviewed a number of books, Journals and government books.

The review covers the following:

–        An overview and historical development of Business center in Nigeria

–        Resource Availability and Business Centre establishment

–        Virtues and Benefits of Business centres

–        Problems of Business centres

–        Attempts at Ameliorating Business centres

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 OVERVIEW AND HISTORICAL DEVELOPMENT OF BUSINESS CENTER

According to NWOSU (1984), Business centers have been with us even since the times of trade by barter with the craftsmen given prominence to today’s manufacturing. Originally, it was based on indigenous artisan ingenuity but the continuing changes in modern production process y which one innovation or invention readers, an existing on obsolete and create new area of consumer satisfaction.

According to Broom Logenecke (1983), the business center industry is therefore said to be the power house of innovative and inventive skills for our modern production process.

By way of definitory, there is no universally accepted definition of business center. It is usually based on the level of economic development of the particular economy purpose.

According to Igboke (1978), the definition of Business center is not rigidly fixed since people adopt different standards for difernt purpose with some of the standards being number of employees, asset size volume of sales etc.

Although this is the case, investment in fixed capital is generally accepted as good basis even though there is no fixed amount that is used as criteria. However, whether the definition must be flexible for easy adjustment to cope with changing needs of industrial development.

According to Business center administration, on American organization Business center definition, business center is not rigidly fixed, but can be relaxed in exceptional cases in so far as the particular firm is not dominant in whole industry. From the above definition, it can be said that the definition are based on size of such company when compared to the whole industry operations and the cost of equipment in use in such industry.

The following are some definitions operational in some developing economies.

In India, Business center is one with investment in plant and machinery not exceeding RS 10 laks.

In Malaysia, it is an enterprises with shareholders funds of less than 50 workers.

Ghana classified Business centres as one with fixed capital, not exceeding 3,000,000 cides and employing not more than 5 workers.

In Africa the definitions are still based on the same instance classified it on the basis of tax or commercial activity as one with investment ceiling of 20 million France ((CFA) and 5 million France (CFA) respectively.

In Nigeria, the definition do not deviate from others. Central bank of Nigeria credit guideline (1980) define business center enterprise as any manufacturing service enterprise whose annual business turnover does not exceed five hundred thousand Naira for extending credit facility to industrial establishments.

Federal ministry of commerce and industry defined business center as industries costing not more than five hundred thousand excluding working capital perhaps the most functional definition is the one made up by united nations industrial Development organization *UNIDO) which suggests that a business center firm is characterized by at least two of the following features:

  1. Ownership and management are usally vested in the same individuals that are the management is not independent and the management isa uslaly also the owners.
  2. The small business controls – a small share of the market and therefore constitute a little quota in the large size market.
  3. Capital is made available by the owner an policy decisions are isn’t he hand of the individuals or small groups.
  4. The owner participants very actively in all decision making on a day by day operations basis with a high degree of rigid control.

The above definition of business center is based on parameters such as the installed capacity utilization, output, employment, capital type sof business or other criteria, which have more relevanve to the industial policies of the nation.

Nigieran bank for commerce and industry adopted a definition for the period 1985-1990 in which it defined business center as one with capital cost not exceeding 750 thousand including working capital but excluding cost of land.

According to Obafemi, Awolowo University center for industrial Research and Development (1981-1982), they define business center as those whose total assets in plant, equipment and working capital do not exceed 250 thousand and with not more than 50 employees.

National Directorate of employment defined business center to accommodate project with capital investment as low as five thousand Naira and employing as few as three persons.

Having seen what other countries federal government of Nigeria and some institutions in the country take business center to be what then is business center in Enugu state the catchments area of this study?

To answer this question, the edict establishment fund for business center (credit scheme edict no of 1976 of Anambra state) states that business center menas a manufacturing processing or service industry with a capital investment at up to 150,000 Naira Including machinery and equipment alone. The understanding of business center by different countries of the world is predicted by the variation policy attitude towards the promotion of business center, which of course is based on their objectives but most importantly on their level of economy and industrial growth/development.

According to Horney (1980) the history of business center has been with man for ages. The fact that individual does not process the resources for a bigger enterprise to same people has resulted in business florushing in every economy. The structure of unemployment in Nigeria has changed dramatically in the past. In 1975, less than 12 percent of the unemployed has gone through secondary schools and over 27 per cent had university education.

In the 60’s and 70’s most of those engaged in business centres were semi – illiterate most of them has undergone some period of apprenticeship in some on-going business. Since 1980’s, the bulk of the new entrants are visibly literate. Many of them have had their training and have acquired skills in some profession but finding little opportunities for work in their chosen field have sought to establish a business away from the field of specialization ( Dr. P. Okigbo, 1990).

The scope of business centres have also been broader ranging from the petty typing with manual and photocopying documents with photocopy machines to the large proportion of acquiring automated machines for the processing of documents in large quantities and quicker. They have almost dominated the entire spectrum of commercial activities and collectively, they employ more workers then the entire public sector,( Onuoha, 1999).

Today, business centres could be said to attain promience with the launching of the second nationak development plan (1970 – 74), which provided for the indigenisation programme and later in 1972, it was known as the Nigeria enterprises promotion decree. The decree served as a stimulant for the Nigeria private sector to embrace the concept of business centres and hence its expansion, Kalu (1994). There is no doubt that business centres constitute the real fabric of Nigerian economy and to say that the present and future economic advancement of this our country lies in the dynamism and growth of business center is not an overstatement.

  • Resource Availability and Industrial Establishment

In venture, industrial acquisitions and establishment of some base industries are the basic for industrial developments and consequent economy. The steam engine invention by James Watt and machine tool discovery by M and sky marked the turning point of the world’s industrialization process.

In Nigeria particularly, Enugu state, the availability of boundless, ingenuity as personified in many fabricators. Business is a game of probability. For instance borrowing money from businessmen is very risky because by the time they for their money back it might not be ready thereby attracting a lot of interest which one might not find it easier to settle at last. According to Jobitex (1973), Business centres basically make use of personal capabilities and joint money ( Isusu) then government money or assistance. In Enugu state, these natural resources are quite in abundance but industrial growth of the state has been marginal as far as the business centres are concerned.

  • Virtues and Benefits of Business Centres

It is on the basis of the good that something is good only when that goodness is ascertainable that many of the world is ascertainable that many of the world economic that have attained advanced stage in industrial development started with business centres especially in he production sector. This goes to confirm the benefits of the business centres and betterment of uit, most especially in Agwu, Enugu State.

Business center can be used in industrial dispersal policy in developing urban areas rather then the use of large/big industries and this case ease off the strain of mass exodus not being employed, Onuoha, (1985).

This leads to the location flexibility and advantage which business center has over other business establishment with this dispersal it can always get access to input with which to produce items limited demand, which can be served by a business center.

According to Akintola, (1984), efficient employment of resources and employment generation are the strong areas of emphasis by business centres. There has been general consensus of opinion among writers and analysts that business centres are the greatest provided of job especially for youths.

A 1975 study indicates that business center along contributed 53.3% of manufacturing value added tax in that year. A more recent study by NISER in 1985 suggested that business center industrial accounted for 45% of industrial employment in the country.

UNIDO (1969), pointed out that business center helps to build up managerial skills in the local populaces.

Both UNIDO already mentioned and liedholn and Chuta (1976) agreed that business center help to transform the traditional sector

In one respect, it modernizes the people’s perception of life and in another it modernizes the traditional handcraft prevalent in the rural economics, introducing the use of machines instead of manual labour.

Accordingly to Barr. Nick Obodo (2002) “Business Centre monitors all activities of Local, national and International levels for every minute of the day. It is evident today that it has reasonable influence on all humans and related activities, but if socially economic or business.

In the same vein, the UNIDO document already referred to point that business center help not only in diversifying economic activities but also in saving foreign exchange for Nigeria.

That is why ther eis continued support by the government. The reason for this support is that business center plays a vital role in the economic development of nations, including Nigeria. Broadly speaking, business centres make more efficient use of inputs (raw materials, capital and labour) than other business establishments. They can be of consideration, by providing places of learning and training for people at all levels and functions (Directors, managers, workers) a capacity that could be used in other sectors of the economy.

In addition, they make a significant contribution to regional activity UNIDO (1969(, Nwosu (1981) all noted that in Nigeria, Business centres are one of the most effective means of stimulating indigenous entrepreneurship. By affording private individuals and groups to star business with minimal resources requirements and by affording them the opportunity to manage the business.

It has been pointed out at various times and with varying degrees of emphasis that business centres emphasis that business center employment for the teaming population of many nations especially in Enugu Metropolis. In Nigeria, it is documented that business center employ about 30% of the entire labour force (Acquah, 1986).

With the emergence of information technology in some business centres it has given new and improved life to some offices, factories, banks, hospitals, hotels, supermarkets, and so on.

  • PROBLEMS OF BUSINESS CENTERS

Although, much literature, commentaries and information abound in the virtues of business centres as far as being the geese that oils the wheel of economic development of any nation, there are some inherent problems militating against the establishment of business centres.

To start a business of ones own, is not an easy task. Thus, according to Ben Back (1989) “ Business opportunity can be informed of a need for the proposed goods and service in sufficient valve and at a high price to operate at a profit”.

For a progressive growth in business center development, there must be a sincere policy for and executives to up-lift the status of business centres. According to Nicolin (1977), “government industrial policies are what determines whether there will be boost or hindrances to business center development, this results from either governmental or legislative decisions which helps the current and future conditions of industries”.

Governments of developing nations pay much attention on high technological industries based industries. This collaborates what Ibezin (1977) called a top down-industrial policy whereby emphasis is laid on high tech-capital intensive industries to the disadvantage of the cottage industries.

According to Adenike (1999) “ in a society where reward is a function to effort or input, people will always try to go for those things that will always try to go for those things that will perpetuate their names like establishment of business but if otherwise, people will always go for the easy means like trading or other things which do not justifying the end.

According to Ademinike (1990) “in a society where reward is a function to effort or input, people will always try to go for those things that will perpetuate their names like establishment.

In the developed economic, the importance of business centres both economic and industrial setting of their nations of limitless that is why they go all out in providing a conducive environment for them to throve on.

The life wire of any business organization especially at the initial stage is money. Available literature has shown that the hallmark of business center development in the world over is money and lack of it shows some probability for its success. The industrialized countries of Japan and united states of America still provide financial assistance to their small industries dub-sector.

Thus, according to Berman, (1990) “ if a project is economically sound and a sponsor is willing and able to take some responsibility for the enterprise during its infancy, the chances of survival are greatly enhanced.

Poor finance management and control is another aspect of management incompetence constituting a big problem to the entrepreneur. His ignorance of the significant financial ratios, which are indicators of effective or ineffective business performance, impairs his progress greatly. Second to this is the lack of effective accounting system in use for controlling the financial affairs of his business. Small business operators believe that the maintenance of accounts books and other business record is costly and unnecessary. They feel they can defer the keeping of notes of important business transactions still they are necessary like amount due to be paid to the suppliers and amount due from the customers. Some feel that keeping proper records of accounts is inviting trouble from the tax authorities, while some others feel that keeping records will be a source of leakage of business and family secruts to outsiders.

In a survey as reported by Teri a (1977), “the most serious problems areas by proprietary entrepreneurs capital shortage was found to be most pressing problem attracting 79% of the survey results”

Equally, the provision of some infrastructure facilities like, electricity water supply, good access roads etc. encourages people to establish business centers especially in Awgu local government area of Enugu state.

In order words, business center establishment enable the owners to interact with people of different calibers thereby enhancing their social life.

 

2.5     Attempts at ameliorating Business center

Problems are inevitable in all human endeavour. However, the important question that always comes with high anticipation is, are these problems soluable or not. If yes, then the problems will be seen as good as being solved. It is on this premise that the examination of some literature on attempts made to solve some of the problems hindering the development of business centers became expedients.

There exists in united state of America (USA). Netherlands and the united kingsom a credit scheme called small business loan Guarantee scheme (SBL) for purposes making funds available to this sub-sector of their economy.

In our country Nigeria, some progressive policies aimed at enhancing, the position of business centers in the national scheme of things are being implemented.

During the 2nd national development plan period (NDPP) 1970-1975, an apex financial house, Nigeria bank for commerce and industry (NBCI) was established with fund allocation of 5.4 Million Naira.

In the 1989 budget, the president, president Ibrahim Babangida, directed Nigeria Bank for commerce and Industry and the commercial Banks to create small business industrial departments with management capabilities to give business centers credit and management advice. He also announced a possible granting of banking licenses to new banks that would specialize and devote their resources to assist small business and other similar business which business cenres are included.

During the 3rd plan period (1975-80) three industrial development centers (IDC) with objectives of identifying and developing business were established in the country and by 1984, the number of (IDCs) has increased to sixteen. The above are in addition to many other efforts by the Federal government and its agencies.

Other schemes through which the governments funds to business center organizations include the credit Banks, Agricultural credit Guarantee scheme, and Many other schemes.

For instance some of the fiscal and monetary policies as well as economics programmes of the Nigerian governments enable many business centers to have assess to fund. This can be seen in form of tax holidays and the provision of some inputs of facilities whose costs should have been borne by the firms to mention but a few.

There are institutions that provide medium and long term financing for laons, project identification and market surveys to determine feasibility and viability projects. Development banks in Nigerian include Nigerian industrial Development Banks, federal mortgage banks, Nigerian Bank for commerce and industry, people.

Bank and community Banks.

Since the establishment of the Nigerian Industrial Development Bank in 1964, the Business center has come a long way, (Sule, 1986).

The Nigeria Bank for commerce, and Industry was established in 1973 solely to cater for small business through loans and equity participation, with emphasis on manufacturing and service industries. Government also established the Nigerian Agricultural cooperative Banks in 1973. they had the duty of giving loans in agricultural sector, Randle, J. (1987). NERFUND established in 1989 is supposed to be comprehensive scheme for business center enterprises. And between 1989 and 1973 they had approved loans totality, 2 billion Naira, for 176 small business. Out of which, 1.5 billion Naira of the approved loans has been disbursed to 100 of the benefiting companies, (Daily sunray, Friday April 2nd 1993).

The people Bank of Nigeria is probably the latest government answer to the plight of entrepreneurs. It was established in 1989. the sole aim was to provide small funds, mostly working capital to business centers at interest free rate. The people bank has branch offices in all the state capitals for distribution of funds.

It recorded in 1990, a repayment rate of over 80% which is about the highest recorded for the development finance institution.

Currently, community Banks are being established all over the place to provide funds for business centers/small business in Nigeria, especially in the rural areas.

The impact of family support programme upon the small business must be mentioned. Having discovered that majority of the entrepreneurs are in the rural areas, the government instituted this programme to encourage small business.

Here in Enugu state, the government is equally trying its best through the establihment of fund for business centers, in 1976 by an Edict their operations are directed towards mitigating the financial problems of business centers.

From the above discussion, it can be seen that some efforts have been and are still being made to improve on the productivity of business center in our economy by both government and individuals.

In addition, according to Bontel communication center “Federal Government should allow the machines and equipments to tactfully come into the country freely. Government shall also look into the accommodation problems of the business. To set up the firm alone is not an easy task, most at times land Lords help in worsening the whole situations by unnecessary increment houses rents.

According to Jobit Business center, having a union that can enable them say their own view in terms of difficulties by some government authorities that always intimidate the owners with unnecessary charge by different authorities.

Summary of Literature Review

          Nwosu, (1984), said that Business center introduce new innovation into the world of Business.

Business center has no definite definition, Igboke, (1998).

Credit scheme edict No.1 of 1976 of Anambra state business means a manufacturing, processing or service industry with capital investment of up to 150,000.00 including machinery and equipments.

Resource availavle to the business center owners are mainly from their personal savings and friends hence that borrowing money from the banks and othr business is a risky business. According to Jobitex business center.

Business center enhances the development of many world economic and makes them to advanced in industrial development.

Despite the much contributions of business centers to the great economy of this nation, there are much problems associated with the establishment of business centers.

To start with, Ben Back defined business opportunities as a need for proposed goods and services in sufficient valves and at a high prise to operate at a profit. he also stated that problems associated with the establishment of Business centers include the need for a progressice growth in it, which requires a sincere policy and an executive to up-lift the state of business centries.

Secondly, government industrial policy, according to Nicolin (1977), government industrial policies is what determines whether there will be boost or hindrances to business center development, which results from governent or legislative decisions. In this effect, Nicolin states that government of developing nations pay much attention on his technological industries. This collaborate what Ibezim (1977) called a top down industrial policy. Thirdly, the choice of people in trading choice other than business centers; Adenike, (1990) comments on this as “In a society where reward is a functionto effort or input, people will always go for the easy means like trading or other thins which do justify the end.

Fourthly, poor financial management, the life wire of any business organization is capital; Available literature have shown that the Hallmark of Business center development in the world over is money and lack of it proves the failure of its success. On this effect, Berman (1990) states “If a project is economically sound and sponsored during its infancy level, the chances of survival are greatly enhanced.

Next to this, is lack of effective accounting system in use for controlling the financial affairs of the business. Small business operators believe that the maintenance of small business operator believe that the maintenance of account books and other business records is costly and unnecessary. They feel they can defers the keeping of notes of important business.

The problem of business center can be ameliorated by credit scheme called small business laon guarantee scheme (SBLGS) for purposes of making funds available to this sub-sectors of their economies, (central Bank of Nigeria, (1967).

In the 1989 budget, president Ibrahim Babangida directed some commercial Bnaks to create small business departments for credit id to the business centers.

Many schemes were established for providing funds to business centers, which including the credits banks, agricultural credit guarantee scheme, and many others e.g. tax Holdings.

Jobit Business center states that having a union that will represent them to say their own view can free them from being exploited by the government authorities.

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