External Environmental Factors and Failure of Small and Medium Enterprises in Lagos Metropolis, Nigeria
- March 26, 2019
- Posted by: RSIS
- Category: Business Administration
International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue III, March 2019 | ISSN 2454–6186
Dr Salihu Abubakar
Department of Business Administration and Management, Waziri Umaru Federal Polytechnic, Birnin Kebbi, Kebbi State, Nigeria
Abstract: – This study examines the relationship between external environmental factors and failure of SMEs in Lagos metropolis, using samples of failed SMEs in Lagos metropolis. Questionnaire was used to collect primary data from the sampled failed SMEs using snow ball method. The data was analyzed using both descriptive and inferential statistics. The outcome reveals that external environmental factors have significant impact on the failure of SMEs in Lagos metropolis, and financial inadequacy (FI) is the major contributing factor to the failure of SMEs in the Lagos metropolis; followed by market competition (MC), market demographics (MD), and inadequate infrastructure (II). In order to reduce SMEs failure and achieve significant positive contribution of SMEs sub-sector to the economic development of the state, the study recommends that government and relevant stakeholders should create an enabling business environment with financial support to SMEs, fair competition, sound market places and adequate infrastructures.
Keywords: SMEs, Failure, Environmental Factors, Inadequate Infrastructures, Market Demographics, Market Competition, Financial Inadequacy
I. INTRODUCTION
SMEs sub-sector is an integral component of economic development and a key element in the fight against poverty and unemployment in both developed and developing economies. They are veritable vehicles in accelerating sustained growth and economic transformation in developed and developing economies. SMEs provide an effective means of stimulating indigenous enterprises, enhancing greater employment opportunities per unit of capital invested and aiding the development of local technology (World Bank, 1995). Consequently, the performance of SMEs sub-sector is closely associated with the performance of the nation.
The Nigeria Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA, 2006) argues that small and medium businesses are the vehicle for rapid industrialization and development of any nation. They also account for 70% of national industrial employment if the threshold is set at 10 – 50 employees, and contribute 10% of manufacturing output (Ajayi, 2002). Anwatu (2006) opines that 75% of the private sector in Nigeria is dominated by SMEs, reiterating that the Organized Private Sector (OPS) is the engine of growth and creator of wealth and employment.
