STRATEGIES FOR ENHANCING AND PROMOTING CAPITAL FORMATION AMONG SMALL-SCALE ENTERPRISES IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Robert, Heywood, Bruce and Graham (1977) stated that capital is the money used to buy expensive piece of heavy equipment such as bulldozer, a sawmill or a tractor-trailer. According to Abner (1990) capital is the most important of all the factors of production. He noted that the more a country used her capital, the higher the rate of industrialization and therefore, the rate of development. To him the reason for this is because the developing countries have less of capital that they are still primary produces largely. He listed some of those developing countries and they includes;
i. Ghana and other West African countries (e.g India)
ii. Latin American countries (e.g Brazil)
iii. India iv. North and Central African countries
v. Pakistan
vi. East and Southern African countries (e.g Kenya)
Okechukwu (1999) as an accountant sees capital as funds usually in the form of assets contributed by the owners of the business and any residual revenue are meeting expenses and outside interest. As a result for a business that is starting operation, all assets contributed by the owners to setup the business which will be regarded as capital. In the course of this explanation He mention that Pandey see’s capital as the total funds invested in the business, he went further to say that batty sees capital as the funds used in the business. Barual (1998) reports that another defects of the growth of capital formation in West African is the inequitable distribution of income. He noted that the very rich people in West African trend to become richer while the poor masses become poorer. He further stated that about 10% of the population of West African countries control about 66.7% of the income. Again, he stated that the few rich people of West African countries have their wealth and impound what they can see, thereby invest less in long productive enterprises, there is no suicient capital to the human (labour) and national (land) resources in West African.
David Begg (2000) defined capital as the stock of produced goods that contributed to the production of other goods and services. He noted that industry and business organization need to increase their capital stock, their machinery equipment, factory and oice buildings. He also noted that industry has to modernize its capital equipment and the new growth industries such as information technology need to invest for future production. Roy Harrods, an English Economist (1940) in his postwar theories on capital emphasized on human capital.
The defined human capital as the skill and knowledge embodied in the minds and hands of the population. Increasing education training and experience allow workers to produce more output from the same level of physical capital. George J. Stigher (1975) defined capital as anything (other than a free human being) which yield valuable services over and appreciable period of time. the believed that capital consists of all economic goods except people and perishable, such as an accumulated fund of general productive power, past income incorporated in particular physical forms or particular forms which will yield money income in the future as adding value of plants, and house and inventories to obtain total wealth.
Era Udu et al (1989) capital is defined as a stock of physical assets accumulated by society to facilitate the production of goods and services. Any form of wealth is known as capital. He pointed out that capital can take many form such as fixed capital (building tools, plants and machinery) circulating capital, sometimes called “working capital”, comprises of raw materials cash in hand, funds obtained through ordinary and preferential share etc. However, he further stated that capital can be distinguished as real and money capital. This includes fixed capital assets and cash in-hand respectively.
1.2 STATEMENT OF PROBLEMS
The growth of small scale enterprises in Nigeria is associated by inadequate supply of capital and poor performance. In Nigeria, many small-scale enterprises are bankrupt because of lack of capital which implies lack of asses-sable funds for further growth of a business organization. The problems stirred up researchers to undertake the study in order to find out the strategies for enhancing and promoting capital formation among small-scale enterprises in Nigeria.
1.3 PURPOSE OF THE STUDY
The purpose of this study are as follows:
(i) To discuss those problems that hinder capital formation among the small-scale enterprises in Nigeria.
(ii) To emphasize on the causes of these problems
(iii) To suggest the suitable means of promoting and enhancing capital formation among small scale.
1.4 SIGNIFICANCE OF THE STUDY
The findings and suggestions of this study, if carried out will promote the growth of small-scale enterprises in Nigeria. And harness those challenges faced by the small-scale enterprises in Nigeria and also suggest suitable means by which they can obtain loan to finance their business.
1.5 RESEARCH QUESTIONS
In order to achieve the purpose of this study, the following research questions pose to guide the investigation.
(i) What are the factors that hinders capital formation among the small-scale enterprises in Nigeria?
(ii) What are the strategies of promoting capital formation
(iii) What is current situation of small-scale enterprise
(iv) How to source for capital, in order to promote small-scale enterprise.
1.6 Scope/Delimitation of the Study
This study on strategies for enhancing and promoting capital formation among small-scale enterprises in Nigeria is limited to the heritage supermarket Enugu.
1.7 Definition of Terms
Strategies: Are plans designed for a particular purpose or the process of planning something or carryout something in a skilful way.
Capital: Is wealth or property that can be used to produce more wealth.
Formation: Is the action of forming something or the process of being formed. e.g habit formation in children etc.
Residual: Is a small amount of something that remains are the main part is taken or used.
Postwar: Is usually attributed to existing or happening in the period are a war, especially world II or recent major war.
Discretionary: Not controlled by strict rules, but le for someone to make a decision about, in each particular situation i.e the court’s discretionary powers (Longman dict).
Inventories: A detailed list, e.g of goods, furniture, or jobs to be done.
Accelerated: To happen or make something happen faster or earlier.
Painstaking: Done with, require or taking great can or trouble exp: A painstaking tasks/investigation, with painstaking attention to detail etc.
Pessimistic: Expecting that bad things will happen in the future or that a situation will have a bad result.
Propensity: A tendency to do something, especially something undesirable.
