THE ENTREPRENEUR AND ECONOMIC DEVELOPMENT OF NIGERIA: PROBLEMS AND PROSPECTS

AMIENS ERNEST OSEGHALE

ABSTRACT Entrepreneurs contribution to the economy is of immense value and an economy is much dependent upon the performance level of its entrepreneur. Nigerias economic development still remains a paradox since the second national development plan that elevated entrepreneur development to policy limelight. This is position have been traced to problems of corruption, infrastructure, finance, bad leadership etc.

1.0

INTRODUCTION Entrepreneurs contribution to the economy is of immense value. He or she is

crucial to the economic growth of the country. The process of economic development in Nigeria in the postcolonial era has been traced to activities of entrepreneurs. The entrepreneur and economic development came into limelight in 1972 with the realization by the Nigerian Government of the need of indigenous entrepreneurs to share in the task of economic development. In the nations 1970 - 1974 Second National Development Plan, the Federal Government gave special attention to the development

of small scale enterprises promoted by entrepreneurs. The objectives of the plan were anchored on the following objectives: i. ii. iii. iv. a united strong and self reliant nation; a great and dynamic economy; a just and egalitarian society; a land of bright and full opportunities for all its citizens; and a free and democratic society (SNDP, 1970:32). Definitions of entrepreneur by Loucks (1988) and World Bank cited in Inegbenebor (2006) are as follows: Loucks (1988) defines an entrepreneur as an individual who perceives needs, conceives goods and services to satisfy the needs, organizes factors of production and create and markets the products. The World Banks definition states that entrepreneurs are people who perceive profitable opportunities, are willing to take risks in pursuing them and have the ability to organize a business. Entrepreneurs are individuals who accept risks, mobilize resources, provide jobs, introduce innovations, and create economic activities. These outlined roles results in the creation of firms that are drivers of economic developments through job creation, technology development, increased economic activities etc.

2.0

LITERATURE REVIEW There are several literature abound on the concept of entrepreneur. The

pioneering work has been credited to Cantillon and Say captured in several literatures. Richard Cantillon (1725), an entrepreneur is a person who pays a certain price for a product to resell it at an uncertain price, thereby making decisions about obtaining and using the resources while consequently admitting the risk of enterprise. Say (1803), an entrepreneur is an economic agent who unites all means of production- land of one, the labour of another and the capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labour, interest on capital and what remains is his profit. He shifts economic resources out of an area of lower and into an area of higher productivity and greater yield. Marchall in 1920 described the entrepreneur as someone who combines through vigorous activity the factors of production, labor and capital so as to produce an increased output of goods and services thereby increasing the total wealth or material welfare of society. Knight (1921) showed that entrepreneurs assumed a risk because of the state of uncertainty in which they worked, and that they were rewarded accordingly by the profits they made from the activities they initiated. Schumpeter (1934) sees an entrepreneur as one who takes risks in a situation of uncertainty and engages in activities that had not been undertaken before by any one. In other words, the entrepreneur brings about new combinations in production, thus 3

engendering creative destruction or dynamic disequilibrium, which is the precondition for economic development. Schumpeter (1934) sees the entrepreneur as an innovator. He does new things in a new way. He supplies new products; makes new techniques of production, discovers new markets, and develops new sources of raw materials. McClelland (1966) defined the entrepreneur as a person who organizes and maintains a business undertaking assuming the risks for the sake of profit. McClelland (1971) defined an entrepreneur as someone who exercises control over production that is not just for his personal consumption. Drucker (1985) posited that the entrepreneur always searches for change, responds to it and exploits it as an opportunity. Say cited in Drucker (1985) coined the term entrepreneur to mean one who shifts economic resources out of an area of lower productivity and yield into alternative areas with higher productivity and greater yield. Gartner, (1989) the entrepreneur is defined by the behaviors that he or she exhibits in performing entrepreneurial activities, rather than by internal psychological traits embracing this notion of behavioral orientation. Dees (2004), an entrepreneur is someone who undertakes a significant project or activity, a venturesome individual who stimulates economic progress by finding new and better ways of doing things. From the above review, one can capture entrepreneur as a change agent, an innovator who is also a risk taker, who exploits business opportunities in his environment and utilize resources effectively to develop new technologies, produces 4

new products and services to maximize his profits and contributing significantly to societys development. The actions of entrepreneurs; what entrepreneurs does just captured above is known as entrepreneurship. Drucker (1985) defines entrepreneurship from the point of change. He sees entrepreneurship practice to involve creating entrepreneurial climate, which includes systematic measurement and appraisal of companys performance as the basis for inbuilt training to improve performance as well as establishment of efficient organsational structure. He also view entrepreneurship as a systematic innovation, which consists in the purposeful and organized search for changes, and it is the systematic analysis of the opportunities such changes might offer for economic and social innovation. Stevenson, Robert and Grousbeck (1985) defined entrepreneurship from the point of view of creating value by pulling together a unique package of resources to exploit an opportunity. Schumpeter (1934) defines entrepreneurship as the engine of "creativedestruction," involving the carrying out of new combinations, including the introduction of a new product into the market, the introduction of a new method of production, the opening of a new market for outputs, the discovery of a new source of raw materials, and the creation of a new form of industrial organization and forcing through innovation, mobilizing the resources for and overcoming any obstacles to doing something new. Aruwa (2006) sees entrepreneurship as The willingness and ability of an individual to seek for investment opportunities, to establish and run an enterprise successfully. Aina & Salao (2008) captured entrepreneurship as comprising any purposeful activity that 5

initiates, maintains or develops a profit oriented business interaction with internal situation of the business or with the economic, political and social circumstances surrounding the business. In short, entrepreneurship is a creative process of organizing, managing an enterprise and assuming the risk involved in the enterprise. Entrepreneurs constitute a veritable force in the promotion of an entrepreneurial culture. Ilesanmi (2000) asserted that the entrepreneurs become models to be initiated by potential entrepreneurs because of the successful images already portrayed by the existing entrepreneurs.

2.1

Entrepreneur and Economic development Falodun, Omogiator and Ezeaku (1997) captured economic development as the

attainment of ideals of modernization such as the rise in productivity, social and economic equity, improved institution and values. The term also denotes the improvement in the general standard of living of the people of the society and it is concerned with the improvement in the quality of life of the people. Schumpeter (1934) asserted that change is the thrust of economic development and the entrepreneur is the hub of change through introduction of new combinations in the production processes. In his book (Schumpeter, 1911), he enumerated and described innovative activities as "the carrying out of new combinations" as follows: i. The introduction of a new good;

ii.

The introduction of a new method of production, that is one not yet tested by experience in the branch of manufacture concerned, which need by no means be founded upon a discovery scientifically new, and can also exist in a new way of handling a commodity commercially;

iii.

The opening of a new market that is a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before;

iv.

The conquest of a new source of supply of raw materials or half-manufactured goods, again irrespective of whether this source already exists or whether it has first to be created; and

v.

The carrying out of the new organization of any industry, like the creation of a monopoly position or the breaking up of a monopoly position.

3.0

ANALYSIS OF THE SUBJECT MATTER It has once been opined that Nigerias principal objective (economic and social)

at independence was that of rapid economic and social development and transformation (Kayode, 1985:3). (Zuvelas, 1999) acknowledges that economic development implies a decline in agricultures share of the gross national product and a corresponding increase in the share of such sectors as government administration, manufacturing, utilities, 7

construction and financial institutions. Despite variations of the definition of economic development, it will suffice in this essay to define economic development as the realization of specific values such as higher per capita income, progressive reduction in unemployment, hunger, disease, illness, poverty and the incremental improvement of the standard and quality of life index of the people. Also economic development is defined as the realization of specific values such as higher per capita income, progressive reduction in unemployment, hunger, disease, illness, poverty and the incremental improvement of the standard and quality of life index of the people. Using this view, I will attempt to analyse the subject matter; entrepreneur and economic development of Nigeria: problems and prospects. Table 3.1: National Unemployment Rates (2000 - 2009)

Year Rate 2000 13.1 2001 13.6 2002 12.6 2003 14.8 2004 13.4 2005 11.9 2006 12.3 2007 12.7 2008 14.9 2009 19.7 Source: Statistical News, National Bureau of Statistics 8

Unemployment is another undesirable phenomenon affecting development. In unemployment table on Nigeria, unemployment is well pronounced. It has its peak value in 2009 and showed gradual increase from 2000 to 2009. This is an indication that there are few entrepreneurs driving enterprises that would have provided gainful employment. With this high rate of unemployment, shows that most Nigerians live on less that $1 which is an indication of high rate of poverty. Unemployment has been identified as one of the major causes of poverty in sub-Saharan Africa (Obadan, 1997).

Table 3.2:

Macroeconomic Indicators in Nigeria, 20002007

EconomicIndicators GDPGrowth(%) OilSectorGrowth(%) NonoilSectorGrowth(%) InflationRate SocialIndicators Population(million) PopulationGrowthRate(%) LifeExpectancy(years) AdultLiteracyRate(%) IncidenceofPoverty(%)

2000 5.4 11.1 4.4 6.9 108 2.8 Na 57 65.6.

2001 4.6 5.2 2.9 18.9 118.8 2.8 54 57 65.6

2002 3.5 5.2 4.5 12.9 122 2.8 54 57 65.6

2003 2004 2005 9.6 6.6 5.8 23.9 3.3 1.7 5.2 7.8 8.4 22.2 15 17.9 125.6 129 134 2.8 2.8 2.8 54 54 54 57 62 57 65.6 54.4 54.4

2006 5.3 3.7 9.5 8.2 140 2.8 54 64.2 54.4

2007 5.7 5.9 9.2 5.9 140 3.2 54 64.5 54.4

Source: Mid-Point Assessment of the Millennium Development Goals in Nigeria 20002007 From Table 3.2, the countrys poverty peaked between 2000 and 2003 and reduced in 2004. It has remained constant till 2007. The non-oil sector growth is positive showing incremental growth rate from year 2002. This development can be attributed to various initiatives put in place by the Federal Government to encourage entrepreneur and boost entrepreneurship. Such initiatives include Small and Medium Enterprises Equity Investment Scheme (SMEEIS) established by the Central Bank of Nigeria (CBN) on the 19th June 2001 to liberalize access to funds through all the commercial banks and Small and Medium Enterprises Agency of Nigeria (SMEDAN) established in 2003 that oversees the affairs of small and medium enterprises in Nigeria. The former, the SMEEIS, in addition to providing finance, also requires banks to identify and package viable industries with Nigerian entrepreneurs. It is the most ambitious effort ever in the economy to provide a ready pool of money for small and medium enterprises funding using 10 per cent of bank profit before tax. The latter, SMEDAN does not provide funds to business operators, it does assist them in preparing good business plans and to gain easy access to funding. It provides support and information services. 10

Entrepreneur is a person who tries to do something new, visualises a business opportunity, organises the necessary resources for setting up the business and bears the risk involved. Thus, an entrepreneur may be termed as an innovator, an organiser and a risk bearer. As an innovator, the entrepreneur introduces new products in the market; finds out new markets for existing products; introduces new production technology; launches new marketing strategy and so on. He bears the risk and uncertainties associated with the business activities. He organises all the factors of production like land, labour and capital and sets up the business to take advantage of the opportunity. These are only possible with limited constraint on his path. In Nigeria, there several problems faced by entrepreneurs, they include corruption, infrastructure and bad leadership, administrative, operating, strategic, legistrative and external problems. Inegbenebor (2006) posited that some of the major constraints often mentioned as limiting the realization of the full potentials of small business enterprises in Nigeria are the weak management structure and practice in the enterprise, poor record keeping and low financial discipline. Corruption has caused incalculable damage to social and political development of Nigeria and, indeed, of most polities in Africa (Onoja, 2000). President Obasanjo in his maiden broadcast during his inauguration in 1999 identified high level corruption as one of the most pressing economic problems confronting the country. Entrepreneurs are hindered by the high level of corruption in the country. Nothing works except palms are greased and this has accounted greatly for the low performance of the various bodies set by government to encourage small business enterprises.

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Ogundele (2002) examined most important problems of confronting indigenous entrepreneurs in Nigeria. . All agreed that inadequate capital is a major problem to them. Finance limit the activities of entrepreneurs; most entrepreneurs do not have the required capital and can not to borrow money from banks or other financial institutions due to difficult and high cost of borrowings start and grow their enterprise and hence source for funds mostly by themselves, from relatives and friends or by going into partnership. This source of fund is not reliable and long term in nature. Lack of infrastructure and bad leadership are also major factors that have seriously militated against economic development of Nigeria 50 years after independence. There has been erratic power supply in Nigeria which has resulted or left the small business owners with no other option than using other sources of energy such as diesel for generation of power. This alternative of power supply is very costly when compared with electricity therefore increasing the cost of productions of goods. This factor militates against the development and growth of small business enterprises in Nigeria. The prospect of economic development is bright resulting from the activities of entrepreneurs. Okpara & Wynn, (2007) the present government has pursued a policy that should provide fertile ground for small business including trade liberalization and making the operating environment friendly to entrepreneurs, in light of this support and incentive programs it would be reasonable to see and to expect that small business enterprises would grow and flourish in Nigeria.

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4.0 CONCLUSION AND RECOMMENDATION Thus, an entrepreneur refers to a person who visualises a business opportunity, takes steps to promote a new enterprise, assembles resources in the form of men, materials and money to make the business venture successful and bears the risk and uncertainties involved. Entrepreneurs have not played the significant roles they are expected to play in Nigeria economic development as there is raising rate of employment, poverty incidence despite the positive growth rate in the non-oil sector. Therefore, entrepreneurs in Nigeria require an urgent attention from the government in tackling their problems in order to survive, grow and develop and contribute to economic development. Concluding this study without adequate recommendation makes it an incomplete one. In light of this recognition, the following recommendations are advocated. i. Government should fashion out modalities in implementing their designed policies and follow it up to a logical conclusion instead of adopting and abandoning one programme for another. ii. There should be adequate regulations of banks and other financial institutions to effectively provide loans to small business enterprises. iii. The infrastructural problem of road networking, communication, water supply, machineries and equipments in Nigeria should be paid necessary attention to effect their development and improvement.

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iv.

Government as a matter of urgency should create an enabling environment that is appreciably devoid of corruption and bureaucracy. They should strengthen existence anti-corruption institution to be able to combat corruption.

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