ABSTRACT
Unemployment has been a major issue in the Nigerian economy since the mid-1980s. Consequently, the Federal government adopted several strategies and policies towards entrepreneurial development in Nigeria to combat the unemployment problem. All over the world, entrepreneurship has been adjudged to have the capacity to generate employment. Indeed, extant literature discloses that entrepreneurship has been linked with the creation of self-employment. This notwithstanding, literature reveal that only limited studies have been conducted on entrepreneurship in developing economies, especially Nigeria, hence the need for further research. Hence, this study investigated entrepreneurial development and employment creation in Oyo State, Nigeria. The study sought specifically to assess the capacity of small and medium scale enterprises (SMEs) to generate employment in Oyo State.
The study adopted a survey research design. The population of the study was all the 4,000 registered SMEs in Oyo State, provided by the National Association of Small and Medium Scale Enterprises. Stratified random sampling technique was utilised to select sixteen out of thirty-three local government areas in Oyo State as well as the sample size of 400 SMEs. The choice of the study area was based on size and concentration of SMEs. The research instrument was a self-developed and validated questionnaire. The reliability test of the major variables in the questionnaire yielded the following Cronbach’s alpha coefficients: Self Employment=0.86, Business Partnership=0.68, Business Inheritance=0.74, Government Employment Training Programme=0.67 and Entrepreneurship Development=0.93. A total of 455 copies of the questionnaire were administered with a response rate of 87.9%. Data were analysed using descriptive and inferential (multiple regression) statistics.
Findings revealed that there was a significant relationship between self-employment and acquisition of vocational skills (R2 =0.763; p=0.000). There was also a significant relationship between business partnership formation and acquisition of managerial skills (R2=0.754; p=0.001).Similarly, there was a significant relationship between family business formation and acquisition of technical skills through inheriting enterprises (R2=0.713; p=0.002). Moreover, there was a significant relationship between government employment training programme and self-employment (R2=0.693; p=0.000). In addition, among the SMEs in Oyo State, bakery (125) business center (76), petty trading (63) and barbing (61) generated more employment opportunities than others.
The study concluded that vocational skills and government training created employment opportunities through the SMEs in Oyo State, Nigeria. Also, formation of business organizations enhanced the acquisition of managerial and technical skills. The study recommended that government and SMEs should focus on the establishment of enterprises that generate employment most. In addition, government should provide adequate training for entrepreneurs while entrepreneurs in turn should provide adequate and continuous training for employees to enhance their technical skills.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The need for employment creation in Nigeria did not arise until the mid-1980s, when the economy of Nigeria collapsed and youth and graduate unemployment became a major issue of the economy of the country, particularly the latter (Arogundade, 2011). Prior to this period, the focus was in occupying positions created by the colonial masters for the smooth running of their colonial administration as well as filling the positions that the colonial masters were vacating which was occasioned by the political independence gained by the country. In this way, both graduates and non-graduates were occupying vacancies so created (Aladekomo 2004; Alarape, 2008).
However, by the mid – 1980s unemployment had reared its devastating effect on the Nigerian economy. This was occasioned by various factors such as economic recession, production of jobless educational institutions’ graduates, low labour absorbing capacity by companies, mass lay off of civil servants, embargo on employment in the civil service, unemployability of our educational institutions’ graduates for lack of relevant skills, irrelevance of curricula offered in educational institutions, closure and relocation of some business enterprises and infrastructural deficits (Idowu, 1987; Aladekomo, 2004; Adebisi & Oni, 2008; Olufemi & Adebola, 2008; Oviawe, 2010; Idogho & Aniabor, 2011; Joseph, 2011; Shadare & Tunde, 2012).
The general household survey conducted by the National Bureau of Statistics (NBS) in 2011 put the unemployment rate in Nigeria as 23.9 percent. This is a very worrisome development to all stakeholders: the society, the unemployed and the government. Particularly worrisome is the rising rate of graduate unemployment among the unemployed labour force in the country over the years (Akintoye, 2008). For instance, the graduate unemployment rate rose from about 1 percent in 1974 to 4 percent in 1984; and between 1992 and 1997, it rose to 32 percent (Akintoye, 2008). In 2008, Yoloye reported that graduate unemployment rate had risen to 71.4 percent (Egunsola, Dazala & Daniel, 2012).
Equally worrisome is also the alarming rate of unemployment among non-graduates. Oye, Ibrahim and Ahmad (2011) putthe largest proportions (31-50%) of the unemployed in the country as being secondary school graduates with 40% of them representing urban youth ranging between 20 and 24 years. Another 31% of them fall within the age rangeof15 – 19 years.
The resultant effect of this high rate of unemployment in Nigeria is youth restiveness of all kinds such as blowing off of crude oil pipes, kidnapping (Onwubiko, 2011) as well as these youth organizing themselves into militant groups in the form of Egbesu Boys, Oodua People’s Congress, Bakassi Boys, Almajiris, “area boys” and Boko Haram to target the very society that alienated them (Awogbenle & Iwuamadi, 2010; Liolio, 2013).
In view of the above, the Federal government adopted several strategies and policies towards entrepreneurial development in Nigeria by establishing institutions and agencies, which provide variety of support services to entrepreneurs. The implication of these policies is the emergence of entrepreneurial development programmes (EDP) in different parts of Nigeria with the aim of combating unemployment problem in the country (Aladekomo, 2004; Alarape, 2008; Arogundade, 2011; Ekpoh & Edet, 2011).
Entrepreneurial development in itself is conceived as a programme of activities to enhance the knowledge, skills, behaviour and attitudes of individuals and groups to assume the role of entrepreneurs. Entrepreneurial development programmes, therefore, are targeted at owner managers of small business firms as well as those identified to possess potentials for self – employment (Owualah, 1999). The aim is to allow individuals and groups to acquire these skills, knowledge and attitudes to enable them take the role of entrepreneurs thereby creating jobs for themselves, since creation of employment also requires the establishment of new ventures (Aladekomo, 2004; Alarape, 2008; Ekpoh & Edet, 2011).
Some of the entrepreneurial development programmes aimed at combating unemployment problem in the country are run by various government agencies which include national economic empowerment and development strategy (NEEDS), small and medium scale development agency (SMEDAN), student industrial work experience scheme (SIWES), national directorate of employment (NDE) which provides vocational training for participants to acquire vocational skills in different trades, among other things;, youth enterprises with innovation in Nigeria (YouWin) and subsidy reinvestment and empowerment programme (SURE-P).
In order to inculcate entrepreneurial behaviour in the minds of students while in school and by extension, reduce the rate of unemployment further in the economy, the federal government of Nigeria through National UniversityCommission (NUC) directed the introduction of entrepreneurship education in tertiary education institutions during the 2007/2008 academic session(Nzelibe, Yusuf, Ozigbo, Mohammed& Ayuba, 2010).
Entrepreneurship is adjudged as being capable of generating employment, among other things, as it is considered to be labour intensive and therefore capable of providing employment for our teeming youths and graduates (Aladekomo, 2004; Ahmad, Baharun &Rahman, 2004; Onugu, 2009; Deakins and Feel, 2009; Oviawe 2010; Idogho & Ainabor, 2011; Arogundale, 2011; Akhunemomkhan, Raimi & Sofoluwe 2013; Aziz, Friedman& Boprieva, 2013; Ohachosin, Onwuchewa & Ifeanyi, 2013). However, in spite of the various numbers of these programmes established in different parts of the country, the rate of unemployment keeps on increasing unabated.
The importance of entrepreneurship cannot be overemphasized. Deakins and Feel (2009) making reference to the statement credited to Jean – Philippe Cotis, the Chief Economist of Organization for Economic Conglomeration and Development (OECD), confirms the importance of entrepreneurship among policy makers and academic researchers by saying that it has scientifically been proved that entrepreneurship activities create employment, productivity and ultimately economic growth.
Furthermore, OECD entrepreneurship and small and medium enterprises (SMEs) outlooks asserts that SMEs and entrepreneurship are more recognized worldwide to be the very source of dynamism, innovative and flexibility in advanced industrialized countries as well as emerging and developing economies. Accordingly, they are seen as being responsible for most of job creation in OECD countries and make important contributions to innovation, productivity and economic growth. Indeed, Akinlua and Akintunde (2008) furtherbuttress this statement by asserting that these small scale businesses employ more workers than their large scale counterparts.
Before this time, however, and inspite of the importance of entrepreneurship, its development has been neglected for a long time in Nigeria (Aladekomo, 2004). Aladekomo(2004) pointed out that the industrial policy which came on board only after the Nigerian independence in 1960 initially concentrated on the establishment of big industries with utter neglect for small scale businesses and by so doing, entrepreneurship which is the bedrock of small scale businesses was unwittingly de – emphasized.
Corroborating this view, Olaniyan (2005) says that Nigerian government in the past formulated policies focused on the large scale enterprises that are deemed to be the hall mark of development in the private sector and this encouraged the establishment of public enterprises to the detriment of private enterprises. He goes further to say that small – scale businesses most of which operate in the informal sector, were viewed by government as only incidental to development. Yet, as observed by Akinlua and Akintunde (2008), it is these small scale businesses that employ more workers than their large scale counterparts.
However, this rise in the unemployment of graduates and non – graduates, inspite of the various entrepreneurial development programmes established that were aimed at combating the menace of unemployment, has raised some contentious issues. Prior to the mid – 1980s when unemployment reared its devastating effect on the economy, this group of people used to enjoy paid employment right from the colonial era. For instance, Aladekomo (2004) says the colonial masters were using the available educational institutionsas factories for producing various categories of staff such as clerks, interpreters, forest guards and sanitary inspectors. All these were paid for their services they rendered to the colonial administration.
George, Owoyemi and Onakale (2012) reveal that it was Mungo Park that first introduced wage payment into Nigeria in 1795 when he had to pay for the services of his two guides. Furthermore, George, et al., (2012) says that this form of employment became attractive to the people to the extent that evensome school students then, were unwilling to complete their primary or secondary school education as the temptation of wage employment was too much for them to resist while still in school. In this way, the society known as Nigeria came to accept this type of employment- paid employment (George, et al., 2012). However, the type of employment that entrepreneurial development programmes lead to is self-employment (Adekomo, 2004; Ekpoh & Edet 2011) and not wage/paid employment.
Government employment training programmes are generally meant as interventionist programmes to alleviate unemployment situation in an economy. These programmes usually translate to small business ventures. Previous studies have shown that these entrepreneurship/SMEs, though provide employment, usually have a short life span. Though, (Fatunla, 1989; Edet, 1991; Owualah, 1999; Emeh, Nwanguma & Aborah, 2012) have confirmed that some of the entrepreneurship programmes initiated by Federal government have recorded appreciable success.
There has been emphasis on entrepreneurship leading to self–employment. Frimpong(2014) reveals that there is lack of empirical studies testing the relationship between participation in entrepreneurship education and partnership business ventures. Frimpong (2014) further reports that there are a lot of advantages of entrepreneurship leading to business partnership. He says sole proprietors need to generate enough funding to remain operational and to capitalize upon market developments and obtaining such capital can be a very difficulttask because lenders are often reluctant to finance this type of one man business. Rather these lenders prefer business organizations corporately owned as a security for their funds.
1.2 Statement of the Problem
In the past, high unemployment rate was alien to graduates in Nigeria. Where this high rate of unemployment was prevalent then was among people without basic education (Akintoye, 2008). The study put persons with and without primary school education as people who were largely affected by unemployment in the 1970s. The study put people with this educational status at between 76.8 and 80.6 percent of the unemployment in 1974 and 1978 respectively among the unemployed labour force; showing that non-graduates do experience unemployment problem.At this same period, graduate unemployment accounted for less than 1 percent of the employed labour force in 1974 but rose to 4 percent in 1984 (Akintoye, 2008). This trend, however, has since changed. Graduate unemployment rate has been rising astronomically from that time onwards. For instance, between 1992 and 1997, it rose to 32 percent; that is about 700 percent above and over the figure of 1984(Akintoye, 2008). By 2008, Yoloye reported that the graduate unemployment rate had risen to 71.4 percent (Yoloye cited in Egunsola, Dazala & Daniel, 2012). The implication of this is that for every 10 graduates in Nigeria, 7 of them are unemployed among the unemployed labour force.
In order to get jobs, therefore,relevant skills must be acquired to carry out such jobs. However, Akutson and Udeh (2015) drew attention of how relevant skills acquired lead to the creation of millions of small businesses which create employment. From the foregoing, it is discovered that the unemployment rate is high among both non – graduates and graduates. It is in view of this rising rate of unemployment that this study seeks to find out if vocational skills actually lead to self-employment.
Public-finance theory allows government to spend public funds to address a peculiar situation (Wolk, 2007). Consequently, in the face of this enormous unemployment problem, the government of Nigeria decided to put in place entrepreneurship programmes, as employment training programmes, financed by it, aimed at combating unemployment in the country (Owualah, 1999; Adebisi & Oni, 2008; Akintoye, 2008;Awogbenle & Iwuamadi, 2010; Oghojafor, Aduloju, Olowokudejo, 2011; Emeh, Nwanguma & Abaroh, 2012).
There is one major handicap that a self-employedface as he relates with financial institutions. This financial problem is their inability to access credit from financial institutions because the latter believe that giving loan to such a business setup can lead to a high financial risk that can lead to poor performance loan. However, when a group of such individuals come together to form a partnership, the financial institutions seem to have confidence in lending to such a business setup. Besides, another area of problem for a self-employed business entity is lack of synergy. When two or more people come together to form a business partnership, they pool their resources together for the progress of the business.
Furthermore, a self-employed business seems to have a short life span. Most die with their founders. However, with business partnership, the death of a partner does not necessarily lead to the collapse of the business entity. Therefore when individuals come together to start a business partnership, the business will have access to credit from financial institutions to run the business, get the talents of partners- managerial, marketing and sales acumen of partners-for the effective running of the business. When synergy is obtained from partners, and capital is available for the business and with the guarantee of long life span, such business will employ production resources, including labour.
However, inspite of these advantages of business partnership, it still fails for a number of reasons. Some of these reasons could include unresolved conflict, where values, career or life goal are misaligned, lack of effective decision making process, lack of team work as well as lack of well-defined financial structure. There are a number of businesses that have been inherited from older generations through which employment is being generated. Hoy (2007) reveals that when intrapreneurs work under the tutelage of entrepreneurs, they acquire necessary skills to run such businesses. This guarantees the continuity of such businesses. When this happens, such businesses have the ability to retain their employees as well as the ability to employ more people.
Schafer and Talavera (2006) and Pikett, Pottel–Viriay & Rosenthel (2010) disclose that the continuity of inherited business is guaranteed when the capital is inherited by such business because this prevents cash flow problems and gives room for expansion of such business. However, Hoy (2007), even though, he recognizes that many family businesses survive for multiple generations; the possibility of “Shirt leaves to shirt leaves in three generations” cannot be ruled out. This means that no matter how long a family business lasts, there is the possibility of spoiled grandchildren squandering the business. This is also buttressed by Hoy (2007) where he stated that an intrapreneur can ruin down a business enterprise. Nwadukwe and Court (2014) in their study reveal that the survival of business by inheritance is difficult to achieve where patriarchal lineage system is put in place where all offsprings are females.
However, in spite of these programmes specifically put in place by government to address the high rate of unemployment among the unemployed labour force, the unemployment rate keeps on increasing unabated, especially graduate unemployment. It is in view of this rising rate of unemployment that this study seeks to find out if these programmes actually have effect in providing employment for these teeming applicants.
1.3 Objective of the Study
The general objective of this study is to determine the effect of entrepreneurial development programme on employment generation in Oyo state, Nigeria.
The specific objectives are to:
1. determinehow acquired vocational skills provide self-employment;
2. determine how government employment training programme leads to self-employment;
3. determine how acquired managerial skillslead to business partnership formations and
4. determine the effect of technical skills acquired from family business on business formation.
1.4 Research Questions
In view of the above, the following research questions generated to guide this study.
1. In what way doacquired vocational skills provide self – employment?
2. How does government employment training programme lead to self-employment?
3. How doacquired managerial skills lead to business partnership formations?
4. To what extent doacquired technical skills inheritedfrom family business have effect on business formations?
1.5 Hypotheses
The following hypotheses were tested at 0.05 level of significance
H01: Acquired vocational skills have no significant effect onself-employment.
H02: Government employment training programme does not significantly lead to self-employment.
H03: Acquired managerial skills do not significantly lead to business partnership formations.
H04: Acquired technical skills from family business do not significantly lead to business formations.
1.5.1 Rationales for the Hypotheses
Hypothesis 1(Ho1) – Acquired vocational skills
Vocational skills are skills that are needed for certain trade, work or occupation. So the acquisition of such skills helps the recipients to get employed. The World Bank disclosed that out of the beneficiaries of vocational education reform project it financed in China between 1996 and 2004, 91 per cent of the participants found employment within six months of graduation. Fromthis, it is seen that acquisition of vocational skills creates employment for the beneficiaries. Therefore when applicants of varying degrees acquire skills, there is a tendency for them to get employed. The self-employed can be entrepreneurs or managers of small scale enterprises creating jobs for themselves and others.
Hypothesis II (H02) – (Government Employment Training Programmes)
Government at different levels, local, state and federal try to address unemployment problem by setting up programmes to reduce unemployment problem or alleviating it. Emeh, Nwanguma and Abaroh (2012) in their study which focus on youth development empowerment programme in Lagos State of Nigeria, disclosed that 70.4 percent of their respondents agreed that government employment programmes help in reducing unemployment in the country. The same study mentions that past government programmes such as carried out by Community Bank, Directorate of Food, Roads and Rural Infrastructure(DFFRI),People Bank, Better Life for Rural Women and Family Support Programme are some of the projects that helped to reduce unemployment in the country, proving that government programmes do indeed help in reducing unemployment problem.
Hypothesis III (H03) – Acquired Managerial Skills
Partnership can be regarded as a contract between two or more persons who agree to pool talent andmoney and share profit or losses.
Some individuals may not have talent to be self-employed nor do they have sufficient money capital to be on their own. Such individuals usually form partnership with some other individuals with varying skills in order to have a synergy effect on the business. At times it could be for the needed capital for the business; some individuals who have some capital may team up with partners that have the technical know -how. Whatever the reasons for such individuals partnering together, the purpose is to establish a business and employ people who will work in such a business entity.
Partnership among individuals leads to establishment of business ventures and when this happens, it leads to employment creation opportunities.With the current unemployment situation bedeviling the economy of the country, it is necessary to investigate business partnership with a view of generating employment. Partnership therefore allows individuals who lack the required skills or capital, to set up business ventures with other partners who possess those things the other partner’s lack.
Hypothesis IV (H04) – Acquired technical skills from family business
Past studies have shown that entrepreneurs who received inheritance are more likely to remain in business and their resources also substantially high (Schafer & Talavera, 2006). By extension such businesses that still exist retain their employees, and at times increase the number of their employees thereby creating employmentopportunities. For instance, Schafer & Talavera (2006), examined the inheritance data of a sample of US individuals and found out, through the inheritance data of 1982 and 1983 that those individuals who received inheritances were those who remained in business. In the same study, it was discovered that inheritance exerts a significantly positive effect on the survival probability of small scale businesses indicating that the reception of the inheritance allows entrepreneurs to overcome the problem of under -capitalization. The survival of business indicates that such businesses are still operational and therefore create employment.
From the above, business inheritance create employment. When businesses are inherited by younger generations, the employment status is not only maintained, its gives room for the creation of employment opportunities. In the face of chronic unemployment situation in the country, the need to investigate the business inheritance in order to create employment becomes imperative.
1.6 Significance of the Study
This study is significant in many ways. When our teeming unemployed non-graduates and graduates are employed through entrepreneurial development programmes the rate of unemployment in the country might reduce significantly as against the rate of 23.9 percent (NBS, 2011). Also, the employment of these applicants through entrepreneurship programmes would not only reduce unemployment rate, it would also increase aggregate demand in the economy and also improve their standard of living (Sotunde, Obasan, Saleko, Oni & Oduwole, 2011). With increase in aggregare demand in the economy, the need for supply to meet the increase in demand might arise requiring the employment of factors of production, including labour. Findings of a study of this nature should have the capacity to trigger additional research work and provide guidelines to policy makers.
1.7 Justification for the Study
The high rate of unemployment (23.9 percent, NBS 2011) in the country is a strong reason for carrying out this study. The high rate of non-graduate and graduate unemployment among the unemployed labour force is worrisome. For instance, Aigbokhan (2000) reported in Akintoye (2008) that graduate unemployment rate was only about 1 percent in 1974 but rose to 4 percent in 1984. Between 1992 and 1997 it suddenly rose to 32 percent as reported by Dabalan et al (2000) in Akintoye (2008). By 2008, Yoloye cited in Egunsola, Dazala and Daniel (2012) noted that this graduate unemployment had hit 71.4 per cent. Just as the rate of graduate unemployment has been rising so also the rate of unemployment among the people of basic education has also been rising. For instance, it rose from the rate of 76.8 percent in 1974 to 80.6 per cent in 1978. This means that the unemployment rate, of both the graduates and non-graduates, has been rising over the years in spite of the entrepreneurship development programmes aimed at addressing the problem of unemployment in the country.
This has brought concern to all the stakeholders: the government, the operators and the affected citizens. This is why there is a need to revisit these programmes with a view of proffering solutions for them to realize their primary objective of providing employment.
1.8 Scope of the Study
The scope of this study is restricted to small and medium scale enterprises (SMEs) in Oyo state, Nigeria. The target population of this study is 4000 SMEs. These are the registered small and medium scale enterprises in Oyo state (NASMEs). The stratified sampling technique was used for the selection of the local government areas of the study. Primary source of data was used through the use of questionnaire. The study covered 26 years (1987-2012). This study considered Oyo state; being an old established state in Nigeria. Also, the selection of these local government areas was based on their urban nature as well as their spread across the three senatorial districts study in Oyo state (Adeoti, 2009;Oyostate.gov,ng,2015).
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