Long Term Financing of Small and Medium Enterprises (SME) as a Veritable Tool of Economic Development Planning in Nigeria

Abstract

The study appraised the concept of economic development planning on a theoretical basis and related the analysis to economic development planning in Nigeria from 1960 to 2000. The National Development, Rolling Plans and the Structural Adjustment Programme (SAP) were carefully examined. The plans, in relation to the enormous human and material resources committed to them, were failures. The reasons for the failure include among others: a. Political instability leading to frequent changes in policies, plans, personnel and abandonment of projects, (b) The plans did not derive from a well-conceived national economic ideology or philosophy. (c) Some of the policies were inappropriate, such as public sector domination of the economy, import-substitution industrialization which relied on imported machineries and raw materials, and subsidies which were badly implemented. (d) The legal environment generally discouraged transparent businesses. (e) Fiscal indiscipline which led to serious internal and external debt problems (f) Some of the policies do not permeate the whole economy because of the existence of a large informal sector. The Financial System in Nigeria, with a focus on the Banking Industry was examined, with a view to assessing its capability of supporting a private sector driven economy. The banking industry, until the economic liberalization programme of the early 90s, relied heavily on government patronage and did not effectively support Small and Medium Enterprises (SMEs), which are effective catalysts for economic growth and development. While the urban areas have adequate banking facilities, the rural areas, where the majority of the population lives, seem to be under banked. The study concludes that the private sector should lead the country's economic revitalization programme while governments at all levels should restrict themselves to the provision of infrastructure, security and a conducive environment, especially regulatory and legal, for business to thrive. The study proposes a rudimentary economic growth model, with SMEs integrated into the petrochemical industry, providing the basic framework. However, certain reforms are essential for the model to work effectively. These include: - giving prominence to collation of statistics at all levels of society to facilitate economic planning, Investing heavily on education, including adult education, to produce the much needed quality manpower and an informed citizenry, Policy formulation should be more consultative and participatory, involving experts and major stakeholders. Further, the government should as much as possible and practicable, minimise undue external influences on domestic policies, the banking industry, especially the development banks should be restructured to effectively support the proposed growth model, the provision of basic infrastructure such as electricity, telephones, roads, and water and Investing heavily on security of life and property.