CAPITAL COST AND SUSTAINABILITY OF SMALL AND MEDIUM-SCALE ENTERPRISES (SMEs) IN NIGERIA
Keywords:
SMEs, Cost of Capital, firm profitability, start-up businesses, SMEs’ financing
Abstract
This study conceptually examines Small and Medium Enterprises (SMEs) funding issues, particularly in emerging nations using Nigeria as a case study. It analyses institutional barriers to funding small startup businesses, such as the high cost of capital, inadequate collateral and weak legal structures. It emphasizes the deficiencies they face regarding high maintenance costs, poor managerial experience, high competition from foreign firms, Government’s inability in financing small and medium firms for them to attain their full capacity, weak Policies, changes in unstable tax tariff, and finally suggesting ways that can improve finance access for small and medium firms. The study recommends that individuals should acquire the necessary knowledge and skills pertaining to their chosen business endeavor through participation in entrepreneurial training programs, that government should promote the enhancement of SMEs capabilities through the localization of supply chains, encourage effective leadership at the highest organizational level and should be encouraged by the localization of value creation by actively engaging with SMEs. It also recommended that the government should increase the campaigns of elucidating the significance of taxation in fostering the growth of nations, while concurrently providing assistance to small and medium firms in comprehending the tax legislation in Nigeria.
Downloads
Download data is not yet available.
References
Abbasi, W. A., Wang, Z., & Abbasi, D. A. (2017). Potential sources of financing for small and medium enterprises (SMEs) and role of Government in supporting SMEs. Journal of Small Business and Entrepreneurship Development, 5(2), 39-47.
Abimbola, O. A. & Kolawole, O. A. (2017). Effect of working capital management practices on the performance of small and medium enterprises in Oyo State, Nigeria. Asian Journal of Economics, Business and Accounting, 3(4), 1-8. doi:10.9734/AJEBA/2017/35237.
Abusomwan, S. O., Liberty, N., & Arodoye, L. N. (2017). Small and medium enterprises’ financing and dynamics of gross fixed capital formation: evidence from Nigeria. International Journal of Business Finance, 15(1), 90-99.
Adda, G. (2020). Financial management practices and growth of small and medium-scale enterprises: The case of Kassena-Nankana West District. Research in business and management, 7(2), 39-58.
Addo (2017). The effect of financial management practices on the financial performance of top 100 small and medium medium enterprises in Kenya.MBA Research paper, University of Nairobi, Kenya.
Akanni, L. F., Bolanta, O. R., Wahab, B. H., Amin, A. M., & Kamaluddeen, S. A. (2021). Challenges of Small and Medium Scale Enterprises in Nigeria. Evidence from Selected SME in Kwara State.
Amarteifio, E. A., & Agbeblewu, S. (2017). Level of education, business experience and small and medium enterprise performance in the Accra Metropolis of Ghana. International Journal of Multidisciplinary and Current Research, 5, 1-8.
Aremu, A. Y., & Muhammad, N. B. (2022). The Obstacle Challenging SMEs Performance in Ogun State, Nigeria. International Journal of Information Systems and Informatics, 3(1), 1-14.
Ayyagari, M., Demirgüç-Kunt, A., & Maksimovic, V. (2017). SME finance. Available at SSRN 3070705.
Bamidele, R. (2012) “Small and Medium Scale Enterprises (SMEs): Panacea for Economic Growth in Nigeria” Journal of Management and Corporate Governance, 4, 83-99
Banji, O. O. (2010) SME: Issues, Challenges and Prospects; Presentation at FSS 2020 International Conference.
Bereprebofa, D., Sinebe, M.T. & Akpotu, J.E. (2023). Working Capital Management and Firms’ Financial Performance: Evidence from Listed Nigerian Firms. GPH-International Journal of Business Management, 6 (11), 01-11.
Chinaemerem, O. C. & Anthony, O. (2012) Impact of Capital Structure on the Financial Performance of Nigerian Firms; Arabian Journal of Business and Management Review1 (12), 139-195.
Chidiebere Chibuike (2023). An evaluation of the contribution of Small and Medium Enterprises (SMEs) to the Economic Development in Nigeria. Retrieved from https://www.linkedin.com/pulse/evaluation-contribution-small-mediums-scale-smes-nigeria-chibuike#:~:text=According%20to%20the%20National%20Bureau%20of%20Statistics%2C%20SMEs%20contribute%20about,%2C%20and%20retail%2C%20among%20others.
Dawuda, A. & Azeko, I. (2015). An assessment of financial records keeping behavior of small-scale businesses in Ghana: A case study of Bolgatanga Municipality. International Journal of Finance and Accounting, 4(3), 187-194.
Eferakeya, I., Enakirerhi, L. I., & Erhijakpor, A. E. (2022). Do SMEs Engage in Capital Budgeting Practices and Risk Analysis Techniques in Nigeria? Exploring the Evidence. Telematique, 5766-5783.
Etuk, R. U., Etuk, G. R., & Michael, B. (2014). Small and medium scale enterprises (SMEs) and Nigeria's economic development. Mediterranean Journal of Social, 5(7), 656-662
Gbandi, E. C., & Amissah, G. (2014). Financing options for small and medium enterprises (SMEs) in Nigeria. European Scientific Journal January.
Gyimah, K. N., Akande, J. O., & Muzindutsi, P. F. (2022). Lending methodologies and SMEs access to finance in Ghana; the mediating role of credit reference information. Cogent Business & Management, 9(1), 2143075.
Ibrahim, M., & Ibrahim, A. (2015). The effect of SMEs’ cost of capital on their financial performance in Nigeria. Journal of finance and accounting, 3(1), 8-11.
Igwe, A., Amaugo, D., Ogundana, J., Egere, G.& Anigbo, O. (2018). Factors affecting the investment climate, SMEs productivity and entrepreneurship in Nigeria. European Journal of Sustainable Development, 7(1), 182-191.
Khaled, A. M. A. & Samer, F. O. (2013) Impact of Cost of Capital, Financial Leverage and the Growth Rate of Dividend on Return on Investment. An Conceptual Study of Amman Stock Exchange; International Journal of Academic Research in Economics and Management Sciences, 2 (4), 59-69
Lemi, K., Megersa, R.& Bogale, M. (2020). The effect of financial management practice on entrepreneurial performance of micro, small and medium scale enterprises in West Oromia. Journal of Process Management. New Technologies, 8(1), 50-64
McInnes A. N. S. (2000). Working Capital Management: Theory and Evidence From New Zealand Listed Limited Liability Companies. Thesis, Lincoln University.
Mohammed, A., Osemeke, E. C., & Ahmed, U. O. (2023). Influence of Financial Management Practices on the Performance of Women Petty Trading in Nasarawa North Senatorial District of Nasarawa State. FUDMA Journal of Accounting and Finance Research [FUJAFR], 1(1), 175-187.
Muneer, S., Ahmad, R. A.& Ali, A. (2017). Impact of financial management practices on SMEs profitability with moderating role of agency cost. Information Management and Business Review, 9(1), 23- 30. https://doi.org/10.22610 /imbr.v9i1.1593
Organisation for Economic Co‐operation and Development (OECD). (2017). Enhancing the contributions of SMEs in a global and digitalized economy. In Meeting of the OECD council at ministerial level (pp. 1-24).
OECD Publishing.OECD. (2018). Enhancing SME access to diversified financing instruments. Discussing Paper. OECD Ministerial Conference on Small and Medium-sized Enterprises, 22-23 February, Mexico.
Ogbo, A., & Nwachukwu, A. C. (2012). The role of entrepreneurship in economic development: European Journal of Business and Management 4, (8), 95-105.
Ogechukwu, A.D. (2011). The role of small-scale industry in national development in Nigeria. Universal Journal of Management and Social Sciences 1(1), 23-41.
Olatunji, T. E., (2013). The Impact of Accounting System on The Performance Of Small And Medium Scale Enterprises In Nigeria –A Survey of SME’s In Oyo State-Nigeria. International Journal of Business and Management Invention, 2, 9, 13-17.
Peters, G. T., & Imo, T. O. (2023). The Effect of Cost of Capital on Firm Performance of Listed Construction Firms in Nigeria. African Journal of Business and Economic Development, 3 (1) 148-162 ISSN, 2782, 7658.
Sinebe, M.T. (2020). Corporate Distress and Firm Management: A Conceptual Review. AFAR Multidisciplinary Journal of management Sciences (MJMS). 2 (2) 131-141.
Sinebe, M. T. & Henry, P. O. (2023). Evaluating Return on Investment as A Tool for Investment Decisions Making and Firm’s Performance. University Of Port Harcourt Business School, African Journal of Accounting, Finance and Marketing 7 (1) 96-106.
Sinebe, M.T. (2023a). Corporate Characteristics Effect on Firm Growth: Evidence from Listed Non- Financial Firms in Nigeria. Middle European Scientific Bulletin, 34, 35-42.
Sinebe, M.T (2023b). Small and Medium Scale (SMES) Financial Management and Performance: A Case Study of SMES In Asaba Metropolis in Delta State of Nigeria. Western Delta University, Oghara, Delta State, Journal of Social and Administrative Sciences Studies, 7 (1) 12-21.
Taiwo, M. A., Ayodeji, A. M., & Yusuf, B. A. (2012). Impact of small and medium enterprises on economic growth and development. American Journal of Business and Management, 1(1), 18-22.
Twesige, D., & Gasheja, F. (2019). Effect of tax incentives on the growth of small and medium-sized enterprises (SMEs) in Rwanda: A case study of SMEs in Nyarugenge district. Journal of Accounting and Taxation, 11(5), 89-98.
Vélez-Pareja, T. & Tham I. (2021). An Introduction to the Cost of Capital. in SSRN Electronic Journal in SSRN Electronic Journal. 16 (1), 27-39.
Abimbola, O. A. & Kolawole, O. A. (2017). Effect of working capital management practices on the performance of small and medium enterprises in Oyo State, Nigeria. Asian Journal of Economics, Business and Accounting, 3(4), 1-8. doi:10.9734/AJEBA/2017/35237.
Abusomwan, S. O., Liberty, N., & Arodoye, L. N. (2017). Small and medium enterprises’ financing and dynamics of gross fixed capital formation: evidence from Nigeria. International Journal of Business Finance, 15(1), 90-99.
Adda, G. (2020). Financial management practices and growth of small and medium-scale enterprises: The case of Kassena-Nankana West District. Research in business and management, 7(2), 39-58.
Addo (2017). The effect of financial management practices on the financial performance of top 100 small and medium medium enterprises in Kenya.MBA Research paper, University of Nairobi, Kenya.
Akanni, L. F., Bolanta, O. R., Wahab, B. H., Amin, A. M., & Kamaluddeen, S. A. (2021). Challenges of Small and Medium Scale Enterprises in Nigeria. Evidence from Selected SME in Kwara State.
Amarteifio, E. A., & Agbeblewu, S. (2017). Level of education, business experience and small and medium enterprise performance in the Accra Metropolis of Ghana. International Journal of Multidisciplinary and Current Research, 5, 1-8.
Aremu, A. Y., & Muhammad, N. B. (2022). The Obstacle Challenging SMEs Performance in Ogun State, Nigeria. International Journal of Information Systems and Informatics, 3(1), 1-14.
Ayyagari, M., Demirgüç-Kunt, A., & Maksimovic, V. (2017). SME finance. Available at SSRN 3070705.
Bamidele, R. (2012) “Small and Medium Scale Enterprises (SMEs): Panacea for Economic Growth in Nigeria” Journal of Management and Corporate Governance, 4, 83-99
Banji, O. O. (2010) SME: Issues, Challenges and Prospects; Presentation at FSS 2020 International Conference.
Bereprebofa, D., Sinebe, M.T. & Akpotu, J.E. (2023). Working Capital Management and Firms’ Financial Performance: Evidence from Listed Nigerian Firms. GPH-International Journal of Business Management, 6 (11), 01-11.
Chinaemerem, O. C. & Anthony, O. (2012) Impact of Capital Structure on the Financial Performance of Nigerian Firms; Arabian Journal of Business and Management Review1 (12), 139-195.
Chidiebere Chibuike (2023). An evaluation of the contribution of Small and Medium Enterprises (SMEs) to the Economic Development in Nigeria. Retrieved from https://www.linkedin.com/pulse/evaluation-contribution-small-mediums-scale-smes-nigeria-chibuike#:~:text=According%20to%20the%20National%20Bureau%20of%20Statistics%2C%20SMEs%20contribute%20about,%2C%20and%20retail%2C%20among%20others.
Dawuda, A. & Azeko, I. (2015). An assessment of financial records keeping behavior of small-scale businesses in Ghana: A case study of Bolgatanga Municipality. International Journal of Finance and Accounting, 4(3), 187-194.
Eferakeya, I., Enakirerhi, L. I., & Erhijakpor, A. E. (2022). Do SMEs Engage in Capital Budgeting Practices and Risk Analysis Techniques in Nigeria? Exploring the Evidence. Telematique, 5766-5783.
Etuk, R. U., Etuk, G. R., & Michael, B. (2014). Small and medium scale enterprises (SMEs) and Nigeria's economic development. Mediterranean Journal of Social, 5(7), 656-662
Gbandi, E. C., & Amissah, G. (2014). Financing options for small and medium enterprises (SMEs) in Nigeria. European Scientific Journal January.
Gyimah, K. N., Akande, J. O., & Muzindutsi, P. F. (2022). Lending methodologies and SMEs access to finance in Ghana; the mediating role of credit reference information. Cogent Business & Management, 9(1), 2143075.
Ibrahim, M., & Ibrahim, A. (2015). The effect of SMEs’ cost of capital on their financial performance in Nigeria. Journal of finance and accounting, 3(1), 8-11.
Igwe, A., Amaugo, D., Ogundana, J., Egere, G.& Anigbo, O. (2018). Factors affecting the investment climate, SMEs productivity and entrepreneurship in Nigeria. European Journal of Sustainable Development, 7(1), 182-191.
Khaled, A. M. A. & Samer, F. O. (2013) Impact of Cost of Capital, Financial Leverage and the Growth Rate of Dividend on Return on Investment. An Conceptual Study of Amman Stock Exchange; International Journal of Academic Research in Economics and Management Sciences, 2 (4), 59-69
Lemi, K., Megersa, R.& Bogale, M. (2020). The effect of financial management practice on entrepreneurial performance of micro, small and medium scale enterprises in West Oromia. Journal of Process Management. New Technologies, 8(1), 50-64
McInnes A. N. S. (2000). Working Capital Management: Theory and Evidence From New Zealand Listed Limited Liability Companies. Thesis, Lincoln University.
Mohammed, A., Osemeke, E. C., & Ahmed, U. O. (2023). Influence of Financial Management Practices on the Performance of Women Petty Trading in Nasarawa North Senatorial District of Nasarawa State. FUDMA Journal of Accounting and Finance Research [FUJAFR], 1(1), 175-187.
Muneer, S., Ahmad, R. A.& Ali, A. (2017). Impact of financial management practices on SMEs profitability with moderating role of agency cost. Information Management and Business Review, 9(1), 23- 30. https://doi.org/10.22610 /imbr.v9i1.1593
Organisation for Economic Co‐operation and Development (OECD). (2017). Enhancing the contributions of SMEs in a global and digitalized economy. In Meeting of the OECD council at ministerial level (pp. 1-24).
OECD Publishing.OECD. (2018). Enhancing SME access to diversified financing instruments. Discussing Paper. OECD Ministerial Conference on Small and Medium-sized Enterprises, 22-23 February, Mexico.
Ogbo, A., & Nwachukwu, A. C. (2012). The role of entrepreneurship in economic development: European Journal of Business and Management 4, (8), 95-105.
Ogechukwu, A.D. (2011). The role of small-scale industry in national development in Nigeria. Universal Journal of Management and Social Sciences 1(1), 23-41.
Olatunji, T. E., (2013). The Impact of Accounting System on The Performance Of Small And Medium Scale Enterprises In Nigeria –A Survey of SME’s In Oyo State-Nigeria. International Journal of Business and Management Invention, 2, 9, 13-17.
Peters, G. T., & Imo, T. O. (2023). The Effect of Cost of Capital on Firm Performance of Listed Construction Firms in Nigeria. African Journal of Business and Economic Development, 3 (1) 148-162 ISSN, 2782, 7658.
Sinebe, M.T. (2020). Corporate Distress and Firm Management: A Conceptual Review. AFAR Multidisciplinary Journal of management Sciences (MJMS). 2 (2) 131-141.
Sinebe, M. T. & Henry, P. O. (2023). Evaluating Return on Investment as A Tool for Investment Decisions Making and Firm’s Performance. University Of Port Harcourt Business School, African Journal of Accounting, Finance and Marketing 7 (1) 96-106.
Sinebe, M.T. (2023a). Corporate Characteristics Effect on Firm Growth: Evidence from Listed Non- Financial Firms in Nigeria. Middle European Scientific Bulletin, 34, 35-42.
Sinebe, M.T (2023b). Small and Medium Scale (SMES) Financial Management and Performance: A Case Study of SMES In Asaba Metropolis in Delta State of Nigeria. Western Delta University, Oghara, Delta State, Journal of Social and Administrative Sciences Studies, 7 (1) 12-21.
Taiwo, M. A., Ayodeji, A. M., & Yusuf, B. A. (2012). Impact of small and medium enterprises on economic growth and development. American Journal of Business and Management, 1(1), 18-22.
Twesige, D., & Gasheja, F. (2019). Effect of tax incentives on the growth of small and medium-sized enterprises (SMEs) in Rwanda: A case study of SMEs in Nyarugenge district. Journal of Accounting and Taxation, 11(5), 89-98.
Vélez-Pareja, T. & Tham I. (2021). An Introduction to the Cost of Capital. in SSRN Electronic Journal in SSRN Electronic Journal. 16 (1), 27-39.
Published
2023-11-16
How to Cite
Akan, D. C., Sinebe, M. T., & Bereprebofa, D. (2023). CAPITAL COST AND SUSTAINABILITY OF SMALL AND MEDIUM-SCALE ENTERPRISES (SMEs) IN NIGERIA. GPH-International Journal of Social Science and Humanities Research, 6(11), 13-24. https://doi.org/10.5281/zenodo.10142271
Section
Articles
Copyright (c) 2023 Akan, David Chucks, Sinebe, M.T., Bereprebofa, Dudutari
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Author(s) and co-author(s) jointly and severally represent and warrant that the Article is original with the author(s) and does not infringe any copyright or violate any other right of any third parties, and that the Article has not been published elsewhere. Author(s) agree to the terms that the GPH Journal will have the full right to remove the published article on any misconduct found in the published article.
