THE STRATEGIES FOR ENHANCING AND PROMOTING CAPITAL FORMATION AMONG SMALL SCALE ENTERPRISES IN NIGERIA

INTRODUCTION: Robert H. Heywood, Bruce and Graham 1997, started that capital is the money used by 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 (Czegledi, Fonger, & Reich, 2015).   He noted that the more a country uses 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 producers largely.   He listed some of these developing countries and they includes the followings:

Ghana and other West African countries

Latin American countries e.g Brazil India

North and central African countries e.g Pakistan

East and southern African countries e.g Kenya.

FC Okechukwu 1999 as an accountant, sees capital as funds (usually in the form of assets).  Contributed by the owners of the business and out residual revenue after meting expenses and outside interest (Czegledi, Fonger, & Reich, 2015).   As a result for a business that is starting operation.  All assets contributed by the owners to set up the business will be regarded as capital.

In the course of his explanation, he mentioned that Pandef sees 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.

Baruam. 1998 reports that another defends of the growth of capital formation in West African is the inequitable distrisation of income.  He noted also, that the very rich people in West Africa tends to become richer while the poor masses become poorer.   He further stated that about 10% of the population of West Africa countries control about 667% of the income again he stated that the few rich people of West African countries can heads their wealth and impound what they can seize, there by invest less in lout productive enterprises there is no sufficient capital to top the human (labour) and Natural (land) resources in West African (Carpenter, 2016).

David Begg 2002 defined capital as the stock of produced goods that contribute to the production of other goods and service.   He stated that industry and business organization needs to increase their capital stock, their machinery equipment, factory and office buildings.   He also stated that industry has to modernize its capital equipment and the new growth industries such as information technology needs to interest for future production (Carpenter, 2016).

Roy Harrod, an English Economist 1940, in his post war theories on capital, emphasized on human capital.  He defined human capital as the skill and knowledge embodied in the minds and hands of the population.

Increasing education training and experience allows workers to produce more output from the same level of physical capital.

George J. Stigler 1975, Defined capital as anything “other than a free human being” which yield valuable services over and appreciable period of times.   He believes that capital consists of all economic foods except people and perishable such s hydroelectric dams etc.  He also view capital as an accumulated fund of general productive power, past income incorporated in particular physical germs or particular forms (Bell, 2013).

1.1   GENERAL BACKGROUND OF THE SUBJECT MATTERS

The growth of small-scale enterprises in Nigeria is being disturbed 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 irresistible funds for further growth of a business organization. These problems help the researcher to undertake this study.

1.2    PROBLEMS ASSOCIATED WITH THE SUBJECT MATTER

Osotimehin et.al, observed that, there is strong correlation between the degree of poverty, hunger, unemployment, economic well-being of the citizens of countries and the degree of vibrancy of the respective country’s small-scale enterprises. He added that, Small and Medium Enterprises (SMEs) in Nigeria have not performed creditably well and hence failed to play the expected vital and vibrant role in the economic growth and development of Nigeria. The contribution of the small-scale enterprises to economic development had been widely recognized by previous researchers (Bell, 2013). However, small and medium scale enterprises are very vulnerable and their failure rate is so high that no nation can afford to ignore it. Aremu et.al, noted that, 70 percent of small-scale enterprises in Nigeria failed within the first five years of operation. Small-scale enterprises have areas of key strengths, in that relatively low skills and resources are required for start-ups but also several significant areas of weaknesses and problems, many of them are not only very weak and fragile but have little prospect of growth and development (Bevan, 2014). How do small scale enterprises get their capital to operate and expend? This study seeks to look at this.

1.3 PURPOSE OF THE STUDY

The primary purpose of this study is to examine the strategies for enhancing and promoting capital formation among small scale enterprises in Nigeria. Other purpose of this study are:

1)           To discuss these problems that hinder capital formation by the small scale enterprises in Nigeria.

2)           To emphasize on the causes for these problems in Nigeria.

3)           To suggest the strategies for promoting capital formation among small-scale enterprises in Nigeria.

1.4   SCOPE/LIMITATIONS OF THE STUDY

This problem is limited to the heritage company, Enugu.

 The findings and suggesting of this study if carried out will promote the growth of small-scale enterprises in Nigeria.

1.5 RESEARCH QUESTIONS

In order to achieve the purpose of this study, the following research questions.

1)           What are the factors that hinder capital formation among small scale enterprises Nigeria

2)           What are the strategies or wants of promoting capital formation among the small-scale enterprises in Nigeria?

1.6    DEFINITION OF TERMS

CAPITAL:  The capital as was stated in the project refers to as funds or wealth invested for further production of represents a stock of wealth which exists at a particular time; set aside for production and these stock of wealth includes: money, machines; buildings and stock of foods.

CAPITAL FORMATION:  the capital formation as used also in this project writing refers to the act of increasing the capital, stock or capital base of a company or firm or a nation.