Infrastructure deficiency and the performance of small- and medium-sized enterprises in Nigeria's Liberalised Economy

Abstract

ORIENTATION: The paper investigates the situation facing SME's in Nigeria, who have to function in an environment with depleted infrastructure. RESEARCH PURPOSE: To examine the effects of infrastructure deficiency on the performance of manufacturing small and medium sized enterprises in Nigeria. MOTIVATION FOR THE STUDY: Low budgetary allocation by the Nigerian government toward investment and rehabilitation of infrastructure in favor of attempts to conform to the tenets of trade liberalisation, has created a situation where basic infrastructure provision is a huge challenge in the creation of SME's. RESEARCH DESIGN, APPROACH AND METHOD: A longitudinal approach was followed, where a survey was conducted amongst 500 SME's in Nigeria. To complement this, semi-structured interviews were conducted in 2007 and 2011 respectively. MAIN FINDINGS: The deficiency in infrastructure negatively impacts the profitability and performance of SMEs, due to the high cost incurred by SMEs in the self-provision of infrastructure and distribution of finished goods. Furthermore, despite the successful privatisation of electricity production in November 2013, there is still no significant improvement in the power supply in Nigeria. However, the government has embarked on road rehabilitation to ease the transportation of goods and services. PRACTICAL/MANAGERIAL IMPLICATIONS: The study uncovers the practical realities of the challenges faced by SME's operating in an environment with insufficient infrastructure, which is typical of much of the developing world. CONTRIBUTION/VALUE ADD: The study highlights the necessity of sound infrastructure provision as a key factor to the development of SME's.