1.0 INTRODUCTION 1.1 BACKGROUND OF THE STUDY: The need for the monetary and fiscal policies had always existed, though not really recognized in the banking system and in the economy at large. The increase rate of money circulation in the economy, due to the rapied growth of commerce and industry has made the monetary authori3es (central Bank of Nigeria) increasingly Interested in making an effort to have money supply and credit conditions controlled, so as to maintain a relative economic stability. And so, the central bank ofNigeriawas empowered to carryout the monetary formulation and execution in consultation with the federal ministry of finance. Also, the need to generate revenue for the increase of investment and the pattern of expenditure for the purpose of influencing economic activities glares for the formulation of fiscsla policy. The economy has also witnessed a lot of economic depression, especially the great depression of 1930. as they continued having an unbalanced budget or the budget adding to the cyclical flunctuations, there was the need for these economic ills to be corrected and the fissal policy succeeded in correcting these ills of the economy. The fact was further influenced by the emergence of growth and stability concept. In othr words, if any economy remains in equilibrium with resources only partially employed, something must be done to unemployment. Therefore, to increase this level, employment could be done in two ways: it could be either directly tackling the problem by employing more workers or directly tackling it by offering inducement to produce or to increase instrument. Indeed, the monetary and fiscal policies direct the total repentance on the economy. Their effectiveness as stabilization or efficient tools remains an unsettled issue among economists. They have been the efficient tools of economic stability. According to John Orji in his book titled “Element of banking” he listed measures to be applied in using fiscal policy to solve economic problems or make the economy stable as thus: 1. Fiscal policy and Recession: When aggregate demand for goods and services, the level of employment and prices are generally low, the economy is said to be faced with recession. In order to get the economy out of recession, the government can apply fiscal policy to solve the problem by taking the following objectives. Reduction in taxation, increase in government expenditure, grants to industries and banks. 2 Fiscal Policy and Inflation: Inflationary pressure is experienced when the aggregate demand is higher them aggregate supply the price level tend to rise, thereby making the banks to borrow. The resulting inflation can be controlled by fiscal policy by employing the following methods: increase in taxation, reduction in government expenditure, reduction of financial grants to firms etc. 1.2 STATEMENT O PROBLEMS There has been instability in the economic system consing**** from flow of money. There has never been sufficient time required for their policy weapon on such key economic variable’s which is of crucial importance as an instrument of economic stabilization. There has been situations where there is either excess or shortage which has often affected unwarranted unbalances or destabilization in the economy. Such instability or unbalance has never encouraged economic growth. In other words, monetary and fiscal policies in most cases, have been retarded which result in unbalance in the economy. 1.3 PURPOSE OF THE STUDY In view of the background, the policies aimed at maintaining economic stability, therefore this work aims specially to achieve the following objectives: 1 To examine the monetary and fiscal policies and ascertain how effective they have been in making poor conditions of the rural areas fairs. 2 To know why despite the monetary and fiscal policies formulated for economic development, the rural areas are still under-developed and under-utilized for much needed economic transformation of the country. 3 To ascertain whether rural dwellers are included in the various policies mapped out yearly, by the government vice central banks, commercial banks and other financial institutions. 4 To determine why there should still be unemployment in the economy, despite the existence of monetary and fiscal policies 5 To ascertain why monetary and fiscal policies as an instrument of economic stabilization. 6 To indemnity the country economic problem with a view to offer lasting solutions to them. 1.4 RESEARACH QUESTION The research questions include: 1 Is monetary and fiscal policies really the efficient tools to economic stability? 2 Do monetary and fiscal policies contribute in growth of the country economy 3 Has there been unbalance in he economy due ot monetary and fiscal policies being retarded. 4 Does the absence of monetary and fiscal policies do any harm to the economy? 5 Do monetary and fiscal policies contributes positively towards improving an developing of rural areas.? RESEARCH HYPOTHESIS 1 Ho: There has been instability in the economic system arising form flow of money and credit condition before the introduction and fiscal policies. 2. HA: There has not been instability in the economic system arising form flow of money and credit condition before the introduction and fiscal policies. 3 Ho: There has been unbalance in the economy resulting from m monetary and fiscal policies being retarded 4 HA: There has not been unbalance in the economy resulting from m monetary and fiscal policies being retarded 1.5 SIGNIFICANCE OF THE STUDY The There has been unbalance in the economy resulting from m monetary and fiscal policies being retarded Cannot be over emphasized in the management of the economy. This study is of great importance to the society. So it will be deliberating on the need for a stable economy. Therefore, this study will help; 1 The government for a better budget planning so that there won’t be any suck case like shortage or excess in the economy after making the budget. 2. The financial researchers for better judgement or better decision making and implementation. 3. To bring up the need to apply the tools and to apply it correctly in the control of the economic decision making supply and economic depreciation. 4 to guide the central bank ofNigeriaand the government onhow to control the economy so as to avoid such cases as decrease of money in circulation (deflation) instead it will keep a stable economy. 5 To maintain stability in the external value of the currency using monetary policy. 6 To attain a high, rapid and sustainable economic growth 7 To maintain balance of payment equilibrium in the economy 1.6 SCOPE OF THE STUDY This research work is limited only to Nigerian economy. The limitation in the Nigerian economy is with reference to central bank of Nigeria Awka. Also the researcher went on extra mile to obtain information and statistics reasonable enough and for fiscal policies as efficient tool for economic growth and stability. 1.7 LIMITATION OF THE STUDY In carrying out this project work, the research is faced with certain limitations among which are: 1. TIME LIMIT: This is as a result of the short semester and tight academic schedule for lecture free period and weekends. 2. FINANCE LIMIT: Because of the economic situation of the country and many expenses which has been met, the researcher is faced with limited finance, also the high cost of transportation, which is the reason why one cannot reach all the possible sources of information required for the project but nevertheless, enough information or data were collected. 1.8 DEFINITION OF OPERATIONAL TERMS MONETARY POLICY: There are many definition of monetary policy as there are many writers on the topic. However, for the purpose of this study, a few definition will surface, for consideration. According to Nwakpa P.N, monetary policy are the various ways which the federal government and the central bank seek to influence the supply of credit as well as their price in order to achieve a stated described economic goal. The desired goal include, to improve the rural area and maintain healthy economy. According to John Orjih in his book titled “Elements of banking” Defined Monetary Policy as, any conscious action undertaken by the monetary authorities to change the volume, quantity, availability, cost and direction of money and credit in a given economy. He also went further to define it as the credit control measures adopted by central banks ot control the supply of money as an instrument for achieving the objectives of general economic policy. According to Okpala C.M. In his book titled “Banking in Nigefia issues and concept” defined monetary policy as: A deliberate effort by the monetary authorities (The central bank) to control the money supply and credit contributions for the purpose of cachieving certain broad economic objectives usig the following instrument tools. 1. Open Market Operation (OMO): This is an activity of buying and selling of government securities in the open market by the central bank ofNigeria. When prices rise, and there is the need to control them, the CBN sells securities to the public. These securities includes: treasury bills, government bonds, treasury certificates etc. 2 Legal reserve Ratio: This is the ratio of cash reserves that banks are required to maintain. It is the percentage of commercial bank deposits (from customers) that the central bank requires them to set aside either in an account with the central bank (cash ratio) or in approved securities that is liquid assets. 3 Discount Rate / Rediscount rate (Bank rate: This is the rate at which the central bank lend money to commercial banks, discount house, and other financial institutions (rediscount rate). 4 Liquidity Ratio: This is a method which compels the banks to spread / diversify their portfolio of liquid assets holding 5 Moral suasion: This is a credit control measure applied by the central bank ofNigeriawhich involves informal discussions with the official of commercial banks. 6 Directives: This is a method applied by the central bank in giving instructions about the credit and banking plicies that could be pursuaed by the fiannical sector for a given fiscal period. 7 Fiscla Policy: This is he means by which a government adjusts it’s spending levels and tax rates to monitor and influence a nations economy. According to the oxford Advanced Dictionnary, it defined fiscsal policy as the creation of tax structure and the determination of the amount of tax revenue and the direction of government expenditure for the purpose of attaining a specific objective such as: greater dependence on our own resources through development of the area. According to Okpala C.M in his book titled “Budgeting” the defined fiscal policy as government’s conscious attempt to client the economic activities towards achieving growth and stability. According to C.C.N Asuzu (1995), he defined fiscal policy as that part of government policy concerning the raising of revenue through taxation and other means and deciding on the level and pattern of expenditure for the purpose of influencing economic activities. These economic activities are directed towards the broad objectives of attaining economic growth and stability. 8 Economic Growth: Simply means a rise in the per-capital income of a given economy. 9 Economic stability: Means a situation characterized by stability in he price level and full employment 10 The Budget: Fiscal policy is implemented through changes in he budget. The budget is a financial statement of the sources (revenue) and uses (expenditure) of fund of the government, which is prepared by the ministry of finance for discussion and approval.
Table Of Contents
Project Abstract
Project Overview
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In a depressed country like ours, global development is entering a phase where entrepreneurship will increasingly play a more important role. There is a need for the Nigerian economy to sustain growth through sustainable access to resources, knowledge, markets, and industrialization putting a premium on innovative entrepreneurship.
There is no doubt that Nigeria is naturally blessed with entrepreneurship opportunities; yet the realization of the full potential of these opportunities has been dampened by the adoption of inappropriate industrialization policies at different times. Several policy interventions that were aimed at stimulating entrepreneurship development via small and medium scale enterprises promotion, based on technology transfer strategy, have failed to achieve the desired goals as it led to the most indigenous entrepreneurs becoming distribution agents of imported products as opposed to building in-country entrepreneurial capacity for manufacturing, mechanized agriculture and expert services (Thaddeus, 2012).
Entrepreneurship is the cornerstone and at the heart of the free enterprise economy (Popoola, 2014). Entrepreneurship is an activity that involves the discovery, evaluation and exploitation of opportunities to introduce new goods and services, ways of organizing, markets, processes, and raw materialthrough organizing efforts that previously had not existed (Shane and Venkataraman, 2000; Venkataraman, 1997).
Economic development here refers to a qualitative process that describes changes in the overall economy aiming to enhance the economic well-being of a community regardless of its size. In economic literature, economic development is frequently described as being a three-legged stool where each leg represents one economic development strategy. The first leg usually refers to business attraction; the second one to business retention and the third one to entrepreneurship development. However, because this analogy assumes the existence of equality and separation among economic development strategies, more useful analogy is that of a pyramid as Dabson (2005) pointed out.
The 2012 Global Entrepreneurship Monitor (GEM) has empirically identified Nigeria as one of the most entrepreneurial countries in the world. The study showed that 35 out of every 100 Nigerians (over a third) are engaged in some kind of entrepreneurial activity or the other. It is therefore imperative at this point in time to critically evaluate not just the principles of entrepreneurship but the practice and its crucial role in fostering economic growth and development in a developing economy like Nigeria.Entrepreneurship is not synonymous with small business. Certainly, small firms are an outstanding vehicle for individuals to channel their entrepreneurial ambitions. The small firm is an extension of the individual in charge (Lumpkin and Dess 1996). However, entrepreneurship is not restricted to persons starting or operating an (innovative) small firm. Enterprising individuals in large firms, the so-called ‘entrepreneurs’ or ‘corporate entrepreneurs’, undertake entrepreneurial actions as well. Nigeria’s GDP growth rate of between 6 – 8 percent in the last ten years shows the country is one of the fastest growing economies in the world. The implication is that any good business established is capable of generating unusual and above average returns. It is one of the few countries with the highest returns on investment anywhere in the world- money, market, capital market, mutual funds, real estate and property, entrepreneurship, etc (Popoola, 2014). Furthermore, for entrepreneurs to play an appropriate role, the role of the state remains important; if not more so than before. Strong states, as regulators and gatekeepers, play a particularly vital role. In the absence of appropriate ‘rules of the game’, entrepreneurship may result in undesirable social outcomes, including corruption, crime, speculation and financial crises, and may worsen the vulnerabilities of people during natural disasters (UN Report, 2011).
1.2 STATEMENT OF THE PROBLEM
The present state of inflation in Nigeria affects, income earners especially those with fixed income and very poor ones in the society find it difficult to match with the increasing prices of goods and services. This continues as long as price rises and there is fall in the purchasing power. Standard of living must be emphasized. More values of money is being required by individuals for the purpose of desired products during an inflation period as opposed to normal economic situations. This brings about decline in the purchasing power. This results in a problem as the ability of individuals to purchase “products” in the light of continued rising prices become reduced.
Also of importance is the issues of inflation giving rising to the different society wish income as the distinction factor. There is a large gap between income of fixed income earners and profit earner. This is because the income profit earners rise with the rising prices of products as opposed to those of fixed income earners.
Promoter of small and medium enterprises are people with ideas, dreams and imaginations but majority of the entrepreneurs lack the needed financial means to translate their dreams and aspirations into concrete that will earn them the desire wealth.In spite of the roles play by SMEs in the Nigeria economy, the sub-sector has continued to suffer from the other numerous of problems. The main problem of this study is to identify the issues and problems that militate against entrepreneurship development in Nigerian and the prospects
1.3 OBJECTIVES OF THE STUDY
The major objective of this study is to examine the development of entrepreneurship in a depressed economy, the researcher intend to cross-examine the following sub objectives;
i) Identify the problems that militate against sustainable entrepreneurship development in Nigeria.
ii) Examine critically the sources of these challenges.
iii) Examine the prospects of entrepreneurship development in the nation’s economy.
iv) Proffer solutions to these issues and problems that militate against entrepreneurship development in Nigerians
1.4 RESEARCH HYPOTHESES
The following null and alternate hypotheses were formulated by the researcher to guide the study;
H0:there is no existing relationship between adequate provisions of capital to the entrepreneurs and the success of entrepreneurship development in Nigeria.
H1:there is an existing relationship between adequate provisions of capital to the entrepreneurs and the success of entrepreneurship development in Nigeria.
H0:there is no existing relationship between socio-economic, political and environmental factors and the development of entrepreneurship in Nigeria.
H2:there is an existing relationship between socio-economic, political and environmental factors and the development of entrepreneurship in Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
This study would be of immense benefit to both the financial institution and small and medium sale industries in Nigeria, as well as the counties policy makers who have desire to place Nigerian on a sound economic and industrial footing. When this research is concluded, it would have contributed to the study of knowledge already pilling on the issue of constraints on growth and support of entrepreneur development, which cannot be over lookedin a depressed nation like Nigeria. Since it is also the aspiration of our national policy on education to train our youths to be self-reliant or self-employed after school, this study will therefore stimulates their zeal to involve in the establishment of SMEs. Finally, the findings of this study will serve as a reference material to scholars who intend to embark on a project of this nature.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
This study centers on the development of entrepreneurship in a depressed economy, using Nigerian Association of Small-Scale Industrialists (NASSI) Enugu State Chapter as it case study. In the course of the study, the researcher encounters some constrain which limited the scope of the study;
Time factor: The time allocated to the researcher during the period of the study was limited coupled with lectures and exams.
Financial constraint: the finance at the disposal of the researcher during the course of the study wasn’t sufficient enough to run the expenses of the research work.
1.7 DEFINITION OF TERMS
Development: development is defined as the process in which someone or something grows orchanges and becomes more advanced.
Entrepreneurship:Entrepreneurship is the process of designing, launching and running a new business, which is more often than not, initially a small business, offering a product, process or service for sale or hire. The people who create these businesses are called entrepreneurs. Entrepreneurship has been described as the “capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit.
Depressed:A mental health disorder characterized by persistently depressed mood or loss of interest in activities, causing significant impairment in daily life.
Economy:An economy (from Greek οίκος – “household” and νÎμoμαι – “manage”) is an area of the production, distribution, or trade, and consumption of goods and services by different agents. Understood in its broadest sense, ‘The economy is defined as a social domain that emphasizes the practices, discourses, and material expressions associated with the production, use, and management of resources’.
Small Scale Enterprise: an enterprise with a labor size of 11-1000 workers or a total cost of not more than 50 million including working capital but excluding cost of land (Sule, 1986:207). Medium Scale Enterprise: An industry with a labor size of between 10-300 workers or a total cost of over 50 million but not more than 200 million including working capital but excluding cost of land (Clifford, 1972:85).
Business: business includes any trade, industry, professional and any occupation carried on for profit Jerome (1996:2).
Growth: According to Anyanwu (1998:300) growth refers to an increase in output as a result of bank loans invested in small and medium scale business. Ploughing back the profit into the business.
Constraints: A hindrance of business not forwarding or not prospering. Enterprises: It means any establishment engaged in production, repairs or services to satisfy human wants and make room for profits.
1.8 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study.
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