CHAPTER ONE

INTRODUCTION
1.1

Background to the Study

Research on SME problems in Nigeria have so far concentrated on variables such as
product and service development challenges, difficulties in accessing finance,
competitiveness of SMEs and government policy and intervention in the area of SME
development (Abdullah, 2013; Olumuyiwa and Mnse (2008). Whiles these variables were
studied independently, there is a relationship between other variables like the price of
energy (electric power) and an SMEs capacity to produce optimally, its sales volume and
labour cost. This study is therefore significant in drawing stakeholder attention to critical
effect of energy supply on the growth and development of SMEs in Nigeria with regards
to its profitability and competitiveness. For SMEs in particular and for national economic
development in general, the activities of electricity power providers are vital and they
need to be monitored because in the utilities industry, where fully/sufficiently
competitive environments are not achieved, the general publics interests are at risk,
either through price exploitation, or through the degradation of quality of supply and
customer services (Chau, 2009).
Since 17th century efforts was made to promoting economic growth and have focused on
the small and medium scale industries (SMIS) as the keys and the development of an
economy and manufacturing sector in general. The role of small and medium scale
industries in the overall growth and development of an economys manufacturing sector
in particular and the economy in general cannot be over emphasized. Small and medium
scale industries are indeed high potentials for development in term of employment
1

generation and wealth creation in any economy. Empirical studies have shown that the
small and medium scale industries (SMIS) have in many state has enhanced greater
employment opportunities per unit of capital invested and aided the development of local
technology. This explains the deep interest which developing nation has shown in the
promotion of small and medium scale industries since the 1970s.
Moreover, the potentials of small and medium scale industries in contributing
substantially to the economic growth and development of Nigeria has been hampered by
various constraints, inducing long term capital inadequate financing unavailability of
information for potential investors, poor management practices and low entrepreneurial
skill, over bearing regulatory and operational environmental, unfavorable tariff policy and
infrastructural deficiencies such as inadequate power supply.
These constraints also limit the performance of small and medium scale industries in
Nigeria. Although, it is a widely held view that the availability of credit as the most
critical to the performance of small and medium scale industries (SMIS), but some
studies have shown that a large number of small and medium scale industries fail because
of nonfinancial reasons such as infrastructural deficiencies (Liedhorm et al 1994). One of
the infrastructural facilities affecting the performance of the SMIS in Nigeria is power
supply (electricity). Due to inadequate provision of power supply constitutes one of the
greatest constraints in SMIS development. The current situation whereby each investor is
too provide electricity is, to say the least, tasking to the SMIS investors who generally
lacks adequate capital for the business and the result of this is low return on investment
due to high operations cost. Therefore, adequate power supply is necessary to ensure cost
effectives investments in small and medium scale industries (Soludo, 2005).

The role of electricity in Nigerias economy is prodigiously significant for growth and
development. The reliable supply of electricity to the SMEs is indeed an important
contributor towards the sustenance of Nigerias middle income status (Ofosu-Ahenkorah,
2008). The accomplishment of this mission is crucial for many reasons.
Electricity is the main driver for industrial development. Thousands of industries in
Nigeria use hydro-electric power for production, storage and distribution. Electricity
serves as raw material for most small businesses (Watson, Viney and Schomaker, 2002).
Electricity is used in every home for domestic purposes and to enhance quality of life.
Incidentally, in Nigeria, electricity as an essential service enjoys protection from
competition and consumers really have little or no choice (Chau, 2009; Watson et al.,
2002). Economically, this implies that if there are difficulties along the supply chain of
electricity, then the nations growth and development will be vulnerable. Secondly, the
interests of the general public, especially those who rely significantly on electricity, will
be put to risk through price hikes and degradation of quality of supply and customer
service (Chau, 2009). A study of the effect of power fluctuation on the profitability and
competiveness of SMEs is therefore a crucial and necessary step for informed
government action on energy. Thus, the research study is based on effect of electricity
supply on Small and Medium Enterprises in Nigeria.
1.2

Statement of the Problem

Small and medium scales industries in both developed and underdeveloped nations play
an important role in the process of economic development and industries.
In spite of the relevance of the small and medium scale industries to Nigeria economy
and industrial development, on that sector faces a lot of problems. Although there are
3

various factors affecting the performance of small and medium scale industries sub sector
ranging from inadequate capital to unfavorable tariff policy, however, the poor state of
power supply in Nigeria is one of the significant factors militating against the
performance of small and medium scale industries. The equality and quantity of a
countrys power supply determines its ability to create competitive industries. Since the
performance of SMIS in any state is greatly influenced by the electricity supply. Given
the pathetic state of power supply in Nigeria it is no wonder that the contribution of the
development the state, manufacturing sector and the economy in general is very
negligible or unsupported by the government.
An overview of the performance of the small and medium scale industries in Nigeria
shows that past policies made limited impact on the sector for example, it is estimated
that SMIS account for about 80 percent of the total industries employment in Nigeria, but
only contribute 15-20 percent of total manufacturing output. Power supply has remained
unreliable and power outage load shedding and rationing have become very frequent.
Power supply had been erratic and unreliable that many businesses have resorted to
purchasing private generators at prohibits. The substantial investment in private
generating plants is estimated to be of capacity of over 250mm, which is almost half of
power holding company of Nigeria (PHCN) available capacity.
1.3

Objective of the Study

The main objective of this research work is for the effect of electricity supply on Small
and Medium Enterprises in Nigeria. The specific objectives of the study are:
i.

To examine the effect of power supply on the performance of small and medium
scale industries in Nigeria.
4

1.4

ii.

To determine whether adequate power supply will enhance sustainable growth of

iii.

SMEs in Nigeria.
To identify the problems that might be against the effectiveness of small and

iv.
v.

medium scale industries in Nigeria.

To identify the role of present Government policy on SMEs Growth.
To identify the role of SMEs on the Nigerian economy

Relevant Research Questions

The study shall propose the following tentative research questions

1.5

i.

What effect does power supply have on the performance of small and medium

ii.
iii.

scale industries in Nigeria?

Will adequate power supply enhances sustainable growth of SMEs in Nigeria?
Are there identifiable problems that might be against the effectiveness of small

iv.
v.

and medium scale industries in Nigeria?

Are there identifiable roles of present Government policy on SMEs Growth?
Are there identifiable roles of SMEs on the Nigerian economy?

Relevant Research Hypotheses

Hypothesis One
H0:

Power supply does not have effect on the performance of small and medium scale
industries in Nigeria.

H1:

Power supply has effect on the performance of small and medium scale industries
in Nigeria.

Hypothesis Two
H0:

Adequate power supply will not enhances sustainable growth of SMEs in Nigeria.

H1:

Adequate power supply enhances sustainable growth of SMEs in Nigeria.

5

Hypothesis Three

1.6

H0:

Present Government policy does not enhance SMEs growth in Nigeria.

H1:

Present Government policy enhances SMEs growth in Nigeria.

Significance of the Study

This study is significant of selected growths. It will add to the available literature on the
study area. Power supply is a problem to the state government and its citizens. From
experiences our various industries, there is no doubt that the small and medium scale
industries over the year have been at the receiving end of the economic environment in
the state. In fact, the contributions of the sector have been declining over the years.
Hence, this study will create awareness to the government to see the extent to which
neglect of infrastructural facilities such as electricity is hampering the performance of
SMIS in meeting their potentials of the providing employment per unit investment
capital, facilitating the development of indigenous entrepreneurships, enhancing local
resources utilization and value added expanding non oil exports at competitive prices,
improving balance of payment position and bring about disagreed overall growth and
development of the state economy.
The lack of power supply in the state serves as external diseconomies for SMIS adversely
affecting their performance, productivity and profitability.

1.7

Scope and Limitation of the Study

This study is restricted to effect of electricity supply on Small and Medium Enterprises in
Nigeria. This study shall also restrict us to selected SMEs in Lagos, and analysis of data
will be carried out through SPSS 20.0. Delimitation of the study is restricted access to

several useful journals and information: some of the libraries and research institute visited
was not equipped with materials relevant to the study, while other refuses to grant access
to their resources. Time frame of the study: the time given to carry out the research work
is not as much as to allow for a deep and extensive study.
1.8

Definition of the Term

The study shall define the following terms for the understanding of the users who might
be rested in using this material for reference purpose. Which include?
SMES: small and medium scales enterprises definition differs according to the source
and various schools of thought.
Micro, Small and Medium Enterprises (MSMEs): were defined as follows:
Micro/Cottage Industry: An industry with a labour size of not more than ten (10) workers,
or total cost of not more than N1.5million, including working capital but excluding cost
of land.
Small-Scale Industry: An industry with a labour size of 11-100 workers or a total cost of
not more than N50million including working capital but excluding cost of land.
Medium Scale Industry: An industry with a labour size of between 101-300 workers or
a total cost of over N 50 million but not more than N200million, including working
capital but excluding cost of land.
Power Supply: is an electronic device that supplies electric energy to an electrical load.
Electricity: a form of energy resulting from the existence of charged parties (such as
electrons or protons), either statically as an accumulation of charge or dynamically as a
current.

REFERENCES
Abdullah, A. H. (2013). Improving and Sustaining Power Super for Socio-Economic
Development in Nigeria tenth. Abuja: Annual Conference.
Chau, V. S. (2009). Benchmarking service quality in UK electricity distribution networks.
Benchmarking:
An
International
Journal,
16(1),
47-69.
http://dx.doi.org/10.1108/146357709109 36513
Civil, F. A (1978). The Development of Small-Scale Industries. A.B.U Zaria: MSC Thesis
published.
8

Ofosu-Ahenkorah, A. K. (2008). Ghanas Energy Resource Options: Energy Conservation in

Energy and Ghanas Socio-economic Development. Development and Policy Dialogue
Report One, George Benneh Foundation, Accra, pp.51-65.
Olumuyiwa S., &Mnse M. (2008). Why Africa Lags Behind in the Energy Sector? A Paper
Presented to the OFID Conference on Energy Poverty in Sub-Sahara Africa, 910 June,
Abuja, Nigeria.
Watson, A., Viney, H., & Schomaker, P. (2002). Customer attitudes to utility products: a
consumer behaviour perspective. Marketing Intelligence and Planning, 20(7), 394 404.
http:// dx.doi.org/10.1108/02634500210450837

CHAPTER TWO
LITERATURE REVIEW
2.1

Introduction

Small and medium scale industries (SMIS) have been contributed too much in national
development, which may include the socio-economic processes. Which issues of the
character, structure, pattern and evolution of desirable impersonal relations of production
distribution allocation and utilization of availability resources in any country, wheel in
order to maintain the level of development and manage the available resources equally
distributed and allocation efficiently utilize them and subsequently put economic
development firmly on a way of modern technologies with respect to production
distribution allocation and utilization are designed and tried strictly to the use of energy
from one to the other (Ayodele, 2001).
The importance of small and medium scale industries in their potentials for job creation,
innovation and mostly found to be the major sources of technological innovation. Its
serve as a fuel to every countrys economic progress. Much of the attention surrounding
growth in the small firms has focused on capital structure decisions, and power supply
(electricity) and dominant in the small and medium scale industries (Terpstra and Olson
1993).
2.1.1

Power supply (electricity)

Electricity power supply development in Nigeria stated in 1896 in Lagos city. Various
generating sets were later installed in different towns as the imperial rule spread across
the country. The pattern of electricity development after then was in the form of
electricity undertakings set-up at various towns, some by the federal government under
the public works department (PWD) and some by the native municipal authorities. In
1950, the colonial government interacted all these isolated power station previously under
the electricity corporation of Nigeria (ECN). Thus ECN became the statutory boby

10

responsible for generation transmission, distribution and sales of electricity to all

consumers in Nigeria (Adeleye 1977). In 1962 the Niger Dam, Authority (NDA) was
established for the construction of Kainji Dam, the first hydroelectricity power station
was commissioned in 1968 with an ultimate installed capacity of 760MW, In 1972, the
activities of both ECN and the MDA were merged and vested as one authority, the
national electric power authority (NEPA), now power holding company of Nigeria
(PHCN). According to Adeyemo (1979), electricity is that part of infrastructure which is
the basic physical facility upon which all other activities in the system significantly
depend on. Development economist under scored the need to building up electricity, as a
key stimulus to development. It has been assented that an analysis of electricity is
invariably a part of the study economic development (Ukpong, 1980).
The process of electricity generation serve as an out let for the product of other industries
like cool, oil natural gas, and diesel, etc. Therefore, the consolidation linkage between the
energy sector and other sector of the economy electricity development and utilization
therefore has pervasive in the Nigeria. In this respect adequate power supply and
distribution constituted a central core to economic development issue, which cannot be
over emphasized.
2.1.2

Small and Medium Scale Industries

Much of the attention surrounding growth in the concept of small and medium scale
industries (SMIS) are a very nitrogenous group including a wide variety of firms
(Mazdumar et al 1987). Small-scale industries are small in nature either in terms of the
number of employee, which not are more than 10 persons at most. It could be also in

11

terms of capital base and or asset or even in the overall turnover of the enterprises (Lawal
1995) usually this type is small compared to the larger industries.
2.2

Conceptual Framework
SMEs are very fundamental for economic development of any country. They contribute
immensely to the economic and social development. According to the World Bank
(2013), SMEs contribute to the creation of employment which reduces regional
disparities between urban and rural areas. The fact is that, it is the SMEs that developed
and become large corporations. According to the CBN (2003), SMEs contribute to the
creation of employment, as it is one of the sectors that provide industrial employment in
Nigeria. SMEs utilize local raw materials that do not require high level technology to
process, and this provides an effective means of mitigating rural-urban migration and
resource utilization. SMEs use simple technology and recycle by-products and waste
from large firms as the input for their production processes.
SMEs contribute substantially to the national output through the provision of raw
material for larger firms usage. Also, the government generates revenues from the
activities of SMEs through various forms of taxes. They also serve as the means for
mobilization and utilization of domestic savings and reduce cost of production, which
increases efficiency of the sector. According to the World Bank (2013), SMEs are defined
based on the size of the enterprise in terms of the total number of employees and/ or total
assets value. SMEs and large firms can be differentiated based on the aforementioned
criteria. However, the definition of SMEs can be viewed from different perspectives,
depending on the organization or country. Bouri et al. (2011) define medium enterprises
as firms with less than 250 employees and having less than 50 million turnover or not

12

more than 43 million balance sheet total. A small enterprise refers to firms having less
than 50 employees, less than 10 million turnover and/or not more than 10 million
balance sheet total.
Stork and Esselaar (2006) report several definitions of SMEs based on different African
countries. In Ghana, SMEs referred to firm that have six to 99 number of employees and
have not more than 2.5 billion Ghana Cedi () of fixed assets (excluding land and
buildings). In South Africa, SMEs are defined as distinct and separate business entities,
including cooperative enterprises and non-governmental organizations that are selfmanaged by a single owner or more which includes its branches or subsidiaries, if any. In
Cameroon, SMEs are defined as firms that have turnover value of not less than 1 billion
Cameroon Franc (CFA), and accrued investments are not more than 500 million CFA, its
short-term credit is not more than 200 million CFA and it has at least 5% owners of the
capital and managers are Cameroonians. In Nigeria SMEs are defined as the firms that
employ fewer than 200 employees and have less than 500 million Naira (N) worth of total
assets, excluding land and building (SMEDAN, 2012). Specifically, small enterprises
refer to SMEs with employees between 10 to 49 and have N5m to less than N50m assets
excluding land and building. Firms with employees between 50 to 199 and have N50m to
less than N500m assets excluding land and building is referred to as medium enterprises.
Therefore, in this study SMEs are defined as firm with fewer than 200 employees.
Currently, performance of SMEs in Nigeria is below expectations.
It is argued that the contribution of SMEs in Nigeria to the national GDP is poor for
numerous reasons. These include inadequate infrastructure/financial support to businesses
operating within the various sectors; limited application of innovation to operations

13

within the segment; and unfavourable competition from foreign goods and services
(Bangudu, 2013; Ndumanya, 2013).
Therefore, building effective strategy is central to any firm as it enables it to achieve and
maintain a competitive advantage. Hence, in order to survive, firms require a combination
of various strategies that are appropriate for rapid environmental changes. In the literature
on strategy, researchers have used various variables to represent a firms strategic
activities that are referred to as strategic orientations (Weinzimmer, Robin, & Michel,
2012). Entrepreneurial orientation is defined as firms activity that is represented by the
behavior of taking risk, being innovative and proactive (Covin & Slevin, 1991). It
referred to as the combination of a firms innovativeness, proactiveness, and risk taking.
Entrepreneurial orientation can be seen as a particular way by which firms relate to
opportunities and activities that lead to new business opportunities (Lumpkin &Dess,
1996). Additionally, entrepreneurial orientation is one of the important resources that
influences firm performance (Lumpkin &Dess, 2001). Several studies have shown that
entrepreneurial orientation is one of the strategic orientations that influences firm
performance (Alegre&Chiva, 2009; Al-swidi& Al-hosam, 2012; Awang, Ahmad, Subari,
& Said Asghar, 2010; Baker &Sinkula, 2009; Coulthard, 2007; Fatoki, 2012; Frank,
Kessler, & Fink, 2010; Idar&Mahmood, 2011; Li, Huang, & Tsai, 2009; Long, 2013;
Madhoushi, Sadati, Delavari, Mehdivand, &Mihandost, 2011; Moorthy et al., 2012;
Rauch, Wiklund, Lumpkin, &Frese, 2009; Tang & Tang, 2012).
2.3

Theoretical Framework
Small-scale enterprise is central and critical in every human society. It is through
entrepreneurship that societies can attain any level of development. Small scale and

14

medium industries is said to be the secret behind rapid development of countries like
Japan, China and Malaysia etc. low entrepreneurship is also said to be the major causes of
under development of most countries in Africa, Asia, Latin America and the rest. In view
of the importance and centrality of small scale and medium to human development, there
have been many attempts by scholars to explain factors behind the presence of small and
medium scale ability in some people and its absence in others. It is these kinds of
explanations that are referred to as theoretical issues of small and medium scale
industries. There is no single universally accepted theory of small scale. This is because
small scale is viewed differently by different scholars from different disciplines such as
economies, psychology, and sociology etc.
2.3.1

Economics theory of small and medium scale industries theory

In the economics perspective, small and medium scale enterprises ability in a man is a
product of his desire to acquire wealth and the fear of distortion or poverty (virtanem
2001). The desire for wealth and therefore of poverty are positively related. A higher fear
of poverty in a man may likely translate into a higher entrepreneurial ability. A lower fear
of poverty on the other hand May likely result in a lower desire for wealth and a low
entrepreneurial ability. A small and medium scale enterprise to grow or to develop it
requires some booster or challenges. The challenges economist believes include among
others, consumer crave for new goods or services, a desire for new methods of
production, transportation and emergence of new market, (virtanem, 2001).
According to some economist, the function of the small and medium scale industries is to
undertake risk and uncertainty to others the coordination of productive, recourse, to
Schumpeter in particular, the introduction of innovation and to still others to provide

15

capital. Schumpeter also the difference dimension to increase the level of the production
among the society in general, he provided thus; Innovation: An innovation may consist
of:
i.

The introduction of a new product.

ii.

The introduction of a new method of production.

iii.

The operating up of a new market.

iv.

The conquest of a new source of supply of raw material.

He also assigns the role of innovation not to the capitalist, but to the entrepreneur. The
entrepreneur is not a man of ordinary managerial ability, but one who introduce
something entirely new.
2.3.2

The big push theory

The big push theory is associated with the name of the professor Paul N. Rostern
Rodan. This theory of big push deal with large comprehensive program is needed in the
form of high minimum amount of investment to overcome the obstacles to development
in an underdevelopment economy and to launch economic development.
Rostern- Rondan talked about three (3) indivisibilities which are pre-requisite for
lunching economic development successfully. Among them is the indivisibility in the
production function. He added that indivisibilities of input, output will lead to increasing
returns. He regards social overhead capital as the most important instance of
indivisibility.
The services of social overhead capital comprises of infrastructure such as electricity
supply, water supply, road, network etc. which are directly productive and have long
gestation period.

16

2.3.3

The Gerschenksrons Great Spurt Theory

Alexander Gerschenksron who pointed out propounded this theory that the great spurt
industrialization could take place if 5 pre-requisite are fulfilled. Among which he
emphasized that there should be provision for material social overhead capitals.
Gerchenkron categorized countries into three groups on the basis of the degree of
economic backwardness, advance moderately backward, and very for a great spurt of
industrialization, he noted that advanced nations start their first stage of development
with the factory (or private firm) in the organizational and extreme backward with
governments. But it should not be inferred from this that industrialization is dependent
upon the creation of these preconditions. In facts, one precondition can be substituted by
another precondition further; preconditions can always be created even during the course
of industrialization.
Gerschenkron supported his view by citing the example of England that capital was
supplement to the early factories in England from previously accumulated wealth or from
gradually plugging back of profits. Extremely backward countries which could not have
these preconditions for industrialization were compensated by the actions of banks and
governments. Besides, for a great spur in industrialization, Gerschenkron emphasized the
adoption of capital intensive techniques. According to him, in an extremely backward
country, there would be a very big technological gap between its techniques of production
and those of developed countries.
It can therefore industrialize but adopting the most advanced capital-intensive techniques
of the countries for tow reason, first, such techniques help the establishment of import
substitution industries, thereby reducing foreign competition. Secondly, backward

17

economic have shortage of skilled labour, they use capital intensive and labour saving
techniques. The more backward and economy is the greater is the degree of capital
intensive of industrialization. This Gerschenkron considered the induction of capital
intensive techniques essential of economic development for historical, borrowed
technology was one of the primary factors assuring the high speed of development in a
backward country entering the stage of industrialization.
2.3.4

The Theory of Unbalance Growth

This theory has been popularized by Hirschnan. According to this consent investment
should be made in selected sector rather than simultaneously in all sectors of the
economy. No underdeveloped countries possess capital and other resources in such
quantities as to invest simultaneously in all sectors. Therefore, investment should be
made in a few selected sectors industries for their rapid development of other sectors.
Thus the economy gradually moves the path of unbalance growth to that of balanced
growth economist like Signer, kindly Berger, Stratenetc, have express their views in
favours of unbalanced growth.
It is the contention of Hirchmen that deliberate unbalancing the economy according to
pre-designed strategies best way to achieve economic growth in an underdeveloped
country. According to Hirchman, investments in strategically selected industries or
sectors of the economy will lead to new economy investment opportunities and so pave
the way to further economic development.
Hircheman tried to explain growth and development of nation or economy with social
overhead capital are included investment, education, public health communications
transportations and convention public utilities like electricity, water, irrigation and

18

drainage schemes etc. He stipulated that a large investment will encourage private
investment, later indirect productive activities (DPA) i.e. industrialization. For example,
cheap and frequent supply of electric power will encourage the establishment of small
industries. Unless social investment provide-cheaper and improved services, in private
investment in direct productive activities (DPA) will not be encouraged.
As Hirschman puts in investment is social overhead capital (soc) is advocated not
because of its direct effect on final output, but it permit and in fact invites direct
productive activities (DPA) to come in some social overhead capital (SOC) investment is
required a prerequisite of direct productive activities (DPA) investment.
2.4

Empirical Review

In a global context, a general definition of the small and medium scale industries using
size and scale of operation is not easy but with the fixed coordinates of national
boundaries, it might be relatively easier (Olorushola 2001). This is so because what is
considered a small-scale enterprise in one country may be regarded as medium or largescale enterprise in another (Osuala, 2004, Anigwe 1992). As a result, each country tends
to defend these categories of enterprises (i.e micro small and medium) based on the
country level of development (Olorunsola, 2001). Even within a country, definition
change over time depending of circumstance and specific objectives of institution
(Mmaduako, 1990).
An over view of the performance of the SMIs in Nigeria scholars that SMIs account for a
about 70 percent of the total industries employment in Nigeria but only contribute 10-15
percent of the total manufacturing output (Charles Soludo, 2005). In federal government
small scale business development plan (SBDP) seeks a small scale enterprises as any

19

manufacturing process or services industry with a capital investment not exceeding

N150,000.00 in machinery and equipment and employing not more than 50 workers
(Osuala, 2004). The central bank of Nigeria (CBN) for the purpose of credit guideline to
financial institution classifies as small and medium scale industries those enterprises with
an annual turnover between the range of N100,000.00 to N150,000.00 with less than 50
employees with asset base (excluding real estate) of not less than 1 million (CBN, 1989).
This sector has not experienced any positive performance recent past because the
potentials of the sector have not been significantly exploited. Many factors have
constrained the growth of the sector and one of these factors is inadequate and epidemic
power supply (electricity). This problem occupies over 50 percent of Nigerians SMIs
problem (Femi Kayode, 2005).
Power supply is the most important commodity for national development. With electrical
energy the people are empowered to work from the domestic level and the cottage
industries, through the small scale and medium industries to employment in the large
scale and manufacturing complexes. Its factors input in the production process s of small
and medium scale industries in particular and the manufacturing sector in general, for
operation of plants. Nasser (1989) in his study of the assessment of power failure on the
manufacturing sector in Nigeria stated that the high cost by the firms in acquiring
alternative power generation because they cannot enjoy the economies of scale advantage
by public power. Despite the effect on high price of good product, produced this had lead
to high importation of foreign good to meet excess domestic demand. This has leaded to
wide closure of firms, unemployment and price instability.

20

According to World Bank research (1993), the study estimated that adoptive cost of
electric failure on the Nigerian economy has equal 310million. US dollars divided
between consumers back up capacity (25 millions dollars) operating and maintenance
cost of diesel auto-generators (90. million US dollars) fuel and lubrication 50 US dollars).
Ukpong (1973) he used modified version of the production factor analysis method
analyzing from 1965 to 1966 cost of power outrage on the industrial and commercial
sector of the city of Lagos area in Nigeria this production function was of this form,
Q=F(X1X2X3X4)where Q= industrials, x4 = electricity. Holding other factors constants,
he concluded that changes in output was directly related to change in electricity supply
from a sample survey of thirty eight (38) firms.
He estimated power supply to be equal to 130KW and 172KW in 1965 and 1966
respectively. Also he estimated lost in output as result of reduction in power supply in
1965 as N840, 000.00 the corresponding figure for 1966 was N1378,000 he also stated
that the loss in output affected national income increased inflation and unemployment.
On a basis, his analysis revealed that the current and concrete industries suffered most
from power failure, followed by food, metal product, textiles, and printing industries. And
this has lead to the slow growth or closure of most of these industries in Nigeria.
Moreover, the impacts of the unreliable electricity have become a regular event in most
part of Nigeria. And these contribute with technical logistical failure and organization
structure problem (Ukpon 1976 and Iwayemi, 1979).
The factors affecting electricity reliability in Nigeria are weather, water level, social
texture and fire coal of current and future electricity demand vandalization and improper
maintenance culture (Udhedu, 1993).

21

Subair and Oke (2008) recognised that electricity as a source of energy is vital to the
growth and development of any economy but the study did not mention any specific
impact on unemployment. Nigerians are resilience and hardly give up in the face of
challenges that affect their welfare and aspirations and this could explain the self-help
provisions of infrastructures (electricity from privately or corporately owned generators
and boreholes and wells to provide water supply) by many in spite of high costs that may
not be good for competitive businesses. Erratic and inadequate power supply has been the
major reason cited by many of the multinationals (Michelin, Dunlop Plc, Volkswagen Plc,
PZ, Unilever) that either closed down or wound up their operations in Nigeria which
further worsened the level of unemployment (National Technical Working Group on
Employment, 2009). For instance, the exit of Michelin from Nigeria costs the economy
1,300 direct jobs.
Similarly, in the study of youth unemployment in Nigeria, Kakwagh and Ikwuba (2010)
identified increasing population, high degree of geographical mobility, lack of
employable skills, non-involvement of youth in decision making processes as major
causes of youth unemployment. The study fails to recognise the level of infrastructure
especially as it pertains to provision of electricity as one of the causes of unemployment
in Nigeria. Manufacturing, metal, electronic repair and hair salon industries depend
largely on electricity power to operate.
In a more recent study of the Nigerias power sector, Barros, Ibiwoye and Managi (2011)
posit that the Nigerian economy is characterized by large informal sectors which rely
heavily on electricity power to operate. This results from the failure of the national power
source to provide stable and adequate power supply, hence alternative though expensive

22

private arrangements had to be made to remain in production for those that could avoid
them. Entrepreneurs who could not cope with the expensive alternatives had no other
choice than to seek alternative means of livelihood. The results are rising unemployment
rates. The position of Barros, Ibiwoye and Managi (2011) is logical and reflects the
reality in the Nigeria but the findings were not empirically supported, this study would
bridge the gaps.
2.4

Overview of Power Supply and the Performance of Small and Medium Scale
Industries in Nigeria
The power supply (Electricity in Nigeria was established in Nigeria in 1896 Lagos
Nigeria. The establishment of Nigerian Electricity Supply Company in Nigeria in 1929
with the construction of a hydroelectric station at Kaura Jos in the year 1950 electricity
corporation Nigeria (ECN) was established about 132 kilowtt. The Niger DAM authority
(NDA) was established in 1962 with a mandate to develop the hydropower potentials of
the country. However, ECN and NDA were merged in 1972 to form the National
Electricity Power Authority (NEPA) now Power Holding Company of Nigeria (PHCN).
After independent, Nigeria accepted development of electricity from water as the most
sensible cause of follow because it does not involved the hauling of fuel from one place
to another and because water is a source from which energy could be tapped indefinitely
(EDI, 1985, 0.49). This was why the Kainji Dam was initialed in the first development
plan. The first phase was completed or scheduled in December 1968. other include the
Onitsha hydropower project (50mw), Zungeru on River Kaduna (500mw), KastinaAla on
the KastinaAla River (26mw) and the manila plateau on the Don go River base
(1250mw). In the 1972, the degree that stipulated the function of PHCN was established

23

the degree, No249, 1972 states the NEPA (now PHCN), would develop and maintain
efficient coordinated and economical system of electricity supply for all parts of the
country. According to the second national development plan (1981-1985), government
policy effort were made by increasing the generating and transmission capacity of PHCN
with heavy investment outlay an approximately 6098mw were functional. The thermal
power stations are located at Afan, Delta, Egbin, Sapale and Ijora, with a generating
capacity of 100mw, 1320mw, 102mw, and 66mw respectively. The hydro station are
Iebba (578mw) Kaiji (760mw), and shiroro (600mw) government promise to generate
6000mw or even more power, is achievable this year, given the installed capacity of
PHCN and ability of staff of the company to deliver. In fact, Nigeria, though the old
electricity corporation of Nigeria, the former Niger Dams authority and the defunct
Nigeria Electric Power Authority had the best trained technical and 39
professional staff backward in Africa. Now the PHCN saddled with a non technical staff
and hampered by official power generating transmission and distribution should be a
knowledge based integrated and controlled system a technical and economic undertaken
devoid of policies failure to use its human and material resources and to nurture and keep
an efficient and dedicated workforce, in the power sector, has turned Nigeria into the
world biggest importer of generators. Source statistical datas the data obtained from the
CBN annual bulletin journal statistical data, text book magazines and seminar report etc.
consequently the information given is extracted from the CBN and other sources of
secondary data, the information below is real gross domestic product and current
expenditure from the years of 1986-2010.
The real gross domestic product and current expenditure from the years of 1986-2010
24

Years
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

RSMP
10673.1
11217.4
12658.8
12867.1
13847.5
15135.4
14404
13809.1
13684.8
12932.2
13061.5
13100.7
12589.7
13030.4
13497.6
14062.6
15607.8
16476.4
18454.3
20220.5
22106.6
24206.8
26337
28407.2
30517.4

RPSP
665.9
696.6
702.1
759.4
828
828
923.5
937.4
1006.8
990.7
1012.5
1006.4
940.9
953.2
972.2
11684.9
13318.1
15598.8
18252.5
19439.9
20344.4
21301.8
22035.9
2270.3
23419.2

REIE
4.6
2.6
-25.6
-22.4
11
1.2
-27
-31.2
-43.5
-59.3
-15.8
5
4.3
11.4
6.6
-4.6
3.3
4.4
4.2
0.05
8.69
11.54
14.39
17.24
20.09

REER
313.3
120.2
120.5
107.6
100
85
70.5
77.2
142.8
122.1
167.1
193.1
203.6
78.9
81
79.95
80.48
81
80.74
81.32
81.94
81.87
82.28
82.57
82.86

The source of data from the central bank of Nigeria bulletin 50 years special anniversary
December 2008. The above table shows the fluctuation of real gross domestic product
and current expenditure on total output of power supply and manufacturing sectors in
Nigeria economy.
In the year 2001 where the ratio of output is 11684.9 has less power supply output and
manufacturing good and services is less contribution to economic development. In the
order hand, 2002, which total output of power supply, are increases 13318.1 and has high
capacity with the approximation of 80.48. But in 2008, manufacturing sector has larger
total output about 22035.9 and total output both approximation and vice versa.

25

2.5

The Economic and Social Importance of SMEs in Nigeria

Small scale industries generate employment for a lot of Nigerians. A lot of

unemployed people and youths have found employment in small scale industries.
A lot of small retail shops, cottages, restaurants, poultry farms, and
telecommunication/telephone shops have been established and managed profitably
by Nigerians who would have been unemployed till date. The entrepreneurs have
in turn provided jobs for other Nigerians, who serves as support, technical and

administrative staffs for them.

It has encouraged self employment for many youths both in the rural and urban
areas. The spirit of successful entrepreneurship has taken over the mind of
Nigerians, who believe in themselves and in the goal of self employment, instead
relying on government jobs. In the telephone retail and rental jobs, a lot of youths
and Nigerians have remained self employed. Their businesses have expanded to

the level of employing some other unemployed people.

Through the establishment of manpower development support schemes, and their
involvement in the training and retraining of entrepreneurs, small scale industries
have provided a pool of potential entrepreneurs and businesspeople who are well
equipped to start and successfully manage industries whether small or large, not
only in Nigeria, but overseas. Successful business people in Nigeria like Aliko
Dangote, the Ibrus, Mike Adenuga, Illodigwe and Dantata started as SMES,

before the growth of their various businesses into conglomerates.

It has reduced the dependence on government and large firms on salaried
employment. This is evidenced from the liberalization policy of the established to
provide

support

staff

and

employment

for

Nigerians

MTN,GLOBACOM, CELTEL and many private universities).

26

(For

example,

Small scale industries have stimulated rural development and the achievement of a
meaningful level of broad economic and rural development. To reduce the
migration from rural to the urban centres, some infrastructural facilities which
promoted small scale industries were provided in the rural areas, such as the
provision of access road, increased improvement in communication facilities like
telephone, postal services and the internet facilities, construction of industrial

layouts and estates, and the provision of electricity and water expansion schemes.
It has uplifted the dignity of labour. There is the spirit of ME TOO, can do it
attitude. People deriving joy in working for themselves and seeing their
businesses grow and mature to conglomerates and deriving joy in being a source

of employment to other Nigerians.

It has upgraded the social status of Nigerian youths, by showcasing them as very
successful entrepreneurs and operators of small scale industries.
This is evidenced in the many success stories of small scale industries as recorded
by the print and electronic media houses.

2.6

The challenges of power supply in Nigeria

Availability and reliability of electricity supplies have always been vexed issue in
Nigeria, its encounter the problem of electricity supply throughout the whole nation.
Besides, the main evidence of inadequate supply of electricity is the substantial installed
capacity of private generators estimated to be almost half of PHCN total generation
capacity comprising numerous large units that are expensive to operate (Sule et al, 1994)
the following are challenges of electricity in Nigeria.

27

i.

Lack of preventive and routine maintenance of PHCNs losses. Energy losses

reflect the poor quality of the electrical system, which is in it, dependent on
inadequate maintenance of the equipment for generation and distribution.

ii.

Frequent major breakdown, arising from the use of out-dated and heavily overloaded equipment.

iii.

Lack of co-ordination between town planning authorities and PHCN resulting in

poor over all power system planning and over-loading of PHCN equipment such
as transformers by undeclared additional load as well as illegal connections by
consumers.

iv.

Inadequate generation due to operation/technical problems arising from machine

breakdown, low gas pressure and low water levels.

v.

Poor funding of the organization, inadequate budgetary provision and undue delay
in releasing of funds to PHCN

vi.

PHCNs inefficient billing and collection system. Even where meters are available
they are not being installed in sufficient numbers thereby leaving customers
unmetered or on estimation. Also there are frequent reports that meters are not
being read regularly and bills are left undelivered. In many cases, payments made
by customers are either credited to wrong accounts or not credited at all.

2.7

Effect of Reliable Electricity Supply on SME Operations

The most significant effect vulnerable supply of electricity has on small business
operations is cost. Cost is a variable input in the measurement of profit. Profit is only
28

realisable where cost of production is less than revenue. As a fixed cost therefore, SMEs
access to sufficient and affordable supply of electricity is therefore a crucial determinant
of profitability and growth. Low levels of infrastructural development and poor services
can drive up firms direct and indirect costs and bias their technological choices away
from energy intensive ones which in turn increase the overall cost relative to competitors
in other regions. SMEs suffer operation and maintenance costs arising out of power
fluctuations (Lai et al., 2008). Haanes et al., (2011) identified reduced costs dueto
energy efficiencies as the second highest possible source of sustainability next to
improved brand reputation. In other words, the higher the frequency and longer the
duration of interruptions, the greater the cost incurred by small businesses and vice versa
and lesser or greater their ability to sustain their business interests.
The Centre for Policy Analysis (CEPA, 2007) identified that the 2007 power rationing
exercise in Nigeria resulted in increased local manufacturing costs. Velasquez and Pichler
(2010) also reiterated that sufficient and affordable supply of energy (in this case,
electricity) has had a decisive significance for economic activities and economic growth
can or may be restricted by resource energy. Since a countrys economic growth is a
composite of economic activities of small and medium enterprises, the less cost they have
to tolerate, the better a countrys chance at harnessing their input towards greater levels of
gross domestic product and growth. Okpara (2011) consents that; SMEs can contribute
immensely towards economic growth and poverty reduction.
Another effect of power fluctuations on businesses is related to their level of
competitiveness. Arinaitwe (2006) has revealed from his research that the rate at which
SMEs fail in developing countries is higher than in the developed world. Irjayanti and

29

Azis (2012) in their research found that as a result of the free market system, Indonesian
SMEs were fighting stiff competition from foreign products and firms who have the
ability to produce better quality products. In their research, they found that high cost of
energy accounted for 62% of respondents identification of barrier factors against
Indonesia SMEs. A research carried out by Data Bank Ghana Limited, a research and
investment company in Ghana, estimates that, Ghanas economy could lose about 1.4
billion dollars due to the impact of electric power crisis on the manufacturing, services
and informal sector of which SMEs play a very pivotal role. Therefore, to forestall these
loses there is urgent need to better structure the production and distribution of electrical
power so as to enhance our chances of growing the economy and achieving the goals of
any development initiatives.
In another study by Alam (2013) which sought to identify the relationship between
electric power consumption and foreign direct investment, the researcher found out that
there was causality for electric power consumption and foreign direct investment as well
as economic growth. Alam (2013) therefore recommended a policy framework that will
ensure that there will be a continuous supply of electricity in order to make advances in
economic growth. Studies connecting power fluctuation to profit are fewer as most
studies tend to consider the entire gamut of related factors that inhibit the performance of
SMEs. For instance, the Confederation of Tanzanian Industries (CTI) argues that
Tanzanias manufacturing sector also experiences unreliable, intermittent power supply,
frequent rationing and outages and such occurrences cause manufacturers to experience
poor service quality, unplanned power stoppages and interruptions, voltage fluctuations,
phase failures and unbalanced voltages (CTI, 2011).

30

Burlando (2010) also identified that a month-long blackout in Zanzibar in Tanzania

caused a large decline in household income among those employed in occupations that
required electricity. Workers relying on electricity had to reduce work hours by an
average of 8% per day during the blackout period (Burlando, 2010). The August 14, 2003
blackout that occurred in New York, Michigan, Massachusetts, Ohio, New Jersey,
Connecticut and Vermont all in the United States of America, caused an estimated loss of
$6.4 billion (Anderson &Geckil, 2003). In another study conducted in Indonesia, it was
revealed that among the many barriers to SME development supply and price of reliable
electricity was mentioned by 62% of the 180 respondents as being a major barrier to SME
development (Tambunan, 2009). In the same research report, high production capacity
deficiency, limitation in sales and high labour costs accounted for 21%, 36% and 18%
respectively. In a another study in Indonesia, it was found that SME sector account for
99% of businesses in Indonesia making them the most significant contributor to
Indonesias economic development (Irjayanti, Maya and Azis, Anton Mulyono, 2013).
Other studies by Wang (2002) on outage costs and strategy analysis of the hi-tech
industries revealed that production process spans weeks and sometimes months in
planning and execution. A slight variation in the load of supply can therefore render the
objects they produce obsolete. Wang (2002) further revealed that a power interruption
lasting between 1 and 4 seconds can result in a loss of more than US$ 3 to 10 million of
damage to their properties.

31

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37

CHAPTER THREE
RESEARCH METHODOLOGY
3.1

Preamble
This chapter entails the research methodology that was adopted by the researcher to test
the theoretical framework of the effect of electricity supply and performance of SMEs in
Ikeja Local Government Area. The following was discussed:
Research design which gives blue print of the research work, population of study ,The
sample and the sampling techniques are discussed, the instrument of data collection and

38

the validity of such instrument are examined, the method of data analysis, the limitation
of the methodology
3.2

Research Design
This study relied on opinion collection from target respondents; survey research design
was used in this study. All data collected through primary sources were analyzed with the
aid of Statistical Package for Social Sciences (SPSS) Version 20.0.

3.3

Population of Study
The target populations for this research consist of selected members of the Small and
Medium Scale Enterprises (SMEs) in Ikeja Local Government Area. Specifically, it
spreads across SMEs businesses

especially those in the business of furniture making,

iron benders, poultry and fisheries, business centre and barbing business, soap and
detergent making among others and analysis in this study focuses on selected SMEs in
Ikeja only.
3.4

Sampling Procedure and Size

The study used the random sampling method by selecting the SMEs businesses randomly
(researcher visited different neighbourhood within Ikeja Local Government and
distributed his questionnaires to the respondents) because it allows equal chance for every
element of the population and therefore the sample size was one hundred and fifty-four
(154).

3.5

Data Collection Instrument

This research work is quantitative in nature, and as such data were collected via the use
of primary data. Structured questionnaire was used for the study. It was designed and
39

constructed to get information from the respondents. The questionnaire consists of two
parts as follows:
Section A deals with respondents bio-data while Section B is the subject item in respect
of the study. The construction of the questionnaire was based on standardized scales of
Likert which are: SA - Strongly Agree, A-Agree, U-Undecided, D- Disagree and SD Strongly Disagree.
3.6

Method of Data Analysis

Descriptive statistics was utilized in the analysis of the data collected to generate
frequencies and percentages and Pearson Product Moment Correlation Coefficient was
used to test the formulated hypotheses.

3.7

Limitation of the Methodology

Research work is subject to one form of limitation or the other, this is not an exemption.
Even though the responses of the respondent was used for purpose of research are
burdened with the following limitations such as:
Respondents were not inhibited to respond freely to the questionnaire because of fear of
their business secrecy to other competitor in the same line of business.
Imperative pieces of information were not disclosed by respondent, because the
information borders on confidentiality of the organization.

40

The respondent might not represent the population mentioned in the sampling size.

REFERENCES
Adebisi, S. A. &Babatunde, B.O. (2010). Strategic Influence of Promotional Mix on
Organisation Sale Turnover in the Face of Strong Competitors, Business Intelligence
Journal, Vol.4 No.2, pp. 343-350
Asika, N. (2006). Research methodology in the Behavioural Sciences, Lagos, Longman,
publishers, Lagos, Nigeria.
Lucey, T. (1989) Quantitative Techniques: An Industrial Manual (ELBS) English Language
Book, Society/Dp publications, London.

41

CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATIONS
4.1

Introduction
This chapter discussed the data obtained from the questionnaires that were distributed and
presented the respondents responses in tabular form for easy analyses and interpretation.
Analyses were centered on the effect of electricity supply on small and medium scale
enterprises (SMEs) in Nigeria with reference to SMEs business owners in Ikeja Local
Government Area, Lagos State. In addition to the above, this chapter describes in details

42

the gender and socio-economic background of the respondents which describes the age,
marital status, educational qualifications, employment status, working experience and
others. These were carried out with the use of descriptive statistics (frequency counts,
percentages, mean and standard deviation) with the aid of SPSS Version 20.0 to produce
tables and statistical data that was applied for the interpretation of the results. However,
due to the attitude of individuals towards research and time constraints, a total of one
hundred and fifty-four(154) questionnaires were administered out of which one hundred
and forty-three (143) questionnaires were returned and validly completed for analysis and
interpretation. Finally, descriptive statistics and Z-test were run to test the hypotheses of
the study.

4.2

Demographic Characteristics of the Respondents

Table 4.2.1: Demographic Characteristics of the Respondents
Response Variables

Gender
Valid

Frequency
87
56
143
Frequency
19
67
36
14
7
143

Male
Female
Total

Age

Valid

18-25 years
25-35 years
36-45 years
46-60 years
61 years and Above
Total
43

Percent
60.8
39.2
100.0
Percent
13.3
46.9
25.2
9.8
4.9
100.0

Marital Status
Single
Married
Valid
Others
Total
Highest Educational Qualification
SSCE/GCE
Valid
OND/NCE
B.Sc/HND
M.Sc/MBA
Total
Business Type
Manufacturing
Valid
Service
Commerce and Trade
Building Construction
Educational Services
Information Communication Technology
Total
Working Experience
Less than 1 year
1-5 years
Valid
6-10 years
11-15 years
16 years and Above
Total
Source: Field Survey, 2016

Frequency
82
51
10
143
Frequency
41
48
35
19
143
Frequency
20
25
53
15
13
17
143
Frequency
26
18
49
23
27
143

Percent
57.3
35.7
7.0
100.0
Percent
28.7
33.6
24.5
13.3
100.0
Percent
14.0
17.5
37.1
10.5
9.1
11.9
100.0
Percent
18.2
12.6
34.3
16.1
18.1
100.0

Table 4.2.1 shows the demographic characteristics of the respondents, focusing on the
gender distribution it reveals that the percentage of male is 60.8% while that of the female
is 39.2%. This shows that the study is gender friendly as it does not discriminate or form
any bias against any gender. Also the percentage indicates that more male gender
responded to questionnaires than female. Age of respondents varied from 18 years and
above with age bracket of 25 to 35 years being the modal age.

44

Marital status of the respondents includes single, married and others such as
divorced/separated and widowed with majority of the respondents being single at 57.3%.
Respondents were asked to provide their educational background, among which 28.7%
were SSCE/GCE holders, 33.6% were identified with OND/NCE, 24.5% were identified
with B.Sc/HND while 13.3% were selected with masters degree holders. This shows that
the respondents are well educated to know the relevance and implication of the study.
On the type of business the respondents are engaging in, 14.0% of the respondents were
categorized under manufacturing SMEs, 17.5% were service oriented SMEs, 37.1% were
categorized to have been engaging in commerce and trade, 10.5% were building
construction SMEs, 9.1% were educational service providers while 11.9% of the
respondents were information communication technology (ICT) service providers. This
indicates that majority of the respondents are engaging in trade and commerce. And
finally, in terms of working experience, the respondents varied from zero years and
above. Out of which the SMEs owners with experience between 6 to 10 years are the
highest.

Table 4.2.2: Respondents view according to their business functions and

characteristics
Response Variables
Nature of Business Registration
No Registration
Valid
Business Name Registration
Partnership
Private Limited Liability
Public Limited Liability
Total

Frequency
67
33
10
17
16
143
45

Percent
46.9
23.1
7.0
11.9
11.2
100.0

Source of Power Generation

PHCN
Inverter
Generator
Valid
Solar Power
Total
Monthly Expenditure on Fuelling and Maintaining
Backup Generator
N30,000
N40,000
Valid
N50,000
N60,000
N70,000
Total
Number of Present Staff
No Staff
Valid
1 5 Staff
6 10 Staff
11 50 Staff
Total
Monthly Electricity Bill
Less than N10,000
Valid
Between N10,000 and N20,000
Above N20,000 but less than N30,000
Total
Numbers of Days without Power Monthly
5-10 years
11-15 years
Valid
16 days and Above
Total
Source: Field Survey, 2016

Frequency
34
12
93
4
143
Frequency

Percent
23.4
8.4
65.0
2.8
100.0
Percent

71
32
17
15
8
143
Frequency
41
65
23
14
143
Frequency
132
7
4
143
Frequency
9
113
21
143

49.7
22.4
11.9
10.5
5.6
100.0
Percent
28.7
45.5
16.1
9.8
100.0
Percent
92.3
4.9
2.8
100.0
Percent
6.3
79.0
14.7
100.0

Table 4.2.2 shows the respondents view according to their business functions and
characteristics, focusing on the nature of business registration, the table reveals that the
percentage of the SMEs with no registration were 46.9%, those with registration
were23.1%, partnership SMEs were 7.0%, while 11.9% were private limited liability and
11.2% were public limited liability. This shows that majority of SMEs under study were
46

not registered with corporate and allied commission (CAC). Also, the respondents were
asked as regard their source of power generation for their business, 23.8% depend only on
PHCN power supply, 8.4% on inverter, 65.0% use generator while 2.8% use solar power.
This indicates that majority of the respondents were using generator as the major and
reliable source of electricity for their business. Also, with the monthly expenditure on
both fuelling and maintaining backup generator from N30, 000 to N70, 000, 49.7% of the
respondents is the modal with N30, 000 monthly expense. As regard the number of staff
working under these SMEs owners, 45.5% was the highest with working staff between
the numbers of 1 to 5. However, when asked from the respondents about their monthly
electricity bill, majority of them pay below N10, 000 electricity bill monthly. And finally,
in terms of the number of days without power supply from PHCN due to one reason or
the other, 6.3% of the respondents experiencedthe absence of electricityfor at least
between 5 to 10 days for their business despite their pays, 79.0% were between 11 to 15
days while 14.7% were 16 days and above. This shows that, majority of SMEs under
study experience the absence of electricity for their business use for at least 11 to 15 days
per month due to one reason or the other.

Table 4.2.3: Respondents view according to their performance rate based on power
alternative criteria.
Very High
Inverter
Frequency
Percent
PHCN

High

Moderat
e
-

12
8.4

47

Low

Very Low

Total

12
8.4

Frequency
Percent
Solar Energy
Frequency
Percent
Generator Set
Frequency
92
Percent
64.3
Source: Field Survey, 2016

11
7.7

31
21.7

101
70.6

143
100.0

4
2.8

4
2.8

92
64.3

Table 4.2.3 focused on the performance of the SMEs according to the power alternative
criteria. From the table, 12 (8.4%) of the respondents using inverter rated it as moderate
in contribution towards achieving optimum performance. In terms of PHCN, almost all
the respondents were using PHCN power supply, out of which none rated it high nor very
high but perceived PHCN contribution to their firms performance as moderate by 11
(7.7%), 31 (21.7%) perceived it low while 101 (70.6%) rated it to be very low. Therefore,
majority of the respondents agreed that PHCN power supply contribution to their
business is very low and lame. Further, regarding solar energy, only 4 (2.8%) of the
respondents were using it and thus find it to be moderate by contribution to firm
performance. Finally, the generator set is the only power alternative with very high
contribution to firm performance as the respondents reveals, under which 92 (64.3%) of
the respondents claimed to have been using generator and it usage is very effective for the
survival of the business and serve as a reliable alternative.
4.3

Presentation and Analysis of Data According to Research Questions

On a five point likert scale with the 5 and 4 being the agreed response as 1 and 2 being
the disagreed response, the decision rule will be based on agreeing the mean above 2.5
and disagreed with the mean below 2.5. Therefore, the data extracted from the
questionnaire were analyzed and presented in tables below.
48

Table 4.3.1: Response on determining whether or not power supply have on the
performance of small and medium scale industries in Nigeria
ITEMS
Output of SMEs per week when
there is constant power is high
Power supply in Nigeria increases
expenditure for small and medium
enterprise
SMEs lose a lot of money when the
light or power goes off
Epileptic power supply has brought
low productivity and profit to SMEs
This irregular power supply has
increases the cost of production for
SMEs
Source: Field Survey, 2016

SA
(%)
64
(44.8
)
24
(16.8
)
102
(71.3
)
97
(67.8
)
43
(30.1
)

A
(%)
55
(38.5)

U
(%)
11
(7.7)

93
(65.0)

6
(4.2)

12
(8.4)
21
(14.7
)
83
(58.0)

13
(9.1)
16
(11.2
)
4
(2.8)

D
(%)
8
(5.6
)
12
(8.4
)
11
(7.7
)
5
(3.5
)
8
(5.6
)

SD
(%)
5
(3.5
)
8
(5.6
)
5
(3.5
)
4
(2.8
)
5
(3.5
)

Mean

Std.
Dev.

4.15

1.02
3

3.79

1.00

4.36

1.14

4.41

1.01

4.05

0.93

As presented in table 4.3.1above, it is the view of the respondents that the output of
SMEs per week when there is constant power is high. This view is reflected in the
responses of 64 (44.8%) respondents who strongly agreed, 55 (38.5%) respondents who
agreed, 11 (7.7 %) respondents who were undecided, 8 (5.6%) respondents who
disagreed while 5 (3.5%) respondents strongly disagreed as well as the mean responses
score of 4.15. Also, with 24 (16.8%) respondents strongly agreed, 93 (65%) respondents
ordinarily agreed, 6 (4.2%) respondents being undecided, 12 (8.4%) respondents
disagreed and 8 (5.6%) respondents strongly disagreed and a mean of 3.79, respondents
agreed that power supply in Nigeria increases expenditure for small and medium
enterprise.

49

Moreover, from the respondents responses which shows 102 (71.3%) respondents that
strongly agreed, 12 (8.4%) respondents agreed, 13 (9.1%) respondents being undecided,
11 (7.7%) respondents disagreed, while5 (3.5%) respondents strongly disagreed and a
mean responses score of 4.36, it is the respondents opinion that SMEs lose a lot of money
when the light or power goes off. Meanwhile, respondents were of the view that epileptic
power supply has brought low productivity and profit to SMEs. This was expressed in
their responses where 97 (67.8%) respondents strongly agreed, 21(14.7%) respondents
agreed, 16 (11.2%) respondents were undecided, 5 (3.5%) respondents disagreed and 4
(2.8%) respondents strongly disagreed to this assertion as well as a mean responses score
of 4.41. Finally, when asked from the respondents whether irregular power supply has
increases the cost of production for SMEs, 43 (30.1%) respondents strongly agreed,
83(58%) respondents agreed, 4 (2.8%) respondents were undecided, 8 (5.6%)
respondents disagreed and 5 (3.5%) respondents strongly disagreed. Therefore, majority
of the respondents agreed to this assertion with the mean responses score of 4.05.

Table 4.3.2: Response on determining whether or not adequate power supply enhances
sustainable growth of SMEs in Nigeria
ITEMS

SA

A
50

SD

Mean

Std.

SMEs are being discriminated

against for the accessibility of
Power generation for their growth
Inadequate power supply hinders
the growth of SMEs
The stringent conditions attached
bills discourage SMEs from
accessing adequate power supply
Higher or crazy bill charged by
PHCN is a major constraint that
hinders the growth of SMEs
Bribery and Corruption is a
greatest challenge facing SMEs in
generating adequate electricity for
the growth of their business
Source: Field Survey, 2016

(%)
31
(21.7
)
105
(73.4
)
26
(18.2
)
12
(8.4)
28
(19.6
)

(%)
44
(30.8
)
17
(11.9)
51
(35.7
)
48
(33.6
)
49
(34.3
)

(%)
19
(13.3)
4
(2.8)
14
(9.8)
15
(10.5
)
17
(11.9)

(%)
21
(14.7
)
14
(9.8)

(%)
28
(19.6
)
3
(2.1)

43
(30.1
)
51
(35.7
)
26
(18.2
)

Dev.
3.20

1.4
4

4.44

1.0
7

9
(6.3)

3.29

1.2
5

17
(11.9)

2.90

1.2
3

3.23

1.3
8

23
(16.1
)

As presented in table 4.3.2above, it is the view of the respondents that SMEs are being
discriminated against for the accessibility of Power generation for their growth. This view
is reflected in the responses of 31 (21.7%) respondents who strongly agreed, 44 (30.8%)
respondents who agreed, 19 (13.3%) respondents who were undecided, 21 (14.7%)
respondents who disagreed while 28 (19.6%) respondents strongly disagreed as well as
the mean responses score of 3.20. Also, with 105 (73.4%) respondents strongly agreed,
17 (11.9%) respondents ordinarily agreed, 4 (2.8%) respondents being undecided, 14
(9.8%) respondents disagreed and 3 (2.1%) respondents strongly disagreed and a mean of
4.45, respondents agreed that inadequate power supply hinders the growth of SMEs.
Moreover, from the respondents responses which shows 26 (18.2%) respondents that
strongly agreed, 51 (35.7%) respondents agreed, 14 (9.8%) respondents being undecided,
43 (30.1%) respondents disagreed, while9 (6.3%) respondents strongly disagreed and a
mean responses score of 3.29, it is the respondents opinion that stringent conditions
51

attached bills discourage SMEs from accessing adequate power supply. Meanwhile,
respondents were of the view that higher or crazy bill charged by PHCN is a major
constraint that hinders the growth of SMEs. This was expressed in their responses where
12 (8.4%) respondents strongly agreed, 48(33.6%) respondents agreed, 15 (10.5%)
respondents were undecided, 51 (35.7%) respondents disagreed and 17 (11.9%)
respondents strongly disagreed to this assertion as well as a mean responses score of 2.91.
Finally, when asked from the respondents whether bribery and corruption are the greatest
challenge facing SMEs in generating adequate electricity for the growth of their business,
28 (19.6%) respondents strongly agreed, 49(34.3%) respondents agreed, 17 (11.9%)
respondents were undecided, 26 (18.2%) respondents disagreed and 23 (16.1%)
respondents strongly disagreed. Therefore, majority of the respondents agreed to this
assertion with the mean responses score of 3.23.

Table 4.3.3: Response on determining whether there is any identifiable problems that might
be against the effectiveness of small and medium scale industries in Nigeria
ITEMS

SA
(%)

A
(%)
52

U
(%)

D
(%)

SD
(%)

Mean

Std.
Dev.

The availability of electricity

facilities in most developing
countries is grossly inadequate
Lack of adequate water supply is the
major problem of SMEs
Poor state of road network in Nigeria
has affected the performance of
SMEs
Unreliable telecommunication
facilities among others also
constraint the effectiveness of SMEs
Bad management practice is a factor
impeding the effectiveness of SMEs

86
(60.1
)
45
(31.5
)
32
(22.4
)
62
(43.4
)
12
(8.4)

44
(30.8
)
39
(27.3
)
51
(35.7
)
58
(40.6
)
87
(60.8
)

3
(2.1
)
3
(2.1
)
8
(5.6
)
4
(2.8
)
14
(9.8
)

6
(4.2)

4
(2.8)

4.41

0.9
4

46
(32.2
)
28
(19.6
)
10
(7.0)

10
(7.0)

3.44

1.3
9

3.27

1.4
3

4.08

1.1
4

3.49

1.0
7

19
(13.3
)

24
(16.8
)
9
(6.3)
11
(7.7)

Source: Field Survey, 2016

As presented in table 4.3.3 above, it is the view of the respondents that the availability of
electricity facilities in most developing countries is grossly inadequate. This view is
reflected in the responses of 86 (60.1%) respondents who strongly agreed, 44 (30.8%)
respondents who agreed, 3 (2.1%) respondents who were undecided, 6 (4.2%)
respondents who disagreed while 4 (2.8%) respondents strongly disagreed as well as the
mean responses score of 4.41. Also, with 45 (31.5%) respondents strongly agreed, 39
(27.3%) respondents ordinarily agreed, 3 (2.1%) respondents being undecided, 46
(32.2%) respondents disagreed and 10 (7.0%) respondents strongly disagreed and a mean
of 3.44, respondents agreed that lack of adequate water supply is the major problem of
SMEs.
Moreover, from the respondents responses which shows 32 (22.4%) respondents that
strongly agreed, 51 (35.7%) respondents agreed, 8 (5.6%) respondents being undecided,
28 (19.6%) respondents disagreed, while24 (16.8%) respondents strongly disagreed and a
mean responses score of 3.27, it is the respondents opinion that poor state of road
53

network in Nigeria has affected the performance of SMEs. Meanwhile, respondents were
of the view that unreliable telecommunication facilities among others also constraint the
effectiveness of SMEs. This was expressed in their responses where 62 (43.4%)
respondents strongly agreed, 58(40.6%) respondents agreed, 4 (2.8%) respondents were
undecided, 10 (7%) respondents disagreed and 9 (6.3%) respondents strongly disagreed
to this assertion as well as a mean responses score of 4.08. Finally, when asked from the
respondents whether bad management practice is a factor impeding the effectiveness of
SMEs, 12 (8.4%) respondents strongly agreed, 87(60.8%) respondents agreed, 14 (9.8%)
respondents were undecided, 19 (13.3%) respondents disagreed and 11 (7.7%)
respondents strongly disagreed. Therefore, majority of the respondents agreed to this
assertion with the mean responses score of 3.49.

54

Table 4.3.4: Response on determining whether there is any identifiable roles of present
Government policy on SMEs Growth in Nigeria
ITEMS
Power has remained relatively stable
since the inauguration of the present
administration
Government participation in
assisting SMEs to secure stable
electricity in Nigeria is below
expectation
Government has institutionalized
monetary policies to enhance the
growth of small and medium
enterprise
Government support toward the
growth of SMEs is below
expectation
Government helps in providing
access to affordable source of
finance for SMEs
Source: Field Survey, 2016

SA
(%)
14
(9.8)

A
U
(%)
(%)
23
26
(16.1) (18.2)

D
(%)
56
(39.2
)
36
(25.2
)

SD
(%)
24
(16.8
)
9
(6.3)

51
43
(35.7) (30.1)

4
(2.8)

50
40
(35.0) (28.0)

8
(5.6)

43
(30.1
)

2
(1.4)

61
48
(42.7) (33.6)

14
(9.8)

12
(8.4)

8
(5.6)

14
(9.8)

34
(23.8)

47
(32.9
)

41
(28.7
)

7
(4.9)

Mea
n

Std.
Dev.

2.63

1.2
2

3.64

1.3
5

3.65

1.2
7

3.99

1.1
7

2.34

1.2
2

As presented in table 4.3.4above, it is the view of the respondents that the power has
remained relatively stable since the inauguration of the present administration. This view
is reflected in the responses of 14 (9.8%) respondents who strongly agreed, 23 (16.1%)
respondents who agreed, 26 (18.2%) respondents who were undecided, 56 (39.2%)
respondents who disagreed while 24 (16.8%) respondents strongly disagreed as well as
the mean responses score of 2.63. Also, with 51 (35.7%) respondents strongly agreed, 43
(30.1%) respondents ordinarily agreed, 4 (2.8%) respondents being undecided, 36
(25.2%) respondents disagreed and 9 (6.3%) respondents strongly disagreed and a mean
of 3.64, respondents agreed that government participation in assisting SMEs to secure
stable electricity in Nigeria is below expectation.
55

Moreover, from the respondents responses which shows 50 (35.0%) respondents that
strongly agreed, 40 (28.0%) respondents agreed, 8 (5.6%) respondents being undecided,
43 (30.1%) respondents disagreed, while2 (1.4%) respondents strongly disagreed and a
mean responses score of 3.65, it is the respondents opinion that government has
institutionalized monetary policies to enhance the growth of small and medium
enterprise. Meanwhile, respondents were of the view that government support toward the
growth of SMEs is below expectation. This was expressed in their responses where 61
(42.7%) respondents strongly agreed, 48(33.6%) respondents agreed, 14 (9.8%)
respondents were undecided, 12 (8.4%) respondents disagreed and 8 (5.6%) respondents
strongly disagreed to this assertion as well as a mean responses score of 3.99. Finally,
when asked from the respondents whether government helps in providing access to
affordable source of finance for SMEs, 14 (9.8%) respondents strongly agreed, 7(4.9%)
respondents agreed, 34 (23.8%) respondents were undecided, 47 (32.9%) respondents
disagreed and 41 (28.7%) respondents strongly disagreed. Therefore, majority of the
respondents disagreed to this assertion with the mean responses score of 2.34.

56

Table 4.3.5: Response on determining whether there is any identifiable roles of SMEs on
the Nigerian economy
ITEMS
SMEs create employment to the
teeming youths through business
opportunity
SMEs generate a viable source of
finance for the government
SMEs sustain the economy through
resources utilization
SMEs are soul and life wire of any
economy
SMEs promote an evenly distributed
of resources through active
utilization of the resources
Source: Field Survey, 2016

SA
(%)
102
(71.3
)
81
(56.6
)
43
(30.1
)
94
(65.7
)
53
(37.1
)

A
(%)
13
(9.1)

U
(%)
8
(5.6)

27
(18.9
)
58
(40.6
)
33
(23.1
)
59
(41.3
)

11
(7.7)
16
(11.2)

D
(%)
15
(10.5
)
14
(9.8)

6
(4.2)

20
(14.0
)
6
(4.2)

17
(11.9)

9
(6.3)

SD
(%)
5
(3.5
)
10
(7.0
)
6
(4.2
)
4
(2.8
)
5
(3.5
)

Mean

Std.
Dev.

4.34

1.1
8

4.08

1.2
9

3.78

1.1
4

4.44

0.9
6

4.02

1.0
3

As presented in table 4.3.5 above, it is the view of the respondents that SMEs creates
employment to the teeming youths through business opportunity. This view is reflected in
the responses of 102 (71.3%) respondents who strongly agreed, 13 (9.1%) respondents
who agreed, 8 (5.6%) respondents who were undecided, 15 (10.5%) respondents who
disagreed while 5 (3.5%) respondents strongly disagreed as well as the mean responses
score of 4.34. Also, with 81 (56.6%) respondents strongly agreed, 27 (18.9%)
respondents ordinarily agreed, 11 (7.7%) respondents being undecided, 14 (9.8%)
respondents disagreed and 10 (7.0%) respondents strongly disagreed and a mean of 4.08,
respondents agreed that SMEs generate a viable source of finance for the government.
Moreover, from the respondents responses which shows 43 (30.1%) respondents that
strongly agreed, 58 (40.6%) respondents agreed, 16 (11.2%) respondents being
57

undecided, 20 (14%) respondents disagreed, while6 (4.2%) respondents strongly

disagreed and a mean responses score of 3.78, it is the respondents opinion that SMEs
sustain the economy through resources utilization. Meanwhile, respondents were of the
view that SMEs are soul and life wire of any economy. This was expressed in their
responses where 94 (65.7%) respondents strongly agreed, 33(23.1%) respondents agreed,
6 (4.2%) respondents were undecided, 6 (4.2%) respondents disagreed and 4 (2.8%)
respondents strongly disagreed to this assertion as well as a mean responses score of 4.45.
Finally, when asked from the respondents whether SMEs promote an evenly distributed
of resources through active utilization of the resources, 53 (37.1%) respondents strongly
agreed, 59(41.3%) respondents agreed, 17 (11.9%) respondents were undecided, 9 (6.3%)
respondents disagreed and 5 (3.5%) respondents strongly disagreed. Therefore, majority
of the respondents agreed to this assertion with the mean responses score of 4.02.
4.4

Test of Hypotheses
Hypothesis One
H01:

Power supply does not have effect on the performance of small and medium scale
industries in Nigeria.

Table 4.4.1: Descriptive Statistics

N
The effect of power supply on
the performance of small and
medium scale industries in
Nigeria

Mean
143

4.1552

Std. Deviation

Std. Error Mean

.97357

.08141

As presented in table 4.4.1, the overall mean score of 4.15 indicates that power supply
have effect on the performance of small and medium scale industries in Nigeria.
58

4.4.1.1: One-Sample T-Test

T

The effect of power

supply on the
performance of small
and medium scale
industries in Nigeria

51.038

Test Value = 0
Sig. (2Mean
tailed)
Difference

df

142

.000

4.15524

95% Confidence Interval

of the Difference
Lower
Upper

3.9943

4.3162

As presented in table 4.4.1.1, the calculated t-test value is 51.04. This value is greater
than the critical t-test value of 1.657, i.e. t-cal (51.04) > t-critical (1.657). With p < 0.05,
this result is significant. Hence, the null hypothesis is rejected and the alternative
hypothesis accepted accordingly. Therefore, power supply have effect on the performance
of small and medium scale industries in Nigeria.
Hypothesis Two
H02:

Adequate power supply will not enhances sustainable growth of SMEs in Nigeria

Table 4.4.2: Descriptive Statistics

N
The enhancement of
sustainable growth of SMEs
in Nigeria through adequate
power supply

Mean
143

Std. Deviation

3.4168

1.20387

Std. Error Mean

.10067

As presented in table 4.4.2, the overall mean score of 3.42 indicates that adequate power
supply enhances sustainable growth of SMEs in Nigeria.

59

Table 4.4.2.1: One-Sample T-Test

T

The enhancement of
sustainable growth of
SMEs in Nigeria
through adequate
power supply

33.940

Df

Sig. (2tailed)

142

Test Value = 0
Mean
Difference

.000

95% Confidence Interval

of the Difference
Lower
Upper

3.41678

3.2178

3.6158

As presented in table 4.4.2.1, the calculated t-test value is 33.94. This value is greater
than the critical t-test value of 1.657, i.e. t-cal (33.94) > t-critical (1.657). With p < 0.05,
this result is significant. Hence, the null hypothesis is rejected and the alternative
hypothesis accepted accordingly. Therefore, adequate power supply enhances sustainable
growth of SMEs in Nigeria.
Hypothesis Three
H03:

Present government policy does not enhance SMEs growth in Nigeria.

Table 4.4.3: Descriptive Statistics

N
The role of present
Government policy on SMEs
Growth

Mean
143

Std. Deviation

3.2503

1.17353

Std. Error Mean

.09814

As presented in table 4.4.3.1, the overall mean score of 3.25 indicates that present
government policy enhances SMEs growth in Nigeria.

60

Table 4.4.3.1: One-Sample T-Test

T

The role of present

Government policy
on SMEs Growth

33.121

Df

142

Test Value = 0
Sig. (2Mean
tailed)
Difference

.000

3.25035

95% Confidence Interval

of the Difference
Lower
Upper
3.0564

3.4443

As presented in table 4.4.3.1, the calculated t-test value is 33.12. This value is greater
than the critical t-test value of 1.657, i.e. t-cal (33.12) > t-critical (1.657). With p < 0.05,
this result is significant. Hence, the null hypothesis is rejected and the alternative
hypothesis accepted accordingly. Therefore, present government policy enhances SMEs
growth in Nigeria.
4.5

Discussion of Findings
With regards to the hypothesis one which states that power supply does not have effect on
the performance of small and medium scale industries in Nigeria, the study discovered
that power supply have effect on the performance of small and medium scale industries in
Nigeria. This result is similar to the findings of Nasser (1989) on the assessment of power
failure on the manufacturing sector in Nigeria which reveals that power supply has
significant effects on manufacturing sector in Nigeria.
Also, the second hypothesis which states that adequate power supply will not enhances
sustainable growth of SMEs in Nigeria, the study found out that adequate power supply
enhances sustainable growth of SMEs in Nigeria. This result is line with the findings of
61

Subair and Oke (2008) which indicated that adequate power supply as a source of energy
is vital to the growth and development SMEs and economy at large.
Finally, with respect to the third hypothesis which states that present government policy
does not enhance SMEs growth in Nigeria, the result shows that present government
policy enhances SMEs growth in Nigeria. This result is corroborated with the findings of
Barros, Ibiwoye and Managi (2011) which stated that government policy positively
contributed to the growth of SMEs in Nigeria. Nigerian economy is characterized by
large informal sectors which rely heavily on electricity power to operate, entrepreneurs
who could not cope with the expensive alternatives had no other choice than to seek
alternative means of livelihood.

62

REFERENCES
Barros, C. P., Ibiwoye, A. &Managi, S. (2011). Nigeria power sector: Analysis of productivity.
Working Paper No. WP 10/2011/DE/UECE, School of Economics and Management,
Technical University of Lisbon.
Subair, K. &Oke, M.D. (2008). Privatization and trends of aggregate consumption of electricity
in Nigeria: An empirical analysis. African Journal of Accounting, Economics, Finance
and Banking Research,3(3), 18 27.

63

CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1

Introduction
This chapter presents the summary of findings from the analysis, the conclusion drawn
from the study and recommendations in line with the objectives of the study are given
based on the research findings. Thus, the research study examines the effect of electricity
supply on small and medium enterprises (SMEs) in Nigeria.
The study was conducted and reported in chapters; the first chapter introduces the
research topic, states the objectives of the study, explains the significance, and scope of
the study among others. The second chapter examines the review of relevant literature on
electricity supply on SMEs and gives conceptual framework and model of the study.
The third chapter was the research methodology in which a detailed method to conduct
the study was presented, it also state the research design to be used, population of the
study, sampling technique adopted, reliability and validity of the data collection
instrument among others. In chapter four, relevant data collected was analysed and
presented using descriptive statistics which includes frequency tables, percentages, mean
and standard deviation. Also, nonparametric statistical tools were used such as descriptive
statistics and t-test to measure mean difference and significant level of the variables with
the aid of Statistical Package for Social Science (SPSS).

64

5.2

Summary of Findings
Electricity supply is used in every home for domestic purposes and to enhance quality of
life. Also, in Nigeria, there is no doubt that the small and medium scale industries over
the year have been at the receiving end of the economic environment. Thus, electricity
supply is an essential service that enjoys protection from competition and consumers with
little or no choice. However, the purpose and objective of this study was to establish the
effect of electricity supply on small and medium enterprises in Nigeria with reference to
SMEs owners under Ikeja Local government area.
Therefore, the results from the findings reveals that power supply have effect on the
performance of small and medium scale industries in Nigeria. Power supply is the part of
infrastructure and the basic physical facility upon which all other activities in the system
significantly depend on most especially SMEs.
Also, the results from the findings found out that adequate power supply enhances
sustainable growth of SMEs in Nigeria. The prevention and routine maintenance of the
equipment for generation and distribution of power supply in Nigeria is very essential
towards enhancing sustainable growth of SMEs, as energy losses will reflect the poor
quality of the electrical system.
And finally, the result of the finding indicated that present government policy enhances
SMEs growth in Nigeria. An awareness should be created to the government to see the

65

extent to which infrastructural development are neglected in the country most especially
electricity supply that is hampering the performance of SMEs in meeting their potentials
and providing employment per unit investment capital, facilitating the development of
indigenous entrepreneurships, enhancing local resources utilization and value added
expanding non-oil exports at competitive prices, improving balance of payment position
and bring about disagreed overall growth and development of the state economy.
5.3

Conclusion
The study aimed to examines the effect of electricity supply on small and medium
enterprises (SMEs) in Nigeria. According to the result from findings, it can be concluded
that inadequate electricity services will constrain business operations because of the
country unethical and incessant supply of electricity which may be unavailable at a time
and available at the other. Therefore, securing this connection may be difficult and the
supply unreliable, even before its cost is considered. High quality and accessible
infrastructure encourages productivity, business growth and investment of SMEs, but
when it is poor and unreliable, businesses productivity and growth suffer.
Also, adequate, access and reliable electricity supply is widely considered to be vital
aspect of operations in most small and medium-scale businesses. Unreliable electricity
supply or electricity insecurity will affect several aspects of business operations. The
most significant impacts to productivity can be due to forced and unexpected halts in
manufacturing processes, including running assembly lines, using machine tools, or
producing textiles. Communications, delivery times, lighting and refrigeration are also

66

affected by electricity poor supply, with consequences for the routine operation of
businesses and their ability to ensure delivery times.
And finally, many small and medium-scale enterprises invest in their own standby
generators to ensure the stability of electricity supply for effective use, but these are often
expensive compared to electricity from the grid. Generators required some technical
expertise as well as reliable supplies of fuel and spare parts. Yet, in Nigeria the use of
own-generation by firms is reported to have increased in recent years. Therefore,
government should set strict policy towards regulating the stability and utilisation of
electricity in Nigeria, this to reduce the high cost of fuel consumptions of SMEs on
generators to run their daily businesses.
5.4

Recommendations
In the light of this study which was carried out to examine the effect of electricity supply
on small and medium enterprises in Nigeria with reference to SMEs business owners
under Ikeja Local government area, the following recommendations are made so as to
help to enhance its operation and be of great value to the organization.
Firstly, it is recommended that the reliability of the electricity supply can be more
important than having a connection in affecting SMEs production. Government should
make strict policy concerning the effects that electricity insecurity has on the operation
and output of manufacturing SMEs to promote action towards reducing negative impacts
in a number of ways.
Secondly, in the absence of a better quality supply, governments and electricity suppliers
(PHCN) should help SMEs by providing reliable load shedding schedules. Where

67

reliability is caused by lack of generation capacity, gaps between demand and supply can
be predicted, and load-shedding should be scheduled and advertised in advance to allow
SME operators to plan their production around outages. It may be necessary to focus on
reducing technical faults in existing transmission and distribution infrastructure as a
short-term priority over the long-term necessity to increase generation capacity in order to
provide load shedding schedules should be implemented.
Thirdly, the most obvious area for action is to improve the reliability of the electricity
supply, which itself needs to be better measured and monitored. This may require shortterm action to reduce technical faults, for example, through maintenance of the
transmission and distribution infrastructure, or it may require longer-term interventions to
expand generating capacity. In Nigeria where electricity consumption is highly unreliable,
the expansion of self-generation, generally a more expensive source of electricity than the
public grid should be adopted to indicate a willingness of SMEs to pay for reliable power
that may provide an opportunity for the government and the power company (PHCN) to
finance investments that will make the power supply more reliable.
The study also recommends that, sharing backup generators or renewable energy capacity
to achieve economies of scale could help more SMEs to access and use backup power
during outages. However, sharing a power supply generators requires good relationships
and trust between firms, and for some, the distance from other firms will be a constraint.
This can be addressed by providing the need or mechanisms to facilitate or promote
generator sharing.
Finally, an alternative supply of electricity can mitigate the effects of outages. SMEs
should therefore make provision for the alternative source of power such as solar energy,
68

inverter and reliable generator to safe and sustain their business. However, standby
generators are currently the preferred option for most SMEs firms, and as their
investment cost can make these alternatives unaffordable for some firms, particularly
smaller ones. To improve access to an alternative electricity source by reducing the
investment costs, measures such as credit schemes, tax or duty concessions, and shared
ownership arrangements, should be considered.
5.5

Suggestions for Further Studies

As an attempt to complement and enrich this study, it is suggested for future studies that a
research participant and sample size can be increased to allow for wider coverage of
responses and proper representation.

69

APPENDIX
Faculty of Business Administration,
Department of Business Administration,
University of Lagos,
Akoka-Lagos.

Dear Respondent,
QUESTIONNAIRE
I am a student of the above institution studying Management (M.Sc.) at postgraduate level.
I am conducting a research on Effect of Electricity Supply on Small and Medium Enterprises in
Nigeria: A study of Ikeja Local Government Area in partial fulfillment for the award of M.Sc.
degree, Business Administration.
Your kind and prompt response in completing the questionnaire herewith attached will be highly
appreciated.
I assure you that all responses will be treated confidentially and will only be employed for
academic purpose.

Yours sincerely,

Lawal, Idris A.
Researcher

70

SECTION A
Instruction kindly tick () the appropriate option or fill in your response in the spaces provided.
1.
2.
3.

Sex: (a)
Male ( )
(b)
Female( )
Age: a) 18-25 ( ) b) 25-35 ( ) c) 36-45 ( ) d) 46-60 ( ) e) 61 and above( )
Marital Status:
(a)
Single
( )
(b)
Married
( )
(c)
Others ( )

4.

Highest Educational Qualification

(a)
SSCE/GCE ( )
(b) OND\NCE
( )
(c) B.Sc./HND ( )
(d) M.Sc./MBA ( ) (e) Others (Please specify)

5.

Type of Business done

(a) Manufacturing ( ) (b) Service ( ) (c) Commerce and Trade ( ) (d) Building
Construction ( ) (e) Educational Services ( ) (f) Information Communication Technology
( )(g) Others specify.
How long have you been in this business?
(a)
Less than a year
( )
(b)
1 to less than 5 years ( )
(c)
6 to less than 10 years
( )
(d)
11 years to 15 years ( )
(e)
16 years and above
( )

6.

7.

Nature of business registration

(a)
No registration
(c)
Partnership
(e)
Public limited liability

( )
( )

(b)
(d)
( )

Business name registration

Private Limited Liability

( )
( )

8.

Sources of Power Generation

(a) PHCN
(b) Inverter
(c) Generator
(d) Solar
(e) Others
(f) Financial assistance from government agencies
(g)
Others specify.

9.

Monthly Expenditure on fuelling and maintaining backup generator

(a) #30, 000( ) (b) Between #40,000 ( ) (c) #50,000 ( ) (d ) #60,000 ( ) ( e) #70,000 ( )
Number of Staff you have at presently
(a) No staff ( ) (b) between 1-5 ( ) (c) 6-10 ( ) (d ) 11-50 ( ) ( e) 51-100 ( )

10.
11.

Monthly Electricity Bill

71

(a) Less than #10,000 ( ) (b) between #10,000 and#20,000 ( ) (c ) above #20,000 but less
than #30,000, ( ) (d) above #30,000 but less than #40,000 ( )
12.

Number of Days without power in a month

(a)
5- 10 days (b) 11-15 days
(c ) 16 days and above

13.

How would you rate the performance of your business on the following criteria (5 being
the highest performance and 1 being the lowest)
a) Inverter
5
4
3
2
1
b) PHCN
5
4
3
2
1
c) Solar System
5
4
3
2
1
d) Generator Set
5
4
3
2
1
e) Others
5
4
3
2
1

SECTION B
Please tick (o) as appropriate, the extent to which you agree with the questions below.
Key:

SA = Strongly Agree, A = Agree, U = Undecided, D = Disagree and

SD = Strongly Disagree.

S/
N

1
2
3
4
5

6
7
8

VIEW

S
A

What effect does power supply have on the performance

of small and medium scale industries in Nigeria
Output of SMEs per week when there is constant power is
high.
Power supply in Nigeria increases expenditure forsmall and
medium enterprise.
SMEs lose a lot of money when the light or power goes off.
Epileptic power supply has brought low productivity and
profit to SMEs
This irregular power supply has increases the cost of
production for SMEs
Will adequate power supply enhances sustainable growth
of SMEs in Nigeria?
SMEs are being discriminated against for the accessibility of
Power generation for their growth.
Inadequate Power supply hinders the growth of SMEs.
The stringent conditions attached bills discourage SMEs from
accessing adequate power supply.
72

SD

9
10

11
12

Higher or crazy bill charged by PHCN is a major constraint

that hinders the growth of SMEs.
Bribery and Corruption is a greatest challenge facing SMEsin
generating adequate electricity for the growth of their
business.
Are there identifiable problems that might be against the
effectiveness of small and medium scale industries in
Nigeria?
The availability of Electricity facilities in most developing
countries is grossly inadequate.
Lack of adequate water supply is the major problem of SMEs

13

Poor state of road network in Nigeria has affected the

performance of SMEs
14 unreliable telecommunication facilities among others also
constraint the effectiveness of SMEs
15 Bad management practice is a factor impeding the
effectiveness of SMEs.
Are there identifiable roles of present Government policy on SMEs Growth
16 Power has remained relatively stable since the inauguration
of the present administration.
17 Government participation in assisting SMEs to secure stable
electricity in Nigeria is below expectation.
18 Government has institutionalized monetary policies to
enhance the growth of small and medium enterprise.
19 Government support towards the growth of SMEs is below
expectation.
20 Government helps in providing access to affordable source of
finance for SMEs.
Are there identifiable roles of SMEs on the Nigerian economy
21 SMEs create employment to the teeming youths through
business opportunity.
22 SMEs generate a viable source of finance for the government.
23 SMEs sustain the economy through resources utilization.
24 SMEs are soul and life wire of any economy.
25 SMEs promote an evenly distributed of resources through
active utilization of the resources.

73