TABLE OF CONTENT

TITLE PAGE

CERTIFICATION

DEDICATION

ACKNOWLEDGEMENT

ABSTRACT

LIST OF TABLE

LIST OF FIGURES

CHAPTER ONE

1.1       INTRODUCTION

1.2       BACKGROUND OF THE STUDY

1.3       STATEMENT OF THE STUDY

1.4       RESEARCH QUESTIONT

1.5       OBJECTIVES OF THE STUDY

1.6       SIGNIFICANCE OF THE STUDY

1.7       STATEMENT OF THE HYPOTHESIS

1.8       JUSTIFICATION OF THE STUDY

1.9       SCOPE OF THE STUDY

1.10   DEFINITION OF TERMS

CHAPTER TWO – LITERATURE REVIEW

2.1    INTRODUCTION

2.2    SMALL AND MEDIUM ENTERPRISES EQUITY INVESTMENT SCHEME

2.3    BENEFITS OF BANK RECAPITALIZATION TO SMEs

2.4     CONTRIBUTION OF BANK RECAPITALIZATION IN THE PROMOTION OF SMEs

2.5    ADVANTAGES OF RECAPITALIZATION ON SMEs

2.6    DISADVANTAGES OF BANK RECAPITALIZATION ON SMEs

2.7    SOURCES OF FINANCING SMEs

2.8    THE GROWTH OF SMALL SCALE INDUSTRIES AND CONTRIBUTIVE SCHEME

2.9    DEVELOPMENT OF NIGERIAN MONEY DEPOSITE BANKS AND THE CONSOLIDATION OF THE SECTOR

CHAPTER THREE

RESEARCH METHODOLOGY

3.1    INTRODUCTION

3.2    AREA OF STUDY

3.3    RESEARCH DESIGN

3.4    POPULATION OF STUDY

3.5    SAMPLE SIZE

3.6    SAMPLE/SAMPLING TECHNIQUE

3.7    RESEARCH INSTRUMENT AND INSTRUMENTATION

3.8    VALIDATION OF THE INSTRUMENT

3.9    ADMINISTATION OF THE STUDY

3.10 METHOD OF DATA ANALYSIS

3.11 LIMITATION OF THE STUDY

CHAPTER FOUR –DATA, ANALYSIS, FINDINGS AND DISCUSSION

4.1    DATA PRESENTATION AND ANALYSIS

4.2    RESEARCH FINDINGS

4.3    DISCUSSION OF FINDINGS

CHAPTER FIVE- SUMMARY, CONCLUTION, RECOMMENDATIONS

5.1    SUMMARY OF FINDINGS

5.2    CONCLUTION

5.3    RECOMMENDATION

5.4    PROPOSAL FOR FUTHER STUDIES

REFERENCES

ABSTRACT

This study was on the study of recapitalized commercial banks and their SME customers in Nigeria. This study was guided by the following objectives; to determine the relationship between Commercial Banks and the performance of Small Business Entrepreneurs in Nigeria, to determine whether bank recapitalization led to increase in funds for financing SMEs and to examine the accessibility of Small and Medium Enterprise Equity Investment Scheme (SMEEIS) funds to SMEs. The study employed the descriptive and explanatory design; questionnaires in addition to library research were applied in order to collect data. Primary and secondary data sources were used and data was analyzed using the chi-square statistical tool at 5% level of significance which was presented in frequency tables and percentage. The respondents under the study were 60 SME owners Port Harcourt branch.

The study findings revealed that there is a positive significant relationship between commercial banks and the performance of small business owners in Nigeria although the relationship is 70% but if more effort is added at least they can be up 90% efficient in their assistance; based on the findings from the study, the Nigerian banks and indeed all stakeholders should improve on the funds made available to SMEs in Nigeria.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Obio/Akpor Local Government Area in the metropolis of Port Harcourt is one of the major centres of economic activities in Nigeria and one of the major cities of the Niger Delta, located in Rivers State. The Local Government Area covers 260 km2 and at the 2006 Census, held a population of 878,890 with about 70% of the population engaging in Small and Medium scale Enterprises (SMEs) or in agricultural production.

Small and Medium Enterprises (SMEs) play a vital role in the development of  any national economy. Due to their importance and the crucial role they play in the economic development and growth of any nation, much attention has been placed on the financing of small and medium enterprises, since they are major contributors to the economy of Nigeria. These enterprises are drivers of the economy; therefore policy attention has to be given to them especially in developing economies because of their impact on many sectors of the economy. Their impact is felt in the following ways: Greater utilization of local raw materials, employment generation, encouragement of rural development, development of entrepreneurship, mobilization of local savings, linkages with bigger industries, provision of regional balance by spreading investments more evenly, provision of avenue for self employment and provision of opportunity for training managers and semi skilled workers.

In Nigeria generally, credit has been recognized as an essential tool for promoting small and Micro Enterprises (SMEs), hence the need for the recapitalization of commercial banks in Nigeria. Bank recapitalization which was effective from 2006 is aimed at making Nigerian banks stronger and better positioned to finance all sectors of the economy including the major drivers of the economy which are Small and Medium Scale Enterprises.

In Obio Akpo, the local government has recognized that for sustainable growth and development, the financial empowerment of the people is vital. If this growth strategy is adopted and the latent entrepreneurial capabilities of this large segment of the people is sufficiently stimulated and sustained, then positive multipliers will be felt throughout the economy. To give effect to these aspirations, various policies have been instituted over time to improve rural and urban enterprise production capabilities Olaitan (2006).

The central Bank of Nigeria on July 6th 2004, announced the recapitalization of banking sector from N2 billion to N25 billion with effect from 1st January 2006. This was with a view to make the sector internationally competitive, sound and improve its ability to provide credit to all the productive sectors of the economy. In order to meet this obligation, banks embarked on strategies of mergers and acquisitions, floating of new shares and so on. At the end of the exercise, Twenty-five (25) new banks emerged. It was hoped that the consolidation will make the banks stronger to be able to provide large amount of funds to the productive sectors of the economy which is predominantly dominated by SMEs, thereby making them grow into large firms with enough resources to contribute to the economic development. Also, in December 2005, the CBN introduced new Micro-finance Policy (MFP) which was designed to be public and private sector driven.

The purpose of the policy was to strengthen community banks in order for them to be able to grant collateral and non-collateral loans to finance micro economic activities in the economy. The policy also aims at providing many people with access to financial services who otherwise will have no access to these services even in the grass root level.

A sound and well-developed financial system in a local government has been recognized to play the role of efficient financial intermediation, thereby helping to bolster general economic growth and development. Through their financial intermediation functions, financial institutions link up savers and borrowers. They also create liquidity in the economy, reduce information costs, provide risk management services, reduce the risks of financial transactions, diversify assets and mobilize savings from the surplus unit of the economy for investment into the most productive ventures.

These benefits motivate financial reforms in the local government where the system is considered undeveloped in order to increase the size of domestic savings, improve the efficiency of financial intermediation and enhance the effectiveness of the financial system. One of the main thrusts of bank recapitalisation in the country is to address the financial problem of the Small and Medium Enterprises (SMEs), which dominate the productive sector that forms the main driving force and the engine of economic growth and development of the economy (Soludo, 2006). SMEs in Obio Apko Local Government Area, falls in the category as defined in the CBN‟s revised Guidelines on Small and Medium Enterprise Equity Investment Scheme (SMEEIS), which are categorized as enterprises with a maximum asset base of N500 million (excluding land and working capital), and with no lower or upper limit of staff.

SMEs in Obio Akpo have a crucial role to play in the development of an economy, they are training grounds for local entrepreneurs, they encourage local savings and ensure equitable distribution of wealth thereby reducing rural- urban migration of human resources.

To this end, government should collaborate with private sector in order to create an enabling and conducive environment for SMEs, so that they can contribute positively towards the development of the economy.

To this end, it is the aim of this research to assess the effect of bank recapitalisation on funds availability and performance of SMEs in Obio Akpo Local Government Area in Rivers State

1.2 STATEMENT OF PROBLEM

The recapitalization development led to various financial activities in the Local government’s financial sector and the country as a whole with most banks initially opting for additional source of fund from the capital market via floating of shares.

However, the consolidation of the banking sector presented new challenges to the banks in Obio Akpo as they require more effort to control their costs and increase their efficiency; this in turn has affected the volume of credit facilities granted to small and medium scale enterprises in Obio Akpo.

According to Iloh (2012) the gap between deposit money bank deposits (DMBD) and commercial bank lending to SMEs from year 2000 upward (the year that saw the end of merchant banks) has increased. There is a wide margin between the two variables because while deposit money bank deposits rose very high, commercial bank lending to SMEs declined from 2004 to 2010. The gap between commercial bank deposits and its lending to SMEs reveals the shift in focus from lending to SMEs to lending to major investors (customers). Regardless of the direct impact of community/microfinance bank on SMEs, SMEs still cry for lack of funding and that is to say that lending to SMEs in Obio Akpo is still poor. This is so because their capital reserve and deposit are very small and insufficient to meet the needs of small and medium entrepreneurs.

It has been argued that SMEs in Obio Akpo have not performed well so far as their role in the economic growth and development of the state is concerned. The situation is even more disturbing when the performance is compared with that of many other states. Recent literatures that include Ganbold (2008) and Beck, documents evidence that the degree of vibrancy of SMEs significantly affects the level of poverty, unemployment and standard of living of the citizenry. Financial constraint is arguably said to be the main problem of SMEs. In recognition of the importance of SMEs, The Local Government has set up various credit schemes, programmes and institutions aimed at developing the sector and solving its financial predicament since the early years. Despite some recorded successes, the programmes seem to have failed to promote the development of SMEs in Nigeria to the expected level.

1.3 OBJECTIVES OF STUDY

The primary objective of the study is to examine the effects of bank recapitalization on small and medium scale enterprises in Obio Akpo Local Government Area of Rivers State. Specific objectives of the study are:

1. To determine the relationship between Commercial Banks and the performance of Small Business Entrepreneurs in Obio-Akpo Local Government area of Rivers State.
2. To determine whether bank recapitalization led to increase in funds for financing SMEs in Obio-Akpo Local Government area of Rivers State.
3.  To examine the accessibility of Small and Medium Enterprise Equity Investment Scheme (SMEEIS) funds to SMEs in Obio-Akpo Local Government area of Rivers State.

1.4 RESEARCH QUESTIONS

In-order to achieve the above stated objectives, the researcher formulated the following research questions:

1. What is the relationship between commercial banks and the performance of small business entrepreneurs in Obio-Akpo Local Government area of Rivers State.
2. Does bank recapitalization increase funding for SMEs?
3. How accessible are Small and Medium Enterprise Equity Investment Scheme Funds to SMEs in Obio-Akpo Local Government area of Rivers State?

1.5 HYPOTHESIS OF THE STUDY

The following hypotheses are formulated in line with the objectives and research questions of the study:

1. Ho: There is no significant relationship between Commercial bank and the performance of Small Business Owners in Nigeria.

Hi: There is a significant relationship between Commercial banks and the performance of Small Business Owners in Nigeria.

1. Ho: Bank Re-capitalization has not led to the increase of funds to SMEs

Hi: Bank recapitalization has led to the increase of Funds to SMEs

1. Ho: Small and Medium Enterprise Equity Investment Scheme funds are not easily assessable to SMEs

Hi: Small and Medium Enterprise Equity Investment Scheme funds are easily assessable to SMEs

1.6 SIGINIFICANCE OF THE STUDY

Robust economic growth cannot be achieved without putting in place well focused programmes to reduce poverty through empowering the people by increasing their access to factors of production, especially credit. The latent capacity of the poor entrepreneurs would be significantly enhanced through the provision of microfinance services to enable them engage in economic activities and be more self-reliant; increase employment opportunities, enhance household income and create wealth.

However, the lack of required financial support from the microfinance banks to Micro Business operators in Port Harcourt state has become a major concern in Nigeria. Hence, this study shall be relevant to policy makers in the areas of finding out the impact of micro financing on the small scale investors. Also, this study shall enhance further research in the subject area.

1.7 SCOPE OF THE STUDY

The scope of this research work is the recapitalized commercial banks and their SME customers in Obio Akpo Local Government Area. However, due to the fact that there are many SME’s, the research is limited to SME owners in Port Harcourt.

1.8 LIMITATIONS OF THE STUDY

Time and financial constraints were the major limitations of the study. Since the researcher could not afford the cost of reaching out to more banks, money became a challenge. The researcher was also engaged in other school activities which also limited the time used for the project.

1.9 DEFINITION OF TERMS

• Economy: An economy is the total sum of product and service transactions of value between two agents in a region, be it individuals, organizations or states. An economy consists of the economic system, comprising the production, distribution or trade, and consumption  of limited goods and services between two agents, the agents can be individuals, businesses, organizations, or governments.
• Mergers and Acquisitions: Mergers and acquisitions (abbreviated M&A) is an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture.
• Recapitalization: Recapitalization is a sort of a corporate reorganization involving substantial change in a company's capital structure.
• SMEs: Small and Medium Enterprises
• SMEEIS: Small and Medium Enterprise Equity Scheme

REFERENCES

• Olaitan, L. 2006. An empirical evaluation of the corporate strategies of Nigerian companies. Journal of African Business, 2(2), 45-75.
• Iloh V. C. 2012. The Effect of Bank Consolidation on Small and Medium Scale Enterprises in Nigeria. Port Harcourt: Longman Nigeria Plc.

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