E Commerce In Smes In Nigeria Economics Essay

There are no cosmopolitan definition of SMEs that are accepted widely ( Mutula and Brakel 2006, p. 403 ) . The definition of SMEs varies across states and harmonizing to sectors ( like fiscal, labour etc ) suitableness but this is usually based on employment, assets or combination of the two ( Ongori and Lutham 2009, p. 94 ) .Various administrations, establishment and organic structures define SMEs otherwise depending on the intent, aim or usage. For illustration SME harmonizing to Organization for Economic Co-operation and Development OECD ( 2005 ) is considered to be independent houses that employ less than a given figure of employees. However, SMEs were classified in footings of size, and fiscal assets. Firms that have up to 250 employees are classified as little and average endeavors while little houses are those that have up to 50 employees and a house with 10 employees or less were regarded as micro houses severally.

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In the United States, the little concern disposal SBA ( 2011 ) a authorities section, defines a little concern utilizing ‘size criterion ‘ , as one that is independently owned and operated and meets employment or gross revenues standard develop by the bureau and the concern can non be dominant in its field, on a national footing. For most industries these criterions are as follows. This in add-on shows a similar tendency as in Nigeria, even if the exchange value makes the fiscal standards to be different ( Ayozie, 2006 )

Fabrication: – Number of employees range up to 1500, depending on the industry.

Retailing: – Small if one-year gross revenues or grosss are non over 2 million to 7.5million dollars.

Wholesaling: – Small if annual gross revenues are non over 9.5 to 22 million dollars

Servicess: – Annual grosss non transcending 2 million to 8 million dollars.

Harmonizing to the Central Bank of Nigeria study ( 2003 ) , Small graduated table houses are houses with a work force of 11 – 100 workers and a entire cost of non more than 50 million naira including working capital and excepting cost of land, while Medium scale houses was defined as houses that have a labour force of between 101 – 300 workers with a entire cost of over N50 million naira but non less than N200 million naira including working capital but excepting cost of land.

The Small and Medium Industries and Equity Investment Scheme ( SMIEIs ) , defined SME as an endeavor with a 200 million naira maximal plus base, with the exclusion of land and working capital and with a work force of non less than 10 employees and non more than 300 employees. Akabueze, ( 2002 ) .

Small graduated table concern, little graduated table industries and little graduated table entrepreneurship are used interchangeably to adult male a little graduated table industry house. Harmonizing to Ayozie ( 2006 ) , in Nigeria and worldwide, there are no in agreement definition of little concerns. A batch writers, bookmans, and schools have diverse thoughts as to the differences in capital spending, figure of employees, gross revenues turnover, fixed capital investing, available works and machinery, market portion and the degree of development, these characteristics every bit vary from one state to the other.

The Third National Development program of Nigeria ( 1975 – 1980 ) defined a little graduated table concern as a fabrication house that employs less than 10 people, or whose machinery and cost of equipment does non transcend N600,000

The Federal Government Small Scale Industry Development Plan of 1980 defined a little graduated table concern in Nigeria as any fabrication procedure or service industry, with a capital non transcending N150, 000 in fabrication and equipment entirely.

Many endeavors in Nigeria are categorized as little concern, most of which are in the commercial sector.


The function little and medium endeavors play in the development of state is really of import. SMEs have greatly contributed to the Nigerian development in footings of employment, growing and development, and selling of goods and services ( Ayozie O, 2006 ) . The Nigerian Government is turning to little and average graduated table industries and enterprisers as a agency of developing the economic system and work outing jobs ( Latinwo and Ayozie, 2010 ) . A great per centum of all registered companies in Nigeria are constituted by little graduated table industries and they have been in being for a long clip ( Ayozie, 2006 ) .

Around the universe, a batch has been said about SMEs. Besides there has been assorted topic of treatments, seminars, and workshops both locally and internationally about SMEs. Some authorities have specifically formulated policies to help the empowering, growing, development and public presentation of SMEs, while have assisted through loans and financial inducements ( Onugu, 2005 ) . Harmonizing to Central bank of Nigeria study ( 2003 ) , SMEs are really of import economic accelerator in developing and industrialised states, in developed states 98 % or more than belong to the Small and Medium graduated table sector. In Japan, 80 % of industrial labor force is employed by little houses, 50 % in Germany and 46 % in USA are employed by smaller concerns.

Harmonizing to the United Nations Industrial development Organization ( UNIDO ) , developing states can suppress poorness and inequality by democratising, deregulating, and liberalising the integrating of planetary economic system. Recent surveies have shown that SMEs contribute to over 55 % of GDP and over 65 % of entire employment in high income states besides that SMEs and informal endeavors account for over 60 % of GDP and over 70 % of entire employment in in-between income states ( OECD, 2004 ) .

SMEs are of import function participants in lending to the passage of agribusiness led economic systems to industrial 1s, SMEs aid in the soaking up of productive resources at all degrees of the economic system and contribute to the edifice of flexible economic system in which little and big houses are interlinked ( Fida, 2008 ) .

Harmonizing to Kongolo ( 2010 ) , SMEs are responsible for the turning forces of the largest turning economic system China in footings of national GDP part which amount up to 60 % variegation of merchandise, graduated table of assets and creative activity of employment.

A batch of people rely on the little and average endeavors either straight or indirectly. Social income distribution, employment and revenue enhancement gross, equal use of resources and stable household income are some of the important effects SMEs have ( Fida, 2008 ) .


Despite the prospective and tremendous part of little and medium sector to go on economic development, little houses in Nigeria still do non run into up to outlook ( Ihua, 2009 ) . Apulu and Lutham ( 2009 ) asserted that there are many factors that affect the public presentation of Nigerian SMEs and these factors add to their rate of failure. More so, as Costello and Sloane ( 2003 cited in Apulu and Lutham 2009 ) the acceptance of new engineerings by SMEs is delayed by internal obstructions of the house.

Ongori ( 2008 ) stated some challenges faced by little houses to be ; hapless substructure, bad administration, jobs of undersized market, legal and organisational barriers, unequal entree to recognition, and deficient regional merger. Previous surveies ( Ihua, 2009 ; Adenikinju, 2005 ; and Akpan-Obong, 2007 ) contributed to the factors that affect Nigerian SMEs and these factors are ( rather similar to that of Ongori, 2008 ) ; infrastructural insufficiency, corruptness, deficiency of support, cost of execution, unequal accomplishments and preparation, cultural factors, electricity restriction, deficiency of policy/institutional frame work, deficiency of owner-manager consciousness. Consequently, these factors will be discussed below.

Infrastructural insufficiency is classified as a major job to the development of the private sector harmonizing the Akpan-Obong ( 2007 ) . However he stated that the status of substructures, peculiarly telecommunications substructure, creates a major barrier to the acceptance of ICT in Nigeria. Corruptness being is a job around all over the universe and is non curious to Nigeria entirely. However the corruptness instance in Nigeria is really alarming and this affects the operations of SMEs one manner or the other ( Dike, 2005 ) .

Cost of Implementation as defined by Folunsho et al. , ( 2006 ) is the entire sum it will be a company to implement new engineerings. In their survey, it was stated farther that SMEs in Nigeria battle with the dearly-won execution of Information and communications engineering, therefore they ignore ICT and put their resources on thoughts that will give rapid turnover.

Lack of support and non use of ICT is another job faced by Small medium endeavors in Nigeria as this hinders their development ( Kuteyi, 2009 cited in Apulu 2009 ) . SMEs need to follow and use alteration to advance the growing of their concern. It was further stated that the credence of alteration, entree to fund and equal information engineering in concern environment will drive the growing of little medium houses in the state.


The economic system of developed and developing states depends on little and average endeavors and these SMEs are bettering their concern thoughts by instilling e-commerce Payne ( 2009 ) . Despite the prospective nature of Nigerian SMEs with characteristics of development of economic growing, engineering, and making more occupation chances. Surveies have shown that they can non follow e-commerce in their concerns because of deficiency of technological knowhow of director every bit good as unequal substructure, ignorance, corruptness poorness and security, Humphrey et Al, ( 2003 ) .

Harmonizing to a study conducted in 2002 of houses in the auto-components, nutrient and drink, electronic goods and technology fabrication sectors was conducted in Uganda and Nigeria, Oyelaran-Oyeyinka and Lal, . ( 2004 ) . The end was to detect grounds that influenced the e-business acceptance by SMEs, including microenterprises. The writers found that, overall, adoption degree of e-business was higher in the extremely skilled sectors of electrical and electronic goods than in the more labour intensive sectors of auto-components and nutrient and drinks. The Nigerian study covered 105 SMEs and microenterprises ( fewer than 10 employees ) in the technology sector. It was discovered that one tierce of the houses did non utilize any ICTs at all, chiefly those whose directors had a low criterion of academic makings. Besides organisations that implemented e-business at a higher degree were operated by directors who had technology backgrounds, and had more adept workers ( technology alumnuss ) among the workers. Their premise was that limited accomplishment degrees in SMEs were a cardinal factor for low ICT use.

The major obstruction for internet consumption in most companies in both developed and developing states is really similar. European, Latin American, African and Asiatic companies reported that internet security was a major reverse, after which came hapless web connexions. The determination showed that the ground why most companies have n’t gone electronic non because of proficient accomplishments and capacity deficit but because e-commerce depends on the ability to pull off the company and the educational degree of the owner ; illustrations from Asia and Africa ( Nigeria ) showed that houses where proprietors had received higher instruction and had direction accomplishments were more likely to utilize energetic equipment.


A batch of research workers have different definitions of Information and Communications Technology. Harmonizing to Apulu and Latham ( 2009 ) , Information and Communication engineering suggestion great chances such as information storing, recovering, processing, and sharing. Despite this its application by SMEs in both developed and developing states is plagued. In the context of this survey ICT would be at the same time used with eCommerce

The parliamentary office of scientific discipline and engineering ( 2006 ) defined ICT as any engineering that aids communicating and aids in capturing, processing and conveying information electronically. Some normally used ICT that were identified in many states include wireless, telecasting, and print media. More so, Hazbo et ‘ Al ( 2008 cited in Apulu and Lutham 2009 ) identified that ICT acceptance is important to SME as information and communicating engineering has become a agencies and enabler of organizational alteration. The method a company or house implements in communication, join forcesing and carry oning minutess with their clients, providers, and distributers via the cyberspace and the ability for the local promenade house to partake in digital economic system is referred to as Information and Communication Technology ( Goldings et ‘ Al 2008 ) .

Harmonizing to Pearson publication ( 2000 ) , ICT combines telecommunications, calculating, and broadcast medium and covers any merchandise that will hive away retrieve, manipulate, transmit, or receive information electronically including telephones, facsimiles, computing machines and telecasting.

Ongori and Migiro ( 2009 ) defined ICT as a broad scope of computerised information communicating engineering.



A study by OECD ( 2004 ) identified that cyberspace connexion occurs in all sizes of concern but little concerns are slower in the acceptance of new Technologies than big 1s. However the OECD ( 2004 ) studies stated some benefits of ICT and eCommerce applications across intra and inter house processes and dealing to be ; The betterment of information cognition direction in the house besides decrease in the cost of dealing for concern to concern ( B2B ) and concern to clients ( B2C ) . ICT are an effectual tool for recovering external communications and quality of service for established and prospective client.

Ongori and Migiro ( 2009 ) corroborate that the acceptance of ICT would transform concern operations in this globalization epoch by altering constructions of concern and the operation of concern. Therefore, for SMEs to turn and be successful, they must be able to vie and rapidly react enthusiastically to the changeless changing market. However what this implies is that SMEs need to be digitally connected in the market topographic point.


Harmonizing to Rasmussen ( 1997, cited in Ongori and Migiro 2009 ) a really of import factor for the endurance and success of a little house, is elusive entree to information in the planetary market

The effectual usage of ICT will enable SMEs trade internationally and vie favorably in with larger houses ( Ramsey et al. , 2003, p.255 )


It is so unfortunate that a figure of factors restrain SMEs from following ICT in developing states including Nigeria ( Apulu and Lutham, 2009 ) . There exists a digital divide which show that ICT acceptance varies between developed and developing states as cited by Golding ( 2008 ) in Apulu and Lutham ( 2009 ) . Harmonizing to Ihua ( 2009 ) there is a really broad engineering spread between developing and developed states. He went on to province that states are divided digitally because of deficiency of entree and handiness of ICT. Therefore, more visible radiation will be thrown to what the term digital divide means in this context.


Digital divide is defined as the unequal entree to Information and communications engineering ( Cayla et’al, 2005 ) . This divide looks at the spread in the diffusion of ICT between developing and developed states, educated and uneducated population or between privileged and unprivileged citizens ( Cayla et ‘ Al, 2005 ) . Surveies have shown that regional distribution of cyberspace users straight correspond with the disparity of different geographical countries ( Hung, 2003 ) . In seeking to bridge the digital divide spread Apulu and Lutham ( 2009 ) stated that there must be an apprehension of local demands conditions. In a study given by World Bank ( 2002 ) , it was argued that the rapid germinating electronic environment of developing states face chance cost if they delay greater entree to utilize of information substructure and information engineering ( IT ) which together make up ICT. Ani et ‘ Al ( 2007 ) defined digital divide as the spread that exists between those who have and those who do non hold entree to modern ICT such as the telephones, computing machines, cyberspace and related services. Harmonizing to Adeogun ( 2003 cited in Ani et ‘ al 2007 ) digital divide can happen between states, and this was described as an “ information gulf ” , he explained such divide occurs between developing and developed states and could besides be referred to as “ international digital divide ” . Digital divide can either take topographic point within a state or within an organisation or establishment ; every bit long as there a spread exist between those who do and those who do non hold entree to adequate degree of Information and communications engineering.

In a study conducted by Ani et ‘ Al ( 2007 ) on bridging the digital divide spread in Nigeria, it was identified that the most serious divide is that of instruction or literacy degree of citizens. The study showed that the most illiterate people in Nigerian towns or metropoliss were nescient about the being or utility of ICT. However, three factors that the study identified to impact the usage of cyberspace in Nigeria are:

Poor cyberspace services and substructures ;

Lack of fiscal capacity to pay ; and

In handiness to the cyberspace.

The hapless clip response is associated with traffic congestions due to inability of the state to hold its ain cyberspace exchange point ‘IXP ‘ ( Eni, 2005 ) . Ani et al. , ( 2007 ) explained that if the Nigerian authorities took necessary stairss to cut down the jobs the digital divide spread could be bridged. Besides, private sectors in Nigeria are majorly in charge of supplying internet entree and as these consequences in the high cost cyberspace handiness experienced by the citizens of the state. Government bureaus should do cyberspace installations available to the general populace.

Muir and Oppenheim ( 2002 ) stated that digital divide is non all about the spread that exists between those who have and those who do non hold entree to the cyberspace. Digital divide includes associated support services like preparation, instruction and a scope of of import legal, economic and societal schemes assorted authoritiess of developed states adopt to supply cosmopolitan information entree and besides effort to bridge the spreads that exist between these states.


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