ENCOURAGING ENTREPRENEURSHIP AS A WAY OF REDUCING UNEMPLOYMENT IN BAYELSA STATE
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
A consistent universal theory does not unilaterally exist for entrepreneurship, but it however consists of several different approaches including sociology, psychology, anthropology, regional science and economics. There is no common theoretical framework that exists to synthesize the different points of views. Some trials to develop multidimensional approach to entrepreneurship study the problems also mainly from the perspective mentioned above in some well-established disciplines.
In trying to combine economic and social context in the same multidimensional model we run into severe methodological difficulties. Many of the studies assume and generalize that all the entrepreneurs, including the owners of small businesses and high-growth innovative ventures, are similar. The diversity of entrepreneurial phenomena and new ventures should be taken into account in modeling entrepreneurship. However, no single taxonomy captures all of the important differentiating variables of entrepreneurship. But more accurate differentiation in categorizing entrepreneurs gives the possibility to combine different traditions and theories in approaching multidimensional phenomenon of entrepreneurship.
Unemployment is one of the developmental problems that face every developing economy in the 21st century. International statistics portray that industrial and service workers living in developing regions account for about two-thirds of the unemployed. (Patterson et al, 2006).
The Nigerian economy since the attainment of political independence in 1960 has undergone fundamental structural changes and challenges. The structural shifts have however not resulted in any significant and sustainable economic growth and development. Available data show that the Nigerian economy grew relatively in the greater parts of the 1970s, with respect to the oil boom of the 1970s; the outrageous profits from the oil boom encouraged wasteful expenditures in the public sector, dislocation of the employment factor and also distorted the revenue bases for policy planning. This among many other crises resulted in the introduction of the Structural Adjustment Programme (SAP) in 1986 and the current economic reforms. The core objective of the economic structural reform is a total restructuring of the Nigerian economy in the face of population explosion (Douglason G.U. and Gbosi A., 2006).
2.1 Unemployment in Nigeria
Gbosi (2006), defined unemployment as a situation in which people who are willing to work at the prevailing wage rate are unable to find jobs. This implies that not just anyone is to be counted as part of the unemployed labour force, in order to avoid overestimation of the official rate of unemployment.
The International Labour Organization (ILO) defines the unemployed in this manner, “the unemployed is a member of the economically active population, who is without work but available for and seeking for work, including people who have lost their jobs and those who have voluntarily left work (World Bank, 1998). The application of this definition across countries has been faulted, especially for the purpose of comparison and policy formulation, as countries characteristics are not the same in their commitment to resolving unemployment problems. (Douglason et al, 2006).
The rate of unemployment in Nigeria can be attributed to a lot of factors, including the depression in the 1980s and in the late 1970s. Economic downturn leads to the implementation of stabilization measures which include restriction on exports to increase dependency on Nigerian manufacturing enterprises the effects of which are mostly not positive.
The analysis by educational status in past years suggests that people who have been majorly affected by unemployment are those without basic education, however today, even the educated have acute troubles getting employed.
It is impressive to note here that, in 2003, Nigerian’s unemployment rate declined substantially to 2.3 percent. This decline was attributed to the various government efforts aimed at addressing the problem through poverty alleviation programmes. This decline also pointed to an increased number of people who got engaged in the informal sector. They also found that education of owners of business enterprises was a significant factor influencing efficiency. They conclude that the evidence of variations in efficiency is indicative of the need for more proactive actions to raise the level of efficiency and employment among the firms in the sample.
Employment generation has been seen as a means of alleviating poverty, increasing the level of economic activities which translate into economic growth. The situation of unemployment in Africa, Nigeria as a case study has been on the increase which has resulted in increase in social vices among other negativities. Although the Nigerian Government put in place policies and programmes which are meant to combat this menace, but due to inadequacies of implementation, these programmes have not made much impact.
According to Bloom, (2000) If Nigeria is able to overcome its challenges and collect its demographic dividend, we estimate that:
• Nigeria can obtain almost 12% increased GDP per capita over the default scenario by 2020, and more than 29% increased GDP per capita by 2030. With additional modest institutional improvements, the extra GDP per capita over the default scenario could be almost 13% by 2020 and about 31% by 2030.
• With the demographic dividend, Nigeria’s economy can be 3 times larger than today in 2030, instead of only 2 times larger without the demographic dividend.
• By realizing the demographic dividend, Nigeria can lift about 5.8 million more people out of poverty by 2020 and about 31.8 million by 2030, over and above the default scenario. With institutional improvements, the number of additional people lifted out of poverty can be 34 million by 2030.
• By increasing investment in human capital as fertility rates decline, Nigeria could increase GDP by nearly 50% and sustain that gain indefinitely.
But to realize its demographic dividend, we estimate that Nigeria will need to create around 24 million new jobs in the next decade and around 50 million new jobs over 2010- 2030. Furthermore, the jobs will have to be productive. This will require increasing Nigeria’s human capital which cannot be achieved without strong investments in health, education, gender parity. In particular, the role of education is so closely tied together with health, gender parity and institutions that any specific intervention that ignores the other three aspects is very unlikely to work. Even if some benefits are realizable in the short term, they will not be sustainable. (Bloom, 2010)
According to the Northern Illinois University Outreach (NIU, 2005); higher education has historically included economic development as part of its core mission. Colleges and universities have allocated fiscal, physical, and human resources and created entrepreneurship systems within the institutions to advance economic development. Senior administrators provide strong, visible leadership designed to:
Create a quality workforce by growing, training, and attracting the finest talent
Support current business and industry
Improve learning and teaching from pre-school through graduate school
Take strong and visible roles in regional initiatives
Disseminate research and promote technology transfer
Enhance the technology infrastructure
Promote livable communities
Employ a diverse workforce
2.1.2 Entrepreneurship Development and Training Institutions
The introduction of entrepreneurship education in tertiary institutions in Nigeria in 2007/2008 academic section was received with so much expectations. This is perhaps due to the fact that government’s past efforts toward the reduction in youth unemployment and poverty in the country had recorded minimal success (Okojie, 2008; Osibanje, 2006). However, many years into the implementation of the policy, not much can be said to have been achieved as unemployment is still sowering higher in the country. So many problems have been identified to be responsible for the situation. From the perspective of institutional deficiency, Kaegon and Nwogu (2012) observed that entrepreneurship development centers located within the tertiary institutions where the students are being trained to acquire knowledge and develop requisite skills for managing businesses, do not have the necessary facilities and infrastructure that would make the centers function effectively. In support of this, Nwosu (2009) observes that the trainees in those institutions are never introduced to successful small enterprises nor are they taught the rudimentary and practical entrepreneurial attitudes which are the essential components in the critical formative years of the trainees. Therefore lack of opportunities to become familiar with entrepreneurial and managerial tasks during the period of training will not allow them to fully appreciate the benefits of entrepreneurial education while in school or after school they added. There is also the issue of funding and inadequate manpower. From literature, it could be seen that the government has less commitment to the policy and the instructors in the programme has less capacity to teach the courses under the programmes. Okebukola (2009) posits that the curriculum of learning is not practical oriented and as such the cooperation of the trainee could not be enlisted.
As Akpan and Etor (2009) have noted, the initiative to teach students in tertiary institutions entrepreneurship, is a move in the right direction but the government should move a step further by showing the necessary commitment to the implementation of the policy through proper funding and repositioning of the institutions to make them responsive to the needs of the trainees so that the trainees can show interest in the programme. They noted that at the moment, the trainees do not see the courses under the programme beyond the required courses they are supposed to pass to make up the required credit load for achieving the degree or certificate in view, and not necessarily for acquiring entrepreneurial skills that will enable them start up businesses for self employment after graduation.
Entrepreneurship Development and Cost of Doing Business in Nigeria
The huge deficit in infrastructure, especially power supply has made business establishment in Nigeria very unattractive. The prospective entrepreneurs have been greatly discouraged by unfavourable business environment. Salami (2011) observes that the problem also include poor access to credit due to collateral demand and high interest rates that are always from 20 percent and above as well as lack of water supply and bad roads network. Other problems are all kinds of illegal charges: rates and levies from different levels of government and their
agents on small scale businesses that are yet to find their footing (Duru, 2011). For this reason, many would-be entrepreneurs have had their dreams dashed because they could not cope with the demands of the business environment. As Hillary (2012) has noted, the small time business operators who did not sustain production on the alternative sources of power such as generators or solar panels, have had their businesses shut down completely. This is because when production cost increases, attempt to recover cost of production with marginal profit leads to increase in the prices of such goods and services thereby making them very uncompetitive in the market and it is obvious that without revenue, no business can survive. Therefore, the factors stated above has really hindered the development of entrepreneurship in Nigeria.
2.1.3 Government Incentives and Entrepreneurship Development
Concerning incentives, the government can play a very significant role by designing an incentive structure to attract both the practicing and prospective entrepreneurs to invest and run their businesses with relative ease. Dike (2009) is of the opinion that incentive could be in the area of tax-holidays of some years for some categories of businesses with small capital outlay, removal of collateral and high interest rates, supply of water, roads network and constant electricity in the industrial clusters as well as reduction in the length of processes for new business registration. He noted that such incentives would no doubt woo investors and lead to development of entrepreneurial activities in the country.
In the opinions of Inyang and Enuoh (2011), government recognizes the strategic role she should play in the development of entrepreneurship in the country but the will to match policies with actions has been lacking. They observed that government should provide business friendly environment by providing the necessary infrastructure and a framework of enforceable competition, law that discourages monopoly and unfair competition as well as by intellectual property rights that protect a firm’s valuable but often intangible, knowledge assets. In the same vein, Adegun and Akomolafe (2013) have reiterated that government should create an enabling environment that reduces the barriers to market entry. They stated further that government should also invest in diverse sources of risk capital to fund entrepreneurs while providing the fiscal incentives for investors to provide the needed funding. This way, they remarked, development of entrepreneurship in the country would be accelerated.
2.1.4 The Prospects of Entrepreneurship Development in Reducing Unemployment
Ogundele, Akingbade and Akinlabi (2012) have stated that contribution of entrepreneurship training and education on unemployment through youth empowerment will be much significant if entrepreneurship is encouraged at all levels in the economy. Also, Akpama, Esang, Asor and Osang (2011) have observed that through entrepreneurial studies, which is inter-disciplinary training that focuses on the acquisition of relevant skills needed to start and run a new business venture, unemployment and poverty can be reduced. As Onyeizugbe, Orogbu and Oyigbo (2015) have observed, attempts to provide solution to societal problems often set processes in motion such that the opportunities for engaging human efforts called job creation are provided. They noted that jobs are created when firms established by entrepreneurs employ people with requisite skills to occupy vacant positions. To Tijani- Alawiye (2004), entrepreneurs successfully run innovative enterprises, nurture them to growth and sustainable level so that more hands can be engaged in the running of the enterprise. Through such processes, he remarked, job opportunities are created.
Entrepreneurship development affords the youth the opportunity to be productively engaged so as to divert their attention from negative vices such as crime, militancy and so on. According to Rasmussen and Stroheim (2005), its major role is wealth creation. Persons engaged in entrepreneurship, either on their own efforts on inside an organization pursue opportunities without regard to resources under their control. Also, Enaohwo (2011) emphasizes the need for youth entrepreneurial empowerment to harness their potentials and intellectual creativity. This, to him, is because its potency is capable of lowering unemployment and poverty level and elevating living standards and quality of life of Nigeria.
2.1.5 Who is an Entrepreneur?
An entrepreneur can be defined as an innovating individual who has developed an ongoing business activity where none existed before. Meredith (1983) defined an entrepreneur as a person or persons who possesses the ability to recognize and evaluate
business opportunities, assemble the necessary resources to take advantage of them and take
appropriate action to ensure success. Entrepreneurs are people who constantly discover new markets and try to figure out how to supply those markets efficiently and make a profit. S/he is a person that searches for change, responds to change, and exploits change by converting change into business opportunity.
2.1.6 Objectives of Entrepreneurial Education
Entrepreneurial education according to Paul (2005) is structured to achieve the following objectives:
1. To offer functional education for the youth that will enable them to be self-employed and self-reliant.
2. Provide the youth graduates with adequate training that will enable them to be creative and innovative in identifying novel business opportunities.
3. To serve as a catalyst for economic growth and development.
4. Offer tertiary institution graduates with adequate training in risk management.
5. To reduce intensity of poverty in the communities, societies and country.
6. Create employment generation.
7. Reduction in rural-urban migration.
8. Provide the young graduates with enough training and support that will enable them to establish a career in small and medium sized businesses.
9. To inculcate the spirit of perseverance in the youths and adults which will enable them to persist in any business venture they embark on.
10. Create smooth transition from traditional to a modern industrial economy.
2.2 Theoretical Framework
The theory upon which this study is anchored is the psychological theory of entrepreneurship propounded by McClelland in 1961. McClelland introduced the concept of need for achievement and goal setting. He argues in his book “The Achieving Society”, that the drive towards achievement is the basis of activity for most entrepreneurs. He used the Jews in his illustration. According to him, the Jewish child is shown from the beginning that he has to maintain and remain on top in order to counteract the attitude of the society to him. McClelland concludes that because of this method of rearing which the Jews operates, they are always on top and strive for excellence wherever they found themselves. McClelland’s belief is that achievement motivated people are generally those who make things happen and get results and this extends to getting results through the organization of other people and resources. The implication is that doing things better when the requisite skills must have been acquired, will naturally open up ideas and job opportunities through the expansion of business ventures to eventually absorb the army of unemployed youth in Nigeria.
2.3 Empirical Review
Anyadike, Emeh and Ukah (2012) conducted a study on Nigeria’s growing unemployment situation and how it is increasingly dwindling the potentials of the country, especially following the official figures of the National Bureau of Statistics that puts the figure at about 50 million Nigerian youth in 2011. The study found that entrepreneurship can generate enough employment opportunities to mitigate the rising rate of unemployment in Nigeria. It was concluded that the government should make skills development for entrepreneurial activities a priority in Nigeria.
In a similar study, Taiwo (2014) carried out an empirical research on impact of entrepreneurship development on job creation in Nigeria. He found out that in any given economy, entrepreneurship development always give birth to job creation which encourages the people to do something that will better their lives and the country at large. He concluded that job creation or employment opportunities in any economy can be traceable to entrepreneurship training and development.
Okoye, Iloanya and Udunze (2014) carried out research work on the extent to which entrepreneurship in Nigeria has helped to reduce youth unemployment. They study showed that government policies and initiative have not affected the “transformation question”. This is due to the increase in the rate of corruption, inadequate funding and maladministration. They concluded that entrepreneurship in the country is supposed to be an engine of growth and job creation, innovation and diversity but unfortunately it is not because of all the inadequacies listed above. They concluded also that the Nigerian entrepreneurs have a long way to go before they can actually drive the desired change in the economy.
Onyeizugbe, Orogbu and Oyigbo (2015) carried out a study on entrepreneurial development and job creation in selected local government areas in Enugu State, Nigeria. The study was meant to determine the extent that innovativeness affects youth empowerment in the selected LGAs. The study which was designed as correlational study found that innovativeness has no significant relationship with youth empowerment. It was concluded that government should pay more attention to the issues of entrepreneurship for job creation. Similarly, Ekong and Ekong (2016) did a study on skills acquisition and unemployment reduction in Nigeria, using the National Directorate of Employment as the study area. The study period was 1987-2012. Designed as a descriptive survey, the study found that positive link exist between skills acquisition by NDE and unemployment reduction in Akwa Ibom State.