ABSTRACT
The failure of previous financial policies of governments to achieve desirable economic growth was a concern that demands restructuring of the system, especially in the glare of an ailing economy. The introduction of the Structural Adjustment Programme (SAP) in 1986 and the privatization programme in 1989 were in response to failed institutional measures to promote and galvanize the small and medium scale enterprises(SME) sector over a long period of time (Rwigema and Venter, 2004).
The prevailing economic conditions in the first few years of SAP (1986-1988) such as rationalization of government expenditure, import restrictions, and financial liberalization saw a spread of Small and Medium Enterprises (SMEs) and a positive attitude reorientation towards made in Nigeria goods, as there was emphasis for consumers and producers to look inward, driven by an import substitution orientation. Indeed that era saw the emergence of Nnewi auto technology and Aba shoe production SME clusters.
One remedy is to promote SMEs as springboards towards building viable LEs via the application of more sustainable equity-based financial strategy. More so, facts that emerged from the appraisal of the various past financing schemes and initiatives for SMEs showed that finance is by no means the only or most important constraint to SME development. Other constraints include inadequate entrepreneurship and managerial skills, financial indiscipline, enabling environment for investment, and weak monitoring mechanism, (Sanusi 2003). This appraisal led to a change in financing structure from debt to equity financing. This new strategy is known as the Small and Medium Enterprises Equity Investment Scheme (SMEEIS). At inception, this scheme was applauded as the solution to the entrepreneurial problem in Nigeria because it is considerably different from previous windows that were debt-based.
Precisely, this scheme involves the use of venture capital (VC) financing, and financial history shows that many large corporations that encompass the world today actually started out with VC financing, e.g. Frederick Smith, Founder of FedEx started out with VC funding of $72 million in 1973, (Hisrich and Peters 1998). VC is a subset of private equity capital, which brings bright ideas and breakthroughs to reality. In other words, Nigerian SMEs that work closely with venture capitalists could transform to large enterprises within an acceptable period of time given the essential ingredients of VC financing. Again, entrepreneurs could receive VC financing at different stages (seed, start-up, expansion, development or bridge finance), implying that VC financing can sustain an enterprise to the point of initial public offer (IPO).
The essential feature of this new window is its commitment towards effective delivery of financial resources, managerial skills and technical expertise. Could this be a reality or another myth in Nigeria, and how would it affect the society? These are some questions that require answers after a reasonable period of stock-taking since the commencement of the Small and Medium Enterprises Equity Investment Scheme (SMEEIS) in Nigeria.
TABLE OF CONTENT
CHAPTER ONE
INTRODUCTION
CHAPTER TWO
LITERATURE REVIEW
CHAPTER THREE
RESEARCH METHODOLOGY
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
BIBLIOGRAPHY