GOVERNMENT EXPORT INCENTIVES AND EXPORT PERFORMANCE OF AGRO-PROCESSING SMES IN LAGOS STATE, NIGERIA

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GOVERNMENT EXPORT INCENTIVES AND EXPORT PERFORMANCE OF AGRO-PROCESSING SMES IN LAGOS STATE, NIGERIA

CHAPTER ONE:

INTRODUCTION

1.1 Background of the Study

The agro-processing sector plays a crucial role in the economic development of nations, particularly in fostering growth, creating employment opportunities, and contributing to foreign exchange earnings through exports. In Nigeria, the agro-processing small and medium-sized enterprises (SMEs) constitute a significant segment of the economy. However, despite their potential, these SMEs often face challenges in accessing global markets and maximizing export opportunities. Government export incentives are designed to address such challenges by providing support to businesses engaged in export activities.

The role of an effective export sector on an economy is of paramount importance in promoting growth and attainments of a nation’s developmental objectives. This is due to its capacity to create employment opportunities and improve income generation with consequent reduction in social costs of youth unemployment and other associated crimes (Akeem, 2011). Export is also an important means of ameliorating the balance of payment deficits and contributing to foreign exchange generation needed for general economic growth and development (Mohsen, 2015). A well-performing export sector particularly in the non-oil product market for a country like Nigeria, has a multiplier effect that enhances increase in the national income (Usman & Salami, 2008). However, while the oil sector according to the recent Central Bank of Nigeria data (CBN, 2017, p. 230)still maintains its dominance with 98.2 % of the total exports in Nigeria, the trajectory and vagaries of instabilities in the international market price of crude oil is a well-known challenge to the dynamics of economic growth and development in Nigeria. This is why many research experts (Ehinomen & Adeleke, 2012; Aladejare & Saidi, 2014; Osotimehin, Jegede, Akinlabi & Olajide, 2012; Onodugo, Ikpe & Anowor, 2013; etc.) are of the view that promoting the export potentials of the Nigerian SMEs in the non-oil products sector,will provide a betterand more reliable result in the ongoing economic diversification programme. However, despite that the SME-led non-oil sector employs over 84% of Nigerian labour force according to Premium Times Newspaper report (25.01.2019), its contribution to total exports stillstands at dismal and meager level of 7.70% (CBN, 2017, p. 230). Thiscontrasts widely with the average of 45% and 65% SMEs’ export contributions in the Asian Tigers and the European Unionrespectively (SMEDAN &NBS, 2013). Therefore, if Nigeria is to make progress in her quest for the SME non-oil export-led growth alternative, urgent and drastic action needs to be taken regarding proper identification of, and effective decision making on the core determinants of improved trade performance of her SMEs domestically and internationally.

Previous studies (Sanchez, 2011; Ajayi, 2016; Mpunga, 2016) have attributed the inability of the SMEs in developing countries to strategically exhibit proactive actions against the challenges of international business to low capabilities and resourcefulness of the firms. With reference to Nigerian economy, researchers (Onodugo et al., 2013; Ehinomen & Adeleke, 2012; Osotimehin, et. al., 2012, etc.) have cited poor entrepreneurial skills, lack of organizational capabilities and inconsistency in government policy on SMEs as the major reasons for poor SMEs’ non-oil export performance in Nigeria. However, while there is lack of empirical evidence to substantiate most of the claims in past studies, there is also, paucity of investigations on the determinants of non-oil export performance of the SME firms in the Southwest Nigeria. Consequently, given that entrepreneurial competence is the core determinant of every business achievement, and without which no reasonable performance outcome can be made (Salim, 2015), the massive influence of government on the economy through its influence on monetary, finance and trade regulations can also, not be overemphasized. This being the motivation for this paper therefore, the researchers have chosen to investigate in this work, the impacts of entrepreneurial competence and government support policy on SMEs’ non-oil export performance in the southwest Nigeria by anchoring on the resource-based view (RBV) and dynamic capabilities theory. The result of this study will serve the government and SME stakeholders with its findings as tools for improving the export performance of the sector.

1.2 Rationale for the Study

Nigeria, being an agrarian economy, has witnessed increased efforts to diversify its revenue sources and reduce dependence on oil exports. Agro-processing SMEs, being key players in this diversification agenda, stand to benefit from government export incentives. Understanding the relationship between these incentives and the export performance of agro-processing SMEs is essential for policymakers, practitioners, and researchers seeking to enhance the effectiveness of export promotion strategies in Nigeria.

1.3 Research Objectives

The primary objectives of this study are:

To assess the nature and extent of government export incentives available to agro-processing SMEs in Lagos State.

To examine the export performance of agro-processing SMEs in Lagos State.

To analyze the impact of government export incentives on the export performance of agro-processing SMEs in Lagos State.

1.4 Scope of the Study

This research focuses on agro-processing SMEs in Lagos State, Nigeria. Lagos State, being a major economic hub, provides a diverse and representative sample of agro-processing activities within the country. The study will assess the government export incentives available at both the federal and state levels and their influence on the export performance of these SMEs.

1.5 Significance of the Study

The study’s significance lies in its potential to inform policymakers, industry practitioners, and academics about the effectiveness of government export incentives in supporting agro-processing SMEs. By identifying gaps and areas for improvement, the research contributes to the enhancement of export promotion policies, ultimately fostering economic growth, job creation, and increased foreign exchange earnings.

1.6 Structure of the Thesis

This thesis is organized into five main chapters. Chapter Two provides an extensive review of literature on government export incentives, agro-processing SMEs, and export performance. Chapter Three outlines the research methodology, detailing the research design, data collection methods, and analytical techniques. Chapter Four presents the empirical findings and analyses, while Chapter Five offers a discussion of the results, conclusions, and recommendations for policymakers and stakeholders.

1.7 Conclusion

In conclusion, this introductory chapter sets the stage for a comprehensive exploration of the relationship between government export incentives and the export performance of agro-processing SMEs in Lagos State, Nigeria. The subsequent chapters delve deeper into the relevant literature, research methods, empirical findings, and discussions, contributing to the existing body of knowledge and informing policy decisions in the realm of export promotion for agro-processing SMEs

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