This research titled “Impact of Government Policies on Entrepreneurship and Economic Development in Ebonyi State: A Study of Relocation Policy of Abakaliki Rice Mill” was aimed at ascertaining the extent to which high tax rate policy has affected the growth of small scale businesses in Ebonyi state, examining the extent to which poor infrastructure has hindered the growth of business enterprises in Ebonyi State, and analyzing the extent to which the Relocation policy of Abakaliki Rice Mill has promoted rice production of the industry among others. This study adopted the “Infant Industry Theory” propounded by Fredrick Rich in 1841. Descriptive survey research design was adopted to study a population of 2046 which was reduced to 334 using Taro Yamene’s formula. Data for this study were collected from primary and secondary sources. Questionnaire instrument was used for data collection. The simple percentage method and frequency distribution tables were used to analyze the responses from the questionnaire instrument whereas the statistical chi-square tool was used in empirical testing of the hypothesis that guided the study. This study revealed that high tax rate policy has significantly affected the growth of small scale businesses in Ebonyi State; poor infrastructure has hindered the growth of business enterprises in Ebonyi State; and the Relocation Policy of Abakaliki Rice Mill has enormously promoted rice production in the industry among others. The implication being that if government does not channel favourable policy measures towards the promotion of entrepreneurship, economic development in the state will become a mirage; hence, this study recommends that Ebonyi State Government should make favourable tax policies that will promote the establishment, survival and growth of entrepreneurship in the state; there is urgent need for government to embark on aggressive infrastructural development policies in the state in order to promote the development of entrepreneurship and economic development in the state, among others.
CHAPTER ONE INTRODUCTION 1.1 Background to the Study
Nigerian government has over the years demonstrated concerted efforts towards the development of entrepreneurship and the nation’s economy. These efforts have been displayed via various policy actions at various periods and in various forms in the political and economic history of the nation. The historical under-pining of government policies towards entrepreneurial development in Nigeria can be traced according to Ofoegbu (2013) to the early post independence Nigeria when the government realized the need to empower indigenous entrepreneurs to own and manage business enterprise in the country and reduce foreign domination of the nations’ economy. As a mark off, government introduced the indigenization policy which was aimed at transpiring the ownership and management of wither to various foreign and multinational companies from the foreigners to indigenous Nigerians and at the same time, promote the spirit of entrepreneurship among Nigerians for more economic independence and development (Nwankwo, 2014). In 1973, a more pragmatic effort was demonstrated by the government through the establishment of the Nigerian Bank for commerce and industry (NBCI) which was charged with funds lofty responsibilities of providing adequate funds for short and long term financing of entrepreneurial ventures, promoting entrepreneurial skills and maintaining favourable environment for entrepreneurship to boom among others (Nwafor and Ude, 2015). In their words, the bank was charged with various responsibilities ranging from the provision of equity and loanable funds to indigenous persons, institutions and organization for medium-and long term investment in industry-commerce and entrepreneurship. The bank therefore supported industrial, agro-based commercial and service entrepreneurships by providing them equity and loan services feasibility studies, management consultancy among others.
Within the same period, government also channeled policy efforts towards the area of import substitution and export promotion (Ede, 2016). In his view, the export promotion and import substitution policies of government were geared towards promoting local production of goods, banning the importation of goods that are locally manufactured as a way of promoting local entrepreneurship and promoting domestic market. In view of this policy effort, government in 1977 introduced the Nigerian enterprises promotion Act which classified enterprises in Nigeria into three categories-those that most be wholly owned by Nigerians, those Nigerians where to have at least 10% of shares, and those which Nigerians were to below 60%. This policy motivated the spirit of entrepreneurship among Nigerians as at that time (Nwafor and Ude, 2015).
In 1960s, there was the world’s economic depression which affected all economics of the world. As a way of addressing the menace, government established the National Directorate of Entrepreneurship (NDE). In 1986 as a panacea with the primary motives of creating employment, promoting entrepreneurship and entrepreneurial skills development (Ogbuagu, 2016). Progressively, government through her policy actions introduced the small and medium Enterprises Equity investment scheme, in 2002, the Bank of industry (BOI) was established to accelerate the development of entrepreneurship through the provision of loan, equity finance, entrepreneurial skills and management services more so, numerous other policy effort of government aimed at entrepreneurial and economic development has taken other dimensions in promoting initiatives that built business confidence, ideas technological support, etc. according to Nwankwo (2014) government has promoted free access to markets, prompt registration advisory services to business, entrepreneurial skill, and acquisition provision of infrastructural facilities, export incentives, monetary and fiscal policies among others.
Ihugba, Odii and Njoku (2015) however, lamented that government policies aimed at entrepreneurial and economic development in Nigeria have been terribly in successful as a result of overbearing bureaucratic procedures, corruption, and policy inconsistency dilapidating infrastructure among others. Hence, the lofty objectives of various policy efforts over the years have suffered from impotency as a consequence of those factors.
It is unarguable that entrepreneurship has significantly promoted development in Nigerian economy. Tracing from the post colonial era, it has employed many Nigerians, increased government revenue generation, engendered productivity, creativity, food provision capacity building and manpower development among others (Ede, 216). By implication, Nigeria’s economic growth has depended largely over the years on the contributions entrepreneurship outputs from various sectors of the economy.
Conversely, Okpo (2017) wrote that poor conceptualization and implementation of government policies, multiple taxation policies, poor financing/financial management, inadequate infrastructure facilities, poor management, and poor entrepreneurial skills among others in no small have over the years bedeviled the entrepreneurial development efforts of government at all levels including Ebonyi state.
Specifically speaking, Ebonyi state government like any other state government in Nigeria has since its creation in 1996 devised various policies geared towards entrepreneurial development in the state. One of such state government policies was the Relocation policy of Abakaliki Rice Mill introduced in 2012. In a similar vein, Eze (2012) argued that in 2011, the state government promoted agricultural entrepreneurship in different aspects of agricultural production and consequently, disbursed hug amount of loan facilities to them in order to enable them start up similarly, under the urban renewal policy of 2012 the state government relocated the Abakaliki Building materials to Nkwagu in Izzi Local Government Area, Abakaliki Rice Mill to the three senatorial zones of the state among other actions. In evaluating the context of development, Ugo (2014) wrote that the state government formulated the Ebonyi state information and communication technology (ICT) policy in 2014. According to her, the policy focused on the following areas agriculture, education, health, infrastructure, e-governance, employment and finance. The policy was aimed at addressing vital issues such as tacking factors and challenges involved in ensuring social and economic growth is rapid, sustainable, widespread and inclusive for the state and its people, ensuring that the state becomes information based has knowledge about the development in the society, etc. furthermore, the policy intended at addressing how the state will exploit and tap into the benefits of the information revolution to facilitate wealth creation, poverty reduction, employment generation, wealth redistribution, sustainable development and global competitiveness (Ugo, 2014). Specifically for entrepreneurs, she maintained that the ICT policy was designed to offer endless possibilities for innovation; local entrepreneurs are more likely to identify new products and services that match local needs than big multi-national companies. It has become important therefore in creating local and commercial laws and tax regimes and tariffs to estimate the local ICT private sectors as well as to create a predictable for external investment which will be needed to expand infrastructure (Ugo, 2014) Aside these, several infrastructural development policies were adopted over the years in encouraging entrepreneurship and economic growth.
Ebonyi Government’s policy on Abakaliki Rice Mill was initiated in 2012 during the administration of Martin Elechi. In the policy, the state Government according to Ede (2016) constructed three ultra-modern Rice Mill industrial clusters in three senatorial zones of Ebonyi state and decided to relocate the Abakaliki Rice Mill the three newly constructed clusters at Onu-Igboji in Ikwo Osso-Edda in Afikpo South and Iboko in Izzi Local Government Areas of the state. The policy was highly challenged abinitio by the entrepreneurs of the Abakaliki Rice Mill who challenged this policy in a legal suit up to Enugu high court of Appeal. However, in recent times, the Ebonyi state House of Assembly has passed a nation authorizing the relocation of the Abakaliki Rice Mill clusters. The Revocation policy was approached more diplomatically by the present administration on assumption of office in May 2015 where they approached the Rice Mill owners for an amicable resolution of the impass and this resulted in the withdrawal of the, matter from the court. Hence, the policy ensures that there is decongestion of development in the state, optimal functionality of the new clusters among other, the new industries however, produce the popular Abakaliki Rice packaged as Ebonyi Rice World which is consumed and exported across and beyond Nigeria.
1.2 Statement of the Problem
Despite the recognized impact of government policies on entrepreneurship and economic development in Ebonyi state, it has become a source of concern for government industrial and policy administrators that there has been poor economic development in Ebonyi state. Entrepreneurship on the other hand has not yielded desired impact on the economic development of the state, as such; this menace is attributable to numerous factors such as poor policy implementation processes, in adequate financing of government policies to address the entrepreneurial needs of the state multiplicity of taxation among other. Each of the factors above has exerted palpable consequences on government policies.
However, the major motivating concern of this study is the inability of government entrepreneurial policies to induce economic development in Ebonyi state. As noted in the background analysis, Ebonyi stat still remains one of the most underdeveloped states in Nigeria despite the vagaries of Government policies over the years on entrepreneurial and economic development. In view of the foregoing, the following questions become imperative to guide the study.
1. To what extent has high tax rate policy affected the growth of small scale businesses in Ebonyi State?
2. To what extent has inadequate power supply hindered the growth of business enterprises in Ebonyi State
3. To what extent has the Relocation Policy of Abakaliki Rice Mill promoted rice production of the industry?
1.3 Objectives of the Study
The broad objective of the study is to examine the impact of government policies on entrepreneurship and economic development of Ebonyi stat with particular reference to the Relocation policy of Abakaliki Rice Mill. Specifically, this study aims.
1. To ascertain the extent to which high tax rate policy has affected the growth of small scale businesses in Ebonyi state.
2. To examine the extent to which inadequate power supply has hindered the growth of business enterprises in Ebonyi State.
3. To analyze the extent to which the Relocation Policy of Abakaliki Rice Mill has promoted rice production of the industry.
1.4 Research Hypotheses
The following hypotheses would tested in the course of the research
HA1: High tax rate policy has significantly affected the growth of small scale businesses in Ebonyi state.
HA2: Inadequate power supply has hindered the growth of business enterprises in Ebonyi State.
HA3: Relocation Policy of Abakaliki Rice Mill has enormously promoted rice production in the industry.
1.5 Significance of the Study
The importance of this study cannot be overemphasized given the impact of government policies on entrepreneurship and economic development. This study however will be significant in the following ways:
Will ex-ray the impact of government policies on entrepreneurship in the economic development of Ebonyi state; hence the public will appreciate the need for proper government policies on entrepreneurship in the country.
Secondly to the government, this study will be will be highly significant in identifying those factors that challenge their policies on entrepreneurship and economic development in Nigeria and as such formulate adequate policies and programs to improve the entrepreneurial situation in the country.
Thirdly, to entrepreneurs, it will serve as a guideline to understanding appropriate entrepreneurial practices that can help them manage their enterprise. It will also improve their knowledge on the dimension of government policies and entrepreneurship and economic development in Nigeria particularly in Ebonyi state.
Fourthly, in the field of academics, it will serve as a reference material considering the dearth of well researched materials o the impact of government policies on entrepreneurship and economic development in Nigeria.
Finally, to the researcher, it will be highly significant in boarding her horizon on the impact of government policies on entrepreneurship and economic development in Nigeria issues, challenges and prospects associated with it.
1.6 Scope and Limitation of the Study
This work covers the impact of government policies on entrepreneurship and government development in Ebonyi state with specific reference to the relocation policy of Abakaliki Rice Mill. It also examines the issues and challenges facing government policies on entrepreneurship and economic development in Ebonyi state. This study also examined entrepreneurship facing in Nigeria.
However, several factors acted as limitations to the research one of which was the absence of well research materials on the impact of government policies o entrepreneurship and economic development in Nigeria. This constraint was however, overcome by the researcher through the use of some material contained in some journals, textbook, articles and data collected from Abakaliki Rice Mill Field study.
Another limitation of this study is the short time period to carry out this work. The time frame given was too short coupled with the normal semester academic work which ran currently with the time of the project. The researcher was overcome his challenge by working more assiduously day and night in other to ensure that his work say the light of the day.
Finally financial constraint affected this work. This cost of producing these materials for the work as well as cost of production was high, such as, the researcher went into borrowing from friends to ensure the success of this work.
1.7 Theoretical Framework
This study adopted the “Infant Industry Theory” propounded by Fredrick Rich in 1841. The theory advocates that the infant/immature domestic industries in the less developed with tariffs, quotes and other useful means from the international competition of a limited time period until their capabilities reach international level and become mature and stable Nweke (2016) further wrote that the immature firms in the less developed countries have little chances to survive from the competition of the mature firms in the developed countries that have been in the business for a long time operating with high efficiency, lower price and high quality for similar products or services.
Therefore, the government in the developed countries should play a role to protect the immature industries and foster its growth. The protections, generally in form of Tariff, quote, etc. may result in a monopoly or in an oligopoly and a higher domestic price in the protected domestic market than the international market than the higher price may cover the higher production costs an help the inefficient and immature firms in business with the profit gained during the protection period, the firms would improve its quality and reduce its operational costs. The protection may be reduced gradually along with the industry reaches minimum level to be able to compete with the well established industries abroad, the protection is lifted. Generally speaking, the protection is designed to create an environment for the infant industries initial growth and facilitate a faster development.
She further wrote that even through the infant industry theory is disputed by the advocate for the Free Trade”. It has been widely used in the world and has actually served as the theoretical foundation of development strategies pursued by countries like the United State and Germany to catch up with Britain in the late 19th century to stimulate their entrepreneurial and economic growth.
However his appropriate protections based on the infant industry theory are conditioned by many specific circumstances and restriction. As a matter of fact the developing countries that simply isolate the domestic market for the protection purpose used to fall in developing the strength of the domestic enterprises.
The theory is highly relevant to the study because of its addresses the survival of infant entrepreneurs and industries by the policies of the government. This is because, if the government enacts policies to protect upcoming entrepreneurs through relevant approaches especially tax exemptions and infrastructural policies, the Ebonyi states economy will experience a significant boom.
1.8 Operationalization of the Key Concepts
Policies: this means courses or principles of action adopted or proposed by a government, business party, group or individual to achieve a given objective Government policy. This implies what government chooses to do or not do, it is the integrate courses and programmes of action that the government has set and the framework or guide it has designed to direct actions and practices in certain problem areas.
Entrepreneurship: Entrepreneurship means the recognitions or creation of business opportunities and the exploitations of the opportunities through new firm creation, it means making new combinations which include the introduction of new foods, new methods of production, opening of new markets, new sources of supply one organizations.
Economic: This entails concerned with the production consummation and transfer of wealth.
Economic Development: this is a multi-dimensional process of qualitative and quantitative transformation of the economic system to foster increased standard of living..