Two analyses were conducted and different results were obtained. The first analysis was on the number of employees in the firm between the two-point period of 2012 fiscal year and 2009 fiscal year; while the second analysis was the number of employees in the firm in the fiscal year the firm started operation and the number of employees in the firm in the 2012 fiscal year.
Table 3.5: First result (2012 and 2009 fiscal year number of the employees)
Enterprise Size Number of employees
Micro Small Medium Large
L1: Gross number of employees in 2012 fiscal
year 2259 14,920 17,989 60,493
L2: Gross number of employees in 2009 fiscal
year 1152 10,913 15,824 62,399
Net jobs created = (A1-A2) 1107 4,007 2,165 -1906
Net jobs created in percentage 96.09% 36.72% 13.68% -3.05% Source: Computed by the author from the World Bank Enterprise Survey data on Nigeria (2014). This result shows that during the timeframe under consideration, and for the firms surveyed, all categories of firms were net job creator with the exception of Large firms that is a net job destroyer. Large firms witnessed abysmal performance, recording a negative growth value of 305%. As indicated earlier, the period under consideration is a factor affecting the result. The economy the world over has been sluggish following the financial crisis that started in 2007. The world economy is not yet out of the woods and Nigeria is no exception. This is coupled with the harsh economic environment, particularly, poverty and poor infrastructural development which are major problems confronting the Nigerian economy. However, the results point to the fact that small businesses are better in terms of net job creation than large firms. Micro firms perform the best with a net job creation of 96.09%, followed by small firms. Small firms had a net job creation of 36.72%, while Medium firms had a net job creation of 13.68%. This is in tandem with the findings of Birch (1979 and 1987), Neumark et al., (2008) and recently the research output by IFC (2013b) and ILO (2015). According to IFC, jobs in small and medium enterprises account for more than half of all formal employment worldwide, with developing countries having on average 66 percent of the permanent and full-time employment share. In the informal sector, small businesses account for 50 percent of the total labour force as shown in the IFC (2013b) findings.
We carried-out the analysis of variance test, as a reliability test to see if there is a significant difference in the mean value of the two variables. The result shows that there is a significant difference in the mean value. Therefore, we rejected the null hypothesis of no significant difference in the mean value and accepted the alternative hypothesis.
Table 3.6: Analysis of Variance Test (ANOVA)
Figure 3.6: Share of informal sector in employment and output in developed and developing economies
Source: Financial Inclusion Expert Group (2010).
According to ILO (2015), small business’s net share of job creation is 54 percent compared to larger firms at 46 percent in the low-middle-income countries.
0 5 10 15 20 25 30 35 40 45 50
Share of informal sector in
labour force Share of informal sector inGDP
Developing 48 37
Developed 25 16
Figure 3.7: Firm size composition of employment by income group
SMEDAN and NBS carried out a comprehensive survey in 2013 which shows that informal micro businesses dominated the Nigerian enterprises with a 98 percent share of the entire enterprises in the country. In actual number, informal micro enterprises accounted for 36,994,578 enterprises in the country (SMEDAN and NBS, 2013). According to this report, small businesses employed 57,836,391 people in Nigeria. The distribution of employment shares by categories of small businesses in Nigeria as reported is given below:
Table 3.7: Small businesses share of employment in Nigeria
Employment by firm size 2013 Percentage
Micro (0-9) 57,836,391 96.81
Small (10-49) 1,863,749 3.12
Medium (50-199) 40,071 0.07
Total 59,740,211 100
Source: Computed from SMEDAN and NBS National MSMEs Survey Report (2013).
This clearly shows that small businesses are the net job providers in the Nigerian economy, accounting for over 80% of employment in the economy: in absolute terms, 59,740,211 jobs, representing 84.02% of the total labour force. In 2013 the country had an unemployment rate of 23.2%, as shown in the NBS data.
Table 3.8: Second result (number of employees in the 2012 fiscal year and the fiscal year in which each firm surveyed started operation)
Enterprise size Number of employees
Micro Small Medium Large
L1: Gross number of employees in 2012 fiscal
year 2362 16,400 16,506 38,571
B6: Gross number of employees in the fiscal
year the firm was established 1072 9,071 11,463 26,230
Net jobs created = (L1-B6) 1290 7,329 5,043 12,341
Net jobs created in percentage 120.34% 80.80% 43.99% 47.05% Source: Computed by the Author from the World Bank Enterprise Survey data on Nigeria (2013). This second analysis confirms that the job creation ability of small firms actually lies in the starting- up and that those jobs may not all be sustainable as depicted in Table 3.7. However, the good news is that the rate at which small businesses spring up makes small businesses to be a net job creator instead of being a net job destroyer. There is evidence that suggest that large enterprises retrench more than the small enterprises during crises, and that small enterprises are less affected by the crisis (Ibrahim, Suhaimi & Chong, 2015; Lai, Saridakis, Blackburn & Johnstone, 2016). We can therefore submit that small businesses have a better ability to create more jobs during economic downturns. According to SMEDAN (2013) report analysis, the number of micro-enterprises in the country went up by 53.34% between 2010 and 2013. Therefore, we can submit that, given the needed support, small businesses will be able to do a good job in reducing the unemployment rate in the country.
We carried-out the analysis of variance test has a reliability test to see if there is a significant difference in the mean value of the two variables. The result shows that there is a significant difference in the mean value. Therefore, we rejected the null hypothesis of no significant difference in the mean value and accepted the alternative hypothesis.
Table 3.9: Analysis of Variance Test (ANOVA)
Variables Coefficients F-stats
Difference in Gross number of employees in 2012 fiscal year and the fiscal year the firm was established 4978375*** 120.58 Residual 9671293.8 Number of observations 2248 Adjusted R-Squared 0.84 Root MSE 67
Source: Computed by the Author from the World Bank Enterprise Survey data on Nigeria (2013). To reduce unemployment drastically, there is a trade-off between quality and quantity, just as there is a trade-off between inflation and unemployment. If we want to uphold quality, then we might be forcing firms not to employ as many as are needed but rather as much as they can offer quality. This is not to say that quality should be traded completely but rather quality should not be a priority for a short period of time of reducing unemployment in the economy. It is rational in the sense that a child learns to stand before walking and to walk before running. Any attempt to muddle things together may defeat the whole aim.