1.1 Background of the Study

Unemployment, both of the educated and the uneducated manpower, has become one of the most topical and thorny issues in contemporary Nigeria. The unemployment situation has changed from previous position marked by prolonged period of unemployment and misemployment, to one in which graduates of tertiary institutions have to normally wait for a long time before getting a first job – if at all. At the beginning of this millennium, employment crisis have emerged as the most challenging issue confronting many world economies. The continuing global economic slowdown and uncertain economic prospects have resulted in a grim global economic landscape. This plunged many economies into deep recession, the ripple effects of which have affected the job markets(Hassan, 2013).

Nigeria has one of the highest levels of youth unemployment in the world with 60-65% (Federal Ministry of Labour and Productivity Report, 2008). These are mostly young adults that have graduated from universities and polytechnics or institutions of higher learning. Available estimate shows that about 1.6 million persons, mostly young adult, graduate annually. In addition to this number, about 3.8 million others are certificate carrying youths that have no formal education, or have completed primary or secondary school, or dropped out from tertiary institutions all of which are annually poured into an already saturated labour market (Federal Ministry of Labour and Productivity Report, 2008).

Many of the youths are not productive and have actually been reduced to petty traders and smugglers; in many instances, the growth in the phenomenon of it is observable that unemployment rate in Nigeria has reached unacceptable dimension. Indeed, the labor market in Nigeria is dangerously close to saturation. Thereby giving the government, parents, employers of labour some serious worries as concerned economists and policy analysts today are calling on the government to create enabling environment for the operation of the SME’s sector since it has the potential to create employment opportunities for the teeming unemployed Nigerians that roam the street in searching for inexistent white-collar jobs.

Small and Medium Enterprises (SMEs) has continued to be a popular phrase in the Business world. This is because the sector serves as a catalyst for employment generation, national growth, poverty reduction and economic development. SMEs world over can boast of being the major employers of labour if compared to the major industries including the multinationals (Kadiri, 2012).

The performance and growth of small and medium enterprises (SMEs) is a major driver and indices for the level of industrialization; modernization; urbanization, gainful and meaningful employment for all those who are able and willing to work, equitable distribution of income, the welfare, income per capital and quality of life enjoyed by the citizenry (Aremu and Adeyemi, 2011); this is because SMEs contribute to employment growth at a higher rate than larger firms (Farouk and Saleh, 2011). The SMEs sector with global recognition is view as an important force of driving the economic growth and employment creation in both developing and developed countries (Kpleai, 2009).

Previous studies such as Ogujiuba, Fadila and Stiegher (2013); Musa and Aisha (2012) agree that SMEs account for well over half of the total share of employment sales and value added SMEs constitute the most viable and veritable vehicle for self -sustaining industrial development, as they possess the capability to grow an indigenous enterprise culture more than any other strategy. SMEs represent the sub sector of special focus in any meaningful economic restructuring program that targets employment generation, poverty alleviation, food security, rapid industrialization and reversing rural urban migration.

Definitely, Nigeria’s vision of being counted among the first twenty economies in the world by 2020 cannot be attained in a socio-economic milieu of hunger, poverty and unemployment among a large segment of its population. Therefore, this study seeks to explore the effect of Small and Medium Enterprises (SMEs) on employment generation in Lagos State.

1.2 Statement of Problem

It is apt to mention however that, the age-long formal education inherited from the imperialist turned out graduates with job-seeking mind-sets as opposed to job-creation; they thus lack entrepreneurial traits like self-motivation, drive and innovation needed by the world of work and employers of labour (Towobola and Raimi, 2011; Raimi et al., 2011; Simkovic, 2012).

Furthermore, with rising population growing at geometric proportion relative to job placement that is growing at arithmetic progression, it became obvious that the nation’s formal education is fuelling unemployment, crime and cycle of poverty as graduates could not be absorbed. It then dawn on government that there is the dire need to redress the socio-economic implications of idleness and hopelessness with policy observers calling on the government to think on entrepreneurship education as a tool for reducing unemployment in Nigeria. It is against this backdrop that this study evaluates the role of Small and Medium Enterprises (SMEs) in employment generation in Lagos State.

1.3 Objectives of the Study

The major objective of the study is to investigate the role of small and medium scale enterprises on Employment generation in Lagos state. Other specific objectives include;

1. To examine if there is a significant relationship between entrepreneurial skill andemployment creation in Lagos State

2. To find out the effect of the SMEs sector on economic growth in Nigeria

3. To investigate the effect of financing on SMEs growth and employment generation in Lagos State

4. To examine the role of the SMEs sector in empowering youth with self reliance in Lagos State?

1.4 Research Questions

The undertaking of this study will consider the following research questions,

1. Is there any significant relationship between entrepreneurial skill and employment creation in Lagos State?

2. What is the effect of the SMEs’ sector on economic growth in Nigeria?

3. Is financing related to SMEs growth and employment generation in Lagos State?

4. What are the roles of the SMEs sector in empowering youth with self reliance in Lagos State?

1.5 Research Hypotheses

The researcher intends to test the following hypotheses:

1. Ho: There is no significant different between entrepreneurial skill andemployment generation in Lagos State.

2. Ho: The SMEs’ sector has no effect on economic growth in Nigeria

3. Ho: There is no effect of financing on SMEs growth and employment generation in Lagos State

4. Ho: SMEs sector do not play any role in empowering youth with self reliance in Lagos State.