Adoption of Appraisal Techniques in Real Assets Investment Decisions by MSMES: Empirical Evidence from Lafia and Abuja in North Central Zone, Nigeria

Abstract

Micro, small, and medium-scale enterprises (MSMEs) are fundamentally critical to the development and growth of both advanced and less-advanced economies, Nigeria inclusive. Consequently, governments and transnational institutions have pursued policies and programmes designed to guarantee the effectiveness and sustainability of MSMEs. But despite the efforts of both governments and transnational institutions, the actualization of the strategic roles of MSMEs remains a source of controversial narratives. For instance, it is regrettable that the several policy reforms ranging from funding to ease of doing business undertaken by the Nigerian government have not translated to significant improvements in the growth and contributions of MSMEs. Based on a descriptive survey of 201 MSMEs in two cities, Lafia and Abuja (FCT) in North-Central zone, Nigeria, the study focused on managerial competencies with emphasis on the adoption of capital appraisal techniques in making investment decisions by operators of MSMEs. Specifically, the study investigated the level of awareness and extent of usage of the techniques among operators of MSMEs and the dominant factors influencing MSMEs' use of investment appraisal techniques. The data generated from the survey were tested with descriptive statistics while multinomial and ordinal logistic regressions were employed to test the hypotheses. The findings of the study revealed that there is low level of awareness as well as low extent of usage of capital appraisal techniques on the part of MSME operators. In addition, the authors concluded that despite the immense advantages of investment appraisal techniques as a rational method of decision-making, it is surprising that there is a low level of propensity on the part of MSME operators in the North Central zone of the country to adopt appraisal techniques. This indicates some underlying need for policy review that will give commensurate attention to the development of managerial competencies, particularly the adoption of rational methods of decision-making as one of the elements of the environment of MSMEs.