IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 10 NO. 1 2025
DOI: 10.56201/ijefm.v10.no1.2025.pg58.80

---

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

Ogbulu, O.M., Udensi, C.E., Okanta, S.U., Uruakpa, P.C., Onoh John & Paul Ndubuisi

---

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 t

keywords:

Investment appraisal techniques, real asset investment and MSMEs

---

References:

Ayodele, T. D. (2010), An assessment of risk analysis techniques and investment performance
among Nigerian firms. Journal of Business and Organizational Development, 2(Dec), 74-
Bethlehem, J. (1999). Cross-sectional research. In H. J. Adèr and G. J. Mellenbergh
(Eds). Research Methodology in the Social, Behavioural and Life Sciences, London:
Sage, pp. 110-43.
Brealey, R.A. and Myers, S.C. (2003), Principles of Corporate Finance, International Edition,
7th ed, McGraw-Hill, New York.
Brigham, E. F., & Ehrhart, M. C. (2011). Financial Management: Theory and Practice (13th
ed.). Mason, OH: South-Western Cengage Learning.
Cochran, W. G. (1977). Sampling Techniques.3rd ed. New York: John Wiley.
Farragher, E., Kleiman, R. & Sahu, A. (2007), The association between the use of sophisticated
capital budgeting practices and corporate performance. The Engineering Economist
46(4): 300-311.



Gibb, A. (1988). The enterprise culture: Threat or opportunity? Management Decision, 26(4), 5–
Gupta H, Barua M.K (2016). Identifying enablers of technological innovation for Indian MSMEs
using best-worst multi criteria decision making method, Elsevier, 107 (C), pp. 69-79.
Jifar, T. (2020). Investment appraisal techniques of small and medium scale enterprises in
Ethiopia (A case study in Selected Wored as of Wolaita Zone). International Journal of
Research in Business Studies and Management, 7(4), 14-24.
Kaiser, H.F. (1974) An index of factorial simplicity. Psychometrika, 39, 31-
http://dx.doi.org/10.1007/BF02291575
Kayanula, D., and Quartey, P., (2000). The policy environment for promoting small, medium
enterprises in Ghana and Malawi. Finance and Economic Research Programme Working
Paper Series 15. Institute of Development Policy Management (IDPM), University of
Manchester.
Kengatharan, L. & Diluxshan, C. P. (2017), Use of capital investment appraisal practices and
effectiveness of investment decisions: A study on listed manufacturing companies in Sri
Lanka, Asian Journal of Finance & Accounting, 9(2), 72-89.
Kerubo, N. H., Muturi, W. and Mogwambo, V. A. (2016). Influence of investment appraisal
techniques on financial performance of small manufacturing firms in Kenya: A survey of
the Jua-Kali sector in Kisii Town. International Journal of Social Sciences, 11 (viii), 791-
Kevin Keasey and Robert Watson (1993). Small Firm Management: Ownership, Finance and
Performance. Wiley.
Kombo, D. K and Tromp, D. L. A (2006). Proposal and Thesis Writing: An Introduction.
Nairobi: Paulines.
Krejcie, R.V., and Morgan, D.W. (1970). Determining sample size for research activities.
Educational and Psychological Measurement.30, 607 –610.
Lidija Barjaktarovi?, Renata Pindzo and Ana Vjetrov (2015). The Analysis of capital budgeting
techniques
implemented by small and medium-sized enterprises in Serbia, Conference: Singidunum
University
International Scientific Conference FINIZ 2015 - Contemporary Financial Management At:
Belgrade, Serbia
Mogwambo, V. A., Mukras, M. S. and Oima, D. O. (2015). Influence of investment appraisal
on efficient portfolio selection in the soft drink industry in Kenya. European Journal of
Business and Management, 7(8), 81-99.
Moser, C. and Kalton, G. (1997). Survey Methods in Social Investigation. London:
Routeldge.
Ndanyenbah, T.Y. and Zakaria, A. (2019), Application of investment appraisal techniques by
small and medium enterprises (SMES) operators in the Tamale Metropolis, Ghana, Journal
of Economics and Sustainable Development, DOI: 10.7176/jesd/10-14-02, Corpus ID:
OECD (2018). Strengthening SMEs and entrepreneurship for productivity and inclusive growth:
2018 SME Ministerial Conference. Available at www.oe.cd/smes



OECD (2019). OECD SME and Entrepreneurship Outlook 2019. OECD Publishing, Paris,
https://doi.org/10.1787/34907e9c-en.
OECD (2021), SME and entrepreneurship policy frameworks across OECD countries: An OECD
Strategy for SMEs and Entrepreneurship. OECD SME and Entrepreneurship Papers,
No. 29. OECD Publishing, Paris, https://doi.org/10.1787/9f6c41ce-en.
Ogah-Alo, L. O, Ikpor, I. M. and Eneje, B. C. (2019). Financing small and medium enterprises
through micro-credit lending in Nigeria: Environmental consequences. International
Journal of Applied Environmental Sciences, 14(2), 177-196.
Ogbulu, O. M. (1999), Industrialization in Abia State: Problems and prospects. Journal of
Industrial Business & Economic Research, 3(2), 700-707.
Okafor, F. O. (1983), Investment decisions: Evaluation of projects and securities, London, Cassell.
Oladimeji, A. O. and Adewale M. A. (2022). Impact of small and medium scale enterprises on
economic development of Nigeria. Asian Journal of Economics Business and Accounting,
2022 - 22 (11).pp. 178-198.
Olawale, F., Olumuyiwa, O. and George, H. (2010), An investigation into the impact of investment
appraisal techniques on the profitability of small manufacturing firms in the Nelson
Mandela Bay Metropolitan Area, South Africa, African Journal of Business Management,
4(7), 1274-1280.
Omolumo, I. G. (2003). Financial management in Nigeria; Lagos; Omolumo
Owualah, S. I. & Ohazebere, E. (2019), The impact of financial crisis on small and medium scale
enterprises access to credit in Nigeria. Research Journal of Finance and Accounting.
10(22), 35-45.
Pamela Peterson and Frank J. Fabozzi (2002). Capital Budgeting: Theory and Practice, John
Wiley & Sons,
PwC (2020).MSME Survey 2020. Available at https://www.pwc.com/ng/en/services/sme-
helpdesk.html
SMEDAN (2021). 2021 MSME Survey report. Available on www.smedan.gov.
SMEDAN (2021). National policy on micro, small and medium enterprises (2021 – 2025).
Available
at
https://smedan.gov.ng/images/PDF/NATIONAL-POLICY-ON-
MSMEsNew.pdf.
UNCTAD (2002): World Investment Report 2002: Transnational corporations and export
competitiveness. United Nations publication, sales no. E.02.II.D.4, New York.
Wambua, P.M. and Koori, J. (2018), Investment appraisal techniques and financial performance
of small and medium enterprises in Nairobi City, Kenya, International Journal of
Current Aspects in Finance, IV (II) pp. 89-101.
World Bank (2022). Small and Medium Enterprise (SME’s) finance. Available on (IBRD-IDA,
2022, www.https://www.worldbank.org/en/topic/smefinance

ACKNOWLEDGEMENT: The funding for the research that generated this paper was
provided by TETFUND under National Research Fund intervention.

DOWNLOAD PDF

---

Back