PROBLEMS AND PROSPECTS OF SMALL-SCALE INDUSTRIES IN NIGERIA
In Nigeria the recognition of the economic significance
of small-scale enterprises is only a recent phenomenon. Hitherto, the adopted
industrialization strategy, which originated in the colonial era, encouraged
the undistracted use of imported raw materials to produce import substitutes.
To the extent that this strategy was biased towards large-scale production
activities, it invariably undermined the growth and development of indigenous
industries, most of which are small medium scale in size. The major criteria
used in the definition of small-scale enterprises include member of employees,
sales value, relative size, initial
capital outlay, financial strength, compassion ownership and type of industry.
This study examines the subjects through comparative
definitions of small/medium and large enterprises and states the purposes of
small-scale enterprises in the task of building an economically viable in
Nigeria. The myriad of problems faced by small and medium enterprise are
To successfully cover this particular aspect of the
project, both primary and secondary sources of acquiring the needed data are
employed and the gathered data are sorted, organized, and arranged under different
heading for a proper analyzing using a simple percentile method.
However, of an the various Challenges of small scale
business highlighted sounds paramount because of a number of reasons, first,
the peculiar situation small-scale industries inherently suggests a weak
capital structure and constraints in respect of access to capital markets.
Second, small-scale industries traditionally suffer discrimination in the
distribution of credits in the conventional loan markets.
Lastly, inspite of policy declarations and measures in
favour of small-scale industries by the government, uncertainties faced by
financial institutions both public and private still lead them to concentrate
lending on low-risk, large scale, corporate borrowers.
1.2 Problem of
1.4 Means of
1.5 Limitation of Study
1.6 Definition of Term
1.7 Purpose of Study
1.8 Significance of Study
1.9 Scope of Study
of Small-Medium Scale Enterprise
2.3 Features of
of Small and l4edium Scale Enterprises
2.5 Problems of
Small-Medium Scale Enterprises
Entrepreneurial Capacity and Poor Business Orientation
2.8 Failure to
take Advantage of Management Consultancy Services
2.11 High Cost of
2.12 Shortage of
Values and Problems of Small Scale Enterprises
2.17 SMEs and
Problem of Rural Small Enterprises
2.19 Examining the
Problems of Financing Rural/Small Enterprises.
of Research Question
of Study Population
ANALYSIS AND PRESENTATION OF DATA
SUMMARY, RECOMMENDATION AND CONCLUSION
5.1 Summary of
1.1 BACKGROUND OF STUDY
Small scale industries are vital sources of employment
generation, development of indigenous technology; even dispersal of industrial
set-ups if increases production of manufacturing exports, and increasing local
content of industrial output by fostering forward and backward industrial
linkages to enhances the general level of economic activity.
Since the second National Development Plan (1970 - 1974)
and third National Development (1975 - 1980), emphasis has been placed on the
development and proliferation of small-medium scale enterprises (SMEs) for the
purpose of using them as veritable engines for economic growth and development.
From the 1970s, therefore different definition have been
given as to what should be regarded as a small of medium scale industry. The
Central Bank of Nigeria (CBN) discuses small scale enterprises, in its credit guidelines
to banks as those enterprises with annual turnover not exceeding N500.000 in the
guidelines to commercial banks and enterprises with capital investment not
exceeding N2 million excluding cost of land; or with a maximum turnover not
exceeding N5 million in the' case of guidelines to' merchant banks. Similarly, the
federal ministry of industry's guidelines to the Nigerian bank for commerce and
industry (NBCI) regard small scale industries as those enterprises cost of
land, but including working capital. In
practice, the Nigerian Bank for Commerce and Industry accepts small scale
industries as those enterprises with capital not exceeding N750,000 excluding
the cost of land but including working capital.
The Nigerian Industrial Development Bank (NIDB) regards
small scale enterprises as those project cost, i.e. investment and working
capital not exceeding N750,OOO and medium scale enterprises as those with
project cost ranging between N750,000 and N3 million.
The Center of Industrial Research and Development (CIRD) at the Obafemi Awolowo University, Ile-Ife
defines small scale enterprises as those with total assets in capital not
exceeding N250,000 and employing not more than 50 full time workers.
From the various definitions one will notice that
emphasis has often been placed on certain financial ceilings in capital
The frequency of formation (and death) of small-scale
enterprises are usually explained by the desires of the owner-manager to own
his personal business. Thus, the small-scale enterprises
being the lengthened shadow of its owner reflect his or her strength as
well as weaknesses. Thus; the small-scale enterprises entrepreneur begins to
its unique animation, abilities, work experience, advantages and attitudes. In
tum, the performance of the small scale is determined by the personality characteristics
of the owners, viz responsibility, vigour, initiative, persistence and health
thinking ability, human relation ability, communication ability and technical
Government in both industrialized and developing
countries provide a wide variety of programmes to
assist small and medium scale enterprises. Despite the success of SME strategies in a few countries (e.g.
Taiwan Northern Italy and Ireland), and majority of developing
countries have found impact of their SME development
programs on enterprise performance has been less satisfactory. Underlying the search for best practice are
some basic question:
i. What is
the justification for pubic intervention on the first place?
ii. Why should
SMEs be singled out for assistance?
iii. If there is justification for government
intervention, what form should that intervention take?
1.2 PROBLEMS OF STUDY
The problems of facing small-medium scale enterprises in
Nigeria are not insurmountable since Nigeria is well placed to provide the
sources to solve these problems. In the
main, the problem range from inadequate financing, lack of accountability to
lack of infrastructure.
Most small business are a one-man proprietorship and the
proprietor, through having to give his attention to various managerial function
in his business soon loses full grip.
This is why it makes for efficient management to spread the
responsibilities within the business or seek the external assistance of a
management consultant. The small-medium
scale enterprises also invariably require a high technical inputs and the cost
of this technical inputs and the cost of this technical expertise is usually
The issues of inadequate financing usually derive form
inadequate proprietorship equity participation.
A strong capital base and financial outlook are required for a
successful business. It therefore makes
for sound financial management to seek for more business partners who could
bring in more funds to finance the activities of the enterprises. However, small scale enterprises are usually
reluctant to bring in partners, even at the risk of under capitalization. The underfunding of small-scale enterprises
has led government to formulate measures aimed at assisting this sector. Loan packages of the World Bank, National
Directorate to employment and in more funds to finance the activities of the
enterprises. However, small-scale
enterprises are usually reluctant to bring in partners, even at the risk of
under capitalization. The underfunding
of small-scale enterprises has led government to formulate measures aimed at
assisting this sector. Loan packages of
the World Bank, National Directorate to employment and NERFUND are among such
assistance scheme. The one-man
proprietorship syndrome of small scale enterprises is not only sad for their
financial profile but can also discourage accountability which is the
foundation of a successful business. Accountability ensures adequate control
over the appropriate financial strategies.
The small-scale enterprises even not shielded form or
immune to the lack of infrastructure, which is the bane of all businesses in
Nigeria. On the contrary, small medium
scale enterprises given more under the weight generating plant, high cost of
telephone and electricity. Needless to
say, no business can survive without their facilities.
1.3 PURPOSE OF STUDY
The major purpose of this study are:
1. To review how small-scale proprietors can
make for efficient management by spreading the responsibilities within the
business of the need to seek the external assistance of a management
2. Appraise the issue of risk of under
capitalization and related this to the reluctance of proprietors to bring in
partners or adequate financing.
3. Suggest ways by which the government
could improve the infrastructural base of the economy such that the cost of
development of small-scale enterprises would be reduced.
4. Overview the situation where government
could make foreign exchange affordable to small medium scale enterprises and
allow the naira to float to find its true value.
5. Review the strategy to be adopted by SMEs
in adopting a courageous approach to developing new ideas.
6. Analyze the inability of the
owned-manager to acknowledge his own weakness and tap the resources of talents
1.4 RESEARCH QUESTION
The tentative research questions the study funds answer
1. To what extent has inadequate financing
affected the growth and development of small-scale enterprises in Nigeria?
2. To what extent has the one-man
proprietorship syndrome of small-scale enterprises of a successful business?
3. To what extent has small-scale
enterprises being affected because of the lack of infrastructure which impede
their level of development and growth?
4. To what extent have the complexity
and frustration involved in sourcing for foreign exchange to take care of the
import needs lead to high rate of business?
5. Failure to
6. To what extent have low productivity,
poor management, poor accounting records and financial indiscipline have should
the extent at which small-scale enterprises can go?
1.5 STATEMENT OF HYPOTHESES
This research tends
to test the following hypotheses
HO: Financing small scale business in Nigeria has
a lot of problems which is not profitable.
HA: Financing small-scale business Nigeria has
prospects of which is profitable.
HO: There’s no justification for government
intervention in the growth of SMEs.
justification for government intervention in growth of SMEs.
1.6 METHODS OF DATA COLLECTION
There are two types of research data namely, primary and
secondary data from primary secondary source.
Primary data: These are data collected specifically for the research
needs. The sources: of these data for the study
are administration of questionnaire
given to a person about a topic of the research, interviewing person in
relevant fields and personal observation of same activities and records kept by
some small and medium scale enterprises. This source of data is advantageous
because first and information is obtained and explanations are obtained
concerning answer to question.
Secondary data: These are those data obtained from relevant reviewed
literature which for the purpose of this search include textbook and journals
management and financing of small and medium scale enterprises and other relevant publications.
1.7 LIMITATION OF STUDY
The methodology employed in this study faces some
setbacks. These include inadequate and unnecessary delay in responses,
inability to have direct access to some of the respondent cost of administering
longer number of questionnaires.
The study also encountered sampling error because it is
not everybody in the population is sampled. Response error is also a serious
drawback to the study because respondents gave an insincere arid in appropriate
response to enable -the ascertainment of the line position of thing considering
the prospects, problems and position of small-scale enterprises in the country.
OF THE STUDY
The study is important because several advantages accrue
to the macro society form small scale enterprises. These include the development of the
entrepreneurial spirit, employment generation for entrepreneurs; promotion of
savings potential and investment ratio. Skill culture is increased as more
people seek apprenticeship in preparation for self-employment.
The study is also important as it proffers ways to which
local law materials use are increased as low capital base might hinder the
purchase of imported raw materials obtained at the foreign exchange market
(FEM) as parallel market.
The study also affords the users the encouragement of
developing local substitutes, and strengthens the capacity to estimate and
supply societal and industrial needs
through backward integration.
1.9 SCOPE OF THE STUDY
The study covers the problems accruing to the financing
accountability, management, marketing and polities of small scale enterprises
in Nigeria, bringing in practical
illustrations as much as possible.
The study also delves into the problems which are
confronted by SMEs in Nigeria ranging
from behavioural, political, cultural, socio economic and country related.
The study does not extend to the financing,
accountability, management marketing as well as the policies of large-scale
enterprises as that advantage much more than what this study can possibly
address. Hence, the study covers the activities of some small-scale enterprises
around Lagos metropolis, which are randomly selected to cover the study centers
of the project.
1.10 ORGANIZATION OF STUDY
The study is divided into five chapters. Chapter one is
the introductory part of the study which includes review of latest literature,
problems of study, background of study, research questions, means of obtaining
data, hypothesis testing, limitation of study, definition of terms, purpose of
study, scope of study, significance of study.
Chapter two is captured "Literature Review"
where several part works the subject matter are several reviewed to cover a
well detailed theoretical framework of the study.
Chapter three is the research methodology of the study.
It covers the research design employed, the research instrument, restatement
off research question, data collection procedure and data analysis techniques.
Chapter four is the analysis, presentation of data using
a simple percentile method of analysis.
Chapter five is the summary of findings, recommendation
of the study as well as conclusion of the study. At the end of the study,
suggestion for further study is offered for interested users and readers.