Problems And Prospects Of Establishing Small Scale Enterprises In Nigeria

Project and Seminar Material for Business Administration and Management BAM

Project and Seminar Material for Business Administration and Management BAM


It also paid attention to the foundling of the small-scale business in Nigeria. Whereas failure of the large-scale import department assembly to propel the country into a satisfactory course of industrialization necessitate the demagnification of strategy to embrace the promotion of small-scale enterprises achievement under the new strategy has not been adequate with expectations of the stated objectives which were economic growth and development through the mobilization of available local resources, employment generation and industrial dispersal as well as mitigation of rural urban migration. Out of a population of eighty drawn from the selected bakeries, sixty seven were selected as the sample size using statistical sample tools (Taro Yamani). A questionnaire was designed and distributed to elicit information from the sample population; also data was sourced through primary and secondary sources. These data collected were presented and analyzed by means of tables and percentages. The hypotheses adduced were tested using such tools as chi-square. It was observed that to achieve economic growth and development to use, such as increasing availability of credit by raising interest rate ceiling and permitting a “spread” that makes it worthwhile for banks to lend to small-scale business or by increasing the number and range of investment etc. problems of small-scale business will be a thing of the past.

Chapter One


1.1 Background of the Study

The contribution of small –scale business in fostering economic growth and development has been well articulated in different areas of this study .the specific attention on them based on their expected impact and potential contribution on broad and diversified production base, as well as their accelerative effect in achieving macro objectives pertaining to full employment, income distribution and the development of local technology. They are particularly most conducive for diffusion of management skills and emulation of indigenous entrepreneurship overtime.

Small business provides financial opportunity and a chance to develop wealth. It is a place where creative, motivated individuals can use their talents and expertise to the fullest, because it provides satisfying careers and job opportunities and it’s also the back bone of the market economy of the word. Every big business starts as a small business, and it started with an entrepreneur (small business), who at first, earns little or no profit. It was the new ideas of small business that brought about Ekene Dili Chukwu Transport, the FAN Milk, Nnewi “Tokumbo” parts, and even the many commercial banks in Nigeria. Untried ideas become annulations that become concepts that changed the business world. And so it goes. Small business is the basis for the economic well being many developed nations including USA/Japan.

Entrepreneurship is what makes a small business successful. Entrepreneurship occurs when an individual develops a new venture, a new approach to an old business or idea, or a unique way of giving the market place a product or service by using resources in a new way under conditions of risk. Small business triumphs and entrepreneurship are closely related to it. It is difficult to separate them.

The unemployment situation in the country coupled with the new government instinctive towards easing social tensions among unemployed youths, through the programmed of the National Directorate of Employment (NDE), were intended to lure a lot of unemployed Nigerians, including graduates into self determination through self employment. Graduates and school leavers are now realizing that government and the established private companies are not ready to come to their aid directly, through paid employment due to the dividing state of the economy. Short of the alternatives, Nigerians including our graduates are therefore launching themselves into various small-scale business ventures, such as cottage soap and cosmetics production, fairing, restaurants, fast food, publishing, writing, block making, garri processing, food processing, refuse disposal, taxi driving, cleaning services, weaving, baking tailoring, advertising and other same business venture which depends mostly on local raw materials. The determination to succeed is also fast becoming the order of the day.

Government has been playing appreciative role in promoting the survival and growth of small-scale enterprise in recognition of them flexible and adaptive nature as well as their re-generative power in promoting economic growth and development. Government also encourages people to establish their own small business so as to reduce the problem of unemployment in the country and also reduce the problem of importation of goods, more so, to produce exportation products.

Government in believing that a dynamic and growing small manufacturing sub-sector can contribute significantly to the implementation of a wide range development effectives, has thus enunciated various policies to encourage their proliferation and make them veritable engines of growth and development. In the third and for the development plans and the on-going three years rolling plan, priority has been accorded industrialization with greater emphasis on small-scale enterprises. The basic activities of government policies as maintained in the monetary and fiscal policy measures, are to improve the financing and other supportive services of small-scale business by expanding and improving access to credit and infrastructural facilities, reducing their production costs, boosting their profitability, enhancing their survival and growth capacities as well as expanding their contributions to non-oil exports by making their products competitive in the export markets.

Hardly could any major industry succeed without the services of small-business enterprise. The major goals of any profit oriented business are to make profit. A company will make more profit if statistics its customers need better them the competitors. Therefore in the contribution of small-scale business, bakeries would produce what the customers want and by so doing they maximize profit and only bakeries that are effective and efficient can satisfy customer’s needs. In reality, it is possible to run a business without profit for a time, but it is not possible for to survive for one day without customers. Customers are the central theme of any business. Without a total commitment to them, contribution to economic growth and development will have limited and brief effects.

1.2 Statement of the Problem

Bakery is in the production industry the quality of products rendered by our Bakeries have been attracting criticisms from people in all works of life. The civil servants, business men and the general public are all very critical of production of cookies like bread, chi-chin, cake, meat pie, boons etc. The complaints ranges from those of poor quality of products, poor packages, high prices, poor delivery, shortage of skilled manpower which affects productivity and restrain expansive the use of potassium bromated which National Agency for food and Drug Administration Commission (NAFDAC) banned for health purpose.

Most bakeries do not put their customers in the prime place as they supposed to be. There is now keen competition and to compete means to contribute to economic growth and development. Dickson (1971:4), agreed with this view when he said that small scale enterprises are ploughed by inadequacies and serious miss-uses of business records and business information. The problem of poor or wrong location of an industry affects its production. Such as nearness to raw materials, market, sources of power and access to supply of labour and transport facilities etc.
Government incentive in industries has previously directed to public investment neglecting private initiative. But a diversified and self-sufficient economy must take into consideration the importance of private sector in capital formation.

1.3 Objective of the Study

Based on the fact that one cannot build a house on a platter of gold without encountering one or two hassles here and there, so in the genesis and revelation of this work as the researcher encountered several problems the course of writing, which ranges from lack of time, financial and material constraints to the inability of reaching all members of the sample due to transport problems and even those reached tend not to render full co-operation thus the total number of people interviewed became smaller.

Other limitations which the researcher encountered in the course of writing are that some of questionnaires distributed to the respondents were not returned despite one or two reminders sent to them, while those that were delivered by hand were non-challantly filled. As such, there have been criticisms about the bakery industries in the way they render services to their customers. i.e. They do not see the customers as king lot in terms of national output and employment. Moreover, Nigeria has various policies on small-scale enterprises in recent National development plan and also in the structural Adjustment programmed (SAP). The researcher wants to carry out a research on what bakeries do and the role they play in economic growth and development the researcher also wants to have an idea base either to support all the sources about the poor impression people have on how to improve their production so as to contribute effectively in national economic growth and development.

Bakeries can do more individualized jobs for customers and thereby attract them on the basis of specialty product quality and personal services rather than on the impersonal of price or mass production of largely identical business. Based on the above, the need for studying this topic is to show the effectiveness of small-scale business in national economic growth and development.

1.4 Research Questions

The importance of small scale business in the promotion of economic growth and development has always been at the forefront of development strategies. However, many developing countries have failed to adopt this strategy owing to their belief that it is a relatively show process of industrialization which may not be very compatible with their desire to “catch up” with the industrial countries. This along with the relative availability of foreign exchange (particularly through foreign grants and export of basic commodities) in the early days of independence has encourage many of those countries to follow a different mode of industrialization for transition from a largely gravis ion society to a modern industrial sector including Nigeria, adopted import substitution strategy of industrialization aimed mainly at producing domestically consumer goods that were erstwhile imported. This strategy of industrialization often requires continuous dependence on major supplier’s over-seas for the provision raw materials and spare parts needed for uninterrupted production in these industries.

Therefore, the aim of this study is to know:

  1. Whether or not small scale business provides opportunities for individual freedom and economic growth and development.
  2. To know if small business community makes a significant contribution to our total economic system as suggested earlier
  3. To find out whether or not bakery industry contribute to the economic growth and development of the country.
  4. If customers are satisfied by the services tendered by bakeries
  5. To formulate business strategies and make recommendations that would be more effective in bakery industries.

1.5 Research Hypotheses

To guide the investigation of the issue raise in the problem definition. It is hypothesized that:

Hypothesis 1
  • H0: Small-scale industry does not contribute to economic growth & Development
  • H1: Small-scale industry contributes to economic growth development.
Hypothesis 2
  • Ho: Lack of finance is the major problem facing small-scale business
  • Hi: Small-scale business does not have any problem in terms of Finance.
Hypothesis 3
  • Ho: Bakeries do not encourage the use of local resources in larger Scale in Nigeria
  • Hi: Bakeries encourage the use of local resources in larger scale in Nigeria

1.6 Significance of the Study

This study is very timely, especially today that all hand is on desk to enhance the development and growth of the Nigeria’s economy through the small scale enterprises. This study will be of immense benefits to cottage enterprises as well as other small and medium scale enterprise.

Furthermore, the research work will serve as a secondary data to future researches on small and medium scale enterprises.

Finally, this work is of importance to the researcher in the following ways.

  1. It will expose and enable him to know more about the organization. Enterprises under study.
  2. It will enable him to more about the role, which small and medium scale enterprises play in Nigeria.
  3. It will also enable him to know the different meaning/definitions and classifications of small and medium scale enterprises.

1.7 Scope of the Study

The scope of this study i.e. small scale enterprise is very wide it had to be carried out in all small-scale industries in Nigeria.

1.8 Limitation of the Study

The study is therefore limited to bakeries industries in Enugu Urban because of time and material resources to see to the whole nation.

1.9 Definition of Terms


National Agency for Food and Drug Administration Commission


Structural Adjustment Programmed

Chapter Five

Summary of Findings, Conclusion and Recommendation

5.1 Summary of Findings

The main purpose of this study was to find out the contribution of small- scale business in Economic growth and development using 10 bakeries in Enugu Urban as a case study and also if possible make recommendations how small-scale business can be properly integrated into the economic development in the country.

From the research study, the researcher found out that government objective in promoting development of small-scale enterprises survive and flourish as units of efficient economic activities in the process of industrialization. In addition to benign sources of supply of potential entrepreneurs, small-business discharge other roles of job creation, promotion of self reliance development industrial dispersal etc.
Federal and state government desire to proliferate successful small-scale enterprises is not as successful as one would have desire because education of the small-scale industrialists was neither given its due recognition nor was appropriate provision made for it. A second chance has been appropriate offered to correct this by mobilizing the unemployed university graduates and others who are interested to form a new crop of small-scale industrialists.

Minimizing under-capitalization and to enhance managerial and technical expertise as well as to create a favourable atmosphere for mode entrepreneurship. Specifically, it was shown that there is need for leading-financial institutions and relevant government agencies to have adequate cadre of professionals among their staff to prepare project profiles and feasibility studies for small industrialists. Their responsibilities should include analysis and testing venture ideas for feasibility and viability. The enormous infrastructure problems of the small-scale enterprises are in the domain of government to are in the domain of government to ameliorate while good intension are not lacking from government it is the failure to translate these intensions into concrete achievement that has perpetuated this monstrous problems.

Supervision of small-scale projects after loans have been obtained has been emphasized. Responsibility of lending financial institution does not end with the sanction and disbursement of loans. There should be intensive follow-up and supervision of the project implementation to ensure that the found advanced has been utilized for the purpose for which the implementation is completed on schedule. It is advocated that a greater part of the cost of supervision be borne by government. Small-scale industries may need special assistance in the procurement of needed foreign exchange because of the financial cost and their well established firms for inadequate available foreign exchange.

Finally, it must be borne in mind that there is no simple method of defining the best course of action for achieving the country’s industrialization. Too much emphasis on small-scale enterprises would result in the country being regulated to a second class technological power. On the other hand, over emphasis on industrialization based on aggressive acquisition of modern high technology could lead to greater foreign dependence than is considered acceptable. There is need therefore for a planned series of trade-offs based on the knowledge of what is desired and can be achieved.

5.2 Conclusion

The preparedness of advanced countries shares in the locally operating transition, deriving implicitly or explicitly from facts so far adduced. To put it succinctly here, Nigeria would be made to know and strive, even in the absence of physical violence through a mere concentrated strategy of western industrial nations in the main of cutting off Nigeria from its usual foreign sources of loans, of acquisition of assembly and spare parts and other industrial inputs including technical and managerial expertise and counselling on the one side and from more.

5.3 Recommendations

In actual fact, one is left with no other thing than to wonder why sartorial allocations to priory areas like Agriculture nice results. It might mean that such substantial amount may always be invested on capital equipment by such sectors like one should know that capital equipment does not yield relevant utility before exert cost incurred vis-à-vis depreciation and replacement. Thus the researcher recommends the following components so as to achieve credit self-reliance through small-scale enterprises.


The availability of credit to small firms can often be increased by raising interest rate ceilings and permitting a spread that makes it worthwhile for banks to land to small-scale enterprises or by increasing the number and range of intermediaries allocating foreign exchange for investment.

Imported Raw Materials:

It is not common, for instance, for middle man than resell their supplies at black market prices to small-scale enterprises that desperately need imported inputs to survive in business but lack influence over the authorities concern.

Technology and Equipments:

By subsidizing imported machinery would stimulate domestic engineering industries and machine shops which are potentially important in helping small-scale enterprises improve their equipment.


Often barriers to the trading companies which market the products of small-scale enterprises exist and should be removed export market can be tapped more fully by ensuring that small-scale enterprises benefit from import duty rebates or exemptions on imported materials and components can also that are incorporated into exported products. Government can also directly enlarge the market for small-scale enterprises by subcontracting maintenance and repair services that public agencies might otherwise perform themselves.

Lastly, the best environment for small-scale enterprises is a relatively free market that provides equal incentives and opportunity for all enterprises. Development programmed like schools, loans to unemployed graduates (mass mobilization for economic recovery, self-reliance and social justice) which focused specifically on small-scale enterprises can also be useful, provided the reinforcement and supplementary are in the private sector initiatives rather than replacing them, but the primary need in most countries is simple to remove the biases and obstacle to small-scale enterprises that are existing in creatively and resultantly.

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