The Role Of Government In The Development Of Small Scale Industries

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The Role Of Government In The Development Of Small Scale Industries


This study assessed the role of government in developing small scale businesses in Enugu metropolis. The objectives of the study were to assess the pilot role of government and its institution towards the development of small-scale business; to examine the challenges facing small scale business in Enugu State. Survey method was used in the research. Data for this study were obtained from both primary and secondary sources. The sample size used was 167. The data obtained were presented in tables using frequencies and percentages and analyzed using inferential statistics. The findings show that there was pilot role of government and its institution towards the development of small-scale business and that there was challenges facing small scale businesses in Enugu metropolis such as under capitalization, inadequate planning, inadequate infrastructure facilities etc. The government should take a far-reaching measure aimed at encouraging mass acceptance of made in Nigeria goods was recommended.

Chapter One


1.1 Background of the Study

Small scale industries are recognized as the driving engine of socio-economic transformation of any economy. Internationally, the small scale sector absorbs more than 80 percent of job opportunities, it facilitates primary production and value addition. Also, it enhances capacity utilization and improves capital per head. It is the surest avenue for providing needed goods and services in rural or semi-urban areas, addressing the problem of rural to urban migration and income distribution, growing the entrepreneurial talent and stimulating economic development in the community (Kondaiah, 2010).

Small scale business or even large business evolves through the process of meeting a need in a society, doing business or engaging in entrepreneurship.

“According to Desai (2010), entrepreneurship or entrepreneurism is the life-blood of any economy and the solution to unemployment and poverty”.

Consequently, it has been rightly pointed out that the economic development of the developed world emerged largely from the efforts of small scale businesses. Historically, most of the large companies and multinationals of today were started by entrepreneurs with very small capital. In this direction, it is noteworthy that international conglomerates such as Ford, Guinness etc as well as Nigeria based multinationals controlled by the Dantatas, Dangotes, Innoson, Ekene Dili Chukwu etc are classic examples of mega companies that were started as small scale businesses.

Without overlooking large businesses, an empirical finding has shown that a significant feature of a flourishing or thriving economy is a vibrant small scale industry sector playing the ennobling role of creating employment, providing sustainability and innovation in the economy and the vital linkage between large industries and individual consumers. It is also known that countries with a higher share of small scale industry have higher growth than those with a lower ratio with the larger businesses having their origins traced to small scale industries.

“According to Llyas (2010), a large percentage of the population depends on this sector directly or indirectly for one thing or the other in meeting their needs”.

Though they all have the same profit motive, but small scale businesses are characteristically different from their larger counterparts in their operational uncertainty, ability to access funding and other needed resources, and the capacity towards innovation and evolution.

“According to Etuk and Mbat (2010), small scale businesses have a higher propensity to employ more labour-intensive production processes than large businesses”.

They contribute significantly to the provision of productive employment opportunities, generate income and boost poverty reduction in the society.

According to Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) (2012), small enterprise account for approximately 90% and 99.8% of all businesses in developing countries and the European Union respectively”.

They are also responsible for 47%, 77% and 62% of all employment in United States of America, the European Union and Japan respectively, while 58%, 53% and 51% total value addition to the economies of the European Union, Japan and South Korea respectively is attributed to this sector. Other studies showed that in high income countries such as Britain and United States of America, small scale businesses contribute over 55% of Gross Domestic Product (GDP) and 65% of total employment. In low income countries like Burkina Faso the sector accounts about 60% of Gross Domestic Product and 70% total employment while in middle income countries like India, Mexico etc it contributes 70% of Gross Domestic Product and 95% total employment.

Generally, the small scale sector plays a commanding role in the transition of traditional economies to modern ones, by adopting innovation and providing opportunities for secondary production or processing which enhances revenue generation and socio-economic development.

“According to Jayachandiran (2009), small scale businesses help to absorb productive resources at all levels and add to the formation of flexible economic systems where they interlink with large firms which attracts foreign capital and investment”.

Therefore, small scale business is a distinctive mainstay of any economy that requires attention by all stakeholders, especially the government. Though its definition and characteristics vary from country to country, there is universal consensus on the type of business that is classified as small scale business. Small enterprises are everyday businesses, started either to provide livelihood to the proprietor or fill a need in the community. They are low level assets, few personnel, and low capital, mostly informal with a high mortality rate. Examples petty traders, furniture makers etc.

Small scale businesses are known to hold the future to the development of a country and occupy a pivotal position in the economy, especially as it concerns industrial growth, youth empowerment and innovation. Despite the vital role played by small scale businesses in economic development, it still experience challenges such as weak market linkage, inconsistent government policies, multiple taxation, obsolete technology, inadequate skills and human capacity including poor flow of information. All these combine together to limit their growth, inability to do better and eventually early demise.

Small scale businesses specializes in the production and marketing of various products and services ranging from food, beverages, drinks, sachet water, cosmetics, spare parts and many others.

“According to Kayode (2009), he acknowledged the diversity of terms of the degree of specialization and division of labour and the quantity of raw materials and output and the character of markets being served by small scale businesses”.

As a result of bulks, Nigeria businesses fall within small scale business which account for over 80% of the number of enterprise in the country. Several number of small scale businesses are successful while others fall or stagger for survival.

The history of small scale business started long before the advent of large scale business, because almost all large scale businesses of today started as a small business and over 90% of all businesses are still classified as small scale businesses. Small scale business is unique in many aspects. If competition must exist, freedom of initiative and businesses are to be maintained and also to continue progress in extending more goods and services to the increasing number of the people in the world, then there must be small scale business.

Government plays a great role in the administration of small scale business in general, because it operates in the society controlled by the government and in particular, there are micro-policies specifically designed to address small business. They regulate production, distribution and marketing. The control of an economy means the control of the production and distribution of wealth. Government has a general duty to manage the prosperity of the nation but does not want to run an endless series of nationalized businesses. It tends to offer just enough support to get enterprise going but to encourage self reliance and self financing as possible. It is to this end that this research intends to examine the role played by government in small scale businesses.

1.2 Statement of the Problem

Since independence, Nigeria has four national development plans, but unfortunately we are still in search of a development strategy to launch as on the play form of developed nations, Hitherto, the development plans have laid emphasis on large manufacturing concerns.

It therefore, becomes imperative that other strategies such as small-scale industries programmes be given a trial in search for a messiah strategy. Thus the study aims of addressing the problems of searching ‘lor the best development plan by finding out and analyzing the benefits of small — scale industries with a view to determining their relevance in Nigeria and ultimately natura! dr”c’’”t.

The study aim a Joing this by identifying the specific contributions of the establishment of small scale industries can make especially in the Nigeria, it will equally identify the categories of business that qualify as small-scale business and the types needed in the rural areas.

For the past decades, small business enterprises in Nigeria were characterized as essentially backward in the overall development of the Nigeria economy. As a result of this, there has been a prevalent feeling that such businesses could be assisted only for social reasons, not as a promising opportunity for national development. Obviously, too little attention has been paid to the benefits to be derived from helping small enterprises of modernize and grow.

This attitude arose partly amongst both the citizens and government and mainly from the very nature of the small business which made it difficult for its impact to be felt in the economy. However, the over-reliance on natural resources especially crude oil as the mainstay of the economy is capable of making the attainment of their desires an illusion. Government, through its actions may be a hindrance or promoter of small scale businesses; thus, this study seeks to assess the role of government in promoting small scale businesses in Nigeria, taking the experience of small scale business owners operating in Enugu metropolis.

1.3 Objectives of the Study

The main objective of the study was to examine the role of government in the development of small scale businesses in Enugu metropolis.

The specific objectives are:

  1. To assess the role of government and its institution towards the development of small scale business;
  2. To examine the challenges facing small scale business in Enugu Metropolis

1.4 Research Questions

Based on the objectives of the study the following research questions were raised:

  1. What is the role of government towards the development of small scale business in Nigeria?
  2. What are the challenges facing small scale business in Enugu Metropolis?

1.5 Research Hypotheses

Based on the objective and research questions, the following hypotheses were formulated:

Hypothesis One

H1: Government has a significant role towards the development of small scale businesses in Enugu metropolis.

Hypothesis Two

H1: Small scale business in Enugu faces significant challenges.

1.6 Significance of the Study

This study will highlight problems associated with the role of government in promoting of small scales industry in Nigeria. It will give information on the possible areas for improvement. Furthermore, the study will help local government to assess and appraisal their role in financing small scales industry in Nigeria. policy makers formulate new economic policies maintain or modify the existing one.

It will equally serve as a guideline to researches who may wish to decide with this study in the future. It will also help small scales entrepreneurs to make sufficient preparation in their request for credit assistance. It will guide the entrepreneurs in making credit demands that are compliance with government monetary policy. The last but not the least it will help the entrepreneurs to display competence in preparing justification for their project. It is rear to see most of them coming up with cash projections, projected balance sheets.

1.7 Scope of the Study

The scope of the study is the role of government in promoting of small scales in Nigeria. A case study of Enugu Metropolis It does not cover a critical appraisal of the state government in financing medium and large scale business.

1.8 Limitation of the Study

However, the were constraints imposed on the researcher this includes the following:


Information for accurate or at least near accurate instances could be drawn. The period of the study was short, hence time posed as a constraint to the researcher.


The researcher would have extended the survey to areas but limitation here already completed work.

Scarcity of Data:

Lack of statistical data from our financial institutions like state government (CBN) ministry of financial and economic development, commercial and merchant bank posed a constraint local governments adhere strictly to the rule of secret, in banking thus they refused to release information.

Chapter Five

Summary of Findings, Conclusions and Recommendations

5.1 Summary of Findings

  1. There is a pilot role of government and its institution towards the development of small scale business.
  2. There are challenges facing small scale businesses in Enugu State.
  3. The researcher found out that the challenges facing small scale business in Enugu State include under capitalization inadequate planning, inadequate infrastructural facilities etc.
  4. The researcher found out that the level of education of the owner/proprietor of small scale industries is usually low with consequent low level of business management, technical skills etc.
  5. The researcher found out that the major advantage of the small scale industries is its employment potential at low capital cost.
  6. The researcher found out that small scale industries are the engine of economic growth and for promoting equitable development.

5.2 Conclusion

This study assessed the role of government in developing small scale businesses in Enugu metropolis. Responses from the small scale business proprietors showed that the role government plays cannot be overlooked in the growth and survival of their businesses. This study identified that without government intervention, most small scale businesses would have gone into extinction. Measures taken by the government in time past have been seen to have a significant and positive impact on their businesses. This portends that policy actions implemented by the government towards promoting small scale businesses produce a favourable outcome on their operations. Government initiatives related to entrepreneurship development has had a significant and positive influence on the performance of small scale businesses.

5.3 Recommendations

  1. The researcher is recommending that federal, states and local governments should implement the relevant policies in the Nigerian industrial policies and thus provide a conducive environment for the operation of small scale industries in State.
  2. The researcher is recommending that various banks in Nigeria should be encouraged to extend credit facilities to small scale industries.
  3. The researcher is recommending that the government of this country should take a far reaching measure aimed at encouraging mass acceptance of made in Nigeria goods and services.
  4. The researcher is recommending that small scale industrialists should utilize loans for which the loan was made.
  5. The researcher is recommending that small scale industrialists should improve business knowledge through training, education and development.
  6. The researcher is recommending that small scale industrialists should utilize professional assistance from management consultants, legal practitioners bankers etc.
  7. The Researcher is recommending that small scale industrialists should enter into lines of business that they are experienced.

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