The Role Of Small Scale Industry In The Development Of Nigeria Economy

Project and Seminar Material for Business Administration and Management BAM

The Role Of Small Scale Industry In The Development Of Nigeria Economy


Nigeria is presently one of the under developed countries of the world and to change the situation, a lot need to be done in all sectors of her economy, particularly the industrial sector. To develop the industrial sector, small-scale enterprise comes under a special focus because they dominate a large portion of Nigeria’s industrial sector.

These small-scale enterprises play a significant role in economic development in Nigeria, setting it on the path towards development of self-reliance.

It is in recognition of the importance of these small-scale industries that this project is written to examine what small-scale industry really are, to look at their contribution to the Nigeria economy as well as problems they face in carrying out their activities with a view to making useful suggestions on the way to curtail these problems.

Chapter One


1.1 Background of the Study

Small-scale industries have been in existence since time immemorial. They are earliest form of business that the early men use to get their needs, basically food, cloths and shelter. They exchanged what they had for what they wanted. It was latter on that large-scale business started to emerge and they are now found in a large number, in every country of the world.

However, small-scale industries still form a dormant part of business enterprises particularly in developing nations, which includes Nigeria. In recent years, since the adoption of the economic reforms program in Nigeria (1986), there have been a device switch of emphasis from the grandiose capital intensive large-scale industrial project to small and medium scale enterprises linkages for rapid sustainable industrial development based on the philosophy of input substitution. Small-scale industry is an industry whole total project cost excluding cost of land but including working capital above #1million but does not exceed #10million. However, in most developed countries and the newly industrializing countries of the world, Small and Medium Enterprises (SME) are generally defined on the basis of number of people employed to take account of Small and Medium Enterprises (SME) labour intensive characteristics

At independent in 1966, Nigeria economy was mainly agrarians industry plays a vital role in economic development in fact, it provided the brightest hope for generating sustained growth employment improved spinning and investment.

1.2 Aims and Objectives of the Study

This project has been designed to serve as an aid to the understanding of the roles played by small-scale enterprises to the development of Nigeria economy and also to suggest effective possible ways of improving small-scale enterprises in Nigeria so as to feel the contribution of small-scale industries. The following are considered to be the basic objectives of the aims or the study:

  1. To examine the activities and contributions of small-scale industries.
  2. To identify the need for improving the small-scale industries.
  3. To identify problems associated with small-scale industries.
  4. To provide with useful suggestions and solutions how to improve small-scale industries in an economy.
  1. It will help an individual to know the necessary requirement need in setting up small-scale industry.
  2. An individual will be able to know what appropriate types of business ownership one should choose.
  3. It will help an individual to identify the various problems associated with small-scale industry.
  4. It will provide useful suggestions and solutions on how to improve small-scale in an economy.

1.2 The Scope of the Study

The research carried out covers Federal ministry of Small and Medium scale industry Abuja. The research could have been successful but unfortunately, the minister for the Federal ministry of information went out with the Director for the Federal ministry of Small-scale industry in order to conduct an interview for new employee of NBC, which is a bank under the ministry of (SSI). Later a member of staff of the industry gave a note on the promotion of small scale and medium scale enterprises as a strategy for Nigeria economic development.

1.3 Statement of Problems of Study

Despite the achievement recorded in the Small-scale Enterprises (SSE) sub-sector, we are mindful of the fact that we need to further address certain issues in order to match or even surpass those recorded by developed and the newly industrializing countries of this world. These issues includes:

(a) Inadequate infrastructural facilities:

Both the Federal and State government are currently intensifying their programmes to provide industrial estate layouts and technology for promotion of SME.

(b) Lack of inter and intra sectorial linkages:

As at now, there are low level of linkages between the cottage industries and Small-scale Enterprises (SSES) ministry has conducted studies and recommendation of the studies are currently being appraised.

(c) Poor managerial capacity:

Since 1986, the Federal Government has been exposing our small and medium scale industries to training through various entrepreneurship development programme like EDPI working- for yourself programme.

(d) Lack of stable and generally acceptable definition for small and medium enterprises:

Such tends to question the basic policy under which activities and programmes an SMES evolve.

1.4 Significance of the Study

I hope this extended essay will be of a greatz significance to an organization as suggestion which shall be given in this study will go a long way in assisting them to improve on small scale management. The study will also help those who want to start small business especially in rural areas.

1.5 Limitation of the Study

Small-scale business is not easy to define as viewed casually due to certain reasons, which are stated below:

  1. The term Small medium and large relatively differs from industrial countries to country and they’re no unique or universally accepted definition of these terms.
  2. It is also important to recognize that the definition change over a period of time and depend to a large extent or countries level of development. For example, “what large scale is in the 1950s may be regarded as small-scale today.
  3. Different parameters are used in defining small business. Among the yard stick used are asset value. Turnover rates number of employees and size within the industries.

However, examples find it difficult to give a single sentence in defining Small business that could be accepted universally. Reference to the British committee that was set up in 1969 to enquire on Small firms. They found it difficult to agree on a single definition that will cover manufacturing, whole selling and retailing industries thus, the committee used eight (8) definitions for various groups which ranged form 200 employees for manufacturing under 50 turn over for retailing 5 vehicles or less for transport.

1.6 Definition of Key Terms

Small – Scale Industries:

This can be define an industry with a total capital employed of at least N 1.5 million, includingworking capital but excluding cost of land, or a labour size of 11 – 150 workers.


Can be seen as a process of acquiring new ideas and skill process of Acquiring new ideas and skill for the purpose of achieving individual growth and societal advancement. Thus development involves a complex of mutual related economic social and political changes.

Quality and Standard:

Small entrepreneur are generally unaware of the importance of standard and quality. They may not have the facilities for and knowledge about standard.

Chapter Five

Summary, Conclusions and Recommendations:

5.1 Introduction

This chapter summarizes our findings on the topic ‘the role of small scale industry in the development of Nigeria economy’. The chapter consists of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was on the role of small scale industry in the development of Nigeria economy. The study is was specifically set to; examine the activities and contributions of small-scale industries, identify the need for improving the small-scale industries, identify problems associated with small-scale industries, and provide with useful suggestions and solutions how to improve small-scale industries in an economy.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 63 responses were validated from the enrolled participants where all respondent were staff of Federal ministry of Small and Medium scale industry Abuja.

The study made the following findings;

  1. The operation of small-scale industries has provided employment opportunities, led to increase in innovation and new products, created a wide market and competition, given avenue for individual financial independence, and increase in Local government revenue and external investors.
  2. The need for improving the small-scale industries in Nigeria include; to generate employment, promote creativity among business owners, promote national economic growth, facilitate management training for skilled and semi skilled labor, and promote the production of intermediate goods for use in large industries.
  3. The problems associated with small-scale industries in Nigeria include; inadequate capital for startups, lack of advertising strategy, poor power and infrastructure, inconsiderate government policies, and mechanical system of promotion.

5.2 Conclusion

There is no doubt that small and medium scale enterprises are essential for rapid and sustained economic growth and development. They create employment, enhance capacity building for manpower and skills development, promote growth, reduce poverty, and facilitate industrial development among others. Several efforts has been made by successive governments to promote SMEs amidst the vast availability of human and materials resources.

Despite these efforts, SME have not contributed significantly to the development of the Nigerian economy. Findings revealed that the potentials of SMEs have not been fully harnessed due to poor implementation of the seemingly promising policies and inadequate financing of the SME sub-sector. In spite of government policies aimed at providing financial and technical support for the promotion of SMEs, they have performed less satisfactorily largely because of operational bottlenecks including lack of depth of the financial system, inadequate infrastructural facilities, poor management practices and low entrepreneurial skills to mention but a few. Banks which are suppose to provide adequate credit facilities in compliance to government policies, usually place exorbitant interest rate alongside huge collateral securities that scare away investors. Borrowers are vulnerable to remain perpetually indepted to lenders upon securing the credit facilities. Therefore, it will be absolutely impossible for SMEs to contribute meaningfully to economic development in Nigeria due to absence of a business-friendly environment.
Finding from the study concludes that Small business contribute to development but certain factors has hindered their effectiveness thus when those problems are solved this would enhance their growth and further contribution to the development of Nigeria

5.3 Recommendation

The following recommendation and suggestions are given, if properly followed and applied by managers of Small-scale business entrepreneurship and government will serve as a means of reducing the rate of failure of Small-scale business currently faced in Nigeria;

  1. The managers of Small-scale business should try and develop management abilities and apply scientific management principles in the running of their business. The managers should and direct their subordinate and they should note the delegation of duties where possible should betake advantage. In addition to that, records should be kept which will prove useful in the subsequent running of the business. Management succession should be well planned so that people who do not posses the qualities desired in running a business should not be allowed control over such business.
  2. It has also been discovered that owners of Small-scale enterprise in Nigeria fail to utilize their time effectively. They do not realize the importance of punctuality in business thus, this give rise to do as they like by opening and closing the business premises anytime. This is wrong a approach and in itself could ruin a business, because it will lead to a loss of customers since they will develop the thinking that the business is not always open, they will then go for other competitors and buy what they want. It is therefore recommended that a fixed time of operation be given for every business e.g. 8.00am to 8.00pm and this should be strictly adhere to.
  3. In order to solve problems of finance, what the Small-scale business owners need to do is that they can try to have a proper credit\debit control. They should try as much as they could to avoid credit sales because it lies down capital. The habit of personal extravagance should not be encouraged in to business. Most Small-scale business owners are found of dipping there hands into the funds of the business without each returning the money back into the business. This should be stopped, as it will definitely lead to be collapse of the enterprise. It has been discovered that sourcing for finance is the major reason why many Small-scale business fail. They are unable to source for loans and even when they do, it is usually with high interest rates. The point here however is that retained profits can be used to finance the business in hard time. When higher profits are made, portion of it can be kept aside as reserve which will later be useful when there is need for more funds for expansion.
  4. Research making is also recommended by Small-scale business. There is the need to make product, process and marketing research in order to know more about the product they plan to be making or selling, the nature of the market, how competitive the market is, the kind of people currently in the same business, the consumer wants, who buys the product, where is the product sold, etc. All these questions can be answered by the information that will be obtained from a well-planned research programme. With research, a careful study of the market can be made to ensure that business opportunities exist which will lead to strategic location of business premises where there is greatest advantages.
  5. The role of government to encourage Small-scale entrepreneurship, it is recommended that Small-scale enterprises should not be as heavily taxed as the large scale ones where possible tax holidays should be given to these enterprises to their full potentials and put in mire effort which will assist their development and hence the development of the Nigerian industrial sector.
  6. The government should also address the problem of finance by the enterprises. Government should provide loans and advances to these enterprises through their agencies.
  7. Government initiated programmes should be restructured, if not redesigned and should be centered on a participatory approach to enhance SME development.
  8. Government should encourage philanthropists and nongovernmental organisations (NGOs) to supplement their effort in providing moral, technical and financial support for the development of Small and Medium Scale Enterprises (SMEs).
  9. Financial institutions and government should develop a holistic approach to provide adequate training and organize workshops/seminars for entrepreneurs.
  10. National Orientation Agency (NOA) should organize programmes to change the orientation of youth/graduates/citizens from job seeking to skill acquisition and entrepreneurial development.
  11. Government should develop and implement policies that will stand the test of time and enable SMEs compete and survive in a commercial setting.
  12. Government should endeavour to provide a friendly business environment in terms of adequate infrastructural facilities, good roads, efficient telecommunication system and uninterrupted power supply for the growth and development of SMEs.

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