Small And Medium Enterprises And Employment Generation

Project and Seminar Material for Education

Small And Medium Enterprises And Employment Generation


In both developed and developing countries, the government is turning to small and medium scale industries and entrepreneurs, as a means of economic development and a veritable means of solving problems. It is a seedbed of innovations, inventions and employment. Entrepreneurship is as old as Nigeria and had contributed to the growth of the economy. Presently in Nigeria, SMEs assist in promoting the growth of the country’s economy, hence all the levels of government at different times have policies which promote the growth and sustenance of SMEs.

This paper identifies the orientation of SME’s and entrepreneurial trends in Nigeria, tackles the operational definition and scopes, and describes the role of the Nigerian government as a participant, regulator and facilitator, both legally and politically in the growth of SMEs and entrepreneurship. It identifies the marketing problems of SMEs and entrepreneurships in Nigeria, the provision and enactment of beneficial and supportive laws, the provision of infrastructural facilities, constant man-power and development, direct financial assistance to SMEs and the establishment of finance institutions to support SMEs. It identifies the roles of SMEs in Nigeria’s development and growth. It discusses the entrepreneurial thoughts, problems and advance practical marketing solution.

Chapter One


1.1 Background of the Study

Small scale enterprises are catalyst in the socio-economic development of any country. They are a veritable vehicle for the achievement of national macroeconomic objective in terms of employment generation at low investment cost, the catalytic roles of SSEs have been amply indigenous technology. The catalytic roles of SSEs have been amply displayed in many countries such as Malaysia, Japan, South Korea, India etc. SSEs contribution substantially to the Gross Domestic products (DGP), export earnings and employment opportunities of these countries.

Using the definition of central Bank of Nigeria (1993), SSEs can) be defined as an enterprise, whose total cost, excluding cost of land but including working capital, is above N10 million.

Financial growth on the other hand may be defined as a gradual and steady change in the long-run which comes about a gradual increase in the rate of savings and population (Schumpeter 1934).

Simply put, Economic Growth is an increase in per capital income over a long period of time or over a business cycle.

A person is said tobe unemployed if a job is not available when he is willing and able to work at the prevailing wage rate.

The Federal Government of Nigeria has long recognized the need to promote the development of SSEs in order to stimulate employment, mobilize local resources, reduce migration from rural to urban area and disperse industrial enterprise more evenly across the country. This is why the government has established institutions to provide both financial and non­financial services to SSEs. The roles of SSEs will be examined in this work in relation to employment generation and financial growth in comparison to that of large scale.

1.2 Statement of the Problems

Nigeria is a country with increasing labour force. She lacks capital as well as foreign investment into the country as a result of political instability and other reasons. Therefore, a proper and efficient way of utilizing her scarce other resources must be found in order to reduce unemployment and increase economic growth. it must be noted that unemployment is not only an economic problem but also a social problem. This means, it does not only under growth, it also gives room for social problems such as robbery, arson, suicide etc.

The key problem facing most small-scale enterprises is lack of finance whether for the establishment of new industries or to carry out expansion plans. The inability to attract financial credit or resources has hindered or stifled the growth of small scale enterprises. The reasons for the lack of fund include the following:

  • High rate of inflation that led to the vast depreciation of the naira exchange rate, thus making it difficult for most small and medium enterprises to obtain the required input for expansion.
  • Low level of savings in the economy, which leads to low capital formation
  • High rate of interest charged on loan, which scares off potential small and medium scale entrepreneurs

The unwillingness of retail banks to grant credit to small and medium scale enterprise because of the low creditworthiness of these enterprises has also hampered their growth over the years.

1.3 Objectives of the Study

The aim of this topic is to recall the pivotal role, which entrepreneurs and the small medium enterprises are expected to play in modern economics. Therefore the study will make every effort to reveal the various ways to encourage entrepreneurship development geared towards employment generation in Lagos state, Nassarawa State.

The specific objectives of this study are as follows;

  1. To identify the constraints encountered by entrepreneurs as a sole operator or as a bigger organization and how their challenges can be overcome.
  2. To determine the level of awareness of people towards entrepreneurship as a tool for employment generation in Lagos state.
  3. To examine various ways that will be employed to develop entrepreneurship in order to get the desired result of employment creation and development.
  4. By extension and implication, the study shall provide how the government both state and national and also the society will influence positively on entrepreneurship.

1.4 Research Questions

The questions guiding this research work are stated below;

  1. What are the major constraints inhibiting entrepreneurs in Lagos state from carrying out their roles as catalysts of economic growth via employment generation and how these challenges can be overcome?
  2. What is the level of awareness of people concerning entrepreneurial as a tool employment generation?
  3. What identifiable and specific roles (Financial, economic, social, motivational, and psychological) do entrepreneurs in Lagos state play in order to get the desired result (employment creation and development).
  4. In what ways can both the government and also society influence entrepreneurship?

1.5 Methodology of the Study

The study will base its data collection on both the primary and secondary sources. The secondary source shall include, textbooks, journal, speeches delivered in various seminars, information from Federal Offices of Statistics, CBN Annual Report etc. The primary source is through the use of questionnaire, which will be used to obtain information from the respondents that from the sample of the study. Data obtained through the questionnaires shall be presented through the use of simple frequency distribution table. The data shall be analyzed through the use of chi-square distribution, which is the statistical method use to test for the difference of two independent statistics.

1.6 Significance of Study

The study is significant in that it will show how SSEs may be used to generate more employment, improve financial growth and help the country from her present recession if not depression as it has done in many other countries mentioned in the introduction.

1.7 Scopes and Limitation

The study will be limited to SSEs as defined. Also the study shall limit five (5) SSEs in Lagos state, the selection of these Small Scale Enterprises will be done by the use of strategic sampling method that would represent the entire population of Small Scale Enterprises in Lagos.

1.8 Organization of Work

The study will be divided into five main chapters.

  • Chapter one will cover the general introduction into the study under which introduction, statement of problems, objectives of the study, statement of the study are discussed.
  • Chapter two will focus on literature review, which has to do with a general presentation of views by former researchers as well as scholars on the main variables of the study.
  • Chapter three will contain the structural composition of the study under which the sources of the finance of small scale enterprises are discussed.
  • Chapter four will be devoted to data presentation and analysis and
  • Chapter 5 will be used for summary, conclusion and recommendations.

1.9 Definition of Terms


An enterprise is an entity engaged in an economic activity.

Autonomous Enterprise:

Is an enterprise which is not classified as a partner.

Small Scale Enterprise (SME):

Is regarded as small or medium sized if it has not more than 250 employees and not more than 50 Million Euro turnover respectively a balance sheet total of less than 43 Million Euro and if not more than 25% of the shares of such an enterprise are in the ownership of another enterprise.


Small and Medium Enterprises are those firms, which satisfy the definitions given above


Small and Medium Enterprises Development Agency of Nigeria


Bank of Industry, which provides medium or long-term loans to enterprises


Central Bank of Nigeria, the apex bank in Nigeria, which supervises other banks

Total Quality Management (TQM):

This is a concept in management which says that every individual and division in an organization should emphasize the satisfaction of customers and client


A type of plan that specifies anticipated result in numerical terms and serves as control device for feedback evaluation and follow-up.


A method of predicting future business conditions for the purpose of establishing goals and budget.


A general guide to thinking and action or decision of people to do something through certain ways or procedures.

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary of Findings

Data analysis carried out in this project research revealed the following facts:

  1. The effect of inadequate start-up capital constitutes a major challenge and constraints to entrepreneurship as a means of employment creation.
  2. Lack of innovative drive is one of the major constraints to the growth of entrepreneurship, as it not only affects unemployment but also hinders the growth of entrepreneurship.
  3. Lack of adequate knowledge and training background of entrepreneurs is one major constrains that hinder the growth of entrepreneurship and generation of employment in Lagos state.
  4. Government policies on accessibility of credit facilities have a negative effect on the development of entrepreneurship and ultimately employment generation and national development.
  5. Lack of conductive environment makes it hard for the growth of entrepreneurs.
  6. The teaching of basic entrepreneurship skills and competences to students will assist entrepreneurship.
  7. Encouraging students to view business as a career option will go a long way to assist entrepreneurs and serve as a solution to employment generation to an extent.
  8. Proper awareness of the benefits of entrepreneurship will encourage much people to go into the venture.
  9. The existence of small-scale industries creates employment opportunities to people serving as a means of livelihood, employment creation for others and economic development.
  10. Entrepreneurs need government support and that of societies tomake them be established by patronizing their products.
  11. Government also has to provide necessary incentives for the development of entrepreneurship in Lagos state, Nassarawa State.

5.2 Conclusion

Entrepreneurship is without doubts an important component in the process of economic development. In fact, the start-up and development of small business remains one of the major ingredients of continued growth in any economy and strategically the alleviation of poverty via employment generation. There is need to have good business training and skills that enable entrepreneurs know the intricacies and logistics in business administration.

The spectrum of data need include among others, business trend, operating environment dynamics, ingredients for business survival etc.

As revealed in the study, one of the problems that hinder the development of entrepreneurship is raising the right amount of working capital and capital for expansion at the time. Most entrepreneurs cannot afford to use the highly sophisticated machines nor employ qualified skills due to the poor incentive and inadequate knowledge and training background. Finally government should endeavour to address the problem of industrialists in the country with special reference to the development entrepreneurship with regard to providing the necessary infrastructure and establishing environment for the entrepreneurs.

5.3 Recommendations

  1. Government should endeavour to provide adequate infrastructural facilities and provision of training of entrepreneurs and also formulate fiscal, monetary and regulatory policies conducive to the growth and development of the economy.
  2. Strong educational background is highly recommended to potential entrepreneurs to ensure successful business venture. Small business entrepreneurs should endeavour to gain the required training needed before establishing their business to ensure smooth running of business.
  3. Laws should be made by government for small business enterprises to insure their business with insurance companies as a means of transferring their business risks to their insurer in case of any loss; by so doing the innovative drive of the people will be increased
  4. The support of government and society to the entrepreneur will help increase success to business venture, thereby giving room for employment generation and economic development.
  5. Government should encourage practical ways which education can assist entrepreneurship development by educating students the important of self-employment through organizing seminars and training workshop where already entrepreneurs will be invited to motivate them.
  6. There is also need to eliminate undue influence such as political consideration etc. so that only genuine and responsible entrepreneurs will receive support in whatever form. Small business owners should always assess themselves and know their capabilities in handling a particular business venture. In other words self-diagnosis is very important for the success of small business.

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