The Small Scale Enterprises and Economic Development of Nigeria

The Small Scale Enterprises and Economic Development of Nigeria

In the course of this study the research considered the works and ideals of many authors who have made available contributions on the issues that relate to the study.A growing economy tends to provide and create opportunities for the small firm. Small firms not only provide a production out let for enterprising and independent minded people, but they are also the most efficient form of business organization in industries where the option size of the production unit or sales out let is small.

According to Ekeigwe (1992) a natural problem with the small business unit is that of necessity, the basic conditions of internal control must be violated.Small scale enterprises has a problem of vital business information.

According to Osubor (1994) the short coming of small business enterprises are problems of gaining capital for expansion, the manager unable to meet or secure the necessary collateral for credit worthiness problems pf continuity is small business especially in Africa, the death of the owner business organizations keep untold secrets of the business, and therefore may bring abrupt and to the business.

Osubor mentioned other problem  as burden if bearing the entire loss of the business failure lack of mass production, the lengthy hours of work which reduce mental efficiency in production and management.

Kalu (1986) said about the importance of small scale industries, “the task or role of these small scale industries is the creation of jobs. In our situation, it has to be in a mode that will absorb as much of our limited capital as possible therefore small scale industries are more suited to our circumstance”.

Oshunbiyi (1989) also emphasized the roles of the small scale industries in his articles, thus,

(1)   “That small scale industries harness their raw materials locally and serve as raw materials inputs to the large scale industries.

(2)   They look inwards and identity or develop prospective products for domestic consumption and the export market as a means of earning foreign exchange for the state. Still on the importance of small scale industries, Austin (1981) said “small scale industries has the potential to assist in the objective of rural development.”

Iwuoha (1993) highlights some of the advantage to be gained in establishing small scale business:

(1)     Efficiency in the utilization of resources.

He stated that small business make efficient use of resources thereby lending to an increase in out put real income etc. it is a known fact that small scale business makes good use of what large scale industries might consider to be waste product for example large paper were used to make cartons.

This goes to show that, indeed small scale business make efficiency use of resources as Iwuoha rightly pointed out. Small scale enterprise helps to mobilize resources that would other wise remain idles in the hands of people and employ them productively.

(2)     Small scale business affords the opportunity for training managers and entrepreneurs,

Small scale industries provides a means of training men and women of proven ability, intimidation and leadership to be efficient managers and entrepreneurs.

Osaze (1986) listed the importance of small scale industries as follows:

(i)           The small scale industries avoid the heavy cost which often result from the Agglomeration at large labor forces.

(ii)          Provide suitable training ground for administrative responsibility than large units.

(iii)        They can be spread geographically to serve predominantly agricultural areas.

(iv)        Presents much less of a break with previously established modes of living and therefore presents less of  a strain then industrialization in the form of large unit and.

(v)         They may also avoid some political problem associated with larger industrial units especially when owned and managed by frequencies”.

Other developed countries apart from Nigeria also realized the importance of small scale industries and because of it attached much importance to its economic development.

For instance, in united states of America, according to Heilbrone (1989), the small scale business is little indeed. Yet by virtue of numbers, the small scale business of America are by no means unimportant in the national economic picture. Small scale business collectively employs roughly 40 percent of American labor force.

In America millions of small entrepreneurs constitute the very cone of the middles class and thus give a characteristics small business view to much of American political and social life.

Ogudipe (1987) said that small scale industries cover all those area and large scale industries, they perform the following roles:

(i)           Ensure more rapid employment

(ii)          Develop indigenous entrepreneurship and increase utilization of local resources.

(iii)        Provide a training ground for indigenous managers and semi-skilled workers.

(iv)        Reduce rural to urban migration by engaging a big fraction of the population as employees.

(v)         Develop indigenous technology and raise the living standard of the rural dwellers. Also the importance of small scale business Ibrahim Babangida when the declared that Nigeria industrial revolution has not started. “It will only start when our small scale industries take off”.

The president blamed the started growth of the small scale industry sector on “inappropriate policies and the red absence of suitable financial arrangement”.

The small enterprise aids development. This is because the small scale industries has a lot of importance as its role to play in the economy which include.

(i)           The small scale industries serve as a misery for the cultivation and development of new entrepreneurial talents who may be the so called captains of industry tomorrow.

(ii)          They diffuse industrial concentration and ownership there by promoting balanced development through accelerated growth of the rural-urban population drift.

(iii)        Small scale industries enhance unemployment and equity income distribution.

(iv)        They provide a source of innovation.

(v)         Generally inter-industry and intersection linkages and form which new large firms will grow. The united Nations Agencies that deal primary with developing countries consider small enterprises as an important component of industrial and employment creation.

Killby (1969) and Faleye (1985) all agree that in developing countries, small scale industries are one of the most effective means of stimulating indigenous entrepreneurship affording private individuals to start business with minerals resources requirement and by affording them the opportunity to manage business themselves. Small scale enterprise helps to build up managerial skills in the local populace.

Once can not help, but agreeing with the authors considering the fact that, Enugu state is known for its education potentials and many university graduates are produced and they have over the years faced employment problems.

However, now that era of industrial station has started the researcher that many of these graduates are now starting small enterprises and have been successful, despite the fact in business ventures that goes with what they did in their higher institutions, and so, one should ask the question why are the successful?

It is because as they engage in small scale enterprises. They gradually obtain the managerial skills and other things needed to make a business work. That is why many people who graduated as engineers and because of unemployment have formed to shoes making or fashion designing have been very successful. Other roles of small scale business include;

(i)      Conversion of traditional industry check (1996) agree that

investment in small scale industry helps to transform the traditional sector. It modernizes the people’s out look towards life, and modernize the rural economics.

It can be noted that people still engage in peasant farming and use crude implements in the cultivation of crops. This old method can be discouraged through encouraging people to start small scale industries on the crops they cultivate. Farmers in the state should be encouraged to combined and establish small scale industries which will enable them to use machinery for cultivation and processing of these crops. This will lead to better quality crops coming out of farms and increase the demand for our local materials and therefore leading to economic development of the state in general.

(ii)      Creation of employment:

Aguah (1986) said that in Enugu state small scale enterprises has business that employs about 30% of entire labor force. It was in realization of these roles that the industries play in accelerating industrials development that former head of state president Ibrahim Babangida in his 1989 budget speech said, “Attention will now be focused on this sub-sector in view of their importance as an engine of growth”.

From what has been highlighted above, it can be seen that small scale enterprises are important tools for economics development of any ambitions country and effort should be made to establish more in the state and local government areas. Small scale industries occupy a strategy position not only in Enugu state economy but also in the economy of any other state. The Philosophy and rationable behind the creation of these industries cannot be over emphasized.

The presence of these industries has been felt tremendously especially in the economic social and political development of the state. Economically, small scale enterprises have helped to produce goods and services that are requisite to the viability of the state. Even when the federal government structural  Adjustment programme (SAP) is in progress, these industries have enhanced the spirit of self sufficiency among local government areas towards the economic development of the state.

Socially, small scale enterprises have engendered the well being of the state through the provision of social amenities in the rural areas where most of these industries are situated.

Politically, it has enabled both state and local governments to explain and expired the abundant human and material resources that are bound in all houses and corners of the state.

The Nacuo (1991) enumerated the impact or rather roles played by these industries towards the socio-political and economic development of Enugu State.

The most prominent among the roles played by small enterprises is the producing of goods and service for both end users and intermediaries. These industries provides finished goods for the individuals use and for the use of large scale industries. It also produces the same materials for the medium scale industries, some of when act as intermediaries between the small scale and large scale industries.

Secondly, he pointed out that small scale enterprise have provided jobs for a reasonable percentage of Enugu state citizens that are gainfully employed today. It is a terrible rate and world have been worse it these industries which is now gaining momentum and have the capacity to employ even more people were not there.

The fact that these industries have existed with little or no huge capital requirement is very big blessing to the economy of the state. This is especially true in the fast growing services sector where jobs were created with relatively low capital cost.

Another important role of the small scale industries have been playing is that, it is serves as a propeller for introducing equity in income distribution. It does this by ensuring that the profit realized is reinvested towards the individuals economic well being, most of that of the industry and the society at large. And this is done within the frame works of its place and execution of its fundamental objectives.

Most of the job opportunities in these industries are for unskilled workers and those that are yet to be trained on any profession. But through the process of routine performance of their duties they graduate into skilled out semi skilled workers which is a basis for future industrial expansion and development. It does not require some of the sophisticated managerial and technological techniques normally expensive bureaucracy which is inevitably practiced in the large industrial organizations is not entirely the same with small scale industries yet it has made possible impacts.

The existence of these enterprises has enhanced the developing and adapting appropriate technological and educational standard that is peculiar with Enugu state, and small scale enterprises aspire to re-discover this and improved upon it.

It has increased savings and investment by local personnel with more effective use of scares capital from the foregoing, it has been well understood that the small scale enterprises operates with limited capital when intensively utilized more profit or reinvested for more expansion and benefit of the firm. The use of local personnel instead of foreign expatriates is another great advantage much as small scale enterprises have improved mobility for developing scare capital, lethal also increase mobility for the improved development of natural resources most of the raw material used in the operation of these industries are natural resources mainly agricultural products, so the need for these resources enhances the intensity with which their development is improved, for in stance the banning of importation of flour by the federal government has motivated the industries (flour mills) that depend on it for their raw materials. They quality and quantity of the corn production in the state.   


The researcher having considered and reviewed the works and opinions of many authors who have made meaningful contribution on this issue, observed among other things, the following.

Obitayo (1991) in highlighting the roles or impacts of small scale enterprises have provided opportunities for developing special sub contracting and marketing arrangements most of the contracts jobs which could have been executed by large scale industries are sublet to the smaller ones which also act as auxiliaries to large scale enterprises. The researcher agreed with him if it is in a government setting where things works as because found that contracts jobs are given to individual, that are close to or” connected to those in power.

Obitayo (1991) said further that small scale enterprises have provided means of introducing improved productivity for those traditionally excluded from the benefits of development programmes. It is also flexible in assisting transition from traditional to industrial life styles, particularly in Enugu State and its local government area. Check (1996) agrees that investment in small scale industry help to transform the traditional sector. It modernizes the peoples out look towards life, and modernizes the traditional band craft prevalent researcher’s investigation carried out in some selected areas in Enugu State, I saw truth in the authors some small scale enterprises that have transited from traditional to industrial enterprises.

According to Iheomacho (1991) small scale enterprises have made possible for learning “total” rather than “piece meal” job component. The job experience acquired in small scale enterprises cannot be compared to that of ordinary apprenticeship. This is because it offers all round job experience while the later gives a disjointed type. The small scale enterprises have offered a brilliant breaking ground for entrepreneurial and managerial talents the critical shortage of which is often a great handicap to economic development most industrial managers are not advanced in management and administration, even when they have received higher education, so the establishment of small scale enterprises offered them sound industrial management.

The researcher observed that the above is true. Those managing small scale enterprises known it all. They are exposed to different job components unlike in large enterprises where there is division of labor.

He continued and the researcher agreed with him totally that small scale enterprises have been lending themselves to industrialization policies favoring decentralization their presence have been attracting the provision of basic social amenities and feeling of government presence in the areas, so small scale enterprises are catalysts for social and developmental changes. Apart from creation of jobs which small scale enterprises is traditionally known for, it is in the process of producing the raw materials needed for the larger industries. This is true because from the researchers study for instance, the palm kernel oil (PKO) that is used by large industries in cosmetics production are produced by these small scale industries.

Theomacuo (1991) however started that small scale enterprises must endeavor to employ trust worthy, suitable and adequately qualified workers who will stand by them in time of trouble and who would combine efforts to bring the industry back on its part. These industrials must realize that for you to get the invest the best (ie they should avoid unnecessary stinginess). They should take time to scrutinize those they want to employ to avoid people live fraud stars small scale industries should give incentives or awards for its dedicated workers. This will help to encourage other workers to be hand working and dedicated ones t be faithful to the industry.

The researcher investigation saw truly in the above points. The bedrock for the growth and survival of any enterprises is having people that are fit for the job and motivating them to put up their best.

Small scale industries should establish market laboratories for use in market research in order to observed consumer preference. Serbert et al (1970) say that research in marketing is fruitless unless it illuminates an identified problem at a work while cost. They should not engage in random research but try to identify the problems or complaints of their consumers. This will help the industries to avoid wastage demand for its product.

According to Burns (1970) small scale industries should learn to create guidelines and rules that govern the whole organization. There should be disciplinary codes or special controls in order to continue conduct within these constraints, there has to be belief in the rightness, the moral legitimacy of these code and social control, small scale industries should have guideline, that will help to run the business and consequences of going against such guideline should clearly state. These rules and regulations however, stringent must be fair small scale industries must learn to be honest in their dealings within and outside their organization so that people will  have more confidence in them. The research in agreeing with this observed that in any organization where this is no code of conduct or rules, or even if there is and they are not obeyed, there is bound to be chaos.

Awoyemi (1981), said that since the country suffers from increase in interest  rate, devaluation of the naira distressed Banks, the small scale industrialists have been left with little or not means of financing their business. It will therefore not be out place to suggest that small scale out fits should enlist in the stock exchange for survival. They should put aside any doubt they have in doing so and look at the positive side of enlisting in the exchange. The researcher agree with this suggestion because the investigation shows that one of the problems of small scale enterprises is lack of capital and government is not forthcoming in helping them out, so small scale enterprises should go to stock market.

It is now evident from the about indications that small scale enterprises do not only have place but have played and are still playing prominent roles in the substance of the state economy, though it has not lives up to its peculiar problems of inadequate funding and full government support, none or partial implement of policies that will boost the enterprises etc.

—-This article is not complete———–This article is not complete————

This article was extracted from a Project Research Work Topic


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The Small Scale Enterprises and Economic Development of Nigeria

9 Comments on “The Small Scale Enterprises and Economic Development of Nigeria”

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    Can anybody assist me on definition of small and medium scale industries in nigeria according to definition of Aluko 1972, Olashore1987, Obitayo 1991, Ekpenyong 1992, Olorunshola 2001, Ariyawu 2003 ??????…

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  8. Can any one help me with this, small scale businesses and development economics are inseperable using Nigeria as a case study justify this ascertion or claim

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