Contribution of Business Support System to Entrepreneurial Development

Contribution of Business Support System to Entrepreneurial Development

SMALL SCALE BUSINESS RELEVANCE TO THE NIGERIAN ECONOMY: Ohuoha (1992) noted that “the future economic prosperity of Nigeria lies in dynamism and growth of small to medium scale enterprises. Specifically, small scale enterprises has the following economic benefits.

  1. Small firms make efficient use of input (raw material capital and labour) than big ones.
  2. They can be places of learning and training forth people at all levels and functions (directors, manager workers) a capacity that could be used in other sectors of the economy.

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  • They facilitates the creation and use of otherwise non-existent of amused saving in addition, they make a significant contribution to regional activities.

EMPLOYMENT GENERATION: Before independence, government establishments were the major employers of labour, but these days with many private enterprises set up by these enterprises, and this has reduce the dependence on government establishment and large firms employment. Small business enterprises have now come to be known as a major source of new jobs and is capable of reducing the present unemployment problem. Therefore, if problems of unemployment are to be resolved, it is likely that we must encourage entrepreneurship as it will go a long way in enhancing the economic development of the country. Ugochukwu (1998) in a paper presented to ASCON consultancy participants SAMECC III 1988 observed that in a study carried out by Nigeria instate of social and economic research (NISER) before 1988, estimated that the employment in the small scale industries was about 45% of the total employment by industries in Nigeria accounted for about 8.6% of valve added in manufacturing in 1978, while the entire manufacturing sector contributed 39.9% of national valued added. Indications are that small scale industries will continue to contribute increasingly to valued added in the economy due to the fact that the raw materials required by this group of business are largely obtained locally.

Infact, its role was summarized in the third national development plan (1975 – 1980) as the generation of employment opportunities, stimulation of indigenous entrepreneurship, facilitation of effective mobilization of local resource including capital and skill and the reduction of regional disparities.          

          Ejiofor (1989) noted that employment by small enterprises can be particularly important in certain states of the federation where there are very large non-agricultural enterprises. He gave example of cross river state programme of the third national development plan (1975 – 1980) which indicated that 95% of industrial labour in that state were employed in small enterprises.

According to the second national development plan 91979 – 1965) between 1966 and 1967, non – agricultural persons accounted for more than 25% of the total employment in the economy. In 1970, of the estimated wage, employment of 1.33 million, 622,000 persons (45%) were employed in small non-agricultural enterprises.

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Ugochuckwu (1988: 6) believes that they are more suited to the relative factor endowments of a developing economy in that they are mere labour intensive. They thereby, offer a promise of greater industrial employment expansion per unit of capital investment, than large scale industries.

Small scale business serves as manpower training center and providing technical innovations, inventions, are the foundations of an economy. In advanced countries, for example, the United States, the increase in the productivity that have characterized two hundred years of their history are all rested in one principal source, new ways to a job at a lower cost. More than half of the major technological advances in the advanced countries originate with individual investors and small enterprise. Some of these innovations include;

Air conditioning, automatic transmission, instant camera, jet engine, xerophy etc. there are instances of similar indigenous technological innovation which have originated from individual entrepreneurs. According to Ejiofor (1989: 5) in a surrey he carried out in Port Harcourt, it was observed that small enterprises apprentices constitute 51% of the labour force in these enterprises. To him, if thee is about one apprentice for every one owner and journey – men in the sectors, and apprenticeship, takes on the average of about three years and one third percent annual increase in trained labour in these activities cannot be supported without adequately rising demand for their product and service.

Filling needs for society and other business: large firms must be their nature operate in a large scale. Many may be unwilling or unable to meet the special needs of smaller groups of consumers. Such group creates almost ready markets for small business which can tailor their products to these groups and fill the needs machine to accommodate hand capped arrivers. Small business also provide a variety of goods and services to each other and large firms. Large firms generally by parts and assemblies from small enterprises for one very good reason, it is less expensive than manufacturing the parts in their own factories. This lower cost is eventually reflected in the price that consumers pay for their products. In this way, we all benefits enormously from the presence of small scale enterprises.

Ekerete (1922: 30) noted that small scale industries have contributed immensely to the development of many societies. They act as a spring board for most giant industries. Some minor constructions are also needed. Distribution is mostly handled by small scale industries while service of plants are sometimes handled by technically oriented small scale firms.

In supporting this, Ejiofor (1989: 51) noted that small business serves as a nursery for entrepreneurial talent and they grow in some cases into large industry. According to him, many large organisations all over the world today started as small business.

Small scale business minimize waste in the economy in favour of this, Ejiofor (1989) agreed that many craftsmen use scrap materials from large firm most only as their raw materials but also for the manufacture of serviceable improved tools and machinery for themselves and others. He further noted that small businessmen top talent savings and skills which otherwise might have remained unused.

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Self reliance is another role, it is playing with the Nigerian economy. Ejiofor (1989) observed that small business can be an aid to personal and national self reliance. This is because they utilize their resources (skills, experience, knowledge and capital) for the benefit of themselves and the nation as a whole.

Acceleration of the development of both the unbound rural areas. With more enterprise in the community, electricity, telephone services, more people get employment and they are able to better their living standards and save for investigation. All these accelerate development both in the urban and rural areas, for example, more enterprises are established in the rural areas. People’s standard of living would increase and they may think of improving their lot by going into community development like building hospitals, schools etc.

Direct creation of wealth by increasing contribution to Gross National Product (GNP). The gross national product is the total naira value of all the goods national product in the country in a particular year. If the GNP increases each year, it is a sign that the economy is growing and wealth is being created. For example, if in 11984 number of enterprises in the country were tow hundred and six (206) and by 1992 it has creased to three hundred and forty – two (342), it means that more products and services have be introduced or are available in the economy and thus increasing the Gross National product.

Providing competition: Small business challenge large well established firms in many ways making them to become more efficient and more sensible to consumer need. A small business cannot of course compete with a large firm across the board, but a number of small enterprises, each competing on one particular area and its own particular way, to have the desired competitive effect. With competition the quality of products or services produced would improve and firms would find new ways of doing things or new products which at long run would improve the national economy.

They aid industrialization, by producing components required by large factories. Small firms enhance industrialization process, small scale firms permeate through all the whole fabrics of the industrial subsections. They are regarded as means of engendering equity in the distribution of employment opportunities as well as income between urban and rural localities and residents respectively.

Although statistical information is lacking to enable and adequate appraisal of the contribution which small enterprises are making towards the economic progress of the country, there is no doubt that they have great potential for the creation of employment opportunities.


Small scale industries have some common problems in all countries and perhaps the most basis problem is the lack of adequate capital and credit facilities for sustaining their growth and development. Credit is no doubt a critical input or industrial in general, but more so in the case of small scale industries which have a week capital base.

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Adequate institutional credit is not available to small scale enterprise as they are generally considered high credit risks by commercial banks and other financial institutions. As overwhelming majority of small scale industries are either proprietary or partnership concerns and, therefore, cannot also draw money from the capital market. As a result, these industries are eithered stared for finance or have to turn to sources other than the institutional ones to borrow money on extremely unfavourable terms. This makes it almost impossible for them to operate profitably in a completive market.

Having regard to the essentially similar and difficult situation faced by small scale industries in Nigeria, the second national development (1970 – 75) incorporated the small scale industries credit (SSIC) schemes in the state programmes in line with the government policy of giving effective aid to indigenous small industrialists. The SSIC scheme was set up by each state government to give loans to small scale industries on liberal terms. The state contributions to the credit fund were augmented by marketing federal contribution to supplement the laundering operations.

It was apparent towards the end of the second plan that government would have to be the main source of finance for small scale industries during the third plan period as well (1975 – 80), inspite of efforts being made to stimulate lending to this sector by commercial banks and other institutional financing agencies. The small industries credit schemes have therefore, been continued under third plan and substantial allocations of funds have been made to the credit schemes by both state and federal government to meet the growing credit needs of the small industries sector. The allocation of additional fund is of the order of N50 million to meet the estimated investment requirement of small scale industries during (1975 – 80).

This article was extracted from a Project Research Work Topic


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