The Roles of Small Scale Industry in Nigerian Economy

The Roles of Small Scale Industry in Nigerian Economy

The importance and advantage derived from the establishment of small-scale enterprises in a development country like ours. Cannot be over emphasized.In the literature on small industry and business there seem to be general consensus that the major contribution of small business is the employment that if offered to a large proportion of the population. As Aluco an his team put it “Although craft and small enterprises accounted for N33.6 million out of N 281.8 million of total industry contribution to gross domestic production. In 1969 – 1970, that is about (12%). The craft and small enterprises sector employed and estimated number of 600, 000 persons while large scale enterprises employed an estimation number of 255,999.

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Omorodion (1989) in the industrial development process pointed out that that small-scale industry makes relatively strong contributions to employment generation, in developing countries.

Not only is the vast majority of the industrials laout force to be found in small and medium scale enterprise, but empirical evidence also shows these trends to use, particularly labour intensive technologies.

Obaejie also recognizes the appointment of contribution of small-scale business in Nigeria As he puts it one of the factor that will determine the success or failure of the Nigeria economy will be the performance of small business. It is therefore in the interest of the government employment increasing policy to have a vigorous an productive small scale business sector.

The government policy to make use of local raw material is being achieved through manly small-scale industries in Aba, Onitsha (1990) found that 72.2% of the firms use local raw material has gone a long way, in establishing the link between the small scale industries effectiveness in the activities of the various sector of the economy. There is need for a direct like as it is offered by the small-scale industries. Some authors described this link as establishing project and utilizing a conducive operation base between agricultural projects and utilizing local raw materials in small quantities.

Establishment of small scale industries make possible, the realization of government policy, thereby closing the gap between the rural and urban centers. According to Okere small-scale industries helps in removing regional imbalance. They assist not only in eliminating the source of social and political conflict, but also in reducing the risk the few development center of the country. To buttress the afore-said assertion, made Nwogudo and Ohitl(1988:224) noted that is possible that domestic saving which would other wise have renamed idle are mopped by small investors of such investments.

Nwosu also said that small scale industries fulfill numerous productive functions and services they generate, other area of importance identified by the Bottom Committee of inquiry include:

a     Small firms production outlets for the energy of the large number of individualist propeller who preferred to work in small units.

b         Providing an essential source of change which must frequently occur in small units an constitutes the bedrock of the growth for large firms in the future.

  1. As a source for the emergency of new industry
  2. Providing essential sources of specialist supplement of most large firms.

 2.2     FEATURES OF SMALL SCALE INTRUDES IN NIGERIA

         Just like every other aspects of the economy, that has liking feature with which it can be identified small scale industries, can be identified small scale industries, can be identified with so many features commonest amongst which is their limitation to sources of fund.

Olusegun (1986:1) in his paper presented in a workshop on small-scale industries identified their features as outline below

  • Majority are located in a building an infrastructure not deigned for industrial use.
  • They are generally ill equipped with poor technological know low most of the operations are natural or best crudely automated.
  • Output is generally low. Hence the products are directed to the catchments area.
  • Employees are often illiterate, unskilled and technically deficient.
  • Policies regarding working conditions, are often more flexible an changeable.
  • There is generally for planning an innovation
  • Quality control is often not always regarded as priority.

According to Enugu (199:24) other features of small-scale industries include the following such as:

  • The owner manager knows and it known by the employees and apprentice of the firm.
  • The firm has little or no accounting records. The labour force is dependent heavily upon apprentices labour (low labour turnover)
  • They are many, but each of them is small in size and has a small inventible capital, scale of operation share of the market and number of people employed the size of the firm is small scale industries especially in development countries is that these industries are dominated by sole proprietorship This means that most of them are owned and operated by one men.

2.3     SOURCES OF FUND/FINANCE FOR SMALL SCALE BUSINESS

The goal of every business entity is to operationally sound more importantly to ensure its survival and continuity. The source of fund of any business organization deeply depend on size of the business, nature of the business.

Also, the magnitude of its activities. Sources of fund available got small-scale business could be traced to both the internal and external:                  

INTERNAL SOURCES

  1. PERSONAL FUND

The researcher argues in the dame line with steinhoh (1974: 81) who say that “whoever potential creditor are investing or lend financial assistance to a number of firm, the first desire would be ascertained the extent of financial exposure or the equity at the owner. The researcher believes that for any person to be credit worthy he must have some financial interest in the business, which he carries out

ii        PROFIT

Enude (1999:218) in his work contends that ploughing back of profit into reserves is not new language in business sector. It should be known that if profit in to reserves is not new language in business helps in re-enforcing the capital base at any business despite the advantage of retained profit, most small scale industries lists use their profit unwisely. They prefer using it for non-profit yielding activities.

 EXTERNAL SOURCE

  1. Loans from relative an friends in the days of our forefather and also in this age small-scale financial assistance since he internal sources are found inadequate.

This source is very cheap an convenient. Enude (1999:216) recorded 79% of fund which has been available to small scale enterprises in the former Anambra State is form this sector.

  1. Isusu

This is a method of raising funds and capital among like-minded people of the same status whereby a specified amount of money is required to be paid oat a specified period through periodic contribution or co-operative society.

 iii FINANCING THROUGH COMMERCIAL BANKS

Commercial banks have been a very big help to small-scale industries in terms of sort term loans. They servile as primary source.

iv       DEVELOPMENT BANK

Akheniekhor (1983:22) started that between 1978 – 82, a total loan of N17.914 was granted to small firms out of allocated N278.6m loan to industries in public sector. Development banks has been grater help.

  1. FUNDS FOR SMALL SCALE INDUSTRIES (FSS)

Federal an state government in their effort to finance small industries was set up in 1981 and by the end of 1983 about   N41.3m had been spent under the scheme.

 THE PROBLEMS OF SMALL SCALE INDUSTRIES AS IT AFFECTS THEIR DEBT – SEDUCING CAPABILITIES THE ONE-MAN BANK

Regrettably, according to Baumauack (1973:34) there is a limited opportunity to specialize in management of small business Authors such as pickle and Abraham son called it experience often, the managers of small scale industries do not have the capacity to operate successfully.

SOCIAL PROBLEMS

According to Okoye (1991:184) as an after math of our low technological base. our smaller business do not produce goods of high quality an cheaper price unlike those imported form the technological advance countries.

 LOAN DIVERSION

          Engaging traditional title takings, polygamous marriage to boost their ago and status symbol, appearing flamboyantly in extravaganza as such as displaying expensive cars. This is financial misappropriation. This rascality does not augur well for profitability an debt service

POOR INFORMATION AN RESEARCH

Because of illiteracy, most small enterprises lack the basic initiative to apply professional advice.

 CUSTOMERS ABUSE TO CREDIT FACILITIES

The pressure on a small business to s ell on credit is so intense because for competition for survival. The manager may believe that he can gain a competitive edge by granting credit or he may feel forced to keep up with competitors who already sell credit.

NO BUDGET AND BUDGETARY CONTROL

Authors like C.S. Ola pointed out that any business regardless of size, need budget and budgetary control, cost accounting an cost information system for analysis classification an recording to cost, as an aid to product valuation, price setting and profit determination. He further stated that any business decision should first be formulated as a budget with application of strict control mechanism.

MEASURES SO FAR ADOPTED BY THE GOVERNMENT TO ALLEVIATE THE PROBLEMS

In recent years both federal an state government introduced various policies and programmes to redress the above short comings, inang and ukpong said that government established a coordinating unit called sham-scale industries generally through the provision of extension services and technical managerial assistance a well s meeting their training needs.

Furthermore, some fiscal policies has so far been enunciated to encourage the activities at the small-scale industries- Okongwu also noted that the 1998 fiscal policy specifically stated that small and medium size companies, with turnover of five hundred thousand, are engaged either in manufacturing, agriculture, production or mining of solid mineral would be charged a lot of rate of tax 20% for the three years.

This article was extracted from a Project Research Work Topic

THE CONSTRAINTS OF SMALL SCALE INDUSTRY IN DEBT SERVICING

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