Small Scale Enterprise – Its Relevance to National Development

Small Scale Enterprise – Its Relevance to National Development

Meaning of Small Scale Enterprise – According to Ojema G.Agbo (2000,P18) he says that there is no definition of small scale industry that is accepted universally. The definitions vary from one country to another. Even in a country, the definitions may differ from state to state and from institution to institution. Definitions are usually based on the level of economic development of the particular economy and the purpose of the definition in the opinion of broom Langenecker 1983, the definitions are not rigidly fixed since people adopt different standards for different purpose with some of the standards being number of employees asset size, volume of sales etc.

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According to Klott Lawerence 1973, small scale industry is any industry which us independently owned and operated and not dominant in its area of operation. Dnicker P.F.1974, maintains that there is only one criteria which with a fair degree of reliability indicates whether a business is mall fair sized or big. He says that “a small business requires at most one man who is not engaged in any other functional work required.

In U.S.A. the small business is one which is independently owned and operated and not dominant in its filed of operation. This act also authorizes the small business administration (S.B.A) to use “the number of employees and sales volume as the base defining a small business” in 1977, the small business administration established the following upper limits in its lending programme (Broom and Langneker ) 1979 for small firm.

1)      Retailing and service-&2million-&7million annual sales depending on the industry.

2)      Wholesaling-& 9.5million-&22milion annual sales depending on industries

  • Manufacturing-250 or fewer employees if employment is between 250 and 1500 a standard. The above (S.B.A) approach to small business concept is based on quantitative approach.

In U.S.A also the center for economic development (CED) used qualitative standard for definition of small scale enterprise. According to the (CED) any small business is characterized by at least two of the following features:

1)      Management is independent, usually the manager are also the owners.

2)      The area of operation is mainly local workers and owners are from one home community, market need not local.

3)      Capital is supplied and ownership is held by an individual or small group.

4)      The business is small when compared to the biggest units in its field

However what appeared to be the official definition of small scale industrial in Nigeria was given by he federal ministry of industries who in 1972 defined small-scale business as “all manufacturing units with a total capital investment of up to N60,000.00 and paid employment of up to 50 persons” this the latest official definition of small scale industry from the ministry of commerce and industries tallies with Dr Mrs. Nzelibe (from faculty of management science Unizik) definition quoting the Nigeria Bank of commerce and industry are as follows:

Small-scale business enterprise are firms with assets (including working capital but excluding land) not exceeding N750,000.00 and paid employment up to 50 persons. Such an establishment must be wholly Nigeria owned (all companies in schedule 1 of 177 Nigeria enterprises promotion decree) meanwhile, the central bank of Nigeria (CBN) adopted a radically different definition of small scale. For the purpose of its credit guidelines to financial institutions, it defined small-scale industry as “establishment where annual turnover does not exceed N500.00.00. this the CBN adopted the criterion of annual turnover rather capital investment.

From the above, it is evident that there is no single definition out across countries and industries despite their difference, all these definitions share a common idea that small scale industry are generally low in terms of number of persons employed and the amount of investment


This is the study of the principles underlying the action and behaviour of small business owners know as entrepreneurs. We are quite aware that labour does not hire itself goods and services do not provide themselves factories does not build itself, innovative idea do not come by itself and risk. is not taken by itself where these activities and behaviour are embedded in a business environment, entrepreneurship does occur. Entrepreneur is often a rather vague abstraction which is subject to varying interpretation is led as follows:

  • Entrepreneur are people who have the ability to see and evaluate business opportunities
  • As an entrepreneur, you must be willing to learn from experience and change with time. You must constantly be aware of new ways of thing to increase your productivity.
  • An important feature of being an entrepreneur is that you provide something of value to others.
  • The biggest asset to sustaining entrepreneurial ability is a positive attitude. Having positive attitude and healthy self image is essential for entrepreneurs.
  • The right mental attitude towards work is extremely important. Successful entrepreneurs enjoy their work and are totally dedicated to what they are doing. Their positive mental attitudes turn their jobs into exciting interesting and rewarding work.

Basically, it is worthy to note that entrepreneurs are the base in which small-scale business enterprise stand and in other to industrialize the society, the potential entrepreneurs need to be trained and developed.


Despite the great benefits which a virile small scale sub sector can bring to the development of the social and economic life of a nation. The small scale industries are plagued with problem which militate against their growth. Several studies have been undertaken with a view of identifying and assisting in solving the problems which hinders the development of small scale industry in the country. The center for industrial research and development of the Obafemi Awolowo University Ile-Ife articulated the problems in small scale business sector which are managerial technical commercial and financial factors.

Onwuchkwua (1993) mentioned three factors that militate against the growth of small scale business in Nigeria. These include:

  1. a) Deficiency in organizational vision.
  2. b) Problem in value orientation.
  3. c) Illiteracy and poverty.

According to Onwuchekwa (1993) “organization is a skill required in small business organization in Nigeria” small business organization lack this skill because most of their owners have no basic education. As a result of this deficiency they are unable to organize effectively in terms of choice opportunities, setting up objectives strategy formulation design etc. the resultant effect here is that these organization don’t expand at all to bigger organizations.

Problem in value orientation the value orientation in Nigeria today is to exhibit wealth and take traditional titles corruption is more than high, no organization can survive in the face of mortal corruption. This problem is facing not only small scale business alone but also other forms of social organizations and agencies in Nigeria.

Illiteracy and poverty- according to Onwuchekwa (1993), the strong problems facing human resource development are illiteracy and poverty. The two combinations are dangerous. Many small scale business managers do not have good education. These situations hinder effective and efficient performance of small sale business organization.


According to Nzelibe (1996) she outlined that one of the causes of the failure of small scale enterprises is poor location. However, it is worthy to note that small scale business enterprise that is located closer to the factors listed below will survive.

  1. a) PROXIMITY OF MARKET: A business that has managerial ability and the ability to evaluate market opportunities will be in the safer side to locate his industry in a place where there is already market waiting for the product.
  2. b) ACCESS TO RAW MATERIALS: So many industries are not stable in production and sometimes some them liquidate due to the fact that their raw materials are imported, any little delay in raw material supply will accumulate work in progress or stop production entirely.
  3. c) CLOSER TO INFRASTRUCTURE: This is way it is necessary for government of any country to provide infrastructural facilities to her citizen & encourage more establishment of (SSBE) in the society. Good roads electricity, water supply communication which is the most important etc, the availability of these things will aid the smooth running of enterprise to success.

The relevance benefits and advantages of small scale industries are quite numerous relative to their size. The establishment of these industries has been the center pieces of industrial development of any country. A cursory look at the profile of small scale business enterprise all over the would help to throw further light on the fact that they possess the potentials for embracing economic development and growth.

Small scale industries to the growth of the contribution of American economy were indeed enormous. For example he small scale enterprise contributes 95% of American business and they employ about 40% of the civilian labour. In Britain small scale business provides 40% of the work force and two million businesses belong to this sector. In 1977, 97% of all jobs created by private sector in Canada were from small scale enterprise. The panacea for economic growth in developing countries often resided in the development of small scale enterprises.

In the Nigeria economy small scale business organization are predominant. They are active in all sectors of the economy. However, their influence is mostly experienced in the distributive trade transportation and local manufacturing. Their major functions are mostly mobilizing capital for investment creating employment and contributing towards community development. A careful and analysis of the Nigeria economy one can observe that the progress made so far have relationship with the activities of small scale business organization. Because of the important role of small business organization in economic development in Nigeria S.A.Aluko (1978) and others asserted that over 70% of the industrial labour in Nigeria were employed in the small scale business industries.

The significance of the contribution of small scale enterprise is further enhanced by the fact that the value added to gross output is generally higher in small scale industries than in large scale industries for instance from the federal office of statistics report on industrial survey from 1978, value added as a percentage of gross output in the small scale industries are 70.4% for textiles, 96% for rubber and plastics and 65% for furniture. The comparative percentages calculated for large scale industries were 46% for textiles, 42% for rubber and plastics and 54% for furniture.

Meanwhile, the development effect of small scale industries in immense when the use of domestic resource are considered. The impact of small scale enterprise in the industrial development of Nigeria was highlighted in the third national development plan (1975-1980) it is noted that small scale industries have the potential for creation of employment opportunities, mobilization of local resources, mitigation of rural-Urban migration and even distribution of industrial enterprises in different parts of the country. The importance of small scale industries in National development plan prompted the federal   government in 1988 to introduce the national directorate of employment (NDE) and entrepreneurship development programme. The goal of this programme. The goal of this programme is to grant loan directly to young graduates to establish small scale business of their choice.

In (1989), President Ibrahim Babangida in his budget speech asserted that small scale industries are important as an engine of growth. This, if the potentialities of small scale industries are exploited, they are capable of immensely promoting the development of the Nigeria economic self- reliance as a whole.

The present administration of president Olusegun Obasanjo in (2003) introduce the national economic empowerment development strategy (NEEDS) which is geared towards encouraging the small scale industries as the foundation for the country’s industrial growth and development and also encourage the people to look inwards for development.


Presently, small scale organization shows their greatest strength in the ears of wholesale retailing service industries and contract construction. But the truth is that most of these industries are experiencing dwindling fortunes. This has been blamed partly on the consumers ebbing purchasing power.

Nigeria is presently experiencing unprecedented inflationary trend according to Nzelibe (1996) “the federal government introduction of structural adjustment programme in Septembers 1986 has pushed up prices of commodities to the point that capital investment on goods rewires a large sum of money. “much of everyday thinking of financial matter new centers on strategies for dealing with inflationary effects on the value of naira. Evidence abound that naira does not change in value with the passage of time but in its purchasing power which has been so weakened drastically by inflation that the survival of small scale business is harder than ever before.

There are speculation in international monetary funds quarters that if things do not change their will be eminent failure of most small scale business in Africa and other third world countries. This, Nigeria which was once describe as the richest country in Africa is now graded as one of the poorest country in African. This promoted Mazi Olouabunwa (1998) to opine that government should as a matter of urgency adopt measures to address these problems in the 1998 budget. Such measure he said should induced salary/ wages increase reduction of personal income tax as well as ensuring the government to reduce the tariff charged on imported raw materials as well as eliminating multiple taxes charged by the three tiers of government. The present situation of small scale business in Nigeria is also compounded by government policies of allowing cheap imports from Asian countries which is presently being felt mostly in soap manufacturing industries cosmetics and other durable goods.

Also Nigeria prolonged period of inflation which has invalidated most economic statistics to data, makes it more complex for any sound furcating about the failure of economic conditions for small scale business. It becomes all the more different when inflation is operating at four hundred percent level. Small scale enterprises cannot borrow money from banks and financial institutions now because they are being restrictive in their lending policy and their interest rates are too high for many small scale investors. Nzelibe (1996) bring us to accept that small scale investors cannot ignore inflation, but must take positive actions to deal with it for the survival of their business during this turbulent economic times. They should endeavour to deal with the day to day situation as best as they can. They must anticipate and accommodate inflation within their plans even before it come by being alert to make every possible change in these cost which they can control.

Here are some suggested survival guides for small scale enterprises owner during inflation

These include:

  1. Avoid sales for credit and ensure adequate cash flow.
  2. Do everything possible to increase productivity.
  3. Increase inventory carefully on popular items and drop non-moving items
  4. Be prepared to change course rapidly on events of sudden down turn
  5. Eliminate cost in every way possible.

In Nigeria small scale industrial development as a conscious strategy for propelling the growth of the economy could be said to data back to the early years of post independence. Strategy provides a business organization the concept of its business activities. The logic of the importance of strategy formulation is that organization has a strategy either consciously or unconsciously formulated. This is why Stonner (1982) defines strategy as the overall response of a business organization over its environment.

According to O.B.A. Obanla (1989) various policies and schemes have been ill-fated to because and are now long forgotten in Nigeria. Note able in sight among past policies and schemes are the establishment of the federal loans board and the regional corporations the small scale industries credit scheme (SSICS). The creation of industrial development centers (IDC) relevant ministerial establishment of federal and state levels in the civil service. the Nigeria bank for commerce and industry (NBCI) initiatives and others are the central bank of Nigeria (CBN) small and medium enterprises (SME) a pose loan schemer to the economic reconstruction fund. The national directorate for employment (NDE), small scale industry (SSI) and graduate employment programme and other initiatives.

A comprehensive account of low the government whish to embark on the promotion and development of small scale industries was given in the third national DEVELOPMENT plan (1975-1980). It explicitly stated that the main objectives of a programme for the development of small scale industries were the creation of employment opportunities, mobilization of local resources, mitigation of rural-urban migration and more over distribution of industrial enterprises in different parts of the country. These were to be achieved through complementary assistance to small scale entrepreneurs in financial management and technical aspects. The main vehicle designated for administering the incentives were the industrial development centers (IDC) and the state small scale industries credit scheme (SSICS)

According to Obank (1989) it was certain that the relevant authorities had not lacked very reasonable and realistic recommendations for the development of the small scale enterprise sub-sector. What appeared to have been lacking was the will power to evolve appropriate institutional mechanisms for enduring a comprehensive co-ordinated   system of assisting policy formulation implementation and appraisal. The result was that achievement of government programmes was not commensurate to expectation.

This article was extracted from a Project Research Work Topic



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