Sourcing Raw Materials for Small-Scale Business In Nigeria

Sourcing Raw Materials for Small-Scale Business In Nigeria

The purpose of this chapter is concerned with the review of related literature from different small scale business.

The chapter discusses the purpose, types of raw material and basic requirement for effective business, the of planning, organizing and controlling in the management of small scale business.

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The chapter is as well to show in clear terms the advantages and source of raw material and how to avoid failure in business.


The first difficulty in small scale business is in one definition. The working definition varies among countries, industries groups from are financial institute to another. Generally, the determining what should be a small scale business. Many different criteria have been used. Some of which include number of employees assets value, sales volumes financial strength number of locations relative size etc. Against this background, the following definition are used at different times and circumstance in this country.

1.)     The industrial research unit of Obafemi Awolowo university, Ife defines small scale business as one whose total assets in capital equipment, plant and working in capital are less than N250,000,00 and employing power than 50fill time works

2.)     The Nigeria bank for commerce and industries (NBCI) in 1991/92 (for the purpose of revolving loan schemes for small scale industries) regards small scale enterprise as those inverting not more than N500,00.00 excluding the cost of land but including working capital). However the bank’s officials since 1995 have been firms whose capital does not exceed N750,000.00( excluding working capital but including land.

3.)     The center for management development (CM) has however, recommended to the federal government that the official definition of small scale industries is a manufacturing, processing or service industry employing up to 50 full time workers, investment in plants and machinery, but excluding land and building shall not exceed N50, 000.00 power plant and machinery are utilized in its operation

4.)     In respect of the small scale industries credit   schemes (SSICS), the federal ministries held small scale industry to be “any manufacturing processing or service industry with capital investment not exceeding N150,000.00.

5.)     Osaze (1986) see small scale business as one which is owned managed controlled by one or two persons, it is family influenced in decision making has an undifferentiated organizational structure has a relative small share of the market and employs less than 50 people

finally, the above mentioned definitions should be revised from time to time. This revision has become necessary for three main reasons.

1.) The need for them (ie definitions to meet the changing need of small scale industries in the country.

2.) In order to reflect to inflationary trends in Nigeria economy.

3.) As a result of the devaluation of Naira the nations currency which will continue if there is no direct fiscal monetary intervention the government


Small scale business has continued to gain a lot support in the country. One might know who the continued support of investment in small scale business. The reasons are that they play a vital role in the economic development of nations, including Nigeria. Broadly speaking, small scale firms make more efficient use of inputs (raw materials capital and labour) than big ones.

They can be places of learning and training for people at all level and functions (directors, managers, workers) a capacity that could be used in other sectors of the economy.

The facilitate the creation and use of raw material otherwise no existence or unused saving (Lassort and Clevier 1989.p 58) in addition. They make a significant contribution to regional activities (the courier May- June 1988, page 53) in this study, we shall review a number and major specific objectives borne in mind in promoting small scale business in Nigeria.


UNIDO (1969),Peter Kuby (1969,p.20) Nwosu1981) in Faleye ( 1985,p.12) all noted that is developing countries small scale business are one of the most effective means of stimulation indigenous entrepreneurship. By affording private, individuals and groups to start business with minimal resources requirement and by affording them the opportunity to manage the business themselves, small scale business help to build up managerial skill in the local populace.


Both UNDO already mentioned and lied no in and Ohurta (1976) agree that investment in small scale business help to transform the traditional sector.

In one respect, it modernizes the people perception of life and in another. It modernizes the traditional hand craft prevalent in the rural economies introducing in use of machines instead of manual labour in most economic activities. Again, the skills of traditional craftsman are modernized and synchronized with the developments in the new industrial sector


It has been pointed out at various times and with varying degrees of emphasis that small scale firms create employment for the teaming population of many nations. In Niger, for instance, it is documented that small scale business employs about 30% of the entire labour force (Aeguah 1986, P.4) (Liedholm and xhute, op.cit,p.120) Ukwu (1987 p.5) on his part, noted that small scale firm generate twelve times theat employment by large and medium scale plants.


Small scale businesses help to link up the various sectors of the economy. in one respect, the constitute the market for agricultural extractive and industrial outputs, and in another way, they provide the source of materials and labour inputs for biggest industries. Referring to European economic community (EEC) countries, Faleye (op.cit,p114) observed that small scale industries provide the much needed linkage in industrial development of these countries, as they are spread both in geographical location and in scope


Small scale firms help to mobilize resources that would otherwise remain idle in the hands of people and employ them productively UNIDO points out that by so doing, capital formation which is a vital engine of economic growth is encouraged.


The establishment said that they are involved in the production of detergents and other cleaning agents like bleach, soaps and tooth paste. The establishments also made it clear that they get their raw materials form local and foreign sources. The local raw materials include red oil, salt. Oil in the country is extracted by farmers who through their processes extract the oil from a palm fruit. Salt in the other hand can be gotten locally in our country, the establishment said that, they get this oil through direct agents, government agents, mainly by local suppliers that are private licensed produce buyers. This oil can be found in swamp forest and regions like Abia State Imo State and AkwaIbom State. This oil most times is stored and preserved in drums tanks. Caustic soda is one of the raw material that are imported. Raw materials such as silicate, EDTA are used preservatives, perfumes and colouring agents.

Generally, most imported raw material (input) are affected by government policies or imported regulation. As a result of these, it affects the price and the availability of the raw materials.


 Basic W Denning in his book corporate planning, selected concepts “(1971,p.97 defines strategic planning as the determination of the future posture of the business with special reference o its product market posture, its profitability, its sizes, its rate of innovation and its relationship with its executives. Its employees and certain external institutions.

Strategic planning is indeed the essence of management. It forms of business be it large scale or even small scale ones apply some form of strategic planning so while discussing planning, the importance or strategy cannot be over emphasized.

Though strategic planning is mostly operational plans. The writer believes that strategic planning can also be applicable to small scale businesses.

This is so because for any business to survive a very careful study of he environmental factors should be takes into consideration from time to time so as to adapt to changes. The relevant environment of any company is defined partly by its presents activities and partly by new activities. Anyone’s business will have a particular environment which may be quite limited. For instance retail shops and supermarkets. A study of the environment will reveal areas of threats and opportunities to the manager.

The useful approach, then centres on the isolation and detailed examination of the key factors contributing to change in order to see what opportunities they present to enterprise businessman, all changes offer new alterative for an existence business. However, the implication of planning will probably alter not only the product market posture of the business but also the pattern of profit and risk.

Planning may then required the re-thinking of the concept of the business in terms of its external relation. This, an aspiring planner or manager must not only be an opportunity seeker but also a man broad insight into the full implications of change in its many dimension while the execution of such changes requires imagination and courage, but above all handwork and effective leadership on the part of the manager or entrepreneurs.

Organizing is another effective requirement of small scale business that must design an appropriate organization for achieving the assigned goals, they make certain organizational policies and practices for compliable plans and that the organization has the necessary capabilities for achieving the goals. Under this direction and guidance, the organization had to drafts promotional programs and campaigns, setting up methods and procedures and making other decisions and executing the policies and implementing business plans.

Above all, small scale business need skills in controlling, there is no management if there is no control or system appraisal. The primary purpose of any system of controls is to set the stage for decision and action. Effective controls keep the organization on course as the business steer towards the company’s set goals


Small scale business has some advantages to play in the management of business. Some of these include:

1.)     SHORT LINE OF COMMUNICATION:         Since there is usually one level of management in the small business enterpriser, face to face, direct contact is possible between the manager and his employees when giving instruction or discussing specific problems relating to the business. The one-to-one communication relationship significantly increases the chances of reducing or eliminating many common communication problems encountered in large firms.

In small enterprises, effective use can be made of commumcation upwards, from the employees to the boss. And effective utilization of short lines of communication will enable small businessman to reduce many of the human problems caused by faulty communication between him and his employees.

2)      PROFIT SERVICE AS SALARY: A key incentive for the small business entrepreneur is that, being his own boss, he is working for himself. This the profit arrived from company operations serves as his financial reward. He controls the soil of his income by the type of decision he makes by the efforts he puts forth and by his managerial experience and expertise.

3)      CLOSE CONTACT WITH EMPLOYEES AND CUSTOMERS:        Small business provides the type of the environment in which close personal of the and employee relationships can be cultivated. Since there is usually only one level of management, direct interaction is possible between the manager and employees. Problem can be worked out on a face to face basis. Customers may even become know on a first name basis and the manager knows what they are buying. may be given personal individualistic considerations to fit their specific needs since the small business recognizes the value of such relationships to the success of the business. Customers like this preferential treatment and it is often the major reason who they return frequently to make additional purchase.

4)     CLOSE TO DECISION MAKING PROCESS:         Since there is usually involved in all decisions affecting the on-going business concern . where as the manger of a large firm often has to refer matters unpaid in order to get a decision the small firm manager can make needed decisions on the spot.   This is an especially important advantage where time is a critical factor

5)      EASE OF ENTRY:      An attractive feature of the small business, particularly the sole proprietorship is the ease with which one can go into business for himself all this is required to open the doors for business is a location, any special operating license required by state government and some capital. No other restrictions are normally placed on entrance into small business.

6)      It can a more individualized jobs for customers and thereby attract them on the basis of specially product, quality and personal service rather than on the impersonal factors of price or mass production of largely identical business.   2.6  SOURCES OF RAW-MATERIALS AND HOW TO AVOID FAILURE IN BUSINESS.

Various small scale firms in the country use different ways to get their raw materials which they use in the production of goods. Notably among these ways are through the local sources and the importation of raw materials from over seas or foreign countries.

Small scale industries recruit agents who go into rural areas to look for local suppliers of the raw material needed.

Another means of getting raw material by the small scale industries is by importing raw materials from foreign countries. Most of these imported raw materials are these raw materials that cannot be found or produced in the country.

They get these raw materials by subscribing for those raw materials needed and in return it is imported into the country.

  • Exchange rate.
  • Government policies importation of goods
  • High excise and import duties placed on some of these raw materials

Raw materials sourcing has been posing a very big threat to small scale business, this is because of some of the adverse factors that hinders the progress of the small scale such adverse factors are finance, social amenities and facilities, into belonging to any small scale industries union lack of planning and lack of record keeping. Because of this mentioned problems this work is suggesting various ways the problems could be solved.

In the case of finance, banker should help those in small scale business by giving them loan which they have to input in their business for growth, mismanagement on the other side of the proprietors should be completely avoided, so that they can pay back the loan collected from the bank or finance house.

In the case of social amenities and facilities the government should do every thing possible to see that every area the country have electricity and good road network, pipe-born water, all this help in the production of goods and service.

Small scale business should endeavour to join or belong to small scale business union, this is very important, because it will give them a strong base and backing in case you want a loan from the bank or other finance houses.

People involved in small scale business should try all means to employ the service of a professional, that will help them keep their account and records, this will help them because correct account and record leads to good business growth, since you have to know when you are loosing and when you are gaining, business planning should not be eluded as a key success in small scale business.

This article was extracted from a Project Research Work Topic


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