TABLE OF CONTENTS

Title page    –        –        –        –        –        –        –        –        –        i

Declaration           –        –        –        –        –        –        –        –        –        ii

Approval page     –        –        –        –        –        –        –        –        iii

Dedication –        –        –        –        –        –        –        –        –        iv

Acknowledgement         –        –        –        –        –        –        –        v

Preface        –        –        –        –        –        –        –        –        –        vi

Table of Contents          –        –        –        –        –        –        –        –        vii

CHAPTER ONE

• Introduction –        –        –        –        –        –        –        1
  • Statement of problems –        –        –        –        –        –        2-3
  • Objectives of study –        –        –        –        –        –        4
  • Scope and limitations of study –        –        –        –        –        4
  • Significant of the study –        –        –        –        –        –        5
  • Definition of key terms –        –        –        –        –        –        6-7

CHAPTER TWO

2.0     Introduction         –        –        –        –        –        –        –        8

• Historical Background of the Study –        –        –        –        9
• Definition of Small – Scale Business – –        –        –        15-18
• Characteristics of Small – scale business –        –        –        19
• Roles of Small–scale business in economic growth      –        20-21
• Problems facing small – scale Business –        –        –        22-23

CHAPTER THREE

Summary, Conclusion and Recommendations

3.0     Introduction         –        –        –        –        –        –        –        –        28

• Summary –        –        –        –        –        –        –        –        28
• Conclusion – –        –        –        –        –        –        –        29
• Recommendations –        –        –        –        –        –        –        29-32

Bibliography        –        –        –        –        –        –        –        33

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE ESSAY

The history of indigenous businesses in Nigeria has the history of small-scale enterprises. Independent businesses are everywhere and in line of work in our community.

Many people want to become their own boss someday. This goal serves as an incentive for millions to become business entrepreneurs most especially now that people have come to realize that it does not pay much to work as civil servant. But rather think of operating businesses of their own.

In recent times in this country, government (federal and state) level have championed the campaign for individuals especially the unemployed ones to become creative and bring to a halt the searching for a White Collar Jobs that are not available; rather people should engaged themselves in thinking of how to get themselves involved in doing one thing or the other on their own in order to create employment for themselves and if possible employ other people.

Making this possible will matched the nation towards its long awaited industrial take off. It is a consensus opinion that small – scale and medium size entrepreneur can assist in re – shaping our economic system.

However, a close look at the performance of small – scale businesses in Nigeria portrays a situation of neglect, apathy and general underdevelopment. This situation had seriously hampered the rapid growth of this important sub sector of the economy, pathetic situation could be attributed to a number of problems hindering the development of small – scale businesses such as managerial problems, marketing problems, lack of high caliber of employees and lack of quantitative data among others. The above-mentioned factors have hindered the development of small-scale business. The acute shortage of required capital to meet the business operational requirements has cultivated has cultivated the fluctuating performance and its declining role in the development of nations economy. The difficulties of small-scale businesses in obtaining required credit facilities and varieties of credit issues has further complication the financial problem facing these industries.

• OBJECTIVE OF ESSAY

The aims of this study are as follows: –

1. To identify possible constraint facing the business with a view to finding solutions.
2. To undertake an intensive investigation on how the establishment of small-scale business could help in economic development.

• To critically examine how small scale business can be managed.

1. To humbly fulfilled the requirement for the award of National Diploma in business studies (Department of Purchasing and Supply) College of Business and Management Studies.

• SIGNIFICANT OF THE ESSAY

The important of this study cannot be over emphasized. In the course of this extended essay the following importance will be revealed.

1. Academic Significance: At the end of this essay, it is hoped and wished that the study will be of an enormous importance to other fellow student and the general public as a whole.
2. Policy Significance: It is equally hoped that the essay will be of great assistance to the government in making decision concerning economic development.

• SCOPE AND LIMITATIONS OF ESSAY

The extended essay is all about the significance of small scale businesses in economic development with a specific reference to the Nigeria economy.

Effort on the course of these essay study were constraint by the following factors:

1. Having little experience in writing these extended essay work is an obstacle, hence, how to go about it for ideas was a big problem.
2. Seeing the supervisor twice a week or sometimes only once a week was also a problem

• Spending money in going about the process of writing the essay is a major problem.

1. Time was also not sufficient enough to obtain all the relevant fact in respect of the essay.

However, all the limitation mentioned above were put aside to conclude the extended essay study.

• DEFINITION OF KEY TERMS

DEVELOPMENT: A Multi – dimensional process involving re – organization and re orientating the entire economic and social system. This involves, in addition the improvement of income and output, radical changes in institutional, social and administrating structure as well as in popular attitudes, customs and beliefs. In other words, it is a process of change from one stage to another, which is a positive change.

ECONOMIC DEVELOPMENT: It is a service provided by people in the increment of skills, capacity, freedom, creativity, self-discipline, responsibility and material well being where poverty, unemployment and inequality have reduced tremendously.

ECONOMIC GROWTH: This is a quantitative increase over a country’s level of output both goods and services at a particular period of time.

GROSS NATIONAL PRODUCT: The (GNP) is the sum total market value of all final goods and services produced in a country in one year.

EMPLOYEMENT: Using the services of some and pay in return a form of salary or wage.

ENTREPRENEUR: One who initiates, establishes, organizes, maintains and expands economic activities.

DEPRECIATION: This is the wearing or loss of quality of fixed assets from use.

INDUSTRY: A factory where raw materials are used to manufacture usable and consumable goods.

PROFLIGACY: This is the state of being reckless and extravagance the use of resources.

CHAPTER TWO

LITERATURE REVIEW

• INTRODUCTION

This chapter intends to review the valuable importance of small – scale enterprises. What some authors, academicians and scholars have written on the contributions of small – scale business to economic development. Books and papers presented by various authors will be thoroughly analyzed in this chapter to show more light on the role played by small – scale business in the development of economy of a nation.

The concept of economic development will be look into in details based on the views of authorities mentioned later on the course of this chapter. To some development is a condition in which people living in a country has adequate food, shelter and the income in equality among them greatly reduced. While to pothers, it is the transformation of the nations mode of production and seeing into bearing into being a qualitative change in the living condition of the people.

Various definition of small-scale business both within and outside the country are given and also the characteristic of small-scale business which differentiate it from large business is also highlighted. The problems of small-scale business are identified in this chapter and the contributions of small-scale businesses to this great country of ours will make our country become the emulation of nations.

• DEFINITION OF SMALL – SCALE BUSINESS

A clear definition of small-scale business is an essential element of government policy in any country since it distinguishes specific group of industries. The definition varies from country to country, depending on the states of development of each country. The definition undergoes periodic changes in response to such factors as inflation and exchange of rate movements. As the Naira has depreciated, the monetary values of small-scale businesses have increased but the size remains relatively constant. The definition of small-scale business that are regarded small in developed countries could be very well be large in a developing country. The question crises how small in scale business. Most people apply the term small – scale enterprises or business to the local concern such as drug stores, service stations, barbers shops, road mechanics workshops. The concept may be accurate enough for general use, since most small firms in Nigeria operates on this scales within small-scale business could be defined as any business with the total capital investment of less than two million Naira (2,000,000) with a number of employees not more than fifty (50). Small business dominates the overall business activities in Nigeria. The measures are subject to constant changes. but whatever the nature of small scale business such business shares the same characteristics as big ones. It is interesting to note that most big business started off as small outfits but with proper planning and effective management expanded and grew.

In February 1985, the Central Bank of Nigeria (CBN) came out with a definition of small-scale business. It states, for attending purpose of merchant banks small-scale enterprises is one with a maximum annual turnover of five hundred thousand (500,000) or with a capital investment of not more than two hundred thousand (200,000) excluding the cost of land. And for a commercial banks, a small-scale enterprises is one with annual turnover not exceeding five hundred thousand (500,000) to five million (5,000,000).

The center for industrial research and development (CIRD) Obafemi Awolowo University Ile – Ife define small-scale enterprises with the total investment capital not exceeding two hundred and fifty thousand (250,000) and employing not more there fifty (50) full time workers.

The Nigerian industrial Development Bank (NIDB) classified small-scale enterprises with project cost (investment and working capital) not exceeding seven hundred and fifty (750,000). For many years now Nigeria economy is characterized by rapid inflation, which may render the monetary definition of these small-scale enterprises in valid. A holistic view expressed by the committee for economic development (CEO) in the United States of America, considered a business small when at least two (2) of the following characteristic prevails.

1. The managers are often the owners.
2. Capital is furnished by an individual owner or a small group.

• The area of operation is local

1. The business is small in comparison with the larger competitors industries.

Putting the above features together it can be summarized by saying small-scale business is self initiated, largely self – finance, closely self – managed and its of relatively small when considered as part of the industry. This definition provided is within respective countries; the frame – work for the administration of policy measures designed for small-scale businesses. Therefore, a country’s definition must be made to suit its own particular circumstances and needs.

• CHARACTERISTICS OF SMALL – SCALE BUSINESS

Apart from the market size, small-scale businesses usually have three (3) distinguishing characteristics. According to Olokoyo (2002:3) in his book managing your small-scale enterprises a guide to managers, entrepreneur and students identity the followings as small-scale business: –

1. Management: The management of small business unit is generally coordinated by the owner. As an owner manager, he is in position to make his own decision. As small operating output owner is both an investor and employer. This givens him or her freedom of action.
2. Capital Requirement: The amount of capital required is relatively compared with that required by larger firms. The capital required is supplied by one (1) or at most by few individuals.

• Local Operations: For most firms the area of operation is local. The employer and employees often live in the community in which the business is located this does not mean that however that all firms serves only local markets. Some go beyond their areas of operation by seeking outlets for their products or services in other parts of the country or even export.

• THE ROLE OF SMALL – SCALE BUSINESS IN ECONOMIC DEVELOPMENT

It is undoubtedly accepted that small-scale enterprises forms the foundation of any nations industrial take – off, especially in a typical developing country like Nigeria. The importance and roles which small-scale business played in developing economy is so vast that this vital sector cannot ordinarily be relegated to a weak background. The word small-scale should not be in anyway reflect the importance of this sector. This sector will be more beneficial for restricting our growing industrial economy in the short run than large industries.

Small-scale business provides more employment for unit of capital invested because they are generally more labour intensive than large-scale business. Where for example one would find large scale business that cost about twelve million (12,000,000), employing a mere sickly scale workers, whereas one can find a small-scale industry that cost just merely a two hundred thousand (200,000) employing thirty to forty (30 – 40) workers. Small-scale enterprises are generally flexible and more willing to expect new opportunity. Small-scale businesses would aid larger, industries. Thereby generating the desired forward and backward linkages requires to build a healthy vibrant industrial forward and backward linkage. In the bicycle in Nigeria for instance, the facts still remain that no bicycle medium scale industries can take in some of the lines of production. The two (2) major bicycle manufacturers in Nigeria, which are Comrade Cycle Co. (Nig) Limited (First Indigenous Bicycle manufacturers) located in Zaria, Kaduna and Raleigh Industries Located in Lagos. Small and medium scale enterprises can manufacture some of the parts. For example, Rims, Cranks, petals, Tube, Tyres, chains spokes Hubs, mud guards, break Rods, Rod cable, Brake pads, basic nuts, Bolts and screw as inputs for the bicycles companies. Small – scale business will help from the technological base where such industries would start from a small unit operating and innovation indigenous technology to suit our particular needs and utilizing local value of resources product, equipment and power. Small-scale enterprises encourage indigenous entrepreneurship, which will help to develop power techniques.

• PROBLEMS FACING SMALL – SCALE BUSINESS

In a paper presented by Kashim (1992:10) on problems facing small-scale businesses. He enumerated some of the problems as follows: –

1. Financial Problem: The financial problem arises from the fact that a man who has own in adequate resources to setup a medium small enterprise had no inclination to invite others to join him. As noted earlier on, no financial institution can provide all the funds required to set up industry without an adequate equity base for a number of reasons. The mutual confidence needed for the polling of resources is extremely lacking among Nigerian industrialist. This is a problem, which generally militates against industrialization.
2. Technical Problem: Reliance on imported raw materials is another major constraint of small businesses in Nigeria. It is for this reason that small enterprises have been hit harder by the depreciation of the Naira as they lack enough resources to compete effectively with large-scale businesses. In some countries world over individuals greatly relies on local resources. But Nigerian small-scale scale enterprises are almost a dependent on importation input as their bigger counter parts. There is an urgent need for reorientation in order to make then fulfill their expected role in industrial development.

• Infrastructure and Policy Problems: The managerial problem is created by the proprietary attitude of the average Nigerian industrialist which motivates him or her to run the entire business by him or herself. While entrepreneurial talent and managerial expertise are not mutually exclusive they do not always co – exist in the same industry. And such proprietary attitude constitutes a great barrier to modern managerial process. Everything resolves around the proprietor who interferes with the day-to-day managerial activities rather than delegating authority to qualified and experience staff. More over, the same proprietor is bent on developing himself when his business is booming. He siphon his funds to serve his personal activities instead of serving his debt of putting the funds back into the business, some rational business owners prepare (3) separate accounts one for the creditors, one for the business and another for himself. Lastly, despite the attention which small-scale business has recorded institutions under the past administration. There is a perceptible lack of coordination engaged in the promoting and financing of small scale businesses. However, the federal ministry of industries is already addressing this problems and a coordinating agency may emerge in the nearest future.

Lack of High Caliber Employee: Because the Business can only pay minimum wages, guarantee few fringe benefit, often low jobs securities and few promotional opportunities. it is reasonable to expect difficulties in recruiting high caliber of employees.