THE ROLE OF FEDERAL GOVERNMENT IN THE PROMOTION OF SMALL SCALE BUSINESS IN NIGERIA

ABSTRACT
The federal government of Nigeria has continued to support small and medium scale business enterprises in its bid to promote the general economic development of the country and to lay a solid foundation to industrialization. In this essay, an attempt is made to create awareness amongst students as well as the general public on the various forms of support the federal government gives the important aspect of the national economy. The essay covers three main chapters: chapter one contains the introduction, objectives of the study, scope, significance of the essay, definition of terms. The second chapter reviewed various literatures from different authors on the topic. The chapter also discussed generally what small scale business is, the role of government in promoting small businesses and its advantages. Chapter three contains findings, conclusions, recommendations and bibliography.
 

CHAPTER ONE

INTRODUCTION

Small scale business constitute an important component of the Nigerian industrial sector. The importance of this sector cannot be over emphasized, especially in a typical developing country like ours where the level of youth unemployment is rising beyond control. Hence small scale industries generate employment opportunities per unit of capital investment because they are generally more labour intensive which are more capital in nature. A large scale industry that cost N20million for instance, may employ a mere 70 (seventy) workers or less. Where as a small scale industry that cost just N150,000 (one hundred and fifty thousand naira) may employ about 20-30 workers.

Small scale business specialized in the production and marketing of various products and services ranging from food, beverages, drinks/sachet water, cosmetics, spare parts and many others.

Kilby (1969) acknowledge the diversity of terms of the degree of specialization and division of labour and the quantity of raw materials and output and the character of markets being served by small scale businesses. As a result the bulk of Nigerian business falls within the small scale business which account for over 80% of the number of enterprises in the country. (Ekunna 1992 Pg.160)

Several number of small scale business are successful while other fail or are staggering for survival due to poor background management, lack of qualified manpower, poor capital base, lack of marketing research and appropriate technology and credit rating among banks and other lenders. These problems continue to militate against the establishment, survival and growth of small scale business in Nigeria. Although successful government in Nigeria have been emphasizing on the importance of small scale business and have established institutional support agencies to facilitate industrialization.

However, small scale business still operate in uncertainty and are faced with serious obstacles, this raises the questions of whether  the federal government is actually up to the responsibility in the promotion of small scale business in Nigeria.   

STATEMENT OF THE PROBLEM

Several studies have identified financial constraint as the major obstacle to Small and Medium Scale Enterprises Development in developing countries including Nigeria. For instance, Adelaja (2003) argued that the access to institutional finance has always constituted a pandemic problem for SME development in Nigeria. He recalled that in the past, a number of schemes have been put in place to provide special credit lines/windows for SMEs but this achieved very limited impact.

The primary focus of this study emanates from the fact that small scale enterprises owners do not have sufficient finance to carry on their due to the low saving culture of the people in this part of the world. The reason for this is not far fetch: low level of income basically. While it is an established fact that Small and Medium Scale Enterprises face financial challenges, no research has been conducted to investigate the effect the financial problem on their contribution to economic development. Asaolu et al (2005) and many other authors and researchers have deduced that the financial challenges mar the developmental role of Small and Medium Scale Enterprises. But this may not be true especially in the case of Nigeria where the informal sector, which is constituted largely by the Small and Medium Scale Enterprises play a very important role in the development of the nation’s economy. Therefore, this study seeks to evaluate the promotion of Small and Medium Scale Enterprises (SMEs) in Nigeria and their contribution to economic growth

OBJECTIVE OF THE STUDY

The main objectives of this study is to evaluate the impact of federal government in the promotion of small scale business in Nigeria. This study will specially seek to achieve the following:

To examine the contribution of Small and Medium scale Enterprises (SMEs) to the economy growth of Nigeria.
2.  To identify the various challenges militating against the promotion of Small and Medium scale Enterprises (SMEs) in Nigeria.
3.  To find suitable strategies that will improve the development, growth and survival of Small and Medium scale Enterprises (SMEs) By the Federal Government of Nigeria

HYPOTHESIS OF THE STUDY

1. Ho: The activities of Small and medium scale enterprises have not contributed to the economic growth of Nigeria.

Hi: The activities of Small and Medium scale Enterprises have contributed to the economic growth of Nigeria.

2. Ho: Small and Medium scale enterprises are not adequately promoted by the government of Nigeria.

Hi: Small and Medium scale enterprises are adequately promoted by the government.

3. Ho: Government officials have not effectively and efficiently  promoted SMEs in Nigeria

Hi: Government officials have effectively and efficiently promoted SMEs in Nigeria.

SCOPE OF THE STUDY

As the title of this essay indicates, the study focuses its attention to federal government support to small scale business enterprises in Nigeria, it causes various policy, guidelines, direct and indirect financial assistance and other programs and initiatives designed to promote this vital sector of the country.

SIGNIFICANCE OF THE ESSAY

The significance of this study lies basically on its contribution to knowledge and its benefits to individual and organization. The current economic crises in Nigeria has deciminated the growth of infant industries and encourages the establishment of similar business venture in both small and large scale proportions.

Although successful governments have vowed to support individuals and group initiatives in the establishment of small scale businesses.

The current state of most small scale business in Nigeria is a far cry particularly when structural adjustment programme (SAP) was introduced, which brought about the problem of devaluation of the naira and the scarcity of foreign exchange of raw materials from abroad which has adversely affected production unit especially under a depressed economy.

This study is an attempt to evaluate the role of government in the promotion of small scale business in Nigeria as a country.

DEFINITION OF TERMS

The following terms and abbreviations used in the extended essay are defined below:

(SSICS) Small Scale Industries Credit Scheme

(SME) Small and Medium Enterprises

(NIDB) Nigerian Industrial Development Bank

(NERFUND) National Economic Reconstruction Fund

(NDE) National Directorate of Employment

1. Small scale enterprise: Apart from size, it is a type of business that is self initiated, largely self financial, closely self managed and is of relatively small in size when considered as part of the industry.
2. Management: Is the part of loaning organizing, directing and motivating others so as to enhance productivity with maximum utilization of available resources and achieving the organizational goals or objectives.
3. Resources: These are the primary inputs that needs to be put together into function before the proper management activities really take place. These activities include; men, materials , money and machines.
4. Enterprises: This is one of the fundamental principles of management that is concerned with the division of labour and assigning of responsibilities with authority for the well being of business unit.