Small Scale Entreprise in Nigeria: Issues and Prospects

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1.Introduction

Small Scale Enterprises (SSEs) have played and continue to play significant roles in the growth, development and industrialisation of many economies the world over. In Nigeria, the SSEs have performed below expectation due to a combination of problems. This situation has been of great concern to the government, citizenry, practitioners, operators and the organised private sector groups.

Small businesses are generally regarded as the driving force of economic growth, job creation, and poverty reduction in developing countries. They have been the means through which accelerated economic growth and rapid industrialization have been achieved (Harris and Gibson, 2006; Sauser, 2005; Arinaitwe, 2002; Kiggundu, 2002; Monk, 2000). While the contributions of small businesses to development are generally acknowledged, entrepreneurs face many obstacles that limit their long-term survival and development. Research on small-business development has shown that the rate of failure in developing countries is higher than in the developed world (Arinaitwe, 2002). They should develop both long-term and short-term strategies to guard against failure (Sauser, 2005; Monk, 2000).

It is generally accepted that SSEs play a key role in economic growth and industrialization in both developed and developing countries (Akinbogun, 2008). An understanding of the problems negatively affecting small businesses in Nigeria is a vital step in managing and avoiding the massive failure of these small businesses and therefore, the purpose of this paper is to examine the challenges facing SSEs in Nigeria with a view to proposing solutions.

The methodology that is employed in this paper is the use of decumentary research to gather information through the secondary sources of data. The use of simple content analysis of the problem are employed in the analysis. To this end the paper is organized as follows; section one is the introduction, section two is the literature review, section three is the analysis on the challanges faced by small scale enterprises and their prospects in Nigeria. The last section contains the concluding remarks.

2. LITERATURE REVIEW

Business enterprises in Nigeria, as indeed the world over, come in various forms, shapes and sizes. They cover an interestingly diverse range of operations or activities (Aruwa, 2004). There is no generally accepted definition of a small business because the classification of businesses into large-scale or small-scale is a subjective and qualitative judgement. SSEs are defined differently in different countries. It is true that a SSE in the United States may be a large enterprise in India and a very large enterprise in Uganda. In countries such as the USA, Britain, and Canada, SSE is defined in terms of annual turnover and the number of paid employees. In Britain, SSE is defined as that industry with an annual turnover of 2 million pounds or less with fewer than 200 paid employees. In Japan, small-scale industry is defined according to the type of industry, paid-up capital and number of paid employees. Consequently, SSEs are defined as: those in manufacturing with 100 million yen paid-up capital and 300 employees, those in wholesale trade with 30 million yen paid-up capital and 100 employees, and those in the retail and service trades with 10 million yen paid-up capital and 50 employees. The Central Bank of Nigeria, in its Monetary Policy Circular No. 22 of 1988, defined SSEs as having an annual turnover not exceeding 500,000 naira. In the 1990 budget, the federal government of Nigeria defined small-scale enterprises for purposes of commercial bank loans as those with an annual turnover not exceeding 500,000 naira, and for Merchant Bank Loans, those enterprises with capital investments not exceeding 2 million naira (excluding cost of land) or a maximum of 5 million naira. The National Economic Reconstruction Fund (NERFUND) put the ceiling for small-scale...
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