CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY.

In recent time the fortune of small scale and medium scale

Industries attracted the attention of government world-wide and thus has

been the focus of general interest and research especially in developing

Countries due to the importance of small scale and medium scale

Industries.

Their importance cannot be over emphasized as they constitute a

whole virile vehicle for the generation of vast production of outputs and job

creation. They are also act as catalyst for restructuring and diversifying the

productive base of an economy and for the Industrial economy and for the

Industrial economy take-off and growth of such an economy. The small

and medium scale Industries are seen to hold the key to future expansion

of the Industrial sector.

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In Nigeria evidence has shown that in 1986 small scale and medium

scale Industries accounted for 70% of all firms employing millions of

Nigerians (first Bank of Nigeria report 1987). By the end of 1979 over

80% of all establishments licensed under the factory act were small and

medium scale Industries (Onwuala 1987). This made the importance of

this economic unit to be unelectable.

Small scale and medium scale Industry in its widest sense implies the

urgent response to the challenges of developing countries of which Nigeria

is not an exception. Small and medium scale Industries should be practiced

with due regards to the importance of available local raw materials in its

environs because the challenges facing small and medium scale

Industrialist are enormous.

The importance of small and medium scale Industries to the

economic development of any country whether developing or developed

have been widely acknowledged and acclaimed. They are considered as

there stimulate to private ownership and entrepreneurial skills generate

employment promote industrial dispersal and rural- urban migration.

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Clive carpenter (2001) said that across the world small businesses

are crucial for economic growth poverty alleviation and wealth creation.

Uayatudeen (2001) said that across the world small businesses have

such a crucial role to play in the development of an economy and that

cannot be ignored. According to William and David most firms and

small and medium scale Industries are compared with companies that

economist usually study. But economists have concentrated on large scale

Industries. The leading textbooks in economics have title discussions on

small and medium scale business or entrepreneurs.

The partial combinations of small and medium scale Industries on the

Nigerian economy are; creation of wealth poverty eradication and

employment generation as encapsulated in the national economic

empowerment development strategies (NEEDS)

However small and medium scale Industries are bedeviled by

numerous challenges which have hampered its development and growth

and also its combination to national development. To this end government

has instituted various programs to address the challenges and constraints

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facing small and medium scale industries growth. The programs and

institutions Include:

a. Setting up and founding of industrial estates.

b. Establishment of national directorate of employment (NSE)

c. Establishment of the Nigerian bank of commerce and industry (NBC)

the national economic re-construction fund (NERFUND)the Nigerian

Industrial bank (NIDB) which has merged in to one agency in the

bank of industry the world assisted small scale enterprises loan

scheme (SNEX) the Nigerian export and import bank (NEXIN) etc.

d. Setting up a small and medium scale enterprises development agency

of Nigerian (SMEDAN); an agency which Co. ordinates development

in small business sector.

Unfortunately all these formal credit schemes have not been able to

adequately address the fundamental problems which have constrained

small scale enterprises access to credit; and any other enterprise

establishing a small and medium scale industry requires capital to take off

survive and eventually expand.

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Nigeria’s major manufacturers produce food and beverages

cigarettes textiles and clothing soaps and detergents footwear wood

products motor vehicle parts chemical products and metals while small

and medium scale manufacturing engage in leather making poultry making

and wood carving. The smaller industries are often organized in craft

guides involving particular families who pass the skill from generation to

generation.

People have lived in what is now known as Nigeria since at least

9000BC evidence indicated that since at least 5000BC some of them have

practiced settled agriculture. In the early (centuries (AD) kingdoms

emerged in the drier northern savanna prospering from trade with north

Africa. At roughly the same time the western and southern forested areas

yielded city- state and looser federations sustained by agriculture and

coastal trade. These systems changed radically with the arrival of the

Europeans in the late 15

th

century the rise of the slave era in the 16

th

Century through the 19

th

Century. Nigeria achieved independence in the

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1960 but has since been plagued by an unequal distribution of wealth and

inflation.

The first well documented kingdom was the Yoruba kingdom which

was observed between the 11

th

-12

th

centuries. Over the next few

centuries they spread their political and spiritual influence beyond the

borders of its small city states. Its artisans were highly skilled producing

among other things bronze castings of heads in a very naturalistic style.

Terra- cotta wood and Ivory were the common media instruments used.

Shortly after the 12th century the kingdom of Benin emerged in the

mid-western south region. Although it was separate from the Yoruba

kingdoms; Benin legends claim that the kingdoms first rulers were

descendant from an Ife prince. By the 15th century the Benin kingdom was

large wood designing was what sustained the city’s trade (both within the

region and later with Europe). Its legacy includes a wealth of elaborate

bronze plagues and statues recording the nation’s history and glorifying its

rulers.

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From the above paragraphs it can be noted that small and medium

scale industries are indeed necessary for the development of any economy.

Small and medium scale industries act as the major stepping stone to

economic growth. In Nigeria today small and medium scale industries are

common but have no efficiently achieved or attained her goals.

Therefore to encourage local businessmen and institutions in buying

small and medium sized businesses the government established the

Nigerian bank for industry and commerce which had an initial operating

capital of 50 million naira. There was some concern in Nigeria that

Nigerians might not be able to raise enough capital to take over the foreign

owned businesses affected by the decree and that there might not be

enough Nigerians with the technical and managerial skills necessary to

replace extricate personnel.

1.2 STATEMENT OF THE PROBLEM

The small and medium scale Industries survey conducted in 2005 by

the central Bank of Nigeria (CBN) provides some evidence that apart from

the acute short of technology managerial skills poor management

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adverse environment and change in policy capital is a source of great

concern to the entrepreneur in the sector. Since one of the microeconomic

goals of the Nigerian government is economic growth we can assume that

the government aims at the expansion of small firms.

In a continent where finance is a major constraint on development

the problem confronting the private sector in Nigeria above all small and

medium scales Industries standout.

Most large scale industries in Nigeria have reduced their borrowings

due to high interest rates and the short term nature of available loans. At

the same time banks are unwilling to lend to the small and medium scale

sector with its high perceived rises. In this case lending is not efficient to

the real sector and loanable funds are currently used to finance primary

consumer imports and to separate in foreign exchange markets. The

research question from the above experience is thus; will small and

medium scale contribute much to economic growth in Nigeria when they

are not properly funded.

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1.3 OBJECTIVES OF THE STUDY.

The aim of this research work is to examine the importance of small

and medium scale industries on the Nigerian economy in order to ascertain

how small and medium scale is utilized in production using the available

raw materials and resources with a view to achieve gradual formalization in

the guest for national industrialization. Meanwhile the specific objectives

are:

a. To determine the impact of small and medium scale enterprises.

b. To examine the effect of small and medium scale enterprises.

1.4 STATEMENT OF HYPOTHESIS.

For the purpose of this study the research developed the following

hypothesis.

Ho: Small and medium scale industries are not catalyst for economic

development and growth in Nigeria.

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Hi: Small and medium scale industries are catalyst for economic

development and growth in Nigeria.

1.5 SIGNIFICANCE OF THE STUDY

The significance of the study is to establish an extent of growth and

development and to expose the immense benefit derivable from small and

medium scale industries.

Also this study will help to redress the belief of the society that small

and medium scale industries can bring about economic and development in

Nigeria.

1.6 SCOPE AND LIMITATION OF THE STUDY.

The study encompasses the roles and contributions of small and

medium scale industries on the Nigeria economy from 1986-2010. The

basis of covering this period of time is to ascertain whether there have

been any significant impacts of small and medium scale industries on the

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Nigerian economy. And also this study does not consider the medium and

large scale industries.

In writing this project the researcher encountered some limitations

which were; lack of information from appropriate quarter time constraints

transportation lack of funds power outrage etc. However in spite of all

the odds the researcher was able to come out with a standard work. The

project However contains information which in reliable and authentic.

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