Background Of The Study

SMEs are important drivers of innovation and competition. The SME sector has remained very innovative and adaptable in order to survive the recent economic downturn and recession. Empirical studies show that new firms play a significant role in employment generation (e.g. Garikai 2011, Baptista et al, 2005; Stel & Suddle, 2005), innovation (e.g. Fritsch & Mueller, 2005), economic growth and reduction of unemployment (Garikai, 2011).


There is a high correlation between the degree of poverty hunger, unemployment, economic well being /standard of living of the citizens of countries and the degree of vibrancy of the respective country’s SMEs. In most economies, SMEs occupy the greatest proportion of enterprises. The SMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. For the past decades, small business enterprises in Nigeria were characterized as essentially backward and cog in the wheel of the overall development of the Nigeria economy. As a result of this, there has been a prevalent feeling that such businesses could be assisted only for social reasons, not as a promising opportunity for national development. Obviously, too little attention has been paid to the benefits to be derived from helping small enterprises of modernize and grow. This attitude arose partly amongst both the citizens and government and mainly from the very nature of the small business which made it difficult for its impact to be felt in the economy.

The latent contributions which small business can make are now attracting recognition. This awareness is manifest in the ever- increasing number of Nigerians who daily strive to put up their personal ideas and abilities to effective use [by starting small business] ventures. Evidence around the world indicate that small scale enterprise provide an effective means of stimulating indigenous entrepreneurship, enhancing greater employment opportunities per unit of capital invested and aiding the development of technology. Through their wide dispersal, they provide an effective means of mitigating rural-urban migration and resource  utilization. Furthermore, by producing intermediate products for use I n large scale enterprises, small businesses contribute to the strengthening of industrial linkages.


Accordingly, due to the recognition of the roles of small business, the Nigerian government has since 1970 initiated programmes for the assistance of small businesses, especially, in the areas of finance, extension and advisory services including, training and provision of infrastructures. All these are designed to enhance the development of small businesses. Successive governments in Nigeria have for the past three decades shown great interest in the financing of small businesses by establishing specialized banks and other credit agencies/schemes to provide customized funding.

In spite of all the contributions and the attention given to it by the government, the small business enterprise is still confronted with problems peculiar to what many may refer to as the ‘Nigerian factor’.

One of such problems is the lack of funds, “It takes money to do business”. From the time a business idea is conceived of [the promotional state] until after it has ceased to operate, there are financial implications in every activity at every point in time associated with the businesses. It is therefore not surprising that the issue of financing is of major concern to small business organization. Despite that, the role of SMEs in Nigeria cannot be underestimated.

It is noteworthy that most of the small businesses in Nigeria are sole proprietorship and partnerships.


Statement Of The Problem

Nigeria is currently witnessing an alarming rate of un- employment rate is growing tin geometric progression. The economy is also increasingly finding it difficult to cope as Nigerian economy is waning. A lot of experts have called for the creation of an enabling environment for small –scale enterprise to thrive. They cited Asian “Tigers” such as Malaysia, China, Sought Korea, Indonesia, Singapore and Thailand where both the government and individuals knowing the importance of small scale industrial development join forces together in fostering effective and sustainable small scale enterprises in their countries. Evidence also abound that in  the above mentioned places, a lot is being done to empower the growth of this sub sector of the economy. The role small scale industries in the development of indigenous technology can not therefore be over emphasized.


1. 3. Objectives Of The Study

This study seeks to identify Comparative analysis of SMEs in employment generation in Nigeria.

Moreover, in this study, attempt will be made to achieve the following:

  1. To assess the importance of the identified roles of small scale enterprises in the employment creation in  Nigerian
  2. To consider the nature and level of financial assistance available to in Nigeria
  3. To evaluate the problems encountered in utilization of the available opportunities and or facilities as regards fixed assets like land and
  4. To suggest ways by which these problems could be tackled in order to improve the financial condition of the small scale businesses and boost their employement generation

Significance Of The Study

The study is thus important because of its potentiality in the development of the small business sector which has been characterized as the “man carrier of development and the engine of social and economic growth” in Nigeria. The study will also help in identifying why people don’t go into small –scale enterprise despite its numerous advantages. It will also find our problems encountered while running the business. The study will help government identify areas requiring attention, thus stimulating government into proper directing of loans and incentives to improve upon existing ventures. It will also provide useful guide for prospective entrepreneur that wish to choose self-employment as a career. And finally, it will serve as secondary data for subsequent studies by a prospective researcher.

Scope And Limitation

A good number of factors made the study difficult. Notably, is the time factor. The time available for the study was so short that the study was done almost in rush. Due to the limited time too, the researcher based his study only on selected small business enterprises within Nigeria. Another problem was combing course work, office work, research work and financial constraints to carryout a full and unbiased study.




  • Small Scale Enterprise:The definition of small scale enterprise varies with people and countries such that it is better defined based on the characteristics. In the Nigerian context, small scale enterprise is any processing, serving or manufacturing industry with an investment in machinery and equipment above N500,000 [Waboi, 1987].
  • According to the centre for management development in a policy proposal to Federal Government in 1982, A small scale enterprise is a manufacturing, processing or service enterprise involved in a factory or production type operation employing up to 50 full time employees, investment in plant machinery are utilized in its
  • Management:According to Akpala [1990. pg 3] Management is the process of combing and utilizing an organization input [men, materials and money] by planning, organizing, directing and controlling for the purpose of producing output [goods and services].
  • Entrepreneur: – According to Hagen, an entrepreneur is an individual who conceives the idea of business, design the organization of the firm, accumulates capital, recruits labour, establishes relations with supplies, customers and the government and converts the conception into a functioning organization
  • Opportunity: An opportunity is a potential gainful  situation that must be recognized and exploited, an opportunity has the qualities of being attractive, durable and timely. It is anchored in product or services which creates or adds value for its buyers or end users.
  • Development: This entails growth of the business, increases in goods and services and t he improvement of lives of the
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