Innovation and healthy competition are both importantly driven by small and medium-sized businesses. In order to endure the most recent economic downturn and recession, the small and medium-sized business sector has maintained a high level of inventiveness and adaptability. Empirical studies show that new firms play a significant role in the creation of jobs (e.g. Garikai 2011, Baptista et al, 2005; Stel & Suddle, 2005), innovation (e.g. Fritsch & Mueller, 2005), economic growth, and a reduction in unemployment (e.g. Garikai 2011, Baptista et al, 2005; Stel & Suddle, 2005); and reduction of unemployment (e.g. Fritsch & (Garikai, 2011).


There is a strong relationship between the level of poverty, hunger, unemployment, and economic well-being or standard of living experienced by the population of a country and the level of vitality experienced by that nation’s small and medium-sized businesses (SMEs). In the majority of economies, the largest share of businesses is held by medium and small businesses. In the majority of economies, small and medium-sized businesses (or “SMEs”) make up more than 90 percent of the total enterprises. These businesses are credited with generating the highest rates of employment growth and are responsible for a significant portion of industrial production and exports. Over the course of the last several decades, small business enterprises in Nigeria have been labeled as fundamentally backward and as a cog in the wheel of the overall development of the economy in Nigeria. As a consequence of this, there has been a widespread perception that assistance for these kinds of businesses could only be provided for social reasons, and not as a potentially fruitful opportunity for the growth of the nation. It is abundantly clear that the potential advantages that could result from assisting smaller businesses in their efforts to modernize and expand have received insufficient consideration. This mentality can be traced back to a portion of the population as well as the government, but it is largely attributable to the inherent characteristics of small businesses, which make it challenging for their effects to be felt in the economy.

The potential contributions that can be made by small businesses are gaining recognition in today’s society. This awareness is reflected in the growing number of Nigerians who, on a daily basis, work toward putting their individual ideas and skills to good use [by beginning new small business ventures]. There is evidence from all over the world to suggest that small scale enterprises provide an effective means of stimulating indigenous entrepreneurship, enhancing greater employment opportunities per unit of capital invested, and contributing to the development of technology. They offer a powerful means of mitigating the negative effects of rural-to-urban migration and resource utilization thanks to their widespread distribution. In addition, small businesses contribute to the strengthening of industrial linkages by producing intermediate products for use in larger enterprises. These products are then used by the larger businesses.


As a consequence of this, and as a result of the recognition of the roles that small businesses play, the government of Nigeria has, since 1970, initiated programs for the assistance of small businesses, particularly in the areas of finance, extension and advisory services including training and the provision of infrastructures. This is particularly relevant in light of the fact that the roles that small businesses play have been recognized. All of these things are geared at making the growth of small enterprises easier to achieve. Over the past three decades, successive governments in Nigeria have shown a significant interest in the financing of small businesses by establishing specialized banks and other credit agencies/schemes to provide tailored funding. This interest in small business financing has been met with great success.

The small business company, despite all of the efforts and attention provided to it by the government, is nonetheless presented with issues that are unique to what many people may refer to as the “Nigerian factor.”

One of these issues is a lack of financial resources, as the saying goes, “It takes money to make money.” There are financial repercussions in every action at every point in time related with the enterprises, beginning with the promotional stage, when an idea for a company is dreamt of, and continuing on through the post-operational phase, when the firm no longer exists. It should not come as a surprise, therefore, that the question of finance is a big concern to organizations that represent small businesses. Despite this, the importance of small and medium-sized businesses (SMEs) in Nigeria cannot be overstated.

It is important to remember that the vast majority of the country’s small enterprises are either single proprietorships or partnerships.

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