SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA: THE

PROBLEMS AND PROSPECTS.

By
Abiodun Fatai1
Department of Political Science, Faculty of Social Sciences
Lagos State University,
Ojo, Lagos
Nigeria.

ABSTRACT
Small and medium scale enterprises have long believed to be catalysts for economic
growth and national development both in developed and developing countries. In Nigeria
where private sector is not well developed SME is assumed to play the role of
employment generation, facilitator of economic recovery and national development. The
paper examined small and medium scale enterprises in Nigeria and in relation to those
challenges which affects SMEs from developing capacity to realizing its full potentials as
well the prospect for improvement and development for employment generation,
economic growth and national development. It is suggested therefore that invigorating
SMEs with strengthened commitment to economic reform would offer a turning point in
facilitating the recovery of Nigeria economy and national development.

Fatai teaches in the Dept of Political Science, Lagos State University Lagos Nigeria, he is also
a PhD student in University of Ibadan, Ibadan Nigeria.
1

INTRODUCTION
The performance and effectiveness of small and medium scale enterprises as an
instrument of economic growth and development in Nigeria has long been under
scrutiny. This intense scrutiny has been against the backdrop of the low
performance and inefficiency that characterized small and medium scale
enterprises particularly in assessing its role on economic growth and development.
Despite government institutional and policies support to enhancing the capacity of
small and medium scale enterprises, small and medium scale enterprises has fallen
short of expectations. This has generated serious concern and sceptism on whether
SME can bring about economic growth and national developments in Nigeria. The
concern is even more disturbing when comparing SME in Nigeria with other
countries particularly where SME has become harbinger of economic
reconstruction and transformation. (Ihua; 2009)In the case of Nigeria, small and
medium scale enterprises have performed at very abysmal level. This low
performance has further exacerbated poverty, hunger unemployment and low
standard of living of people in a country whose economics is ailing.
The current problems of hunger poverty and unemployment have undermined the
capacity of the economy and small and medium scale enterprises are seen as
mechanism for intervention to addressing these long term problem of the economy.
Unfortunately, SME have not been able to propel economic growth and
development which are quintessence of mitigating the effect of Poverty, hunger,
unemployment, and low standard of living on the economy. The challenge of
addressing the problem of hunger, poverty and unemployment is even more
worrisome when considering the actualization of the millennium development
goals by the country 2015. If Nigeria is to achieve the millennium development
goals by 2015, one of the sure ways is to enhance the capacity of its SMEs. The
2

core issues identified by the millennium development goal such as hunger, poverty,
literacy, maternal and mortality rate would not be achieved unless the problems of
SMEs are clearly tacked.
The challenges and the problem of small and medium scale enterprises are tied to
some economic variables and the challenges that generally characterized the
nations economy. Some of the challenges and problems include high level of
unemployment, high poverty incidence, and low industrialization capacity, lack of
finance, inconsistent government policies and inadequate infrastructure and
insecurity of the business climate among others. Nevertheless, the internal
characteristics of small and medium scale enterprises too have also interact with
some economic variables to undermine the capacity of the economy. Issues of low
level of entrepreneurial skills, poor management practice, inadequate equity capital
and lack of information among other problems.
In spite of these problems and challenges, the current economic reform process
ongoing in Nigeria aimed at reducing poverty, unemployment and strengthening of
basic institutions and sub sector of the economy target at improving and enhancing
the capacity of small and medium scale enterprises is beginning to show a renew
optimism on small and medium scale enterprises as instrument of economic growth
and development.
SMALL AND MEDIUM SCALE ENTERPRISES: A CONCEPTUAL
DISCOURSE
Small and medium scale enterprises have been long recognized as an instrument of
economic growth and development. This growing recognition has led to the
commitment of World Bank group on SMEs sector as core element in its strategy
to foster economic growth, employment and poverty alleviation. In the year 2004
3

the World Bank group has approved roughly $2.4 billion in support of micro small
and medium enterprises (World Bank, 2001, Ayyagari et. al 2007) While the
importance of small and medium scale enterprises has not been in doubt,
unfortunately classifying businesses into large and medium scale is subjective and
premised on different value judgment. Such classification has followed different
criteria such as employment, sales or investment for defining small and medium
scale enterprises. According to extant literature the definition vary in different
economies but the underlying concept is the same. Ayaggari et.al (2003) Buckley
(1989:1) contends that the definition of small and medium scale enterprises varies
according to context, author and countries. In country such as USA, Britain and
Canada small scale business is defined in terms of annual turnover and the number
of paid employees. (Ekpeyong and Nyang, 1992: 4) In Britain for example small
scale business is conceive as that industry with annual turnover of 2 million pound
or less with fewer than 200 paid employees.(Ibid; 4) In the case of Japan it is
conceptualized as type of industry, paid up capital and number of employee.
Consequently small and medium scale enterprises are defined as those
manufacturing with 100million yen paid up capital and 300 employees. Those in
wholesale trade with 300million paid up capital with 100 employees while those in
retail trade with 100million paid up capital with 50 employees. (Ibid; 4)
In the case of Nigeria hardly do you see a clear-cut definition that distinguishes
between small and medium scale enterprises. However, the Central Bank of
Nigeria in its monetary policies circular No. 22 of 1988 view small scale industry
are those enterprises which has annual turnover not exceeding 500,000
naira.(CBN; 1988) Similarly in 1990 the Federal Government of Nigeria defined
small scale enterprises for the purpose of commercial bank loans as those
enterprises whose annual turnover does not exceed 500,000 thousand naira and for
4

merchant bank loan those enterprises with capital investment not exceeding 2
million naira (excluding the cost of land) or a minimum of 5 million naira.
Ogechukwu (2006) contends that in the wake of SFEM, and SAP era in 1993, this
value has now been reviewed and subsequently, increased to five million naira.
Since this happened, there may be a need to classify the small scale industry into
micro and super-micro business, with a view to providing adequate incentives and
protection for the former. In that context, any business or enterprise below the
upper limit of N250, 000 and whose annual turnover exceeds that of a cottage
industry currently put at N5, 000 per annum is a small scale industry. (Ibid; 5) The
National Directorate of Employment (NDE) concept of a small scale industry has
been fixed to a maximum of N35, 000. (Ibid; 5). In other words a business unit of
not less than $240 dollar is characterized as a small scale business in Nigeria. That
may not be the same in other countries, but that classification may be useful in
developing countries, because of the low capacity of its small scale industry.
That is why Kozak, (2007) argues that we cannot explain SME other than to say
they are companies with metric (usually no of employees or annual turnover that
fall bellow certain threshold. It is these indicators, number of employees and or
rate of turn over that tend to define the context within which different countries
and economies situate their understanding of small and medium scale enterprises.
This is to say that, even though SMEs is definable with much or less the same
indicator (No of employees, rate of turnover .etc) the indicators are not the same in
all countries all the time. In other words while number of employee and rate of
turnover are the indicator, the number of employee and total amount of turn over
for defining SMEs in different countries are certainly not the same. For instance,
the employee requirements in Britain is 200, with 2million pound turnover, the
same cannot be said of Japan with 100million Japanese yen as paid up capital and
300 paid employees. While in Nigeria, the paid employees are usually not
5

considered important, but more importantly is the turnover of 500,000 especially

for the purpose of Commercial and Mortgage bank loans. Balunywa (2010)
however affirmed that the number of employee may not be a good indicator,
especially where the company is labour intensive. This is true in country like India,
where labour intensive is a policy approach to industrialization. However, that is
not to say that in some cases, trading organization cannot transact big business, but
yet employed few employees. In that case, capital employed may be used as
indicator for defining small and medium scale enterprises.
In countries where the number of employees is an indicator, the number of
employee required differs from country to another. In Uganda the figure of
employees for SMEs is between 5-50, (Ngobo, 1995) in India it is 30-100, while in
the US, is less than 500. (Stoner et.al, 1996) In Kenya, 10 or fewer people are
called micro business, while 11-50 are referred to small enterprises and 51-100 are
called medium enterprises. (Kibera and Kibera, 1997). That is why in the United
State of America, small business administration is defined as one that is
independently owned and operated, is not dominant in its field and meet up
employment or sales standard developed by the agency. (Stoner et.al 1996)This
shows the same trend with other countries like Nigeria and Japan except that the
exchange value differs in the financial criteria.
In a more general and comprehensive term Ogechukwu (2005) chronicled a
general criteria for defining small and medium scale enterprises in different
countries. These includes number of employees, annual turnover, local operations,
sales volumes, financial strength, managers and owners autonomy, relatively small
markets compared to their industries and capital usually supplied by individual or
shareholders etc. There are so many small scale business units in Nigeria which
qualifies within this context most of them are in the commercial sector. However a

common trend in Nigeria today is the gradual classification of service provider,

hotels, fast food and restaurants as small and medium scale enterprises.
As a result of this definitional differences and lack of universal definition, the
European Union in 2003 adopted a universally accepted definition of small and
medium scale enterprises and micro business as companies with less than 250
employees, with respect to financial criteria, revenues must not exceed 50 million
Euro(measure as turn over) or 43million euro(measure as balance sheet) In
addition, the European Commission specifies term of ownership stating SMEs
must

be

independent

with

less

than 25%

being

owned

by outside

interest.(European Commission; 2007). In a report of enterprises association,

Macqueen (2004) conceive of SMEs as enterprises employing 10-99 full time
employees or with a fixed capital investment of US$1000-500,000.
Small and medium scale enterprises are certainly not transnational company,
multinational cooperation, publicly owned enterprises or large facility of any kind.
However they can depend on business and ownership structure to become a large
business unit (Macqueen 2006) while it can be argued that 80% of the financing of
SMEs come from owners, friends and families, business form can take different
form including private ownership, limited partnership, contract and sub-contracts,
cooperatives or associations. (Kozak, 2007) Small and medium scale enterprises
have a narrow context within which its operation is carried out. However, where it
is effectively operated it has capacity to sprout the economic growth and national
development.
SMALL

AND

MEDIUM

SCALE

ENTERPRISES

REVISITING GOVERNMENT INTERVENTION

IN

NIGERIA:

In every economies small and medium scale enterprises has been seen has a pivotal
instrument of economic growth and development either in developed or developing
economies. Several studies have confirmed this. (Ogujiuba; et. al 2004, Onugu;
2005, Ihua; 2009) Data from the federal office of statistics in Nigeria affirmed this
importance when it reveal that about 97percent of the entire enterprises in the
country are SMEs and they employed an average of 50% of the working
population as well as contributing to50 percent of the country industrial output. As
Ariyo (1999) and Ihua (2009) averred, SMEs in Nigeria are not only catalyst of
economic growth and development, but are also the bedrock of the nation.
Although small business activities had existed since the period of independence in
Nigeria, however, conscious effort on small and medium scale enterprise as
instrument of economic and national development started in 1970-1979 when
Nigeria adopted the policy of indigenization through its national development plan
programme. The development plan articulated the need for the Nigerian economy
to be self reliant through industrialization, entrepreneurial development
employment generation and development through increasing export trade. (NDP,
1970)
The federal government singled out small and medium scale enterprises as the key
area of intervention. This was premised on the government desire of giving support
to small scale industries in the country as a measure of meeting up with its
commitment to the development plan and the indigenization policy. The intention
was that it would be a reaction against the dominance of the economy by the
international capitalist entrepreneur and on the account that revitalizing small and
medium scale enterprise would enhance the capacity of the indigenous capitalist
class, as a potential player in economic growth and national development.

In its intervention effort, government promulgates different regulation for the basis
of protecting the small scale industries. Some of the regulations include Nigeria
Enterprises Promotion No. 3 of 1977, Patent Right and Design Act No 60 of 1979
Custom Duties (dumped and subsided goods Act No. 9 of 1959, Industrial
Promotions act No. 40 of 1979, Industrial development Tax Act No. 2 of 1971
among others. (Alawe, 2004). Apart from the promulgated act government
supported SMEs through favorable investment policies, institutional and fiscal
policies, protective business law and financial incentives to encourage the national
development and indigenization policy which small and medium scale are very
central to. Several micro lending institutions were established to enhance the
capacity and development of small and medium scale enterprises. Such microcredit institutions include Nigeria Bank for commerce and industry (NBCI)
National Economic Reconstruction Funds (NERF) People`s Bank of Nigeria
(PBN) Community Bank (CB) National Export and Import Bank (NEIB) and the
liberalization of the banking sector to enhance the banking institutions for effective
participation in the growth and capacity building of small and medium scale
enterprises. (Ogujiuba; et. al 2004).
Government also established Raw Materials and Research Development Council
(RMRDC) of finance and research institutions in 2001, the research report of this
institution is useful to SMEs and business organization in their product choice
decision, product development delivery strategies to increase SMEs business
effectiveness and efficiency. To complement this effort, government also created
some polytechnics and university to provide manpower scheme and also set up
some manpower training institutions. Such as Centre for Management Studies,
(CMD) Administrative Staff College of Nigeria (ASCON) Industrial Training
Institute (ITI) etc. (Ogechukwu; 2006) A number of recommendations and findings
9

of these institutes and centre were geared towards developing small and medium
scale enterprises
In addition to this, the government through the bankers forum at the initiative of
CBN as an interventionist strategy also established small and medium industry
equity investment scheme (SMIEIS) in 2001. This scheme requires bank to set
aside 10 percent of their profit before tax to fund SME in an equity participation
framework. In 2002, government further intervened to enhance the capacity of
SMEs through direct policy as consisting of direct investment and the
establishment of more SMEs, promotion institution agencies (technological
development institutions, credit lending institutions, technical and management
institutions and the provisioning of infrastructures such as industrial estate,
nationalization of foreign firms and provision of incentives and subsidies for the
promotion of small and medium scale companies. (Alawe 2004)
The establishment of anti-corruption bodies such as Economic and Financial Crime
Commission (EFCC) and Independent Corrupt Practices Commission (ICPC),
investment in power generation, road maintenance and construction and enactment
of pension funds were addition effort geared towards improving the SMEs sector.
(Onugu, 2005). In spite of the participation and effort of the government in
developing SMEs, the contribution index of manufacturing to GDP was 7% in
1970-1979 (Odedokun, 1981). In 2004, a survey conducted by manufacturer
association of Nigeria revealed that only about 10percent of industries run by its
members are fully operational. Similarly Joshua (2008) contends that about
70percent of the small and medium scale enterprises in Nigeria are between
operational or on the verge of folding-up, while the remaining 30 percent operate
on low level capacity and are vulnerable to folding up in the nearest future.

10

In 2009, the constraint was further compounded by a sharp drop of manufacturing

to GDP of 4.19 percent while industrial capacity utilization dropped to
48.8percent. (National Bureau of Statistics, 2009). This portends danger for the
Nigeria economy given the fact that manufacturing industries are critical agent of
real growth and development for the country. According to Mr. Jide Mike the
Acting Director General of the Manufacturing Association the debris of
dilapidated manufacturing concerns across the country is the outcome of years of
harsh operating conditions. He averred that in spite of the small and medium
industries equity investment scheme, funding as post a serious threat to SMEs. He
therefore concluded by saying 30percent of SMEs have closed down, about
60percent are ailing and only 10percent operate at a sustainable level.
PROBLEMS OF SMALL AND MEDIUM SCALE ENTERPRISES IN
NIGERIA
It is worrisome that despite the incentives, favorable policies and regulations and
preferential support by government aimed at improving small and medium scale
enterprises, SMEs, has performed below expectation in Nigeria. While the
challenges associated to small and medium scale enterprises and their failure has
been widely acclaimed. Some of these include lack of planning, inimical
government regulations, poor marketing strategies, lack of technical know-how,
and lack of capital (Aftab and Rahim 1989, Ekpeyong 1983, Onugu 2005,
Ogechukwu 2006). Yet some of the challenges of the SMEs are induced by the
operating environment (government policy, globalization effects, financial
institutions etc) others are functions of the nature and character of SMEs
themselves. (Onugu; 2005)
Financial problems
11

The association of Nigerian development finance institutions in 2004 issued a

statement in relation to the why SMEs performed poorly in Nigeria. Truly, finance
is usually a constraint to SMEs, while this may be true empirical evidence shows
that finance contributes to only about 25percent of the success of SMEs. (Ogujuiba
et. al 2004) Thus the creation of other appropriate support system and enabling
environment are indispensable for the success of SMEs in Nigeria. In Nigeria most
SMEs are folding up or lack competitiveness because they lack the much require
financial capacity to prosecute their manufacturing concern. Most of these
enterprises cannot access loan on a long and short term basis. In a World Bank
report in 2001, it was reported that almost 50 percent of micro, 39 and 37percent of
the small and medium scale firm are financially constrained in Nigeria as oppose to
25 percent of the very large firm. (World Bank, 2001)The implication of this
shows that small and medium scale enterprises are either discriminated against or
cannot access funds at the credit market. In addition to this, the financial stringent
attached to loan and credit also discourage industries from accessing credit from
the bank. This factor has largely undermined the capacity of small and medium
scale enterprises in Nigeria. Even where SMEs can access the loan, it is usually a
short term loan and what SMEs required in building capacity is a long term loan
which can be rolled on investment overtime. This issue has generated heated
debate between the SMEs operator and the Banks. While SME operator have been
claiming that Bank requesting stringent conditions and terms of approval, the Bank
on the other hand had claimed that SMEs operators dont present bankable
projects. Nevertheless, Ogujuiba et. al (2004) in a report on SMEs claimed that
20percent of SMEs have reported being constrained in receiving long term loan.
This has forced SME to use their internal financing which is usually unsustainable
and vulnerability of SME as a result of low capital base. Even at the establishment
of the second tier security market of the Nigerian stock exchange as a palliative
12

measures to solve the financial problem of SMEs, most SMEs shunned it because
of the tight procedure and administrative bottleneck in the assessment of credit
facilities.
Lack of Infrastructural facilities
The performance of SMEs has also been hindered by the lack of infrastructural
facilities. Inadequate facilities like power supply, telecommunication, access road
network and water supply constitutes one of the major constraints challenging
SMEs in Nigeria. A World Bank study in 1989 estimated that the cost of
providing infrastructural facilities by SMEs in the absence of those facilities is
estimated to be about 15-20percent of the cost of cost of establishing
manufacturing enterprises in Nigeria. Omolola (2008:15) contends that the
percentage has since increase to 30-35percent of the cost of establishing
manufacturing concern in Nigeria. Of the infrastructural problem, the problem of
power has best the most critical of the infrastructural problem. The erratic power
supply has hindered the business environment. In Nigeria most businesses has
fold-up or cannot operate as result of irregular and epileptic power supply. The
problem of power is so bad to the extent that the large industries are now relocating
to Ghana and other neighboring countries, while majority of the small and medium
scale business has since gone into extinction. The implication of this has led to the
reduction in production activities. The cost of fueling generator, machines and
equipment has led to cut in employees and running cost of the small and medium
scale enterprises. This has eventually led to the folding up of most of these
enterprises in Nigeria, since they cannot compete in the market any more.
Most Banks have capitalized on this reason and blamed their inability to fund SME
on the poor state of infrastructure, economic climate and low performance of
13

public utility. (Olarenwaju; 2001). However, Chris Onalu of the CMC International
Bank in contradistinction rejected Bank excuse on infrastructural facilities
claiming that huge profit profits declared by Bank shows that the operating
environment is not as bad as they think. Although the fact that most of these banks
declared huge profit does not mean that the operating environment is good, it is
public knowledge that most of the banks in Nigeria have been seen to doctored
their account book on account of claiming a clean health bill. The truth however is
that the state of infrastructural facilities in Nigeria is poor. Power supply is
unstable and inadequate, the states of the roads are terrible and water is not
sustainable, telecommunication services are not effective. Where infrastructural
facilities are neither present nor inadequate and functional, the investment
environment cannot stimulate improvement for small and medium scale
enterprises. In these instances, Banks would not be willing to invest in SME
because of high risk and the uncertainty of the investment climate.
Government unfavorable fiscal policy and policy inconsistencies
The inability of government to execute favorable fiscal policies and policies
inconsistencies has undermined the capacity of small and medium scale
enterprises. As Njoku (2002) identifies, inconsistencies in government policies is a
major problem affecting small and medium scale enterprises. Ogujuiba (2004) also
factored in the problem to inappropriate time or delay in budget implementation as
factor constraining investment and trade decision. In most cases the process of
approving budget at the legislative level is usually delay due to executive and
legislative face-off most time and even when the budget is approved the executive
implementation of such is also very slow due to administrative bottlenecks. Thus,
delaying investment decision of small and medium scale enterprises, particularly
on tariff and taxes measures in their trade decisions. Factors such as this have made
14

the investment environment to be unpredictable and uncertain for small and

medium scale enterprises. In some cases, high incidence of government regulatory
agencies, taxes and levies by different levels of government have resulted into high
cost of running SMEs and entrepreneurs are seems not to be motivated by this
factors. As Onugu (2006) posits, this is due to the absence of harmonized and
gazzetted tax regime which would enable manufacturers to build in a recognized
and approved levies of tax payable.
Internal characteristics and Problem of SMEs
Most small and medium scale enterprises in Nigeria are battling with serious
internal problem. These problems range from poor management practice, poor
accounting standards, shortage of manpower, financial indiscipline and corruption.
The reasons why most SMEs have not been able to improve are due to poor
management knowledge and practices, transparent organization set up, succession
plan, entrepreneurial skills, strategic business plan etc. The dearth of such skills in
most SMEs due to inadequate educational professional and technical back ground
on the part of the owners and employee of SMEs has plunged SMEs into further
crisis. It is the characteristics of small and medium scale enterprises to ignore basic
management procedure and thus run business as a family affair by undermining
proper book keeping and accounting and managerial practices. Because of the way
the business management and accountability measures are ignored, reckless
financial administration, wrong investment decision and corruption becomes the
order of the day(Omolola; 2008)
PROSPECTS OF SMALL AND MEDIUM SCALE ENTERPRISE IN
NIGERIA

15

In spite of the challenges confronting small and medium scale enterprises in

Nigeria, government realized the role of SMEs as the catalyst for economic growth
and development through employment and their contribution to macro-economic
development. It is therefore only proper to say government is making tremendous
effort in ensuring that these challenges are tacked. This explains why, apart from
the past effort by government, the emergence of democracy has also increase
government effort since democracy is tied with economic development. (Omolola
2008). Government in the past has established various support institutions and
reliefs measures aimed at enhancing and improving the capacity of SMEs.
Example of such includes, specialized banks meant to offer investment credits and
loans to improve the investment capacity of SMEs. In addition, government also
initiates regulatory and preferential laws as a measure of protection and offers
preferential treatment to small and medium scale enterprises for the purpose of its
improvement and development.
However and despite government effort in the past there is a renew support for
small and medium scale enterprises since 1999; the government has since
commence economic reform which SMEs are central to its objectives. The
opportunity on the future of SME has started yielding result, because the economic
reforms had show evidence of improvement in the legal and regulatory
environment, particularly regarding company registration, taxation, infrastructural
improvement (especially telecommunication). The establishment of Bank of
Industry (BOI), small and medium scale enterprises development agencies of
Nigeria, the facilitation of small and medium scale industries equity investment
scheme (SMIEIS) and other employment generation and poverty alleviation
scheme at various levels of government. Such as National Economic
Empowerment and Development strategies (NEEDS-at national level, SEED- at
16

State level and LEEDS- at Local Government level.) As Onugu (2005) put it the
economic reform programme would aid the creation and consolidation of existing
small and medium scale enterprises because of its focus on income generating
opportunities for the people. (Onugu, 2005).Similarly, Omolola (2008) views the
current effort of government since 1999 towards revamping SMEs as a sustainable
process capable of building the prospect of small and medium scale enterprises and
a path to national recovery of the Nigeria ailing economy.
While lauding government effort, the organized private sector is also making a
vital contribution in this direction. As Onugu( 2005) observed The capital market
driven by the Nigeria stock exchange (NSE) and the security and exchange
commission (SEC) have not only been expanding its facilities, but also for cost
effectiveness for small and medium scale enterprises to access funds from the
market. In 2005, during the commissioning of small and medium enterprises
development agency of Nigeria (SMEDAN), the former president of Nigeria,
Olusegun Obasanjo urged the Central Bank of Nigeria (CBN) to realize the
objective of small and medium scale industries equity investment scheme.
(SMIEIS) which is expected to complement the development effort of financial
institution in term of loan assessment on a short and long term basis for investment
purposes. The current thrusts of the established SMEDAN give some measure of
optimism as it portray government serious engagement and cultivation of small and
medium scale enterprises. Currently the agency has completed a nation-wide
survey on SMEs as basis of articulating ideas for micro, small and medium
enterprises policy thrust .This policy thrust would aid in facilitating improvement
and capacity building programme, support service and intervention for the small
and medium scale enterprises in Nigeria.

17

At the international front, the globalization and current economic reforms which
has liberalization, commercialization and privatization has its main component has
also open up vista for the SMEs and entrepreneurs. The liberalization of trade
through world trade agreement has open up opportunity to SMEs to access
international market and the African growth opportunity act which offer incentives
to exporter from African countries to the united state of America. (Onugu 2005,
Omotola, 2008). This international effort is further enhanced by Tony Blair
commission for Africa. In February 2005, the President of the Institutes of
Directors Ms. Benedicta Molokwu confirmed that the Tony Blair commission for
Africa is to assists small and medium scale enterprises in Nigeria by creating
access to loan and on lending through banks. In the same direction, the government
through SMEDAN has also called the G8 to assist in providing an enabling
environment for small business to thrive in Nigeria. In a paper titled Developing
Africas SME potential: How G8 can do more to help Africa organized by the
African business Roundtable and Tony Blair commission for Africa in Lagos.
According to Mrs. Modupe Adelaja the Director of SMEDAN she sought support
from the G8 to assist the effort of the stakeholder to streamline and simplify the
procedure for business registration and taxation at the three tiers of government
adding that this would allow SMEs to move from informal to formal level.
There is no doubt that, if the current economic reform programme in Nigeria can
be sustained, the capacity of small and medium scale enterprises would be
enhanced and improved. This would no doubt have a positive effect for
employment generations, wealth creation, and poverty alleviation etc. Above all it
would set Nigeria economy on the path to recovery, promote economic growth and
national development.

18

CONCLUSION
Small and medium scale enterprises are long believed to be instrument of
economic growth and development. This has been true in developed economies as
experience from United State of America, Britain, Japan, and Germany among
others proved that. The same cannot be said of the developing countries,
particularly Nigeria where SMEs performance is abysmal. While government
efforts both in institutional and policy support were emphasized in this paper.
Those institutional and policy support were found not to have been able to
addressed the challenges sufficiently. The culpability of SMEs could be
attributable to the government and the SMEs entrepreneur themselves. Despite
these challenges, there is a new optimism since the enthronement of democracy in
1999 in Nigeria. The economic reform process is being pursued with vigour and on
the basis of enhancing Nigeria ailing economy. SMEs sub-sector was seen as
critical to Nigerias economic recovery. No doubt, SMEs was a salient issue in the
economic reform process. As it were, the reform is bearing good fruit and the
implication of that for the renew prospect on the improvement and development of
SMEs in Nigeria.

19

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