You are on page 1of 22


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

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.

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

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

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 (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

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

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, 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 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 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

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.


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

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

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

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

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


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

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.


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.


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.


Aftab K and E. Rahim 1998 Barriers to the Growth of Informal Sector firm, a case study: Journal of Development Studies 25(4) Alawe Tijani (2004) Entrepreneurship Processes and Small Business Management. Industrial Science Centre, Owoyemi House, Abeokuta road Sango Otta Ogun state, Nigeria. Arriyo D 1999 Small firm are the Backbone of Nigeria economy. Africa Economic Analysis, Africa Business Information Service, Bridgnorth United Kingdom. Ayyagari M, T. Beck and A. Demirguc-kunt (2003) Small and Medium Enterprises across the Globe. A New database. World Bank, Development Research Group. Working paper 3127 Washington DC. Balunywa Waswa, What are Small Scale Enterprises? Entrepreneurship and Small Business Enterprise. Makerere University Business School Accessed December 2010 at are Small Scale EnterprisesEntrepreneurship-and-small-business-enterprises-growth-i Beckley Peter (1988) Foreign Direct Investment by Small and Medium Sized Enterprises: The Theoretical Background. Bradford, United Kingdom. University of Bradford Management Centre. Ekpeyong David and M.O Nyang (1992) Small and Medium Scale Enterprises in Nigeria: Their Characteristics, Problems and Sources of Finance. African Economic Research Consortium, Nairobi. Europea Commision (2007) Enterprises and Industry: SME Definition. Accessed at policy/sme definition/index en.htm Ihua Ugwushi (2009) SMEs Key Failure-Factor: A Comparism between United Kingdom and Nigeria, in journal of social science 18-(3) 199-207, Kent, University of Kent.

Joshua Mindle (2008) Small and Medium Scale Business as Instrument of Economic Growth in Nigeria. Lagos, Kinston Publishers. Kibera and Kibera 1997, as cited in Balunywa Waswa, What are Small Scale Enterprises? Entrepreneurship and Small Business Enterprise. Makerere University Business School Accessed December 2010 at are Small Scale Enterprises-Entrepreneurship-and-small-

business-enterprises-growth-i Kozak Robert (2007) Small and Medium Forest Enterprises: Instrument of change in the developing World. Vancouver, British Colombia, University of British Columbia. Macqueen D (2006) Governance Towards Responsible Forest Business. Guidance on Different Types of Forest Business and the Ethics to which they gravitate. International Institute for Environment and Development (IIED) London, United Kingdom. Macqueen D (2004) Association of Small and Medium Forest Enterprises: An initial Review of Issues for Local Livelihood and Sustainability. International Institute for Environment and Development (IIED), Briefing Paper. London, United Kingdom Federal Republic of Nigeria, National Bureau of Statistic Report, 1999. Federal Republic of Nigeria, Second National Development Plan 1970-1974. Ngobo 1995, as cited in Balunywa Waswa, What are Small Scale Enterprises? Entrepreneurship and Small Business Enterprise. Makerere University Business School Accessed December 2010 at are Small Scale Enterprises-Entrepreneurship-and-small-business-enterprises-growth-i Njoku 2002, as cited in



Odedokun M.O (1998) Effectiveness of Selective Credit Policies Alternative Framework of Evaluation and World Development Vol. 16 pp 120-122. Olarewaju 2001, as cited in

www.valuefronteraonline/publication.jsp?typeaponeindustrialeconomics-smes Ogechukwu Ayozie (2006), The Role of Small Scale Industry in National Development in Nigeria. Texas Corpus Christi, Texas, United State. November 1-3 2006 Ogujuiba K.K, Ohuche F.K and Adenuga A.O (2004) Credit Availability to Small and Medium Scale Enterprises in Nigeria: The importance of New Capital Base for BanksBackground and Issues. Working paper accessed in December 2010 in Omotola Derinola, (2008) Small Scale Enterprises, Economic Reform and National Development in Nigeria. Lagos, Adejo Publishing. Onugu Basil (2005), Small and Medium Enterprises in Nigeria (SMEs) Problem and Prospect. Being a dissertation submitted to St. Clement University in partial fulfillment of the Award of the degree of Doctor of Philosophy in Management. Stoner 1996, as cited in Balunywa Waswa; What are Small Scale Enterprises? Entrepreneurship and Small Business Enterprise. Makerere University Business School Accessed December 2010 at are Small Scale Enterprises-Entrepreneurship-and-small-business-enterprises-growth-i. World Bank, Review on Small Business Activities. World Bank, 2001 World Development Report. Washington, Oxford University Press for the World Bank. World Bank, study on Small and Medium Scale Enterprises. 1989.