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2011, The Collegiate Journal of Economics

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Kennedy Ediagbonya

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Small and medium sized enterprises (SMEs) are the backbone of virtually all economies of the world because of their role in employment creation and provision of personalized services (Wattanapruttipaisan, 2003). SMEs have strong influence on the sustainable development process of less developed as much as developed countries because they foster economic growth and alleviate poverty (Ayyagari, Beck and Demirguc-Kunt, 2003). Udechukwu (2003) asserts that the development of SMEs is an essential element in the growth strategy of most economies and holds particular significance for developing countries like Nigeria.

The best performing economies in Asia are heavily based on SMEs which are major sources of dynamism in economic development. The requirements for SMEs to access the global market and upgrade their position within the international market as a result of trade liberalization are becoming increasingly difficult due to competition (Abonyi, 2003). Berry (2002) suggests that the increasing prevalence of flexibility and specialization of SMEs has persuaded many business analysts to believe in the strategic role SMEs play in the industrial structure of any developing nation. But he noted that SMEs are quite vulnerable to external shocks due to the global competition from the liberalization of trade. There is reasonable assurance that given favourable policy environment, SMEs can successfully compete in the global market (Briggs, 2007). Most governments, especially in Less Developed Countries (LDCs) now recognize the need to formulate policies that create conducive atmosphere for the establishment and operation of SMEs. The new emphasis by various governments in LDCs on SME development can be linked with the current global trend of economic liberalization and the need to bridge the development gap that hitherto exists between them and industrialized countries. Governments in developing countries, especially in Nigeria, provide a wide variety of programs to develop and assist SMEs. Despite these programs, it has been observed that their impact on the performance of SMEs has been less than satisfactory (Manbula, 2002). This can be attributed to some factors that governments and policy makers in developing countries have failed to put into consideration in the design and implementation of SME development programs.

Most SMEs either remain small, moribund or shut down within few years of operation due to some constraints that hinder their growth, especially finance (Rodriguez and Berry, 2002). There is no available evidence in Nigeria that the situation has improved with economic liberalization (trade and financial market) that brought about stiff competition from well-established Multinational Corporations (MNCs). The proponents of economic liberalization claim that it improves the situation of SMEs by giving them better access to finance and encourages competition which will in turn reduce poverty (Tagoe, Nyarko and Anuwa-Amarh, 2005). This paper focuses on the manufacturing SMEs in Nigeria and the programs designed by the Nigerian government for the development of SMEs.

It develops the argument that government programs for SMEs development are not properly implemented which has hindered SMEs competitiveness. The institutional structures upon which these programs can function effectively are either not in place or insufficient. This has resulted in a biased economic environment for SMEs to compete with well-established MNCs under a liberalized trade environment.

This research work on “The failure of small-scale Business in Nigeria; Its causes and solutions” with a study of selected companies in Enugu State is conducted to proffer solutions by way of recommendations to the problems of small scale business.


There are a lot of problems which this research work seeks to address. It is in agreement with certain experiences that the inability of the management of the small scale businesses to determine causes of failure may have led to low growth rate. Also it is perceived that the inability of the management to develop policies for solving the problem of small scale businesses may have reduced the profitability of such enterprises. Indeed, nothing weakens organization more than when management develops poor attitude to personnel training. Experiences show that the poor attitude of the government to creation of conducive environments for business may have reduced the chances of survival of small scale enterprises. The inability of works to implement management policies just as experiences have shown, may have led to unproductivity.

Again poor financial management strategies may have aggravated the situation just as the perceived inability of management to employ competent personnel may have led to unproductivity. Above all, the poor marketing strategies of most organizations just as experience can show may not have helped matters. It is in view of this problem that this research work is conducted.


This work is conducted to achieve the following objective

  • To determine the causes of failure of small scale businesses.
  • To find out whether government creates a conducive environment for small scale businesses.
  • To determine which workers do not implement management policies in small scale businesses.
  • To evaluate if finance options affect small scale businesses.
  • To determine whether the employment of incompetent hands leads to small scale business failure.


In order to address the above stated problem, the following research are essential, hence they are reflected in the questionnaire.

  • What are the causes of small scale business failure in Nigeria?
  • Does the government provide conducive environment for Small Scale business?
  • Do workers implement management policies?
  • Does finance options affect small scale business?
  • Does the employment of incompetent hands lead to the failure of small scale business?


The hypotheses stated earlier in this research work are:

Ho:  The cause of small scale business failure is due to poor policy

H 1 :  The cause of Small scale business failure is not due to poor policy

Ho:  There is no proof that government can create a conducive environment for Small scale business.

H 2 :  There is a proof that lack of conducive environment is not responsible for failure of small scale business in Nigeria.

Ho:  There is no evidence to show that workers implement management policies in small scale business.

H 3 :  There is evidence to show that workers implement management policies in small scale business.

Ho:  There is no significant relationship to show that finance option can affect Small scale business.

H 4 :  There is a significant relationship to show that finance option can affect Small scale business.


It is the desire of the researcher to investigate into the causes and solutions to the failure of small scale businesses in Nigeria as it affects all organization. But due to time and financial constraints, the researcher has chosen SCR Busiess Cetre, Tasco investment, Jah Bless furniture’s, Nelo Tailors, Francis foods and Nucon Ventures as case study firms. It cannot also be said that it is only the factors or points given in this work that will cause the failure of small scale businesses in Nigeria.


Information gathered from the study could be used by Managers of Small and medium Scale Enterprises for planning appropriate measures for business growth and survival as well as the effective allocation of resources. To students in every higher institution of learning, it will provide them with some vital information concerning strategies for small scale business survival. Also, it will provide basis for which further research could be conducted. Finally, it is believed that this research study will be of great use to general public by expanding their knowledge on small scale business.


A lot of constraints were encountered in the course of carrying out this research work. The researcher lacked sufficient resources to face the challenges of this research work. It was not easy to source for the adequate material to be used to carry out this research. Indeed the researcher found it difficult to collect certain information from the management staff of the organization and it was quite uneasy to educate the respondents on the best ways of filling the questionnaire.

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PROBLEMS AND PROSPCTS OF SMALL SCALE BUSINESS IN NIGERIA (A CASE STUDY OF ENUGU SOUTH LOCAL GOVERNMENT AREA) ABSTRACT Abstract is a précised summary of what is actually done in a project; it means that the following information should be there. The topic under the study and the location, the statement of the problem. The research hypothesis also carried out, relevant literature reviewers of the study must be identified. A questionnaire was design with concrete validity and reliability. Relevant data will be collected from the respondents and analyzed accordingly. This research work is a very crucial study for the managers and prospectivess owners of small scale business operator. The study has motivated by the diminishing state of the Enugu south and also the prospects. To solve the research problem, both the primary and secondary data were collected. The research instrument used in collecting the data were questionnaire, oral interview and field visits. The respondents comprises of the owners, managers and workers of small scale business in Enugu south. In organizing and presenting data collected, tables and percentages were used. The various hypothesis were tested using the chi-square.Most of the respondents rated the performance of Ennugu south as being below standard easily sheet down. Most of the respondents rated the Enugu south yielding profits with bright future. Most of the respondents between most operators of the Enugu south are illiterates, has little money and keep no records of business.  Base on findings, the researcher recommend that: All Enugu south residents are prospects ones should study the proposed sight of their business before location. i.e proper financial records should be kept e.g the cash book.  TABLE OF CONTENTS CHAPTER ONE INTRODUCTION 1.1        Background of the study                                                1.2        Statement of the Problem                                      1.3        Purpose of the Study                                            1.4        Scope of the study                                                       1.5        Research Hypothesis                                             1.6        Significance of the study                                                1.7        Limitation of the study                                           1.8        Definition of Terms                                                       CHAPTER TWO LITERATURE REVIEW 2.0    Literature   Review                                                       2.1    Definition of Small Scale Business                           2.2    Why People want to go into Business Ownership        2.3    Scope of the Scale Business                                   2.4    Roles of Small Scale Business in National Economy    2.5    Sources of Fund for Small Scale Business                 2.6    Government Commitment to Encourage                   2.7    Feasibility Study                                                   2.8    Problems of Small Scale Enterprises                        CHAPTER THREE RESEARCH DESIGN AND METHODOLOGY 3.1    Research Design                                           3.2    Area of the Study                                                 3.3    Population of the study                                  3.4    Sample and Sampling procedure                     3.5    Instruments of Data Collection                                3.6    Validity of Instrument                                    3.7    Reliability of Instrument                                         3.8    Method of Data Collection                              3.9    Method of Data Analysis                                        CHAPTER FOUR DATA PRESENTATION AND ANALYSIS 4.1    Presentation and Analysis                                      4.2    Testing of Hypothesis                                            4.3    Summary of Findings (Result)                                         CHAPTER FIVE DISCUSSIONS, RECOMMENDATIONS AND CONCLUSIONS 5.1    Discussion of Findings (Results)                               5.2    Implications of the Research Findings                      5.3    Conclusions                                                         5.4    Recommendations                                                        5.5    Suggestions for Further Research                            Bibliography Appendix CHAPTER ONE INTRODUCTION 1.1       BACKGROUND OF THE STUDY Small scale business has been the main trust of Nigeria’s development programmed over time. However, it is being widely acknowledged that rural development should be the centre piece for effective short and long run development of any nation such as Niger. Both the federal and state governments on one hand and general public on the other hand attest to the fact through their efforts towards the development of the countryside of Nigeria.         In realization of this and in pursuance of its attainment the federal government created the directorate for Foods, Roads, Rural Infrastructure (FRRI) to work in partnership with the rural communities towards the provision of Amenities such as rural roads, water bore holes and production of more foods. As well several states, which Anambra is one of them, have adopted rural developmental programme which is charged with the responsibility of developing and coordinating rural development activities in the state.         From the on-going, therefore, it is dear that the governments and people of the country now attach much importance to rural development. It is therefore, the need to achieve integrated rural development vis-a vis national development that prompted this study with the objective of determining the role of the establishment of small scale industries in Nigeria can play in this regard. The Enugu south business of what could be described as small scale Enugu south business started as a result of movement of people from one place or town to another. These movements are categorized in: a.   Movement which one locality or town for example going to work from one’s house within the same city or from one’s city to another. b.   Movement from one town to another like in the case Ogui migration where there is an exodus of the people from rural area to the developed ogui area. In this case, people concerned to go out for greener pasture like looking for better jobs and business. c.    Movement from one country to another for withers business, study or search for better jobs. d.   Movement to places of interest like-the Olumo Rocks in Abeokuta or Yoruba game reserve. In course of these movements, it has not required quantity of food and drinks that would last them the length of time they would stay outside their homes. The instructive desire to help in feeding of these groups of travelers brought about the business of Enugu south. Before the 15th century, what used to be called inns existed in Europe. These were place where travelers called spend a night or two even more and were served food and drinks at a cost. The inns were merely remedy by inn-keepers between 1750-1850, the year of industrial revolution; the business of Enuge south became a common thing all over Europe. In Nigeria, the business is beleected to have started with the arrival of Europeans into the country. Before the Europeans, all travelers’ woe only catered for by their hoppetabeo nature. Travelers who come to peace mission were virtually carried for by their hosts. These Europeans or their guide had to make do with the local food which brought about some kind of exchange process. As this process continued, it dawned on the local people that food could be prepared and sold to these travelers who moved from one place to another. This was the early shape of Enugu south unfit it grew to its present standard which was made possible by the attendant development of the country by the presence of the Europeans. 1.2       STATEMENT OF THE PROBLEM Government of federal state and local levels has set agencies that are specifically changed with providing funds and other services for the small scale business people. The purpose of establishing these support agencies by government is to encourage the rapid development of small or medium scale industries in the country for government want to encourage school levels to establish their own small business or unemployment and for economic development. These support agencies are National Directorate of Employment (NDE), Funds for small scale industries (FSSI) and National Economic Reconstruction Funds (NER FUND) have their various functions. Some are established to provide loans, render advisory services, identify source of raw materials, structure their organization which could be managerial or technical/structuring.         But inspite of all efforts being made, the performance expectation. Especially in the small scale Enugu south business today, these are relatively high rate of business failure, low productivity, managerial management, financial strigency, and of good human relations under capitalization etc. Small scale Enugu south still performs below expectation? What are the courses of small scale Enugu south business failure? 1.3       PURPOSE OF THE STUDY The study will address the following purpose: 1.    To find out why small scale Enugu south still perform below standard.              2.    To find out why there is high rate of business failure in small scale Enugu south. 3.    To determine the extent of managenal incompetence of owners of small scale Enugu south in the management of their business. 4.    To determine why there is poor human relations with small scale Enugu south. 5.    To find out the causes of low productivity in small scale Enugu south. 6.    To determine the extent of financial stringency in the operations of some small scale Enugu south. 7.    To recommend what should be done to improve standard of small scale Enugu south. 1.4       SCOPE OF THE STUDY This work covers a selected Enugu south in Enugu south. The Grand Metropolist in the Eastern part of Nigeria. I strongly believe that carefully analysis of fault obtained will enable me to make general observations regarding Enugu south business in the other cities of Nigeria. This study tries to identify areas of problem such as financial, marketing, advertising, expansion and other meaningful suggestion that will help managers in this sector to surmount them. 1.5       RESEARCH QUESTIONS To solve the research problem, I have asked the following research questions. 1.    Are small scales Enugu south performing below standard? 2.    Are there high rate of business failure in small scale Enugu south? 3.    What is the extent of managenal incompetence of owners of small scale Enugu south? 4.    Are there low productivity in small scale Enugu south? 5.    Does poor human relations have negative effect on the turnover of small scale business? 6.    What is the effect of financial stringency on the operation of small scale Enugu south? 1.6       RESEARCH HYPOTHESIS The following hypothesis will be used in the study 1.    HO: Most small scale Enugu south do not perform below standard. Hi: Most small scale Enugu south perform below standard. 2.    HO: Owners of small scale Enugu south do not make good profits. Hi: Owners of small scale Enugu south make good profits. 3.    HO: There is no financial stringency in small scale Enugu south business. Hi:  There is financial stringency in small Enugu south business. 4.    HO: There is no good human relation in small Enugu South business. Hi: There is a good human relation in small Enugu South business. 5.    HO: Most operations of small Enugu south are not illiterate. Hi: Most operators of small Enugu south are illiterate. 1.7       SIGNIFICANCE OF THE STUDY The study is very timely, especially today that the nation is striving towards better economics development and growth. This study will be of immense benefits to both the operating and potential Enugu south business because it will give a thorough insight into Enugu south operations. This is aimed at patting Enugu south in trace operative so that those concerned will get to know what the business is about. In the same vein, different categories of Enugu south customers will be put in a position where they can appreciate Enugu south business and probably adjust their irrational behaviors. The work unravels the technicians of the game to ensure success of the operation by discussing things like customers-workers relationship, marketing strategies, behavior in the restaurants.         The study should create the long required awareness in the Enugu south business. It will help the Enugu south business and also emigration the Enugu south on its potentials and how best to top them optionally and also appreciate the important role it plays in the society and national economy. 1.8       DEFINITION OF TERMS Enugu south means a place or building where foods and drinks are served. Bedrooms are provided for accommodation, there are other facilities provided, such as cusmo, swimming pool, playing grounds like femiscourt, and others. There are other pab house such as guest house, inn, resort and hotel. i.       Foo-Foo: This means pounded yam or cassava that of the southern part of Nigeria. ii.    Amala: Food prepared in solid form like pounded yam and eaten with draw soup. It is usually common on the Yoruba speaking area of Nigeria. iii.    Draw Soup: This is like stew and is usually prepared with okro or ogbono cut in pieces. It is very delicious and makes the eating of solid food more pleasurable. iv.          Peper soup: This is a traditional Nigeria food prepared with meat, and salt to taste. It also usually taken in relaxation time. v.           Eba or Garri: It is usually inform of pounded yam but it made with boiled water. vi.          Moi-moi: This is a land of food made from grounded beans.          According to Kotler Lawrence (1973), small scale industry is any industry which is in dependently owned and operated and not dominant in its area of operation. Drucker, P.F. (1974), maintains that there is only one criteria which with a fair degree of reliability, indicates whether a  business is small, fair sized or big. He says that “a small business requires at most one man who is not engaged in any other functional work required. The man at top knows who the few people are in the organization in whom responsisibility for key results without having to consult his records or associates. Drucker summed it up by asserting that regardless of titles and position, it can hardly exceed twelve to fifteen men which is about the number one man can really know and can really be familiar with.         The committee for Economic Development (C.E.D) of the united state has given a valuable list of characteristics of the small business which states that a small business will have at least two of the following characteristics: a)    Management are also owners b)    Area of operation are mainly local c)    Owners supplied capital, and d)    Small in size within the industry According to Small Business Administration (SBA), U.S Federal Government agency established in 1953 to advice, assist and protect small business, definition of small scale business is not rigidly fixed, but can be relaxed to exceptional cases so far as the particular firm is not dominant.  

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Procedures and Problems of Setting Up A Small-Scale Business in Nigeria (A Case Study of The Rural Areas)

This research work looks at the Procedure and Problems of Setting up a Small Scale Business in Nigeria.  This study reveals the numerous contribution of small scale business to our economic growth and political stability.

In the first chapter, the topic is introduced with the general background of small scale business in Nigeria also included is the significance of the study, scope, limitation and operational definition of terms.

The second chapter goes to discuss the literature review including the meaning, features, forms, merits and demerits, source of fund, difference between small and large business, problems of securing of fund and importance of small scale business in Nigeria.

Chapter three discuss about the research methodology, the area of the study, population, sample and sampling techniques and instruments used,

Chapter four discuss on presentation and analysis of data, findings and summary of findings.

Finally, chapter five discuss the summary, conclusion and Recommendation of the project topic procedures and problem of setting up a small scale business in Nigeria (A case study of the rural Areas).






Table of Contents

Chapter One

1.1Background of the study1

1.2Statement of Research problem2

1.3Aims and Objective of the Study3

1.4Significance of the Study4

1.5Scope of the Study4

1.6Limitation of the Study5

1.7Operational Definition of Terms6

Chapter Two – Literature Review

2.1Meaning of Small Scale Business8

2.2Features of Small Scale Business8

2.3Forms of Small Scale Business9

2.4Merit and Demerit of Small Scale Business11

2.5Sources of Funds to Small Scale Business12

2.6Distinction between Small Scale and Large Businesses13

2.7Problems of Sourcing for Funds in Small Scale Business15

2.8Importance of Small Scale Business in Nigeria16

2.9Problems of setting up Small Scale Business18

Chapter Three

3.1Research Methodology26

3.2Population of the Study26

3.3Sample and Sampling Techniques26

3.4Instrument for Data Collection27

3.5Validity of the Instrument28

3.6Administration of the Instrument28

3.7Method of Data Analysis28

Chapter Four

4.1Presentation and Analysis of Data29

4.2Summary of Findings34

Chapter Five





Appendix 40

Research, A. & G., E (2020). Procedures and Problems of Setting Up A Small-Scale Business in Nigeria (A Case Study of The Rural Areas). Afribary . Retrieved from

Research, Afri, and Ekrakitie G. "Procedures and Problems of Setting Up A Small-Scale Business in Nigeria (A Case Study of The Rural Areas)" Afribary . Afribary, 07 Sep. 2020, Accessed 02 Apr. 2024.

Research, Afri, and Ekrakitie G. . "Procedures and Problems of Setting Up A Small-Scale Business in Nigeria (A Case Study of The Rural Areas)". Afribary , Afribary, 07 Sep. 2020. Web. 02 Apr. 2024. .

Research, Afri and G., Ekrakitie . "Procedures and Problems of Setting Up A Small-Scale Business in Nigeria (A Case Study of The Rural Areas)" Afribary (2020). Accessed April 02, 2024.

Document Details

Related works, the role of insurance companies in nigeria economic development, the impact of electronic banking in nigerian banking system, the problem of banking systems in nigeria, bank failure: causes and consequences, banking distress in nigeria causes and implications, development banking in nigeria, challenges facing the nigeria banking industry, revenue generation in local government areas (problems and prospects), debt recovery techniques in the banking sector, problems and prospect (a case study of union bank nigeria plc), the study of the impact of universal banking in nigeria financial system.

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