The role of small scale industry in national development in nigeria




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Operational Definition of the Term Small Scale Business

Small scale business, small scale industries and small scale entrepreneurship are used interchangeably to man a small scale industry firm. Its deliberation was to refer to the operational definition. In Nigeria and worldwide, there seems to be no specific definition of small business. Different authors, scholars, and schools have different ideas as to the differences in capital outlay, number of employees, sales turnover, fixed capital investment, available plant and machinery, market share and the level of development, these features equally vary from one country to the other.



    1. In Nigeria, the Third National Development plan defined a small scale business as a manufacturing establishment employing less than ten people, or whose investment in machinery and equipment does not exceed six hundred thousand naira.

    2. The Central Bank of Nigeria in its credit guidelines, classified small scale business as these businesses with an annual income/asset of less half a million nairas (N500, 000).

    3. The Federal Government Small Scale Industry Development Plan of 1980 defined a small scale business in Nigeria as any manufacturing process or service industry, with a capital not exceeding N150, 000 in manufacturing and equipment alone.

    4. The small scale industries association of Nigeria (1973) defined small scale business as those having investment (i.e. capital, land building and equipment of up to N60, 000 pre-SAP Value) and employing not more than fifty persons.

    5. The Federal Ministry of Industries defined it as those enterprises that cost not more than N500, 000 (pre-SAP Value) including working capital to set up.

    6. The Centre for Management Development (CMD) definition of small industry in the policy proposal submitted to the federal government in 1982 defined small scale industry as, “a manufacturing processing, or servicing industry involved in a factory of production type of operation, employing up to 50 full-time workers.

Lastly, in the United States, the small business administration defines a small business as one that is independently owned and operated is not dominant in its field, and meets employment or sales standard develop by the agency. For most industries these standards are as follows. This also shows the same trend as in Nigeria, although the exchange value makes the financial criteria to be different.

  1. Manufacturing: - Number of employees range up to 1500, depending on the industry.

  2. Retailing: - Small if annual sales or receipts are not over 2 million to 7.5million dollars.

  3. Wholesaling:- Small if yearly sales are not over 9.5 to 22 million dollars

  4. Services: - Annual receipts not exceeding 2 million to 8 million dollars. Thus in general, the specific characteristics/criteria used in describing small scale business are;

  1. The number of people/persons employed. It is usually a small business, because small number of people are employed.

  2. Annual Business Turnover: - Because initial capital is low, then annual turnover will also be low.

  3. Local operations: - For most small firms, the area of operation is local. The employees live in the community in which the business is located.

  4. The sales volume is minimal.

  5. Financial strength is relatively minimal.

  6. Managers are independent, and they are responsible only to themselves.

  7. The managers are also the owners.

  8. The owners of the business actually participate in all aspects of the management (i.e. the management of the enterprise is personalized)

  9. They have relatively small market when compared to their industries.

  10. The amount of employees is relatively small when compared to the biggest companies in a similar venture.

  11. The capital is mainly supplied by an individual or small group of individuals/persons or shareholders.

  12. They usually have one, but many have several shop locations all in the same city or metropolitan areas.

There are many enterprises in Nigeria categorized as small business. Most of them are in the commercial sector and there is also a trend now towards the service industry hotels, restaurants, fast foods, etc.



Marketing Problems of Small Business Enterprises

One of the major marketing problems facing small business enterprises in Nigeria is lack of understanding and the application of marketing concept. In a study conducted by Ogwo (1991), this was conspicuously exposed. Most Nigerian small business owners equate ‘marketing’ to ‘selling’ and this is reflected in their various dysfunctional business behaviour against customer satisfaction and good business orientation. They lack the knowledge and skills of basic marketing ingredients – marketing research, market segmentation and marketing planning and control. The outcome of this is poor quality products, unawareness of competition, poor promotion, poor distribution, and poor pricing methods. They are not marketing oriented and market-focused if a marketer is defined as someone who understands and applies marketing in order to create, build, and maintain beneficial relationships with target markets. Baker (1979) and Doyle (1985) identify lack of marketing orientation as the major factor for business failure

Most Nigerian small manufacturer, in a higher degree, depends on imported equipment and raw materials for their operations. With the over-devaluation of naira, vis-à-vis other foreign currencies, they are not finding it easier to secure these items abroad. They therefore resort to poor locally produced alternatives. The result is usually poor quality products. This may be one of the factors responsible for Nigerian consumers’ unquenching appetite for imported goods, even though many of these foreign goods are equally of poor quality especially those coming from Asian and Far East countries. Porter (1980) point out that high quality raw material are important to producing high quality product. With the increasing demand for imported goods in Nigeria, dubious local and foreign importers are dumping fake products which go further to frustrate small scale manufacturers and seriously affect our hard earned foreign exchange.
Besides, small-scale producers lack good quality control in their operations. In this respect, they rely mainly on replacing faulty products instead of developing good quality control system (Onwuchuruba 2001)

Only very few Nigerian small manufacturers are aware of the nature of competition facing them. They estimate their success only through sales revenue without considering also their market share. Even, some do not know their market segments on which to focus their operations.


Piercy (182) has emphasized the importance of good stockholding, transport, and distribution for enhancing commercial success. Many of our small manufacturers do not have properly defined criteria for appointing their product distributors. They rely mainly on trust created through relationships between the owners of the companies and the distributors. These relationships are in form of fathers and mothers, brother and sisters, friends and in-laws etc. This relationship often ends up in running the business down.
High costs of vehicles and poor roads are also affecting the operations of small manufacturers in their efforts to move finished products down to consumers in both rural and urban areas. They have a complex channel of distribution with many layers which go to push the prices of their products higher. Besides, small manufacturers pay little attention to the promotion of their products. Advertising and other methods of promotion are not adequately used. There is no other way of creating awareness of their innovations and stimulating consumers to action than promotion. Even, many of them do not participate in trade fairs and exhibitions. This also inhibits their growth and ability to compete with larger companies.
In a developing country like ours with low income and high level of poverty, a company that wants to succeed should offer its product at the price the consumers can bear. But often, small manufacturers set prices of their products arbitrarily without regard to this peculiar consumer characteristic in our environment. Since they do not have clearly defined criteria upon which to base their prices, they always seek to maximize profits at short runs without having a long-term view of their businesses. Farah (1980) cautions the United States car firms on setting high prices if they wish to succeed in markets around less developed countries due to low income and high level of poverty in the areas.

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