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The Problems Of Financing A Small Scale Business In Nigeria

Abstract of The Problems Of Financing A Small Scale Business In Nigeria

Since independent Nigeria the giant of Africa has spent much time and resources, both human and a material trying to convince the developed countries and indeed the whole world that she (Nigeria) is capable of developing her industrial capabilities.

Much of the efforts made in this direction have found expressions mostly in international conference and seminars, newspapers report, radio announcements and various national development plans.

Industries have actually increase since after the independent, but the disappointing record of economic performance in the last decade has led to the reopening of the debate on the strategy of industrialization.

Nigeria is still a net import of all sorts of goods from needless to heavy machinery, simple because most of the industries where established for their immediate lucrative such as beer, soft drink and other consumers goods industries without the consideration to nation’s industrial needs or for the utilization of local materials.

Besides most of the large scale industries before the industrialization decree were foreign owned and were associated with significant possibilities of income leakages.  This inspite of the rapid increases in the gross national productivity (GNP) in last decade, the poorest segment of the population peculiarity those in the rural areas has received relatively little benefit.

Unfortunately the bulk of Nigeria businesses are small-scale industries of the number of business establishments, they account for about 80% or above of the total number of enterprise in the country.

The important role they play in the development process was observed by the first progress report of the second National Development plan “in spite of the anticipated rapid growth of the wage sector, the major solution to the nations unemployment problem will have to be found in other areas like agriculture and small scale industries development.

Inspite of all these, the small scale industries sub-sector has continued to suffer from lack of credit most all the governments financial programmes for the small industrial credit scheme, fund for  small scale industries has remained largely inadequate and of little effect.

The banks and other financial houses cannot help matters either despite the central bank credit scheme to industries.

It would be noted in this regard that majority of the small scale industries would not be able to meet the requirement of the bank and other financial institution lending policies. Therefore given this financial constraints.

Chapter one of The Problems Of Financing A Small Scale Business In Nigeria



It is necessary to stress the point that to succeed in business require some measure of discipline.  Most industrialist expect to make a reasonable profit from the investment of time and resources, that they have to make in other to bring a project to fruition.

While this may sound simple enough, the bother line is the fact in an economy wide context, the rate or level of reward that can accrue to various level of effort, discipline and productivity should never be allowed to get out of proportion in relation to effort put in.

Experience has shown that industrial pursuits have been found to yield for the patient and disciplined industrialist rather than stand for business concern with all kinds of effort mostly unproductive and require no legitimate effort to reap profits in multiple fields.

After considering the above mentioned statement of facts about industry.  The question is how far are we from being industrialized bearing in mind that it yields for disciplined and patient industrialist, all things being equal.

Taking cognizance of the fact that a step forward is the beginning of a mile.  Some, therefore Nigeria’s business industrial evolution will only start when positive steps are taken towards adequate financing of small scale business.  The experience of newly industrialized countries has been an eye opener.

Finance is the greatest problem we are likely to face whenever we talk of establishing a small scale industry.  This is the most crucial aspect of business enterprise and a lot of controversy surrounding the problem of inadequate finance.  A close look on the small scale industries/business, all over the country would help to throw further light on the effect of lack of fund on growing business.  The drastic effect is mostly felt when one tries to study the rate at which our young industries are gradually collapsing.  Even surviving ones are terribly looking for assistance that they are not sure of.

Funds are scare, hence the growing industries as regarded in this part of the world as never-do-wells especially Nigeria.  When an economy is shaky, growing industries in that economy tend to suffer most and usually stand the taste of time.  Hence, an increase in the number of causalities in this regard.

The researcher aimed at exploiting the possibilities, problems of financing small scale business/industries.  The project centers on management and financial problems


There are various problems facing the establishment of small scale business like financial limitation, lack of raw material, poor management and quality of the management, staff, poor accounting method, high interest charge on loans and lack of adequate planning and feasibility studies.

The most common and problematic issues is funding.  Small scale business find it difficult to obtain fund from established institution like commercial banks and because of the some projects have take off but had to be abandoned half way.  The issue involved is the question of capital adequacy.

When a company is under capitalized it cannot realize its full potentials.  Many small scale enterprise in Nigeria experience this problem.  They cannot expand their scale of production to optimum level.

To ameliorate these problems therefore government should implement the law or policy that made to enhance small scale business (especially that of infact once) such as central bank policy that direct all commercial bank to give out some percentage of loan to small scale business than those of medium and large scale industries/business.


The purpose of this study include:

(a)        To ascertain the present economic state of the lifes of small scale business with the view to identify the major problems that affect the financing of small scale business bearing in mind the adequate financing stands as an energizer to its operations.

(b)        To determine what strategies employed by the surviving and successful ones among them toward alleviating these problems.

(c)         To ascertain the extent to which the financial institution has helped to develop small scale business.

(d)        To provide a useful guide for the prospective entrepreneur who may choose self employment as a career, especially in lines of business.

(e)        It will equally serve as a spring board or progenitor of further researchers in the area of small scale business management. It will lead to more effective business decision making by small scale business operators/ managers.


The area situation would have been the study of all the small scale business in Nigeria but however, this would have posed some threats to the researcher. Among them were the lack of adequate fund to meet the rising cost of research.  Unavailability of sufficient books by Nigerian authors in the area of small business and its problems.  Also the problem associated with the collection of data.

Consequently, the study is specially design to examine the problems of garri processing industry at Abakpa Nike, Enugu towards getting financial assistance from financial houses.


This issue will not be treated in isolation taking into cognizance the level of development in Nigeria.  Based on this, questions were asked by the researcher, which include:

1.     What number of small scale business have benefited      from the commercial house loans and advances.

2.     To what extent does small scale business cope with the inadequacy of funds?

3.     What are the strategies employed by the surviving and the successful ones?

4.     How do small scale business apply for loans from   financial institution?

5.     What are the role of the government and organizations   in finding lasting solution to the problem numerated   above?


The significance of this research is that the result will help identify how business loan are obtained or secured both locally and internationally from financial institutions are being used.  On this note awareness is being created or it will help to create it on how fund or finance could be raised to finance small scale business.


This study is limited specifically to analyze the problems face by small scale business in obtaining finance.  A case study of garri processing industry Abakpa Nike, Enugu and some other selected small scale business in Enugu State.

In consideration of the nature of this work and purpose for which it is intended to achieve as well as the anticipated result, the research methodology as may adopted were those found to be most relevant and appropriate.

Therefore the information to generate or needed will be that relating to the research questions asked.


PRODUCTION:    Any business oriented action which aimed                     at converting input into output of goods or                        services.

INVESTMENT:    The outlay of money for income or profit the sum invested in business or the property purchased.

CAPITAL:           Accumulated wealth especially when used to produce more wealth.

STRATEGY:        This is the firms action plan aimed at achieving its objectives, satisfying the need of the customers and surviving the competition in its environment.

FEASIBILITY STUDY: This is the finding aimed at determining the business profit potential and return on investment.


Nweke U. C. (2002), Research and Project Methodology, Pre-test Material.

Nebeife D. O. (2002), Business Policy and Strategy Management, JTC Publishers, Enugu.

Ani, N. B. (1999), An Overview of Entrepreneurial Development, Enugu, JTC Publishers,


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