Small Scale and Medium Enterprises (SMEs) in Nigeria


SMEs - Startups

It is very necessary to always recall our beginning in the modern SMEs activities and various lessons we have learnt in the course of Nigeria’s development in SMEs so as to chart the way forward. Traditional industries in pre – colonial Nigeria included salt making and metal works. Various centre for salt making could be found around Lake Chad and Awe in present day Nassarawa state in the Northern part of the country and at Nembe and Ishekiri areas in the south. Similarly, domestic iron-ore and Tin production which was carried out in the Jos, Plateau and Mandara Hills ensured a steady supply of ore for metal making all over Nigeria, especially in the North (Giwa, 1991).

Apart from these traditional activities, another outstanding feature of Nigeria economy at the beginning of the century was trading activities with Europeans along the coasts which concentrated on purchasing and exporting various agricultural commodities. These included cocoa, groundnut, palm produce and cotton. The period between 1894 and 1918 as been referred to as “Golden age” for the Nigeria trade in agricultural produce (Patrick, 1984) for a very long time, industrial development remained a dream until after the second world – war when Nigeria began to give serious thought to industrialization (Giwa, 1991).

Historically, Small and Medium scale Enterprises had its origin in Eastern Mediterranean (Baumback, 1992). According to Essien (2001), SMEs all over the world are divergent array of business concern involved in economic activities spanning from micro and rural enterprises to contemporary industrial organization that was sophisticated technologies. Before independence, the business climate was dominated by the multinational companies with vast business experience and strong capital base. Example of such companies includes the Levetis and PZ, who engaged in bringing into the country (Nigeria) finished goods from their parents companies abroad (Onuala, 2001).

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Also before independence, there was no legacy of investment policy on SMEs, by the colonial masters. As a matter of fact, industrial investment was believed to be in exclusive competence multinationals (Bauback, 1983). The post independence Nigeria government adopted the import substitution, large scale industrialization strategy to accelerate the country’s economic progress. The death of the private sector in the economy forced government to assume the role of entrepreneur herself to off – set the colonial neglect of pre – independence (Essien, 2001). The collapse of oil boom in 1980’s exposed the weakness of the government’s industrialization strategy. Industrial output as well as its contribution to GDP also declined. It was then that interest in Small and Medium scale Enterprises (industries) began to emerge and since become the focus of national industrial policy (Onuala, 2001).

In order to encourage the growth of small and medium scale enterprises after independent, successive government in Nigeria over the years had employed both monetary, fiscal and industrial policy measures at the macro level and financing arrangements at the micro levels, to assist the development of SMEs in Nigeria. for example, the banks to allocate a minimum stipulated credit to sectors classified as ‘preferred’ including SMEs whose allocation increased from 10% in 1970 fiscal year to 16% and 20% of total loans from granted to domestic borrowers in 1980 and 1990, respectively (Nnanna, 2001).

Also, generous tax incentives were offered to investors in industries in the fiscal policy measures of the federal government announced with the federal government annual budgets. The Nigeria export promotion council was also established by the federal government to assist investors in the export sector. Recently President Jonathan created new ministry called ministry of trade and investment headed by renowned economist Olusegun Aganga. Most beneficiaries of the policies were SMEs (Onuala, 2001).

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Despite Nigeria’s political independence in 1960, there was no significant or appreciable economic self reliance. Oil boom which was meant to have supported large scale business instead generated a corresponding decline in nonsolid sector of the economy. However, remarkable phenomenon in small-scale enterprises emerged towards the end of the last decades of the 20th century. The break through entrepreneurship and small business development came about through the indigenization decree and later the Nigeria enterprises promotion decree. Federal government of Nigeria in its 1970 – 74 national development plan gave priority attention to the development of small and medium industries as the foundation and training grounds for the growth and business development of these enterprises (Udo, 1991).

Bello (1995), observed that there is the tendency for Nigeria small entrepreneurs to continue crying for government assistance instead of finding ways and means of helping themselves. This could be done through efficient and effective management practices and strategies. According to collier, (1998), there are certain policies that are peculiar to Nigeria’s economy for its growth and development. These policies includes good governance, export oriented manufacturing among others. Actually, the history of Small and Medium scale Enterprises date back to the period of our fore fathers that were engaged in crude farming. Strengthen the international competitiveness of manufactured goods and finally specialized items in small – scale quantity to meet and diverse demands. On this basis, it has been acknowledged that technological and organizational revolution now underway in the global economy is not driven by large capital intensive in nature and with quick start up, time and agile response to rapidly shifting markets of technologies (World Bank, 1995).

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