EFFECT OF SMALL SCALE BUSINESS ON

ECONOMY GROWTH OF NIGERIA

By

JIMOH IDAYAT
TOLULOPE
2017231010114

BEING A PROJECT SUBMITTED TO THE DEPARTMENT OF

BUSINESS ADMINISTRATION, FACULTY OF BUSINESS AND
COMMUNICATION STIDIES, THE POLYTECHNIC, IBADAN

IN PARTIAL FULFILLMENT TO THE REQUIREMENT FOR

THE AWARD OF NATIONAL DIPLOMA (ND) IN BUSINESS
ADMINISTRATION THE POLYTECHNIC, IBADAN.

OCTOBER 2019

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 CERTIFICATION

This is to certify that this project work EFFECT OF SMALL SCALE BUSINESS ON

ECONOMY GROWTH OF NIGERIA was carried out by Jimoh Idayat Tolulope with

matriculation number 2017231010114 respectively under the supervision of Mrs. Aremu

to meeting part of the requirement for award National Diploma (ND) in Business

Administration, The Polytechnic, Ibadan, Nigeria.

MRS. AREMU A.B. Date

Project Supervisor

MRS. ABODUNDE S.M. Date

(HOD)

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 DEDICATION

I dedicate this work to Almighty God the creator of heaven and earth for his protection,

blessing and his mercy upon my life and also His support toward my national diploma

program (ND) right from the admission process to the end of the program.

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 ACKNOWLEDGEMENT

I am particularly grateful to Almighty God for his protection, mercy, joy and

blessing upon my life.

My gregarious acknowledgement goes to my dearly parent Mr and Mrs Jimoh, for

their love, financial support and also for their parental cares whist i acknowledge my

entire family members for their corporation and also their support towards my program.

My sincere gratitude goes to my supervisor in person of Mrs. Aremu, for her

support, understanding and advice in the course of this study.

My gratitude goes to my dynamic head of department in the person of MRS

ABODUNDE. For her support, understanding and also his contribution to my lives

through his fatherly and moral advice to my educational carrier, may the almighty God

spare his life for good on earth amen.

My gratitude also goes to my lecturers and friends.

I love you all.

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 ABSTRACT

This research work was designed to determine the effect of small scale business on
economy growth of Nigeria. A selected enterprises were used as a case study and
questionnaires were administered in order to extract information on this project. The
objectives of the study includes to assess the roles of small scale business in the
development of Nigerian economy, examine the effect of small scale business growth
rate on economic growth in Nigeria, what extent has small scale business lead to
employment generation in Nigeria. Some literatures were reviewed in relation to the
topic with the themes and sub themes of the study. However, in research methodology,
the researcher used some instruments for data collection. These instruments emanated
from both the primary and secondary source of data. The data collected were analyzed,
grouped into frequency, computed and arranged in tables for easy references. The
statistics tools for analysis are the simple percentage and chi-square technique. These
techniques were appropriately applied at 5% level of significance. The result of the study
shows that small scale businesses play a vital role in the development of Nigerian
economy despite the various problems the encounter in the establishment of small
businesses. Some recommendations were also made based on the results of the findings.

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 TABLE OF CONTENT
Title Page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
Table of Content vi

CHAPTER TWO
INTRODUCTION
1.1 Background of Study
1
1.2 Statement of Problem
2
1.3 Objective of Study 3
1.4 Research Questions 3
1.5 Research Hypothesis 3
1.6 Significance of Study 4
1.7 Scope of Study 4
1.8 Definition of Terms 4

CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction 6

2.1 The Concept of Small Scale Business 6

2.2 Contributions of small scale business enterprises to economic

development in Nigeria 8

2.3 Problems Impeding the Development of SMEs in Nigeria 11

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2.4 SMEs and Economic Growth and Development in Nigeria 13
2.5 Economic Role of Small Scale Enterprises in Nigeria 14

CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction 16
3.1 area of Study 16
3.2 Population of the Study 16
3.3 Sample size and Sampling Techniques 16
3.4 Research Instrumentation 17
3.5 Method of Data Collection 17
3.6 Method of Data Analysis 17
3.7 Validity of the Instrument 18
3.8 Method of Administration of the Research Instrument 18

CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Data Presentation 19
4.2 Analysis of Questions and Interpretation 19
4.3 Test of Hypothesis 27

CHAPTER FIVE
SUMMARY, RECOMMENTATION AND CONCLUSIONS
5.1 Summary of Finding 34
5.2 Conclusion 34
5.3 Recommendation 35
5.4 Limitation for further study 36
References

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 CHAPTER ONE
INTRODUCTION

1.1 BACKGROUND OF THE STUDY

For the past decades, small scale business in Nigeria were characterized as
essentially backward and cog in the wheel of the overall development of the Nigeria
economy. The latent contributions which small business make are now attracting
recognition. This awareness is manifest in the ever increasing number of Nigerians who
daily strive to put up their personal ideas and abilities to effective use by starting small
business ventures. Evidence around the world indicate that small scale business provide
an effective means of stimulating indigenous entrepreneurship, enhancing greater
employment opportunities per unit of capital invested and aiding the development of
technology. Through their wide dispersal, they provide an effective means of mitigating
rural-urban migration and resource utilization. Furthermore, by producing intermediate
products for use in large scale enterprises, small businesses contribute to the
strengthening of industrial linkages. Yusuf (2015)

Accordingly, due to the recognition of the roles of small business, the Nigerian
government has since 1970 initiated programmes for the assistance of small businesses,
especially, in the areas of finance, extension and advisory services including, training and
provision of infrastructures. All these are designed to enhance the development of small
businesses. Successive governments in Nigeria have for the past three decades shown
great interest in the financing of small businesses by establishing specialized banks and
other credit agencies/schemes to provide customized funding. Yusuf (2015)

The contribution of small scale business to the growth and development of an

economy has been the focus of general interest and research, especially in developing
countries due to the importance of small scale business industry to the global economy.
Small and Medium Scale Enterprise (SME) has proved to be a major tool adopted by the
developed nations to attain socio- economic development. They further stated in recent

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time, small scale industrial sector is considered to be the backbone of modern day
economy. Historical facts show that prior to the late 19th century, cottage industries,
mostly small and medium scale businesses controlled the economy of Europe Opafunso
and Adepoju (2016).

In the developing nations like Nigeria, the impact of small scale business on the
growth and development can be felt in so many ways. Greater utilisation of local raw
materials, employment generation, encouragement of rural development, development of
entrepreneurship, mobilisation of local savings, linkages with bigger industries, provision
of regional balance by spreading investments more evenly, provision of avenue for self-
employment and provision of opportunity for training managers and semi-skilled
workers. Consequently, small scale business industry has been regarded as engine of
growth (Ezeh and Okpala, 2015)

As cited by Eze and Okpala (2015), extant literature revealed that the
development of small and medium enterprises (SME’s) should be seen as attempts
towards the achievement of a wider economic and socio-economic objective, including
poverty alleviation. Small and medium Enterprise drives their country’s development as
they create employment and contribute to the gross domestic product (GDP).

1.2. STATEMENT OF PROBLEM

Nigeria is currently witnessing an alarming rate of unemployment rate is growing

in geometric progression. The economy is also increasingly finding it difficult to cope as
Nigerian economy is waning. A lot of experts have called for the creation of an enabling
environment for small scale enterprise to thrive. In spite of all the contributions and the
attention given to small scale industry by the government, the small business enterprise is
still confronted with some problems such as lack of funds, poor infrastructure, lack of
technology among the rest thereby retard the impact of contribution of small scale
business industry to the economy of Nigeria. This study is to investigate the effect of
small business on economy growth of Nigeria.

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 1.3. OBJECTIVES OF STUDY

This study seeks to identify the effect of the small scale business on economy
growth of Nigeria. The specific objective is to:

i. Assess the roles of small scale business in the development of Nigerian economy.
ii. Examine the effect of small scale business growth rate on economic growth in
Nigeria
iii. What extent has small scale business lead to employment generation in Nigeria
1.4. RESEARCH QUESTIONS

In an attempt to achieve the objectives states above, the following questions were
formulated.

i. What are the roles of small scale business in the development of Nigerian
economy?
ii. What are the effects of small scale business growth rate on economic growth in
Nigeria?
iii. To what extent has the small scale business solve the problem of unemployment in
Nigeria?
1.5. RESEARCH HYPOTHESES

The following hypotheses have been formulated to test the research questions.

Ho: There is no significant relationship between small scale business and economy
development growth of Nigeria.

Hi: There is a significant relationship between small scale business and economy
development growth of Nigeria.

Ho: Small scale business does not play a significant role solving the problem of
unemployment in Nigeria.

Hi: Small scale business does play a significant role solving the problem of
unemployment in Nigeria.

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1.6. SIGNIFICANCE OF TH STUDY

This research will be beneficial to the government, small and medium scale
enterprises, management practitioners and academia.

This study will immensely assist the government to plan and develop the sectors
of an economy through empowerment and regulatory controls given to the small and
medium scale enterprises.

This research will be a benefit and empowered the industry to learn new
skill/capabilities by adjusting to the trends towards the development and growth of their
businesses and the economy by develop and grow in marketing, production of goods and
services, agriculture, science and technology, finance and information.

To the academics, this study will form basis for further studies and sustains an
existing knowledge on the subject matter.

1.7. SCOPE OF THE STUDY

This study focuses on the effect of small scale business on economy growth of
Nigeria, using Blessed pure water Bodija Ibadan as a case study and ABC enterprises.

1.8. DEFINITION OF TERMS

Small Scale Enterprise: A small scale enterprise is a small business marked by a limited
number of employees and a limited flow of finances and materials.

Business: A business is an organization where people work together to make and sell
products or services. A business can earn a profit for the products and services it offers.

Economy: The system of how money is made and used within a particular country or
region. A region's economy is connected with things like how many goods and services
are produced and how much money people can spend on these things

Economy growth: Economic growth is an increase in the production of economic goods

and services, compared from one period of time to another. It can be measured in
nominal or real (adjusted for inflation) terms
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Management: Management is the process of combing and utilizing an organization input
[men, materials and money] by planning, organizing, directing and controlling for the
purpose of producing output [goods and services].

Entrepreneur: Entrepreneur is an individual who conceives the idea of business, design

the organization of the firm, accumulates capital, recruits labour, establishes relations
with supplies, customers and the government and converts the conception into a
functioning organization business.

Opportunity: An opportunity is a potential gainful situation that must be recognized and

exploited an opportunity has the qualities of being attractive, durable and timely. It is
anchored in product or services which creates or adds value for its buyers or end users.

Development: This entails growth of the business, increases in goods and services and
the improvement of lives of the citizen.

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 CHAPTER TWO

LITERATURE REVIEW

2.0 INTRODUCTION

Small and medium enterprises (SMEs) are considered the backbone of economic
growth in all countries. They play an important role in Nigerian’s economic growth, as
they constitute larger percent of the companies in Nigeria. They also contribute to
national development by positively influencing the distribution of income in both
functional and nominal terms. In emphasizing the importance of small business, they
enhance capacity building as they serve as entrepreneurial training avenues; they create
more employment opportunities per unit of investment because of their labour intensive
operations; they achieve a much more relative high value added operations because they
are propelled by basic economic activities that depend mostly on locally sourced raw
materials; they provide feeder industry services as they serve as major suppliers of
intermediate goods and components to large-scale industries as well as major agents for
the distribution of final products of such industries; they provide opportunities for the
development of local skills and technology acquisition through adaptation. Rogers (2015)

2.1 THE CONCEPT OF SMALL SCALE BUSINESS

Small and medium scale enterprises (SMES) have been generally acknowledged
as the bedrock of the industrial development of any country. Apart from the numerous
goods and services produced by small scale business, they provide a veritable means of
large scale employment, as they are usually labour intensive. They also provide training
grounds, for entrepreneurs even as they generally rely on the use of local raw materials.
If well managed, small scale business can gradually transform into the giant corporations
of tomorrow. These contributions thus explain why government and international
agencies mobilize efforts towards the realization of sustainable industrial growth and the
creation of mass employment through the rapid growth and development of the small and
medium enterprises (Nnanna, 2015).

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 Given the significance of SMEs in economic growth and development, numerous
studies have assessed the role of SMEs sector in light of various activities stimulating
growth and development. For instance, Nagaya (2017) examines the impact of SMEs on
economic growth found out that SMEs activities are growth enhancing through various
channels like employment and poverty reduction. Correspondingly

This fact underscores the essence, importance and relevance of the small scale
business in the development of any given economy. The experiences of developed
economies in relation to the roles played by small scale business buttresses the fact that
the relevance of small scale business cannot be overemphasized especially among the
Less Developed Countries (LDCs) or rather Developing Countries. In order to highlight
the significance of SMEs in relation to the growth and development of a given economy,
SMEs have been variously referred to as the “engine of growth”. Almost all countries
that have focused on the small scale business sector and ensures its vibrancy have ended
up succeeding in the significant reduction and its attendant enhancement in the quality
and standard of living, reduction in crime rate, increase in per capita income as well as
rapid growth in gross domestic product (GDP) among other salutary effects. (Ogujuiba,
2015)

There is a consensus that if all stakeholders are to show serious commitment to

the development of the small scale business sub-sector, it follows that the economy must
necessarily witness meaningful transformation and prosperity. A dynamic small scale
business sub-sector is vital and imperative for the overall economic development of the
country. Aside from providing opportunities for employment generation, small scale
business help to provide effective means of curtailing rural-urban migration and resource
utilization. By largely producing intermediate products for use in large–scale companies,
small scale business contributes to the strengthening of industrial inter-linkages and
integration. A vibrant, efficient and effective small scale business generates many
resultant benefits for stakeholders, employees, customers, employers as well as the entire
economy.

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 Small scale business have no doubt been indeed recognized as the main engine of
economic growth and development, a major variable for promoting private sector,
development and partnership. Various governments, development agencies and experts
as well as multilateral institutions do appreciate this fact such that they positively respond
to any occasion and situations, which could permit their contributing to or creating
opportunities for promoting the lot of small scale business.

The key roles of SMEs include mobilization of domestic savings for investment,
significant contribution to Gross Domestic Product (GDP) and Gross National Income
(GNI), harnessing of local raw materials, employment creation, poverty reduction and
alleviation, enhancement in standard of living, increase in per capita income, skills
acquisition, advancement in technology and expert growth and diversification

This can however only be realized with the existence of a responsive and vibrant
industrial policy and involving governments overall economic development strategies
which will involve all stakeholders and ensure the effective and efficient harnessing,
coordination and utilization of economic resources. (Omotola, 2015)

2.2 CONTRIBUTIONS OF SMALL SCALE BUSINESS ENTERPRISES TO

ECONOMIC DEVELOPMENT IN NIGERIA

The contribution of small scale business enterprises to the economy cannot be

overstated. Besides contributing significantly to reducing unemployment, it forms a core
of the economy generating significant percentage of domestic taxes and producing goods
and services using large numbers of labor from the low to middle income categories of
people; and supplying the goods and services to the general population. In a nutshell,
small scale business enterprises represent the largest proportion of the productive
population and by extension provide the fuel that keeps the economy running towards
technological, economic, political and social development (Aremu, 2015).

i. Employment generation: Before independence government establishment were

the major employment of labour but these days with many private enterprises set

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 up by entrepreneurs many people have gained employment with these enterprises
and this has reduced the dependence on government establishment and large firms
for employment. Small businesses employ a greater percentage of the working
population in any country. These people employed receive their salaries and
wages from these small organizations.
ii. Technological innovation: Small scale business enterprise brings about
technological innovation in Nigeria. In most cases small scale business brings
about the emergence of new things in our environment. Most of the managers of
small scale business are highly intellectual and with the rate of advancement in
technology the managers do not relent instead they carry on continuous research
on how to improve on existing technologies. Small scale businesses in Nigeria
acquires or improve domestic technology in the production of several goods such
as bakery products, soft drinks, textiles, foot wears and soap production etc. and
what seems to have been acquired was just further improvement in the technology
of production so as to improve the quality of these goods. This suggests that one
of the main contributions of small scale business enterprise to the economy is
truly improving indigenous technology.
iii. Improved standard of living: Standard of living is the level of quality people in
a particular society or country enjoying their living, which is not only affected by
their level of income but the quality and quantity of goods and services made
available to them. Small scale businesses, whether in manufacturing industry or
services industry such as retailing, entertainment etc. contribute a great deal to the
uplift in the standard of living of the people residing in the society where they are
found.

Contributions of small scale business enterprise: The contributions of small scale

business enterprises to an economy especially developing ones include: Greater
utilization of raw materials, employment generation, encourage of rural development,
development of entrepreneurship, mobilization of local savings, linkages with bigger

16
industries, provision of regional balance by spreading investments more evenly,
provision of avenue for self-employment and provision of opportunity for training
managers and semi-skilled workers Oluba, (2017).
Small scale business enterprises contribute to economic development through the
following: The provision of employment, innovation and areas marketing for goods and
services which are offered for sales. A lot of youths, retired workers and out of school
graduates are now gainfully employed, thereby reducing the unemployment rate and its
attendant’s social complication about new goods and services and supply the needs of
large industries, which have to rely on the small scale operators for business success.
Small scale business in Nigeria constitute over 80 percent of all registered
companies, occupying positions in agro based and allied industries, rubber based, leather
shoes industries, chemical, electronics, general merchandising, restaurants, dress making,
hair dress making, cane-chairs, leather products, pomade and toiletries, animal feeds and
husbandry, printing, etc. They have accounted for a large percentage of all businesses and
a favorable percentage of the nation’s gross national product. Small scale business
enterprises have been the means through accelerated economic growth and rapid
industrialization have been achieved. Harris (2016).
The small scale business mobilizes funds, which would otherwise had been lying
idle or wastefully spent and direct such to productive use. It shows superiority in the use
of local raw materials when compared with modern manufacturing establishment. Small
scale businesses also facilitate conservation of foreign exchange and the development of
scarce recourses in both developed and developing economy. They create more
employment opportunity at a relative low capital cost; for instances. Small scale business
enterprises efficiently make use of local raw materials and technology thereby helping in
the realization of the goal of self-reliance. Akinseye, (2015)
Moreover, governments at various levels (local, state and federal levels) have in
one way or the other focused on the performance of small scale business enterprise for
economic gains. While some governments have brought up policies aimed at facilitating
and empowering the growth, development and performance of small scale business

17
enterprise, others are focusing on assisting small scale businesses enterprise to grow
through soft loans and other fiscal incentives in order to enhance the socio-economic
development of the economy like alleviating poverty, employment generation, enhance
human development, and improve social welfare of the people.
2.3 PROBLEMS IMPEDING THE DEVELOPMENT OF SMES IN NIGERIA
SMEs are known worldwide to encounter some structural difficulties, problems or
limitations, which if confronted can drive them to promote economic growth and
development. Some of the principal problems SMEs face in Nigeria include the
following:

i. Inadequate Funding: It is a known fact internationally that SMEs are funded by

their owners’ personal or family savings. Nonetheless, the high level of poverty and
consequently low level of savings in Nigeria and other Less Developed Countries
have made this source of funding for the establishment, growth and development of
new and existing SMEs inactively low. This perhaps explains why most SMEs in
Nigeria more often than not start off with inadequate funding and afterward start
warming up for shut down if external funds from either the government or financial
institution do not come. According to Ezeh, ‘the unpreparedness of small business
owners in terms of capital prior to going into business is said to be accountable for
their untimely failure’ (Ezeh, 2015).
ii. Inadequate Infrastructural Facilities: The problem of unstable and unreliable
supply of electricity, dilapidated roads, inadequate supply of water for both home and
industrial use, inefficient and costly communication system, among others, have for
long hindered the growth and development of SMEs in Nigeria. Nearly all SME
operating in Nigeria have one or more power generating plants as an alternative
source of power supply. The cost of obtaining, maintaining, sustaining and managing
such generating plants are more often than not very expensive and this has made cost
of production as well as prices of product very expensive, with the latter turning out
to be more and more uncompetitive in comparison with the imported equivalent. It is

18
 estimated the cost of providing basic infrastructural amenities at 5% to 20% of the
total cost of setting up a manufacturing and processing industry in Nigeria (Osoba,
2016).
iii. Low Capacity Utilization: This is perpetually gotten from the low demand for SMEs
products owing to their poor quality as well as exorbitant prices. Therefore, sales as
well as profits have remained relatively low leading to poor returns on investment.
Majority of small scale business operate at between 30%-35% of their established
capacity between with sales and profit volume showing little increase. (Osoba, 2016).
iv. Poor Planning and Management: Management involves planning, coordination,
organization and control of both human and natural resources in an organization to
attain its set aims and objectives. Therefore, it involves getting things done
appropriately and efficiently through people. Nonetheless, a survey of SMEs
operating showed that owners practically get everything done by themselves without
seeking consultation from professionals or experts. This has resulted to
incompetence, inefficiency, wastage and under-utilization of resources available to
the organization. In actual fact, planning is the essential function of management.
Most SME operators venture into business on impulse without adequate feasibility
study on the project or business. The problem of poor planning and management in
Nigeria’s real sector has been traced to inadequate relevant and appropriate
information or data relating to the proposed business ventures.
v. Poor Education and Experience: Closely associated to the problem of planning and
management is the low level of education the fundamental basis for the wealth of a
nation”. Capital and natural resources are inert factors of production, human beings
are the active agents who accrue and amass capital, exploit natural and material
resources, put up social, economic and political organization and carry forward
national development. Without a doubt, a country which is incapable to build and
develop the skills and knowledge of its citizens and utilizes them effectively in the
economy will not be able to develop anything else. In the view of Essien (2016),
effective and successful formal education is the only way to build as well as develop

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 the human skills, expertise and competence required for the growth and development
of SMEs in Nigeria.
vi. Raw Material Management and Choice of Appropriate Technology: These are
fundamental for growing and developing any business, be it large or small. The
difficulty relating to and inadequate business experience among SME operators in
Nigeria. These have given an explanation for the lack of pioneering, inventive,
innovative, dynamic, vibrant and entrepreneurial skills and abilities necessary to
effectively confront and tackle issues as they emerge. Human resources therefore,
constitute the foundation for wealth of nations. (Yakubu, 2016).

2.4 SMEs AND ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIA

SMEs activities received closer attention from the Nigeria government with an
effort to diversify the economy. The over-dependent of government on the oil necessitate
Nigeria government at the mid-1980s to mandate the banks to set up branches in the rural
areas of the country to allow the dwellers to have access to financial services. This bold
policy of Nigeria government provides opportunity for much people especially
entrepreneurs in the rural areas to have access to the money in banks as loan. Researches
have shown that SMEs is the largest business sector in the world economy. SMEs
encourages high growth rate of employment than the larger firms. In lieu of that, Nigeria
has attracted much growth and development potential more especially in Agricultural
sector were small-scale self-employed people partake in agro-allied processing activities,
that the country is agriculturally inclined. Eniola (2016).

SMEs account for more than 90% of all firms outside the agricultural sector, a
significant level of employment and generate major domestic and export earnings. This
therefore constitutes a major key instrument in poverty reduction and alleviation in both
developed and developing economies like Nigeria. Furthermore, SMEs assist in fostering
rural infrastructure development, improvement of living standard of the rural dwellers,
utilization of local resources, output expansion, and transformation of indigenous

20
technology, production of intermediary goods, and increase in revenue generation to
government. Odubanjo (2015).

The petroleum oil is considered to contribute high to status of Nigeria but SMEs
provides gainful employment for about 70% of Nigerian population. Available report
suggests that agricultural sector accounts for close to 35% to 40% of the nation’s GDP.
Most actors in the Agricultural sector are small-scale self-employed individuals engage
in activities ranging from farming, handcraft, fishing, agro forestry and livestock rearing.
These SMEs activities rescue government in areas of economic diversification. SMEs
contribute substantially in encouraging job creation invention and innovation in
technology, development of entrepreneurial skills, equal distribution of income and
resources, emergence of more competitive industries and general improvement in the
living standard of the people within an economic region. Osalor (2015).

2.5 ECONOMIC ROLE OF SMALL SCALE ENTERPRISES IN NIGERIA

Several economic development advocates have come to realize the significant role of
small scale enterprises. They are viewed to be characterized by dynamism, witty
innovations, effectiveness and the relative small size allows for faster decision making
process in conducting business activities. Governments globally have realized the
significance of this category of enterprises and have initiated cumulative public policies
to encourage and fund the establishment of small scale enterprises. More so, Basil (2015)
argued that small business enterprises are becoming increasingly evident through a robust
economy and the mobilization of local resource revolution, reduction in rural-urban
migration, uses of industries disposal and creation of employment opportunities which
can be achieved by a conscious and systematic policy of development of small and
medium enterprises.
Small scale businesses are initially formed in traditional settings such as haircut, weaving
etc. This also helps in maintaining craft man ship as well as helping in generating
employment, maximize waste by using scrap materials from large firms hence, enhances
economic sub - contracting.

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 i. Small scale industries create employment opportunities for a lot of citizens.
Through SMEs lot of unemployed citizens and graduates have found employment
in small scale enterprises. A lot of small retail shops, cottage industries,
restaurants, poultry farms, and telecommunication/ telephone shops have been
initiated and managed profitably by people who would have been unemployed till
date. The entrepreneurs have in turn create jobs for other citizens, who serve as
support, technical and administrative staff for them (Ayozie, 2015).
ii. It has also encouraged self-employment for many graduates both in the rural and
urban centres. The spirit of successful entrepreneurship has taken over the drive
and doggedness of Nigerians who believe in themselves and in the goal of self-
employment, instead of relying on paid employment. For example, in the
telephone retail and rental jobs, a lot of graduates and unemployed Nigerians have
remained self -employed. Their businesses have expanded to the level of
employing some other unemployed citizens.
Through the initiation of manpower development support schemes, and their involvement
in the training and retraining of entrepreneurs, small scale enterprises have provided a
pool of potential entrepreneurs and business people who are well equipped to start and
successfully manage industries (Ayozie 2015).

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 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 INTRODUCTION

Methodology is a set of rules and procedures upon which research is based and
against which claims for knowledge and assumptions are evaluated for decision making.
It can also be said to be the specification for collecting and analysing the data necessary
to help solve the problem at hand.

3.1 AREA OF STUDY

The area of study includes the staffs of Blessed pure water Bodija Ibadan Oyo
state and ABC enterprises. The study will however concentrate on the effect of small
scale business on economy growth of Nigeria. The study choose Blessed pure water and
ABC enterprises as a case study because they both are seen as successful small scale
business by the researcher to have contributed to economy growth in their business
industry

3.2 POPULATION OF THE STUDY

The Population of any study is a census of all items or subjects that posses the
characteristics or that has knowledge of the phenomenon being studied and the
population for this work includes all thirty staffs of Blessed pure water, Bodija Ibadan
and twenty staffs of ABC enterprise Ibadan.

3.3 SAMPLE SIZE AND SAMPLING TECHNIQUES

Sample size will be choose from the total population of 50 staffs of both small
businesses using a sampling techniques of Taro formula

Sample size is determined by:

n= N

1 = Ne²

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n = sample size

N = estimated population

e = level of significant 0.05 or 5%

n= 50

1 + 50 (0.05) ²

= 50

1 + 50 (0.0025) = 44.44

n = 44

44 will represent the sample size

3.4 RESEARCH INSTRUMENTATION

In this study, the researcher will use questionnaire for the collection of data for
the study. The questionnaire will specifically design to accomplish the objectives of this
study. The instrument will be run on a four scale option: Agree, Strongly agree, Disagree,
Strongly disagree. The questionnaire will also support with interview by the researcher.

3.5 METHOD OF DATA COLLECTION

The researcher will use primary and secondary method of data collection to obtain
required data for this study. The primary data will be obtain through the use of
questionnaire and personal interview while the secondary data will be obtain from past
literatures via books, journals and internet.

3.6 METHOD OF DATA ANALYSIS

Collected data will be analyse using chi-square formula

The formula for chi-square (x2) distributions is

X² = (fo - fe) ²

fe

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 where,

x2 = Calculated Chi-square value

Oi = Observed

ei = Expected Frequency

3.7 VALIDITY OF THE TEST

This study will be review by the researcher supervisor, correction(s) will be made
where lapses occurred and necessary data will be added in places where they will be
needed hence the validity of the test, and the data from the primary sources are reliable.

3.8 METHOD OF ADMINISTRATION OF THE RESEARCH INSTRUMENT

The research instrument (questionnaire) constructed by the researcher to collect

relevant primary data needed for research analysis will be distributed to respondent of the
case study of the study after which the instruments are retrieved analysis will take place
base on the opinion and response of the respondent. Chi square formula will be used to
analyse the questionnaire.

25
 CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS INTERPRETATION

4.1 DATA PRESENTATION

This chapter deals with the presentation, analysis and interpretation of the
problem under investigation.

The data analysis has been broken into sections as shown in the questionnaire
would be used to test the hypothesis stated in chapter one by using Chi-square statistic
method.

A total number of forty four (44) questionnaires was distributed and retrieved.
Table of computed result are presented for specific finding followed by specific
interpretation.

4.2 ANALYSIS OF QUESTIONS AND INTERPRETATION

SECTION A

Question 1: Your Sex?

Table 1: Analysis of respondents by sex

Sex No of respondent Percentage

Male 30 68

Female 14 32

Total 44 100

Comment: The result obtained from the respondents as shown in the table 1 indicates that
30 of them were male and 14 were female given 68 percent and 32 percent respectively,
which indicates that male respondents are more than female respondent.

26
Question 2: Marital Status?

Table 2: Analysis of respondents by marital status

Status No of respondent Percentage

Married 25 57

Single 19 43

Total 44 100

Comment: The result obtained from the respondents as shown in the table 2 indicates that
25 of them were married and 19 were singles given 57 percent and 43 percent
respectively, which indicates that male respondents are more than female respondent.

Question 3: Age group

Table 3: Analysis of respondents by Age group

Age No of respondents Percentage

21 – 30 22 50

31 – 40 15 34

41 above 7 16

Total 44 100

Comment: Table 3 reveals the age groups of the respondents, 50 percent of the
respondents are between 21-30 years, while 34 percent are between 31-40 years and 16
percent are between 41 years above, which is an indication that respondents are more of
31 years to 40 years.

27
Question 4: Academic qualification

Table 4: Analysis of respondents by Academic qualification

Academic No of respondents Percentage

Hnd/b.sc 30 68

Msc 12 27

Phd 2 5

Total 44 100

Comment: Table 4 reveals the academic qualification of the respondents 68 percent of

the respondents are HND/B.Sc, holders, while 27 percent are holders of second degree
and 5 percent are PhD holder.

Question 5: Work Experience

Table 5: Analysis of respondents by Work Experience

Work experience No of respondent Percentage

0–5 14 32

6 – 10 20 45

10 and above 10 23

Total 44 100

Comment: Table 3 reveals that 14 of 44 respondents has 0-5 years’ work experience
while 20 and 10 has worked between 6 – 10 years and 10 years above which gives the
percentage of 32%, 45% and 23% respectively.

28
SECTION B

Question 6: Do you think small scale business contribute to the development of Nigeria
economy?

Option No of respondent Percentage

Agree 10 23

Strongly agree 34 77

Disagree -

Strongly disagree -

Total 44 100

From the above table, the number of respondents that agreed were 10 (23%) and 34
respondents strongly agreed with 77% that small scale business contribute to the
development of Nigeria economy.

Question 7: Do you think small scale business contribute to employment generation in

Nigeria economy?

Option No of respondent Percentage

Agree 40 91

Strongly Agree 4 9

Disagree - -

Strongly Disagree - -

TOTAL 44 100

29
From the above table, the numbers of respondents that agree were 40 while 4 strongly
agree that small scale business contribute to employment generation in Nigeria economy
giving 90% and 10% respectively.

Question 8: Do you think small scale business generate more employment to Nigeria
economy more than other sectors?

Option No of respondent Percentage

Agree 29 66

Strongly Agree 9 20

Disagree 6 14

Strongly Disagree - -

TOTAL 44 100

From the above table, the numbers of respondents that agree were 29 while 9 strongly
agree and 6 disagree giving 66%, 20% and 14% respectively. This indicate that small
scale business generate more employment to Nigeria economy more than other sectors.

Question 9: Do you think there is relationship between small scale business and
economy development growth of Nigeria?

Option No of respondent Percentage

Agree 40 91

Strongly Agree 4 9

Disagree - -

Strongly Disagree - -

30
 TOTAL 44 100

From the above table, the numbers of respondents that agree were 40 while 4 strongly
agree that there is relationship between small scale business and economy development
growth of Nigeria giving 90% and 10% respectively.

Question 10: Do you think small scale business is the solution to the problem of
unemployment in Nigeria?

Table 10:

Option No of respondent Percentage

Agree 30 68

Strongly Agree 12 27

Disagree 2 5

Strongly Disagree - -

TOTAL 44 100

From the above table, the numbers of respondents 30 agree, 12 strongly agree and 2
disagree which is 68%, 27% and 5% respectively of the total respondents, therefore it is
clear that small scale business is the solution to the problem of unemployment in Nigeria.

Question 11: Do you agree that small scale business is the backbone of every economy
in the world?

31
 Option No of respondent Percentage

Agree 30 68

Strongly Agree 12 27

Disagree 2 5

Strongly Disagree - -

TOTAL 44 100

From the above table, the numbers of respondents 30 agree, 12 strongly agree and 2
disagree which is 68%, 27% and 5% respectively of the total respondents, therefore it is
clear that small scale business is the backbone of every economy in the world.

Question 12: Do you think small scale enterprises improve standard of living of
Nigerians?

Option No of respondent Percentage

Agree 20 45

Strongly Agree 22 50

Disagree 2 5

Strongly Disagree - -

TOTAL 44 100

From the above table, the numbers of respondents 20 agree, 22 strongly agree and 2
disagree which is 45%, 50% and 5% respectively of the total respondents, therefore it is
clear that small scale enterprises improve standard of living of Nigerians.

32
Question 13: Do you agree that inadequate funding is a major challenge of small scale
business in Nigeria?

Table 13:

Option No of respondent Percentage

Agree 10 23

Strongly Agree 10 23

Disagree 9 20

Strongly Disagree 15 34

TOTAL 44 100

From the above table, the numbers of respondents 10 agree, 10 strongly agree, 9 disagree
and 2 strongly disagree which is 23%, 23%, 20% and 34% respectively of the total
respondents, therefore it is clear that inadequate funding is not a major challenge of small
scale business in Nigeria.

Question 14: Do you think lack of technological knowhow is a challenge to small scale
business Nigeria?

Table 14

Option No of respondent Percentage

33
 Agree 15 34

Strongly Agree 9 20

Disagree 10 10

Strongly Disagree 10 10

TOTAL 44 100

From the above table, the numbers of respondents 15 agree, 9 strongly agree, 10 disagree
and 10 strongly disagree which is 34%, 20%, 10% and 10% respectively of the total
respondents, therefore it is clear that lack of technological knowhow is a challenge to
small scale business Nigeria.

4.3 TEST OF HYPOTHESIS

To draw a generalized and valid conclusion on the study, chi-square x2 was used
in testing the hypothesis. Hence the hypothesis was tested using the chi- Square x2
formula.

X² = (fo - fe) ² or (o - E) ²

fe E

Where:fo = Observed frequency

fe = Expected frequency

Question 9: Do you think there is relationship between small scale business and
economy development growth of Nigeria?

Table 15: HYPOTHESIS 1

Alternative Response Frequency Percentage

Agree 40 91

34
 Strongly Agree 4 9

Disagree - -

Strongly Disagree - -

Total 44 100

The researcher carried out the computation using the sight steps of chi-square X².

Ho: There is no significant relationship between small scale business and economy
development growth of Nigeria.

Hi: There is a significant relationship between small scale business and economy
development growth of Nigeria.

The testing statistic, which is

X² = (fo - fe) ²
fe
Where: fo = Observed frequency

fe = Expected frequency

The level of significance mostly used in 5% i.e. 5% = 0.05

The degree of freedom is given as df = (k – 1)

Where: k = Total no of row = 4

(4 – 1)

df = 3

The tabulated value of significance 0.05 at 3 df = 7.815 using chi–square table.

Computation of the test statistics, using the table response on whether there is any
relationship between small scale business and economy development growth of Nigeria.

Expected frequency = Efe

35
 n

Where: e = Expected frequency

Σfo = Observed frequency

n = Total no of row = 4

e = 44

44

4 e = 11

Alternative Response Observed Frequency Expected Frequency

Agree 40 11

Strongly Agree 4 11

Disagree - -

Strongly Disagree - -

Total 44

To calculate what is observed we use:

X² = (fo - fe) ² or (o - E) ²
fe E

(40-11) ² (4-11) ² (0-11) ² (0-11) ²

+ + +
11 11 11 11

(29) ² (-7) ² (-11) ² (-11) ²

+ + +

36
 11 11 11 11
= 76.4 + 4.4 + 11 + 11

= 102.8 Calculated value X²

X²ₐ calculated Chi-square = 103

X²ₑ Tabulated Chi-square = 7.815

Calculated Chi-square X²ₐ is 103 and it is greater than tabulated Chi-square X²ₑ 7.815
Therefore, X²ₐ > X²ₑ then we Reject Hₒ and Accept Hᵢ

Decision: Since the calculated value of X² is greater than the table value of X² we reject
the Null hypothesis and accept the alternative hypothesis. Therefore, we conclude there is
a significant relationship between small scale business and economy development growth
of Nigeria.

Question 10: Do you think small scale business is the solution to the problem of
unemployment in Nigeria?

Table 17: HYPOTHESIS 2

Alternative Response Observed Frequency Expected Frequency

Agree 30 68

Strongly Agree 12 27

Disagree 2 5

Strongly Disagree - -

Total 44 100

The researcher carried out the computation using the sight steps of chi-square X².

The Null and alternative hypothesis:

37
Ho: Small scale business does not play a significant role solving the problem of
unemployment in Nigeria.

Hi: Small scale business does play a significant role solving the problem of
unemployment in Nigeria.

The testing statistic, which is

X² = (fo - fe) ²
fe
Where: fo = Observed frequency

fe = Expected frequency

The level of significance mostly used in 5% i.e. 5% = 0.05

The degree of freedom is given as df = (k – 1)

Where: k = Total no of row = 4

(4 – 1)

df = 3

The tabulated value of significance 0.05 at 1 df = 7.815 i.e. using chi–square table.

Computation of the test statistics, using the table response on whether small scale
business does play a significant role solving the problem of unemployment in Nigeria

Expected frequency = Efe

n
Where: e = Expected frequency

Σfo = Observed frequency

n = Total no of row = 4

e = 44

38
 44
e = 11
4
Alternative Response Observed Frequency Expected Frequency

Agree 30 11

Strongly Agree 12 11

Disagree 2 11

Strongly Disagree - -

Total 44

To calculate what is observed we use:

X² = (fo - fe) ² or (o - E) ²
fe E
(30-11) ² (12-11) ² (2-11) ² (0-11) ²
+ + +
11 11 11 11
(19) ² (1) ² (-9) ² (-11) ²
+ + +
11 11 11 11

= 32.8 + 0.09 + 7.3 + 11

= 51.19 Calculated value X²

X²ₐ calculated Chi-square = 51

X²ₑ Tabulated Chi-square = 7.815

Calculated Chi-square X²ₐ is 51 and it is greater than tabulated Chi-square X²ₑ 7.815.
Therefore, X²ₐ > X²ₑ then we Reject Hₒ and Accept Hᵢ

39
Decision: Since the calculated value of X² is greater than the table value of X² we reject
the Null hypothesis and accept the alternative hypothesis. Therefore, we conclude that
small scale business does play a significant role solving the problem of unemployment in
Nigeria.

CHAPTER FIVE
SUMMARY, RECOMMENDATION AND CONCLUSION
5.1 SUMMARY OF FINDINGS
The findings of the result revealed that small scale business have a significant
impact on the economic growth of Nigeria. The study investigates the effect of small
scale business on economy growth of Nigeria. It is a fact that small scale enterprise is one
of the strategies towards socioeconomic development of any society. From the study, it

40
was strongly affirmed that small scale businesses has increased in number and it have
positive impact on poverty reduction in the country through reduction in unemployment
rate, small scale enterprise has play a significant role in development of Nigeria economy
by creating jobs and employment opportunities, improving of technological innovation,
encourage of rural development, development of entrepreneurship, mobilization of local
savings, linkages with bigger industries and increasing in the GDP of the country.
5.2 CONCLUSIONS

Hardly can any major economy survive without the services of small scale
business enterprises. The relative strength of their importance varies from one economy
to another. The role of small scale businesses in economy development in Nigeria cannot
be over-estimated. Firstly, the continuing growth in the economy of any nation depends
to a large extent on the startups of small businesses, which depends on locally fabricated
machinery and local raw material inputs. small scale businesses bring technological
innovation and then improve the standard of living in the country as it help in stabilize
the economy, and also serves as a training school for the indigenous entrepreneurs and
provides grounds for the acquisition of skill for a large number of workers and most
importantly small scale businesses create jobs employment for many thereby reduce
unemployment rate in the country. This study concluded that operations and the growth
of small scale business enterprises is the backbone of the economy development of
Nigeria.

5.3 RECOMMENDATIONS
After discussed the findings of this study the small scale business contributes in
strengthening industrial linkages by producing intermediate products for use in large
enterprise in Nigeria. The researcher also showed that inadequate infrastructural facilities
from the government have been one of the challenges face by small scale businesses.
This study suggested the followings:

41
 i. Government should provide a conducive environment for small scale businesses
to thrive by providing good infrastructural facilities.
ii. Inadequate funding is also one of the challenges of small scale business operators
in the country. Government should support the small scale enterprise by pulling
fund into the sector so the operators of this sector.
iii. Lack of technical knowhow and poor planning and poor managerial skill from
some small scale businesses operators is also one major challenge to small scale
business in the country. Small scale business operators are advice to get adequate
skill and knowledge on their business operation in other for their businesses to
contribute to the economy growth of Nigeria.

5.4 LIMITATION FOR FURTHER STUDY

Though, the researcher has undertaken a research work on the effect of small
scale business on economy growth of Nigeria in which findings and recommendations
have been drawn. But there some limitations which during the research work such as
inadequate time, finance, COVID’19 pandemic which could not permitted the researcher
to gather much adequate information in this area of study. Therefore, it should be an area
of further study for the future researchers to follow the same procedure or step to find out
the effect of small scale business on economy growth, so that the study would be
universally and globally accepted.

REFERENCES

Aremu, M.A. (2015). Small and Medium Scale Enterprises as a Means of Employment
Generation ND Capacity Building in Nigeria, A paper Presented at the
International Conference on Management and Enterprise Development on,
“Intellectual and New Strategies for Sustainability Development of the Third
World” Held at Conference Center, University of Ibadan, Ibadan, Nigeria.

42
Akinseye, (2015). Small and medium scale enterprises and economic growth in Nigeria:
An assessment of financing options. Pakistan Journal of Business and Economic
Review.

Essien, P. (2016). Evolving a National Framework for the Emergence of a Strong and
Virile Small and Medium Scale Industry Sub-Sector in Nigeria . A Seminar Paper
Presented at MAN House.

Ezeh, J. and Okpala (2015): The Role of Small scale Business in Nigeria Economy.
Entrepreneur’s Notebook. Learning Ventures Press.

Harris.O. (2016) The contribution of small scale industries to the national economy,
Standard research journal of business management, Vol.

Nagaya (2017). SME impact on output growth, case study of India. Palma Journal, 16

Nnanna. N. (2015). Entrepreneurial developments and small scale industry contribution

to Nigerian national development: A marketing Interface. Information
Management and Business Review.

Ogujuiba K.K, (2015). Credit Availability to Small and Medium Scale Enterprises in
Nigeria: The importance of New Capital Base for Banks- Background and Issues.
Working paper accessed in December 2010 in
www.valuefronteraonline.com/publication.jsp?type=aponeindustrialeconomics-
smes.

Oluba, (2017). Small and medium enterprise and economic development, Pakistan
Journal Of Business And Economic Review, Vol.2(1).

Omotola, D. (2015). Small Scale Enterprises, Economic Reform and National

Development In Nigeria. Lagos: Adejo Publishing Co.

Opafunso, Z. and Adepoju, O. (2016). The impact of small and medium scale enterprises
on economic development of Ekiti State, Nigeria. Journal of Economics and
Sustainable Development.

43
Osoba, A. M. (2016). Towards the Development of Small Scale Industries in Nigeria.
Nigerian Institute of Social and Economic Research

Rogers (2015). Issues in Business Development. Social Science Journal, Vol. 8, No. 2.

Yakubu (2016). Impact of small and medium scale enterprises in Lagos State. Kuwait
Chapter of Arabian Journal of Business and Management Review.

Yusuf, T. O. (2015). SMEs, Business risks and sustainability in Nigeria. European

Journal of Business and Social Sciences.

QUESTIONNAIRE
DEPARTMENT OF BUSINESS AND COMMUNICATION STUDIES
EFFECT OF SMALL SCALE BUSINESS ON ECONOMY GROWTH OF
NIGERIA

(A CASE STUDY OF BLESSED PURE WATER BODIJA, IBADAN)

Dear Respondent,

44
This questionnaire is strictly designed for research. It directed to obtain information on
the above mentioned topic. The research is in partial fulfillment for the National Diploma
in Business Administration and Management Studies of the polytechnic, Ibadan.
Thank you.

Section A:
Demographic Information
1. Gender: Male ( ) Female ( )
2. Marital Status:Single ( ) Married ( )
3. Age: 21-30 ( ) 31-40 ( ) 41-50 ( ) 51 and above ( )
4. Academic qualification: HND/B.SC ( ) MSc ( ) PhD ( )
5. Working experience: 0-5 ( ) 6-10 ( ) 11-20 ( ) 21 and above ( )

Section B

Research Question

6. Small scale business contributes immensely to the development of Nigeria economy?

Agree ( ) Strongly agree ( ) Disagree ( ) Strongly disagree ( )

7. Do you agree that small scale business contribute to employment generation in

Nigeria economy Agree ( ) Strongly agree ( ) Disagree ( ) Strongly disagree ( )
8. Do you agree that small scale business generate more employment to Nigeria
economy more than other sectors Agree ( ) Strongly agree ( ) Disagree ( )
Strongly disagree ( )
9. Do you agree that there is significant relationship between small scale business and
economy development growth of Nigeria Agree ( ) Strongly agree ( ) Disagree ( )
Strongly disagree ( )
10. Small scale business is the solution to the problem of unemployment in Nigeria
Agree ( ) Strongly agree ( ) Disagree ( ) Strongly disagree ( )

45
11. Small scale business is the backbone of every economy in the world Agree ( )
Strongly agree ( ) Disagree ( ) Strongly disagree ( )
12. Do you agree that small scale enterprises improve the standard of living of Nigerians
Agree ( ) Strongly agree ( ) Disagree ( ) Strongly disagree ( )
13. Do you agree that inadequate funding is a major challenge of small scale business in
Nigeria Agree ( ) Strongly agree ( ) Disagree ( ) Strongly disagree ( )
14. Lack of technology is a challenge to small scale business in Nigeria Agree ( )
Strongly agree ( ) Disagree ( ) Strongly disagree ( )

46