The Role of Small and Medium Scale Enterprises in the Development and Growth of Nigeria

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Entrepreneurs are key to economic development.

Submitted: April 28, 2017

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Submitted: April 28, 2017




According to The Central Bank of Nigeria, small and medium scale enterprises are Small businesses that are privately owned corporations, partnerships, or sole proprietorships that have fewer employees of about or less than 300 employees, and turnover of less than N100 Million per annum than a regular-sized business or corporation. Businesses are defined as "small" in terms of being able to apply for government support and qualify for preferential tax policy varies depending on the country and industry.


Small scale enterprises include service or retail operations such as convenience stores, small grocery stores, bakeries or delicatessens, hairdressers or tradespeople (e.g., carpenters, electricians), restaurants, guest houses, photographers, very small-scale manufacturing, and Internet-related businesses such as web design and computer programming. Some professionals operate as small businesses, such as lawyers, accountants, dentists and medical doctors.


Small and medium scale enterprises are called SMEs in Nigeria and some other countries. And it has being proven from research that they are vehicles of development for any economy, especially developing countries. If a country has a buoyant SME industry, the economy of such country should expect development and growth as they contribute to the income or tax base of the country.


In Nigeria, 96% of the businesses are SMEs but they lack government intervention, as over the years they have not being committed to the growth of the SMEs industry, which has contributed to the decline of the economy.




Poor Funding: SMEs access to loan, grants etc. is low in Nigeria. The government and large corporations etc. are not ready to help the funding problem of Nigeria SMEs owners. They feel it is not a major concern forgetting the long term effect the lack of financial commitment to SMEs will have on the economy. This lack of commitment didn’t just start now, it has been in existence even before we got independence as a nation.


Enabling Business environment: You will see a petty trader trying to sell her wares in a small corner of her street, and the authorities will come scatter her wares all in the name of maintaining order in the community, without providing an alternative solution. The business environment is stifling the SMEs. The SMEs operates under a harsh and unfavourable environment.


Technology: Technology they say is one of the tools to development tool of any economy, and Nigeria appears shortsighted in recognizing this tool. The SMEs in Nigeria do not enjoy the exposure to technology to sell their products to the world like some of their counterparts.

Basic Infrastructure: This has hindered the progress SMEs ought to be enjoying in Nigeria. Virtually all the infrastructure we are using today in Nigeria are as old as the day the country was discovered. Nigeria infrastructure sector is experiencing decay like Bad roads, Epileptic power supply, lack of good water supply, lack of basic health amenities etc.


Corruption: This vice has eaten up almost all the sectors of the Nigeria economy and the SMEs sector is not the same. Nobody cares for nobody! “If I am okay, then I do not care” is the attitude we see in the most sector in the country. When I'm talking about corruption, I'm not addressing the money laundering aspect only. This website explains it best below:

There are three broad classifications of corruption, which are however not mutually exclusive:

  • Petty and Grand corruption Petty Corruption:

Petty Corruption:

Practiced on a smaller scale. Defined as the use of public office for private benefit in the course of delivering a public service. Usually involves relatively small amounts of money, including bribery (grease money or speed payments), the public servant abuses his/her position by accepting a benefit for what is a routine transaction or approval. The direct victim of this abuse of power is the citizen.


Grand Corruption:

The most dangerous and covert type of corruption. Instances where policy making, its design, and implementation are compromised by corrupt practices. Found where public officers in high positions (such as councilors), in the process of making decisions of significant economic value, routinely demand bribes or kickbacks for ensuring that tenders or contracts are awarded to specific contractors. Occurs at financial, political and administrative centers of power.



  • Political and Business corruption

Business Corruption

Often not regarded as a crime, rather as a means to accelerate business processes. Proponents claim that the end result is not affected; the mechanisms used to achieve the result are simply accelerated; In essence, bureaucracy is bypassed and time is utilized. Includes bribery, insider trading, money laundering, embezzlement, tax evasion and accounting irregularities.


Political Corruption

Occurs predominantly in developing and less developed countries.

Usually associated with the electoral process.


  • Voting irregularities
  • Nepotism and cronyism
  • Rule of a few
  • False political promises
  • Paying journalists for favorable coverage of candidates and parties
  • Influencing voters by the distribution of money, food and/or drink
  • Holding on to power against the will of the people.



Chaotic and Organized corruption

Organized Corruption

A well-organized system of corruption in which there is a clear idea:

  • Of whom to bribe;
  • How much should be offered
  • And are confident that they will receive the favor in return.

Organized corruption is often perpetrated by crime gangs and syndicates and includes white-collar crime and identity theft.


Chaotic Corruption

A disorganized system where there is no clarity regarding whom to bribe and how much payment should be offered.

There is:

  • No guarantee that further bribes will not have to be paid to other officials;
  • No reasonable assurance that the favor will be delivered;
  • No coordination between the recipients of benefits, with the result that the price of corruption is often inflated


All these distinctions have no value: no form of corruption is better or worse than another.


Capacity Building: according to wiki it is, ‘’process of developing and strengthening the skills, instincts, abilities, processes and resources that organizations and communities need to survive, adapt, and thrive in the fast-changing world." Some SMEs operator jumped into business without gaining skills and because of this, the business did not the light of one year.




  • Funds should be made available to SMEs with an attractive repayment plan. The government should partner with corporate bodies, Non-governmental organizations, Unions etc., to giving the needed funds to SMEs with attractive repayment plans.


  • Increase investment in infrastructure. Roads should be constructed as they are mostly the channel of distribution. The moribund Nigeria airways should be revived as t6hjis will ease the cost of traveling (export) for SMEs operators to other countries.


  • Create enabling environment that accommodates the SMEs growth. Ingenuity, innovations, creativity must be encouraged. And we must endeavor to buy what we produce.


  • Corruption prevention laws should be put in place. The Three arms of government (Legislative, Executive, and Judiciary) should work together to pass a bill in ensuring that corruption is reduced to the minimum level. The citizen should have a say in bill enactment.


  • Nigeria should start investing in Technology infrastructure. We should do away with the archaic technology and use new modern ones to boost productivity.


  • Nigeria needs to invest in citizenry empowerment. Partnership with countries or corporate bodies to train our citizens the necessary skill set for the growth of the economy – this is what we called investment in human capital.


  • Products or services should be subsidized for SMEs operators by the government and other stakeholders.


  • Favourable fiscal and monetary policies. The legal and regulatory structure of Nigeria should be done to favor SMEs. Stimulation of demand and creation of markets through government procurement policies.


  • Facilitation of the exchange and dissemination of knowledge and information among stakeholders to the citizens and SMEs owners.


  • Reduction of uncertainties and resolution of conflicts through appropriate institutions, such as industrial arbitration.


  • Establish a national body that will see to the affairs of stakeholders in the SMEs sector. It will comprise the CBN, Ministries of S&T, Industry, Finance, SMEDAN and NPC and located in the presidency.




  • Increase in Employment rate– I personally will prefer 100 of small corporations than 1 big corporation as unemployment rate would be reduced
  • National income generation and export revenues
  • The creation of new and innovative firms.
  • The graduation of as many informal enterprises as possible into the formal sector.
  • The Maverick Enterprise Role that SMEs play also includes a transformative role. For SMEs, this means transforming from simply surviving to sustainability; this mean transforming from just producing to productivity, and finally, this mean long term market trade capabilities domestically, regionally, and internationally. These transformative rules are the same for both urban and rural entrepreneurs.



SMEs have compelling growth potential to drive the economy of Nigeria towards growth and development.

The solution to Nigerian SMEs can be realized if both the government and citizens concertedly work together.





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