Economics Project Topics

A Critical Investigation of Small and Medium Scale Enterprises and Their Relevance to Economic Development in Uyo

A Critical Investigation of Small and Medium Scale Enterprises and Their Relevance to Economic Development in Uyo

A Critical Investigation of Small and Medium Scale Enterprises and Their Relevance to Economic Development in Uyo, Akwa Ibom State.



The following are the objectives of this study;

  1. Examine if there is any relationship between medium and small businesses and economic development.
  2. To determine if the current financing pattern and proportionate contribution of bank loans is favourable for medium and small businesses in Nigeria.
  3. To determine whether small and medium businesses encounter challenges in obtaining credit from banks.





Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.

Precisely, the chapter will be considered in three sub-headings:

  • Conceptual Review
  • Theoretical Review
  • Empirical Review


Meaning And Concept Of Small Business Enterprise

In many respects, the meaning and concept of small businesses cannot be completely isolated from the operational environment. Thus the perception and definition is highly dependent on the particular economy that provides the environment of operation. In Nigeria, there seems to be no clear cut definition or scope for determining small business enterprise. However varied definition and scope were made by some agencies as follows:

[a] The national directorate of employment defined it as being able to accommodate project with capital investment as loan as N5,000 and employing as few as three persons.

[b] The Central Bank of Nigeria in its monetary policy guidelines 1980 defined small scale business as an enterprise whose annual turnover rangers between N25,000 and N50,000, also the Federal Ministry of Industries before the Structural Adjustment Programme [SAP] and Foreign Exchange Market,defined small scale business as any manufacturing, processing or service industry with capital investment of not more than N150,000 in plant and machinery.

[c] The Nigeria Bank for Commerce and Industry also defines the small scale enterprise as firms’ or companies with assets [including working capital but excluding land] not exceeding N750,000 and paid employment of up to 50 persons an such an establishment be wholly owned by Nigerians.

Measuring the appropriateness of some of these definition, Nwakobi [1985] criticized most of the definition describing them as merely “institutional” Nwabobi holds the views that the definitions do not pain a health picture of the growth of small scale business enterprise, considering the difficulties involved in capital formation and other discrimination of attitudes of the banks towards the owners of small scale business enterprise. In July, 2001, the national council on industries at the 13th meeting in Markurdi, Benue State, reviewed and adopted the following classification of industrial enterprises and came up with the definition that “A small scale industry is an industry with total capital employed of over N1.5 million but not more than N50 million including working capital but excluding cost of land and of a labour size of 11 -100 workers. However, comparatively, most develop countries seems to have agreed on a maximum unit of 500 employees as a small firm [Feldman 1989]. However, a review of the performance induct of small scale business can be best anchored on the United Nations industrial development organization definition of small scale business as “an economic venture” that is characterized by the following:

  • Ownership and management being vested in the same Individual 
  • Capital being made available by an owner on whom the policy Decisions rest
  • Having a coalised operational area
  • A situation of a venture controlling a small share of the market Their by constituting a little quota in the large sized market 
  • The owner participating very actively in all decision making Processes on a day to day operation basis with a high degree Of rigid control.

Reflecting the characteristics, small scale business enterprises have emerged, especially in the developing world, with roles of employment generation, encouragement of rural development, assisting substantially in lifting gross domestic product, developing entrepreneurship and proving avenue for self employment.


Small businesses have the potential to contribute significantly to the diversification of the industrial structure required for growth. Small-scale enterprise has different definitions in various countries and industries, often within the same sector. About fifty (50) various concepts of small-scale enterprises have been found by the United Nations Industrial Development Organization (UNIDO) in seventy-five (75) different countries (Tendler et al, 2011). The key perspectives were focused on factors such as installed capacity usage, manufacturing, unemployment, resources, business form, and other factors that were more relevant to the country’s industrial policies. A small enterprise, according to the Small Business Act of 2000 (USA), is one that is privately owned and run and is not the market leader in its industry (Harper 2008). Furthermore, the United States of America’s Committee on Economic Development (CED) has a description that states that an enterprise is small if it fits two or more of the following conditions.

  • Management is independent i.e. manages are also owners 
  • Capital is supplied and ownership is held by an individual or a small group. 
  • The area of operation is mainly local 
  • The size of the firm is small relative to the industry

As a result of the above, we suggest that a small-scale industry be described as any business with an investment capital or total assets of (n1) one naira to ten million naira and less than one hundred employees. This term, if adopted as a widely agreed definition of small-scale industry, would help small-scale industry in particular, as well as the Nigerian economy in general, to expand. Much has been said and written about small-scale industry’s importance to economic growth and sustainability. The aim and meaning of small-scale business are to facilitate the trade of foreign exchange and the advancement of management services in developing nations. Because of their small size or scope of activity, as well as their ownership and management processes, they are able to use scarce capital. Unlike a major corporation, where formalities are included in the day-to-day activities of the company. Small-scale companies, according to Mobogunje, are “those whose activities do not include any of the formalities involved with a large-scale company or government agency”. The Nigeria Bank for Commerce and Industry (NBCI) made the decision in the firm conviction that the prosperity of a developing country like Nigeria depends on the growth of its small-scale businesses. “Nigeria Bank for Commerce and Industry has assured its continued support for small-scale business in spite of the high risk of failure in the sub-sector of the economy,” Akwaeze wrote in his contribution. Small-scale business contributes to the versatility of the corporate structure. This has an effect on their ability to meet a wide range of customer needs, especially in the lower economic echelon of manufacturing products and services with a high intrinsic value-added material. As a result, a relatively open economy with fair distribution and opportunity for all industries is the ideal climate for small businesses.




3.1 Introduction

In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.

3.1 Research Design

Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e. mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.





This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of forty-one (41) questionnaires were administered to respondents of which thirty eight (38) were returned while 35 were validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of  35 was validated for the analysis.


The table below shows the summary of the survey. A sample of 41 was calculated for this study. A total of 38 responses were received whiles 35 was validated. For this study a total of 35 was used for the analysis.




5.1 Introduction

This chapter summarizes the findings on critical investigation of small and medium scale enterprises and their relevance to economic development in Uyo, Akwa Ibom State. The chapter consists of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was on a critical investigation of small and medium scale enterprises and their relevance to economic development in Uyo, Akwa Ibom State. The study was specifically carried out to examine if there is any relationship between medium and small businesses and economic development,  determine if the current financing pattern and proportionate contribution of bank loans is favourable for medium and small businesses in Nigeria, and   determine whether small and medium businesses encounter challenges in obtaining  credit from banks.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 35 responses were validated from the enrolled participants where all respondent were the some  selected SMEs, in Uyo, Akwa-ibom state.

5.3 Conclusions

Based on the findings of this study, the researcher concluded that;

  • There is a relationship between medium and small businesses and economic development.
  • The current financing pattern and proportionate contribution of bank loans is not favourable for medium and small businesses in Nigeria.
  • Small and medium businesses encounter challenges in obtaining credit from banks

5.4 Recommendations

Based on the findings of the study, the following recommendations are proffered:

  • New economic policy should be introduced in the country to prevent massive importation of foreign goods particularly those that our local industries can produce domestically in order to protect the local producers against stiff completion with foreign firms.
  • Financial institutions especially banks should be encouraged to increase their loans and advances to SMEs in the country to address the financial challenges confronting the operations and survival of many enterprises in the country.
  • Effort should be made to ensure that adequate infrastructural facilities are in place for proper operations of small and medium scale enterprises in the Nigerian economy. Availability of adequate electricity and efficient transport system is very essential for survival, growth and development in any given economy.
  • Seminar, Workshop and training should be organised from time to time for managers and operators of SMEs in the country in order to improve their technical and managerial skills for better performance from such enterprises.


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