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Chapter One: Introduction

1.1 Background of the Study
The most efficient production of products and services has long been the only feasible and dependable alternative for an economy’s development, growth, and survival.

Government and development specialists have completely recognised SMEs as the primary engine of economic growth and, as a result, a key factor in promoting the implementation of the 2020 financial systems strategy.

This is because the development of this sub-sector is an important component of the growth strategy, not only because it contributes to higher living standards, but also because it generates significant local capital and achieves high levels of productivity and capacity.

From a planning standpoint, SMEs are increasingly seen as the primary catalysts for attaining fair and sustainable industrial diversification and dispersal, with SMEs accounting for more than half of total employment, sales, and value added in most countries (Udechukwu, 2003).

This is not surprising given that Nigeria’s industrial sector has not made a substantial contribution to economic development since independence in 1960, owing to a lack of notable growth attributed to indigenous industrial entrepreneurship.

Since the early 1970s, the Nigerian economy has relied heavily on oil products. Because of the enormous amount of wealth generated by oil, little attention has been paid to the correct development of the industrial sector.

The reason for the industrial sector’s poor performance is primarily due to a lack of attention paid to the promotion and development of the small and medium-sized sub-sector, which is widely recognised as the engine of economic growth and the foundation for the industrialization process of any nation seeking solid development.

This is especially true because entrepreneurship development is an important part of skill development and a pillar for economic resurgence and progress.

Furthermore, the vital role of small and medium-sized enterprises (SMEs) as the only authentic foundation for accelerated industrialization, growth, and development, as witnessed in all the Newly Industrialised Countries of South East Asia, referred to as Asian Tigers, is recognised for its accelerative effect in achieving macro-economic objectives such as full employment, income distribution, development of local technology, and stimulation of indigenous entrepreneurship.

1.2 Statement of the Problem
Several studies have identified financial constraints as the most significant impediment to the development of small and medium-sized enterprises in developing nations, including Nigeria.

For example, Adelaja (2003) claimed that access to institutional capital has always been a pandemic concern for SME development in Nigeria. He noted that a number of schemes had previously been implemented to create special credit lines/windows for SMEs, but their impact was quite limited.

The principal focus of this study stems from the fact that small-scale business owners lack sufficient financing to continue operating due to the poor saving culture of the people in this region of the world. The explanation for this is simple: a low amount of income.

While it is widely acknowledged that Small and Medium-Sized Enterprises confront financial constraints, no research has been performed to investigate the impact of these issues on their contribution to economic development.

Asaolu et al. (2005), as well as many other authors and researchers, have concluded that financial problems undermine the developmental role of Small and Medium-Sized Enterprises.

However, this may not be true in Nigeria, where the informal sector, primarily made up of Small and Medium Scale Enterprises, plays a critical part in the country’s economic development.

As a result, the purpose of this study is to assess the promotion of small and medium-sized enterprises (SMEs) in Nigeria, as well as their contribution to economic growth.

The primary goal of this research is to find and analyse the most successful and efficient methods for financing and promoting small and medium-sized businesses.

In light of the preceding, the researcher seeks to find out the following:

The government’s role in promoting and developing small and medium-sized enterprises (SMEs).

1. Investigate the contribution of small and medium-sized enterprises (SMEs) to Nigeria’s economic growth.

2. To identify the numerous barriers to the promotion of Small and Medium Scale Enterprises (SMEs) in Nigeria.

3. To identify appropriate solutions for improving the development, growth, and survival of small and medium-sized enterprises (SMEs).


The study would look at the following questions:

1. What is the current trend in financial support for SMEs in Nigeria?

2. What contribution do small and medium-sized enterprises make to Nigeria’s economic growth?

3. How has the financial system contributed to the growth of Nigerian SMEs?

4. How can Nigeria’s Small and Medium Scale Enterprises (SMEs) grow?

1.5 Hypothesis of the Study
1. Ho: The actions of small and medium-sized firms have not contributed to Nigeria’s economic progress.

Hi: Small and medium-sized enterprises (SMEs) have contributed to Nigeria’s economic growth.

2. Ho: The Nigerian government does not effectively foster small and medium-sized firms.

Hello: The government provides appropriate support for small and medium-sized businesses.

3. Ho: SMEDAN authorities did not effectively and efficiently promote SMEs in Nigeria.

Ho, SMEDAN authorities have effectively and efficiently promoted SMEs in Nigeria.

1.6 Significance of the Study
Small and Medium-Sized Enterprises (SMEs) in Africa rely heavily on their own savings to grow and innovate. Firms frequently require real-world services support and formal financial assistance, failing which under-investment in long-term capabilities (training and R&D) may result (Oyelaran-Oyeyinka, 2003).

Aside from finance, there are critical elements (such as staff knowledge, skills, and experience; internal facility capacity and quality; market information and knowledge; intellectual and managerial leadership; external infrastructure, and the incentive system at the micro and macro levels) that are lacking in technology support institutions.

These weaken the efficiency of their support for Small and Medium-Sized Enterprises (SMEs). This study is crucial because it will aid in evaluating the operations of a critical section of the industrial sector:

Small and Medium Scale Enterprises (SMEs), which have been identified as having a high potential for fostering economic growth and development (Oni and Daniya, 2012).

The evaluation will be conducted with a special emphasis on their finance, thereby contributing to the current literature on the subject.

This research focuses on the promotion of Small and Medium-Sized Enterprises (SMEs) in Nigeria, with a particular emphasis on the impact of the Nigerian government on the development of SMEs.

The study’s goal is to investigate the key issues confronting Small and Medium-Sized Enterprises and propose solutions for effectively and efficiently financing them.

The majority of the material and data for the study would be acquired from existing literature and relevant government institutions, such as the National Bureau of Statistics (NBS) and the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), among others.

1.8 Limitations of the Study The sole drawback encountered by the researcher over the course of conducting this study was the delay in gathering data from various respondents.

Because of their hectic schedules and the nature of their jobs, the majority of respondents were hesitant to fill out questionnaires. The researcher struggled to obtain responses from the various respondents, which nearly jeopardised the study’s success.

1.9 Definition of Terms
The Oxford Learner’s Dictionary defines business as a commercial activity, a way of life, a trade, profession, occupation, and so on.
Capital is defined as a man-made productive asset set aside for the production of other assets. In other restricted circumstances, it is described as money set aside to establish a business.

Economic development can be defined as the process by which a country’s real per capita gross national product of income improves over time as a result of continuous gains in per capital productivity.

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