The Problem of Financing a Small Scale Business in Nigeria

The Problem of Financing a Small Scale Business in Nigeria

The Problem of Financing a Small Scale Business in Nigeria


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Abstract on The Problem of Financing a Small Scale Business in Nigeria

This research  is aimed at finding out how to solve the problem of financing a small scale business industry in Nigeria, using Igweshi garri processing industry at Akpugo in Nkanu West Local Government Enugu as a case study with a view to discovering areas of improvement and possible handicaps associated with such industries. In Enugu State, the state government established fund for small scale industries (FUSSI) in 1971 through the state ministry of commerce, industry and technology The fund says “small scale industry means a manufacturing, processing or servicing industry with a capital investment of up to N150,000 in machinery and equipment alone, this excludes working capital and cost of land”. Data was collected through primary and secondary sources for this project. That is oral interview and designed questionnaire and also textbooks, newspapers, internet and  journals were all used. Some of the findings of the study include: Lack of good equipment or machines, Bad roads, electricity and poor management. My suggestions and recommendations is that, government should grant loans to the small scale industries to enable them buy good machines for their business.Government should also provide electricity in rural areas, so that it will help Igweshi garri processing industry and small scale industries to grow.


Chapter One of The Problem of Financing a Small Scale Business in Nigeria



It is necessary to bring out the point that to succeed in business required some measure of discipline.  Most industrialist expected to make a reasonable profit from the investment of time and resources, that they have to make it, in other to bring a project to friction.

While this may sound simple enough, the bother line is the fact in an economy wide context, the rate of level of reward that can accrue to various level of effort, discipline and productivity should never be allowed to get out of proportion in relation to effort input.

Experience has shown that industrial pursuits have been found to yield for the patient and disciplined and industrialist rather than stand for business concern with all kinds of effort mostly unproductive and required no legitimate effort to reap profits in multiple fields.

After considering the above mentioned statement of facts about industry; the question is, how far are we from being industrialized bearing in mind that it yields for disciplined and patience industrialist all things being equally.

Taking cognizance of the fact that a step forward is the beginning of a mile.  Some, therefore Nigeria’s business industrial Evolution will only start when positive steps are taken towards adequate financing of small scale business.  The experience of newly industrialized countries has been an eye opener.

Finance is the greatest problem we are likely to face whenever we talk of establishing a small-scale industry.  This is control surrounding the problem of inadequate finance.  A look on the small-scale industries/business, all over the country would help to throw further light on the effect of lack of fund or business, the drastic effect is mostly few when gradually collapsing, even surviving ones are terribly looking for assistance that they are not sure of.

Funds are scarce, hence the growing industries as regarded in this part of the world as never-do-wells especially Nigeria.  When an economy is shaky, growing industries in that economy tend to suffer most and usually stand the taste of time. Hence, an increase in the number of causalities in this regard.

The researcher aimed at exploiting the possibilities, problems of financing small-scale business/industries.

The project centers on management and financial problems.


There are various problems facing the establishment of small-scale business like financial limitation, lack of raw materials, poor management and quality of the management, staff, poor accounting methods, high interest charge on loans and lack of adequate planning and feasibility studies.

The most common and problematic issues is funding Small-scale business/industries. It is quite difficult to obtain fund from established institutions like commercial banks. Some projects have take off but had to be abandoned half way. The issue involved is the question of capital adequacy.

When a company is under capitalized it cannot realize its full potentials. Many small-scale enterprises in Nigeria experience this problem. They cannot expand their scale of production to optimum level.

To ameliorate these problems therefore, government should implement the law or policy that will enhance small-scale business/industries (especially that of infant ones) such as central bank policy that direct all commercial bank to give out some percentage of loan to small scale business than those of medium and large scale industries/business.


The objectiveof the study are as follows:

(a)       To ascertain the present economic state of the life of small-scale business with the view to identify the major problems that affect the financing of small scale business bearing in mind that adequate financing stands as a chance to energize to its operations.

(b)      To determine with  strategies employed by the surviving and successful ones among them towards  alleviating these problems.

(c)       To ascertain the extent to which the financial institution has helped to develop small-scale business/industries.

(d)      To provide a useful guide for the prospective entrepreneur who may choose self-employment as a career, especially in lines of business.

(e)       It will equally serve as a springboard progenitor of further researchers in the area of small-scale business/industries.


Hypothesis I

Ho:  Inadequate fund does not adversely affected the operation of small-scale industries/business in Enugu.

Hi:   Inadequate fund affect adversely of small-scale industries/business in Enugu.

Hypothesis II

Ho:  poor accounting method does not affect small-scale industries/business in Enugu.

Hi:   poor accounting method affects small-scale industries/business in Enugu.

Hypothesis III

Ho:  poor management does not affect small-scale industries/business in Enugu.

Hi:   poor management affect small-scale industries/business in Enugu.


This issue will not be treated in isolation taking into cognizance the level of development in Nigeria.  Based on this, some vital research questions were asked by the researcher, which includes:-

1.    What number of small-scale business/industries have benefited from the commercial banks loans and advances?

2.    To what extends does small-scale business/industries cope with the        inadequacy of funds?

3.    What are the strategies employed by the surviving and       the successful ones?

4.    How does small-scale business apply for loans from financing institutions?

5.    What are the role of the government and organizations      in finding lasting solution to the problem numerated   above?


The significance of the study is that the result will help identify how business loans are obtained or secured both locally and internationally from financial institutions.

As a result of this, awareness is being created on how fund or finance could be raised to finance small-scale business/industries.




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