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This study,THE INFLUENCE OF POOR FINANCING ON THE OPERATION OF SMALL SCALE INDUSTRIES IN NIGERIA contains concise information that will serve as a framework or guide for your project work. The project study is well-researched for academic purposes and are usually provided in complete chapters with adequate References.




The every economy a critical look into it will reveal that the need and desire of people are sissified by numerous small-scale manufactures not withstanding the existence of big business organizations which are locally and internationally famous.Small-scale industries contribute immensely in the growth and development of an economy through their contributions to the national income of such economy.  infact small scale industries were the mainstay of every economy world wide. Inspite of the contribution of small-scale industries financial constraint has been confronting their growth and development. It is because of this that the researcher decided to delve into the influence of poor financing on the operation of small scale industries in Nigeria.A critical look showed that this teething problem of finance was caused by inability of small scale industrialist to sources fund externally through the issue of shares to the public loan overdraft, grant etc. this implies that for the financing of operations of small scale industries the fund sourced internally have proved inadequate for the operations of the industries In collection of data to know the reason behind this poor financing so that a useful solution will be offered the use of questionnaires and  interview were employed.  The use of questionnaires and interview  analyzed to ascertain the truthfulness and authenticity of data collected.  In doing this the use of co-efficient of variation (C.V) was adopted in which case the response with he lower or lowest co-efficient of variation is rejected.At the end of the study it was discovered that:

  1.   Inadequate capital contributed to the failures of small scale industries.
  2. Lack  of proper management which resulted from inadequate fund to employ competent employees contributed to the failure of small scale industries.
  3. Absence of eternal equity contributed to the failure of small scale industries.

Following the result from the study. It could be concluded that if adequate fund is provided to them the performance of small scale industries will be improve upon.To wipe-out this ugly trend some suggestion and recommendations were offered  The gearing of the firms should be increased.

  •  Staff should be well remunerated and  motivated.
  • Government should be given grants and tax relief’s to small scale industrialists
  • Finally the should go for external sources of fund to finance their operation.

Therefore if the suggestions and recommendation proffered by the researcher in this study as strictly adhered  to the objective of growth and development of the small scale industries will be achieved thereby improve the state of Nigeria economy.



1.0           INTRODUCTION

1.2              Statements of problem.

1.3              Purpose of study

1.4              Significance of the study

1.5              Scope of the study

1.6              Research hypothesis

1.5             Definition of terms



2.0             Meaning of small-scale industry

2.2              Characteristics of small scale business (industry)

2.3              Towards efficiency in small scale industry management

2.4              Recommendation our success in small scale industry management

2.5              Effect of uncontrollable forces on small scale industry

2.6              Remedies to these uncontrollable forces

2.7              Adequacy of financing small scale industry

2.8              Reason why small scale industries

2.9              Effect of interaction with industrial association to small scale industries

2.10           Factors in small business success


3.0             Research methodology

3.1               Populations

3.2              Sample and sampling technique

3.3              Sources of data

3.4              Instrument for data collection

3.5              Reliability of the instrument used

3.6              Administration and collection of data

3.7              Method of data analysis


4.0             Data Presentation & analysis

4.1                Analysis of responses from respondents in the questionnaires

4.2               Test of hypothesis

4.2.1            Test of hypothesis one

4.2.2           Test of hypothesis two

4.2.3            Test of hypothesis three


5.0              Finding conclusion and recommendation

5.1                Finding

5.2                Conclusion







A look around us will reveal that that our economy consists of people whose material needs and wants are satisfied by numerous business organizaiton especially in the manufacturing sector we can comfortably count on the roster of business organizations both locally and internationally famous such as lever brothers Plc Nigeria bottling company (NBC) Plc Pfizer Plc UAC etc.American writers have pointed out that the world view of the UAS as a “land of industrial grants” a national of big operation is misplaced of all manufacturing industries in USA 89% Employs fewer than 100 people and 65% have fewer than 20 employees.  In all developed and developing countries all over the world the greater proportion of their productive sector are mainly of small sizes. It then becomes imperative to point out that grant industries with their mass production not with standing it is the small scale industries not withstanding it is the small scale industries that from the backbone of every nations economy.

It is important to note that relatively all these big business organization started as a small scale business organization before they grew their present standard. It should therefore discerned that most businesses we know today started as an idea. The idea then patented before it grew into an industry.

Most significant innovation all over the world started with self- employed small-scale businesses which was achieved in an effort to effect change. So as to respond to consumers increasing needs.In Nigeria small business organizations sprang up as a result of the evolution of entrepreneurship.  This started with the barter system in which case people exchanges excess of their product with other people’s product, which they need.  This encouraged them to increase their productivity. Early small-scale industrial sought and obtained the service of family members and friends to boot production.

Modern small-scale industry evolve with the arrive of colonial masters. The small industrialists were metea with some barriers, which led to the demise of most of them. One of them is the introduction of formal education, which resulted to value system. With this formal education people gained opportunity to be employed in civil service for the fact that the economy was large enough to absorb all Nigerians with formal education.

With the escalation in the number of educated people government could no longer employ most of the school leavers. Government in her bid to stem at this ugly trend introduce economic policy programmes aimed at encouraging private individual to be self reliance by urging them to go into private business and be self employed were initiated in Nigeria such programme include national open apprenticeship scheme national directorate of employment (NDE) Agriculture sector employment programme  (ASEP) etc.

There is no general acceptable definition of the subject matter small-scale industry. This is due to the fact that a different criterion has been adopted in defining small-scale industry by different countries. All the definitions gives by difference countries is based on some quantitative measure, which includes number of employee’s capital investment, use or nonuse of motive power and sales volume. Generally, small scale industries are those owned managed and controlled by one or two person and its family influenced decision making has undifferentiated organizational structure has a relative small share of the market and employs less then 50 people (Csasa1986).

In another development small scale industry can be a manufacturing  industries  or a service industries .

The existence of big manufacturing industries provide grant opportunities for small scale industries because these big industries got most of their raw materials through small scale industries who sources and make them available to big industries. So if our big industries must grow our small scale manufacturing industries must also grow opportunities also exist for small scale manufactures in local consumers markets. Examples of small scale industry were pottery and ceramics bakeries printing shops etc.

There are some principles, which have been developed over the years to ensure the success of small-scale industries.  At times knowing that to do it still harder is knowing how best to do it suppose that the small scale industrialist has the experience capital business acumen and judgment he should be able to organize and establish the industry with some degree of success. Therefore keeping the industry going depend on how he conducts it.   These principles and practices are as follows:

  1.   Careful study of markets
  2. Wise and knowledgeable planning of activities
  3. Vigilant control investment personnel equipment etc.
  4. Adequate expense record
  5. Thoughtful selection of goods.
  6. Strategic location with particular reference to the market.
  7. Sound policies unalterable in general objective but flemible and adjustable to meet obvious business expediencies.
  8. Strong working relationship with the suppliers
  9. Judiciously control credit.
  10. Customer selection and market concentration
  11. Skillful selected personnel.

In addition the following factors are generally accepted as prerequisite or   siniequa-non-to success in any small-scale business. They are

  1. A gamine business opportunity
  2. Managerial ability

iii.   Adequate capital.

A critical look at these factors will reveal that competition and changing conditions set standards that the small businessmen can and must meet.  Also larger businesses have developed method that can be successfully adopted and adopted by small-scale business operation.  Finally basic requirement for business success are the same in all fields regardless of size and position of the firm.


Small-scale industrialists and small business owner who are usually the mangers of he business at times express strong desire for independence. This creates a lot of problems in the operation of small business. Sometimes he feels reluctant to go into partnership with someone who would make up for his inefficiency especially in the area of finance so as to increase his capital base.

Also the owner fails to realize the need to go for external sourcing of capital in order to effect expansion in the business and or industry.  In most cases the original equality capital of the business is provided by the owner members of his family and probably friends.

Small firms mat reach a stage at which it will have to depend to a great extent on retained earning if it to grow.  Perhaps most often financial problems facing the owner is insufficient equity round which was as a result of the unwillingness of the owner to issue shares to other to expand his equity capital. In another development small-scale business/industry witness difficultly in rising equity capital. All these resulted to inadequate capital available to the industry and thus lead to poor financing on the operation of small-scale industries in Nigeria.  This is the bane of most cottage industries in Nigeria.  About 80% of small-scale industries failed because of this problem of poor financing and others. Problem associated with it. Problem that emanated from poor financing include;

  1. Liability of the business organizaiton to expand as a result of lack of external equity capital.
  2. Lack of competent manageemnt which is the consequence of inability of owner to employ the service of exerts.
  3. Use of obsolete  methods of production because of owner’s inability to lay hand on new technology.
  4. Inappropriate location of resulted from the owner’s inability to off-set some legal obligation as needed by the government such as tax rate etc.
  5. Excessive competition which resulted form ineffectual sales which is a consequence of poor finance to cope with increased competition in the industry/ market.
  6. Other include one man bad problem lack of knowledge or fore-sight failure to fore last financial emergency needs and understating of income sales and expected change in social and economic needs lack of technical research.

It is in the light of the problems stated above that the researcher tends to draw the attention of small scale industrialist on the need for adequate capital for the expansion growth and development of small industry  in Nigeria especially in Awka metropolis .


There are some reasons that necessitated the researcher to embark on this research   these reasons can be under listed thus

  1.   Since 1986 when the Nigeria economy stated undergoing serious economic crisis ministries and public corporations embark on the retrenchment in order to meet their colossal wage bills. The result is that the affected individual who have been in paid employment are forces to look for other sources of income. This resulted to some of them engaging themselves in self- employment.
  2. Young graduates usually put on their ties and continue to more form one office to another in search of white-collar job.  This can be effectively curbed by engaging himself or herself in self- employment in one from of small scale industry or the other such as soup production.

iii.  The unemployment rate in Nigeria today is high and individual unemployed should not wait for government  to provide employment. The answer to this is the establishment of small scale industries so as to get self employed.

  1. It is generally believed that small scale industrials formed the  backbone  of their large scale counter-part in the area of provision local raw materials to them. This arouse the need for people to engage in the establishment of small scale industry.
  2. The study is addition being necessitated to  get self-employed for there is like hood that general business will evolve in the area that were hitherto unpopular.
  3. The needs and wants of consumer said to be insert able small scale industries are major provider of the  needs and wants of the greater proportion of Nigeria  consumers and satisfies them to reasonable extent.

vii.  Greater percentage of work forces is being  absorbed by small scale industries than large scale industries. This was a result of high technology being employed by large firm as such small scale  industries  help to reduce the unemployment rate in our economy.


There is rationale behind every human actions therefore this research work will not be an exception. It is expected that user or readers of this research work will derive the following benefit form the study.

  1. Business operation or industrialist should realize the urgent need to sources for and make use of external capital so as to ginger expansion in their business
  2. Young graduates should after reading through this research work learn how to get self employed instead of waiting for government to give them jobs.

iii.  The small-scale industrialist will also be more enlightened on the proper management of capital and even human resources for the success of the business.

  1. Other areas, which have not been exploited, should be discovered and exploited after reading this study by the industrialist.
  2. Application of findings of this study will engender proper growth and development of collage industries in order to contribute to the grom domestic product. (GD.P)


These research work is intended by the researcher to unveil the influence of poor financing  in the operation of small scale industry in Nigeria with special reference to industries in Awka metropolis.

The   dimension of  the study should be limited to the effect of poor financing on the operation of small scale business (industries) and also goes further to stress the need for small scale industrialists to go for external equity for expansion purpose.

In this research work will be restricted to financial management so as counter upon the influence of poor finance on small scale business in Nigeria. Ti should be pointed out here that this study will not go outside the relevant areas expect where remarks and other essential data may be required.


The following hypotheses are relevant and necessary for the carrying out of this research.

  1. H0:      Lack of adequate finance has not contributed to the  failure of small scale

industries in Nigeria.

Hi:       Lack of adequate finance has    contributed to the  failure of small scale industries in Nigeria.

H0:      Unavailability of external equity has hindered the expansion of

small scale industrial

Hi:       Unavailability of external equity has hindered the expansion of

small scale industrial

H0:      Proper management of small  scale industry has not propelled its growth and development in Nigeria.

Hi:       Proper management of small  scale industry has  propelled its growth and development in Nigeria.


The following words relating to the subject matter of the research work have been defined thus:

RETAINED EARNING: Retained earning as undistributed profit to the shareholders. It is profit that is ploughed back into a business for expansion.

FINANCE:  It is an economic force used in the making payment both final and deferred settlement for things of value.

INDUSTRY: Industry is a group of firms which are engages in manufacturing as oppose to commerce and distribution.  Firm is a sub set an industry.

CAPITAL: Capital  is a wealth or money or property used in the production of further wealth or money with which a business started with.

EQUITY CAPITAL:  Equity capital is the money contributed by the owners i.e shareholder as a capital of the business. It can also said to be shareholders money.

MOTIVE POWER:  Motive power is the human labour used in production in an industry usually human resources.

DEBT:  It is amount owned by a business or individual to another business or individual called the creditor or period.

EXTERNAL  EQUITY: It is capital borrowed by a business form outside the business in the from of loan.




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