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This project was carried out to show FINANCING SMALL SCALE BUSINESS IN NIGERIA ECONOMY. It is also meant to emphasize the relationship between theories of this financing small scale business in Nigeria economy and their application in real business life. The project was also designed to know the various form of small scale business in Nigeria economy facing some king of financial problem in our dear society and ways by which they can be improved financially and also means by which the finance can be improved shall be found in this project. The survey method was used in carrying out this research. Questionnaires were administered to Bankers. Also the review of textbooks and journals was adopted. This research contains five chapters. Chapter one contains the introduction of the project. Chapter two dealt with the literature review, chapter three is the research methodology. Chapter four contains data analysis and presentation while the last chapter contains the summary, conclusion and recommendation.


Exchange has been taking place since the time of trade by barter till todays modern complex marketing system.

The oil boom of the 1970s and early 1980s have a sharp increase in foreign exchange earnings and government revenue has a passive effect on the total national income and a dimensional process that add to reorganisation and reorientation of the entire socioeconomic system, that is radical changes in Nigeria economy and resulting from this, many industries that depend on import for cheap goods and materials sprang up during this period, not because of this, many people left their jobs and crafts and went for white collar jobs, there was early marriage and the level of population increased rapidly. This led to high demand form imported raw materials and the Nigeria economy was depressing gradually.

Business is a primary social institution, which allocates resource relatively within the economy. It combines human, materials and capital resources to produce the goods and services for profit motive. It is the sum total of all the activities involved in then creation and distribution of goods and service for private profit. It is believed that for many activities to be considered a business, it must consist both the opportunity for profit and the risk or loss. Starting a new business or buying an existing business is not a simple activity. It involves much complex operation, huge financial outlay and psychological imprisonment that need proper training.

When the economy had gone bad, the then military regime under the administration of General Ibrahim Babangida, took a measure to correct and aid the nation economy, by introducing structured Adjustment programme SAP launched in July 1986. Despite the fact that the government took the measure to promote the recovery and Nigerian economy and to utilize then local resources, it also has an adverse effect on small scale industries and Nigeria in general.

What is really meant by small scale Business, it has a lot of definition and one can not easily point out one, as the general definition but we will only mention few ones because giving a universal definition to it is an arduous task. In the third National Development Plan Handbook 1975 80, the term small scale business refers to as Those manufacturing establishment employing less than 10 people or whose investment in machinery and equipment don not exceed six hundred thousand Nair N600, 000. The Central Bank of Nigeria, an important national economic institution in its credit guide lines defined small scale business or industrial as Those business with an annual turnover less than half a million naira. In view of the difficulty of giving a precise definition to the topic, we have to agree with Osagbemi 1983 who regarded a small scale business as one Whose scale of operation is less than the average the concept of average implied in the definition is suitable for all economic condition. All that are needed to do is just take average figures of certain variables and all business that falls below this average can be referred to as small scale business.

Planning is the bedrock and most vital ingredient in success and business operation, without good and adequate, planning a business is volatile to failure, for a business to succeed, the potential entrepreneur must formulate his business objective, analyses its ability in terms of strength and weakness, locate sources of finance and good management and establish a system of control and accountability.


For small business owners to survive the changes in Nigeria dynamic economy, they must identify and exploit usual opening business so as to be capable of catching and retaining. However, small scale business multi dimensional problems cab be attributed to the followings;

i. Financial Constraint Problem

ii. Management Problem

iii. Economic Recession Problem

iv. Business e Environment Problem

v. Government Policy

vi. Product Liability and Patent Abuse

These problems will be looked into this research work with a view of providing appropriate solutions.


The main objective of the researcher is to highlight the readers of these research work the permanent way of removing some barriers standing in the way of small scale industrialist from the attracting bank loan or make their requirement for bank loan more of a reality than a dream.

Furthermore, the researcher in carrying out this research work hope to draw the attention of the government to the advantage which a nation can drive from the small scale business if its properly finance and to let the small scale business as know why the commercial banks always feel reluctant in financing their business.


The following hypotheses are raised in this study directed specifically to the aspect of financing small scale business in Nigeria.

i. Hypothesis One

Null Hypothesis H0: Government did not provide enough or satisfactory incentives for the promotion and development of small scale business in Nigeria

ii. Alternative hypothesis HI: Government provide enough or satisfactory incentives for the promotion and development of small scale business in Nigeria.


There are many advantages which a nation can be driving from small scale companies, if its properly finance and give room for is free growth, that is the reason why professor Oshuntogun says in one seminar Banks and Small scale company that small scale company is a catalyst for economic development. It highlights the possible roles of small scale industries in any developed country.

i. Reduction of Regional Economic Implication

ii. Implementation and Utilization of resources

iii. Creation of Employment opportunities

iv. Development of entrepreneurship as well as other roles in bringing integrated agroindustrial development.

Furthermore, the researcher in carry pout the research hope to draw the attention of small scale business which is found of complain that their desire to expand their business or developed new ideal is Thwarted by the caution and conservation of bankers whom he accuses of always wanting to cover their risk 100 by guarantee or tangible collateral as security against losing their money. The small scale business man does not however accept the fact that it is poor organization, inadequate planning and lack of management skill and experience couple with his unwillingness to seek professional advice which built the barrier between him and form of financial assistance.


The scope of the research work will cover, how commercial banks finance small scale company, reason for inadequate banks support to small scale companies, the role of banking in the financing small scale company, hot to improve fund to small scale company and effect of SAP on small scale companies etc.


It was not easy getting the materials for this project together. We faced a lot of difficulties, among which are;

i Time: There was not enough time required to carry out these project, due to the fact that the time needed was shared between our normal academic period and the time needed for the project and due to these, there was limited time for the work to be done sufficiently and in good order.

ii Finance: Financial problem was another great obstacle we faced in the course of writing this project, money is needed for the day to day running of the project and even the fund available were not enough for the carrying out of this project.

iii Reluctant in answering the questionnaire: Some feel reluctant to answer some certain aspect of the questionnaire. There are certain information which the banks and firm take as confidential to their business which we the researcher is unable to know which can be of great help to this research work.

1.7 Definition of terms

The following terms are defined so as to know their meaning for the benefit of the study.

1. Small scale Business: the central bank of Nigeria 1986 in its guidelines defines small scale industries as those businesses with an annual turnover less than half a million naira N500,000.00

2. Business Finance:This is defined as the management of the inflow and outflow of funds through an organisation. It can be described as the process of generating revenue and meeting of expenses of a balance.

3. Fund:This can be refers to as those resources, liquid or otherwise employed in a business to generate profit. These can be categorized according to mode of generating them i.e. either internal or external.

4. Capital: This is a factor of production often defined by economist as wealth or capital goods. Capital is manmade and so have these attributes;

It can be increased or diminished

It can be employed to increase the output of an economy etc.

5. Cash: This is most liquid capital. It is current purchasing power in the hands of the firms and can be used for the purpose of acquiring some resource of paying some obligations

6. Management of cash flows: The flow of cash should be properly managed. The inflow of cash should be accelerated while as far as possible output of cash should be decelerated.

7. Corporate Finance: This is procedure covering the coordination of activities in a company or institution to source or locate the financial resources required for implementation of the activities of the organisation in order to meet the objectives of that organization.

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