CHAPTER ONE

1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In recent time, interest in the linkages between Small and Medium Scale
Enterprise (SMEs) and economic performance of countries has attracted the
attention of researchers and policy makers and spawned volume of studies on this
research area (see Kadiri, 2012; Taiwo, Ayodeji & Yusuf, 2012; Thurik &
Wennekers, 2014; Vijayakumar, 2011). This is not surprising considering the role
of SMEs in promoting economic growth and development through various
channels including job creation, income redistribution, poverty reduction and
maintaining a healthy economy (Beck, Demirguc-kunt & Levine, 2005).
The small and medium scale enterprises sub sector of the economy holds
the key to the nation’s quest for economic growth and development. Today,
regardless of the level of growth and development the world over, countries
continue to embark on viable policies and programs that would create and pave
way for the sustainable development of their economies through SMEs
development. Numerous studies have shown that small and medium scale
enterprises act as a catalyst for growth and development of a national economy
(Anthony & Arthur, 2008; Chinweuba & Sunday, 2015 & Vijayakumar, 2013).
In recent decades, Nigeria has made it one of the nation’s prime objectives
to expand its industrial base through creation, sustenance and growth of small and
medium scale enterprises for attainment of economic growth. This has remained
the focus of various administrations in Nigeria particularly during the present
democratic dispensation.
Moreover, a major obstacle limiting the development of SMEs in Nigeria is
the death of infrastructural facilities and financial sources for the sub sector. In
most cases, the operators often find financing options particularly banks
1
inaccessible. This phenomenon has pushed many operators to explore other
alternative funding sources with high interest rate and other implications. In
response to that, government came with various financial windows for the SMEs
through the Central Bank of Nigeria. This includes; Micro, Small and Medium
Scale Development Fund (MSMSDF), microfinance banks, direct loans from state
governments among many other financial windows. Over a short period, it has
yielded significant improvement in their activities (Jibir, 2015).
On the other hand, the decay of infrastructural facilities especially power
has negatively affected the performance, growth and development of SMEs in
Nigeria over the years. However, there are efforts by both states and central
government to provide a supporting power supply for industrial development. This
development in SMEs activities has spawned volume of empirical studies trying to
ascertain the nexus between their activities and general performance of the
economy. Studies such as Aremu and Adeyemi (2011); Cravo, Gourly and Becker
(2009); Kaigama, Talib, and Ashari (2016); Nagaya (2017) and Taiwo, Ayode and
Yusuf (2012) among many others have looked into the relationship between SMEs
and economic growth and came up with different and conflicting results which
call for further investigation. Besides that, it is observed that majority of the
studies applied primary data in the case of Nigeria. There are very few studies that
used time series data. Thus, the present study plans to undertake the anatomy of
the relationship between SMEs activities and economic growth using dataset for
Nigeria. The study goes beyond the existing studies in two ways: firstly, it has
applied more recent time series data and secondly, it considers wide specification
and robust econometric techniques. On the basis of that, it provides fresh insight to
the existing literature on the relationship between SMEs and economic growth.

2
1.2. STATEMENT OF PROBLEM
Nigeria is currently witnessing an alarming rate of unemployment rate is
growing in geometric progression. The economy is also increasingly finding it
difficult to cope as Nigerian economy is waning. A lot of experts have called for
the creation of an enabling environment for small scale enterprise to thrive. In
spite of all the contributions and the attention given to small scale industry by the
government, the small business enterprise is still confronted with some problems
such as lack of funds, poor infrastructure, lack of technology among the rest
thereby retard the impact of contribution of small scale business industry to the
economy of Nigeria. This study is to investigate the effect of small business on
economy growth of Nigeria.
1.3. OBJECTIVES OF STUDY
This study seeks to identify the effect of the small scale business on growth
of Nigeria economy. The specific objective is to:
i. Assess the roles of small scale business in the development of Nigerian
economy.
ii. Examine the effect of small scale business growth rate on economic growth
in Nigeria.
iii. Determine the impact of small scale business in employment generation in
Nigeria.
iv. Investigate the challenges faced by small scale businesses in Nigeria and
their impact on the overall economy.
1.4. RESEARCH QUESTIONS
In an attempt to achieve the objectives states above, the following questions
were formulated.
i. What are the roles of small scale business in the development of Nigerian
economy?
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 ii. What are the effects of small scale business growth rate on economic growth
in Nigeria?
iii. To what extent has the small scale business solve the problem of
unemployment in Nigeria?
iv. How do the challenges encountered by small scale businesses in Nigeria
affect their contribution to the country's economic growth and development?
1.5. RESEARCH HYPOTHESES
The following hypotheses have been formulated to test the research
questions.
Ho: There is no significant relationship between small scale business and economy
development of Nigeria.
Ho: There is no significant relationship between small scale business growth rate
and economy growth of Nigeria.
Ho: Small scale business does not play a significant role solving the problem of
unemployment in Nigeria.
1.6. SIGNIFICANCE OF TH STUDY
This research will be beneficial to the government, small and medium scale
enterprises, management practitioners and academia.
This study will immensely assist the government to plan and develop the
sectors of an economy through empowerment and regulatory controls given to the
small and medium scale enterprises.
This research will be a benefit and empowered the industry to learn new
skill/capabilities by adjusting to the trends towards the development and growth of
their businesses and the economy by develop and grow in marketing, production
of goods and services, agriculture, science and technology, finance and
information.

4
 To the academics, this study will form basis for further studies and sustains
an existing knowledge on the subject matter.
1.7. SCOPE OF THE STUDY
This study focuses on the effect of small scale business on growth of
Nigeria economy, using Top Success phones, Iwo Road, Ibadan and Ore-Ofe book
shop, Apete, Ibadan as a case study.
1.8. DEFINITION OF TERMS
Small Scale Enterprise: A small scale enterprise is a small business marked by a
limited number of employees and a limited flow of finances and materials.
Business: A business is an organization where people work together to make and
sell products or services. A business can earn a profit for the products and services
it offers.
Economy: The system of how money is made and used within a particular country
or region. A region's economy is connected with things like how many goods and
services are produced and how much money people can spend on these things
Economy growth: Economic growth is an increase in the production of economic
goods and services, compared from one period of time to another. It can be
measured in nominal or real (adjusted for inflation) terms
Management: Management is the process of combing and utilizing an
organization input [men, materials and money] by planning, organizing, directing
and controlling for the purpose of producing output [goods and services].
Entrepreneur: Entrepreneur is an individual who conceives the idea of business,
design the organization of the firm, accumulates capital, recruits labour,
establishes relations with supplies, customers and the government and converts the
conception into a functioning organization business.
Opportunity: An opportunity is a potential gainful situation that must be
recognized and exploited an opportunity has the qualities of being attractive,
5
durable and timely. It is anchored in product or services which creates or adds
value for its buyers or end users.
Development: This entails growth of the business, increases in goods and services
and the improvement of lives of the citizen.

6
 CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION
Small and medium enterprises (SMEs) are considered the backbone of
economic growth in all countries. They play an important role in Nigerian’s
economic growth, as they constitute larger percent of the companies in Nigeria.
They also contribute to national development by positively influencing the
distribution of income in both functional and nominal terms. In emphasizing the
importance of small business, they enhance capacity building as they serve as
entrepreneurial training avenues; they create more employment opportunities per
unit of investment because of their labour intensive operations; they achieve a
much more relative high value added operations because they are propelled by
basic economic activities that depend mostly on locally sourced raw materials;
they provide feeder industry services as they serve as major suppliers of
intermediate goods and components to large-scale industries as well as major
agents for the distribution of final products of such industries; they provide
opportunities for the development of local skills and technology acquisition
through adaptation, Rogers (2015).
2.1 THE CONCEPT OF SMALL SCALE BUSINESS
Small and medium scale enterprises (SMES) have been generally
acknowledged as the bedrock of the industrial development of any country. Apart
from the numerous goods and services produced by small scale business, they
provide a veritable means of large scale employment, as they are usually labour
intensive. They also provide training grounds, for entrepreneurs even as they
generally rely on the use of local raw materials. If well managed, small scale
business can gradually transform into the giant corporations of tomorrow. These
contributions thus explain why government and international agencies mobilize
7
efforts towards the realization of sustainable industrial growth and the creation of
mass employment through the rapid growth and development of the small and
medium enterprises (Nnanna, 2015).
Given the significance of SMEs in economic growth and development,
numerous studies have assessed the role of SMEs sector in light of various
activities stimulating growth and development. For instance, Nagaya (2017)
examines the impact of SMEs on economic growth found out those SMEs
activities are growth enhancing through various channels like employment and
poverty reduction.
This fact underscores the essence, importance and relevance of the small
scale business in the development of any given economy. The experiences of
developed economies in relation to the roles played by small scale business
buttresses the fact that the relevance of small scale business cannot be
overemphasized especially among the Less Developed Countries (LDCs) or rather
Developing Countries. In order to highlight the significance of SMEs in relation to
the growth and development of a given economy, SMEs have been variously
referred to as the “engine of growth”. Almost all countries that have focused on
the small scale business sector and ensure its vibrancy have ended up succeeding
in the significant reduction and its attendant enhancement in the quality and
standard of living, reduction in crime rate, increase in per capita income as well as
rapid growth in gross domestic product (GDP) among other salutary effects,
Ogujuiba, (2015).
There is a consensus that if all stakeholders are to show serious
commitment to the development of the small scale business sub-sector, it follows
that the economy must necessarily witness meaningful transformation and
prosperity. A dynamic small scale business sub-sector is vital and imperative for
the overall economic development of the country. Aside from providing
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opportunities for employment generation, small scale business help to provide
effective means of curtailing rural-urban migration and resource utilization. By
largely producing intermediate products for use in large–scale companies, small
scale business contributes to the strengthening of industrial inter-linkages and
integration. A vibrant, efficient and effective small scale business generates many
resultant benefits for stakeholders, employees, customers, employers as well as the
entire economy.
Small scale business have no doubt been indeed recognized as the main
engine of economic growth and development, a major variable for promoting
private sector, development and partnership. Various governments, development
agencies and experts as well as multilateral institutions do appreciate this fact such
that they positively respond to any occasion and situations, which could permit
their contributing to or creating opportunities for promoting the lot of small scale
business.
The key roles of SMEs include mobilization of domestic savings for
investment, significant contribution to Gross Domestic Product (GDP) and Gross
National Income (GNI), harnessing of local raw materials, employment creation,
poverty reduction and alleviation, enhancement in standard of living, increase in
per capita income, skills acquisition, advancement in technology and expert
growth and diversification
This can however only be realized with the existence of a responsive and
vibrant industrial policy and involving governments overall economic
development strategies which will involve all stakeholders and ensure the
effective and efficient harnessing, coordination and utilization of economic
resources, Omotola, (2015)

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2.2 CONTRIBUTIONS OF SMALL SCALE BUSINESS ENTERPRISES
TO ECONOMIC DEVELOPMENT IN NIGERIA
The contribution of small scale business enterprises to the economy cannot
be overstated. Besides contributing significantly to reducing unemployment, it
forms a core of the economy generating significant percentage of domestic taxes
and producing goods and services using large numbers of labor from the low to
middle income categories of people; and supplying the goods and services to the
general population. In a nutshell, small scale business enterprises represent the
largest proportion of the productive population and by extension provide the fuel
that keeps the economy running towards technological, economic, political and
social development, Aremu (2015).
i. Employment generation: Before independence government establishment
were the major employment of labour but these days with many private
enterprises set up by entrepreneurs many people have gained employment
with these enterprises and this has reduced the dependence on government
establishment and large firms for employment. Small businesses employ a
greater percentage of the working population in any country. These people
employed receive their salaries and wages from these small organizations.
ii. Technological innovation: Small scale business enterprise brings about
technological innovation in Nigeria. In most cases small scale business
brings about the emergence of new things in our environment. Most of the
managers of small scale business are highly intellectual and with the rate of
advancement in technology the managers do not relent instead they carry
on continuous research on how to improve on existing technologies. Small
scale businesses in Nigeria acquires or improve domestic technology in the
production of several goods such as bakery products, soft drinks, textiles,
foot wears and soap production etc. and what seems to have been acquired
10
 was just further improvement in the technology of production so as to
improve the quality of these goods. This suggests that one of the main
contributions of small scale business enterprise to the economy is truly
improving indigenous technology.
iii. Improved standard of living: Standard of living is the level of quality
people in a particular society or country enjoying their living, which is not
only affected by their level of income but the quality and quantity of goods
and services made available to them. Small scale businesses, whether in
manufacturing industry or services industry such as retailing, entertainment
etc. contribute a great deal to the uplift in the standard of living of the
people residing in the society where they are found.
Contributions of small scale business enterprise: The contributions of small
scale business enterprises to an economy especially developing ones include:
Greater utilization of raw materials, employment generation, encourage of rural
development, development of entrepreneurship, mobilization of local savings,
linkages with bigger industries, provision of regional balance by spreading
investments more evenly, provision of avenue for self-employment and provision
of opportunity for training managers and semi-skilled workers Oluba, (2017).
Small scale business enterprises contribute to economic development
through the following: The provision of employment, innovation and areas
marketing for goods and services which are offered for sales. A lot of youths,
retired workers and out of school graduates are now gainfully employed, thereby
reducing the unemployment rate and its attendant’s social complication about new
goods and services and supply the needs of large industries, which have to rely on
the small scale operators for business success.
Small scale business in Nigeria constitute over 80 percent of all registered
companies, occupying positions in agro based and allied industries, rubber based,
11
leather shoes industries, chemical, electronics, general merchandising, restaurants,
dress making, hair dress making, cane-chairs, leather products, pomade and
toiletries, animal feeds and husbandry, printing, etc. They have accounted for a
large percentage of all businesses and a favorable percentage of the nation’s gross
national product. Small scale business enterprises have been the means through
accelerated economic growth and rapid industrialization have been achieved.
Harris (2016).
The small scale business mobilizes funds, which would otherwise had been
lying idle or wastefully spent and direct such to productive use. It shows
superiority in the use of local raw materials when compared with modern
manufacturing establishment. Small scale businesses also facilitate conservation of
foreign exchange and the development of scarce recourses in both developed and
developing economy. They create more employment opportunity at a relative low
capital cost; for instances. Small scale business enterprises efficiently make use of
local raw materials and technology thereby helping in the realization of the goal of
self-reliance. Akinseye, (2015)
Moreover, governments at various levels (local, state and federal levels)
have in one way or the other focused on the performance of small scale business
enterprise for economic gains. While some governments have brought up policies
aimed at facilitating and empowering the growth, development and performance
of small scale business enterprise, others are focusing on assisting small scale
businesses enterprise to grow through soft loans and other fiscal incentives in
order to enhance the socio-economic development of the economy like alleviating
poverty, employment generation, enhance human development, and improve
social welfare of the people.

12
2.3 PROBLEMS IMPEDING THE DEVELOPMENT OF SMES IN
NIGERIA
SMEs are known worldwide to encounter some structural difficulties,
problems or limitations, which if confronted can drive them to promote economic
growth and development. Some of the principal problems SMEs face in Nigeria
include the following:
i. Inadequate Funding: It is a known fact internationally that SMEs are funded
by their owners’ personal or family savings. Nonetheless, the high level of
poverty and consequently low level of savings in Nigeria and other Less
Developed Countries have made this source of funding for the establishment,
growth and development of new and existing SMEs inactively low. This
perhaps explains why most SMEs in Nigeria more often than not start off with
inadequate funding and afterward start warming up for shut down if external
funds from either the government or financial institution do not come.
According to Ezeh, ‘the unpreparedness of small business owners in terms of
capital prior to going into business is said to be accountable for their untimely
failure’ (Ezeh, 2015).
ii. Inadequate Infrastructural Facilities: The problem of unstable and
unreliable supply of electricity, dilapidated roads, inadequate supply of water
for both home and industrial use, inefficient and costly communication system,
among others, have for long hindered the growth and development of SMEs in
Nigeria. Nearly all SME operating in Nigeria have one or more power
generating plants as an alternative source of power supply. The cost of
obtaining, maintaining, sustaining and managing such generating plants are
more often than not very expensive and this has made cost of production as
well as prices of product very expensive, with the latter turning out to be more
and more uncompetitive in comparison with the imported equivalent. It is
13
 estimated the cost of providing basic infrastructural amenities at 5% to 20% of
the total cost of setting up a manufacturing and processing industry in Nigeria
(Osoba, 2016).
iii. Low Capacity Utilization: This is perpetually gotten from the low demand for
SMEs products owing to their poor quality as well as exorbitant prices.
Therefore, sales as well as profits have remained relatively low leading to poor
returns on investment. Majority of small scale business operate at between
30%-35% of their established capacity between with sales and profit volume
showing little increase. (Osoba, 2016).
iv. Poor Planning and Management: Management involves planning,
coordination, organization and control of both human and natural resources in
an organization to attain its set aims and objectives. Therefore, it involves
getting things done appropriately and efficiently through people. Nonetheless,
a survey of SMEs operating showed that owners practically get everything
done by themselves without seeking consultation from professionals or
experts. This has resulted to incompetence, inefficiency, wastage and under-
utilization of resources available to the organization. In actual fact, planning is
the essential function of management. Most SME operators venture into
business on impulse without adequate feasibility study on the project or
business. The problem of poor planning and management in Nigeria’s real
sector has been traced to inadequate relevant and appropriate information or
data relating to the proposed business ventures.
v. Poor Education and Experience: Closely associated to the problem of
planning and management is the low level of education the fundamental basis
for the wealth of a nation”. Capital and natural resources are inert factors of
production, human beings are the active agents who accrue and amass capital,
exploit natural and material resources, put up social, economic and political
14
 organization and carry forward national development. Without a doubt, a
country which is incapable to build and develop the skills and knowledge of its
citizens and utilizes them effectively in the economy will not be able to
develop anything else. In the view of Essien (2016), effective and successful
formal education is the only way to build as well as develop the human skills,
expertise and competence required for the growth and development of SMEs in
Nigeria.
vi. Raw Material Management and Choice of Appropriate Technology: These
are fundamental for growing and developing any business, be it large or small.
The difficulty relating to and inadequate business experience among SME
operators in Nigeria. These have given an explanation for the lack of
pioneering, inventive, innovative, dynamic, vibrant and entrepreneurial skills
and abilities necessary to effectively confront and tackle issues as they emerge.
Human resources therefore, constitute the foundation for wealth of nations.
(Yakubu, 2016).
2.4 SMEs AND ECONOMIC GROWTH AND DEVELOPMENT IN
NIGERIA
SMEs activities received closer attention from the Nigeria government with
an effort to diversify the economy. The over-dependent of government on the oil
necessitate Nigeria government at the mid-1980s to mandate the banks to set up
branches in the rural areas of the country to allow the dwellers to have access to
financial services. This bold policy of Nigeria government provides opportunity
for much people especially entrepreneurs in the rural areas to have access to the
money in banks as loan. Researches have shown that SMEs is the largest business
sector in the world economy. SMEs encourages high growth rate of employment
than the larger firms. In lieu of that, Nigeria has attracted much growth and
development potential more especially in Agricultural sector were small-scale
15
self-employed people partake in agro-allied processing activities, that the country
is agriculturally inclined. Eniola (2016).
SMEs account for more than 90% of all firms outside the agricultural
sector, a significant level of employment and generate major domestic and export
earnings. This therefore constitutes a major key instrument in poverty reduction
and alleviation in both developed and developing economies like Nigeria.
Furthermore, SMEs assist in fostering rural infrastructure development,
improvement of living standard of the rural dwellers, utilization of local resources,
output expansion, and transformation of indigenous technology, production of
intermediary goods, and increase in revenue generation to government. Odubanjo
(2015).
The petroleum oil is considered to contribute high to status of Nigeria but
SMEs provides gainful employment for about 70% of Nigerian population.
Available report suggests that agricultural sector accounts for close to 35% to 40%
of the nation’s GDP. Most actors in the Agricultural sector are small-scale self-
employed individuals engage in activities ranging from farming, handcraft,
fishing, agro forestry and livestock rearing. These SMEs activities rescue
government in areas of economic diversification. SMEs contribute substantially in
encouraging job creation invention and innovation in technology, development of
entrepreneurial skills, equal distribution of income and resources, emergence of
more competitive industries and general improvement in the living standard of the
people within an economic region. Osalor (2015).
2.5 ECONOMIC ROLE OF SMALL SCALE ENTERPRISES IN
NIGERIA
Several economic development advocates have come to realize the significant role
of small scale enterprises. They are viewed to be characterized by dynamism,
witty innovations, effectiveness and the relative small size allows for faster
16
decision making process in conducting business activities. Governments globally
have realized the significance of this category of enterprises and have initiated
cumulative public policies to encourage and fund the establishment of small scale
enterprises. More so, Basil (2015) argued that small business enterprises are
becoming increasingly evident through a robust economy and the mobilization of
local resource revolution, reduction in rural-urban migration, uses of industries
disposal and creation of employment opportunities which can be achieved by a
conscious and systematic policy of development of small and medium enterprises.
Small scale businesses are initially formed in traditional settings such as haircut,
weaving etc. This also helps in maintaining craft man ship as well as helping in
generating employment, maximize waste by using scrap materials from large firms
hence, enhances economic sub - contracting.
i. Small scale industries create employment opportunities for a lot of citizens.
Through SMEs lot of unemployed citizens and graduates have found
employment in small scale enterprises. A lot of small retail shops, cottage
industries, restaurants, poultry farms, and telecommunication/ telephone
shops have been initiated and managed profitably by people who would
have been unemployed till date. The entrepreneurs have in turn create jobs
for other citizens, who serve as support, technical and administrative staff
for them (Ayozie, 2015).
ii. It has also encouraged self-employment for many graduates both in the
rural and urban centres. The spirit of successful entrepreneurship has taken
over the drive and doggedness of Nigerians who believe in themselves and
in the goal of self- employment, instead of relying on paid employment.
For example, in the telephone retail and rental jobs, a lot of graduates and
unemployed Nigerians have remained self -employed. Their businesses
have expanded to the level of employing some other unemployed citizens.
17
Through the initiation of manpower development support schemes, and their
involvement in the training and retraining of entrepreneurs, small scale enterprises
have provided a pool of potential entrepreneurs and business people who are well
equipped to start and successfully manage industries (Ayozie 2015).
2.6 NON-ECONOMIC IMPORTANCE OF SMES
An important issue that needs to be added at this point is that over and above
economic importance of the SMEs, they perform important normative functions
by providing economic opportunities not only generally, but especially to marginal
groups such as women, ethnic minorities, the young and the elderly. It is also
argued that working in SMEs engenders personal values that are related not only
to economic activities, but also to non-economic normative values, such as
independence and self-reliance.
2.7 THEORETICAL REVIEW
2.7.1 Keynesian Economic Theory
Keynesian economic theory was propounded by Keynes. This theory believes that
small scale enterprises play a vital role in the economic development of a country.
The theory inferred that government can entrench economic stability through
efficient financial disbursement to small scale enterprises drive via micro finance
banks. The theory opines the operations of small scale enterprises drive the
government makes the environment conductive. The government intervention in
ensuring a conductive economic environment for the small scale enterprises must
ensure efficient allocation of resources, regulation of markets, and stabilization of
polices on those economic factors that interact on the operations of small scale
enterprises.
Keynes assumes that small scale enterprises drive in a conductive environment
where there are polices that maintain fixed interest rate, exchange rate and
inflation rate that could have propulsive effect on the operations and therefore, the
18
ability of these firms to understand its environment of operations taking
cognizance of the dynamism in the business environment will not only make them
pertinent decisions that enhance their performance. The following are the
assumptions of the theory;
 The theory assumes that small scale enterprises operate in environment
orchestrated by the interplay of various elements of the environment.
Therefore, small scale operators should take abreast of its economic
environmental factors, through external to them, but help them to be proactive
in their operations.
 The theory also assumes that small scale enterprises drive in stable economic
environment where there are fixed exchange rate, interest rate, inflation rate
etc.
2.8 EMPIRICAL REVIEW
Ogujiuba, Ohuche and Adenuga (2004) looked into credit availability to small and
medium scale enterprises in Nigeria.. The paper showed that the capitals vital for
the response of bank lending to economic shocks and emphasize the need for a
sound and efficient financial sector to support small and medium scale enterprise.
Dada (2014) did an empirical review of commercial banks’ credit and the
development of small and medium scale enterprises in Nigeria between 1992 and
2011.The estimated models shows that commercial banks to small and medium
scale enterprises exert a positive influence on small and medium scale enterprise
development, which was by wholesales and retailed trade output as a components
of Gross Domestic Product, while exchange rate and interest rate revealed
negatives effects on small and medium scale enterprises development. The study
suggested among others that adequate savings should be mobilized from the public
and that government should persuade banks to lend to small and medium scale
enterprise by providing guarantee, interest rate concession and other incentives.
19
Imoughele and Ismaila (2013) investigated the impact of commercial bank credit
accessibility on sectoral output growth in Nigeria, covering the period 2011-2018.
The result of the study revealed that commercial bank has a long run relationship
with sectoral output growth in Nigeria. While appraising the growth effect of
small and medium scale enterprises financing in Nigeria, Afolabi (2013) in
estimating the multiple regression model. The result indicated that small and
medium scale enterprises output has positive influence on economic development
while lending rate is found to exert negative effect on real gross domestic product,
a proxy for economic growth.
A related study by Nwosa and Oseni (2013) sought to empirically ascertain the
impact of bank advances to small and medium scale enterprises on manufacturing
output in Nigeria 1992-2010. The study found that banks and advances to the
small and medium scale enterprises sector had significant positive impact on
manufacturing output both in longrun and short-run. Akinguola (2011), in this
paper, explored the relationship between small and medium scale enterprises
financing and growth in Nigeria. The paper proposed that accessibility to low
interest rate should be provided in other to enhance the growth in Nigeria
economy. Examining the relationship between commercial bank credit indicators
and rural economic growth in Nigeria, Tajudeen (2012) study shows that the rural
economic growth is co-integrated with commercial bank credit indicators in
Nigeria. The study also confirmed positive relationship between rural economic
growth and commercial banks rural loans between commercial banks loan to
agriculture and rural economic growth. Ojong, Arikpo and Ogar (2015)
investigated the role of deposit money banks on the growth of small and medium
scale enterprises in Nigeria. The results revealed that bank credit had a significant
relationship with the growth of small and medium scale enterprises. Multiple
taxations and government policies were found to have a significant relationship
20
effect on small and medium scale enterprises growth. The authors suggested
deposit money banks should be encouraged to increase the volume of loan able
funds to small and medium scale enterprises, while elimination of multiple
taxations, reduction in corporate taxes and the strengthening of government policy
frame work were recommended. Safiyaay and Garba (2013) examined the role of
commercial banks in enhancing the growth small and medium scale enterprises in
Nigeria. It was discovered that commercial banks contribute to financing small
and medium scale enterprises though their contribution has declined considerably
as the government through Central Bank of Nigeria directives brought to an end
the mandatory banks credit allocations. The paper hence recommended that
commercial banks should often on its stringent requirements so that small and
medium scale enterprises can benefit maximally from loan advances as large
companies do.
A study by Duru and Lawal (2012) assessed the impact of financial sector reforms
on the growth of small scale enterprises in Nigeria. The results indicated that all
variables considered have significant positive impact on the growth of small and
medium scale enterprises in Nigeria, thus the government should create and
enabling environment small and medium scale enterprises to thrive.

21
 CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION
Methodology is a set of rules and procedures upon which research is based
and against which claims for knowledge and assumptions are evaluated for
decision making. It can also be said to be the specification for collecting and
analyzing the data necessary to help solve the problem at hand.
3.1 AREA OF STUDY
The area of study includes the staffs of Top Success phones, Iwo Road,
Ibadan and Ore-Ofe book shop, Apete, Ibadan. The study will however
concentrate on the effect of small scale business on economy growth of Nigeria.
The study chooses Top Success phones and Ore-Ofe book shop as a case study
because they both are seen as successful small scale business by the researcher to
have contributed to economy growth in their business industry.
3.2 POPULATION OF THE STUDY
The Population of any study is a census of all items or subjects that posses
the characteristics or that has knowledge of the phenomenon being studied and the
population for this work includes all thirty (30) staffs of Top Success phones, Iwo
Road, Ibadan and twenty (20) staffs of Ore-Ofe book shop, Apete, Ibadan.
3.3 SAMPLE SIZE AND SAMPLING TECHNIQUES
Sample size will be choose from the total population of 50 staffs of both
small businesses using a sampling techniques of Taro formula
Sample size is determined by:
n= N
1 = Ne²
n = sample size
N = estimated population
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e = level of significant 0.05 or 5%
n= 50
1 + 50 (0.05) ²
= 50
1 + 50 (0.0025) = 44.44
n = 44
44 will represent the sample size
3.4 RESEARCH INSTRUMENTATION
In this study, the researcher will use questionnaire for the collection of data
for the study. The questionnaire will specifically design to accomplish the
objectives of this study. The instrument will be run on a four scale option: Agree,
Strongly agree, Disagree, Strongly disagree. The questionnaire will also support
with interview by the researcher.
3.5 METHOD OF DATA COLLECTION
The researcher will use primary and secondary method of data collection to
obtain required data for this study. The primary data will be obtain through the use
of questionnaire and personal interview while the secondary data will be obtain
from past literatures via books, journals and internet.
3.6 METHOD OF DATA ANALYSIS
Collected data will be analyze using chi-square formula
The formula for chi-square (x2) distributions is
X² = (fo - fe) ²
fe
Where,
x2 = Calculated Chi-square value
Oi = Observed
ei = Expected Frequency
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3.7 VALIDITY OF THE TEST
This study will be review by the researcher supervisor, correction(s) will be
made where lapses occurred and necessary data will be added in places where they
will be needed hence the validity of the test, and the data from the primary sources
are reliable.
3.8 METHOD OF ADMINISTRATION OF THE RESEARCH
INSTRUMENT
The research instrument (questionnaire) constructed by the researcher to
collect relevant primary data needed for research analysis will be distributed to
respondent of the case study of the study after which the instruments are retrieved
analysis will take place base on the opinion and response of the respondent. Chi
square formula will be used to analyze the questionnaire.

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