CHAPTER ONE1.0 INTRODUCTION1.1 BACKGROUND OF THE STUDY.In recent time, the fortune of small scale and medium scaleIndustries attracted the attention of government world-wide and thus hasbeen the focus of general interest and research, especially in developingCountries due to the importance of small scale and medium scaleIndustries.Their importance cannot be over emphasized as they constitute awhole virile vehicle for the generation of vast production of outputs and jobcreation. They are also act as catalyst for restructuring and diversifying theproductive base of an economy and for the Industrial economy and for theIndustrial economy take-off and growth of such an economy. The smalland medium scale Industries are seen to hold the key to future expansionof the Industrial sector.xiIn Nigeria, evidence has shown that in 1986, small scale and mediumscale Industries accounted for 70% of all firms, employing millions ofNigerians (first Bank of Nigeria report, 1987). By the end of 1979, over80% of all establishments licensed under the factory act were small andmedium scale Industries (Onwuala, 1987). This made the importance ofthis economic unit to be unelectable.Small scale and medium scale Industry in its widest sense implies theurgent response to the challenges of developing countries, of which Nigeriais not an exception. Small and medium scale Industries should be practicedwith due regards to the importance of available local raw materials in itsenvirons because the challenges facing small and medium scaleIndustrialist are enormous.The importance of small and medium scale Industries to theeconomic development of any country, whether developing or developed,have been widely acknowledged and acclaimed. They are considered asthere stimulate to private ownership and entrepreneurial skills, generateemployment, promote industrial dispersal and rural- urban migration.Clive carpenter (2001), said that across the world, small businessesare crucial for economic growth, poverty alleviation and wealth creation.Uayatudeen (2001) said that across the world, small businesses havesuch a crucial role to play in the development of an economy and thatcannot be ignored. According to William and David, most firms andsmall and medium scale Industries are compared with companies thateconomist usually study. But economists have concentrated on large scaleIndustries. The leading textbooks in economics have title discussions onsmall and medium scale business or entrepreneurs.The partial combinations of small and medium scale Industries on theNigerian economy are; creation of wealth, poverty eradication andemployment generation as encapsulated in the national economicempowerment development strategies (NEEDS)However small and medium scale Industries are bedeviled bynumerous challenges which have hampered its development and growthand also its combination to national development. To this end, governmenthas instituted various programs to address the challenges and constraintsxiiifacing small and medium scale industries growth. The programs andinstitutions Include:a. Setting up and founding of industrial estates.b. Establishment of national directorate of employment (NSE)c. Establishment of the Nigerian bank of commerce and industry (NBC),the national economic re-construction fund (NERFUND),the NigerianIndustrial bank (NIDB) which has merged in to one agency in thebank of industry, the world assisted small scale enterprises loanscheme (SNEX), the Nigerian export and import bank (NEXIN) etc.d. Setting up a small and medium scale enterprises development agencyof Nigerian (SMEDAN); an agency which Co. ordinates developmentin small business sector.Unfortunately, all these formal credit schemes have not been able toadequately address the fundamental problems which have constrainedsmall scale enterprises access to credit; and any other enterpriseestablishing a small and medium scale industry requires capital to take offsurvive and eventually expand.xivNigeria’s major manufacturers produce food and beverages,cigarettes, textiles and clothing, soaps and detergents, footwear, woodproducts, motor vehicle parts, chemical products and metals while smalland medium scale manufacturing engage in leather making, poultry makingand wood carving. The smaller industries are often organized in craftguides involving particular families who pass the skill from generation togeneration.People have lived in what is now known as Nigeria since at least9000BC, evidence indicated that since at least 5000BC, some of them havepracticed settled agriculture. In the early (centuries (AD), kingdomsemerged in the drier northern savanna, prospering from trade with northAfrica. At roughly the same time, the western and southern forested areasyielded city- state and looser federations sustained by agriculture andcoastal trade. These systems changed radically with the arrival of theEuropeans in the late 15th century, the rise of the slave era in the 16thCentury through the 19th Century. Nigeria achieved independence in thexv1960, but has since been plagued by an unequal distribution of wealth andinflation.The first well documented kingdom was the Yoruba kingdom, whichwas observed between the 11th-12th centuries. Over the next fewcenturies, they spread their political and spiritual influence beyond theborders of its small city states. Its artisans were highly skilled, producingamong other things, bronze castings of heads in a very naturalistic style.Terra- cotta, wood and Ivory were the common media instruments used.Shortly after the 12th century, the kingdom of Benin emerged in themid-western south region. Although it was separate from the Yorubakingdoms; Benin legends claim that the kingdoms first rulers weredescendant from an Ife prince. By the 15th century, the Benin kingdom waslarge, wood designing was what sustained the city’s trade (both within theregion and later with Europe). Its legacy includes a wealth of elaboratebronze plagues and statues recording the nation’s history and glorifying itsrulers.xviFrom the above paragraphs, it can be noted that small and mediumscale industries are indeed necessary for the development of any economy.Small and medium scale industries act as the major stepping stone toeconomic growth. In Nigeria today, small and medium scale industries arecommon but have no efficiently achieved or attained her goals.Therefore, to encourage local businessmen and institutions in buyingsmall and medium sized businesses, the government established theNigerian bank for industry and commerce, which had an initial operatingcapital of 50 million naira. There was some concern in Nigeria thatNigerians might not be able to raise enough capital to take over the foreignowned businesses affected by the decree and that there might not beenough Nigerians with the technical and managerial skills necessary toreplace extricate personnel.