Page 1 of 10
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 07
August 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 11
The Growth of Small and Medium Scale Enterprises in
Nigeria: The Impact of Central Bank and Other Institutions
Apanisile Olumuyiwa Tolulope1 and Ajayi Adeola2
Department of Economics, Obafemi Awolowo University, Ile-Ife, Osun State, Nigeria
2. Email: ajayifunso4christ@gmail.com
Abstract
Small and Medium Scale Enterprises are the
engine of economic growth. They have been
accepted worldwide as instruments of
economic growth and development. SMEs
not only contribute to improved living
standard they also bring about substantial
local capital formation and achieve high
level of productivity and capability. In
Nigeria, Central Banks and Other
Institutions are the financiers of Small and
Medium Scale Enterprises. These
institutions have made tremendous efforts
towards the realization of sustainable
industrial growth of Small and Medium
Scale Enterprises in Nigeria. In spite of the
contributions of these institutions to
facilitate its growth, numerous problems
have continued to hinder the optimal
performance of the SMEs. This necessitated
the study of the impact of Central Bank of
Nigeria and Other Institutions to the growth
of Small and Medium Enterprises in
Nigeria.
The paper concluded that Federal
Government, Central Bank of Nigeria and
Other Institutions should address these
endemic problems militating against the
optimal development of the sub-sector in
order for them to contribute to economic
growth and development of the country.
Keywords: Central Bank, Development,
Economic Growth, Support Institutions,
Small and Medium Scale Enterprises
Introduction
Small and Medium Enterprises occupy a
place of pride in virtually every country or
state. Because of their (SMEs) significant
role in the development and growth of
various economics, they (SME) have aptly
been referred to as the engine of growth and
catalysts for socio-economic transformation
of any country (Ihua, 2009). Apulu (2012)
opined that SMEs represent a veritable
vehicle for the achievement of national
economic objectives of employment
generation and poverty reduction at low
investment cost as well as the development
of entrepreneurial capabilities.
Since the adoption of economic reform
programme in 1986, there has been a
decisive shift from capital projects based on
import substitutions to Small and Medium
Scale Enterprises with immense potential for
developing domestic linkages for sustainable
industrial development.
For over two decades, the Central Bank of
Nigeria and Other Institutions has been the
major financiers of SMEs. They have also
been mobilizing efforts towards the
realization of sustainable industrial growth
and the creation of mass employment
Page 2 of 10
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 07
August 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 12
through the rapid growth and development
of the Small and Medium Scale Enterprises
in Nigeria.
This paper will therefore review literature on
Small and Medium Scale Enterprises vis-à- vis the impact of CBN and Other
Institutions in to the growth of SMEs in
Nigeria.
Literature Review
Many scholars have written on Small and
Medium Enterprises in Nigeria. This fact
underscores the essence, importance and
relevance of this sub-sector in the
development of any given economy.
National Council on Industry (19992)
defined Small Scale Enterprises as those
with fixed assets above N1 million but not
exceeding N10 million excluding land but
including working capital while Medium
Scale Enterprises are those with fixed assets,
excluding land but including working capital
of over N 10 million but not exceeding N
40million.
This definition was revised in 1996 with
Small Scale Enterprises defined as
enterprises with total cost above N1 million
but not exceeding N40 million, with a labour
size of between 11 and 35 workers while
Medium Scale Enterprises area defined as
enterprises with total cost above N150
million and a labour size over 100 workers.
Gbolami (2006) et al. (2010) regarded SMEs
as firms that have fewer employees and a
lower turnover and assets than large firms
such as multi-national companies.
According to Onugu (2005), SMEs are
increasingly recognized as the principal
means for achieving equitable and
sustainable industrial diversification and
dispersal .In most counties of the world,
SMEs account for well over half of the total
share of employment, sales and value added.
Udechukwu (2003) emphasised that SMEs
constitute the most viable and veritable for
self-sustaining industrial development from
varied experiences especially in developing
countries. He stated further that SMEs in
most developing economics represent the
sub-sector of special focus in any
meaningful economic restructuring
programme that targets employment
generation, poverty alleviation, food
security, rapid industrialization and
revisiting rural and urban drift.
SMEs are important economic catalysts in
industrialised countries as they are in the
developing world. In many developed
countries, more than 98% of all enterprises
belong to the SMEs sector; 80% of the total
industrial labour force in Japan, 50% in
Germany and 46% in USA are
employed in smaller firms. In USA, small
business constitutes nearly 39% to the
national income (Udechukwu, ibid).
Lukacs (2005) ascertained that in Singapore,
51 % of the total workforce is employed in
the SMEs sector and in particular, SMEs in
the manufacturing sector account to 15% of
the GDP.
He also stated that SMEs account for the
largest employers in Hong kong with over 4
million people and in Japan 81% of the
employment is in the SMEs sector.
Ongori and Migiro (2010) maintained that in
India SMEs have been consistently
outperforming large companies on crucial
parameters such as the growth in production
and growth in employment.
Page 3 of 10
Journal for Studies in Management and Planning
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e-ISSN: 2395-0463
Volume 01 Issue 07
August 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 13
Sharma and Bhagwat (2006) noted that the
SMEs sector in India accounts for 40% of
industrial production, 35% of the total
exports and provides about 80% of
employment in the industrial sector.
Abuga (2007) asserted that the significant
role played by the SMEs in terms of the
development is acknowledged the world
over. He also stated that they occupy an
important strategic place in economic
growth and equitable development in all
counties.
In African, SMEs employ more than 40% of
all new entrants to the labour force since
they tend to be more labour intensive than
large firms and are better place to alleviate
unemployment (Muuka, 2002)
Similarly, Odeyemi (2003) stated that
Nigerian SMEs account for about 70% of
industrial employment and well over 50% of
the GDP.
SMEs help to promote industrial and
economic development through the
utilization of local resources .They are also
responsible for the production of
intermediate goods and transformation of
rural technology (Aina, 2007)
The Federal Office of statistics revealed that
about 97% of the entire enterprises in
Nigeria are SMEs which employ an average
of 50% of the working population as well as
contributing up to 50% of the country’s
industrial output.
In recognition of the crucial role SMEs play
in economic growth and development the
Bank of Industry granted over seventy
percent of entire loan to SMEs in 2006
(Muktar, 2009).
In order to make SMEs more vibrant, the
Federal Government of Nigeria has evolved
institutions which have mobilised efforts
towards the realisation of sustainable SMEs
development in the country. They include:
1)The Central Bank:-Central Bank serves
as principal agent for promoting improved
access to credit for industrial development
particularly to Small and Medium Scale
Enterprises. They provide loans and
advances to Small and Medium Scale
Enterprises. Central Bank of Nigeria has
remained committed to the growth and
development of Small and Medium
Enterprises in Nigeria. This stance has been
successively reflected in the bank’s policies
over the years. According to Anyanwu
(2003), the minimum stipulated percentage
was 10 of total credit to indigenous
borrowers, which constituted the SMEs. It
was raised to 16 and 20 of total loans and
advances in 1980 and 1989 respectively. To
improve access to finance for SMEs, the
Central Bank approved the sum of five
hundred million naira debenture stock for
SMEs in 2010.Also, this year the governor
Central Bank approved the sum of two
hundred and twenty billion naira to Small
and Medium Scale Enterprises in Nigeria
2) Nigeria Bank for Commerce and
Industry:-Nigeria Bank for Commerce and
Industry was established jointly by the
federal government of Nigeria and the
Central Bank of Nigeria (CBN) in 1978 as
the apex institution for financing Small and
Medium Scale Enterprises. The rationale for
establish for establishing the bank was to
bring financial discipline to bear and to
hopefully ensure a more efficient utilization
