Effect Of Small Scale Industry On Economic Development

1.0       INTRODUCTION

1.1       Background of the Study

The government has launched a number of policies and programs to support the growth of SMEs, but it can only do so much to advance sustainable economic development. Due to this, the government was forced to implement economic reform programs in order to move away from large-scale, capital-intensive industrial projects that were based on the theory of import substitution strategies and toward Small and Medium-Sized Enterprises, which always have better prospects for growing the domestic economy and producing the necessary goods and services to drive the economy toward development (Oni and Daniya, 2017). The goal of SAP and NEEDS, which were launched in the 1980s and 2000, respectively, was to prepare people for creating wealth through small businesses by instilling in them a true spirit of entrepreneurship (Fasau, 2016).

Due to their ability to increase industrial output and human welfare, small businesses have been widely acknowledged for their contributions to the development of any economy. Due to their ability to diversify their business, increase industrial production, and accomplish fundamental goals, small-scale enterprises are the engine of economic growth and development. In almost every economy, small businesses make up the majority of all businesses and are responsible for the majority of output and employment in the private sector. Also, the nation’s unemployment rate is lowered since the small business creates job opportunities. The small-scale industrial sector is now regarded as the foundation of the modern economy. Currently, 90% or more of Nigeria’s industries are small-scale.

Because SMEs contribute to employment growth at a higher rate than larger firms (Farouk & Saleh, 2019), the performance and growth of SMEs is a major driver and indices for the level of industrialization, modernization, and urbanization, as well as gainful and meaningful employment for all those who are able and willing to work, income per capital, equitable distribution of income, and the welfare and quality of life enjoyed by the citizenry (Aremu & Adeyemi, 2019). It is widely acknowledged (Birch 2020; Storey 2021) that the SME sector plays a significant role in propelling economic growth and job creation in both developed and developing nations (Ariyo, 2018; Kpleai, 2019). According to Culkin and Smith (2020), SMEs, or businesses with 200 or fewer employees, make up the largest business sector in every economy in the world. Governments all over the world are also actively encouraging and supporting the growth of SMEs as part of their larger national development strategies (Abdullah & bin Dakar 2020).

Today, small-scale industry is acknowledged as a crucial component of the country’s economic expansion and is known as the “engine of growth.” According to Essien [1], small businesses account for up to 99% of all businesses in most countries worldwide, employing people and creating about 75% of jobs. Every nation’s industrial development is greatly influenced by small businesses (Ahmed, 2018). Ojo (2019) asserts that small businesses have a greater chance of growing their own domestic economy by producing the goods and services that drive Nigeria’s economy. Focusing on small-scale industry became crucial in Nigeria as a way to guarantee self-sufficiency, generate employment, replace imports, and make effective use of local raw resources (Ojo, 2019). In Nigeria, small enterprises create jobs and serve as a springboard for entrepreneurship. Small businesses now prioritize entrepreneurship rather than just offering social goods (Thurik & Wennekers, 2020). Therefore, it serves as a source of job creation and economic growth. Hence, the reason policy makers in Nigeria pay attention to entrepreneurship and small businesses.