CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1.0. INTRODUCTION
Nigerian Bank for Commerce and Industries was established in October 1973 to
finance the process of indigenization of the nation’s economy with a capital of
N50 million; the bank first function is entrepreneurship development by giving
assistance to indigenous businessmen who obtain funds in the form of loans of
equity to acquire the ownership interest of aliens in business activities. Potential
entrepreneurs were able to obtain funds from the banks to buy up shares or buy
the entire business activities in schedule I and II. Nigerian Bank for Commerce
and Industries assists business by providing consultancy services in
identification of viable projects. Entrepreneurs who want to change into another
line of business can be assisted by NBCI to identify projects that can be
profitable and this usually minimize the risk of business failure. The bank also
assists the entrepreneur in the preparation of well researched and articulated
feasibility reports. After deciding on a particular business idea, the next thing is
to begin to gather facts and figures to enable you take a decision as to which way
to go. This state of fact-finding aimed at determining the business profit
potentials and return on investment is called feasibility study. It is therefore
necessary to carry out a feasibility study before committing any money.
2.1.1 CONCEPT OF COMMERCIAL BANK
This bank was established in 1964, owned jointly by the Federal Government
and the Central Bank of Nigeria through the reconstruction of the investment co-
operation 'of Nigeria, which had been in operation since 1959. Commercial
Banking institutions in Nigeria can be classified into two: the purely indigenous
banks owned 100% by Nigerian Government and individual and the mixed banks
with a majority of indigenous shareholders at least 60% equity and majority
foreign interest. As Nigerian law does not allow the establishment of foreign
banks with a majority foreign interest (Femi, 1986).

2.1.2. FUNCTIONS OF COMMERCIAL BANK

I. Extension of Credit Facilities
Nigerian commercial banks function as other commercial banks in other free
enterprises economies. Their primary function is the extension of credit to
worthy borrowers. They are vehicles for implementing government national
development plan. In making credit facilities available to industrialists or
entrepreneurs they are rendering great social service. The commercial' banks
make funds available for general development in all aspects of the economy.
Types of Credit Facilities
Commercial banks are more interested in producing short term loan facilities to
their customers. These can be in the form of:
i. Loan Account: The loan is mainly used by entrepreneurs or other
individuals to supplement what they already have. The amount granted is
generally small and it is payable in the shortest possible time.
ii. Overdraft: Commercial Banks also lend funds to their customers on
overdraft, and funds advanced on this basis are in theory, repayable on
demand, while interest is payable on the outstanding balance on a daily
basis and generally granted to business customers, larger, medium, small
scale enterprises.
II Business Advisory Service
The main aim of this advisory service is to assist small business customers to
develop their business in such a way that they can attract bank finance,
entrepreneurs are taught how to introduce simple record keeping and accounting
their operation.

Area of Finance: - It is necessary for the commercial banks to properly examine

the area to which the fund being demanded by the small scale business is to be
employed. The cash needs for meeting up operational cost and administration
expenses have already been mentioned and need not to be over emphasized.
Until then however, at the startup of business, there is need for equipment, plant,
machines and free or lease-hold premises for the business. This is an area the
bank needs to provide the basic finance for the entrepreneur.
Funds to be provided by the banks will also cover that which can be used for the
purchase of raw material for a manufacturing company, there is the use for
adequate provision of funds for materials replenishment. It is necessary to
determine the record point so as to make the required purchase. The bank has the
role of ascertaining these from the feasibility report being presented by the
entrepreneur. There is need for the finance in the distribution of manufactured
goods through the whole sellers or directly to the retailers. This distribution
channels income to high transport cost. Funds provided by the commercial banks
can be used by offsetting these cost. The distribution cost here includes the
advertising and other pronl0tional and marketing cost. Before the distribution of
the manufactured goods, the production processes require finance even up to the
final stage. The finance required here is for maintenance of production
equipment and service cost. This will also include the packaging cost and
trademarks. It is necessary for the commercial banks to examine these areas of
finance to ensure provident use of their funds and success of small scale business.
However, the commercial banks have to specify the conditions for making these
funds available to the small business.
Conditions of Finance:- Feasibility and viability report for a loan to be extended
to any small business, the commercial banks must scrutinize the cash flows on
which the feasibility and viability of the industry project is based. The feasibility
study being conducted on the project service to determine the practicability of
the venture. In order words it serves to show how attainable the objective of the
industry is. The viability of the industrial projects refers to the financial worth of
the project. The bank cannot in any venture projects unrealizable returns. The
bank demands evidence for feasibility and viability. The feasibility and viability
report are often a bundle of assumptions and presumptions, and to materialize
means that the object of the project might be equally marked. The need for these
reports arises during the early stages of the business.
Qualities of the Entrepreneurs: The commercial banks scrutinize the capacity,
character, integrity and collateral securities of the prospective borrowers for
advances to be made to him, the threat of capacity has to do with his age, mental
fitness and alertness and ability to enter into a contract with the provisions of the
laws of the land. The character threat has to do with his business mind of dealing
with issues. It is essential to ascertain that the entrepreneur is not a difficult
person. It is equally essential that commercial banks have to ascertain the
goodwill the entrepreneur has built for himself over the years both in the business
and the entire society. For a new entrepreneur this quality may not be necessary
but the entrepreneur could have built a good reputation in some other ways,
academically, socially or otherwise. Another issue worth scrutinizing is the
extent of financial involvement of the entrepreneur at the time to seek for the
commercial bank loan.

Ability of the entrepreneur to convince the commercial bank of his state in the
business would ginger the commercial bank to aid him considering all of the
above stated conditions and qualities. Additionally, ability of the entrepreneur to
present a tangible or worthwhile collateral security will enable the commercial
bank to finance his business. This is very essential when the entrepreneur is yet
to establish a high reputation in his environment considering the newness of his
business.
Position of the Business: - The commercial banks will finance a business that
is at a fairly good position or have prospects of attaching a fairly good position.
This is viewed from the balance sheet of one business in the past years of
operations. The bank in addition will want to satisfy itself as to the continued
profitability of the business. The business must be seen not only as profit
making but also as that of an increasing annual profits from year to year.

2.1.3 ADVANTAGES OF BANKS AS SOURCES OF FINANCE TO

SMALL SCALE ENTERPRISES

In considering the type of financial assistance that can be obtained from banks
and other financial institutions, I will like to state right from the on-set that banks
and the government operate from different pedestals. Most banks are privately
owned institutions which have profit maximization as their main goal in business
in contrast, government financing is usually developmental in nature and
therefore has the advantage of good terms, low interest, low equity or little or no
collateral security.
Banks, as a source of finance to small scale enterprise advantage includes:
a) The fact that the bank deals with money and all kinds of business on a full
time basis, shows it is in a better position to provide expert advice to the
small scale retailer in particular business and general business trends.
b) Borrowing from a bank as opposed to a government source, for instance
may be better for your credit rating because banks are more reliable to give
unbiased opinions on their clients rating than public institutions.
 c) Banks have the largest breath that is more types of loan, than other
institutions as banks can structure any kind of facility to meet the specific
needs of their clients.
d) Banks offer many business services, including credit references on
customers or potential customers, financial investment and estate advisory
service loans, discounting customers’ accounts and note payable, payment
of freight invoices cheque reconciliation services and payroll accounting
services.
2.1.4 DISADVANTAGES OF BANKS AS SOURCE OF FINANCE TO
SMALL SCALE ENTERPRISE
a. Banks are generally conservative when considering loans.
b. The technical requirement, spread, financial projected budget of presenting
a loan can be seen quite frustrating to the daunting, even uninitiated and on
a related note.
c. Because banks are highly regulated by the government and still need to be
profitable they have to be careful that their loans do not fail. Banks
therefore have very detailed and tough requirements which borrowers often
regard as laborious.
2.2.1 MEANING OF SMALL SCALE ENTERPRISE
A small scale enterprise is a privately owned and operated business,
characterized by a small number of employees and low turnover. A small
enterprises usually only shares a tiny segment of the market it operates in.
From the given background, a small scale industry is a means to an end and not
an end itself. Yet it is regarded as being of great importance in the present state
of our economic life. We shall hereby examine the importance of small-scale
industries from two perspectives. Firstly we shall examine the importance of
small-scale industries to an individual and then the economy as a whole.

2.2.2 IMPORTANCE OF SMALL SCALE ENTERPRISE

I. To an individual: - An individual will have to establish a small scale
industry for the following reasons.
a. Profit Motive: - The individual would like to make as much profit as he
can from a small scale business. Hence identification of a profit source will
motivate one to establish a small scale business.
b. Independence: This is more of a psychological reason than any other thing.
Certain individuals claim that they will enjoy a lot of independence running
their own small-scale business than when they are employed by any big
corporate organization.
c. Money Making: - An individual might like to establish a small-scale
business not because he just wants to make profit or feel independent but
to make as much money as he can from small scale ventures. He simply
wishes to be identified as someone who has made money.
d. Source of Livelihood, Job and Investment: - One can earn his living
through a small scale industry. One might decide to create job for himself
and others by establishing a small scale industry. One might like to be
noted as an investor with interest in various ventures. Hence, setting up of
small scale industry provides a means of investment.

II. To the Economy: The present day Nigerian economy stands to benefit from
the establishment of small scale industries.
a. Employment Creation: - This is one of the objectives of the Nigerian
industrial policy that was adopted. The policy specified the establishment
and promotion of small scale industries as the basic tool for tackling the
various forms of unemployment that has been witnessed in the country
over the past few years. In recent years, Nigerian government has been
experiencing serious unemployment problems. One of the way fashioned
out by the government to reduce this problem is to encourage many
individuals by giving them certain incentives to establish small scale
business enterprises. Establishing small scale industries will in addition
develop in Nigeria a broader base of entrepreneurial culture and desired
level of trained labour and man-power. In reality the small scale industries
will absorb a commendable percentage of the unen1ployed if encouraged
with vigor.
b. Acceleration of Economic Growth: The fact that small scale enterprise is
important for economic growth is not an over-statement. They engage in
one business or the other providing services for the masses, these services
help in no small measure in improving living standards of the people.
c. Accelerate Large Scale Production: The small scale business helps the big
firms in distributing their goods and services and also supply them with
raw materials needed in their production. This is why most small scale
businesses are located in the cities where big businesses are located.
d. Skill Acquisition: Some of the big businesses in Nigeria, started as small
scale enterprises. Example is Ekenedili chukwu Transport Company. This
helps the business owners to acquire more skills and experience that could
enable him or her manage big businesses. From this, one can see that small
scale business provides fertile ground for practical Training and
development for ambitious managers who hope to manage bigger business
in future.
 e. Increased Export of Manufactured Goods:- With more goods
manufactured by these industries, there will be the need to export some of
the goods. However, Nigerian export oriented production will become
more competitive in the world market.

2.2.3 CHARACTERISTICS OF SMALL SCALE ENTERPRISES

Small businesses have certain characteristics which distinguish them from large
scale businesses and which also justify separate analysis of their role in
development.
These characteristics/features may be summarized as follows:
i. Small scale business are many:- The number of small scale business is
usually many when compared with large scale business. This is because
the amount of money required to establish them is relatively small and
there may be no legal provisions to be fulfilled before they are set up.
ii. Management usually the independent is manager is usually the owner and
thus is independent. This is unlike the large scale businesses where the
owners are different from management and hence not independent.
iii. There is no much specialization because the manager/ proprietor handles
or supervises the financing, production, marketing and personnel of the
business.
iv. The manager/proprietor does not raise short) medium and long term capital
needs of his business from the organized financial market. Instead, he relies
heavily on personal savings) loans from friends, relatives or money lenders.
v. Small scale business has a small share of the market. The entrepreneur
continues his vision to the local community in which he carries on his
business, ignoring wider and more distant markets.
2.2.4. THE MAJOR FORMS OF FINANCIAL ASSISTANCE
i. Personal savings:- It is natural that any time a person wants to borrow
money from anybody, the likely questions should be how much do you
have? And when will you repay the loan? In business circle, we know that
every business is faced with risks. A person borrowing money to new
business owner always wants to be sure that such risks are shared by the
owner. That is the owner should be able to save up to fifty percent of the
total amount needed. The higher the percentage of amount of the capital
saved the better chances of obtaining loan from the potential creditors
because many of them will take him serious.
ii. Trade Credit: Trade credit is the financial assistance provided by the
businesses to the customers. This type of assistance is more pronounced in
supplying of inventory which is always' being replaced. Manufacturers
also extend credit facilities to wholesalers with generous terms for payment.
One of this terms of payment includes sales discount which encourages
prompt payment which always motivate the business owner to pay within
the maximum discount period. For example, if a N30,000 inventory can be
purchased for N20,000. First payment and the balance to be paid in 30 days,
the manufacturer in this case has virtually provided N10,000 of the
required capital to the whole seller. The whole seller has the chance of
selling that inventory at a profit and be able to pay off the balance of
N10,000.
iii. Loans from the Banks: One of the functions of commercial banks is to
make loans and advances available to both small and large scale businesses.
However, before loans are granted, the customer must be able to provide
reasonable security. The bank 'charges interest on such loans. Banks
provide mostly short term loans to small scale businesses. That is the loan
 should be repaid within one year. They can grant intermediate and long
term capital to small businesses depending on the performance and
stability of that business. The banks also provide overdraft to small
business. In this case, the business owners are allowed to draw up to a
certain amount in excess of what they have in their accounts
iv. Loans from Friends and Relations: Many new business owners do not like
borrowing money from friends and relatives to start business but it still
remains one of the ways of generating funds to start new business. Some
of new business owners often are encouraged by their friends, parents and
well-wishers who give one form of help or the other to get the business
started. This source of raising funds to small business is not without its
problems. The parents and friends who supply loans to the business
overtime interfere with the activities of the business. Combining family or
social relationship with business may not augur well with the operations of
the business. The problem situation can be alleviated if the terms of loans
are clearly on how to recover the loan if it becomes delinquent, should be
well understood.
v. Entering into Partnership: If the new business owner does not want
to borrow money either from the banks or friends and relatives, another
option open to him is to take a partner or partners. In case the partners do
not want to take part in the running of the business, they just hold full
partner status because of their initial investment in the firm. The duties,
responsibilities and rights of each partner must be dearly stated in the
partnership agreement. Let us assume at this point that the new partner
needs N500, 000, to start a new business but is able to save the sum of
N200,00, he is faced with the problem of how to raise the balance of
N300,000. Let's also assume that new business owner does not want loan
from anybody. He may decide to look for partners who are willing to
 contribute the total sum of N300, 000 to make up the sum of N500, 000 for
the initial take off of the business.

2.2.5 PROBLEMS OF SMALL SCALE ENTERPRISE IN NIGERIA

i. Under Capitalization: Money matters are not matters of fancy, virtually all
business need capital for its operations and growth. But many of the small
scale business units are undercapitalized. They have limited sources of
finance and this creates problem buying merchandize of not independently
at best price, inadequate qualities and quantities cum varieties. This
problem of finance is in three dimensions; the need for startup capital,
working capital and expansion capital. Commercial banks which were
expected to be the launch pad for the development of small scale industries
through the provision of loans have failed to give adequate support to them.
Stiff collateral security demanded by banks often means that small scale
industrialists are unable to meet these provisions consequently losing the
chance to obtain loans. In addition, high interest rates charged on loans
have scared off potential small scale entrepreneurs. Banks on their own
part, have argued that they are discouraged to lend to this sub-sector since
many potential and existing small scale enterprises draw up feasibility
reports that are not viable, lack of managerial skills and do not maintain
adequate financial or accounting records about their businesses. High
percentage of default on repayment of loans is among the reasons that led
to this sub-sector to be regarded as a high risk area for lending purposes.

ii. Poor Business Accountability: The financial problem of small scale

enterprises is rarely only financial. Often it is only a symptom, the
diagnosis of which reveals other weaknesses. Business finance and stock
are mixed up with personal financial and stocks required for personal needs.
Cash and stocks are taken at will for personal use whenever the need arises
 without accounting for such withdrawals. This makes it difficult to assess
the operating results of the business and at times starves the firm of its
liquid resources.
iii. Poor Record Keeping: Some small scale industrialists believe that the
maintenance of book of accounts and other business records is costly and
unnecessary. They feel they can differ from the keeping of notes on
important business transactions such as amounts due to be paid to suppliers
and amounts due from customers. Some feels that keeping proper account
is inviting trouble from the tax authorities while some others feel that
keeping records will be a source of leakage of business secrets to others.
The success of the business depends on proper planning. Planning is
possible only when data is available. Infact, many small scale business
operators do not understand the intricacies of main training adequate
business records or of preparing financial statements. Financial data may
be available but the managers may lack the necessary knowledge of
appreciation of their values to interpret and use them effectively.
iv. Lack of Enterprise: This relates to lack of experience in the line of business
which small scale business owners enter. They may have experience in one
line of business and not in another due to his unfamiliarity with the specific
problems of the particular new line of business.
v. Lack of Business Knowledge: Knowledge consists of facts and theories
that enable people to understand phenomenon and to sol.ve problems.
These are habits, trial and error, authority, traditions, institutions, expert
opinions, personal experience, education and induction. A small scale
business owner who has not acquired enough knowledge about business
may likely fail if he enters into it.
vi. Poor/Wrong Location: Where a business is sited is called its location. The
factors which usually affect the location of business include nearness to
 raw materials, market, source of power, access to supply of labour and
transport facilities etc. Too often a location is selected for some superficial
reasons such as the availability of building to rent or buy, closeness of the
facility to one’s home etc. These factors do not account for business
success. Good location is extremely important as a factor of business
success. Poor location has caused the down fall of many small scale
enterprises. One mistake some people make is to rent store in a location
that has a history of failure. They often feel they will be able to turn the
situation around.

2.3.0 INTERRELATIONSHIP BETWEEN BANK LOANS AND SMALL

SCALE ENTERPRISE
A small scale industry could be financed either through the banks or funds raised
personally by the entrepreneur. Funds raised personally by the entrepreneur can
be through savings, gifts, and borrowings. Funds to be raised through banks the
industrial and development banks, and Nigeria Industrial Development Banks
(NDB). Many financial institutions are involved in entrepreneurship
development in Nigeria in many ways. Some of them are set up by government
for specific functions while others are set up by private organizations. Their main
functions are to provide funding relief from financial consequences of
uncertainty and advisory services for business enterprises, public or private.
Through them, the government plays the role of financial companies. Some of
these institutions include: Nigerian Bank for Commerce and Industry (NBCI),
Nigerian Agricultural and Co-operative Banks (NACB), Nigerian Industrial
Development Bank (NIDB), Peoples Bank of Nigeria (PBN), the Commercial
Banks and Merchant Banks etc.
For any entrepreneur sourcing for fund and enough funds cannot be mobilized
from friends and relations, the next thing that comes to mind is to try the banks.
The Commercial Banks for instance are the centres of the leading marketing and
make the greatest number and variety of loans. The commercial banks are the
creators of credits in the economy but they are very conservative in lending. The
commercial banks look at many things apart from the ability of entrepreneur to
provide the needed collateral and may be interested in having a general view of
the proposed business by looking at the feasibility report, the experience of the
entrepreneur, his personal credit records, profit potentials etc.
 CHAPTER THREE
METHODOLOGY
3.1 RESEARCH DESIGN
In any formal research work, there is need for the development of a detailed plan.
Research design according to Baridam (1990) is the framework of plan that is
used in collection of the analysis of data from a study. It ordinarily refers to the
plan or structure of any aspect of the research procedure. Research design is
basically how the structured research was carried out. It is the plan and structure
of the investigation conceived so as to obtain answer to the research questions.
According to Obodoeze (1996) research design "is the plan or approach the
researcher had agreed to use in solving the research problem" that is, the
specification of procedure for collecting and analyzing the data necessary to help
solve the research problem. Really, it is simply an indication of the methods and
procedures of gathering needed information. Thus, in this study the basic
research designs employed are analytical and descriptive in nature, employing
questionnaire and making use of observations. Their uses are based on the
relevance, accuracy, simplicity and clarity of information gathered. The research
shall adopt a descriptive approach, which involves the normal gathering, analysis
and interpretation of a set data so as to explain the underlying factors that
surround the problems that triggered off the research.
3.2 POPULATION OF THE STUDY
Population can be defined as the whole set of objects or individuals about which
a statistical investigation is carried out. It comprises the group about which you
want to obtain information concerning a particular thing. Based on this,
Obodoeze (1996) moved further to explain that basic issues in defining the
population is who and what is to be surveyed.
Nwude (1998) saw population as the totality of any group, persons, objectives
which is defined by some unique attributes. But in our context, population is a
specific group of people, firms, conditions, attitudes etc. that forms the focal
point of this study. According to Maduegbuna (2006). “Population refers
specifically to the boundaries of coverage. The aggregate items or persons or
respondents from whom data significant to the study were collected”.
Therefore the determination of the population including sample size is involved
in this study. The random sampling or sampling population will be used to
collect data from "UBA of Nigeria Plc, Offa branch" and also with the use of
questionnaire administration to the bank officials of the UBA of Nigeria Plc, offa
branch and its customers. The bank officials and customers represent the
accessible target groups that cover the population of interest. It is believed that
they would yield reliable data taken as a proof for the actual responses from the
required respondents.
The study population comprises the staff and customers of the investigating bank,
which is the UBA BANK.
Now the total number of staff and customers in UBA BANK is 45 and 1500
respectively.
3.3 SAMPLE AND SAMPLING DESIGN
The sampling size would generally be derived from the Yaro Yaman's formula
as follows:
N
n = 1 + N (e)2
Where N = population
n = sample size
e = 5% level of significance (0.5)
1 = constant

3.4 DATA COLLECTION INSTRUMENT

The research instrument used in the study is the questionnaire.
A questionnaire is a research instrument consisting of a series of questions and
other prompts for the purpose of gathering information from respondents.

3.5 ADMINISTRATION OF DATA COLLECTION INSTRUMENT

The questionnaire to be administered to the respondents. The researcher
structured the question into simplified and systematized choice of Yes or No
questions. Choice questions give the respondents the opportunity of making
choice among alternative options available.
3.6 DATA ANALYSIS TECHNIQUE
In analyzing the data collected, appropriate figures were used to represent the
data collected from personal interviews and questionnaire. Then the figures were
tabulated so that they can be easily understood and properly interpreted.
It deals with the analysis of the data collected, so in analyzing the questionnaire,
percentage method of data analysis was adopted. This is because, if the
percentage rises, the information acquired can be confidently believed to be true.
The simple percentage formula which was used in the analysis of the research
questions is shown below,
F x 100
N1
Where;
F = Frequency
N = Cumulative frequency
100 = percentage
The rationale for choosing the technique was to make for clarity of purpose,
understanding and interpretation to any inquirer.

3.7 VALIDITY AND RELIABILITY OF RESEARCH INSTRUMENT

From definition, validity can be seen as the extent to which a measuring process
is free from both systematic and random I error. To what extent does the research
measure the instrument or what it is designed to measure.
To ensure that the project supervisor went through the questionnaire to ensure
that the questions were properly formulated to suit the study.
The content validity approach was used by the researcher. It is sometimes
addressed as "face validity" because it allows critical evaluation by experts.
Therefore, the information provided by this method could not be prejudiced
against the information supplied hence the data collected was not in doubt or
invalid. But the information is valid and reliable.
 CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS

4.1 DATA PRESENTATION AND ANALYSIS

This research project is concerned with the impact of bank loans on small scale
and medium scale enterprises in Nigeria. The study has so far highlighted and
discussed some major issues including the significance of the study, method of
collecting data and the hypotheses upon which the data collected were presented
and analyzed.
This chapter therefore focuses on how the various data collected were presented,
analyzed and interpreted. This is to enable the researcher provide answers to the
research questions and reduce the answers to interpretable forms so that the
results of the variables could easily be understood.
4.2 DATA PRESENTATION AND ANALYSIS OF RESEARCH
QUESTION DATA

The researcher distributed items of questionnaire between the staff of UBA

Nigeria Plc, Offa Branch and to the investors that make up the customers of the
bank.
The researcher distributed 45 (Fourth Five) items of questionnaire to the staff of
the United Bank for Africa, Offa Branch. The size of the customers of the bank
was reduced to a sample size of 397 customers using the statistical sampling
technique. Based on this, 397 items of questionnaire were distributed to the 397
customers representing the entire customers of the bank.
 Table 4.1 shows an analysis of the distributed questionnaire and the returns of
the completed questionnaire from these groups of respondents.
Table 4.1: Analysis of Distributed Questionnaire

Questionnair % of Response
Respondents Completed Questionnaire
e
Distributed Returned not returned
Questionnaire
UBA Staff 45 32 13 20.8

Customers 397 357 40 68.1

Total 524 466 58

--------

The table above reveals that 32 staff of UBA Offa branch returned the completed
questionnaire while 13 did not return theirs. On the other hand, 357 customers
returned the completed questionnaire while 40 did not return, for various reasons
adduced by them.
Thus, analysis was based on the 32 members of the staff of UBA and 357
customers that returned the completed questionnaire. This represented 20.8%
and 68.1% of the respondents respectively.

TEST OF HYPOTHESIS

The hypothesis formulated for this study was used to find out if they would
actually hold when faced with empirical evidence. It was used to determine
whether to accept the hypothesis or not based on the outcome of the test. In the
test of hypothesis, tables were developed for each hypothesis.
Thereafter, the chi-square tool of analysis was used to test the hypothesis.
In using the chi-square (x2) distribution for the test, the null hypothesis for each
hypothesis was stated and the level of significance was put at 0.05 or 5% level
while the degrees of freedom (df) were dependent upon the number of
observations.
The formula for the chi-square (X2) test is given below

X2 = E(fo - fe)2
fe

Hypothesis One
Question 6 and 9 of the questionnaire for both United Bank for Africa (UBA)
staff and the customers respectively relate to question bordering on if small scale
enterprises in Nigeria do contribute to the growth of the economy. This is
congruent with hypothesis one which states, small scale enterprises in Nigeria
do not contribute to the growth of the economy.

Table 4.2: UBA Staff

Options No. of Responses Percentage (%) of
Responses
Yes 20 73

No 12 27

Total 32 100

Sources: Distributed Instrument

From the above table, 20 respondents representing 73% of the UBA staff agreed
that small scale enterprises in Nigeria do contribute to the growth of the economy,
while 12 respondents representing 27% did not agree.
Table 4.3: UBA Customers

Options No. of Responses Percentage (%) of

Responses

Yes 330 92.4

No 27 7.6

Total 357 100

Source: Distributed instrument

From the above table, 330 respondents representing 92.4% of the UBA
customers agreed that small scale enterprises in Nigeria do contribute to the
growth of the economy, while 27 respondents representing 7.6% of the
customers disagreed.

Table 4.4: Respondents

Options UBA Staff Customers Total

Yes 20 330 350

No 12 27 39

Total 32 357 389

Table 4.5: Test of Statistic

fo Fe fo-fe (fo-fe)2 (fo-fe)2/fe

20 28.8 -8.8 77.44 2.67

330 321.2 8.8 77.44 0.24

12 3.21 8.79 77.3 24.08

27 35.8 -8.8 77.44 2.16

∑ = 29.15

Calculated chi-square (x2) values is 29.15

Degrees of freedom (df) = (r-1) (C-1)

= (2-1) (2-1)

=1x1=1

The critical value X2t under 0.05 level of significance = 3.84

Decision Rule
Accept Ho if the calculated chi-square (x2) value is less than the critical value
(x2t), and if otherwise reject.
Thus, since x2 is greater than x2t, i.e. 29.15>3.84, He will be rejected while Hi
will be accepted. This implies that small scale enterprises in Nigeria do
contribute to the growth of the economy.
Hypothesis Two
Questions 8 and 10 of both UBA staff and customers questionnaire respectively
state thus; Do you think that small scale enterprises have any significant
relationship with employment programmes in the country? This is in line with
hypothesis two which states that small scale enterprises have no significant
relationship with employment programmes in the country.

Table 4.6: UBA Staff

Options No. of Responses Percentage (%) of
Responses
Yes 22 81.7

No 10 18.3

Total 30 100

Source: Distributed instrument

The table above shows that 22 respondents representing 81. 7% of the UBA staff
agreed that small scale enterprises have significant relationship with
employment programmes in the country while 10 respondents representing 18.3%
of the staff did not agree.
Table 4.7: UBA Customers
Options No. of Responses Percentage (%) of
Responses
Yes 250 70

No 107 30

Total 357 100

Source: Distributed instrument

The table 4.7 above shows that 250 respondent representing 70% of the UBA
staff agreed that small scale enterprises have significant relationship with
employment programmes in the country while 107 respondents representing 30%
of the staff did not agree.

Table 4.8: Respondents

Options UBA Staff Customers Total
Yes 22 250 272

No 10 107 117

Total 32 357 389

Source: Distributed instrument

Table 4.9: Test of Statistics

fo Fe fo-fe (fo-fe)2 (fo-fe)2/fe

22 22.37 0.37 0.17 7.60

250 249.6 0.4 0.16 6.41

10 9.62 0.38 0.144 0.015

107 107.4 0.4 0.16 1.49

∑ = 15.51

Calculated chi-square (x2) values is 5.73

Degrees of freedom (df) = (r-1) (C-1)

= (2-1) (2-1)

=1x1=1

The critical value X2 t under 0.05 level of significance = 3.84

Decision Rule
Accept Ho if the calculated chi-square (X2) value is less than the critical value
(X2t) and if otherwise reject.
Therefore, since X2 is greater than x2t, i.e. 15.51>3.84, the null hypothesis (Ho)
will be rejected while the alternative (Hi) will be accepted. This implies that
small enterprises have significant relationship with employment programmes in
the country.
Hypothesis Three
Both questions 7 and 11 of the questionnaire distributed to the UBA staff and
customers respectively states thus, Does the small scale enterprises have any
correlation with poverty alleviation programme in the country? This question is
congruent with hypothesis three which states; small scale enterprises have no
correlation with poverty alleviation programmes in the country.

Table 4.10: UBA Staff

Options No. of Responses Percentage (%) of
Responses
Yes 19 59.6

No 13 40.4

Total 32 100

Source: Distributed instrument

The table above shows that 19 respondents representing 59.6% of the UBA staff
agreed that small scale enterprises have a correlation in poverty alleviation
programmes in the country while 13 respondents representing 40.4% did not
agree.
Table 4.11: UBA Customers
Options No. of Responses Percentage (%) of
Responses
Yes 270 75.6

No 87 24.4

Total 357 100

Source: Distributed instrument

Table 4.11 above shows that 270 respondents representing 75.6% of the UBA
staff agreed that small scale enterprises have correlation with a poverty
alleviation while programmes 87 respondents representing 24.4% of the staff did
not agree.

Table 4.12: Respondents

Options UBA Staff Customers Total

Yes 19 270 289

No 13 87 100

Total 32 357 389

Source: Distributed instrument

Table 4.13: Test of Statistics

fo Fe fo-fe (fo-fe)2 (fo-fe)2/fe

19 23.8 -4.8 23.04 0.97

270 265.2 4.8 23.04 0.09

13 8.23 0.4 0.16 0.02

87 91.8 -4.8 23.04 0.25

∑ = 7.33

Calculated chi-square (x2) values is 10.69

Degrees of freedom (df) = (r-1) (C-1)

= (2-1) (2-1)

=1x1=1

The critical value X2 t under 0.05 level of significance = 3.84

Decision Rule
Accept Ho if the calculated chi-square (x2) value is less than the critical value
(x2t) and if otherwise reject.
Therefore, since x2 is less than x2t, i.e. 7.33>3.84 we accept the (Ho) and accept
(Hi). This means that small scale enterprises have correlation with poverty
alleviation programmes in the country.
4.3 DATA INTERPRETATION
In accordance with the statistical test carried out on the hypothesis formulated,
the following facts hold;
i. It has been proved by empirical test that small scale enterprises in Nigeria
do contribute to the growth of the economy. This implies that the small
scale enterprises are very vital to economic growth of the company. The
government fiscal policies should recognize small scale enterprises and
provide enabling environment that makes them to contribute to both
economic and industrial growth of Nigerian economy. It has been proved
scientifically that small scale enterprises are correlated with poverty
alleviation programmes of the government.

ii. In hypothesis two, the null hypothesis which states that small scale'
enterprises have no significant relationship with employment programmes
in the country was proved wrong after the test was carried out. Small scale
enterprises have a significant relationship with the employment
progran1mes in the country. In the sense that the more there is small scale
establishment, the more employments are created in the country. The small
scale industries have some shock absorber which bigger organizations do
not have in providing job opportunities to the youths. In consequences;
government is advised to develop side by side, big and small organizations
for the betterment of the country.

iii. Meanwhile, in hypothesis three. The null hypothesis which states that
small scale enterprises have no correlation with poverty alleviation
programmes in the country was proved wrong after the test was carried out.
Small scale enterprises are seen as a machinery for reducing poverty by
creating self employment opportunities in the country, thereby increasing
the living standard of the people. Government should encourage school
leavers by advancing loans and other grants to them to enable them start
off business especially where they have inherent flairs.