First Bank of Nigeria and the Performance of Small Scale Enterprises

This project, submitted to the National Open University of Nigeria in 2018, investigates the role of deposit money banks in the performance of small-scale enterprises (SMEs) in Nigeria, with a specific case study of First Bank of Nigeria. The research explores the sources of finance available to SMEs, the role of deposit money banks in meeting their financial needs, and methods to reduce the formality required for financing. The study uses a sample of 90 employees and employs simple random sampling, with data analysis using percentages and Chi-square tests to examine the relationship between financing and SME performance. The findings indicate a need for consistent industrial policies and highlight the importance of deposit money banks in lending to SMEs. The project includes an introduction to the topic, a literature review, the research methodology, data analysis, and conclusions with recommendations for government and financial institutions. This research contributes to understanding the challenges and opportunities in financing SMEs in Nigeria.

THE ROLE OF DEPOSIT MONEY BANKS IN THE PERFORMANCE OF SMALL
SCALE ENTERPRISES IN NIGERIA: A CASE STUDY OF FIRST BANK OF NIGERIA
BY
OGUNSOLA TIMILEHIN OLUWOLE
MATRIC NO: NOU142803652
A PROJECT SUBMITTED TO THE DEPARTMENT OF ENTERPRENEURIAL AND
BUSINESS MANAGEMENT, FACULTY OF MANAGEMENT SCIENCE, NATIONAL
OPEN UNIVERSITY OF NIGERIA, IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF BACHELOR OF SCIENCE (B.Sc. HONS)
DEGREE IN ENTERPRENEURIAL AND BUSINESS MANAGEMENT
JULY, 2018

DECLARATION
I OGUNSOLA TIMILEHIN OLUWOLE do humbly declare that this research work entitled
THE ROLE OF DEPOSIT MONEY BANKS IN THE PERFORMANCE OF SMALL
SCALE ENTERPRISES IN NIGERIA is as a result of findings from my research efforts,
carried out in the Department of Entrepreneurial and Business Management, Faculty of
Management Sciences, National Open University of Nigeria. It was carried out under the
supervision of Dr. Adegunle. I further declare that, to the best of my knowledge, this work
contains no material previously published by another person or group except where due
acknowledgement has been made in the text and stands subject to plagiarism scrutiny.
___________________________________ __________________________________
Name/Signature Date
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CERTIFICATION
This is to certify that this research project entitled THE ROLE OF DEPOSIT MONEY
BANKS IN THE PERFORMANCE OF SMALL SCALE ENTERPRISES IN NIGERIA
was carried out by OGUNSOLA TIMILEHIN OLUWOLE in the Department of
Entrepreneurial and Business Management, Faculty of Management Sciences, National Open
University of Nigeria, Abuja, Nigeria for the award of Bachelor of Science Degree in
Entrepreneurial and Business Management.
_____________________ ______________________
Dr. Adegunle Adesina Date
(Ph.D)
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DEDICATION
This project is dedicated to Almighty God who gave me the privilege and the opportunity
to start and complete this program successfully.
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ACKNOWLEDGEMENTS
My unalloyed gratitude goes to God Almighty, my creator, who has been the source of
my strength and help me to reach this stage of my academic pursuit.
I express thanks to many people for their contributions and assistance especially Dr.
Adegunle my supervisor for your immense contributions amidst your tight schedules and fatherly
advice to make the research work a great success. Sincerely, you are a great supervisor with a
difference. I equally extend my regards to Professor Bandele M.O., Director NOUN, Ibadan
Study Centre and all the entire staff of National Open University of Nigeria (NOUN), Ibadan
study center especially Mrs. F. Adeoye (my faculty officer) and other staff in the Administrative
Unit for their understanding and encouragement all through the degree programme.
My greatest appreciation goes to my dear parent Mr/Mrs Ogunsola for their untiring
efforts, prayer and financial support. Also to Mr and Mr Oshin and to my entire siblings,
Ogunsola Oluwagbemiga Ike, Ogunsola Oyinkansola Funke, Ogunsola Daniel Aguda your
goodwill, love and maximum support is highly appreciated.
Indeed, I appreciate wonderfully the inspiration, encouragement and efforts of the
following friends, and coursemates: Mr Aigbevboile Ibraheem, Ajala Mayowa, Rasaq Semiu,
Yusuf Opeyemi, Ibidoja Oluwatoyin, Afonja Omotolawa Aldrat, Williams Oluwatoyosi,
Ogunbodede Olamide. I say big thanks for being there always for me.
May God Almighty bless you all (Amen)
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ABSTRACT
This research examined the role of deposit money banks in the performance of small
scale enterprises in Nigeria a study of First Bank of Nigeria. Specifically, the study highlights the
different sources of finance available to small scale enterprises, it also examine the role of
deposit money banks in satisfying the financial needs of SMEs in Nigeria and finally it also
examine method to reduce formality needed for financing the entrepreneurs by deposit money
banks. A sample is a portion of the population selected for study. It is very important to select
sample size that will give sufficient fair representation of the population. There are two basic
way of making the sample size decision, one is by rule of thumb and the other one is by
calculated method. In this research work, the rule of the thumb was used for this research where
90 employees of total population were selected as the sample size. Simple random sampling was
used to select target individual from each stratum. The complete questionnaires were collected
serially, coded and analyzed sequentially a cording to the research questions. Tables were used to
present information to facilitate analysis, simple percentages where used while Chi -square was
used to test the hypothesis. The responses were of five-point scale which range from "strong
agreed to the undecided ". Thus; Strongly Agreed = 5 Agreed = 4 Undecided = 3 Disagreed = 2
Strongly Disagreed = 1. The findings of the research indicated that there is no significant
relationship between financing of small and medium scale enterprises and deposit money banks.
Furthermore, result indicated that there deposit money banks and lending to small scale
industries and also in meeting the needs of small and medium scale enterprises. It is
recommended that the government should be consistent in its industrial policies so as to enable
manufacturing firms to factor tariff measures into their trade decisions.
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TABLE OF CONTENTS
Page
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Abstract vi
Table of Contents vii
List of Tables ix
CHAPTER ONE: INTRODUCTION
1.1 Introduction 1
1.2 Background to the study 2
1.3 Statement of the problem 5
1.4 Objectives of the study 6
1.5 Research questions 6
1.6 Statement of the hypothesis 6
1.7 Significance of the study 7
1.8 Scope of the study 7
1.9 Limitations of the study 8
1.10 Definitions of terms 8
CHAPTER TWO: LITERATURE REVIEW
2.0 Introduction 10
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2.1 Conceptual framework 10
2.2 Theoretical frame work 14
2.3 Literature on Subject Matters 15
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Area of the Study 34
3.1 Sources of Data 34
3.2 Sampling Techniques 36
3.3 Method of Data Collection 37
3.4 Method of Data Analysis 37
3.5 Reliability of the Instrument 38
3.6 Validity of Instrument 39
3.7 Limitation of Study 39
CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION
4.0 Data analysis, findings and discussion 40
4.1 Findings of the Study 40
4.2 Test of Hypothesis 47
4.3 Discussion of Findings 51
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 52
5.2 Conclusion 53
5.3 Recommendations 54
References 56
Appendix 61
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LIST OF TABLES
Table 4.1.1: Demographic Characteristics of Respondents based on Sex 40
Table 4.1.2: Demographic Characteristics of Respondents based on Marital Status 40
Table 4.1.3: Demographic Characteristics of Respondents based on Age 41
Table 4.1.4: Demographic Characteristics of Respondents based on Educational
Qualifications 41
Table 4.1.5: Demographic Characteristics of Respondents based on Working
Experience 42
Table 4.1.6: How would you rate the performance of deposit money banks in
financing small and medium scale enterprises in Nigeria? 42
Table 4.1.7: Have you ever needed advice on certain issues or information
concerning your organization? 43
Table 4.1.8: What sources do you obtain fund to run your business? 43
Table 4.1.9: Are there significant relationship between financing of small and
medium scale enterprises and deposit money banks? 44
Table 4.1.10: Do you have accounts into which business receipts are paid? 44
Table 4.1.11: Do you keep daily or weekly records of business transactions? 45
Table 4.1.12: Are there significant relationship between deposit money banks and
lending to small scale industries and also in meeting the needs of small
and medium scale enterprises? 45
Table 4.1.13: Would you say that the CBN also influence the bank lending policies? 46
Table 4.1.14: Do SMEs help to reduce incidence of unemployment in Nigeria? 46
Table 4.1.15: Do you have lending program for small and medium scale enterprises
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in your bank? 47
Table 4.2.1: Testing of the 1st Hypothesis 48
Table 4.2.2: Testing of the 2nd Hypothesis 50
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CHAPTER ONE
1.1 Introduction
Small and medium scale enterprises (SMEs) are seen as instruments for reducing the
poverty level affecting the country and improving the economy of Nigeria. Therefore the need
for SMEs growth in Nigeria is beyond question. Studies by the International Finance Corporation
(IFC) show that approximately 96% of Nigerian businesses are SMEs compared to 53% in the
US and 65% in Europe, they contribute approximately 1% of GDP compared to 40% in Asian
countries and 50% in the US or Europe (Oyelaran - Oyeyinka, 2012). The question as to why the
SMEs in Nigeria, are not contributing to the growth of the economy as they should like in other
countries now arises. Small and medium scale enterprises earn their funds from various sources
like personal savings, family and friends, loans and professional money lender such as deposit
money banks and institutions like National Directorate of Employment, National Economic
Reconstruction Fund and other Small and medium scale enterprise schemes. Despite all the
above mentioned sources of finance, financial constraint is still put as the major problem of
SMEs.
The Banking System is very important for any nation because it is the pivot of socio-
economic development of any economy Terungwa, (2016). This implies that commercial banks
have active developmental roles to play in the economy such as mobilizing fund from the surplus
to the deficit spending units. Commercial banks are considering as the main source of finance for
SMEs or rather entrepreneurs in Nigeria. Akabueze, (2007) assert that Finance has been seen as a
critical element in the growth and development of SMEs. For instance the commencement and
efficient performance of any industrial enterprises be it small or large will require the provision
of funds for its capitalization, working capital and rehabilitation needs, as well as for the creation
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of new investments. Provision of funds to the industrial sector, particularly, for the SMEs has,
therefore, been of prime interest to policy-makers in both the public and private sectors. It is a
known fact that firms depend on a variety of sources for their finances. These include external
and internal, formal and informal sources Aruwa (2009).
1.2 Background of the Study
The satisfaction of any government is the triumph of an advanced level of development in
such a way that its citizens would derive natural accessory to governance. However, for a nation
to be in a phase of development there must be some prerequisites, which include socio-political
and economic stability.
Practitioners and scholars have long believed that small and medium scale enterprises
(SME's) performance are very critical to the development of any economy. The important role
SMEs play in the development of the economy of any nation is even more evident when the
economy of developing nations like Nigeria is considered. The performance and growth of
SME's is a major driver and indices for the level of industrialization, modernization,
urbanization, gainful and meaningful employment for all those who are able and willing to work.
It also encourages income per capital, equitable distribution of income, and the welfare and
quality of life enjoyed by the citizenry according to Aremu and Adeyemi (2016).
The Nigerian economy is dominated by SME's in agriculture, manufacturing, commerce
and industry services. Hence, the historical background of SME's in Nigeria can be traced back
to 1946. Ever since, SME's have gained prominence and mention as a seed bed of innovations,
inventions and employment generation or creation (Aremu and Adeyemi, 2016). SMEs in
Nigeria are seen as the backbone of all economies and are a key source of economic growth,
dynamism and flexibility. Hence, SME's play a very important part of the Nigerian economy as a
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