THE ROLE OF COMMERCIAL BANKS IN FINANCING SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA A CASE STUDY OF ZENITH BANK PLC, PORT HARCOURT

CHAPTER ONE

INTRODUCTION

1.0 Background to the Study

Small and Medium Scale Enterprises are sub-sectors of the industrial sector which play crucial roles in industrial development (Ahmed, 2006). Following the adoption of the Structural Adjustment Programme (SAP) in 1986, there have been several decisions to switch from capital intensive and large scale industrial projects which were based on the philosophy of import development to Small and Medium Scale Enterprises which have better prospects for developing domestic economy, thereby generating the required goods and services that will propel the economy of Nigeria towards development. It was on this premise that Ojo (2009) argued that one of the responses to the challenges of development in developing countries, particularly in Nigeria, is the encouragement of entrepreneurial development schemes.

Despite the abundant natural resources, the country still finds it very difficult to discover her developmental bearing since independence. Quality and adequate infrastructural provision has remained a night-mare, the real sector among others have witnessed downward performance while unemployment rate is on the increase. Most of the poor and unemployed Nigerians in order to better their lots have resorted to the establishment of their own businesses. Consequently, entrepreneurship is fast becoming a household name in Nigeria. This is as a result of the fact that the so called white collar jobs that people clamour for are no longer there. Even, the touted sectors (banks and companies) known to be the largest employers of labour are on the down-turn following the consolidation progremme and fraudulent practices of the high and mighty in the banking sector. The companies of course are folding up as a result of erratic power supply, insecurity and persistent increase in lending interest rate which has lead to high cost of production and undermines profit making potentials of companies operating in Nigeria. As a result of banking sector practices and continuous folding up of companies, a lot of Nigerians are thrown into unemployment which inevitably detrimental to the economic situation of the country. Since the office jobs that people desire are no longer there for the teeming population, and some of those that succeeded in getting the jobs are being thrown out as a result of the factors identified above, the need for the government and the people to strategies on the way-out of this problem became imperative. Hence, the need for Small and Medium Scale Enterprises (SMEs) became a reality as a means of ensuring self-independence, employment creation, import substitution, effective and efficient utilization of local raw materials and contribution to the economic development of our dear nation (Nigeria).