THE ROLE OF COMMERCIAL BANKS IN FINANCING SMALL SCALE INDUSTRIES IN NIGERIA (A CASE STUDY OF UNION BANK OF NIGERIA PLC)

BACKGROUND TO PROBLEM: The various development plans implemented in Nigeria have prioritised the achievement of self-reliance.  The rationale behind the establishment of this national objective stems from the considerable expectations placed upon citizens in terms of generating employment possibilities, fostering self-reliance in the domains of basic food and material production, achieving high per capita income, generating foreign exchange earnings, and facilitating the production of industrial raw materials.

According to Okporobie (1989:10), it has been observed that despite the purported emphasis placed on the sector, small-scale enterprises in Nigeria have continued to experience a decrease.

Nevertheless, the central bank's realisation that this policy alone was insufficient prompted the central bank to mandate, starting from 1970/80, that all commercial banks reserve a portion of the minimum credit allocation for small-scale Nigerian firms, specifically targeting indigenous borrowers.  The aim established in 1979 was set at a rate of ten percent (10%), which was later increased to sixteen percent (16%).

Despite the fact that the available data indicates that the performance of commercial banks in relation to this directive has been unsatisfactory. The central bank is committed to exerting maximum effort to ensure that banks achieve complete coupling, while maintaining the seamless operation of the national banking system.

The author also noted that the absence of small-scale industries in Nigeria poses a significant obstacle to the nation's pursuit of industrialization. The researcher holds the viewpoint that forthcoming advancements in industrialization necessitate addressing fundamental concerns pertaining to establishing economic linkages that can generate tangible inputs for manufacturing endeavours.

Hence, it is imperative to allocate priority attention to sectors that can readily create domestic inputs.  This will lead to the establishment of agro-allied industries, such as food processing and the production of other by-products.

The primary goal should be to optimise the value generated through the processing and manufacture of inputs into end goods.

According to Nzewi and Oze (1985:56), it has been noticed that empirical data supports the notion that robust incentives for producers in the small-scale industrial sector are essential not only for meeting food requirements, but also for facilitating the provision of increasing input supplies and demand. This, in turn, serves as a fundamental basis for ensuring continuous industrial growth.

The current economic limitation has the potential to serve as a fortuitous opportunity for the advancement of our industrialization efforts, namely within the dynamic manufacturing sector.  For example, the exchange rate in the market is determined by observing its outcome, and the elevated expenses associated with imported inputs might act as a catalyst for industrialists to enhance their efforts in finding domestic alternatives.According to the findings of Ekenyong and Nyong (1992), small scale firms are considered an integral component of a sustainable framework for achieving significant economic development in emerging economies such as Nigeria.

Small-scale firms are deemed to be more economically efficient in promoting development compared to large enterprises because to the apparent association and amplification effects they have on the overall performance of the economy and its growth.