TRAINING MANUAL

ON

ENTREPRENEURSHIP DEVELOPMENT 1

EED 326
TABLE OF CONTENT

Topic 1: Understand the role of personal savings and portfolio

investment in National Economic Development

1. Define the following: Income, expenditure and savings;

2. Explain the role of savings in starting and sustaining
businesses;
3. List the benefits of interest;
4. Explain personal financial planning and management;
5. Explain shopping habits;
6. Describe how taxes are paid on income that people earn
and how income tax is calculated.
7. Explain portfolio investment and brokerage;
8. Identify types of portfolio investment;
9. Explain the role of portfolio investment in the National
Economic Development.

Topic 2: Understand the life skills needed by an entrepreneur

1. Identify the characteristics of an entrepreneur;

2. Define Communication;
3. Explain the role of Communication in an enterprise;
4. Define teamwork and team spirit;
5. Identify the characteristics of teams;
6. List benefits of teamwork in an enterprise;
7. Define leadership;

8. List the qualities and characteristics of good leaders;

9. Describe a target in relation to the success of an
enterprise;
10. Explain how targets are set;
11. Explain how a target is achieved;
12. Explain discipline and self – discipline;
13. State the benefits of Personal discipline in the life
of an entrepreneur.

Topic 3: Understand the various sources of information for

entrepreneurship development

1. Identify nature and type of information required by

entrepreneurs;
2. Identify the sources of the information required in 1 above;
3. Identify organizations and agencies involved in the

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 promotion and development of entrepreneurship;
4. Explain the role of banks and financial institutions in
enterprise promotion and development;
5. Describe the contributions of government agencies in
sourcing information;
6. Describe methods of obtaining assistance from the above
organizations.

Topic 4: Appreciate the roles of commercial and development

banks in small scale industrial development

1. Identify financial institutions involved in entrepreneurship

development;
2. Describe the assistance provided by commercial banks;
3. Explain the role of development banks in the promotion and
development of small and medium enterprises (SMEs);
4. Assess government policy on financing SMEs;
5. Explain the process of opening and operating a healthy Bank
Account.

Topic 5: Know the functions of various support agencies in

small and medium scale industrial development
1. Identify various support agencies involved in the promotion
and development of entrepreneurship in Nigeria;
2. Explain the following and their roles in the promotion and
development of entrepreneurship: NEPC, NIPC, NERFUND, NDE,
RMRDC, SMEDAN, IDC, TBICs, and Federal and State
Ministries of Commerce/ Industry;

3. Explain the assistance rendered by research and academic

institutions in entrepreneurship development.

Topic 6: Understand Business Proposal Writing

1. Define and explain business proposal

2. Explain the purpose or use of business proposal
3. Explain the elements of a business proposal
4. Model business proposal on a business venture

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COURSE TITLE: ENTREPRENEURSHIP DEVELOPMENT1

COURSE CODE: EED 326

INTRODUCTION:
Entrepreneurship Education is aimed at learning directed towards
developing in the student skills, competencies, understandings and
attributes that will equip Students to be innovative, and to identify,
create, initiate, and successfully manage personal, community, business
and work opportunities, including working for themselves.

This course introduces students to advanced topics on entrepreneurship

studies. It is expected to build upon the sound foundations of E.Ed.126
and E.Ed.216 at the ND level respectively. Topics treated at the lower
levels are however included so that students at the HND level without
prior training in entrepreneurship will not be at a disadvantaged
position. Moreover, as some of the HND applicants must have had at
least one year of industrial work experience those topics are meant to
enrich their focus and interest. The primary aim of the course is to
equip the student with the skills, competencies, understandings and
attributes that will enable him to launch, manage and grow his
enterprise successfully after graduation. Thus at the end of this 4 credit
hour course the student should be able to:

GENERAL OBJECTIVES:
1. Understand the history of entrepreneurship development in Nigeria

2. Understand the role of personal savings and portfolio investment

in National Economic Development

3. Understand various life skills needed by an entrepreneur

4. Understand the various sources of information for

entrepreneurship development

5. Appreciate the roles of commercial and development banks in

small scale industrial development.

6. Know the functions of various support agencies in small and

medium scale industrial development.

7. Understand the activities of different industrial associations in

relation to entrepreneurship.

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8. Know the functional areas of business

9. Understand the need for business planning.

10. Understand the strategies for consolidation and expansion of a

business enterprise

11. Understand the need for both management and business

succession plan

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TOPIC 1

UNDERSTAND THE ROLE OF PERSONAL SAVINGS AND PORTFOLIO

INVESTMENT IN NATIONAL ECONOMIC DEVELOPMENT

INTRODUCTION:
In practical terms the student will be introduced to a culture of personal
savings and related wealth option through investing in shares and stock.
The place of financial intelligence and investment intelligence as they
enhance wealth creation are also emphasized. This way, the activities
and operation of the Capital Market and the potential benefits for wealth
creation and entrepreneurial activities will be clearly identified and
tapped. Personal financial planning and management, the use of
stockbrokers to build diversified portfolio are also areas of focus. Secrets
of savings culture, financial intelligence and discipline will be extensively
covered.

SPECIFIC LEARNING OUTCOMES:

1. Define the following: Income, expenditure and savings;
2. Explain the role of savings in starting and sustaining
businesses;
3. List the benefits of interest;
4. Explain personal financial planning and management;
5. Explain shopping habits;
6. Describe how taxes are paid on income that people earn and
how income tax is calculated.
7. Explain portfolio investment and brokerage;
8. Identify types of portfolio investment;
9. Explain the role of portfolio investment in the National
Economic Development.

CONTENT:

1 Define the Following: Income, Expenditure and Savings;

Income, generally defined, is the money that is received as a result of the

normal business activities of an individual or a business.

Internationally, the accounting term income is synonymous to term

revenue. The International Accounting Standards Board uses this
definition:

Income is increase in economic benefits during the accounting period

in the form of inflows or enhancements of assets or decrease of

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 liabilities that result in increase in equity, other than those relating
to contributions from equity participants.

For the average citizen in many countries, the term “income” is most
relevant for its role in determining how much income tax a person must
pay.

In common usage, saving generally means putting money aside, for

example, by putting money in the bank or investing in a pension plan.

In a broader sense, saving is typically used to refer to economizing,

cutting costs, or to rescuing someone or something.

In terms of personal finance, saving refers to preserving money for future

use - typically by putting it on deposit - this is distinct from investment
where there is an element of risk.

Saving differs from savings in that the first refers to the act of putting
aside money for future use, whereas the second refers to the money itself
once saved.

 For example: you may decide to start saving 10% of your income;
because you aim for your savings to grow into an amount sufficient
to buy a car

Saving in Personal Finance

Within personal finance the act of saving corresponds to nominal

preservation of money for future use, although inflation can still erode its
real value. A deposit account paying interest is typically used to hold
money for future needs, i.e. an emergency fund, to make a capital
purchase (car, house, vacation, etc.) or to give to someone else (children,
tax bill etc.).

Savings within personal finance refers to the accumulated money put

aside by saving.

Within personal finance, money used to purchase shares, put in a

collective investment scheme or used to buy any asset where there is an
element of capital risk is deemed an investment. This distinction is
important as the investment risk can cause a capital loss when an
investment is realized, unlike cash saving(s). Lower levels of risk
normally apply to savings e.g. interest rates may fail to preserve its real
value, or in extreme cases loss can occur due to bank failure.

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In many instances the term saving and investment are used
interchangeably which confuses this distinction. For example many
deposit accounts are labeled as investment accounts by banks for
marketing purposes. To help establish whether an asset is saving(s) or
an investment you should ask yourself, "where is my money invested?" If
the answer is cash then it is savings, if it is a type of asset which can
fluctuate in nominal value then it is investment.

Personal finance is the application of the principles of finance to the

monetary decisions of an individual or family unit. It addresses the ways
in which individuals or families obtain, budget, save and spend monetary
resources over time, taking into account various financial risks and
future life events. Components of personal finance might include
checking and savings accounts, credit cards and consumer loans,
investments in the stock market, retirement plans, social security
benefits, insurance policies, and income tax management.

2 Explain the role of savings in starting and sustaining

businesses;

Want to start a business? Start saving your money.

Have you ever dreamed of starting your own business and being your
own boss with your own hours? It may seem like a dream, but it’s not
impossible to attain—a majority of first-generation millionaires got there
just by starting their own businesses. These aren’t just tech businesses
though—these are electricians, plumbers, and other local small
businesses. These are companies that anyone can start—even you.

To do so, however, you need to have some startup capital. For some
companies, venture funding is the way to go, but for most, self-funding is
essential. This means that you will need to have money saved up to start
your company. If you are serious about wanting to start your own
business, you will need to begin budgeting for it.

If you want to save money to start your own business, you have two
options:

1. You can try to work on the new venture while you are still at your
current job. Depending on your situation, this might be a better option
than the second one.

2. Save enough money so that you can quit your job and focus on your
new company full time.

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Both options have their pros and cons, but it might be a good idea to
follow option1. Many companies fail, and the first option is a good way to
hedge your bets in case your company doesn’t do as well as you hope.

If you don’t have a budget, it’s pretty important that you create one,
especially if you are planning to quit your current job. In a previous post,
I provided links to some good resources and articles on such topics as
calculating start-up costs. You should try to do the math to see how
much you need to save. In a future article, I’ll try to explain how to figure
out exactly how much you need to start your business.

Beyond saving for a new business, there are other options, such as
borrowing. A survey of P2P loans on Lending Club shows that a growing
number of business owners are turning to Lending Club to raise funds
for creating and expanding their businesses.

Regardless of how you raise your funds, budgeting is still important. By

budgeting and planning for your business, no matter what it is, you will
improve your chances of it being a success. If it does well, you will be
comfortably rich.

3 List the Benefits of Interest;

Learning that it is important to:

(1) save early and often,
(2) save as much as possible,
(3) earn compound interest,
(4) try to earn a high interest rate,
(5) leave deposits and interest earned in the account as long as possible,
and
(6) choose accounts for which interest is compounded often.

4 Explain Personal Financial Planning and Management;

Personal financial planning

A key component of personal finance is financial planning, a dynamic

process that requires regular monitoring and reevaluation. In general, it
has five steps:

1. Assessment: One's personal financial situation can be assessed by

compiling simplified versions of financial balance sheets and
income statements. A personal balance sheet lists the values of
personal assets (e.g., car, house, clothes, stocks, bank account),
along with personal liabilities (e.g., credit card debt, bank loan,

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 mortgage). A personal income statement lists personal income and
expenses.
2. Setting goals: Two examples are "retire at age 65 with a personal
net worth of =N=10,000,000 " and "buy a house in 5 years paying a
monthly mortgage servicing cost that is no more than 25% of my
gross income". It is not uncommon to have several goals, some
short term and some long term. Setting financial goals helps direct
financial planning.
3. Creating a plan: The financial plan details how to accomplish your
goals. It could include, for example, reducing unnecessary
expenses, increasing one's employment income, or investing in the
stock market.
4. Execution: Execution of one's personal financial plan often
requires discipline and perseverance. Many people obtain
assistance from professionals such as accountants, financial
planners, investment advisers, and lawyers.
5. Monitoring and reassessment: As time passes, one's personal
financial plan must be monitored for possible adjustments or
reassessments.

Typical goals most adults have are paying off credit card and or student
loan debt, retirement, college costs for children, medical expenses, and
estate planning.

5 Explain Shopping Habits;

Shopping Habits

The economy is a core influence. When it is positive, shoppers feel more

freedom to be selective about where and how they shop. When the
economy is of primary concern, shoppers exercise more discretion about
where and how they spend their money.

Loyalty can be stolen: Shoppers will deviate from past shopping habits
to achieve additional value. Taking queues from the economy, 61% cited
price/value as the primary reason driving them to a retail destination.

Control your habits, improve your life: We are all the sum of our daily
habits. Small actions repeated over and over make up our day, our week,
our year, our life. We all know there are things we ~should~ (or
shouldn't) do. The trick is just getting our conscious brain a little help to
turn "I think I should" into "I knew I could!"

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6 Describe How Taxes Are Paid on Income That People Earn and
How Income Tax Is Calculated.

Employee gross income/Employers can provide, among other items,

basic salaries, housing allowance, transport allowance, utilities, lunch
allowance, leave allowance, club subscriptions, clothing allowances,
leave passage, insurance premiums, and tax reimbursements to their
employees. Basic salary, utility allowance, insurance premiums, tax
reimbursements, leave allowance, clothing allowances, and club
subscriptions are fully taxable in the hands of an individual. Provision of
meals in any canteen in which meals are provided for the staff generally
or non-assignable luncheon vouchers given to staff are not taxable. An
annual relief of =N=2,436.00 is granted on the transport allowance paid
to an individual.

Apart from the above, employers also provide cars and accommodation
for their staff. If a company provides accommodation for an employee,
the employee would be taxed on the ratable value of the accommodation.
The employer deducts withholding tax at the rate of 10% at source. If a
car is allocated for an employee’s use, 5% of the cost of the car would be
treated as benefit-in-kind that would form part of the employee’s taxable
income.

The Lagos State Board of Internal Revenue allows =N=7,500.00 tax relief
on leave allowances. Leave passage supported with travel documents is
tax exempt. Also, the provision of any uniform, overall or other protective
clothing by an employer would not be treated as part of the employee’s
taxable income.

Individuals residing in Lagos or Abuja are entitled to relief on their

housing allowance amounting to the lower of 28% of their basic salaries
or =N=10,000.00; the relief for residents of state capitals and other
places amounts to the lower of 28% of the basic salaries or NGN6,000
and NGN4,000, respectively

7 Explain Portfolio Investment and Brokerage;

Portfolio

A portfolio is a grouping of financial assets such as stocks, bonds and

cash equivalents, as well as their funds counterparts, including mutual,
exchange-traded and closed funds. Portfolios are held directly by
investors and/or managed by financial professionals. Prudence suggests
that investors should construct an investment portfolio in accordance
with risk tolerance and investing objectives.

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What is a 'Portfolio Investment?'

A portfolio investment is a hands-off or passive investment of securities

in a portfolio, and it is made with the expectation of earning a return.
This expected return is directly correlated with the investment's expected
risk. Portfolio investment is distinct from direct investment, which
involves taking a sizable stake in a target company and possibly being
involved with its day-to-day management. Portfolio investments can span
a wide range of asset classes such as stocks, government bonds,
corporate bonds, Treasury bills, real estate investment trusts (REITs),
exchange-traded funds (ETFs), mutual funds and certificates of deposit.
Portfolio investments can also include options, derivatives such as
warrants and futures, and physical investments such as commodities,
real estate, land and timber.

The composition of investments in a portfolio depends on a number of

factors. Some of the most important include the investor’s risk tolerance,
investment horizon and amount invested. For a young investor with
limited funds, mutual funds or exchange-traded funds may be
appropriate portfolio investments. For a high net worth individual,
portfolio investments may include stocks, bonds, commodities and rental
properties.

Brokerage

A brokerage firm, or simply brokerage, is a financial institution that

facilitates the buying and selling of financial securities between a buyer
and a seller. A brokerage company’s main duty is to be a middleman that
connects buyers and sellers to facilitate a transaction. Brokerage
companies receive compensation by means of commission once the
transaction has successfully completed. For example, when a trade order
for a stock is executed, an investor pays a transaction fee for the
brokerage company's efforts to complete the trade.

Choosing a Company

A brokerage company is also called a brokerage. Investors have a range

of options when choosing a company to work with. An investment
brokerage is authorized to trade securities for buyers and sellers.
Brokerage commissions erode returns, so investors should select a
company that provides economical fees. Before opening an investment
account, do research and compare fees, products, benefits, customer
service, reputation and the quality of services provided.

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Full-Service Brokerage

Full-service brokerages are also known as traditional brokerages. These

companies offer estate planning services, tax advice and consultations.
These companies also offer up-to-date stock prices, quotes, and research
on economic conditions and market analysis. Traditional brokerages
charge a fee, commission or both. For example, a brokerage may charge
a load fee up to 5.75% for mutual funds. Broker commissions average
about 2%. In addition, brokers sell their clients’ additional products to
earn supplementary fees.

Discount Brokerage

A discount brokerage typically charges less than a traditional brokerage.

Several companies also offer advice at a lower cost. However, the depth of
the advice depends on the size of an investor’s account. These types of
companies charge lower commissions by having their clients conduct
trades via computerized trading systems.

These companies may do business over the phone or on the Internet.

These companies charge a minimum commission of $5 up to a higher
rate of $45 for a broker assisted trade. Clients can wire money to their
account and access tax documents.

Online Brokerage

Online brokerages only offer a website for investors to conduct

transactions on their own. Clients can communicate by email or phone
to conduct trades or ask questions. These companies offer their services
at a discounted rate because they don't offer investment advice.

Captive Brokerage

Captive brokerages are affiliated with a specific mutual fund company.

Captive brokers are biased and are persuaded to recommend and sell
mutual funds that the mutual company owns. As a result, brokers may
sell client’s products that are not in their best interest.

Independent Brokerage

Independent brokerages are not affiliated with any mutual fund

company. They function similarly to a full-service brokerage. Typically,
these brokers are not biased and can recommend and sell client’s
products that are in their best interest.

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8 Identify types of portfolio investment;
 (Government) Bonds
 Shares and stocks
 Debentures, and
 Acquisition of assets

In economics and finance, Portfolio investment represents passive

holdings of securities such as shares or stocks, bonds, or other financial
assets, none of which entails active management or control of the
securities' issuer by the investor; where such control exists, it is known
as foreign direct investment. Portfolio investment is strictly connected
with a portfolio diversification process.

Some examples of Portfolio investment are:

 purchase of shares in a company.

 purchase of bonds issued by government.
 acquisition of assets.

Portfolio investment is part of the capital account on the balance of

payments statistics.

A brokerage is a firm that acts as an intermediary between a purchaser

and a seller. More commonly, a brokerage is referred to as a brokerage
firm. To broker a deal is to communicate with both the buyer and seller
as to acceptable price on anything sold or purchased.

A broker, a single person, or the brokerage firm completes any necessary

legal paperwork, obtains the appropriate signatures, and collects money
from the purchaser to give to the seller. Since the buyer and seller are
employing the brokerage to complete the deal, the brokerage may collect
a portion of the money obtained. In some cases, a brokerage receives
money from both parties. In others, the brokerage receives a commission
only from the seller.

Brokerage firms are most commonly thought of in relationship to the sale

and purchase of stock shares. Fees are variable, depending on the degree
to which the brokerage is involved in decisions about purchase. Some
stockowners give their brokers power of attorney to make decisions about
when to buy or sell stock and depend upon their brokers for researching
new stock for purchase. This type of brokerage firm usually assesses a

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fairly large fee, and regardless of whether the owner loses or earns
money, the firm is paid

How the Stock Market Works

A share of stock is a small ownership stake in a company. When you buy

stock, you become a shareholder or stockholder. Companies sell stock in
order to raise the money needed to expand or improve their businesses.
Businesses that raise capital in this way are called public companies.
Investors buy stock to obtain returns on their investment, jst as you may
deposit money in a savings account to earn interest. If you purchase the
stock of a company that does well, you may earn a higher return than
what you could earn from a savings account – and your money may
actually grow faster.

Stocks can help your money grow in two ways. If the share price of your
stock goes up, you can draw a profit – also known as a capital gain –
when you sell your shares. Of course, the share price can go down, and
you can loose some of your money. Some stocks pay investors a
dividend, which is a portion of the company’s profits, on a regular basis.

Stock prices are driven by supply and demand. It a company is doing

well or its shares are selling at a fair price, many investors may buy its
stock, creating demand. Demand drives up the price. If the company is
not doing well – or the share price has been driven too high – investors
may stop buying or begin selling. As demand drops, so does the price.

Stocks are bought and sold at the stock market. This is where public
companies seeking capital meet investors who seek profits. The first
stock exchange began in 1602 in Amsterdam, Holland, where shares of
the United East India Company were traded. America’s first stock market
opened in 1792, near an old buttonwood tree where stock traders used to
meet. England’s first stock market opened in 1773, in a former London
coffeehouse. The Nigerian stock exchange opened in ----. At the stock
market, each stock is registered with a particular exchange. If you think
of the stock market as a big shopping mall, then an exchange is a store
that carries only certain brands of products. Today there are stock
markets all over the world. At each, stocks are bought and sold on a
daily auction conducted by stock traders and specialists.

When someone wants to buy or sell stock, they usually go to a brokerage

firm and talk to a licensed stockbroker. The stockbroker will execute
your trade – that is, help you buy or sell stock – and charge you a small
transaction fee. Stockbrokers who are financial consultants may also
offer investment guidance.

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When a stock market does well and prices rise over a period of time, it’s
called a bull market. When prices decline for a period of time, it’s called a
bear market.

Let’s say you purchased 10 shares of XYZ stock at =N=52.00 a share.

Over time, the share price rises to =N=78.50 an increase of =N=26.50 a
share. If you sell at that point, you will make a profit of =N=265.00. If the
stock pays a dividend, that amount will be added to your total return. A
small transaction fee will be deducted from the proceeds by the firm that
that executes the transaction. You will also be responsible for taxes on
the profit.

Differences between shares and debentures

 Shareholders are effectively owners; debenture-holders are
creditors.
 Shareholders may vote at Annual General Meetings (AGMs) and be
elected as directors; debenture-holders may not vote at AGMs or be
elected as directors.
 Shareholders receive profit in the form of dividends; debenture-
holders receive a fixed rate of interest.
 If there is no profit, the shareholder does not receive a dividend;
interest is paid to debenture-holders regardless of whether or not a
profit has been made.

9 Explain the role of portfolio investment in the National

Economic Development.

FINANCIAL MARKET

1.1 The financial market is built on the following basics:

1. Individuals in primary occupations minimize current consumption to

build up savings.

2. Stock of savings is made available to fund users (corporations and

governments) at the current price of money, i.e. interest rate, subject to
government interference.

3. In the formal sector, savers and users of their funds do not meet
directly – they operate through financial intermediaries, such as:
banks/deposit intermediary, stockbrokers/investment intermediary and
insurers/risk management intermediary. With the advent of universal
banking in 2003, most Nigerian banks can now undertake all aspects of

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financial intermediation, ranging from retail banking, stock broking,
asset management, Issuing House to insurance and Registrar services.

4. Financial intermediaries issue financial instruments/claims to savers

(financial assets) and users (financial liabilities) in exchange for the
funds received or disbursed, respectively.

1.2 Financial market is classified into two broad segments based on

tenor of the financial instruments issued:

Money Market:
This is the market for short-term financial instruments, with 1 – 12
months tenor.

Instruments: Fixed Deposits, T-bills, CPs, BAs, etc.

Near-money attributes: Low risk, Low Return and High Liquidity
Institutions: CBN, Commercial/Merchant Banks, and
Discount Houses.

It is important to note that money market instruments are essentially

products of deposit intermediaries (such as commercial banks, discount
houses etc) in the process of savings mobilization and the CBN as an
instrument of short-term monetary operations.

Capital Market:
This is the market for long-term financial instruments, with over 12
months tenor.

Instruments: Equity, Bonds and Derivatives.

Investment attributes: Varied, depending on the type of
instrument.
Institutions: SEC, NSE, Stockbrokers/Issuing Houses,
Registrars, etc.

It is important to note that core capital market instruments are typically

creations of corporations in the process of corporate financing (i.e.
capitalization) and the governments (Federal, State or Local Governments)
in the financing or re-financing of development, public debt and policy
management.

1.3.1 PUBLIC LIMITED LIABILITY COMPANY, PLCS:

A public limited liability company (PLC) can raise fresh capital from the
capital market by issuing of any of the following instruments for
subscription in the primary market:
1. Ordinary Shares

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2. Preference Shares
3. Corporate Bonds

Corporate issues decision is a function of the company's target capital

structure, alternative cost of capital as well as proprietary interests. It is
perhaps easier for the average Nigerian to understand why a company
should borrow or issue corporate bonds instead of raising money by
issue of ordinary shares to new co-owners. Once the return on
investment (ROI) is higher than the cost of debt, or applicable interest
rate, the use of debt magnifies the return on owners' capital, but at a
risk depending on the firm's debt/equity ratio.

Why should a firm go public, or raise new equity? The answer is beyond
the scope of this manual, but the rationale is evident in the fact that
ordinary shares is by far the most traded class of financial instrument in
all capital markets. Of the 265 securities listed on the Nigerian Stock
Exchange as at December 2004, 207 were equities. This trend is
expected to continue with successful implementation of the National
Economic Empowerment & Development Strategy (NEEDS) vis-à-vis the
on going banking industry re capitalization, sector reforms and
privatization of public enterprises such as NEPA, NITEL, etc. However,
the greatest boost to Nigerian equity sector will come from flotation of
eligible indigenous blue chips, such as Dangote, Chanchangi, Ibeto, The
Young, Honeywell, Eleganza, etc.

When an investor buys ordinary shares in a company, the investor

becomes a co-owner of the company entitled to the following perks:
1. Cash/Bonus Dividends declared from the yearly profit(s)
2. Capital Appreciation over a period of time
3. Right to Vote at Annual General Meetings of the PLCs
4. Right to residual claims on the PLC's assets in the event of
liquidation

Thus, equity interest is residual, and as such, riskier. However, in

periods of boom and high company profits, equities benefit from the
upside potential.

1.3.2 GOVERNMENT BONDS:

Government at various levels can raise money from the capital market by
issuing:
1. Development Stock/Bonds (FGN)
2. Development Bonds (Sgs)
3. Municipal Bonds (Lgs)

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The motivation for developing bond markets is particularly specific
(related to satisfying particular borrowing needs efficiently) and
particularly general (related to making financial markets function more
effectively). The prime specific reasons for developing a bond market in
most countries are to finance fiscal deficits or in the case of corporations,
finance long maturity projects. The most fundamental general reasons
are to (1) make financial market more complete with wide range of
instruments to ensure significant asset/liability matches, (2) diversifying
capital intermediation beyond the highly leveraged banking industry and
(3) ensure easy transmission of the monetary policies.

Investors in corporate or government bonds are entitled to periodic

interest payments, on a compounding or discounting basis depending on
the stated coupon rate, and repayment of the face value on maturity of
the bond. Bonds are less risky as interest payment is a prior charge on
company profit, before corporate tax and creditors are settled first in the
event of liquidation. However, creditors are often worse off in periods of
rising interest rate due to the inverse relationship between bond value
and current interest rate. This is one of the reasons why the bond sector
of the Nigerian Stock Exchange is moribund.

1.3.3 FUNDS:
There are two types of Funds:

Investment Trust Fund (Closed Fund): This is the case of a PLC

offering its shares for subscription and the paid-up capital is, in turn,
being invested in the securities of viable enterprises. The fund is
managed and dividends declared to owners of shares at the end of the
company's operation year. e.g Berkshire Hathaway owned by Warren
Buffet “the Sage of Omaha”.

Unit Trust/Mutual Fund (Open Fund): This is an open-end fund, which

is offered, in smaller units to be able to source funds from big and small
investors. There is a regular valuation to arrive at the net asset value of
the fund, which leads to the bid, and offer price. The investors purchase
units in the fund and are entitled to dividend payments, receiving
Annual Reports and attending AGM's.

2.0 THE NIGERIAN CAPITAL MARKET

You can now visualize the capital market as a forum for trading and
sourcing medium and long – term funds. The market can be divided into
two broad categories, each with sub-markets.

Securitized capital market:

Stock Market: Quoted and Unquoted

19
Commodity Market: Coal, Gold, Cereals, Cocoa, Groundnut, etc
Derivative Market: Futures, Options and Mortgage Backed
Securities.

Unsecuritized capital market:

Real Estate
Medium/Long term Bank Loans
Equipment Leasing
Project financing
Venture Capital

2.1 INSTITUTIONS:
It is important to note that the mechanics of the stock market is not as
simple as for example, operating a local bank account, where the bank
staff and the customer meet directly. As a matter of rules and procedure,
the stock market features a number of registered market operators and
consultants in both the primary and secondary market segments:

1. Securities & Exchange Commission

2. Nigerian Stock Exchange
3. Stockbrokers
4. Issuing Houses
5. Registrars
6. Receiving Bankers
7. Trustees
8. Underwriters
9. Portfolio/Fund Manager
10. Investment Adviser
11. Rating Agencies
12. Professional Firms/Consultants: Accountants, Lawyers, etc.

Investment & Securities Act, 1999 Sec. 29 requires all capital market
operators and such other intermediaries associated with the securities
industry to register with the Securities & Exchange Commission and
conduct all securities transactions in accordance with the conditions of
the certificate of registration obtained from the Commission.

2.1.1 Securities & Exchange Commission (SEC)

The Securities & Exchange Commission is the regulatory apex
organization for the Nigerian capital market, just as the Central Bank of
Nigeria regulates the money market. The Commission was established by
the Investment & Securities Act, 1999 to regulate investment and
securities business in Nigeria.

20
The key functions of the Commission as stipulated in Section 8 of the Act
are as follows:
1. Register and regulate all capital market operators, including securities
exchanges
2. Register securities to be offered for subscription or sale to the public.
3. Register/approve and regulate the workings of venture capital funds,
collective investment schemes (such as mutual funds), mergers,
acquisitions and all forms of business combinations.
4. Prepare guidelines, organize and co ordinate capital market education
5. Protect the integrity of the securities market against abuses arising
from insider trading, fraud or unfair trade practices.

2.1.2 The Nigerian Stock Exchange (NSE)

Stock exchanges provide secondary markets for securities (i.e. ordinary
shares, corporate or government bonds) issued by companies and
governments in the process of raising funds from the primary segment of
the capital market. It is a Self-Regulatory Organization (SRO) and
provides trading floors for registered stockbrokers/dealing members of
the stock exchange trading in registered/listed securities of quoted
companies or government according the Rules and Regulations of the
Stock Exchange. Manipulations, insider trading, money laundering and
other securities industry malpractices are strictly prohibited on the stock
exchange.

The Nigerian Stock Exchange (1977) was established in 1961 as Lagos

Stock Exchange. It has witnessed tremendous growth in recent times
and the trends is towards creating an international standard capital
market satisfying the long-term financing/investment needs of Nigerian
governments, companies and portfolio investments.

Transaction cycle is now T + 3 days. The exchange's delivery and

settlement system is built on the Central Securities Clearing System
(CSCS), which demands prior (1) verification and deposit of shares for
sale and (2) lodgment of investors' funds with the Settlement Banks
before any dealing. NSE has Remote Trading capability, allowing
brokers to trade on the floor and investors, to monitor the market, and
even enter orders from remote locations on a real time basis via internet.
It recently introduced a Fraud Alert System to shareholders via GSM/e-
mail before trades can be executed on their stocks lodged in the CSCS.
NSE is compliant with global standards set by World Federation of Stock
Exchanges in terms of technology and market scrutiny regime.

2.1.3 Stockbrokers
Stockbrokers: are the principal intermediaries, especially in the
secondary market segment. In this capacity, a broker is an agent of a

21
principal and he is paid commission for his services. There are currently
over 200 registered stockbrokers

22
2.2 TRADED SECURITIES:
The Nigerian Stock Exchange lists and deals on financial instruments
issued by PLCs quoted on the Exchange subject to the provisions of Sec.
32 (1) of the Investment & Securities Act, 1999:
“No person shall transfer, issue, sell, offer for subscription or sale to the
public, securities or investments … unless such securities or investments
are registered by the Commission (SEC) and prior approval for the transfer,
issue, sale, offer for subscription or public offer for sale to the public has
been granted by the Commission.”
The traded securities areOrdinary shares, such as – NBL, Guinness,
Zenith, FBN, Texaco, UACN etc; and Government Bonds.

The comprehensive list of securities traded on the NSE are contained in

the NSE Daily Official List, which are usually published by major
dailies and business journals, such as BusinessDay, Financial
Standard, Business Times. Any individual desirous of understanding
the stock market is advised to develop interest in reading and tracking
the Daily Official List and in business and corporate news, generally.
Key to Understanding the Stock table, published by BusinessDay
provides the basic guide to the Daily Official List. In the Daily Official
List, securities are listed under two segments:
First-Tier
Second Tier

23
TOPIC 2

UNDERSTAND THE LIFE SKILLS NEEDED BY AN ENTREPRENEUR

INTRODUCTION:
There are certain life skills or developmental attributes that are very
much required by entrepreneurs for them to be effective and efficient
managers of their respective enterprises. It is very important for every
entrepreneur to develop appropriate life skills and apply them in the
smooth running of their business organisations. For a potential
entrepreneur to succeed certain required skills are indispensable for its
daily functions/activities and survival. These skills are applied
appropriately in all entrepreneurial operations, to enable the
entrepreneur interact with clients, communicate as well as demonstrate
good spirit and discipline. Towards this direction an attempt is made in
this section present to potential entrepreneurs these requirements as
guide for their benefits. It also alerts potential entrepreneurs with the
requisite basic needs for a profitable and successful entrepreneurial
career.
Specific Learning Outcomes:
1. Identify the characteristics of an entrepreneur;
2. Define Communication;
3. Explain the role of Communication in an enterprise;
4. Define teamwork and team spirit;
5. Identify the characteristics of teams;
6. List benefits of teamwork in an enterprise;
7. Define leadership;
8. List the qualities and characteristics of good leaders;
9. Describe a target in relation to the success of an enterprise;
10. Explain how targets are set;
11. Explain how a target is achieved;
12. Explain discipline and self – discipline;
13. State the benefits of Personal discipline in the life of an
entrepreneur.

CONTENT

1. Identify the characteristics of an entrepreneur;

Characteristics of an Entrepreneur

It is important to identify the characteristics of an entrepreneur so as to

imbibe in the student such qualities that would enable him to be one.
Some of the characteristics are:

24
 a) Self Confidence – Belief in oneself and not just fate. Once he sets
goals, he has to behave in his ability to achieve same. He is not
disturbed or discouraged by obstacles.
b) Risk-taking – The entrepreneur calculate the risk involved in the
venture before starting it. He is neither a gambler nor risk averse.
He takes moderate risk.
c) Result Oriented – He believes in achieving results, therefore he
sets clear and measurable goals. He is persistent, persevering and
also determined to ensure these objectives are met.
d) Drive and Energy - An entrepreneur exhibit drive and energy. He
puts a lot of physical and mental energy in his business. He runs
around to contact costumers, suppliers, other associates including
banks, etc.
e) Long-term Investment – He is future oriented. He usually sees
projects on long term basis and hence takes decision as such. He
is not interested in establishing a project that would collapse after
a few years in operation.
f) Leadership – It is not always possible to run an enterprise single
handedly. Assistance from other people is needed from both skilled
and semi-skilled hands. The entrepreneur has to motivate direct
and guide this people to accompany his goals. It takes a good
leader to motivate people.
g) Creativity – An entrepreneur has to be original and innovative. He
has to be resourceful, versatile and knowledgeable. He should be
flexible when consumers are not recapture to his products. What
keep him perpetually in business is his creative ideas.

2. Define Communication;

Communication is a process that allows organisms to exchange

information by several methods. Communication requires that all parties
understand a common language that is exchanged with each other.
Exchange requires feedback. The word communication is also used in
the context where little or no feedback is expected such as broadcasting,
or where the feedback may be delayed as the sender or receiver use
different methods, technologies, timing and means for feedback.

There are auditory means, such as speaking, singing and sometimes

tone of voice, and nonverbal, physical means, such as body language,
sign language, paralanguage, touch, eye contact, or the use of writing.

3. Explain the role of Communication in an enterprise;

Communication strategy is a coherence linkage never to be overlooked in
an enterprise. Communication needs to be comprehensively planned and
spontaneous, as well as top-down and bottom-up. Communication

25
processes, including the target audience, the message, the means of
communication, the frequency, the rationale, and the selection of
communicators, must be tailored to each purpose and constituency.

Top organizations have a communication process that communicates the

knowledge and information that people need in a way that they
understand and can apply to their job. Communication is neither a
separate nor a periodic task. Use every means available to let everyone
working with you know your plans and your reasons. A manager should
provide team members with the information they require to do a good
job, communicating with them frequently, and giving them clear
guidelines on the results that are expected.
Communication is a two-way relationship, so establish an enabling
environment for other could give you the information you need. Use
feedback to make certain that communication has become
understanding and consensus. Practice management by wandering
around (MBWA) and active listening.
Communicate with reports and benchmarks that track business progress
and anticipate issues and opportunities, for example:
 the annual budget
 monthly measurements and benchmarks requiring action
 key weekly measurements on which action can be taken.
Focused meetings can also foster clear effective communication, and
spark action.
To be successful, a project must have...:Constant, effective
communication among everyone involved in the project in order to
coordinate action, recognize and solve problems, and react to changes.
Don't speak personally to employees, except when announcing increased
targets, shortened deadlines and tightened cost restraints. Eliminate
politics, by giving everybody the same message.

If our motive is to manipulate, our communication and our leadership in

general will prove to be ineffective over time. Effective communication
must centre on principles – The law of the ‘farm’ based on enduring seed
time and harvest relationships.

Quick, easy, free, and fun approaches won't work on the "farms" of our
lives because there we're subject to natural laws and governing
principles. Natural laws, based upon principles, operate regardless of our
awareness of them or our obedience to them. Often habits of
ineffectiveness are rooted in our social conditioning toward quick-fix,
short-term thinking. In school, many of us procrastinate and then
successfully cram for tests. But does cramming work on a farm? Can you

26
go two weeks without milking the cow, and then get out there and milk
like crazy? Can you "forget" to plant in the spring, goof off all summer,
and then hit the ground real hard in the fall to bring in the harvest? We
might laugh at such ludicrous approaches in agriculture, but then in
academic environments, we might cram to get grades and degrees.

The only thing that endures over time is the law of the farm: I must
prepare the ground, put in the seed, cultivate, weed, water, and nurture
growth. So also in a business or a marriage there is no quick fix where
you can just move in and magically make everything right with a positive
mental attitude and a package of success formulas.

Correct principles are like compasses: they are always pointing the way.
And if we know how to read them, we won't get lost, confused, or fooled
by conflicting voices and values. Principles such as fairness, equity,
justice, integrity, honesty, and trust are not invented by us: they are the
laws of the universe that pertain to human relationships and
organizations. They are part of the human condition, consciousness, and
conscience.

People instinctively trust those whose personalities are founded upon

correct principles. We have evidence of this in our long-term
relationships. We learn that technique is relatively unimportant
compared to trust, which is the result of our trustworthiness over time.
When trust is high, we communicate easily, effortlessly, instantaneously.
We can make mistakes, and others will still capture our meaning. But
when trust is low, communication is exhausting, time-consuming,
ineffective, and inordinately difficult.

Sam Walton, the Founder of Wall-Mart writes: "Communicate everything

you possibly can to your partners. The more they know, the more they'll
understand. The more they understand, the more they'll care. Once they
care, there's no stopping them. If you don't trust your associates to know
what's going on, they'll know you really don't consider them partners.
Information is power, and the gain you get from empowering your
associates more than offsets the risk of informing your competitors." 

Active Listening
Active listening is a habit that you can and should develop. Being great
listener benefits managers by reducing misunderstandings, improving
information accuracy, and ensuring that they have complete information
from which to work. Employees, peers, and even your manager will open
up more when they feel listened to.

27
You need to listen to the words that are being said and hear the person’s
intent, or disconnects will occur. Even with the best of intentions,
messages can become distorted and confused. Managers who learn to
listen well and provide effective feedback will improve overall dialogue
reception.

You are listening actively when you

 Demonstrate a sincere desire to pay attention to the other person
(instead of mentally practicing what you are going to say next).
 Commit to being coachable and open with the information being
received from the other person.
 Relate to his or her perspective and empathize with his or her point
of view.
 Seek to understand the other person.
 Pay attention and don’t be distracted by other things in the
environment.
 Ensure you have interpreted the message as intended through
feedback, confirming, restating, or paraphrasing.
 Reflect on what is being said.
 Synthesize the information, emotion, and feelings to improve
understanding.
 Clarify the information by asking questions and probing.
 Validate perceptions and assumptions.
 Let the other person talk.
 Are fully present and focused on the other person.

12 Active Listening Tips

1. Mentally put yourself in other person’s shoes.
2. Keep the conversation on what the speaker says, not on what
interests you.
3. Spend more time listening than talking.
4. Let the other speaker talk. Do not dominate the conversation and
do not interrupt incessantly.
5. Pay attention, never become preoccupied with your own thoughts
when others talk, take brief notes to concentrate on what is being
said.
6. Do not finish the sentence of others.
7. Ask questions, but do not answer questions with questions.
8. Be aware of biases and perceptions. Control your biases and
validate your assumptions.
9. Encourage the speaker, provide feedback and paraphrase to show
you are listening.
10. Plan response after the other person has finished speaking,
not while they are speaking.

28
 11. Analyze by looking at all the relevant factors, ask clarifying
and open-ended questions.
12. Summarize – walk the person through your analysis.

4. Define teamwork and team spirit;

Teamwork is the concept of people working together cooperatively, as in a

sportsteam.

Projects require that people work together, so teamwork has become an

important concept in organizations. Effective teams are an intermediary
goal towards getting good, sustainable results. Industry has seen
increasing efforts through training and cross-training to help people to
work together more effectively and to accomplish shared goals, whether
colleagues are present or absent.

“The old structures are being reformed. As organizations seek to become

more flexible in the face of rapid environmental change and more
responsive to the needs of customers, they are experimenting with new,
team-based structures” (Jackson & Ruderman, 1996 A 2003 national
representative survey, HOW-FAIR [1], revealed that Americans think that
'being a team player' was the most important factor in getting ahead in
the workplace. This was ranked higher than several factors, including
'merit and performance', 'leadership skills', 'intelligence', 'making money
for the organization' and 'long hours'.

Aside from any required technical proficiency, a wide variety of social

skills are desirable for successful teamwork, including:

 Listening - it is important to listen to other people's ideas. When

people are allowed to freely express their ideas, these initial ideas
will produce other ideas.
 Questioning - it is important to ask questions, interact, and
discuss the objectives of the team.
 Persuading - individuals are encouraged to exchange, defend, and
then to ultimately rethink their ideas.
 Respecting - it is important to treat others with respect and to
support their ideas.
 Helping - it is crucial to help one's coworkers, which is the general
theme of teamwork.
 Sharing - it is important to share with the team to create an
environment of teamwork.
 Participating - all members of the team are encouraged to
participate in the team.

29
Communication - For a team to work effectively it is essential team
members acquire communication skills and use effective communication
channels between one another e.g. using email, viral communication,
group meetings and so on. This will enable team members to work
together and achieve the team’s purpose and goals

5. Identify the Characteristics of Teams;

The 17 Indisputable Laws of Teamwork

1. The Law of Significance: One Is Too Small a Number to Achieve
Greatness
2. The Law of the Big Picture: The Goal is More Important Than the
Role
3. The Law of the Niche: All Players Have a Place Where They Add
the Most Value
4. The Law of the Great Challenge ("Mount Everest"): As the
Challenge Escalates, the Need for Teamwork Elevates
5. The Law of the Chain: The Strength of the Team Is Impacted by Its
Weakest Link
6. The Law of the Catalyst: Winning Teams Have Players Who Make
Things Happen
7. The Law of the Vision ("Compass"): Vision Gives Team Members
Direction and Confidence
8. The Law of the Bad Apple: Rotten Attitudes Ruin a Team
9. The Law of Countability: Teammates Must Be Able to Count on
Each Other When It Counts
10. The Law of the Price Tag: The Team Fails to Reach Its Potential
When It Fails to Pay the Price
11. The Law of the Scoreboard: The Team Can Make Adjustments
When It Knows Where It Stands
12. The Law of the Bench: Great Teams Have Great Depth
13. The Law of Identity: Shared Values Define the Team
14. The Law of Communication: Interaction Fuels Action
15. The Law of the Edge: The Difference Between Two Equally
Talented Teams Is Leadership
16. The Law of High Morale: When You're Winning, Nothing Hurts
17. The Law of Dividends: Investing in the Team Compounds Over
Time
Characteristics of Winning Teams
Winning Teams:

30
  have a great many winners in them; most of the players poised and
confident, and although they may well be 'stars' in their own right
they allow others to shine in order to be a 'star team' together
 often include winning groups and combinations which work
together so well they seem to have a sixth sense, whereas in fact
they have merely learned to cooperate to make each other winners
and to make a team a winning team
 have the winning habit and because they usually have more
winning games behind them than otherwise they go into every game
expecting to win
 develop a synergy that comes from winning and which increases
not by simple progression but exponentially: 1x1=11
 develop both mental and physical energy to withstand adversity
 create a winning atmosphere - everyone surrounding them
emerges as a winner
 make winning contagious so that new comers soon acquire the
team's magic

Getting Team Members to Work Along With You

 Communicate with people frequently and praise them
 Consult with people about their work
 Encourage people to participate in setting goals on the job
 Counsel people about teamwork and opportunities etc.

6. List Benefits of Teamwork in an Enterprise;

"It's possible to achieve almost anything as long as you are not

worried about who gets the credit" - Harry S. Truman
Why Teambuilding?
Teamwork is essential for competing in today's global arena, where
individual perfection is not as desirable as a high level of collective
performance. In knowledge based enterprises, teams are the norm
rather than the exception. A critical feature of these team is that they
have a significant degree of empowerment, or decision-making
authority. There are many different kinds of teams: top management
teams, focused task forces, self-directed teams, concurrent engineering
teams, product/service development and/or launch teams, quality
improvement teams, and so on.
Building the Dream Team
"The Dream Team has from three to ten people, focused on a common
target, with interconnected roles, complementary know-how, self-

31
created process, and a "committed connectedness" that holds all
members mutually and equally responsible and accountable for the
results."
Strategic Alignment
In any socio-technical system the people in the system work better
when they understand how they fit into the system as a whole.
To meet and exceed customer satisfaction, the business team needs to
follow an overall organizational strategy.
Building Your Management Team
The necessity of building a management team is central in the concept
of leader effectiveness. The management team is the entire work group
as an integral unit (rather than an aggregate of individuals), governing
itself within the area of freedom allowed by its position in the
organizational hierarchy.

Cross-Functional Teams
To face today's complex challenges, you need to incorporate a wide
range of styles, skills, and perspectives.
Managing Systemic Innovation by Cross-Functional Teams
In the new era of systemic innovation, it is more important for an
organization to be cross-functionally excellent than functionally
excellent. Firms which are successful in realizing the full returns from
their technologies and innovations are able to match their technological
developments with complementary expertise in other areas of their
business, such as manufacturing, distribution, human resources,
marketing, and customer relationships. To lead these expertise
development efforts, cross-functional teams, either formal or informal,
need to be formed. These teams can also find new businesses in white
spaces between existing business units.

Managing Cross-Cultural Differences

Culture in general is concerned with beliefs and values on the basis of
which people interpret experiences and behave, individually and in
groups. Broadly and simply put, "culture" refers to a group or
community with which you share common experiences that shape the
way you understand the world.
Cases in Point: Building High-performing Teams
High-performing teams do not carry underperforming C players for
long. In the National Basketball Association (NBA), 20% of players are
traded every year. At General Electric (GE), Jack Welch required that

32
 the bottom 10% be cut every year. "One of the surest ways to raise the
level of a team is to cut from the bottom and add to the top."

7. Define leadership;

A simple definition of leadership is that leadership is the art of

motivating a group of people to act towards achieving a common goal.

Put even more simply, the leader is the inspiration and director of the
action. He or she is the person in the group that possesses the
combination of personality and skills that makes others want to follow
his or her direction.

In business, leadership is welded to performance. Effective leaders are

those who increase their company’s bottom lines

Leadership versus Management

"Manage things... lead people"- Admiral Grace Hopper
A Huge Difference
Do you want to be a leader or a manager? You need to make a choice as
there is a huge difference. "The world is full of managers and
desperately short of leaders - real leaders."

Today's World Realities

The old ways of management no longer work and will never work again.
The magnitude and pressure of environmental, competitive, and global
market change we are experiencing is unprecedented. It's a very
interesting and exciting world, but it's also volatile and chaotic. You
cannot address these new challenges with more of the same
management solutions - successful change requires leadership.
Psychological research has shown that "under circumstances of
uncertainty or unusual challenge and difficulty, people look for help in
understanding questions about what matters, what to do, what
direction to take, and what they should not do. Providing people with
the answers that help them with these difficult questions is the essence
of leadership."5
Leading Change
Leadership is about getting people to abandon their old habits and
achieve new things, and therefore largely about change - about
inspiring, helping, and sometimes enforcing change in people. "While
there can be effective absent ideas in management, there cannot be in
true leadership".

33
 To Lead or To Manage?
You need both. The old proverb says that leadership is doing the right
thing; management is doing things right. The difference between the
two is not as sharp as the saying would suggest, and both are required
for effective corporate growth: leadership risk creates opportunities
while management strictness turns them into tangible results.
However, "if your organization is not on a journey don't bother about
leadership - just settle for management", advises John Adair.
 
"There is a direct correlation between the way people view their
managers and the way they perform." Strong leadership is imperative
for shaping a group of people into a force that serves as a competitive
business advantage".

8. List the Qualities and Characteristics of Good Leaders;

Synergy between Leadership and Management Roles

 Leadership role: to provide inspiration, create opportunities,
energize people, and make key choices
 Management role: to make things happen and keep work on
track; to supervise endless details and engage in complex
interactions that are routinely part of any development

What Drives Others to Carry out Your Will

 If you are a manager: WHAT you are
 If you are a leader: WHO you are and what you DO

Leadership - Going Beyond Manager's Tasks

Manager's tasks:
 administrating
 planning
 controlling
Leader's extra tasks, in addition to manager's tasks :
 forming a vision which provides people with a bridge to the future
 inspiring, encouraging, and energizing people, arousing their
willing and enthusiastic support to the common task at hand
 empowering people to pursue the common course of action

Differences between What Leaders and Managers Do

Managers Leaders

34
React Create opportunities

Control risks Seek opportunities

Enforce organizational rules Change organizational rules

Seek and then follow direction Provide a vision to believe in and

strategic alignment

Control people by pushing them Motivate people by satisfying basic

in the right direction human needs

Coordinate effort Inspire achievement and energize

people

Provide instructions Coach followers, create self-leaders,

and empower them

Management versus Leadership

Restricting enabling
Controlling freeing
playing safe risking
molding releasing
forcing enhancing
regimenting challenging
stifling participating
rigid flexible
autocratic democratic
consistent predictable
Doing things right Doing right things

9. Describe a Target in Relation to the Success of an Enterprise;

Our world is a giant storehouse of abundance. Some people enter a

storehouse with a strainer and leave with nothing. Some go in with a
teaspoon and barely taste the sweetness.

But when you dream and set goals, you enter into the storehouse with a
transport truck and load up on all that life has to offer.

Setting life goals is the ultimate key to experiencing personal fulfillment

35
and achievement in life. Goal setting produces in you a burning desire,
intense self-confidence, and a firm determination to achieve more.

Why Set Goals?

To set and reach your personal goals, you must first think about the
dreams you have for all SIX AREAS OF YOUR LIFE.

These areas include:

-- MENTAL
-- FINANCIAL
-- SOCIAL
-- SPIRITUAL
-- FAMILY
-- PHYSICAL

10. Explain How Targets are Set;

Target setting checklist

1. Set targets for intended outcomes. Targets should reflect the

actions planned and what the partnership is trying to achieve.

2. Specify what must actually happen for the desired outcome to be

achieved, detailing:

 target inputs (e.g. resources in terms of staff or cash)

 processes (e.g. the activities which staff will have responsibility for)
 target outputs (e.g. the immediate consequences of these activities)
 milestones (stages to be reached by given dates)

These detailed targets may not need to be included in the strategy,

but having them helps partners be clear about the level of
investment and activity needed to achieve the desired result.

It also helps managers check that projects are on course. Setting

targets for, and monitoring, inputs as well as outputs is vital for
assessing the cost effectiveness of particular initiatives and
understanding why a project may not have achieved its intended
results.

3. Start from good baseline information. Meaningful targets and good

project design depend on having good information on the scale and
nature of the problem. Where there are gaps in the baseline
information, set a target date by which the data will be obtained.

36
 4. Estimate the impact that the activities will have. Estimating impact
is easier for some crimes than for others. Examples of good
practice can help to give a feel for the expected impact from taking
a similar course of action in similar conditions. For example, see
(insert reference)

Running through this series of questions can help in judging where to

pitch a target:
 What is the starting position?
What is the scale of the problem?
Are the conditions the same?
Are we putting in the same resources?
 What else is going on that may affect performance?
How might the target(s) be affected by other local or national initiatives?
 How does the local target relate to national targets?

In the case of disorder and racist incidents, police forces and local
authorities are now required, under the new duty of Best Value, to
provide information on their performance against specific indicators.

 Has the staff providing services been consulted on the target?

Does the target set take account of their input?
How will staff commitment be secured?
Is the target worthwhile?
How do these compare with other areas?
 What has similar activity achieved elsewhere?
Are we planning to tackle the problem in the same way?
Will the public regard it as acceptable?
Will achieving it be satisfying?

Based on what has been achieved elsewhere, does it represent value for
money?

5. Consider How the Target is Best Expressed

There are many different ways of framing targets. Some options include:

 Absolute  reduce the number of malicious

arson incidents by 200

 Proportional  reduce the number of malicious

arson incidents by 10%

37
  Relative to a  reduce the rate of malicious
 benchmark arson incidents in Ward A to the
borough-wide average

 Relative to expected  reduce the rate of malicious

 level arson incidents by 15% relative
to expected background trends

 Relative to  save twice the amount invested

 cost/value for money in recovering burnt out vehicles

 Tied to a tolerance threshold  reduce risk of malicious arson

to less than 5% threshold

6. Make sure the targets set are clear and unambiguous, i.e.:

 Specific
 Measurable
 Achievable
 Realistic
 Timely & Time-scaled

Where possible a named person should be responsible for delivering and

reporting on each target.

7. Consider how the target might be met. Could the target be met in
ways other than those you intend? If so, how will you check for /
guard against this?

8. Consider setting targets that reflect the role of different partners.

Targets that reflect different partners’ objectives can help in
tracking and acknowledging contributions made by different
agencies.

9. Consider how the targets will be communicated to people who need

to know about them. When, and how, will targets be built into
work plans? How will the targets be shared with a wider audience?

10. Review progress at regular intervals Checks against the targets

will help to highlight where projects need adjusting or where
targets need revising to reflect a changing situation. The action
plan may also need revising to take account of new developments

38
11 Explain How a Target is Achieved:

Targets are achieved through discipline: real dreams go far

beyond idle fantasy or daydreams.

The first step to turning dreams into reality is to write them down –
clearly and briefly. Include every adventure, every journey, every
challenge, everything you can think of that you would like to do or to
become. It does not make any difference how ridiculous a dream sounds.
So many times people say "I can't do that," and they never give thought
to the possibility of trying. Write down any dream that comes into your
mind.

12. Explain discipline and self – discipline;

To discipline thus means to instruct a person or animal to follow a

particular code of conduct, or to adhere to a certain "order," or to adopt a
particular pattern of behaviour. For example, it is good to discipline a
child to wash his hands before meals. Here, 'washing hands before
meals' is a particular pattern of behaviour, and the child is being
disciplined to adopt that pattern. 'To disciple' also gives rise to the word
disciplinarian, which denotes a person who enforces order. An ideal
disciplinarian is one who can enforce order without coercion. Usually
however, the phrase 'to discipline' carries a negative connotation. This is
because enforcement of order - that is, ensuring instructions are carried
out - is often regulated through punishment

What Is Self-Discipline?

Self-discipline is the ability to get yourself to take action regardless of

your emotional state. Imagine what you could accomplish if you could
simply get yourself to follow through on your best intentions no matter
what. Picture yourself saying to your body, “You’re overweight. Lose 20
pounds.” Without self-discipline that intention won’t become manifest.
But with sufficient self-discipline, it’s a done deal. The pinnacle of self-
discipline is when you reach the point that when you make a conscious
decision, it’s virtually guaranteed you’ll follow through on it.

Self-discipline is one of many personal development tools available to

entrepreneurs. Of course it is not a panacea. Nevertheless, the problems
which self-discipline can solve are important, and while there are other
ways to solve these problems, self-discipline absolutely shreds them.
Self-discipline can empower you to overcome any addiction or lose any
amount of weight. It can wipe out procrastination, disorder, and
ignorance. Within the domain of problems it can solve, self-discipline is

39
simply unmatched. Moreover, it becomes a powerful teammate when
combined with other tools like passion, goal-setting, and planning.

Building Self-Discipline

My philosophy of how to build self-discipline is best explained by an

analogy. Self-discipline is like a muscle. The more you train it, the
stronger you become. The less you train it, the weaker you become.

Just as everyone has different muscular strength, we all possess

different levels of self-discipline. Everyone has some — if you can hold
your breath a few seconds, you have some self-discipline. But not
everyone has developed their discipline to the same degree.

Just as it takes muscle to build muscle, it takes self-discipline to build

self-discipline. The way to build self-discipline is analogous to using
progressive weight training to build muscle. This means lifting weights
that are close to your limit. Note that when you weight train, you lift
weights that are within your ability to lift. You push your muscles until
they fail, and then you rest.

Similarly, the basic method to build self-discipline is to tackle challenges

that you can successfully accomplish but which are near your limit. This
doesn’t mean trying something and failing at it every day, nor does it
mean staying within your comfort zone. You will gain no strength trying
to lift a weight that you cannot budge, nor will you gain strength lifting
weights that are too light for you. You must start with weights and/or
challenges that are within your current ability to lift but which are near
your limit.

Progressive training means that once you succeed, you increase the
challenge. If you keep working out with the same weights, you won’t get
any stronger. Similarly, if you fail to challenge yourself in life, you won’t
gain any more self-discipline.

Just as most people have very weak muscles compared to how strong
they could become with training, most people are very weak in their level
of self-discipline.

It’s a mistake to try to push yourself too hard when trying to build self-
discipline. If you try to transform your entire life overnight by setting
dozens of new goals for yourself and expecting yourself to follow through
consistently starting the very next day, you’re almost certain to fail. This
is like a person going to the gym for the first time ever and packing 300
pounds on the bench press. You will only look silly.

40
If you can only lift 10 lbs, you can only lift 10 lbs. There’s no shame in
starting where you are. I recall when I began working with a personal
trainer several years ago, on my first attempt at doing a barbell shoulder
press, I could only lift a 7-lb bar with no weight on it. My shoulders were
very weak because I’d never trained them. But within a few months I was
up to 60 lbs.

Similarly, if you’re very undisciplined right now, you can still use what
little discipline you have to build more. The more disciplined you become,
the easier life gets. Challenges that were once impossible for you will
eventually seem like child’s play. As you get stronger, the same weights
will seem lighter and lighter.

Don’t compare yourself to other people. It won’t help. You’ll only find
what you expect to find. If you think you’re weak, everyone else will seem
stronger. If you think you’re strong, everyone else will seem weaker.
There’s no point in doing this. Simply look at where you are now, and
aim to get better as you go forward.

In weight lifting, once you’ve mastered a week at one level, take it up a

notch the next week. And continue with this progressive training until
you’ve reached your goal. By raising the bar just a little each week, you
stay within your capabilities and grow stronger over time. But when
doing weight training, the actual work you do doesn’t mean anything.
There’s no intrinsic benefit in lifting a weight up and down — the benefit
comes from the muscle growth. However, when building self-discipline,
you also get the benefit of the work you’ve done along the way, so that’s
even better. It’s great when your training produces something of value
AND makes you stronger.

41
13. State the benefits of Personal discipline in the life of an
entrepreneur

The Five Pillars of Self-Discipline

The five pillars of self-discipline are: Acceptance, Willpower, Hard Work,

Industry, and Persistence. If you take the first letter of each word, you
get the acronym “A WHIP” — a convenient way to remember them, since
many people associate self-discipline with whipping themselves into
shape.

Acceptance:
The first of the five pillars of self-discipline is acceptance. Acceptance
means that you perceive reality accurately and consciously acknowledge
what you perceive.

This may sound simple and obvious, but in practice it’s extremely
difficult. If you experience chronic difficulties in a particular area of your
life, there’s a strong chance that the root of the problem is a failure to
accept reality as it is.

Why is acceptance a pillar of self-discipline? The most basic mistake

people make with respect to self-discipline is a failure to accurately
perceive and accept their present situation. Remember the analogy
between self-discipline and weight training? If you’re going to succeed at
weight training, the first step is to figure out what weights you can
already lift. How strong are you right now? Until you figure out where
you stand right now, you cannot adopt a sensible training program.

What Is Willpower?
Willpower is your ability to set a course of action and say, “Engage!”

Willpower provides an intensely powerful yet temporary boost. Think of it

as a one-shot thruster. It burns out quickly, but if directed intelligently,
it can provide the burst you need to overcome inertia and create
momentum.

Willpower is the spearhead of self-discipline. To use a World War II

analogy, willpower would be D-Day, the Normandy Invasion. It was the
gigantic battle that turned the tide of the war and got things moving in a
new direction, even though it took another year to reach VE Day (Victory
in Europe). To make that kind of effort every day of the war would have
been impossible.

Willpower is a concentration of force. You gather up all your energy and

make a massive thrust forward. You attack your problems strategically

42
at their weakest points until they crack, allowing you enough room to
maneuver deeper into their territory and finish them off.

Hard Work:

The big secret in life is that there is no big secret. Whatever your goal, you
can get there if you’re willing to work.
- Oprah Winfrey

My definition of hard work is that which challenges you. And why is

challenge important? Why not just do what’s easiest?

Most people will do what’s easiest and avoid hard work — and that’s
precisely why you should do the opposite. The superficial opportunities
of life will be attacked by hordes of people seeking what’s easy. The much
tougher challenges will usually see a lot less competition and a lot more
opportunity.

Strong challenge is commonly connected with strong results. Sure you

can get lucky every once in a while and find an easy path to success. But
will you be able to maintain that success, or is it just a fluke? Will you be
able to repeat it? Once other people learn how you did it, will you find
yourself overloaded with competition?

When you discipline yourself to do what is hard, you gain access to a

realm of results that are denied everyone else. The willingness to do what
is difficult is like having a key to a special private treasure room.

Industry:
Industry is working hard. In contrast to hard work, being industrious
doesn’t necessarily mean doing work that’s challenging or difficult. It
simply means putting in the time. You can be industrious doing easy
work or hard work.

In life there are many tasks that aren’t necessarily difficult, but they
collectively require a significant time investment. If you don’t discipline
yourself to stay on top of them, they can make a big mess of your life.
Just think of all the little things you need to do: shopping, cooking,
cleaning, laundry, taxes, paying bills, home maintenance, childcare, etc.
And this is just for home — if you include work the list grows even
longer. These things may not reach your A-list for importance, but they
still need to be done.

Self-discipline requires that you develop the capacity to put in the time
where it’s needed. A lot of messes are created when we refuse to put in
the time to do what needs to be done — and to do it correctly. Such

43
messes range from a messy desk or cluttered email inbox all the way
down to an Enron or Worldcom. Big mess or small mess — take your
pick. Either way a significant contributing factor is the refusal to do what
needs to be done.

Disciplining yourself to be industrious allows you to squeeze more value

out of your time. Time is a constant, but your personal productivity is
not. Some people will use the hours of their day far more efficiently than
others. It’s amazing that people will spend extra money to buy a faster
computer or a fuel efficient car, but they’ll barely pay any attention to
their personal capacity. Your personal productivity will do a lot more for
you than a computer or a car in the long run. Give an industrious
programmer a 10-year old computer, and s/he’ll get much more done
with it over the course of a year than a lazy programmer with state of the
art technology.

Persistence:

Nothing in the world can take the place of Persistence. Talent will not;
nothing is more common than unsuccessful men with talent. Genius will
not; unrewarded genius is almost a proverb. Education will not; the world
is full of educated derelicts. Persistence and determination alone are
omnipotent. The slogan “Press On” has solved and always will solve the
problems of the human race.
- Calvin Coolidge

Persistence is the ability to maintain action regardless of your feelings.

You press on even when you feel like quitting.

When you work on any big goal, your motivation will wax and wane like
waves hitting the shore. Sometimes you’ll feel motivated; sometimes you
won’t. But it’s not your motivation that will produce results — it’s your
action. Persistence allows you to keep taking action even when you don’t
feel motivated to do so, and therefore you keep accumulating results.

Persistence will ultimately provide its own motivation. If you simply keep
taking action, you’ll eventually get results, and results can be very
motivating. For example, you may become a lot more enthusiastic about
dieting and exercising once you’ve lost those first 10 pounds and feel
your clothes fitting more loosely.

Persistence of action comes from persistence of vision. When you’re

super-clear about what you want in such a way that your vision doesn’t
change much, you’ll be consistent in your actions. And that consistency
of action will produce consistency of results.

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TOPIC 3

UNDERSTAND THE VARIOUS SOURCES OF INFORMATION FOR

ENTREPRENEURSHIP DEVELOPMENT

INTRODUCTION:
As we are living in the information age, we have come to recognize
information as a veritable resource. Hence, there is every need for all
entrepreneurs to be conversant with information and how it could be
sourced especially for the smooth running of their enterprises. In light of
the foregoing, this section attempts to guide potential entrepreneurs to
source for information.

SPECIFIC LEARNING OUTCOMES:

1. Identify nature and type of information required by
entrepreneurs;
2. Identify the sources of the information required in 1 above;
3. Identify organizations and agencies involved in the promotion
and development of entrepreneurship;
4. Explain the role of banks and financial institutions in enterprise
promotion and development;
5. Describe the contributions of government agencies in sourcing
information;
6. Describe methods of obtaining assistance from the above
organizations.

CONTENT

1 Identify nature and type of information required by entrepreneurs

2 Identify the sources of the information required in 1 above;

Nature and Types of Information Required by Entrepreneurs

A. Marketing information
B. Technical information
C. Information and communication technology (ICT)
D. Financial Information

Where to Obtain Information and Assistance

1. Industry data is helpful in comparing a business to other similar

businesses. This data is available from trade associations or government
agencies and includes ratios such as: stock turnover, cash discounts,
percentage mark-up and average sales per month.

45
2. Membership-based organizations can provide services such as
political lobbying, conducting research, organizing education and
training programmes, implementing new technology, responding to
members’ questions and concerns and disseminating information
through newsletters, magazines and special reports.

3. Subscribing to trade papers and magazines is also desirable.

Entrepreneurs should set aside time to read articles especially important
in understanding new trends and developments relating to the business.
Keep a file of pertinent articles for future reference.

4. Training programmes help entrepreneurs to develop formal plans for

improving their management skills and ability. Training courses and
adult education programmes are designed by many institutions, agencies
and associations. Entrepreneurs should be aware of these personal
development possibilities and take full advantage of them.

5. Consultants can be of assistance both directly and indirectly. Pay

special attention to the approach and techniques used by a consultant to
solve business problems. When working on solutions to future problems,
you may have to act as your own consultant and may want to use these
same techniques.

6. The library is a primary resource for information. Government

agencies have a variety of publications which may be helpful. Some
colleges and universities have reference libraries which may have a
circulation section available to the public. Research institutes and some
large corporations have libraries with sections on specific topics. Trade
associations and labour organizations may also have libraries containing
material related to specific needs. Libraries are a storehouse of
information which may be useful in operating a small business. Books,
periodicals, reports and newspapers may contain information which can
be of help in solving some of the problems in operating a business.

7. Internet can be used to carry out research and to find useful

information and data. E-mail can be used to communicate with providers
of information who have web sites on the internet.

8. Business Development Services providers. There are many

Business Development Services providers who will offer guidance in
various aspects of business operations.

Who Can Provide Information and Assistance?

“FREE”
1. Employees. Few entrepreneurs can do everything themselves, and

46
they need qualified employees to relieve them of most of the day-to-day
operational problems. This allows them to dedicate their time to working
on the longer range problems. The people who work for a business can
provide answers to specific problems in a business. For example,
entrepreneurs might ask employees for their advice and assistance about
stock display or customer attitudes. Employees are in a good position to
give valuable advice providing they know that their opinions and
suggestions are valued.

2. Customers. These people can supply very special information about

the products and services they buy. Customers should be asked their
opinions because they are an excellent source of information about the
relative strengths and weaknesses of a business operation.

3. Suppliers. Because the success of most suppliers depends on the

businesses they serve, it stands to reason that they should be interested
in an entrepreneur’s success. Many suppliers are able to give sound
management advice because they are able to explain how other
successful businesses operate and provide suggestions about how
businesses can improve.

4. Other Business Owners. Most businesses have common problems

and owners are generally willing to discuss their problems with one
another. Occasionally, the competitive nature of business may
discourage this frank exchange. If the businesses are unrelated and do
not compete for the same customers, entrepreneurs may be willing to
share ideas concerning solutions to common problems. In this way, all
business owners can benefit from this interaction and improve their
business operations.

5. Free Web Sites. Information and communication technology

specialists will direct you to free web sites. Consult them.

“FOR A FEE”
1. Professionals. Use the talents of professionals, such as web
designers, IT specialists, financial advisors, bankers, management
consultants, insurance agents, accountants and bookkeepers, estate
agents, surveyors and lawyers, to assist in solving business problems.
Try to develop good questioning techniques to get as much advice and
information as possible from these professionals.

Each professional person is a potential resource, but entrepreneurs must

be able to explain their needs clearly and ask relevant questions
concerning their needs so that professionals can provide valuable advice.

2. BDS Providers. Use the Directory of BDS Suppliers to contact them.

47
3. Identify organizations and agencies involved in the promotion
and development of entrepreneurship;

Worldwide findings over the years have shown that small firms and
entrepreneurships play very important roles in national economic growth
and development. The Government of Nigeria, like its counterparts, the
world over, has realized the importance of small and medium scale
enterprises and has, over the years formulated various public policies to
encourage, support and fund the establishment and development of
SMEs. Developments in small and medium enterprise are what give a
developing nation the base for employment creation, solid base for
creating a middle class and encouragement for the use of local raw
materials and technology.

THE NIGERIAN EXPORT PROMOTION COUNCIL (NEPC)

The NEPC was established through the promulgation of the NEPC Act of
1976 and formally inaugurated in March, 1977.  The Council’s
Amendment Decree of 1992 was to minimize the bureaucratic
bottlenecks and increase autonomy in dealing with members of the
Organized Private Sector. Its goal and mission are to make the non-oil
export sector a significant contributor to Nigeria’s GDP, facilitate
opportunities for exporters to promote sustainable economic
development. Their Website is www.nepcng.com

Activities of the Council

 To promote the development and diversification of Nigeria's
export trade
 To assist in promoting the development of export-related
industries
in Nigeria
 To spearhead the creation of appropriate export incentives
 To actively articulate and promote the implementation of
export policies
and programmes of the Nigerian Government
 To co-ordinate and monitor export promotion activities in
Nigeria
 To collect and disseminate information on products
available for export
 Collect and disseminate local manufacturers and exporters
information on foreign markets
 Provide technical assistance to local exporters in such areas
as export procedure and documentation, transportation,
financing, marketing techniques, quality control, export

48
 packaging, costing and pricing, publicity and other similar
areas
 Provide directly or jointly, with training institutions,
training for its staff and assist with the manpower
development of the export community in Nigeria
 Organize and plan the participation of Nigeria in trade fairs
and exhibitions in other countries
 Administer grants and other benefits related to export
promotion and development
 Undertake studies of the current economic conditions, with
special attention to the export sector with the aim of
advising Government on necessary policies and measures
 Co-operate with other institutions on matters relating to
export financing, export incentives specialized services to
exporters
 Engage in export promotion publicity
 Assist in finding appropriate solutions to practical problems
encountered by exporters in the process of exportation
 Plan and organize outward trade missions and provide
support from Nigeria
 Services to in-ward missions from other countries
 Perform such other functions as may be conductive to the
achievement of the objective of the Export Decrees

THE NIGERIAN INVESTMENT PROMOTION COMMISSION(NIPC)

The Nigerian Investment Promotion Commission (NIPC) is an Agency of

the Federal Government which was established in 1995 to, among other
things, “Co-ordinate, monitors, encourages and provides necessary
assistance and guidance for the establishment and operation of
enterprises in Nigeria.”

By this decree the government abolished almost all restrictions on

investment, especially restrictions on foreign investment into the
Nigerian economy. Most of the efforts of the NIPC are, therefore, focused
on attracting foreign investment.

However its total mandate includes domestic investment and its area of
operation even include small and medium scale enterprises. It is
currently managing, on behalf of the Federal Government, a World Bank
MSME pilot project aimed at empowering and increasing capacity in the
MSME sectors as well as in NGOs that specialized in BDS to MSMEs.
While the pilot program only includes Lagos, Abia and Kaduna States, it
is likely that other states and the FCT will come under this program
within the next five years. The NIPC also has a new very informative web

49
site at www.nipc-ng.org. It has a very comprehensive section on tax
incentives.

THE RAW MATERIALS RESEARCH AND DEVELOPMENT COUNCIL

(RMRDC).

The Raw Materials Research and Development Council (RMRDC) is an

agency of the Federal Government of Nigeria vested with the mandate to
promote the development and utilization of Nigeria’s industrial raw
materials.

It originated from the recommendations of a Workshop on Industrial

Matters which was organized by the manufacturers Association of Nigeria
(MAN) and the Nigerian Institute of Social and Economic Research
(NISER) in July 1983. It was established by Decree No.39 of 1987, but
commenced operation on February 10, 1988. It is today, Nigeria’s focal
point for the development and utilization of the nation’s vast industrial
raw materials.

The primary mandates of the Council are:

a. To draw up policy guidelines and action programmes on raw
materials acquisition, exploitation and development; 
b. To review from time to time, raw materials resources
availability and utilization, with a view to advising the
Federal Government on the strategic implication of depletion,
conservation or stock-piling of such resources; 
c. To advise on adaptation of machinery and process for raw
materials utilization; 
d. To provide special research grants for specific objectives and
device awards or systems for industries that achieve
breakthrough or make innovations and inventions; and 
e. To encourage the publicity of research findings and other
information relevant to local sourcing of raw materials.

Industrial development is one of the indices for measuring the

development of nations. The development and survival of a
manufacturing sector in an economy is predicted largely on availability of
raw materials. The exploitation and utilization of such raw material is
critical to economic development. RMRDC is therefore very critical to the
development al of Nigeria’s productive sectors.

Currently, the capacity utilization of many industries in Nigeria is low

due to lack of raw material utilization and the singular focus of the
economy on one product. It is hoped that RMRDC through its numerous

50
programmes, will promote new investments in the other local resources
and encourage industries to substitute local raw materials for currently
imported ones.  

The global goal is to pursuit this policy which will invariably have
multiplier effects on the nation’s economy in terms of new industries,
more employment and increase gross domestic product (GDP). Their web
site is: www.rmrdc.gov.ng

THE SMALL AND MEDIUM ENTERPRISES DEVELOPMENT AGENCY

OF NIGERIA (SMEDAN) was established by the SMEDAN Act of 2003 to
promote the  development of the MSME sector of the Nigerian Economy.
The Agency positions itself as a “One Stop Shop” for Micro, Small and
Medium Enterprises Development. Micro Enterprises are included in the
clientele of the Agency since they form the bedrock for SME’s.
On its web site, its vision is to establish a structured and efficient micro,
small and medium enterprises sector that will enhance sustainable
development of Nigeria. The mission is to facilitate the access of micro,
small and medium entrepreneurs/investors to all resources required for
their development.
Justification for our existence. Poverty, due to lack of access to income-
earning opportunities and lack of capacity to take advantage of the
opportunities, is a social malaise that is threatening global prosperity in
general and national economic growth and development in particular.
A well developed MSMEs sector has proven to be one of the most
veritable channels to combat poverty. The establishment of SMEDAN is
therefore justified by the need to trigger the development of Nigeria’s
MSMEs in a structured and efficient manner
Its main functions are to provide business information, in partnership
with various state governments. Its efforts with most states, and the FCT
are well replace on the web. At www.abujaenterprise.org.
these sites serve as a credible suppository of business information for the
location. It compiles, reviews and updates all existing economic policies,
regulations, incentives, and legislation affecting MSME operations within
the State.
Its world market section sources and makes available information on
international markets, products standards/specifications and
regulations, including updates in development databank on MSMEs, raw
materials, available local technologies, machineries and prototypes. Its
proposed services through their sites and offices include:
Proposed Design and Establishment of Comprehensive BSCs and IPs:
To be able to provide Business Support Centers (BSCs) in each State, to

51
provide business advisory services. i.e Link MSMEs to sources of funds;
provide internet/website facilities; provide market information; provide
business consultancy services; collate and make available business
plans and prototypes; implement capacity building programmes; advise
on regulatory and standardization frameworks and collate all relevant
business information that could be useful to SMEs.
Develop and establish, in collaboration with state governments and
NGOs in the private sector, Industrial Parks (IPs) to facilitate easy access
to land, good infrastructure, security, regulatory bodies such as NAFDAC
and SON; banking services etc.

Capacity Building and Proposed Promotional Services:

 Develop, test and disseminate new business models illustrating
best business practices to upgrade SMEs operations.
 Conduct seminars, conferences, workshops, and interactive
sessions for promotional and capacity building purposes.
 Encourage and facilitate business clusters, networks and
cooperatives for enhanced productivity and easier access to
factors of production including finance.
 Encourage and facilitate new investments in designated priority
areas in each State.
 Organize, trade and investment exhibitions and interactive fora.
 Develop and apply standards and quality control measures for
technologies and products of SMEs.
 Improve the financial management skills of MSMEs through
training workshops.
 Develop and implement effective strategies for opening up
domestic and international markets for MSMEs products.

Proposed to be a Main Financial Intermediary between MSMEs &

Sources of Finance:
 Liaise with financial institutions to harness and pool resources
for utilization by MSMEs.
 Develop and implement a strategy for the effective and timely
disbursement of SMIEIS funds.
 Hold regular consultations with international donor agencies,
trade groups, relevant ministries, research institutes, states
and local governments with the view to share ideas and partner
in implementing programmes for the development of MSMEs.

52
  Attract foreign investments and funds for the development of
the MSMEs sub-sector.
Proposed Policy Development:
 Develop and seek statutory approval for a national policy on
MSMEs. Conduct impact assessment studies and use same to
recommend improvements in policy intervention.
www.smedan.gov.ng

THE INDUSTRIAL DEVELOPMENT CENTERS (IDCs)

Over the years, the Federal Government has taken various steps, to
promote the development of Small and Medium Scale Enterprises
(SMEs). These included, among others, funding and setting up of
industrial estates to reduce overhead costs.

One of the many institutions established was the Industrial Development

Centers (IDCs), to provide extension services to SMEs in such areas as
project appraisal for loan application, training of entrepreneurs,
managerial assistance, product development, production planning and
control, as well as other extension services. The first IDC was established
in Owerri in 1962 by the former Eastern Nigeria Government, Ministry of
Trade and Industry, and was taken over in 1970 by the Federal
Government.

Subsequently, more IDCs were established at Zaria, Oshogbo, Maiduguri,

Abeokuta, Sokoto, Benin City, Uyo, Bauchi, Akure, Ilorin, Port Harcourt,
Kano and Ikorodu. Over the years the achievements of the IDC’s have not
been commendable and in most instances they have been overtaken by
other government agencies doing the same programmes.

TECHNOLOGY BUSINESS INCUBATION CENTERS, (TBIC’s)

Part of the NEEDS program of the Obasanjo era included the creation of
jobs, education facilities with special emphasis on Technology business
Incubation Centers, (TBIC’s). The goal is to promote and engage the
semi-formal productive sectors of the economy:
According to information at the beginning of 2000 about 70% of the
population of Nigeria are engaged either in the informal sector, the
Agricultural sector, or small and medium enterprises (SME’s). Such an
important sector of the economy has access only to the most
rudimentary technology, information and processes. As part of the
transformation agenda, the government wanted to diversify the economic
base and mainstream the informal sector while strengthening its
linkages to the rest of the real sector by increasing the local value
addition and share of manufactured goods in total exports.

53
Under NEEDs, I and II the institutional and policy framework for this
was being established through Small and Medium Enterprise
Development Agency of Nigeria, (SMEDAN), Business Incubation Centres
Technology, TBIC’s) and (Small and Medium Industries Equity
Investment Scheme, (SMIEIS).
In a summary SMEDAN and TBIC’s aimed to provide conducive
environments for nurturing start –ups and survival of value added and
technology – related manufacturing.

4. Explain the Role of Banks and Financial Institutions in

Enterprise Promotion and Development;

The reduction of all six existing DFIs to two; (BOI and NACRDB) has
narrowed the playing field and streamlined the operations of the DFIs.
The Nigerian Industrial Development Bank (NIDB), the National
Economic Reconstruction Fund (NERFUND) and the Nigerian Bank for
Commerce and Industry (NBIC) have been brought together to form the
Bank of Industry. On the other hand, the Family Economic Advancement
Programme (FEAP), Peoples Bank of Nigeria (PBN) and the Nigerian
Agricultural and Cooperative Bank (NACB) have become a single Bank,
the Nigerian Agricultural, Cooperative and Rural Development Bank
(NACRDB).

These institutions, before the Government took the decision to merge

them, were unable to perform their roles effectively due to the following
reasons:
1. Low Capitalization
2. Inefficient Operations
3. Poor loan portfolio
4. Poor Liquidity
5. Inability to access external lines of credit, and
6. Lack of capacity to finance projects

BANK OF INDUSTRY (BOI)

The Bank of Industry (BOI) is owned by the Federal Government of
Nigeria. This bank emerged from the government’s rationalization of
some development Finance Institutions (DFIs) namely the Nigerian Bank
for Commerce (NBCI), Nigerian Industrial Development Bank (NIDB) and
the Nigerian Economic Reconstruction Fund (NERFUND).

SHAREHOLDING:
NAME: UNITS %
Min. of Finance Incorporated 297,688,401 59.54
Central Bank of Nigeria 201,822,645 40.36
Nigerian citizens and associations 488,954 0.10

54
The Bank of Industry has four subsidiaries from its merger:
• Leasing Company of Nigeria (LECON)
• NIDB Trustees Limited (NTL)
• NIDB Consultancy and Finance Limited (NIDB Consult)
• Industrial and Development Insurance Brokers (IDIB)

FACILITIES
• Initial capital base of N50 billion
• Six zonal offices

TYPES OF PROJECTS FINANCED BY BOI

• Projects in the areas where Nigeria has comparative advantage
• Projects that engage in the efficient conversion of local raw
materials into finished products
• Ventures that can be least cost producers of good quality
products that could be successfully marketed locally and/or
internationally.

PRODUCTS AND SERVICES DELIVERABLE BY BOI

1. Medium and Long-term loans.
2. Working Capital Finance
3. Equity Financing
4. Management of dedicated funds
5. Loan guarantees
6. Co-financing
7. Investments in Corporate Boards
8. Business Development Services
9. Lease financing
10. Trusteeship
11. Stock Brokerage
12. Foreign Exchange Dealership
13. Insurance Brokerage

PROSPECTS
The BOI is intended to focus on the private sector in both funding and
commercial operations. The Bank has opted to adopt the existing
prudential guidelines for Banks though more stringent when compared
with the CBN proposal to apply some standards used by other finance
companies for BOI.

BOI would focus on SMEs with linkages within the broad economy with a
view to enhancing overall industrial interaction, expanding output and
employment and utilizing local resources to its fullest advantage. The
huge SMIEIS funds currently accumulated by the Banks will help BOI
fulfill its mandate.

55
It is expected that the bank’s contribution to the economy will grow
stronger as the implementation of the economic reforms progresses to
widen the scope of needs for economic/business development financing.

NIGERIAN AGRICULTURAL COOPERATIVE AND RURAL

DEVELOPMENT BANK (NACRDB)

The Bank is a development Finance Institution wholly owned by the

Federal Government of Nigeria. NACRDB was incorporated in 2000
following the merger of defunct Nigeria Agricultural and Cooperative
Bank, People’s Bank of Nigeria and risk assets of the Family Economic
Advancement Programme (FEAP). The Nigerian Agricultural and
Cooperative Bank began operation on 6th March 1973 as Nigerian
Agricultural Bank Limited. The two government institutions own the
Bank in the following ratio:
Federal Ministry of Finance 60%
Central Bank of Nigeria 40%

FACILITIES
• Six zonal offices.
• 200 branch offices.
• N50 billion capital base.

TYPES OF BUSINESS
NACRDB provides:
• Finance and credit facilities to agricultural and agro-allied
industries.
• Loans to farmers, agricultural institutions, organizations and
cooperative societies.
• Direct investments by way of equity participation in wholly owned
or joint-venture projects.
• Provision of guarantees to viable agricultural and agro-allied
ventures.
• Rural savings scheme.

LENDING CHANNELS
The NACRDB has five channels of financial support to its clients:

i. On- lending Scheme:

This is lending through Cooperative Financing Agency (CFAs), Non-
Government Organisations (NGOs), Self Help Groups (SHGs) and some
Private Sector micro-credit institutions

56
ii. Small Holder Scheme (SHS)
The Small Holder Scheme is designed for small and medium scale
individual and group farming organizations and funds are provided as
loans on very favourable terms and conditions. Interest charges are
usually below the market rate.

iii. First/Second Livestock Development Programme (SLDP)

This programme projects are also designed for small and medium scale
individual and group farming organizations and funds are provided as
loans on very favourable terms and conditions. Interest charges are
usually below the market rate.

iv. Special Projects

The special projects are usually undertaken in collaboration with such
international financial institutions and donor agencies as IFAD,
ECOWAS and ILO.

v. Investments in projects
This targets mainly medium and large-scale entrepreneurs who have the
capacity to provide collateral securities.

PROSPECTS
• Sourcing of offshore credit facilities for loan disbursement.
• Participation in Agricultural Exchange Market through its
subsidiary, the Food Development Company.
• Creation of local market for raw material supply to local
industries.
• Diversification of operations to agricultural support services:
desertification control project, tangential agro-allied projects,
equipment leasing, agro-chemicals manufacture and others.

SMALL AND MEDIUM INDUSTRIES EQUITY INVESTMENT

SCHEME (SMIEIS)

Establishment of the Scheme:

The Small and Medium Industries Equity Investment Scheme (SMIEIS) is
a voluntary initiative of the Bankers’ Committee approved at its 246th
Meeting held on 21st December, 1999. The initiative was in response to
the Federal Government’s concerns and policy measures for the
promotion of Small and Medium Enterprises (SMEs) as vehicles for rapid
industrialization, sustainable economic development, poverty alleviation
and employment generation.

57
The Scheme requires all banks in Nigeria to set aside ten (10) percent of
their Profit After Tax (PAT) for equity investment and promotion of small
and medium enterprises.

Purpose of the Scheme:

The 10% of the Profit After Tax (PAT) to be set aside annually shall be
invested in small and medium enterprises as the banking industry’s
contribution to the Federal Government’s efforts towards stimulating
economic growth, developing local technology and generating
employment.

The funding to be provided under the scheme shall be in the form of

equity investment in eligible enterprises. This will reduce the burden of
interest and other financial charges expected under normal bank
lending, as well as provide financial, advisory, technical and managerial
support from the banking industry.

For the purpose of this scheme, a small and medium enterprise is

defined as any enterprise with a maximum asset base of N500 million
(excluding land and working capital), and with no lower or upper limit of
staff.

Activities Covered By the Scheme:

Every legal business activity is covered with the exception of
(i) Trading/merchandising
(ii) Financial Services

Eligibility for Funding:

To be eligible for equity funding under the Scheme, a prospective
beneficiary shall:

(i) Register as a limited liability company with the Corporate Affairs

Commission and comply with all relevant regulations of the Companies
and Allied Matters A ct (1990) such as filing of annual returns, including
audited financial statements;
(ii) Comply with all applicable tax laws and regulations and render
regular returns to the appropriate authorities; and
(iii) Engage or propose to engage in any of the businesses covered by the
scheme

Mode of Investments and Other Related Issues:

1. Equity under the scheme may be in the form of fresh cash injection
and/or existing debts owed to participating bank.

58
2. A participating enterprise may obtain more funds by way of loans from
banks in addition to equity investment under the scheme.

3. Eligible enterprises are free to approach any bank, including those

they presently have relationship with, to seek funding under the scheme.
Prospective beneficiaries should note that the banks may operate the
scheme directly, through their wholly owned subsidiary venture capital
companies or through venture capital companies floated by consortia of
banks or through independent venture capital companies.

4. Prospective beneficiaries are advised to seek the opinion of third party

consultants such as lawyers, accountants and valuers in determining the
value to be placed on the assets and capital of their businesses in order
to determine a fair price before or during negotiations with the banks.

Requirements by Beneficiaries:

1. Beneficiaries will be expected to:

(a) Ensure prudent utilisation of funds;
(b) Keep up-to-date records on the companies’ activities under the
Scheme;
(c) Make the companies books, records and structures available for
inspection by the appropriate authorities (including banks and the CBN)
when required;
(d) Comply with guidelines of the Scheme; and
(e) Provide monthly financial and operational reports to the investing
banks before the 15th of the next succeeding month.

2. The recommendations of industrial associations, particularly

Manufacturers Association of Nigeria (MAN); National Association of
Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA);
National Association of Small and Medium Scale Enterprises (NASME);
and National Association of Small Scale Industries (NASSI) will be
mandatory for members of these associations.
3. Membership of recognized NGOs engaged in entrepreneurial
development and promotion of small and medium scale enterprises will
also be an advantage.

5 Describe the contributions of government agencies in sourcing

information;

We need information to operate successfully, and with the internet,

much is available. Unfortunately, the sheer quantity available makes it
difficult to quickly locate the most accurate and timely information. Yes

59
there is a lot of information "out there", but it can be a real challenge to
find it.

Information types and sources

There are two broadly based needs: personal and business.

Personal information includes news, current affairs, sports results,

entertainment opportunities, financial information, hobby specific
information and the like.

Business information includes general business news, company specific

data, market/competitor information, industry/professional information,
etc.

Some of this information will come to you automatically, e.g. bank

statements, company annual reports, membership newsletters, press
briefings by ministers and heads of agencies, departmental brochures,
etc.

Some can be generated so that you receive it regularly, e.g. by

subscribing to an email newsletter, e.g. local cinema weekly program
notification, newspaper (media) bulletins, etc.

Finding and subscribing to good newsletters (free or subscription based)

can ensure that quality, relevant and up-to-date information regularly
comes to you. In this age of e-government, it has become much easier to
source information from government ministries and agencies. This covers
international/regional market information as well as operating rules.

There are other sources as well.

If you have an interest in specific news items or general items, services

like Google Alerts can keep you updated. For example, I monitor the
breaking news. This ensures that I am alerted of local news happenings
that I may have missed. The service is not perfect. You can receive
updated news or updated web pages or both. The choice is yours.

If you have an interest in a particular website, services like Watch That

Page can be very useful. You can register to be alerted when a web page
is updated or changed.

As an example of the services available, the Books/Journal Updates

Links site provides a listing of publishers, etc. that will advise of new
listings for topics of your interest.

60
Newsletters and services like these can assure a quality, regular inward
flow of information.

In summary, information sources should be managed and controlled.

Rather than being reactionary, it is also possible to create personal
quality information sources as well.

61
TOPIC 4

APPRECIATE THE ROLES OF COMMERCIAL AND DEVELOPMENT

BANKS IN THE PROMOTION OF SMALL AND MEDIUM ENTERPRISES
(SMES)

INTRODUCTION:
Indeed, the Commercial and Development Banks are contributing a lot
towards the promotion of small and medium enterprises especially in the
various functions they carry out in their day to day operations. The
potential entrepreneurs are therefore to benefit from the functions and
assistance rendered by these financial institutions. It is in this direction
that inputs are provided in this section to highlight the positive roles of
Commercial and Development Banks in the development of small and
medium enterprises.

SPECIFIC LEARNING OUTCOMES:

1. Identify financial institutions involved in entrepreneurship
development;
2. Describe the assistance provided by commercial banks;
3. Explain the role of development banks in the promotion and
development of small and medium enterprises (SMEs);
4. Assess government policy on financing SMEs;
5. Explain the process of opening and operating a healthy Bank
Account

CONTENT

1. Identify Financial Institutions Involved In Entrepreneurship

Development;

The reduction of all six existing DFIs to two; (BOI and NACRDB) has
narrowed the playing field and streamlined the operations of the DFIs.
The Nigerian Industrial Development Bank (NIDB), the National
Economic Reconstruction Fund (NERFUND) and the Nigerian Bank for
Commerce and Industry (NBIC) have been brought together to form the
Bank of Industry. On the other hand, the Family Economic Advancement
Programme (FEAP), Peoples Bank of Nigeria (PBN) and the Nigerian
Agricultural and Cooperative Bank (NACB) have become a single Bank,
the Nigerian Agricultural, Cooperative and Rural Development Bank
(NACRDB).

These institutions, before the Government took the decision to merge

them, were unable to perform their roles effectively due to the following
reasons:

62
 1. Low Capitalization
2. Inefficient Operations
3. Poor loan portfolio
4. Poor Liquidity
5. Inability to access external lines of credit, and
6. Lack of capacity to finance projects

BANK OF INDUSTRY (BOI)

The Bank of Industry (BOI) is owned by the Federal Government of
Nigeria. This bank emerged from the government’s rationalization of
some development Finance Institutions (DFIs) namely the Nigerian Bank
for Commerce (NBCI), Nigerian Industrial Development Bank (NIDB) and
the Nigerian Economic Reconstruction Fund (NERFUND).

SHAREHOLDING:
NAME: UNITS %
Min. of Finance Incorporated 297,688,401 59.54
Central Bank of Nigeria 201,822,645 40.36
Nigerian citizens and associations 488,954 0.10

The Bank of Industry has four subsidiaries from its merger:

• Leasing Company of Nigeria (LECON)
• NIDB Trustees Limited (NTL)
• NIDB Consultancy and Finance Limited (NIDB Consult)
• Industrial and Development Insurance Brokers (IDIB)

FACILITIES
• Initial capital base of N50 billion
• Six zonal offices

TYPES OF PROJECTS FINANCED BY BOI

• Projects in the areas where Nigeria has comparative advantage
• Projects that engage in the efficient conversion of local raw
materials into finished products
• Ventures that can be least cost producers of good quality
products that could be successfully marketed locally and/or
internationally.

PRODUCTS AND SERVICES DELIVERABLE BY BOI

1. Medium and Long-term loans.
2. Working Capital Finance
3. Equity Financing
4. Management of dedicated funds
5. Loan guarantees
6. Co-financing

63
 7. Investments in Corporate Boards
8. Business Development Services
9. Lease financing
10. Trusteeship
11. Stock Brokerage
12. Foreign Exchange Dealership
13. Insurance Brokerage

PROSPECTS
The BOI is intended to focus on the private sector in both funding and
commercial operations. The Bank has opted to adopt the existing
prudential guidelines for Banks though more stringent when compared
with the CBN proposal to apply some standards used by other finance
companies for BOI.

BOI would focus on SMEs with linkages within the broad economy with a
view to enhancing overall industrial interaction, expanding output and
employment and utilizing local resources to its fullest advantage. The
huge SMIEIS funds currently accumulated by the Banks will help BOI
fulfill its mandate.

It is expected that the bank’s contribution to the economy will grow

stronger as the implementation of the economic reforms progresses to
widen the scope of needs for economic/business development financing.

NIGERIAN AGRICULTURAL COOPERATIVE AND RURAL

DEVELOPMENT BANK (NACRDB)

The Bank is a development Finance Institution wholly owned by the

Federal Government of Nigeria. NACRDB was incorporated in 2000
following the merger of defunct Nigeria Agricultural and Cooperative
Bank, People’s Bank of Nigeria and risk assets of the Family Economic
Advancement Programme (FEAP). The Nigerian Agricultural and
Cooperative Bank began operation on 6th March 1973 as Nigerian
Agricultural Bank Limited. The two government institutions own the
Bank in the following ratio:
Federal Ministry of Finance 60%
Central Bank of Nigeria 40%

FACILITIES
• Six zonal offices.
• 200 branch offices.
• N50 billion capital base.

64
TYPES OF BUSINESS
NACRDB provides:
• Finance and credit facilities to agricultural and agro-allied
industries.
• Loans to farmers, agricultural institutions, organizations and
cooperative societies.
• Direct investments by way of equity participation in wholly owned
or joint-venture projects.
• Provision of guarantees to viable agricultural and agro-allied
ventures.
• Rural savings scheme.

LENDING CHANNELS
The NACRDB has five channels of financial support to its clients:

i. On- lending Scheme:

This is lending through Cooperative Financing Agency (CFAs), Non-
Government Organisations (NGOs), Self Help Groups (SHGs) and some
Private Sector micro-credit institutions

ii. Small Holder Scheme (SHS)

The Small Holder Scheme is designed for small and medium scale
individual and group farming organizations and funds are provided as
loans on very favourable terms and conditions. Interest charges are
usually below the market rate.

iii. First/Second Livestock Development Programme (SLDP)

This programme projects are also designed for small and medium scale
individual and group farming organizations and funds are provided as
loans on very favourable terms and conditions. Interest charges are
usually below the market rate.

iv. Special Projects

The special projects are usually undertaken in collaboration with such
international financial institutions and donor agencies as IFAD,
ECOWAS and ILO.

v. Investments in projects
This targets mainly medium and large-scale entrepreneurs who have the
capacity to provide collateral securities.

PROSPECTS
• Sourcing of offshore credit facilities for loan disbursement.
• Participation in Agricultural Exchange Market through its
subsidiary, the Food Development Company.

65
 • Creation of local market for raw material supply to local
industries.
• Diversification of operations to agricultural support services:
desertification control project, tangential agro-allied projects,
equipment leasing, agro-chemicals manufacture and others.

2. Describe the Assistance Provided By Commercial Banks;

SMALL AND MEDIUM INDUSTRIES EQUITY INVESTMENT

SCHEME (SMIEIS)

Establishment of the Scheme:

The Small and Medium Industries Equity Investment Scheme (SMIEIS) is
a voluntary initiative of the Bankers’ Committee approved at its 246th
Meeting held on 21st December, 1999. The initiative was in response to
the Federal Government’s concerns and policy measures for the
promotion of Small and Medium Enterprises (SMEs) as vehicles for rapid
industrialization, sustainable economic development, poverty alleviation
and employment generation.

The Scheme requires all banks in Nigeria to set aside ten (10) percent of
their Profit After Tax (PAT) for equity investment and promotion of small
and medium enterprises.

Purpose of the Scheme:

The 10% of the Profit After Tax (PAT) to be set aside annually shall be
invested in small and medium enterprises as the banking industry’s
contribution to the Federal Government’s efforts towards stimulating
economic growth, developing local technology and generating
employment.

The funding to be provided under the scheme shall be in the form of

equity investment in eligible enterprises. This will reduce the burden of
interest and other financial charges expected under normal bank
lending, as well as provide financial, advisory, technical and managerial
support from the banking industry.

For the purpose of this scheme, a small and medium enterprise is

defined as any enterprise with a maximum asset base of N500 million
(excluding land and working capital), and with no lower or upper limit of
staff.

Activities Covered By the Scheme:

Every legal business activity is covered with the exception of
(i) Trading/merchandising

66
(ii) Financial Services

Eligibility for Funding:

To be eligible for equity funding under the Scheme, a prospective
beneficiary shall:

(i) Register as a limited liability company with the Corporate Affairs

Commission and comply with all relevant regulations of the Companies
and Allied Matters A ct (1990) such as filing of annual returns, including
audited financial statements;
(ii) Comply with all applicable tax laws and regulations and render
regular returns to the appropriate authorities; and
(iii) Engage or propose to engage in any of the businesses covered by the
scheme

Mode of Investments and Other Related Issues:

1. Equity under the scheme may be in the form of fresh cash injection
and/or existing debts owed to participating bank.

2. A participating enterprise may obtain more funds by way of loans from

banks in addition to equity investment under the scheme.

3. Eligible enterprises are free to approach any bank, including those

they presently have relationship with, to seek funding under the scheme.
Prospective beneficiaries should note that the banks may operate the
scheme directly, through their wholly owned subsidiary venture capital
companies or through venture capital companies floated by consortia of
banks or through independent venture capital companies.

4. Prospective beneficiaries are advised to seek the opinion of third party

consultants such as lawyers, accountants and valuers in determining the
value to be placed on the assets and capital of their businesses in order
to determine a fair price before or during negotiations with the banks.

Requirements by Beneficiaries:

1. Beneficiaries will be expected to:

(a) Ensure prudent utilisation of funds;
(b) Keep up-to-date records on the companies’ activities under the
Scheme;
(c) Make the companies books, records and structures available for
inspection by the appropriate authorities (including banks and the CBN)
when required;

67
(d) Comply with guidelines of the Scheme; and
(e) Provide monthly financial and operational reports to the investing
banks before the 15th of the next succeeding month.

2. The recommendations of industrial associations, particularly

Manufacturers Association of Nigeria (MAN); National Association of
Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA);
National Association of Small and Medium Scale Enterprises (NASME);
and National Association of Small Scale Industries (NASSI) will be
mandatory for members of these associations.
3. Membership of recognized NGOs engaged in entrepreneurial
development and promotion of small and medium scale enterprises will
also be an advantage.

3. Explain the Role of Development Banks in the Promotion and

Development of Small and Medium Enterprises (SMEs);

SOURCES OF BUSINESS FINANCING

Many prospective entrepreneurs have promising business ideas and

plans. However, the capital necessary to initiate their plans may not be
readily available. As a result, many prospective small enterprises never
become operational. The small business owner will have to invest a
certain amount of personal money to start a business. However, with
sound preparation and planning, financing can be obtained from other
sources. The two primary sources of financing to establish a business
may be the owner’s equity or borrowing from lending institutions.

1. Equity financing

The main source of equity financing for most entrepreneurs is their

personal savings. Financial experts say that one-half of the money
needed to start a small business should come from the owner. This
means future owners must work and save before having enough money
to start a business.

Another popular source of equity financing is money from other sources

such as family, friends, venture capitalists, a business. However, there
are a few points to consider. For example, will they want to get involved
with operating the business? What will happens if the business doesn’t
succeed? Will it ruin your relationship?

Equity financing can also be obtained by selling part of the business to

one or more partners. With partners putting in money, it is usually
easier to raise the total amount needed. However, partners must be able
to get along and sometimes this is not easy. Since many people starting

68
their own business want to make their own decisions, the partnership
alternative may not be a good idea.

2. Borrow from lending institutions

When equity sources are not enough, the entrepreneur has the option of
borrowing from other sources. Lenders will usually lend money for
starting a business to people they know and trust. Lenders are careful
not to lend money if the risk is too great. Lenders do not want to lose
money on businesses that fail. Most lenders will therefore review the
business plan carefully. This plan should describe how the business will
be operated, how much money will be needed and how it will be used,
and at what point the business will be profitable.

Most people think of banks when borrowing money. However, it is not

always easy for small enterprises to borrow from them. Banks only lend
money when the risk of losing it is very low. Frequently, they will only
lend to customers whom they have known for a long time. If someone is
thinking of borrowing money at some time in the future, it would be a
good idea for that person to develop a personal relationship with a local
banker as soon as possible.

3. Considerations in applying for a business loan

Different lending institutions have different procedures which have to be

followed by the loan applicant. While lending institutions want to help
potential borrowers, these institutions have to be assured that
repayment of the loan will take place as agreed by the borrower. It is
necessary to understand the following factors that are taken into
consideration when appraising a loan application.

Type of loan: short-term (up to one year) or long-term (longer than one
year).

Purpose of the loan: it is essential to determine that the applicant will

not invest the money in a business venture which is illegal, not favoured
by government policy or is unfavourable to the community concerned.

Credit worthiness and integrity of the borrower: Can the borrower be

trusted?

Capability: the business profile of the applicant becomes an indicator of

the entrepreneur’s capability to operate the project with professional
expertise and effectiveness. Capability characteristics help the lender to
understand whether the borrower will be able to utilize the loan for the
intended purpose.

69
Repayment period: this is a very important requirement both from the
borrower’s and the lender’s standpoint. The lender needs to know
whether the offer of the borrower to repay is realistic. The lender can
ascertain this through statistical and financial projections and advise the
applicant regarding a realistic repayment period, and other details such
as the amount of monthly installments.

Security: security or collateral for the loan must be acceptable to the

lender. Even if all other conditions are fulfilled, the lender may not grant
the loan if security conditions and terms required by the bank are not
adequate. This is especially true when applying for a business loan for
the first time.

Guarantors: some lenders call for security both in the form of immovable
property and tangible assets and guarantees from friends.

Business plan: this is the major instrument used by any lending

institution to decide whether a loan applicant deserves a loan. A
business plan discloses whether the intended business is viable or not. A
loan applicant may have his own expert prepare a business plan to prove
that the loan he is applying for deserves due consideration by the lending
organization. The lender always appraises the business plan presented
by the applicant and comes to his own conclusions or prepares his own
feasibility study to assess and appraise the viability of the proposed
business. A very significant aspect is the cost involved and the cash flow.
Cash flow, as well as financial and statistical projections, indicate
whether the project can generate more money than the cost incurred.
These results will indicate to the lender whether the loan is safe and the
borrower can repay according to the agreed terms.

Current customers of a lending institution have an easier position when

applying for a business loan if the loan is to be used as working capital.
The bank will study the customer’s past financial records and these
financial records will help the banker to decide what action to take. If the
customer intends to start a new business, then the procedures will
almost be similar to that of a new applicant. By keeping written financial
records, the entrepreneurs will have written proof of the past history of
the business.

There are several sources of money available to entrepreneurs.

Frequently, the key decision is to determine which source of money is
most appropriate for their current needs. Selection of the right source of
financing for their needs can often have a pronounced effect on the
future of their business.

Receiving a short-term bank loan when a longer-term loan is required

70
can soon create a crisis. Selling a part of the business to raise capital
that could have been borrowed may be extremely costly. Over-extended
credit can be costly and restrict operations.

There are many opportunities for mistakes in the choice of capital

source. However, the right choice can provide the capital needed while
freeing entrepreneurs from unnecessary costs, risks, or the possibility of
losing control of their own business.

4. Criteria for evaluating loan sources

To determine the best source for raising capital needed in a particular

situation, the following five questions should be considered.

What are the benefits of a loan in relation to its costs? (cost)

Which loan source exposes the business to the lowest degree of risk?
(risk)

Will conditions imposed by a loan source reduce flexibility in seeking

additional capital or in using capital generated through operations
according to the owner’s best judgement? (flexibility)

Could the owner’s control of the business be adversely affected? Could

the loss of control prevent the entrepreneur from making operating
decisions that are in the best interests of the business? (control)

Which financial sources are available to the business? (availability)

Cost. The cost of a loan is usually measured by its impact on the

earnings of the present owners, not simply the increased expenses
incurred by that business. Consider a company that is deciding between
a 20,000 loan at 10% interest or selling 25% of the shares in the
business to raise 20,000. The business expects to pay interest of 2,000
on the loan per year, which would reduce its net income by 2,000 before
taxes. If the business expects to earn 30,000, interest expenses would
reduce earnings to 28,000.

In the equity alternative, the net income would be 30,000, since there
would be no interest expenses. However, only 22,500 would be applicable
to the present owners since 7,500 (30,000 x 25%) would represent the
participation of new shareholders. Therefore, the income of the business
under the equity alternative would be higher, but the participation of the
present owner(s) would be less.

Each capital source has its own cost. Internal sources such as the sale
or liquidation of assets could lead to a loss of revenue following inventory

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disposal or added operating costs if machinery was sold to generate cash.
In reaching a decision, it is important to consider all relevant costs for
each source of finance.

Risk. There are several types of risk involved in raising capital. Use of
trade credit could lead to supplier dissatisfaction and possible damage to
your credit standing. Since borrowed money must be repaid with
interest, debt capital imposes obligations upon the cash flow of the
business that must be met to avoid default. A default could cause a
number of actions, such as forfeiture of collateral or forced bankruptcy.
The only money source that involves no risk to the business is equity
capital, since the equity investor, not the business, is the risk-taker.

5. Lending officer’s concerns

Often a bank lending officer refuses or “declines” a loan request.

Foremost in the lender’s mind is the question: “Can the firm pay back
this loan?” The lender may refuse the loan because the owner hastily and
haphazardly prepared the loan application under pressure. As a result,
the lending officer detects an air of instability and lack of planning in the
owner’s description of his or her business affairs. When an
entrepreneur’s request for a loan is turned down, the loan applicant
should accept the refusal gracefully and eliminate weaknesses before
applying for a loan in the future.

Questions Concerning Borrowing

The lender needs answers to several pertinent questions to determine

whether or not the borrower can repay the loan. One of these questions
is: “How does the borrower intend to use the money?”

What kind of loan? When consider borrowing, determine what kind of

loan is needed. A business uses four basic types of money in its
operations. The purpose for borrowing will determine the type.

Trade Credit:This type of money is not borrowed. It is money you owe

your suppliers who permit you to carry inventory on open account. A
good past credit experience is evidence of your ability to repay borrowed
funds.

Short-term Credit: Banks and other lenders provide this type of money
to make purchases of inventory for special reasons, such as buying
inventory for the next selling season. Such loans are self liquidating
because they generate money from sales. Short-term credit is repaid in
less than one year.

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Long-term Credit: Loans for more than a year are used for the
expansion or modernization of a business. They are repaid out of
accumulated profits. Usually, a loan of this type is a mortgage or a
promissory note.

Equity Funds: This type of money is never repaid. An investor gives cash
to the business in return for a share of ownership in the business.

Many owners fail to recognize the difference between the four types of
money. Keep in mind that money borrowed for a temporary purpose
should be used in the profit producing areas of the business and will be
repaid out of that operation. Equity funds are those which remain in the
business and increase the net worth for the owner.

Are sales adequate? Is a loan being requested to: increase sales volume,
buy additional stocks of high volume merchandise which may have even
greater potential, or create a new image through an overall advertising
campaign?

What is the receivables position of the business? Receivables are the

accounts receivable that are going uncollected and getting old. In effect,
does the business need money to carry old accounts?

Is the profit margin adequate? Is there a lot of business but results show
a lack of profit? This may indicate that the business expenses are not
controlled. Is the market insufficient? What is the plan for repayment? Is
the forecast for cash income and expenditures realistic?

The lender will carefully review the cash flow of the business to
determine whether or not the owner is providing sufficient cash to meet
the firm’s obligations. The lender also has to make sure that cash needed
for working capital is not being absorbed by the business into other
areas of equity and thereby reducing the available cash.

However entrepreneurial forces in Nigeria are traditional and strong. In

recent times an increased unemployment and a corresponding rise in
poverty has left few other options for the enterprising Nigerian.

With the advent of the new democracy and the national quest for free
economy, the government has created and adopted policies promoting
the use of technology in education. The Nigerian Economic Policy 1999-
2003, is a comprehensive compendium of the government’s policies and
guiding principles for the nation. The policy states: "Government will
provide affordable quality education for all Nigerians, the Universal Basic
Education and mass Adult Literacy programs will be pursued in earnest"
and in particular, "Government will create incentives to expand access to
information and communications technology which will facilitate leap-

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froging in order to short-circuit the longer span of development.” The
policy even recommends partnerships with national and international
agencies including the United Nations Transfer of Knowledge through
Expatriate Nationals, (TOKTEN) program.

4. Assess Government Policy on Financing SMEs;

The Federalgovernment has always been concerned on accelerating the

growth of SMEs considering the important role of this sector in the socio-
economic development of the nation. This has informed the setting up of
various agencies and Development Financial Institutions aimed at
addressing the peculiar problems of the SMEs. On the inception of
democratic rule in 1999, the government reviewed existing structures
and policies and decided on rationalizing the DFIs to make them more
functionally effective.

The reduction of all six existing Development Financial Institutions

(DFIs) to two - (BOI and NACRDB) has narrowed the playing field and
streamlined the operations of the DFIs. The Nigerian Industrial
Development Bank (NIDB), the National Economic Reconstruction Fund
(NERFUND) and the Nigerian Bank for Commerce and Industry (NBIC)
have been brought together to form the Bank of Industry. On the other
hand, the Family Economic Advancement Programme (FEAP), Peoples
Bank of Nigeria (PBN) and the Nigerian Agricultural and Cooperative
Bank (NACB) have become a single Bank, the Nigerian Agricultural,
Cooperative and Rural Development Bank (NACRDB).

These institutions, before the Government took the decision to merge

them, were unable to perform their roles effectively due to the following
reasons:
1. Low Capitalization
2. Inefficient Operations
3. Poor loan portfolio
4. Poor Liquidity
5. Inability to access external lines of credit, and
6. Lack of capacity to finance projects

The following strategies have been used to address poverty reduction and
SME growth:
1. Support for rapid development of SMEs through increased funding
of development financial institutions to enable provision of long-
term credit to the real sector of the economy;

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 2. Design and implementation of agricultural subsidy and special
presidential initiatives (on selected products) for direct benefit for
the Nigerian farmers;
3. Elaborate the infrastructure and platform for private sector
exploitation of solid minerals;
4. Utilize the competitive opportunity provided by due process
mechanism for award of contracts to encourage participation of
indigenous enterprises in government procurement
5. Support and encouragement of foreign construction companies
and other multinational corporations to patronize local producers
of inputs as well as sub-contract to small indigenous firms.

5 Explain The Process Of Opening And Operating A Healthy Bank

Account

OPENING A BANK ACCOUNT

Opening a simple checking/current bank account should not be too
complicated. Here are 7 essential steps that should cover it:

Step 1: Choose an Institution, (A bank)

You may have already done this. If not, shop around, ask friends
and family on what type of account you want? A savings
account/A checking/current account? Would you like to have a
“Cash” card? See which bank has the features you want and get an
open bank account with them.

Step 2: Go to the Bank’s Office

The easiest way to get this done is go to their nearest office and
pick up their application forms and any other requirements they
may have. Some banks may now ask you to use their web site. The
advantage of opening a bank account online is that you can do it
at any hour, anywhere. However, if you only want to open an
account in person you can just show up at the branch during
business hours.

Step 3: Pick the Product You Want

Any financial institution will have a variety of account types and

services that you can mix and match: Savings, Checking, Term
Deposit etc.

75
They’ll all have fancy names that you may need to learn. Pick the
one that has the mix that is right for you.
On a website, you may have to drill down to the product that is
right for you. You might click “Open Bank Account”, and then click
“Checking”, and finally “Free Checking”. If you open bank accounts
in person, you can just chat with a banker who will help you open
the best account for your needs.
Step 4: Provide Your Information
In order to open an account, you must provide some information to
the bank. They do not open bank accounts without certain details
about you. This is to protect them against risk and comply with a
variety of regulations. You’ll need to provide simple details like
your name and birthday, as well as identification numbers (this
could be your national ID number or your drivers license).
If you’re doing this online, you’ll just type the information into a
textbox. If you open bank accounts in person you can hand your
ID’s over to the banker who will probably make photocopies.
Step 5: Agree to Terms
You’ll have to agree to abide by certain rules and accept
responsibility for certain actions. When you open bank accounts,
you form a relationship based on a very touchy subject – your
money. Therefore you should know what you’re getting into. If you
open bank accounts online, you complete this step by clicking an
“I Agree” (or similar) button, and performing the next step.
Step 6: Print, Sign, and Mail (If Applicable)
If you open bank accounts in person, this step does not apply. If
you are opening an account online, you’ll probably have to print,
sign, and mail a document to the bank before the account is
opened. Some banks may use electronic disclosure and consent
that is legally binding, but many still won’t open bank accounts
unless you complete this step. Until they receive the documents,
your account is not active.
Step 7: Congratulate Yourself!
Congratulations, you are the proud owner of a new bank account.
Now, you may have to wait a few days to a few weeks for the bank
to process your paperwork. Then, they will mail you anything you
need to operate the account such as checkbooks and a debit,
(ATM/Cash) cards.

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TOPIC 5

KNOW THE FUNCTIONS OF VARIOUS SUPPORT AGENCIES IN

THE DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES
(SMES)

INTRODUCTION:
The support agencies are set up usually by the Government to promote
entrepreneurship and they are doing a lot towards the development of
SMEs especially in terms of Industrial Development. The need to know
about these support agencies and the activities they carry out are
presented in this section; so that potential entrepreneurs could benefit
from their services.
Specific Learning Outcomes:
1. Identify various support agencies involved in the promotion
and development of entrepreneurship in Nigeria;
2. Explain the following and their roles in the promotion and
development of entrepreneurship: NEPC, NIPC, NERFUND,
NDE, RMRDC, SMEDAN, IDC, TBICs, and Federal and
State Ministries of Commerce/ Industry;
3. Explain the assistance rendered by research and academic
institutions in entrepreneurship development.

CONTENT
1 Identify various support agencies involved in the promotion
and development of entrepreneurship in Nigeria;
2 Explain the following and their roles in the promotion and
development of entrepreneurship: NEPC, NIPC, NERFUND,
NDE, RMRDC, SMEDAN, IDC, TBICs, and Federal and State
Ministries of Commerce/ Industry;

World wide findings over the years have shown that small firms and
entrepreneurships play very important roles in national economic growth
and development. The Government of Nigeria, like its counterparts, the
world over, has realized the importance of small and medium scale
enterprises and has, over the years formulated various public policies to
encourage, support and fund the establishment and development of
SMEs. Developments in small and medium enterprise are what give a
developing nation the base for employment creation, solid base for
creating a middle class and encouragement for the use of local raw
materials and technology.

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THE NIGERIAN EXPORT PROMOTION COUNCIL (NEPC)

The NEPC was established through the promulgation of the NEPC Act of
1976 and formally inaugurated in March, 1977.  The Council’s
Amendment Decree of 1992 was to minimize the bureaucratic
bottlenecks and increase autonomy in dealing with members of the
Organized Private Sector. Its goal and mission are to make the non-oil
export sector a significant contributor to Nigeria’s GDP, facilitate
opportunities for exporters to promote sustainable economic
development. Their Web sight is www.nepcng.com

Activities of the Council

 To promote the development and diversification of Nigeria's
export trade
 To assist in promoting the development of export-related
industries in Nigeria
 To spearhead the creation of appropriate export incentives
 To actively articulate and promote the implementation of
export policies
and programmes of the Nigerian Government
 To co-ordinate and monitor export promotion activities in
Nigeria
 To collect and disseminate information on products
available for export
 Collect and disseminate local manufacturers and exporters
information on foreign markets
 Provide technical assistance to local exporters in such areas
as export procedure and documentation, transportation,
financing, marketing techniques, quality control, export
packaging, costing and pricing, publicity and other similar
areas
 Provide directly or jointly, with training institutions,
training for its staff and assist with the manpower
development of the export community in Nigeria
 Organize and plan the participation of Nigeria in trade fairs
and exhibitions in other countries
 Administer grants and other benefits related to export
promotion and development
 Undertake studies of the current economic conditions, with
special attention to the export sector with the aim of
advising Government on necessary policies and measures
 Co-operate with other institutions on matters relating to
export financing, export incentives specialized services to
exporters

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  Engage in export promotion publicity
 Assist in finding appropriate solutions to practical problems
encountered by exporters in the process of exportation
 Plan and organize outward trade missions and provide
support from Nigeria
 Services to in-ward missions from other countries
 Perform such other functions as may be conducive to the
achievement of the objective of the Export Decrees

THE NIGERIAN INVESTMENT PROMOTION COMMISSION(NIPC)

The Nigerian Investment Promotion Commission (NIPC) is an Agency of

the Federal Government which was established in 1995 to, among other
things, “Co-ordinate, monitor, encourage and provide necessary
assistance and guidance for the establishment and operation of
enterprises in Nigeria.”

By this decree the government abolished almost all restrictions on

investment, especially restrictions on foreign investment into the
Nigerian economy. Most of the efforts of the NIPC are, therefore, focused
on attracting foreign investment.

However its total mandate includes domestic investment and its area of
operation include small and medium scale enterprises. It is currently
managing, on behalf of the Federal Government, a World Bank MSME
pilot project aimed at empowering and increasing capacity in the MSME
sectors as well as in NGOs that specialized in BDS to MSMEs. While the
pilot programme only includes Lagos, Abia and Kaduna States, it is likely
that other states and the FCT will come under this programme within the
next five years. The NIPC also has a new very informative web site at
www.nipc-ng.org. It has a very comprehensive section on tax incentives.

DEVELOPMENT FINANCE INSTITUTIONS (DFIs)

Over the years, a number of Development Finance Institutions (DFIs)

were established by various governments to provide funds that would
boost economic activities in the country and in the process, reduce the
rate of poverty. Sadly, however, 47 years after independence, the rate of
poverty has continued to grow. Some of the Development Finance
Institutions that were introduced over the years to help fight poverty are:
The Nigerian Bank for Commerce and Industry (NBCI), Nigerian
Industrial Development Bank (NIDB), and the National Economic
Reconstruction Fund (NERFUND).

In the early 2000 the NIDB was transformed into the Bank of Industry
(BOI), following the government’s decision to merge it with NBCI and

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NERFUND.
In addition to the above the government, since the advent of the new
democracy, initiated more programmes aimed at fighting poverty in the
country. They range from the National Poverty Eradication Programme
(NAPEP) to Small and Medium Enterprises Development Agency of
Nigeria (SMEDAN)

The microfinance scheme has just been introduced in 2007, as an

evolution of the community banks to Microfinance Banks (MFBs) that
would primarily focus on small scale lending as a way of empowering low
income earners and small ventures so as to fight poverty and boost
economic activities.

THE RAW MATERIALS RESEARCH AND DEVELOPMENT COUNCIL

(RMRDC).

The Raw Materials Research and Development Council (RMRDC) is an

agency of the Federal Government of Nigeria vested with the mandate to
promote the development and utilization of Nigeria’s industrial raw
materials.

It originated from the recommendations of a Workshop on Industrial

Matters which was organized by the manufacturers Association of Nigeria
(MAN) and the Nigerian Institute of Social and Economic Research
(NISER) in July 1983. It was established by Decree No.39 of 1987, but
commenced operation on February 10, 1988. It is today, Nigeria’s focal
point for the development and utilization of the nation’s vast industrial
raw materials.

The primary mandates of the Council are:

a. To draw up policy guidelines and action programmes on raw
materials acquisition, exploitation and development; 
b. To review from time to time, raw materials, resources
availability and utilization, with a view to advising the
Federal Government on the strategic implication of
depletion, conservation or stock-piling of such resources; 
c. To advise on adaptation of machinery and process for raw
materials utilization; 
d. To provide special research grants for specific objectives and
device awards or systems for industries that achieve
breakthrough or make innovations and inventions; and 
e. To encourage the publicity of research findings and other
information relevant to local sourcing of raw materials.

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Industrial development is one of the indices for measuring the
development of nations. The development and survival of a
manufacturing sector in an economy is predicted largely on availability of
raw materials. The exploitation and utilization of such raw material is
critical to economic development. RMRDC is therefore very critical to the
development of Nigeria’s productive sectors.

Currently, the capacity utilization of many industries in Nigeria is low

due to lack of raw material utilization and the singular focus of the
economy on one product. It is hoped that RMRDC through its numerous
programmes, will promote new investments in the other local resources
and encourage industries to substitute local raw materials for currently
imported ones.  

The global goal is to pursue this policy which will invariably have
multiplier effects on the nation’s economy in terms of new industries,
more employment and increase gross domestic product (GDP). Their web
site is: www.rmrdc.gov.ng

THE SMALL AND MEDIUM ENTERPRISES DEVELOPMENT AGENCY

OF NIGERIA (SMEDAN) was established by the SMEDAN Act of 2003 to
promote the  development of the MSME sector of the Nigerian Economy.
The Agency positions itself as a “One Stop Shop” for Micro, Small and
Medium Enterprises Development. Micro Enterprises are included in the
clientele of the Agency since they form the bedrock for SME’s.
On its web site, its vision is to establish a structured and efficient micro,
small and medium enterprises sector that will enhance sustainable
development of Nigeria. The mission is to facilitate the access of micro,
small and medium entrepreneurs/investors to all resources required for
their development.
Justification for our existence. Poverty, due to lack of access to income-
earning opportunities and lack of capacity to take advantage of the
opportunities, is a social malaise that is threatening global prosperity in
general and national economic growth and development in particular.
A well developed MSMEs sector has proven to be one of the most
veritable channels to combat poverty. The establishment of SMEDAN is
therefore justified by the need to trigger the development of Nigeria’s
MSMEs in a structured and efficient manner
Its main functions are to provide business information, in partnership
with various state governments. Its efforts with most states, and the FCT
are well displayed on the web. E.g. www.abujaenterprise.org. for Abuja
enterprises agency. These sites serve as a credible suppository of
business information for the location. Each site compiles, reviews and

81
updates all existing economic policies, regulations, incentives, and
legislation affecting MSME operations within the State.
The world market section on SMEDAN’s site provides sources and makes
available information on international markets, products, standards,
specifications and regulations, including updates in development
databank on MSMEs, raw materials, available local technologies,
machineries and prototypes. Other proposed services through their sites
and offices include:
Design and Establishment of Comprehensive BSCs and IPs: To be
able to provide Business Support Centers (BSCs) in each State, to
provide business advisory services. i.e Link MSMEs to sources of funds;
provide internet/website facilities; provide market information; provide
business consultancy services; collate and make available business
plans and prototypes; implement capacity building programmes; advise
on regulatory and standardization frameworks and collate all relevant
business information that could be useful to SMEs.
Develop and establish, in collaboration with state governments and
NGOs in the private sector, Industrial Parks (IPs) to facilitate easy access
to land, good infrastructure, security, regulatory bodies such as NAFDAC
and SON; banking services etc.

Capacity Building and Proposed Promotional Services:

 Develop, test and disseminate new business models illustrating
best business practices to upgrade SMEs operations.
 Conduct seminars, conferences, workshops, and interactive
sessions for promotional and capacity building purposes.
 Encourage and facilitate business clusters, networks and
cooperatives for enhanced productivity and easier access to
factors of production including finance.
 Encourage and facilitate new investments in designated priority
areas in each State.
 Organize, trade and investment exhibitions and interactive fora.
 Develop and apply standards and quality control measures for
technologies and products of SMEs.
 Improve the financial management skills of MSMEs through
training workshops.
 Develop and implement effective strategies for opening up
domestic and international markets for MSMEs products.

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Proposed to be a Main Financial Intermediary between MSMEs &
Sources of Finance:
 Liaise with financial institutions to harness and pool resources
for utilization by MSMEs.
 Develop and implement a strategy for the effective and timely
disbursement of SMIEIS funds.
 Hold regular consultations with international donor agencies,
trade groups, relevant ministries, research institutes, states
and local governments with the view to share ideas and partner
in implementing programmes for the development of MSMEs.
 Attract foreign investments and funds for the development of
the MSMEs sub-sector.
Proposed Policy Development:
 Develop and seek statutory approval for a national policy on
MSMEs. Conduct impact assessment studies and use same to
recommend improvements in policy intervention.
www.smedan.gov.ng

THE INDUSTRIAL DEVELOPMENT CENTERS (IDCs)

Over the years, the Federal Government has taken various steps, to
promote the development of Small and Medium Scale Enterprises
(SMEs). These included, among others, funding and setting up of
industrial estates to reduce overhead costs.

One of the many institutions established was the Industrial Development

Centers (IDCs), to provide extension services to SMEs in such areas as
project appraisal for loan application, training of entrepreneurs,
managerial assistance, product development, production planning and
control, as well as other extension services. The first IDC was established
in Owerri in 1962 by the former Eastern Nigeria Government, Ministry of
Trade and Industry, and was taken over in 1970 by the Federal
Government.

Subsequently, more IDCs were established at Zaria, Oshogbo, Maiduguri,

Abeokuta, Sokoto, Benin City, Uyo, Bauchi, Akure, Ilorin, Port Harcourt,
Kano and Ikorodu. Over the years the achievements of the IDC’s have not
been commendable and in most instances they have been overtaken by
other government agencies doing the same programmes.

TECHNOLOGY BUSINESS INCUBATION CENTERS, (TBIC’s)

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Part of the NEEDS program of the Obasanjo era included the creation of
jobs, education facilities with special emphasis on Technology business
Incubation Centers, (TBIC’s). The goal is to promote and engage the
semi-formal productive sectors of the economy:
According to information at the beginning of 2000 about 70% of the
population of Nigeria are engaged either in the informal sector, the
Agricultural sector, or small and medium enterprises (SME’s). Such an
important sector of the economy has access only to the most
rudimentary technology, information and processes. As part of the
transformation agenda, the government wanted to diversify the economic
base and mainstream the informal sector while strengthening its
linkages to the rest of the real sector by increasing the local value
addition and share of manufactured goods in total exports.
Under NEEDs, I and II the institutional and policy framework for this
was being established through Small and Medium Enterprise
Development Agency of Nigeria, (SMEDAN), Business Incubation Centres
Technology, TBIC’s) and (Small and Medium Industries Equity
Investment Scheme, (SMIEIS).
In a summary SMEDAN and TBIC’s aimed to provide conducive
environments for nurturing start –ups and survival of value added and
technology – related manufacturing.

3 Explain the assistance rendered by research and academic

institutions in entrepreneurship development.

Entrepreneurs are widely recognized as the prime movers of economic

development; the people who translate ideas into action. An interesting
though not widely accepted definition of an entrepreneur is a person who
has the ability to scan and identify opportunities in his or her
environment, gather the resources necessary to take advantage of the
opportunities and implement successful action to utilize the
opportunities.

Another definition identifies an entrepreneur by their behaviour rather

than the specific occupation they are involved in. Those who have
studied entrepreneurial behaviour have noted certain characteristics
such as innovativeness, ability and willingness to take calculated risks,
determination, insight, total involvement, independence, need for
achievement, leadership ability and so on.

Recognizing the prime-mover status of business entrepreneurs, the

Government can implement a wide-ranging set of strategies to encourage
youth to initiate their own small businesses. The major focus for this
effort is small enterprise development (SED). Small enterprise

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development traditionally involve establishing an enabling environment
for small enterprise growth including analysis and adjustments to the
regulatory environment that has been a hindrance to prospective
small business owners. Formal small enterprise development policy
encompasses entrepreneurship development programmes under a
heading 'Non-Financial Promotional Programmes' (NFPP). The other
two aspects in SED policy are the provision of responsive small
enterprise credit facilities and an examination of gender issues.

Entrepreneurship development also involves introducing youth to

entrepreneurship education with the aim of getting them to think about
entrepreneurship and the role of business entrepreneurs in economic
development. They also get an opportunity to analyze the difficult
employment situation in the country and are encouraged to consider
self-employment as a career choice. Stacked up against such a choice
are many examples of business failures in the community, negative
attitudes towards business, and misconceptions about what makes a
business succeed (the common view is that all you need to succeed is
'capital).

One major task of entrepreneurship education trainers/researchers is to

counter these negative influences with positive ones such as
presentation of successful role models and case studies of successful
small enterprises. One major problem is how to integrate
entrepreneurship concepts and practices into the teaching of other
subjects. Students are encouraged to initiate micro-businesses while still
in college as a way to enable them to acquire an insight into the
operation of a business. They are also required to identify a potential
business as well as prepare and present a complete Business Plan as
their final-year evaluation in the subject.

Selecting Promising Entrepreneurs:

A panel of experts from small enterprise development agencies, financial
institutions and entrepreneurship development agencies would select
promising plans and encourage the selected graduates to develop their
plans, attend further training and implement their plans. It is hoped that
in this way, more youth will initiate their own businesses and that more
of such businesses would succeed. Indeed an enterprise that is more
than three years old is regarded as having achieved some measure of
success.

Supporting the Young Entrepreneurs:

In order to ensure that the young entrepreneurs do not go out into the
business 'jungle' and face the difficulties on their own (yes, it is not
easy!), Small Business Centers (SBCs) should be established with several

85
objectives such as assisting students finalize their Business plans
and link them with financiers, develop information and other
resources, develop small business assistance programmes for
women and disadvantaged groups within their communities and
conduct research in entrepreneurship and small business
development. The SBCs should also offer consultancy and counseling
services to small businesses and provide need-based training for the
same target group.

The SBC Network:

This provides an opportunity to study the various aspects of
information management including identifying high utility
information, collecting, processing it, and providing it to clients in
as useful a form as possible. SBCs may be regarded as low level
centers that deal with low technology micro-enterprises or alternatively
as the start of an effective nation-wide enterprise support network with
all the sophistication and effectiveness of similar service providers in the
US and elsewhere.

The ability for SBCs to acquire up-to-date information depends on the

availability and cost of such information. One way to improve access
speed and reduce cost is by implementing a computer-based
information system linked to the international networks (Internet)
and regional networks. This would enable information sharing as
well as expertise sharing among SBCs. However, mechanisms for
generating usable information and useful databases that is very scarce at
present, offer good research opportunities to universities.

Regional Center for Enterprise Development ( RCED )

The SBCs have local perspectives with each assigned specific

geographical areas of operation. The need for a center with a national
and regional perspective cannot be overlooked. The Center's activities
should be geared towards entrepreneurship, managerial and
extension oriented research, entrepreneurship studies and
technological research; consultancy, rural enterprise development,
small and medium enterprise, information dissemination and
appropriate technology, and conduct of industry dialogues,
conferences and appreciation seminars. ... It is a center of excellence
and innovation in the field of small, medium and large enterprise
training, promotion and development'. The Regional Center should seek
partners globally to share common interests and good practices.

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 TOPIC 6

UNDERSTAND BUSINESS PROPOSAL WRITING

1.0 Define and Explain Business Proposal

BUSINESS PROPOSALS

A business proposal is a written document sent to a prospective client in

order to obtain a specific job. Proposals may be solicited or unsolicited. A
client may simply request a proposal on a project in the course of a sales
call by saying: "You know, that sounds interesting. Why don't you send
me a proposal on that." In other cases the proposal may be a formal
solicitation, usually called an RFP (request for proposal). RFPs are almost
always documents, too. They specify the product or service to be
provided, the qualifications sought, and the deadline for submission.
Solicited proposals, obviously, mean that the client has already decided
to make a purchase. Only the selection of a vendor remains to be done.
An unsolicited proposal, by contrast, is often a sales presentation
dressed in another cloak—but the proposal is specifically aimed at a
well-defined and limited activity. An example of an unsolicited proposal
is the submission of the outline of a book to a publisher arguing the
popularity of the subject, the novelty of the approach, and the merits of
the author.

Business proposals must be distinguished from estimates. In many fields

where small business is active, estimates serve the same purpose as a
proposal. They are the document that clinches the sale of a roofing or a
paving job or a monthly house-cleaning service. But where estimates are
used, the qualifications of the seller and his or her method of
accomplishing the job are also established, but by other means—
typically by an interview or sales call. Sometimes the seller is assumed to
fit the job because the business already enjoys a good reputation.
Proposals, on the other hand, usually involve complex or unusual one-
time services like landscaping a park, surveying a market, or building a
refinery. In these cases the approach to the job, the design, the
implementation, the schedule, and even the aesthetics require more than
simply a dollar estimate.

Many service businesses operate entirely on the basis of proposal. In

other cases a proposal is sometimes required, sometimes not. In highly
technical fields, the proposal may be filled with dry listings of engineering
specifications and/or process details. But it is vital to remember that
proposals are always first and foremost sales documents.

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2.0 IMPORTANCE AND PURPOSE OF A BUSINESS PLAN

Business plans are documents used for planning out specific details
about your business. They can range in size from a simple few sentences
to more than 100 pages with formal sections, a table of contents and a
title page. According to Entrepreneur Magazine, typical business plans
average 15 to 20 pages. Comprehensive business plans have three
sections--business concept, marketplace and financial--and these are
broken down into seven components that include the overview or
summary of the plan, a description of the business, market strategies,
competition analysis, design and development, operations and
management, and financial information. Even small one-page business
plans have importance and purpose for the success of the business
however.

Clarify Direction

The primary purpose of a business plan is to define what the business is

or what it intends to be over time. Clarifying the purpose and direction of
your business allows you to understand what needs to be done for
forward movement. Clarifying can consist of a simple description of your
business and its products or services, or it can specify the exact product
lines and services you'll offer, as well as a detailed description of your
ideal customer.

Future Vision

Businesses evolve and adapt over time, and factoring future growth and
direction into the business plan can be an effective way to plan for
changes in the market, growing or slowing trends, and new innovations
or directions to take as the company grows. Although clarifying direction
in the business plan lets you know where you're starting, future vision
allows you to have goals to reach for.

Attract Financing

The Small Business Administration states, "The development of a

comprehensive business plan shows whether or not a business has the
potential to make a profit." By putting statistics, facts, figures and
detailed plans in writing, a new business has a better chance of
attracting investors to provide the capital needed for getting started.

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Attract Team Members

Business plans can be designed as a sale tool to attract partners, secure

supplier accounts and attract executive level employees into the new
venture. Business plans can be shared with the executive candidates or
desired partners to help convince them of the potential for the business,
and persuade them to join the team.

3.0 ELEMENTS OF THE BUSINESS PROPOSAL

In most industries proposals have a well-defined format specific to the

field. Examples might be providing electrical wiring services to major
high-rise or pouring foundations for a suburban development. In such
cases the bidder should first obtain old proposals and follow the
structure typically used by his trade in that market. In professions such
as architecture and landscaping a visual presentation, sometimes even a
model, is central to the sale. The same holds for an advertising proposal.
In these three areas—there are others as well—the actual presentation is
usually a meeting. Any document is supplemental and tends to
summarize the presentation with additional so-called "boiler plate," i.e.,
administrative details.

What follows here is a discussion of more general proposals, usually

associated with studies, surveys, or service activities (e.g., protective
services for a warehouse complex). In such proposals the following
general structure applies.

All proposals have at least two distinct pieces: a cover letter and the
proposal document itself. In addition, sometimes, one or more
appendices may be provided with charts, graphs, photographs, maps,
and so on. Brief proposals, also sometimes known as "letter proposals,"
combine the first two pieces into a single submission usually of a
maximum of six to eight pages.

The cover letter serves as a transmittal document. Many bidders also use
the cover letter to provide the essence of the proposal in very abbreviated
form, highlight the bidder's qualifications, name the price, and ask for
the order.

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The proposal document usually has the following structure:

 Title Page. This part typically includes your name and the name of
your company, the name of the person or company to whom the
proposal is submitted, and the date of submission.
 Table of Contents. While usually not necessary for shorter
proposals, these are sometimes used for complex formal proposals.
In cases where different departments of the client will separately
review parts of the document, the table of contents is a helpful
means of rapidly guiding the reader to such topics as Electrical,
Structural, Heating & Cooling (in a building project) '¦ or Food
Services, Music, Entertainment, Transportation Services (in a
project to organize a festival).
 Executive Summary. A summary may be included here or may be
conveyed in the cover letter.
 Statement of the Problem/Issue/Job. This section repeats, in a
rephrased manner, the client's objectives and goals as interpreted
by the bidder. Including this restatement of the issue is valuable in
showing the client that the bidder understands the issue correctly.
 Approach. In this section the bidder summarizes his or her
proposed approach to solving the client's problem or carrying out
the necessary task. The proposed approach is often the key to
winning the job—if the price is right—because it shows unique
means, modes of thought, or techniques, why they will solve the
problem, and why they are superior to alternatives. The section
need not be detailed. Details are left to the Methodology. But it
presents the strategic elements of the proposal and argues in their
favor.
 Methodology. This section develops in some detail how the
Approach will be carried out. Level of detail should be just
sufficient to convey to the client convincingly what will happen
without becoming entangled in minutiae.
 Bidder's Qualifications. The section presents documentation why
this bidder should be chosen on the basis of qualifications, past
history, and successful accomplishment of similar jobs in the past.
 Schedule and Benchmarks. Major elements of the job are here
displayed against a time line. If necessary, specific benchmarks are
identified to indicate successful accomplishment of intermediate
objectives.
 Cost Proposal, Payment Schedules, and Legal Matters. The
bidder concludes by presenting the price in as much detail as
required in the RFP. It is always wise to specifically pin-point when
the bidder expects to obtain partial payments as the work
proceeds. If legal matters are involved, they can be placed here. If
they are lengthy, they may merit a section of their own.

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4.0A SimpleModel Business Proposal Letter on a Business Venture
At least every business firm starts as an idea that needs nurturing and
pursuing. A business proposal letter template seeks to place forth a
business idea, or an intention to work in a way with potential partners
with the aim of convincing them to lend support on joining in the
campaign. When writing such a letter, one need to point out their
expectation to start a given business, explain its ideals and expected out
comes both to the owners,comsumers and stakeholders.

A business proposal letters usually directs its attention to possible

business partners or funders who needs to see an opportunity before
giving their green light on the project. However, a business proposal does
not limit itself to an idea yet to be put to test, it also involves explaining
need to develop certain product or services in a given formulation that
may turn the tide in favor of the participants.

Model Business Proposal Contract Letter To Client

PROPOSAL LETTER
THE CHAIRMAN/CEO ABC PLAZA
ABUJA,CA 90012-2952

SUBJECT: REQUEST FOR PROPOSAL CONTRACT NO. TBD(IFP/RFP NO)

TBD(Solicitation Title )

In response to the above referenced request for proposals (RFP) and in

accordance with the accompanying instructions to proposals and Submitttal
Requirements ,we the undersigned hereby offer to perform and complete the
work as requirement in the contract document.

If recommended for contract award, we provide to you all required certificate of

insurance.

The proposal submitted in response to RFP shall be in effect for days after the
proposal due date.

Further, the undersigned agrees to execute the company prepared contract

within ten calender days after receipt of Notice of Award and provide to the
organisation all required certificate of insurance. The proposal represent that
the following person(s) are authorized to negotiate on its behalf with you in
connection with this RFP and will provide appropriate evidence of authorization
upon request:

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Printed Name Title Phone

Printed Name Title Phone

Printed Name Title Phone

In addition to the formal certification provided,the proposal certifies that ithas:

A. Examined and is fully familiar with all of the provisions of the RFP
Documents and any amendment thereto;
B. Satisfied itself as to the requirements of the contract;
C. Carefully reviewed the accuracy of all statements in this proposal;
D. Examined the experience, skill and certification (if any)requirements
specified in the statement of work and that the
entities(Contractor,Subcontractor,Supplier) performing the work fulfill
the specified requirement,and
E. Satisfied itself with respect to other matters pertaining to the RFP which
in any way affect the performance of the work .

Note: A comprehensive Business Proposal must contain the proposal

document mentioned above

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