Boosting the Nigerian Economy through Small and Medium Scale Enterprises’ Financing

Abstract

Financial institutions no doubt are reputed for the inter-mediation role of moving funds from the surplus sector of the economy to the deficit sector. However, what is overtly contentious is whether the funds being extended to the deficit sector are well applied to herald the intended growth effect in a volatile economy like Nigeria. This study is yet another empirical attempt to re-establish the link between financing of the small and medium scale enterprise sub-sector and the economic growth of Nigeria. The study made use of secondary data from the Central Bank of Nigeria (CBN) statistical Bulletin covering periods from 1980-2017. Data generated were subjected to diagnostic tests and certified with for use. The Ordinary Least Squares (OLS) method was applied for the data analysis. The results showed that bank credit extended to the SMEs sub-sector though exerted positive effect but was not significant as revealed from the t-statistic and the corresponding p-value. The study therefore recommended that more deliberate efforts and policies should be put in in place to ensure that banks are encouraged to lend to the sub- sector and lending interest rate be further reduced to single digit to make it more attractive to borrowing SMEs. Furthermore, the lending application procedures should be devoid of very stringent conditions for easy accessibility.

Keywords: Small and medium scale enterprises, Economic growth, Macroeconomic variables