Impact Of Small And Medium Enterprise On Economic Growth In Nigeria

• Yilson Ezra Emmanuel

  Author

• Adikaba Innocent Azara

  Author

• Dang Limark Samuel

  Author

• Ngukwarai Isaac Dishok

  Author

Small and medium size enterprise (SMEs) plays significant role in promoting economic growth in Nigeria Despite their importance SMEs in Nigeria, are bedeviled by numerous challenges which include lack of access to finances, inadequate infrastructure and regulatory constrained. These challenges have resulted in low productivity, limited competitiveness and high rate of failure among SMEs resulting in its low contribution to economic growth in Nigeria. It is in light of this drawback that this study examines the impact of SMEs on economic growth in Nigeria. Time series data source from CBN statistical bulletins and National Bureau of statistics (NBS) covering a period of 1990-2024. The data were analyzed using ARDL. Findings of the study indicates that commercial bank loan to SMEs (CBLSME) and Small and Medium Enterprise Output (SMEO) has significant impact on economic growth (GDP) in Nigeria during the period under reviewed , while Total Credit to Private Sector (TCPS) is negative and statistically insignificant in promoting economic growth in Nigeria. Lending rate (LR) is positive and statistically insignificant in promoting economic growth in Nigeria. The long run result indicates that commercial bank loan to SMEs (CBLSME) and Small and medium Enterprise Output (SMEO) are statistically significant, having positive impacts on GDP, while Total credit to private sector (TCPS) is negative and statistically insignificant in promoting economic growth in Nigeria. Finding of the study also indicates that Lending rate (LR) negative and statistically insignificant in impacting economic growth in Nigeria. It is therefore recommended that: Government should make policy that will mandate Commercial banks to lend a certain percentage of their total credit to SMEs sub-sector so as to boost the SMEs capacity and increase outputs and increase economic growth since finding of the study indicates that Commercial bank loan to SMEs impact positively on economic growth in Nigeria during the period under review. In order to increase investment by SMEs and economic growth, commercial banks should reduce the lending rate to SMEs. Secondly, lending rate should be low in order to reduce cost of capital and associated default by SMEs due to high cost of servicing loans because findings of the study indicates that Lending rate have insignificant impact on economic growth in Nigeria during the period under review. 

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