EMPIRICAL ANALYSIS OF SMALL AND MEDIUM SCALE ENTERPRISES AS A CATALYST FOR DOMESTIC ECONOMIC GROWTH: AN EVIDENCE FROM NIGERIA (1993 - 2018)
Apeh, Ajene Sunday, Ph.D
Volume 4 Issue 1
Abstract
This study examined the impact of Small and medium scale enterprises (SMEs) as a catalyst to the growth of Nigeria’s domestic economy for the sample period 1993 to 2018. The econometric technique adopted for the study was based on Error Correction Model. The estimated result revealed that the sign of the coefficients are in line with the a priori expectation. The magnitudes of the coefficients show that SMEO and INF are positively fairly inelastic both in the short run and in the long run. INF is statistically insignificant in the long run. This means that economic growth in Nigeria is relatively insensitive to changes in the mentioned explanatory variables based on available data. In order words relying purely on output from small and medium scale enterprises, bank credit to small and medium scale enterprises, interest rate and inflation for the economic growth may not yield the required result as expected. Therefore, there is need for policy mix in order to achieve the desired goal. In another dimension the amount of output from small and medium scale enterprises and bank credit to small and medium scale enterprises is grossly inadequate to stimulate economic development in Nigeria. Interest rate is found to have a negative fairly inelastic impact on economic growth both in the short run and in the long run in line with theoretical expectations. However, in the meantime, output of SMEs (SMEO) does not make any significant contribution to Nigeria’s economic growth performance. The study concluded that poor government policies, on tariffs and incentives, bribery and corruption, non-existent entrepreneurial development centers and poor state of infrastructure act as impediments to the growth and development of SMEs in Nigeria. The study recommended amongst other (i)that governments at all levels in Nigeria should be encouraged to encourage microfinance institutions and commercial banking institutions to develop friendly loan policies in order to enable SMEs access enough funds for their businesses. This will enable the poor in their areas to have access to credit; (ii) Governments should introduce financial literacy in schools, establish entrepreneurial development centers for capacity building, provide enough infrastructures, especially electricity and road network, and finally establish agencies for control of bribery and corruption. Key words: Real Gross Domestic Product, Output, Small and Medium Scale Enterprises, Bank Credit Inflation rate, Interest rat
Download Paper