Economic Environment of Small and Medium Scale Enterprises: Implications on Economic Growth in Nigeria

Abstract

The complexities arising from the fluctuations of economic environmental factors have constituted core difficulties encumbering the operations of small and medium scale enterprises in Nigeria. This led to collapse of businesses, loss of jobs and unprecedented decline on their performance which is a cog on the wheel of economic growth. Therefore, this study titled economic environment of small and medium scale enterprises and its implications on economic growth in Nigeria was an attempt to explore the implications of economic environment of small and medium scale enterprises on economic development. The study employed a quantitative design with secondary data on SMEs performance, government tax revenue, exchange rate, interest rate and inflation rate, respectively. Ordinary Least Square (OLS) formed the basis for the estimation. The study found that exchange rate, inflation rate, interest rate and government tax revenue have negative relationship with SMEs performance. The implication of this negative relationship is that consistent increase in government tax revenue, exchange rate, inflation rate and interest rate have propulsive affect on performance of SMEs in Nigeria, vice versa and recommended that the federal government should come up with economic policy and regulatory framework that will maintain fixed exchange rate, interest rate and low inflation because stabilizing these economic variables would drive the operations of small and medium enterprises, as they will innovate, create and invent new things, products and services to stimulate productivity, which in turn, create resource-based economy.