Impact of Small and Medium Scale Enterprises on Economic Development of Nigeria

Abstract

Nigeria has made it one of its primary goals in recent decades to develop its industrial base through the formation, maintenance and expansion of small and medium scale enterprises in order to achieve economic development. Fiscal incentives, grants, support and aid from bilateral and international agencies, as well as specialized institutions, have all been used to help the SME sector thrive. However, SMEs in Nigeria have not performed creditably and so have not played the crucial and lively role that they should have in the country's economic growth and development. As a result, the government, citizens, operators, practitioners, and organized private sector groups have all expressed concern about the situation. Using time series data set from 1991 to 2020, this study utilized the Fully Modified Ordinary Least Squares (FMOLS) to analyze the impact of small and medium enterprises (SMEs) on the development of the Nigerian economy. The study found a long-run relationship between small and medium scale enterprise and economic development in Nigeria. Our findings also indicate a unidirectional relationship from gross domestic product to commercial bank loans to SMEs. However, there is no causal relationship between inflation and gross domestic product; interest rate and gross domestic product, while none of the economic growth indicators report a bi-causal relationship. The study hereby recommends that government should assist prospective entrepreneurs to have access to finance and necessary information relating to business opportunities to enable them to reduce their operating costs and be more efficient to meet the market competitions.