Determinants of small and medium scale enterprises, poverty and economic growth: A case study of Nigeria

Abstract

Small and Medium-sized Enterprises (SMEs) have been the subject of increasing attention by policymakers in national governments and international institutions in both developed and developing countries. This article focuses on the determinant of small and medium scale enterprises, poverty and economic growth in Nigeria. Secondary data were tested for unit root. Correlation analysis, Autoregressive Distributed Lag model were adopted to test for the objectives of this study. Results of analyses indicated that the major significant determinants of the growth rate of SMEs in Nigeria were bank loan to SMEs at two previous years, government expenditure to SMEs at previous year and three years after for interest rate. The findings also indicated that bank loan to SME, government expenditure and interest rate were also the determinants of real gross domestic product growth (RGDPG) with respect to the years under study. Results of ARDL also showed that SMEs contribution to gross domestic growth, bank loan to SMEs and government expenditure were all significant and exerted dominant impact on poverty level. Furthermore, results revealed a unidirectional causality between economic growth and poverty, between SME growth and poverty, and between SME growth and economic growth. The study therefore recommends the setting up of enterprise development agencies in every state of the federation to serve as coordinating unit that will help business enterprises as well as reduce unemployment, poverty and its attendant effect on economic growth.

The Casualty Evidence for Interest Rates and SME’s Outputs Relation from A Developing Economy

“…This is comparable with extant evidence, for instance, Ilegbinosa and Jumbo (2015) find negative link for the SMEs' finance and interest rate causal relations. Kareem et al (2022) found a unidirectional causality between poverty and SME growth, and more directly, Ibi-Oluwatoba et al 2020 found negative relationship between interest rate and SMEs' outputs.…”

“…Ilegbinosa and Jumbo (2015) find that finance provided to SMEs and interest rates are negatively related. Kareem et al (2022) demonstrated a positive effect of interest rates on SME outputs three years later. Ibi-Oluwatoba et al (2020) found a negative relationship between interest rates and SMEs' outputs of GDP.…”

“…Second, many banks in the country suffer higher nonperforming loans, thus restraining SMEs' opportunity to lend since the banks are more concerned about their balance sheets due to tighter macro-prudential policy (Kure et al, 2017;Umorene al., 2018;Popoola, 2023). Third, current evidence for the monetary policy impact has not considered the evidence of asymmetric causality relations (Ilegbinosa & Jumbo, 2015;Ibi-Oluwatoba et al, 2020;Kareem et al, 2022). Therefore, the asymmetric relation between monetary policy, and in particular interest rates and SME outputs remains an unanswered question for empirical investigations.…”

Does Small, and Medium Enterprises Aid Poverty Reduction in Nigeria? Robust Evidence From Alternative Poverty Indicators

“…For instance, amongst other studies includingAcho and Abuh (2018),Bello et al (2018) Eze and Okpala (2015),Gbam (2017),Ilegbinosa and Jumbo (2015),Omonigbo (2017),Opafunso and Adepoju (2014), considered the influence on economic growth. Some, such asAdebayo (2020), Kareem et al (2022,Ogundele et al (2022),Sangodapo (2020), and others, focused on the effect of SMEs on employment creation and/or poverty reduction.The studies utilised different approaches including survey design, self-developed questionnaire and qualitative analysis as well as different quantitative secondary data methods founded on extent estimation assumptions.Based on Survey and primary data collection evidence, includingSafiriyu and Njogo (2012),Muritala et al (2013),Opafunso and Adepoju (2014), and others, show the relationship between SMEs, poverty, and/or growth.Safiriyu and Njogo (2012) find that SMEs creates employment and improves sustainable development in Lagos.Muritala et al. (2013) show how SMEs predict Nigerian economic growth, and find that poor management, inadequate financial support, lack of training and experience, corruption, insufficient profits, shortage in product/service demands and poor infrastructure, were challenges experienced by the SMEs in the country Opafunso and Adepoju (2014).…”