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

Abstract

Purpose: Nigeria is amongst countries dedicated to attaining the SDGs by 2030. The Nigerian government, through budgetary allocation, policies and programmes, has pursue interest to empower the SMEs with the aim to create employment and reduce poverty. The of the article is to demonstrate how the activities of the SMEs affect reduces unemployment in the country. Methods: The paper applies the ARDL method to examine whether SMEs’ have effect poverty reduction. The estimation shows how SME contribution to GDP, alongside other independent variables - industrial output to GDP, and interest rate - transmit to impact poverty index. Results and Conclusions: The findings show that SMEs have significant negative effects on the two indicators for poverty reduction. The increase in in the SMEs outputs lowers the percentage of the Nigerian poor surviving on less than $5.50 and less than $1.90 per day. The result further shows that the interest rate is positively signed, supposing, in the long run increase interest rate, increase the poverty level according to both measures. Implications: The study suggests that the government should adequately fund the SME to enable them play major roles as medium to ensure reduction in the poverty rates in Nigeria. Originality/Value: The study adds values to extant literature by considering two robust indicators of poverty - the poverty headcount ratio and the poverty incidence – in considering the effect of SMEs’ outputs.