Determinants of the Development of Small and Medium Scale Enterprises in Nigeria

Abstract

The pivotal roles played by Small and medium scale enterprises (SMEs) in transforming the economies of the developed countries had long been established in the literature. It is disheartening however to observe that the contributions of SMEs to GDP in Nigeria in the last three decades has been quite insignificant and haphazard. Therefore, this paper examines the various factors that determine the growth of small and medium scale enterprises (SMEs) in Nigeria during 1980-2013. The study utilizes the Ordinary Least Square method within the framework of the multiple regression model. The results emanating from the analysis suggest that credit facilities, interest rate as well as inflation rate are key determinants of the growth and survival of SMEs in Nigeria. Thus, the government, through the Central Bank of Nigeria (CBN), should relax the restrictive regulations and operations which discourage borrowings as well as promote intervention programmes through which adequate funds will be easily accessible to prospective investors.

Keywords: Economic growth, Inflation rate, Interest rate, Small and Medium Scale Enterprises

JEL Classification: O40, E31, E40, L60.