Impact of Banking Sector Credit on the Growth of Small and Medium Enterprises (SME’s) in Nigeria

Abstract

This study examines the impact of banking sector credit on the growth of small and medium enterprises in Nigeria. The main objective of the study is to investigate whether banking sector credit has significant impact on the growth of small and medium enterprises in Nigeria. As part of the methodology, annual data between 1985 and 2010 was collected and used in the study while descriptive statistics, correlation matrix and error correction model was used to test the formulated hypotheses which reveals that banking sector credit has significant impact on the growth of small and medium enterprises in Nigeria as it has positive impact on some major macro-economic variables of growth such as inflation, exchange rate, trade debts etc. The study however, recommends that financial lending institutions (Monetary Authorities) should relax the stringent conditions associated with credit facility in the funding of SMEs in the country so as to encourage easy accessibility of loans which will help in improving SME’s financing and performance.

Keywords: Banking Sector Credit, SME Financing, Growth, Small and Medium Scale Enterprises, Nigeria