Analysis of Small and Medium Scale Enterprises (SMEs) Financing and Economic Growth: Which Way for Nigeria

Abstract

Perfectly structured SMEs can contribute significantly to employment generation, wealth creation, poverty alleviation and sustainable economic growth and development.  SMEs lack of access to effective source of finance has been identified as one of the major quagmire hindering their contributions to economic growth. On this premise, this paper assesses specific financing options available to SMEs in Nigeria and contribution to economic growth. The paper uses secondary sources of data which were generated from the publications of Central Bank of Nigeria (CBN) statistical Bulletin and World Development Indicators (WDI). Ordinary Least Square (OLS) estimation technique is employed to determine the effect of SMEs financing on economic growth in Nigeria. The analysis of the results suggested that there is an insignificant direct relationship between SMEs financing and Economic growth in Nigeria, this can be adduced to policy inconsistencies in SMEs financing. The paper recommended that strenuous effort should be made by the government by easing access to SMEs finance via subsidized interest rate in order enhance economic growth and development.

Keywords: Small & Medium Scale Enterprises, Financing Options, Economic Growth and Nigeria