Impact of Infrastructure on Productivity of Small and Medium Enterprises in Nigeria

Abstract

The study investigates the link between infrastructure and productivity of small and medium enterprises (SMEs) in Nigeria Following the Engle and Granger two-step approach to cointegration and employing quarterly time series for the Nigerian economy over the period 1980 to 2017. We found long-run equilibrium relationship between infrastructure and small and medium enterprises output in Nigeria over the period investigated. Particularly, electricity infrastructure impacted most negatively and significantly on SMEs output with a unit change in electricity output causing SMEs output to drop by about 0.2units in the short run. The contribution of water resources and transport infrastructure have not been significant on SMEs productivity. The error correcting term indicates that about 7.33E-09 of the disequilibrium between selected infrastructure and SMEs output in the economy is being restored annually. The conclusion is that the output of SMEs in the country has been constrained by infrastructure gap and this has limited the growth capacity of the Nigerian economy. Policies that will ensure that the SMEs play their roles in the economy must be hatched. In addition, the government, in collaboration with relevant stakeholders may consider creating SMEs zones in every State of the country and provide needed infrastructure within the zone such that SMEs can enjoy economies of agglomeration.

Keywords: Infrastructure, SMEs, Economic growth, Employment, Wealth creation

JEL H54

DOI: 10.7176/RHSS/9-2-05