Determinants of small and medium scale enterprises, poverty and economic growth A case study of Nigeria

Abstract

Small and Medium-sized Enterprises (SMEs) have been the subject of increasing attention by policymakers in national governments and international institutions in both developed and developing countries. This article focuses on the determinant of small and medium scale enterprises, poverty and economic growth in Nigeria. Secondary data were tested for unit root. Correlation analysis, Autoregressive Distributed Lag model were adopted to test for the objectives of this study.

Results of analyses indicated that the major significant determinants of the growth rate of SMEs in Nigeria were bank loan to SMEs at two previous years, government expenditure to SMEs at previous year and three years after for interest rate. The findings also indicated that bank loan to SME, government expenditure and interest rate were also the determinants of real gross domestic product growth (RGDPG) with respect to the years under study. Results of ARDL also showed that SMEs contribution to gross domestic growth, bank loan to SMEs and government expenditure were all significant and exerted dominant impact on poverty level. Furthermore, results revealed a unidirectional causality between economic growth and poverty, between SME growth and poverty, and between SME growth and economic growth.

The study therefore recommends the setting up of enterprise development agencies in every state of the federation to serve as coordinating unit that will help business enterprises as well as reduce unemployment, poverty and its attendant effect on economic growth.