Abstract

This paper empirically examines Small and Medium Scale Enterprises and Nigeria’s economic growth from 1970-2012. The benefits of SMEs to any economy are easily noticeable. These includes: creation of jobs, provide a vehicle for reducing income disparities, increase the output of goods and services produced in the economy etc. The main objective of this paper is to examine the impact of SMEs on economic growth in Nigeria. In order to achieve this objective, the study polled 84 SMEs for primary data collection as well as statistical records for years 1975-2012 as secondary data. The ordinary least square, co-integration and error correction model was used to estimate the data collected during the period of this study. The variables used include Gross Domestic Product as the dependent variable and Finance Available to Small and Medium Enterprises, Interest rate and Inflation rate as the independent variables. Our result showed that Finance Available to SMEs showed a positive relationship with economic growth while Interest rate and Inflation rate showed a negative and positive influence on economic growth respectively. Thus, we concluded that the independent variables play an important role in determining the impact of Small and Medium Scale Enterprises on economic growth in Nigeria. Based on this, it was recommended that the Nigerian Government should organize a national enterprise forum, which would focus on the contributions of SMEs in national development objectives; the Federal/State Ministries of Industry in collaboration with the National Association of SMEs should work out strategies for an annual report of SMEs operating in Nigeria and the Government should adopt policy measures to maintain a favorably low commercial banking lending rate as this will accelerate high investment in Small, Medium and large-scale businesses and subsequently in the long-run contribute significantly to economic growth.

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