Small and Medium Enterprises and Economic Growth in Nigeria

Abstract

Small and Medium Enterprises (SMEs) form the very base upon which the big business organizations are built and they have proved to be a major tool adopted by the developed nations to attain socio-economic development. Most of the previous studies focused primarily on financial aspects such as bank credit, financing options, or investment levels when assessing the impact of SMEs on economic growth. This study investigates the roles of non-financial factors such as employment in service, export, or regulatory frameworks in shaping the relationship between SMEs and economic growth.
The study employed historical research design using secondary time series data on GDP annual growth rate and export (% GDP), employment in service (% of total employment), service value added (% GDP), et cetera,. Ordinary least square estimation technique was used. The data were subjected to pre-estimations and statistical evaluations.
Findings revealed that the short – run dynamic regression of the model indicates that in the short run, the coefficient of export in the current and lagged values are negatively signed and the lagged export variable is statistically significant. The coefficient for employment in service is positively signed in the current and negatively signed in their respected lagged year but not statistically significant, suggesting that they may not have a significant impact on economic growth. The coefficient for service value added current value is negatively related to gross domestic product, and is statistically significant. In the long run, the coefficient for export is positively related to Gross domestic product and very significant. The coefficient for employment in services is positively but not significant. The coefficient for service value added is negatively related to Gross domestic product but insignificant.
The study therefore concludes that SMEs are engine of economic growth. The study therefore recommends that government provide financial access to SMEs in order to increase domestic economic activities that will spur exports, so as to achieve increase in employment and spur further economic development