Investigating the Effect of Small and Medium Enterprises (SMEs) Finance on Economic Growth in Nigeria

Abstract

The study examined the effect of SME finance on Economic growth in Nigeria using time series data spanning from 2000-2025 sourced from World Development indicator (WDI) and Central Bank of Nigeria (CBN) statistical bulletins. Given the stationarity of all variables at first differences I(1), the study employed ordinary least squares (OLS) regression model and Co-integration to examine the long term equilibrium among the variables.  OLS results revealed a positive relationship between SMEs finance and economic growth. However, there is a bidirectional relationship between independent variables and economic growth. The study concluded that SME finance has a significant positive effect on the economic growth. The study, therefore, recommended that considering the importance of SMEs to the economy, there should be a readjustment of government policies to encourage sustainable SMEs finance and capture all the SMEs into a formal sector for effective policy making.