A Critical Analysis of Small and Medium Enterprise Financing and its Impact on Growth and Sustainable Development in Nigeria
Abstract
The study considers a critical analysis of small and medium enterprise finance and its impact on growth and sustainable development in Nigeria over the 1992-2025 with the data acquired on Real Gross Domestic Product (RGDP), Employment Generation (EGN), Bank Loans (BKL), Credit to SMEs (CSME), Lending Rate (LRT), Inflation Rate (INF) (Control Variable). The model used in the study was an autoregressive distributed lagged model (ARDL). The study also found out that in the short-term, the significant impact of BKL and CSME on sustainable development is positive, whereas the significant impact of LRT on sustainable development in Nigeria is negative, respectively. In the long run, BKL, CSME, and LRT have a significantly negative impact on sustainable development in Nigeria, but CSME has a negative and insignificant impact on sustainable development. However, BKL and CSME have a positive significance on sustainable development through growth development in Nigeria. It was found that financing of SMEs contributes greatly to sustainable development and economic growth. Thus, the paper suggests that central banks should lower the lending rates to single digit with the aim to generate employment, alleviate poverty and bring about economic stability and sustainability. The central bank of Nigeria (CBN) should collaborate with banks in Nigeria to give out loan to SMEs with the aim of generating employment in Nigeria and government should emphasize more on creating an enabling environment of doing business rather than aid and grants that will never reach the target audience.