Effect of Bank Credit on the Growth of Small Medium Enterprises in Nigeria

Abstract

Small and medium enterprises play pivotal roles in the economy by contributing toward job creation, Gross Domestic Product, and inclusive growth. However, access to finance remains the key challenge to small and medium enterprises performances. This study looks at nexus between bank credits and Small and medium enterprises growth in Nigeria with empirical findings. Secondary data were obtained from the Central Bank of Nigeria and Small and Medium Enterprises Development Agency of Nigeria. Ex post facto research design based on the annual time series for the data obtained from the Central Bank Statistical Bulletins 1999-2024 were employed. Data Analysis was basically centered on Ordinary Least Square regression and Granger Causality tests for a study on bank credit and small and medium enterprises growth. Regression result shows that bank credit positively and significantly affects small and medium enterprises growth while higher interest rates has negative effect on small and medium enterprises growth. The Granger Causality test disclosed that the bank credit is the one that granger causes small and medium enterprises growth and not vice-versa. These findings provide insights for the financial inclusion, small and medium enterprises for a financing, and sustainable economic growth with specific policy recommendations on the need for complete financial landscape to be set for small and medium enterprises finance in Nigeria.