Small and Medium Enterprises Development and Employment Generation in Nigeria

Abstract

This study examines small and medium enterprises development and employment generation in Nigeria using secondary time series data obtained from the Statistical Bulletin of Central Bank of Nigeria. In executing the study, the econometric regression techniques of the Ordinary Least Square (OLS) was applied after determining stationarity of our variables using the ADF Statistic, as well as the cointegration of variables using the Johansen approach and it was discovered that the variables are stationary and have a long term relationship among the variables in the model. From the result of the OLS, it is observed that gross domestic product, government expenditure and commercial banks credit to SMEs have a positive relationship with SMEs growth and development in Nigeria. On the other hand, unemployment and interest rate have a negative relationship with SMEs. Apart from government expenditure and unemployment rate which was not significant, gross domestic product, commercial banks credit to SMEs and interest rate significantly influence SMEs contribution to employment generation. The study therefore recommends that: The government should be definite about SMEs registration status. This will enable them qualify for government supervised scheme. Government should give grants to innovative SMEs in different areas of economic activities. The grants should be accessed at the local government levels so as to ensure accountability and consequently increase the number of people employed in the SMEs sector. Government should provide collateral, creating and supporting specific loans to SMEs through supervised credit schemes. This will help reduce high mortality rate of SMEs and boost employment.