Micro, Small and Medium Enterprises (MSMEs) financing, employment and national economic welfare in Nigeria

Abstract

This study examines the effect of Micro, Small and Medium Enterprises (MSMEs) financing on employment and national economic welfare in Nigeria from 1980 – 2020 using the Autoregressive Distributed Lag (ARDL) technique. MSMEs financing was measured by government loans to MSMEs, while employment was measured by unemployment. Empirical results show that the effect of MSMEs on unemployment was negative and insignificant in the long run and negative and significant in the short run. It was also found that government external debt and labour force participation had a positive and insignificant effect on unemployment in the long and short run. Real GDP growth (annual %) had a negative and significant effect on unemployment in the long and short runs. The findings also showed that MSMEs had a positive effect on economic welfare in the long and short-run but the long-run effect was insignificant, while the short run was significant. On the other hand, the effect of government external debt and labour force participation on economic welfare was found to be negative and insignificant in the long and short run. However, inflation hurt economic welfare in the long and short-run but the effect was significant in the long run and insignificant in the short run. The government should ensure that funds set aside for MSMEs development get to them. Also, training MSMEs periodically on entrepreneurship management is recommended. Laws can be made to guide against the underemployment of labour by the private sector and control the engagement of the labour force.