Modeling the Impacts of MSMEs’ Contributions to GDP and their Constraints on Unemployment: The Case of African’s Most Populous Country

Abstract

Abstract The activities of micro small and medium-sized enterprises (MSMEs) are crucial to combating the menace of unemployment towards the actualization of the Sustainable Development Goals (SDGs) in African. However, financial constraints and infrastructural deficits are conspicuous issues among the numerous challenges confronting MSMEs’ activities in many developing nations. Hence, this study explores the challenges and the impacts of MSMEs’ contributions to GDP on the unemployment level in Nigeria as Africa’s most populous country. The empirical results from the study using annual time series data (1985-2018) reveal that a rise in MSMEs’ activities vis-à-vis their contributions to GDP in 5 major economic sectors (agriculture, trade, accommodation, manufacturing, and other services) alongside the financial support given to them, have significant impacts on stemming the level of unemployment in the Nigerian economy. Contrastively, the cost of accessing credit by MSMEs significantly exasperates unemployment while the impacts of the level of infrastructural investments by the government were found to be insignificant in reducing unemployment in the country over the reviewed period. In practical terms, the findings suggest that while ensuring adequate provision of financial support to MSMEs, cogent efforts should be concurrently geared toward the implementation of sufficient budgetary allocations for investment in critical infrastructures like electricity, transport, and ICT facilities to boost MSMEs’ activities to proactively address the unemployment menace in Nigeria.