Abstract
This study examines the impact of banks loan to SMEs on manufacturing output in Nigeria for the period spanning 1992 to 2010. The study employed an error correction modeling technique and observed that banks loan to the SME sector had insignificant impact on manufacturing output both in the long and short run. Based on the findings, the study recommended the need for greater deliberation and conscious effort by the government in ensuring that loans are given to ultimate users. There is also the need for moderation of collaterals and interest rate attached to banks loan to SMEs, to make it more attractive to stakeholders in the SMEs sector.
Highlights
In recent years, the contributions of the Small and Medium Enterprise (SME) sector to output growth and employment generation in United States and some Asian countries has renewed the focus of economic planners and policymakers in Nigeria on the importance of the small and medium enterprises (SMEs) sector in aiding industrial growth and reducing the level of unemployment rate in the country
Unit Root Test: The Augmented Dickey-Fuller (ADF) test on the left hand of the table 1 revealed that the variables; manufacturing output, gross capital formation, loan of SME sector and interest rate are integrated of order one while labor force is integrated of order two that is the variable is an I(2) series
The small and medium scale sector has been responsible for aiding growth and employment generation in countries like the United States and some Asian and emerging countries of the world
Summary
The contributions of the Small and Medium Enterprise (SME) sector to output growth and employment generation in United States and some Asian countries has renewed the focus of economic planners and policymakers in Nigeria on the importance of the SME sector in aiding industrial growth and reducing the level of unemployment rate in the country. This has led to the initiation of programs capable of enhancing the performance of the SMEs sector in Nigeria. Section four presents the analysis of empirical results while section five discussed summary and policy recommendations
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