Nexus between Loanable Funds and Performance of Small and Medium Scale Enterprises in Nigeria: Empirical Evidence

International Journal of Research and Scientific Innovation (IJRSI) | Volume VII, Issue III, March 2020 | ISSN 2321–2705

Nexus between Loanable Funds and Performance of Small and Medium Scale Enterprises in Nigeria: Empirical Evidence

Gbalam Peter Eze (Ph.D), Tonye Richard Apiri
Banking & Finance Department, Faculty of Management Sciences, Niger Delta University Wilberforce Island, Bayelsa State, Nigeria

Abstract: – Industrial and economic developments are flourished by small and medium scale enterprises (SMEs) in a country through efficient utilization of local resources, production of intermediate goods and services and transformation of rural technology. This study empirically examined Nigerian context of loanable funds impact on performance of small and medium scale enterprises (SMEs)within a study range of 2001-2018. The study employed time series data sourced from Central Bank of Nigeria (CBN) annual statistical bulletin, 2018. The error correction mechanism (ECM) was used to analyze data set after determining their individual stationarity with the presence of long-run cointegrating relationship among variables employed in the study. The study found that, credit to the private sector and interest rate ceiling have both linear and non-linear significant impact on the performance of small and medium scale enterprises (SMEs) in Nigeria. Therefore, the study recommends: Government and financial institutions in Nigeria to continue to encourageand create a centralized entity within their operations as a strategy of governance to offer short and medium term loans to small and medium scale enterprises either monthly, quarterly or annually as to enable them consistently stay afloat in their business operations.

Keywords: Loanable funds, small and medium scale enterprises, performance, firms.

I. INTRODUCTION

Nigeria is a blessed and prosperous country with enormous human and natural resources of which many are still yet to be tapped. With all these blessed human and natural resources, Nigeria is yet to be developed. Nigeria has gone through political instability that has resulted in a climate of social tension and the unpredictable market for businesses since her independent from British rule in 1960. The powerful and violent takeover of government by the military through coup and the indigenization policy of the late 1970’s has make investors or individual with excellent high business potentials to feel reluctant to invest in any kind of business despite its hitherto significant growing market.Although perceived corruption, inadequate infrastructural facilities, policy instability, and lack of accountability of public funds gives set back on the market(Ariyo, 2005).This fact materialized World Bank description of Nigeria as a paradox (World Bank, 1996).

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