Inflation and Small and Medium-Scale Enterprises (SMES) Growth in Nigeria

Adegbemi Babatunde Onakoya, Titilope Idowu Oladejo and Kolawole Daud
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Adegbemi Babatunde Onakoya: Department of Economics, Babcock University, Ogun State, Nigeria
Titilope Idowu Oladejo: Department of Economics, Babcock Business University, Ogun State, Nigeria
Kolawole Daud: Department of Economics, Babcock Business University, Ogun State, Nigeria

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 3, 987-1000

Abstract: Small Medium Enterprises (SMEs) are important to the economy because they help achieve macroeconomic goals. This has led monetary authorities to adopt policies that foster SMEs’ development and success. This has made the study focus on Inflation and Small and Medium-Scale Enterprises (SMEs) Growth in Nigeria. The objectives of the study are to examine how inflation rates, interest rates and exchange rates have affected SMEs growth in Nigeria, secondary data that spanned from 2001 to 2022 used for the study analysis were sourced from Central Bank of Nigeria (CBN) and the Federal Office of Statistics (FOS). The variables’ stationarity was tested using unit root tests to test the time series data. Cointegration, Ordinary Least Square (OLS) and Error Correction Model (ECM) were used for analysis. Many diagnostic tests were performed on the study residuals. The interest rate positively and statistically significantly affects Nigerian SMEs’ funding. In contrast, inflation has a negative impact on Nigerian SMEs’ funding. The exchange rate had no effect on SMEs funding, according to the research. The study recommended that the monetary authorities should implement policies to reduce inflation and prioritize SMEs growth in Nigeria by establishing dedicated channels via different financial institutions to provide them with low-interest loans. This will boost their growth and help reduce inflation.

Date: 2024
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