Monetary Policy And The Growth Of Small And Medium-Sized Enterprises (SMEs) In Nigeria:1986-2021

Abstract

This study looked at how monetary policies affected the expansion of SMEs in Nigeria between 1986 and 2021. The data were taken from the World Bank's development indicators and the CBN statistical bulletin, and an ex post facto research design was utilized. The Augmented Dickey Fuller (ADF) unit root test was used for pre-estimation tests on each variable to help prevent erroneous regression effects, while the ARDL error correction model method was used for empirical analysis. The analysis revealed that the level of output for SMEs in Nigeria has not been significantly impacted by lending rates for SME loans. Furthermore, the data revealed that, between 1986 and 2021, currency rates had no discernible impact on the productivity of SMEs. It demonstrated how frequently fluctuating exchange rates have an adverse effect on SMEs. However, it was found that between 1986 and 2021, the level of output for SMEs in Nigeria was significantly impacted by SMEs' loans and advances. Finally, the study found that between 1986 and 2021, Nigeria's SMEs' output levels were significantly impacted by an increase in the money supply. It demonstrates how an expansionary monetary policy, which raises the amount of money in circulation, makes loans and advances from deposit money institutions more readily available for the expansion of SMEs. According to the report, the government must implement beneficial economic changes that will improve the performance of SMEs throughout the nation in order to influence the foreign exchange rate. The adoption of policy measures by the monetary authorities to maintain a favourable low commercial bank lending rate (which will lower the cost of capital) is crucial; doing so will encourage investors in SMEs by accelerating high business investment in small, medium, and even large-scale businesses, which will ultimately have a significant long-term impact on economic growth.