The Real Impact of Financial Intervention on Enterprise Development in Nigeria

Abstract

This paper investigates the real impact of financial interventions on enterprise development in two of Nigeria’s states. These states were chosen because of the huge presence of development agencies attempting to grow enterprises, and their importance in the Nation’s economy. The following time series data of critical importance to the success of enterprise development programme were collected: enterprises created, employment generated, taxes receivable by governments, and shareholders wealth. The key independent variable, financial intervention was disintegrated into private equity fund, debt fund and grants. Four multiple regression models were specified, representing each of the four dependent variables identified. The first, enterprises created, established the outreach impact of financial intervention on enterprise development. The other three (employment, taxes and shareholders wealth), corroborated enterprise creation, established deepening effect, and demonstrated the intervention’s capacity to sustain these enterprises and add economic value to stakeholders. Multiple coefficient of determination (R²) and F-test were the principal inferential analyses conducted. The ordinary least square method was employed with an assumption that over the fifteen years period (1999-2013) the data were stationary. It was found that in all four cases, financial intervention significantly contributed to enterprise development. However, the EC recorded the least R²value (0.45) whereas others were above 0.75. The collinearity diagnostics showed that correlation among independent variables was quite minimal in all cases.  Accordingly, it was concluded that financial intervention has the capacity to grow enterprises and deepen quality of such enterprises.  Finally, it was noted that further work is needed to clearly and convincingly characterize the effectiveness of different sources of funds, and to establish any departure in the known behavior of sources of funds from mainstream capital market.

Key words: Enterprise development, financial intervention,