The Relationship Between SME Funding and Economic Output in Nigeria

Abstract

Capital is a necessity in the take off and survival of an enterprise as ideas can only translate into robust products and services when the right mix of resources (Financial and Non-Financial) have been rightly deployed. The capacity of Small and Medium Enterprises (SMEs) to thrive especially in a nation like Nigeria is largely dependent on capital availability and as such this paper empirically examined the relationship between SMEs funding and economic output in Nigeria. Microfinance bank loan was used as a proxy for SMEs funding while gross domestic product was used to proxy economic output. The study utilized secondary data which was compiled from various annual reports of the Central Bank of Nigeria Statistical Bulletin. The unit root test results indicated that the variables were stationary at level. Consequently, the study utilized simple regression analysis for statistical examination. The result shows that microfinance bank loan has a positive and significant relationship with gross domestic product and as such the study recommends that the stringent requirements in securing loan facility from microfinance banks need to be relaxed through the right policy framework to strongly encourage entrepreneurs to prospect and be able to secure the funds needed for their business activities which eventually will spur profit, economic output and government generated revenue through taxation.

Keywords: Funding, Output, Growth, Entrepreneur, Microfinance.

DOI: 10.7176/JESD/16-3-01

Publication date: May 30th 2025