Financing Small and Medium Scale Enterprises (SMEs), Human Capital Formation and Economic Growth in Nigeria

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O. Odili


This study examines the impact of commercial banks’ credit to small and medium scale enterprises and human capital formation on economic growth in Nigeria using time series data from 1981 to 2013. An augmented growth model was estimated via the Ordinary Least Square (OLS) techniques. The variables were tested for stationarity and co-integration analysis was carried out using the Augmented Dickey-Fuller estimation procedure. The study reveals that government expenditure on education has positive and significant effect on gross domestic product, while government expenditure on health had positive but insignificant effect on GDP. Similarly, commercial banks’ credit to the SMEs sector and gross national savings yielded positive but statistically insignificant effect on economic growth in Nigeria. Finally, Lending interest rate and the domestic inflation in Nigeria have inverse and significant effect on growth of the domestic economy. The study recommends capacity building for SMEs personnel to ensure proper business management and record keeping. Furthermore, there is need to encourage entrepreneurship by promoting investment in the domestic economy and by diversifying the economy to manufacturing, production and agricultural sectors.

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