Financing Small and Medium Scale Enterprises (SMEs), Human Capital Formation and Economic Growth in Nigeria
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Abstract
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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References
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Adegoke, Y. (2009), Role of Education in Alleviating Poverty in Africa. The Nigerian Experience, Journal of Economics and Social Studies Volume 6, Pp 19-31.
Ahiawodze, A. K. and Adade, T. C. (2012), Access to Credit and Growth of Small and Medium Scale Enterprises in the Ho Municipality of Ghana, British Journal of Economics, Finance and Management Sciences, Vol. 6 (2), 34 – 51.
Akingunola, R. O. (2011), Small and Medium Scale Enterprises and Economic Growth in Nigeria. An Assessment of Financing Option, Pakistan Journal of Business and Economic Review, 2 (1)
Aremu, M. A. and Adeyemi, S. L. (2011), Small and Medium Scale Enterprises as a Survival Strategy for Employment Generation in Nigeria, Journal of Sustainable Development 4 (1): 200 – 206.
Awe, A.A, and Ajayi, S.O. (2010), The Nexus between Human Capital Investment and Economics Growth in Nigeria, Pakistan Journal of Social Sciences, Volume 7, 1-7.
Awopegba, P. O. (2002), Human Resources, High Level Manpower and the Development of the Nigerian Economy, Nigerian Journal of Economic Research, vol. 1, 87-96.
Azende, T. (2012), Risk Management and Insurance of Small and Medium Scale Enterprises (SMEs in Nigeria). International Journal of Finance and Accounting, 1 (1), 8-17.
Beck, T. and Levine, R. (2004), Stock Markets, Banks and Growth: Panel Evidence, Journal of Banking and Finance, 28.
Berger, A. N., Klapper, L. F. and Udell, G. F. (2001), The Ability of Banks to Lend to Informationally Opaque Small Businesses, Journal of Banking and Finance, 25, 2127- 2167.
Berger, A. N. and Udell, G. F. (2004), A More Complete Conceptual Framework for SME Finance. World Bank Conference on Small and Medium Enterprises: Overcoming Growth Constraints World Bank, MC 13-121 October 14-15.
Bolbol, A., Fatheldin, A. and Omran, M. (2005), Financial Development, Structure and Economic Growth, The Case of Egypt, 1974–2002, Research International Business and Finance 19, 171– 194.
Caporale, G. M. et. al. (2004), Stock Market Development and Economic Growth, The “Causal Linkage”. Cointegration-with Applications to the Demand for Money,’ Oxford Bulletin of Economics and Statistics, Vol. 29, No.1, 169-210.
Chidi, C. and Shadare, O. (2011), Managing Human Capital Development in Small and Medium sized Enterprises for Sustainable National Development in Nigeria, International Journal of Management and Information Systems, 15 (2) 95-104.
Dagogo, D. W. and Ollor, W. G. (2009),The Effect of Venture Capital Financing on the Economic Value Added Profile of Nigerian SMEs. African Journal of Accounting, Economics, Finance and Banking Research Vol. 5, No. 5. 37- 51.
Domar, E. D. (1946), Capital Expansion, Rate of Growth, and mployment, Econometrica, Vol.14 (2), 137 – 147.
Emeni, F. and Okafor, C. (2008), Effect of bank mergers and acquisitions on small business lending in Nigeria, Journal of Business Management, Vol. 1 (9), 146 – 156.
Gujarati, D. N. (2003), Basic Econometrics. 4th Edition Delhi: Tata McGraw-Hill, 747-840.
Harrod, R. F. (1960), The Theory of Economic Growth, The Economic Journal, Vol. 70, (278), 277-293.
Hoover, K. D. and Mauro, B. (2009), The Neo-classical Growth Model and 20th Century Economies, Economic Journal, 39, 137 - 75.
Khan, A. (2000), The Finance and Growth Nexus. FRBP Business Review, January/February, 3-14. Available at SSRN: http://ssrn.com/abstract.
Klein, N. (2014), Small and Medium Size Enterprises, Credit Supply Shocks, and Economic Recovery in Europe,’ International Monetary Fund WP/14/98.
Kolawole, S. (2013), Role of Microfinance in Nigeria Economy, Available at www.preshstore.com
Levine, R. and Zervos, S. (1996), Stock Market Development and Long-run Growth, American Economic Review. 88(3), 537-558.
Levine, R. and Zervos, S. (1998), Stock Markets, Banks and Economic Growth, American Economic Review, 88.
Lucas, R. E. J. (1990), On the mechanics of economic development, Journal of Monetary Economics, 22, 3-42.
Mambula, C. (2003), Perceptions of SMEs growth constraints in Nigeria, Journal of Small Business Management, Vol. 40 (1), pp. 58-65.
Mankiw, G. N., Romer, D. and Weil, D.N. (1992), A contribution to the empirics of growth, Quarterly Journal of Economics, Vol. 107: 407–37.
McKinnon, R. I. (1973), Money and Capital in Economic Development, Washington D.C. Brookings Institute, 80.
Meir, D. (1995), The Power of Their Ideas. Boston Beacon Press Ltd. New York.
Nnanna, O. J. (2002), Monetary and Finance Sector Policy Measures in the 2003 Budget, NCEMA Policy Analysis Series.
Nwosa, P. I. and Oseni, I. O. (2013), ‘The Impact of Banks Loan to SMEs on Manufacturing Output in Nigeria, Journal of Social and Development Sciences Vol. 4, No. 5, pp. 212-217.
Obasan, K. A. and Arikewuyo, K. A. (2012), The Effect of Pre- Post Bank Consolidation on the Accessibility of Finance to SMEs in Nigeria, Journal of Business and Management Research, Vol. (1), No. 3, 108 -120.
Odili, O. and Ighedosa, E. I. (2015), Trends in Commercial Banks Credit to Small and Medium Scale Enterprises (SMEs), Current Financing Difficulties and Implications for the Nigerian Economy, International Journal of Management Sciences, Vol. 4, No. 7, 298-311.
OECD, (2004), Promoting SMEs for Development, paper presented at the 2nd OECD Conference of Ministers Responsible for Small and Medium-Sized Enterprises (SMEs), “Promoting Entrepreneurship and Innovative SMEs in a Global Economy: Towards a More Responsible and Inclusive Globalization,” Istanbul, Turkey, 3-5 June.
Okpe, I. J. and Abu, G. A. (2009), Foreign Private Investment and Poverty Reduction in Nigeria.
Journal of Social Sciences, vol. 19, 205-211.
Okojie, C.E. (1995), Human Capital Formation for Productivity Growth in Nigeria. The Nigerian
Economic and Financial Review, Vol. 1, 44-62.
Olaniyan, O. and Bankole, A. (2005), Development of Child Schooling Among Poor and Non- Poor Families in Nigeria; Paper Presented at the African Econometric Society’s Annual Conference held in University of Cape Town, South Africa, June 30 – July 3.
Popkova, E. G., Shakhovskaya, L. S. and Mitrakhovich, T. N. (2008), ‘New Quality of Economic Growth Concept’; International Journal of Economic Policy Studies; Pp 01-10.
Ranjani, K.S. (2012), Regulating Microfinance Institutions in India: A Conceptual Framework, Synergy, 10 (1).
Romer, P. (1986), Increasing Returns and Long Term Growth, Journal of Political Economy, 94: 1002-38.
Schumpeter, J. A. (1934), The Theory of Economic Development. Cambridge, Mass, Havard University Press.
Shaw, E. S. (1973), Financial Deepening in Economic Development. Oxford University Press, New York.
Simon-Oke, O. and Olayemi, S. O. (2014), Foreign Private Investment, Capital Formation and Poverty Reduction in Nigeria, European Journal of Business and Social Sciences, Vol.2, No.10, pp 157-168.
Solow, R. M. (1956), A Contribution to the Theory of Economic Growth, Quarterly J. Econ., Vol. 70, pp. 65-94.
Tushabomwe-Kazooba, C. (2006), Causes of Small Business Failure in Uganda: A Case Study from Bushenyi and Mbarana Towns. African Studies Quarterly, vol. 8, No. 4.
United Nations Economic Commission for Africa (1988), Human Development Report, Oxford University Press, New York.
Uremadu,S. O., Ogechi, I. A., Odili, O. (2014), Banking System Credit to Small and Medium Scale Enterprises (SMEs) and Economic Growth in Nigeria, A Co-integration Approach’ IOSR Journal of Economics and Finance (IOSR-JEF) Volume 5, Issue 6., PP 41-51
Yusuf, T. O. and Dansu, F. S. (2013), SMEs Business Risks and Sustainability in Nigeria. European Journal of Business and Social Sciences, vol.2, no. 9, 76-94.
Adamu A. (2002), Human Capital and Capabilities, as cited by Awe A.A and Ajayi S.O in “The Nexus between Human Capital Investment and Economic Growth in Nigeria”, Pakistan Journal of Social Science, Volume 7, Pp 1-7.
Adegoke, Y. (2009), Role of Education in Alleviating Poverty in Africa. The Nigerian Experience, Journal of Economics and Social Studies Volume 6, Pp 19-31.
Ahiawodze, A. K. and Adade, T. C. (2012), Access to Credit and Growth of Small and Medium Scale Enterprises in the Ho Municipality of Ghana, British Journal of Economics, Finance and Management Sciences, Vol. 6 (2), 34 – 51.
Akingunola, R. O. (2011), Small and Medium Scale Enterprises and Economic Growth in Nigeria. An Assessment of Financing Option, Pakistan Journal of Business and Economic Review, 2 (1)
Aremu, M. A. and Adeyemi, S. L. (2011), Small and Medium Scale Enterprises as a Survival Strategy for Employment Generation in Nigeria, Journal of Sustainable Development 4 (1): 200 – 206.
Awe, A.A, and Ajayi, S.O. (2010), The Nexus between Human Capital Investment and Economics Growth in Nigeria, Pakistan Journal of Social Sciences, Volume 7, 1-7.
Awopegba, P. O. (2002), Human Resources, High Level Manpower and the Development of the Nigerian Economy, Nigerian Journal of Economic Research, vol. 1, 87-96.
Azende, T. (2012), Risk Management and Insurance of Small and Medium Scale Enterprises (SMEs in Nigeria). International Journal of Finance and Accounting, 1 (1), 8-17.
Beck, T. and Levine, R. (2004), Stock Markets, Banks and Growth: Panel Evidence, Journal of Banking and Finance, 28.
Berger, A. N., Klapper, L. F. and Udell, G. F. (2001), The Ability of Banks to Lend to Informationally Opaque Small Businesses, Journal of Banking and Finance, 25, 2127- 2167.
Berger, A. N. and Udell, G. F. (2004), A More Complete Conceptual Framework for SME Finance. World Bank Conference on Small and Medium Enterprises: Overcoming Growth Constraints World Bank, MC 13-121 October 14-15.
Bolbol, A., Fatheldin, A. and Omran, M. (2005), Financial Development, Structure and Economic Growth, The Case of Egypt, 1974–2002, Research International Business and Finance 19, 171– 194.
Caporale, G. M. et. al. (2004), Stock Market Development and Economic Growth, The “Causal Linkage”. Cointegration-with Applications to the Demand for Money,’ Oxford Bulletin of Economics and Statistics, Vol. 29, No.1, 169-210.
Chidi, C. and Shadare, O. (2011), Managing Human Capital Development in Small and Medium sized Enterprises for Sustainable National Development in Nigeria, International Journal of Management and Information Systems, 15 (2) 95-104.
Dagogo, D. W. and Ollor, W. G. (2009),The Effect of Venture Capital Financing on the Economic Value Added Profile of Nigerian SMEs. African Journal of Accounting, Economics, Finance and Banking Research Vol. 5, No. 5. 37- 51.
Domar, E. D. (1946), Capital Expansion, Rate of Growth, and mployment, Econometrica, Vol.14 (2), 137 – 147.
Emeni, F. and Okafor, C. (2008), Effect of bank mergers and acquisitions on small business lending in Nigeria, Journal of Business Management, Vol. 1 (9), 146 – 156.
Gujarati, D. N. (2003), Basic Econometrics. 4th Edition Delhi: Tata McGraw-Hill, 747-840.
Harrod, R. F. (1960), The Theory of Economic Growth, The Economic Journal, Vol. 70, (278), 277-293.
Hoover, K. D. and Mauro, B. (2009), The Neo-classical Growth Model and 20th Century Economies, Economic Journal, 39, 137 - 75.
Khan, A. (2000), The Finance and Growth Nexus. FRBP Business Review, January/February, 3-14. Available at SSRN: http://ssrn.com/abstract.
Klein, N. (2014), Small and Medium Size Enterprises, Credit Supply Shocks, and Economic Recovery in Europe,’ International Monetary Fund WP/14/98.
Kolawole, S. (2013), Role of Microfinance in Nigeria Economy, Available at www.preshstore.com
Levine, R. and Zervos, S. (1996), Stock Market Development and Long-run Growth, American Economic Review. 88(3), 537-558.
Levine, R. and Zervos, S. (1998), Stock Markets, Banks and Economic Growth, American Economic Review, 88.
Lucas, R. E. J. (1990), On the mechanics of economic development, Journal of Monetary Economics, 22, 3-42.
Mambula, C. (2003), Perceptions of SMEs growth constraints in Nigeria, Journal of Small Business Management, Vol. 40 (1), pp. 58-65.
Mankiw, G. N., Romer, D. and Weil, D.N. (1992), A contribution to the empirics of growth, Quarterly Journal of Economics, Vol. 107: 407–37.
McKinnon, R. I. (1973), Money and Capital in Economic Development, Washington D.C. Brookings Institute, 80.
Meir, D. (1995), The Power of Their Ideas. Boston Beacon Press Ltd. New York.
Nnanna, O. J. (2002), Monetary and Finance Sector Policy Measures in the 2003 Budget, NCEMA Policy Analysis Series.
Nwosa, P. I. and Oseni, I. O. (2013), ‘The Impact of Banks Loan to SMEs on Manufacturing Output in Nigeria, Journal of Social and Development Sciences Vol. 4, No. 5, pp. 212-217.
Obasan, K. A. and Arikewuyo, K. A. (2012), The Effect of Pre- Post Bank Consolidation on the Accessibility of Finance to SMEs in Nigeria, Journal of Business and Management Research, Vol. (1), No. 3, 108 -120.
Odili, O. and Ighedosa, E. I. (2015), Trends in Commercial Banks Credit to Small and Medium Scale Enterprises (SMEs), Current Financing Difficulties and Implications for the Nigerian Economy, International Journal of Management Sciences, Vol. 4, No. 7, 298-311.
OECD, (2004), Promoting SMEs for Development, paper presented at the 2nd OECD Conference of Ministers Responsible for Small and Medium-Sized Enterprises (SMEs), “Promoting Entrepreneurship and Innovative SMEs in a Global Economy: Towards a More Responsible and Inclusive Globalization,” Istanbul, Turkey, 3-5 June.
Okpe, I. J. and Abu, G. A. (2009), Foreign Private Investment and Poverty Reduction in Nigeria.
Journal of Social Sciences, vol. 19, 205-211.
Okojie, C.E. (1995), Human Capital Formation for Productivity Growth in Nigeria. The Nigerian
Economic and Financial Review, Vol. 1, 44-62.
Olaniyan, O. and Bankole, A. (2005), Development of Child Schooling Among Poor and Non- Poor Families in Nigeria; Paper Presented at the African Econometric Society’s Annual Conference held in University of Cape Town, South Africa, June 30 – July 3.
Popkova, E. G., Shakhovskaya, L. S. and Mitrakhovich, T. N. (2008), ‘New Quality of Economic Growth Concept’; International Journal of Economic Policy Studies; Pp 01-10.
Ranjani, K.S. (2012), Regulating Microfinance Institutions in India: A Conceptual Framework, Synergy, 10 (1).
Romer, P. (1986), Increasing Returns and Long Term Growth, Journal of Political Economy, 94: 1002-38.
Schumpeter, J. A. (1934), The Theory of Economic Development. Cambridge, Mass, Havard University Press.
Shaw, E. S. (1973), Financial Deepening in Economic Development. Oxford University Press, New York.
Simon-Oke, O. and Olayemi, S. O. (2014), Foreign Private Investment, Capital Formation and Poverty Reduction in Nigeria, European Journal of Business and Social Sciences, Vol.2, No.10, pp 157-168.
Solow, R. M. (1956), A Contribution to the Theory of Economic Growth, Quarterly J. Econ., Vol. 70, pp. 65-94.
Tushabomwe-Kazooba, C. (2006), Causes of Small Business Failure in Uganda: A Case Study from Bushenyi and Mbarana Towns. African Studies Quarterly, vol. 8, No. 4.
United Nations Economic Commission for Africa (1988), Human Development Report, Oxford University Press, New York.
Uremadu,S. O., Ogechi, I. A., Odili, O. (2014), Banking System Credit to Small and Medium Scale Enterprises (SMEs) and Economic Growth in Nigeria, A Co-integration Approach’ IOSR Journal of Economics and Finance (IOSR-JEF) Volume 5, Issue 6., PP 41-51
Yusuf, T. O. and Dansu, F. S. (2013), SMEs Business Risks and Sustainability in Nigeria. European Journal of Business and Social Sciences, vol.2, no. 9, 76-94.