ECONOMIC DIVERSIFICATION: HARNESSING THE IMPACT OF SMALL AND MEDIUM ENTERPRISES ON ECONOMIC GROWTH IN NIGERIA

Abstract

The study examines the contribution of Small Medium Enterprises (SMEs) on the Economic diversification of Nigeria, using data between 1983 and 2023. The study employed Autoregressive Distributed Lag (ARDL) model, Co-integration to establish the short and long-run relationship between the role of Small Medium Enterprises on Economic Diversification of Nigeria. Stationarity test carried out using Augmented Dickey Fuller (ADF) revealed that all the variables were stationary at first difference 1(1), implying that the variables contains unit root and statistically significant at both 1% and 5% level of significance. The results of the study revealed that explanatory variables (inflation rate, small medium enterprises output, Deposit Money bank loan, and interest rate) were found to be positively sign and have significant relationship on the economic diversification of Nigeria both in short and long run.  Deposit Money Bank loans and Small and Medium enterprises output significantly influence the role of small medium Scale enterprises on the diversification of the Nigeria economy with a P-value 0.0708<.0.05 and 0.0023<0.05 level of significance respectively. The study recommended that there is the need for government to make credit available towards financing of the Small Medium Enterprises (SMEs). Government should formulate and implement policies, such as reduction in tax rate/provision of incentives that would help to facilitate the growth of Small Medium Enterprises (SMEs) in Nigeria.