Banking System Credit to Small and Medium Scale Enterprises (SMEs) and Economic Growth in Nigeria: A Co-integration Approach

This study examined the impact of banking system credit to small and medium scale enterprises (SMEs) and economic growth in Nigeria using annual data covering 1981 to 2013 periods. The study employed ordinary least square (OLS) and co-integration econometric method with the use of sequential modified LR test statistic as lag length selection criteria to conduct its tests and analysis. The results revealed that the banking system credit to SMEs though gradually increased yearly as a result of increase in population and hence economic activities, the credit to SMEs as a percentage of total credit to the private sector declined yearly. Banking system credit to SMEs was not significant and thus did not contribute meaningfully to economic growth in Nigeria. Total credit to the private sector was statistically significant and positive at 5% level of significance. While lending rate has negative and significant impact on economic growth in Nigeria. The need for the government to intervene in a more meaningful way through articulated policies and programmes that will promote funding of SMEs and reduce the level of lending interest rate have been recommended. This will