COMMERCIAL BANK CREDIT TO MICRO, SMALL, AND MEDIUM ENTERPRISES (MSMES) AND ECONOMIC GROWTH IN NIGERIA

Abstract

The study assessed commercial bank credit to Micro, Small, and Medium Enterprises (MSMEs) and economic growth in Nigeria. Particularly, it empirically assessed the causal relationship between commercial bank credit to this category of entrepreneurs and economic growth in the country spanning the period of 1992 to 2020. To do this, the study used the Toda-Yamamoto (T-Y) procedure. Using gross national product as proxy for economic growth and total commercial bank credit to MSMEs, findings from the T-Y estimation revealed that there was no causal relationship between commercial bank credit to MSMEs and economic growth in Nigeria for the period under analysis. It concludes that commercial bank credit to these entrepreneurs was inadequate to spur growth. To reverse this, the study recommends that commercial banks should extend more funds to MSMEs, while also providing them with long-term and sound credit risk management and business development services to boost their growth enhancing effects on the economy.