HOW EFFECTIVE ARE THE ACTIVITIES OF SMALL AND MEDIUM SCALE ENTERPRISES (SMES) IN POVERTY ABATEMENT IN NIGERIA?

Abstract

This study investigated the effect of small and medium scale enterprises (SMEs) operations on poverty rate in Nigeria. The Dynamic Ordinary Least Squares (DOLS) approach was used for the empirical analysis over the period of 1995 to 2022. The DOLS result revealed that both credit to SMEs and economic growth as captured by RGDP have strong positive and significant impact on poverty alleviation since their coefficients were found to be negative and statistically significant in reducing poverty rate in Nigeria. The result also revealed that SMEs asset or wealth has a negative and significant impact on poverty rate as its coefficient was found to be positive. The result also shows that huge and idle capital acquisition by SMEs can have a significant negative impact on poverty level in Nigeria. Meaning it can increase poverty level if SMEs owners are only interested in using their credits or profit to increase their income, as well as their physical assets without recourse to increase in product line and expansion of intellectual capital. Consequently, the following recommendations among others were made: first, that Nigeria government and the monetary authority should implement more channels through which SMEs can assess credit at a minimal interest rate. Also there should be monitoring apparatus that will ensure that SMEs channel these minimal interest credits to the right business that will increase their ability to lift more people out of poverty. SMEs should on their own aspire for higher productivity rather than wanting to stack profit as idle capital in banks