Deposit Money Banks Loans to Small Medium Enterprises and the Nigerian Economy: An Empirical Analysis
Abstract The study empirically investigated the effects of deposit money banks loans to small medium enterprises on the Nigerian economy for the period 1989-2019. Data were collected from secondary sources through the CBN statistical bulletin 2019 and analyzed using Vector Autoregression (VAR), OLS regression, Wald test. In the model, GDP was used as the proxy for the economy which is the dependent variable while loan to small medium enterprises, loan to private sector, loan to small medium enterprises as a percentage of loan to private sector are the independent variables. The empirical results showed that short- run relationship exist between the economic variables and the Nigerian economy. The VAR test revealed that loan to private sector has positive relationship with GDP and can significantly explain GDP. Loan to small medium enterprises has positive relationship with GDP but not significant while loan to small medium enterprises as a percentage of total credit to private sector have negative relationship with GDP and it is not significant enough to explain GDP. The link between bank loans to small medium enterprises and the economy is positive and can be improved upon through sound policies and developments of small medium enterprises. In particular, deposit money banks should make more funds available for the development of small medium enterprises in Nigeria and not only to large Corporations. Regulatory authorities should introduce strict measures against any bank that failed or refused to follow the guidelines for the financing of small medium enterprises. Keywords: Deposit money banks, small…