Government Expenditure, Growth of Micro, Small and Medium Scale Enterprises in Nigeria: A Step Towards Inclusive Development

Abstract

Today, many countries strive to develop their small and medium scale enterprises (SMEs) sectors because of their acknowledged capacity to facilitate the optimal utilization of locally available resources while engaging local technology for the production of goods and services for local consumption as well as export trade. Also in area of agriculture, these enterprises serve as means of sustainable food production, improve employment generation, combat food shortage, and enhance economic growth and development. However, the growth performance of this sector in Nigeria has been dwindling over time, which requires government expenditure (GE) policy intervention. Therefore, this study examines the influence of public expenditure on the growth of SMEs in Nigeria employing unit root and co-integration tests for the period 1981–2019. The results reveal that SMEs and selected macroeconomic variables have a long-run relationship with SMEs output performance. It also shows that GE has direct and significant impact on the growth of SMEs in Nigeria, while government deficit financing (GDF) has adverse and insignificant effects on the Nigeria SMEs both in the short- and long-run period. Inflation rate (INF) has an inverse but significant effect on the growth of SMEs in Nigeria both in the short- and long-run periods. This study thus recommends, among others, that government should ensure the proper management of capital expenditure and recurrent expenditure in raising the growth of SMEs in Nigeria to achieve inclusive growth.

Citation

Cletus, A.K., Samson, O. and Onuwa, O.J. (2023), "Government Expenditure, Growth of Micro, Small and Medium Scale Enterprises in Nigeria: A Step Towards Inclusive Development", Das, R.C. (Ed.) Inclusive Developments Through Socio-economic Indicators: New Theoretical and Empirical Insights, Emerald Publishing Limited, Leeds, pp. 179-191. https://doi.org/10.1108/978-1-80455-554-520231014