ACKNOWLEDGEMENT
First and foremost, I sincerely thank the almighty god for wisdom, good
health, strength and inspiration given to me to put this work together.
I am very delighted to acknowledge the effort of my untiring supervisor
which is also my current head of department (H.O.D) of Banking And Finance Dr.
S.O. Isedu I call him God’s hand on earth. He is a man that has the hand of God in
him, for the guidance and support as well as giving me part of his time to read
through and give expertise advise towards making this project a successful one.
I also want to use this medium to appreciate the effort of all the Lecturers in
the Department: Dr. Isedu (H.O.D), Prof. E. J. Ofanson, dr. Asemota, Mrs.
Aigbomian E.E, Mr. Enebulu, dr. Omogbia, Mr. Imafidon, Mr. Erhabor, may God
bless you all.
I want to use this medium to say a very big thank you to my Mother Mrs.
Benjamin Omonika for her sweet love, caring, prayers advice and her financial
support towards my quest for academics success, may God continue to bless and
protect her for me.
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A very big thank you to my adorable and beautiful sister; miss Stephen
blessing whom have been there for me till date. To my loving and caring in-law
mr. Stephen Olushola I say thank you. I love you all.
` And to everyone outside there that made this journey a successful one, I say
a very big thank you to you all.
I must not forget the effort of mentors mr. valentine and mr. douglass.
Also to my friends in the grear department of banking and finance reymond, sadiq,
Stephen, matthew, osahon and Sunday my roommate; may god bless you all.
Amen.
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TABLE OF CONTENTS
Cover page - - - - - - - - i
Title page - - - - - - - - ii
Certification - - - - - - - - iii
Dedication - - - - - - - - iv
Acknowledgements - - - - - - - v
Table of contents - - - - - - - - vii
Abstract - - - - - - - - x
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study- - - - - - - 1
1.2 Statement os the Problem- - - - - - - 5
1.3 Objectives of the Problem- - - - - - - 7
1.4 Research Questions - - - - - - - 7
1.5 Hypotheses - - - - - - - - 8
1.6 Significance of the Study- - - - - - - 8
1.7 Scope of the Study- - - - - - - - 9
1.8 Definition of Terms- - - - - - - - 9
CHAPTER TWO: LITERATURE REVIEW
2.1 Conceptual Framework - - - - - - 12
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2.2 Some SMES Definitions- - - - - - - 14
2.3 The Concept Of Small Scale Industry- - - - - 15
2.4 SMES Contribution to Economic Development and Growth 19
2.5 Constraints Faced by SMES in Accessing Credit - - 22
2.6 Importance of Financial Institutions in sms development - - 27
2.7 Commercial banks financing of small scale enterprises
Under the new central bank of Nigeria directive and its
likely Impact - - - - - - - - 29
2.8 Theoretical Literature- - - - - - - 34
2.9 Empirical review - - - - - - - 38
CHAPTER THREE: METHODOLOGY
3.1 Research Methodology - - - - - - 43
Research Design - - -- - - - -- - 43
3.3 Method of Data Collection - - - - - - 44
3.4 Model Specification - - - - - - - 44
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND
INTERPRETATION
4.0 Introduction - - - - - - - - 47
4.1 Presentation Data - - - - - - - 47
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CHAPTER FIVE: SUMMARY OF FINDING, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary- - - - - - - - - 54
5.2 Conclusion- - - - - - - - - 55
5.3 Recommendation - - - - - - - 56
REFERENCE - - - - - - - 58
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ABSTRACT
This research work appraised the role of commercial banks in the financing of
small business in Nigeria from 2001-2017. The main objective of this research is
the examination of the role of commercial banks in the financing of small business
in Nigeria. The work made use of secondary data which were sourced from Central
Bank of Nigeria statistical bulletin (Various Issues). The ordinary least square
(OLS) regression technique was employed in the analysis of the data. The test
conducted from the estimated model indicates that there is a direct robust
significant relationship between bank total credit to SMES (BTC), interest rate
(IR), money supply (MS) and output of small and medium scale enterprises (SME)
in Nigeria, while official exchange rate (EXR) is inversely related to output of
small and medium scale enterprises in Nigeria. Based on the conclusion made, it is
recommended monetary authority should ensure that bank rates (interest rate) on
credit facilities extended to SMES should be drastically reduced. We recommend
“soft loans” to this important sector of the economy. Credit delivery to them
should not be strict. Also, government should encourage and strengthen the
activities of development, finance, and gross root financial institution that advance
credit to SME.
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Chapter one
Introduction
1.1 background to the study
there is growing recognition of the important role small and medium enterprise
(smes) play in economic development. The smes constitute about 90% of total
business units in Nigeria and account of 60% of Nigeria’s employed labour
force (kdi, 2008). They are often described as efficient and prolific job creator,
the seeds of big business and the fuel of national economic engines. Even in
the developed industrial economies, it is the sme sector rather than the
multinationals that is the largest employer of workers (mullinex, 2000).
Nigeria statistical service revealed that nearly 93 percent of all registered
businesses in nigeria are of the smes category. The national board of small
scale industries (nbssi) define as enterprises that employ no more than 29
workers, with investment in plant and machinery (excluding land and building)
mot exceeding the equivalent of $100,000. Small enterprises in Nigeria are
said to be a characteristic feature of the production landscape and have been
noted to provide about 85% of manufacturing employment of Nigeria (steel
and Webster, 1991; aryeetey. 2001). Smes are also belived to contribute about
70% to Nigeria’s GDP and account for about 92% of business in Nigeria.
From an economic perspective, however, enterprises are not just ipplier, but
also consumers; this plays an important role if they are to position themselves
in a market with purchasing power: their demand for industrial or consumer
goods will stimulate the activity of their clients. Demand in the form of
investment plays a dual role, both from a demand-side (with regard to the
suppliers of industrial goods) and on the supply-side (through the entail for
new production arising from upgraded equipment) (berry et al,. 2002).
In order for the Nigeria sme’s to continue to fulfil the above and much more,
they need access to finance to carry out their business operation the expansion.
The seeming lack of finance for smes is not only retarding their expansion but
also the growth of the nation’s economy. Macroeconomic conditions in Nigeria
in 2000 severely constrained private sector access to credit. High levels of
government borrowing pushed interest rates up and crowded the private sector
out of the financial markets. With government treasuries paying real interest of
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16.8 percent, banks had little incentive to take they perceived as riskier private
sector debt. (USAID’s DCA Nigeria Brief 2009).
On what they perceived as riskier private sector debt. (USAID’s DCA Nigeria
Brief 2009).
In pursuit of self-reliance in a developing country particularly in Nigeria, the
central government enacted a decree called “Enterprises promotion Decree”
when there was need for small scale enterprises in the promotion of economic
development. This has since been at the fore front of development strategies.
However, many developing countries have failed to adopt these strategies
owing to their belief that it is a relatively slow process of industrialization.
Without the development of small scale enterprises in Nigeria, the nation’s
quest for industrialization will certainly remain forever at a slow pace. It is the
humble opinion of the researcher that futher development on our business
enterprises must add to the basic issue of creating linkage within the economy
to begin to yield real inputs to our economic activities. Priority attention must
therefore be given to those business enterprises for which domestic inputs
could easily produced. The objective should be to maximize the value added in
their processing and manufacturing as final strong producer incentive to small
scale enterprises are necessary not only to meet the food requirement but also
to promote growing input supplier industrial growth. The present economy
constraints may well turn out to be a blessing in disguise to our small scale
industry effort particulary for the dynamic manufacturing sector. For instance,
the market determine exchange rate through foriegh exchange market with its
resultant high cost of imported inputs may serve as impetus for industrialist to
intensity their search for loan
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