PERFORMANCE-DETERMINANT NEXUS OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA

The study investigated the determinants of performance of small and medium size enterprises in Nigeria from 1986-2024. The model formulated used SME Output as the dependent variable proxy for performance while data on exchange rate, interest rate, and credit to SMEs and electricity consumption, crime rate were used as independent variables used as the determinants of performance. By using the Autoregressive Distributive Lag (ARDL) technique, findings showed that in the long-run, electricity consumption by SMEs had a positive but insignificant relationship with the performance of SMEs in Nigeria over the period studied. In the short-run, interest rate had a positive but insignificant relationship on SMES Output while in the long-run, the relationship was negative. The effect of exchange rate on SMEs Output was both positive in the short and long-run period even though it was only positively significant in the long-run. In the long-run, access to credit exerted positive but insignificant growth on SMEs Output while crime rate exerted a significantly negative effect on SMEs Output in both the short and long-run periods. In conclusion, electricity consumption, access to credit and reduction in crime are the short-term determinants of performance of SMEs while in the long-run, chief determinants are lower interest rate, stable exchange rate and reduced crime rate. The study therefore recommends that a single-digit interest is necessary to reduce the cost of borrowing funds which will stimulate more SME operators to access funds for their businesses. SMEs should engage in the mass production of quality products that will appeal to local and international market. This way, they will have access to foreign currencies and thus hedge against the effect of depreciation of the naira. Adequate security should be provided by the Nigeria Police Force and other sister agencies with adequate funding provided.The Economic and Financial Crimes Commission should live up to their responsibility of dealing with the issue of financial and internet fraud. This will boost local and foreign investors’ confidence within the Nigerian economy.