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THE IMPACT OF COMMERCIAL BANK CREDIT ON THE GROWTH OF SMALL AND MEDIUM SCALE ENTERPRISES: AN ECONOMETRIC EVIDENCE FROM NIGERIA (1986 – 2012)
The study employed Co-integration and Error Correction Modelling (ECM) techniques to investigate empirically the impact of commercial bank credit on Nigeria’s Small and Medium Scale enterprises (SMEs) between 1986 and 2012.The results revealed that SMEs and selected macroeconomic variables included in the model have a long run relationship with SMEs output. The study also reveals that savings time deposit and exchange rate has a significant impact on SMEs output in Nigeria. Furthermore, commercial bank credit to SMEs, total government expenditure and bank density has direct but insignificant impact on the country SMEs output this may be connected with stringent policy in accessing credit facility and the crowd out effect of government expenditure in the economy. The study also shows that interest rate has adverse effect on SMEs output. The study recommended among others that interest rate on credit facility granted to SMEs should be drastically reduced, commercial banks should grant soft loan to this important sector of the economy and also reduced stringent policy in supply of credit to SMEs and monetary authority should encourage commercial bank to set up more branches in the rural areas in order to encourage rural occupant to save and have assesses to credit facility.
Keyword: Small and Scale Medium Enterprises, Bank Credit, Loans, Commercial Bank