The Role of Small and Medium Scale Enterprises in Poverty Reduction in Nigeria: 2001 – 2011

Abstract

This article x-rays the role of Small and Medium Scale Enterprises (SMEs) in poverty reduction in Nigeria, between 2001 and 2011. It is aimed at finding out the extent to which small and medium scale enterprises, through their employment activities, helped to address poverty reduction. In trying to establish the thrust of the paper we used secondary data and the adoption of econometric model, specifically simple linear regression, to empirically explain this relationship. From the empirical results, SMEs’ income captured by their contributions to GDP, are statistically significant in explaining the level of employment and hence poverty reduction. Also the funding of SMEs and the level of government participation are not significant to the growth of SMEs measured by their level of income (SGDP). The models formulated have good fits judging from the R2s and their adjusted values. Also the F-ratio validates the overall significance of the variables and their non-conformity to the apriority expectations of some of the variables. These call for concern. With this development, some recommendations were made amongst which are: that government should provide mechanism for SMEs to have access to loans with long payback period; and that interest rate should be reduced to a single digit to encourage entrepreneurs’ innovativeness. It is therefore imperative that policy makers, governments and their agencies provide the technical, technological, financial, assistance and infrastructures needed for the opportunities in the SMEs to be harnessed optimally.

Key words: Small and Medium Scale Enterprises (SMEs), Poverty, poverty reduction, Employment Generation, Gross Domestic Product.