IMPACT OF MONETARY POLICY ON THE GROWTH OF SMALLAND MEDIUM SCALE ENTERPRISES IN NIGERIA

ABSTRACT

This study investigated the impact of monetary policy on the growth of small and medium scale enterprises (SMEs) in Nigeria, with a focus on determining the dynamic responses of each policy on SMEs growth in Nigeria. The model employed in this study is the Autoregressive Distributed lag model (ARDL model) due to the distinction in order of integration. The time frame for this study spanned between the years 1981-2019. The study found that money supply has a positive and significant impact on growth of SMEs at the 5% level of significance, as well as inflation and interest having a negative but significant impact while exchange plays out not to be a significant factor determining the growth of SMEs. The implication is that the interplay of these variables is important to keep SMEs alive in Nigeria. The policy insinuation therefore, is that monetary policy should be set in such a way that the objective it wants to achieve is clearly and transparently defined in response to the dynamics of the domestic and global economic developments. Also, there is a need for a consistent monetary policy framework that should bring about a realistic exchange rate with emphasis on its role to directly promote output and productivity of the SMEs. Policy makers should consider exchange rate policies as a long-run fix to the problem of growth in foreign goods demand