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ABSTRACT
The theoretical literature is replete with discussions on the nexus between small and medium scale enterprises and industrial performance, especially as it relates to developed countries. Thus, the main objective of this research is to ascertain the effect of SME on industrial performance and to determine the direction of causation between the growth of SME and Industry. This study has with empirically analysed the effect of SME on industrial growth with data from 1990-2020. The variables considered are industrial output, a proxy for industrial growth as the dependent variable and SME output, real GDP, export rate and unemployment rate as independent variables for the study. Augmented Dickey-Fuller (ADF) test was used to test the individual variables and the variables were found to be stationary at first difference. Then Johansen (1988) technique was used to check if the stationary variables were cointegrated. Furthermore, ECM was employed to correct any form of disequilibrium in the model. The result of stationarity and normality showed that the model is well specified and should be used for policy analysis. The study data was extracted from Central Bank of Nigeria (CBN) statistical bulletin. The result showed that two of the variables RGDP and export rate was statistical significant at 5% level and positively influencing industrial growth, while SME and unemployment were insignificant and negatively influencing industrial growth. Overall, the study showed that SME had a negative relationship with industrial growth and recommend government policies and actions that could aid the value of SME like infrastructural facilities and reduced interests on loans which will ensure a positive contribution of SME to industrial growth.
