Author: Olatunji A. Shobande and David Mautin Oke
Volume: 59 Issue No:3 Year:2017

Abstract: This paper examines the nexus among SMEs financing, diversification and long-term growth in Nigeria over the period 1995-2014 using quarterly data. On the basis of the diagnostic tests, the analysis was predicated on the Johansen Cointegration and the Vector Error Correction Mechanism (VECM). Feedback mechanism in the study was also examined using the popular Granger causality test. The result indicated a bi-causality between SMEs financing and long-term growth as well as between economic diversification and long-term growth. The positive relationship between SMEs financing and longterm growth both in the short and long runs clearly implies that appropriate SMEs financing would enhance long-term growth of the Nigerian economy. Therefore, policymakers should pursue policies that ensure modernization of the informal trading practices and provide adequate credit facilities for genuine SMEs in the country. This should be complemented with appropriate macroeconomic and supply-side policies.

JEL Classification: G32, L25, O47