Small–medium enterprise formation and Nigerian economic growth

Abstract

PurposeThis study examines the nexus between entrepreneurship through small–medium enterprise (SME) business formation and the growth of the Nigerian economy. Furthermore, this paper seeks to explore the link between small enterprise development and econo.Design/methodology/approachThe paper focused on secondary data for the period 1990–2016 for macro parameters including, registered small and medium scale enterprise, nominal gross domestic product, employment, total labor force and population. Forecasting technique was applied to obtain data for missing trends. Quantitative analytical techniques used include the dynamic method of the error correction model (ECM) and Johansen co-integration test for a long-run correlation.FindingsThe result shows an increasing number of SME formation which has also led to the growth of the economy. However, an increase in the amount of micro-small and medium scale enterprises did not contribute to the development of the economy more than existing businesses. The employment elasticity is positive and significant and shows that the contribution of entrepreneurship regarding employment is the most essential factor that advances economic growth and reduction of unemployment.Originality/valueThe paper examines how the persistent increase in small and medium enterprise formation improves the growth and development of the Nigerian economy, employing the ECM approach.