Insecurity, Inflation and Performance of Small and Medium Scale Enterprises in Nigeria
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Abstract
This study was carried out to examine the influence of insecurity and inflation on the performance of small and medium-scale enterprises (SMEs) in Nigeria. The study specifically examined the influence of insecurity, inflation and interest rate on SMEs. The variable of interest, which is the performance of SMEs, was measured with SMEs’ contributions to real gross domestic products, while the independent variable was proxied with the global insecurity index, inflation rate, and interest rate. The study employed secondary annual time series data, which spanned from 1999 to 2023. The data used were extracted from the CBN Statistical Bulletin 2023 edition. Preliminary tests were conducted using the Augmented Dickey-Fuller to determine the level of integration of the variables of interest. Consequent upon the findings of the above tests, the study employed an auto-regressive distributed lag as the method to estimate the specified model. A residual post-diagnostic test was also conducted. Findings from the study indicated that the influence of insecurity on the performance of SMEs on GDP is negative with a coefficient of -1,303.885 and significant with a probability value of 0.0000. Also, interest rate exerted a negative (with a coefficient of -415.51) and significant influence on the performance of SMEs to GDP with a probability value of 0.000. Similarly, the inflation rate has a negative (with a coefficient of-142.57) and significant influence on SMEGDP with a probability value of 0.0069; thus, all the explanatory variables with negative coefficients had a significant and negative influence on SMEs' contributions to real gross domestic products in Nigeria. The study concluded that insecurity and inflation have a significant but negative influence on the performance of SMEs in Nigeria. The study, therefore, recommended that governments both at the federal and state levels should design proactive and practical policies and measures to reduce the level of insecurity in Nigeria so as to guarantee safe and more secure environment for the SMEs to thrive and contribute significantly to Nigeria’s economic growth.
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