Impact of Credit, Interest Rate and Inflation on Small and Medium Enterprises Productivity in Nigeria

This study sought to evaluate the impact of credit, interest rate and inflation on Small and Medium Enterprises Productivity in Nigeria, using annual time series data from 1986-2023. The data for the study was sourced from the World Development Indicator (WDI) and the Central Bank of Nigeria (CBN) statistical bulletin. The data collected were gross domestic product (GDP) which is the dependent variable while commercial bank total credit to private sector (CPS), small and medium enterprises contribution to GDP (SMEC), inflation rate (INFL) and interest rate (INT) are the independent variables. Descriptive, inferential statistics and Error Correction Model (ECM) were used to test the long run relationship of the variables. The results of the regression show that credit to private sector and small and medium enterprises contribution to gross domestic product is positive and significant to economic growth. The results further revealed that inflation rate and interest rate have a negative and insignificant effect on gross domestic product. The study recommends that government should put more efforts to curb inflation to give more confident to investors and should implement measures (low interest rates) that would broaden the borrowing base to improve financial capacity of SMEs, thus lead to an increase in the contribution of SMEs to nations GDP. KEYWORD: SME, Interest rate, Inflation, GDP.