This article examines how different government funding schemes affect the performance of Small and Medium Enterprises (SMEs) in Nigeria from 2005 to 2024, using annual time-series data. By applying the Autoregressive Distributed Lag (ARDL) bounds testing technique, we measure the influence of four funding channels: commercial bank credit, Central Bank of Nigeria (CBN) intervention programs, Bank of Industry (BOI) credit lines, and equity financing, all in relation to SMEs’ contribution to national GDP. The results show that different sources of finance lead to markedly different impacts on firm performance: bank loans from commercial lenders produce a robust and statistically significant effect (β = 0.370, p < 0.001), as do the CBN’s intervention programs (β = 0.693, p < 0.001), both delivering gains that materialize swiftly. Conversely, equity finance has a delayed but powerful influence, with a substantial significant lagged effect reported (β = 0.915, p < 0.001). Loans from the BOI, in contrast, exhibit a positive but statistically weak effect, suggesting that while the direction of effect is encouraging, the evidence falls short of conventional significance thresholds. Long-run cointegration is supported by the ARDL bounds test (F-stat = 6.604, surpassing the 4.01 critical threshold), indicating that the funding effects are durable. When placed alongside funding frameworks in advanced economies, the Nigerian model, though effective, appears less refined; adjustments are needed to achieve the level of sophistication seen in the United States and United Kingdom financing systems.
Echika Collin Ugwuoju (Wed,) studied this question.