Exploring the Role of Monetary Policy, Environmental Sustainability, and Digital Banking in Promoting SME Growth in Nigeria Amid Economic and Geopolitical Uncertainty

This study examines the relationships between monetary policy, environmental sustainability, digital banking, and SME growth in Nigeria under varying levels of economic uncertainty and geopolitical risk from 2002 to 2024. Using Threshold ARDL and Threshold NARDL models, the study captures regime-dependent and asymmetric relationships that may be obscured by linear specifications. The findings show persistent SME growth and differentiated monetary policy effects across instruments. Economic uncertainty and geopolitical risk are predominantly negatively associated with SME growth, with threshold and nonlinear estimates indicating asymmetric responses to changes in these risks. Selected monetary policy effects also vary with prevailing uncertainty and geopolitical risk. Digital banking is generally positively associated with SME growth, while renewable energy consumption and environmental performance exhibit positive associations in selected specifications. The findings further indicate that these relationships vary across models, regimes, and the direction of changes in risk conditions. The findings indicate that SME growth is associated with the interaction of these key factors under changing economic and geopolitical conditions, with the estimated relationships varying across instruments and risk conditions. The study contributes by integrating these dimensions within a common nonlinear framework and highlights the importance of considering prevailing risk conditions when interpreting monetary transmission and designing policies for SME development in Nigeria.