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Abstract:
This study investigated deposit money bank loans to small and medium enterprises and its effect on economic growth in Nigeria from 1992 to 2016. The study employed two predictor variables (deposit money bank loans to small and medium enterprises and bank lending rate), one predicted variable (gross fixed capital formation representing economic growth) and one controlled variable (inflation rate). Test carried out include unit root test, co-integration test and ordinary least square. The findings revealed that: There is positive significant relationship between deposit money bank loans to small and medium enterprises and gross fixed capital formation in Nigeria, there is negative and significant relationship between bank lending rate and gross fixed capital formation in Nigeria, and there is negative insignificant relationship between inflation rate and gross fixed capital formation in Nigeria. Based on the findings, the study recommends that, Since deposit money banks are scared of granting loan facilities due to the nature of small and medium enterprises, to be more secure and to attained the desired economic growth, government should put policies that will enable deposit money banks to be part or stakeholders in every small or medium sized enterprise that seeks loan facility, so that granting of credit facilities could be made easier and more secured; also government should put policies to favor small and medium sized enterprises by fixing a lower lending rate to enable the subsector to strive maximally.
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