IMPACT OF DEPOSIT MONEY BANKS LOANS TO SMALL SCALE ENTERPRISE ON NIGERIA’S ECONOMIC GROWTH

Abstract

This study examines the impact of Deposit Money Banks loans to small-scale enterprises on Nigeria’s economic growth for the period 2001–2023. The study specifically evaluates the contribution of Deposit Money Banks loans to small-scale enterprises to gross domestic product growth, analyses the relationship between total private sector credit and economic growth, and assesses the effect of lending rates on this relationship. An ex post facto research design was adopted, using secondary time series data on Deposit Money Banks loans, total private sector credit, lending rate, and real gross domestic product obtained from the Central Bank of Nigeria Statistical Bulletin. Data were analysed using descriptive statistics, correlation analysis, and multiple regression with EViews version 13.0. The findings reveal that Deposit Money Banks loans to small-scale enterprises have a positive and significant impact on Nigeria’s economic growth, demonstrating that targeted financing of small enterprises enhances productivity and employment. In contrast, total private sector credit exhibited a significant negative relationship with gross domestic product, indicating inefficiencies in credit allocation, while lending rates unexpectedly showed a positive association with gross domestic product, reflecting macroeconomic adjustments in Nigeria. The study concludes that improving access to credit for small-scale enterprises, ensuring efficient allocation of private sector credit, and maintaining lending rates that support growth are crucial for sustainable economic development in Nigeria