COMMERCIAL BANKS AND SMES IN NIGERIA

Small and Medium Enterprises (SMEs) play a vital role in the economic development of Nigeria through employment generation, poverty reduction, and contribution to Gross Domestic Product (GDP). Despite their importance, many SMEs face significant challenges in accessing adequate financing for business growth and sustainability. Commercial banks are expected to provide financial support to SMEs through loans, credit facilities, and other banking services. However, various factors such as stringent lending requirements, high interest rates, inadequate collateral, and perceived credit risks often limit SMEs’ access to bank financing. This study examines the relationship between commercial banks and the growth of Small and Medium Enterprises in Nigeria. Specifically, it investigates the extent to which commercial bank credit influences SME development, identifies the challenges faced by SMEs in obtaining bank financing, and evaluates the effectiveness of commercial banking services in supporting SME operations. The study adopts a descriptive and analytical approach using secondary data obtained from relevant publications, reports, journals, and financial records. The findings reveal that commercial bank financing has a significant positive impact on SME growth and productivity. However, access to credit remains constrained by strict lending conditions and high borrowing costs. The study concludes that improved collaboration between commercial banks and SMEs is essential for sustainable economic development in Nigeria. It recommends that commercial banks should adopt more flexible lending policies, reduce interest rates, and develop SME-friendly financial products, while government should strengthen policies that encourage lending to SMEs through credit guarantee schemes and supportive regulatory frameworks.