THE IMPACT OF BANK CREDIT ON THE GROWTH OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA (A CASE STUDY OF FIRST BANK PLC)

In recent times, small and medium scale enterprises (SMEs) have assumed the centre stage in the industrial development agenda of Nigeria. But to a large extent the existence and survival of these SMEs depend on adequate financing. The paper therefore examined the role played by commercial banks’ credit in facilitating the growth of SMEs in Nigeria. It adopted co-integration and error correction mechanisms in carrying out this empirical examination. The findings revealed that Commercial Banks’ credit has not contributed significantly to the growth of Small and Medium Scale Enterprises in Nigeria. To support the growth of SMEs by Commercial Banks, so that they can be properly positioned to play a catalytic role in rapid industrial take off and development in Nigeria, the paper recommended as follows: SMEs should be made to have easy access to credits by commercial banks, to achieve this, the monetary authority should ensure that the lending rate at which commercial banks lend to the SMEs is reduced to the barest minimum; devaluation of the national currency – the naira, should not be encouraged as devaluation makes imported raw materials and capital goods used by the SMEs very expensive and hence impedes their production rather, local sourcing of raw materials should be encouraged to reduce the pressure on exchange rate; and finally, more Commercial Bank branches should be established in Nigeria, especially in the rural areas to create opportunity for SMEs operating in such areas to have access to credits and finance their operations. Keywords: Commercial Banks, Credit, Growth, Lending Rate, and SMEs.