Investigating the nexus between Non-Performing Loans in the Nigerian Banking System and Lending to Micro-Small Medium Enterprises
Micro-Small and Medium Enterprises (MSMEs) constitute vital ingredients for the lubrication of the development process of any economy. Therefore, Micro-Small and Medium Enterprises are bedrocks of emerging economies as they exact vital roles in promoting and sustaining growth and development. However, in Nigeria MSMEs are facing myriad of challenges and difficulties in funding their activities. Rising trends in Non-performing loans (NPLs) adversely affected availability of loans and advances to economic agents in the Nigerian economy thereby constraining financial intermediation and economic activities hence growth. The study investigated the nexus existing between NPLs in the Nigerian banking system and lending to MSMEs sub-sector in Nigeria from 1981-2015. Time series data used in the study were collected from annual statistical bulletin of the Central Bank of Nigeria (CBN). These data were subjected to descriptive and inferential methods. The results of the graphical presentations indicated irregular fluctuations in NPLs. The graphs indicated positive trends in respect to lending to MSMEs and the productivity of MSMEs. The estimated OLS results showed negative nexus between non-performing loans and lending to MSMEs. This negative nexus led to concomitant low MSMEs productivity in Nigeria. The study recommended that CBN should increase its financial surveillance over the sectors and also ensure timely resolutions of the NPLs challenges CBN should increase arrays of financial intervention that would address paucity in funds in the MSMEs sub-sector
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