Small and Medium Enterprises’ (SMES) Contributions to Nigeria’s Economy
Abstract
This study examines the contributions of Small and Medium Enterprises to Nigeria’s economy from 1999 to 2024 through the lens of the Pecking Order Theory, which explains how the sector's reliance on a hierarchy of financing prioritizing internal retained earnings over high- interest debt and elusive external equity shapes its growth trajectory. Representing over 96.7% of all Nigerian businesses, MSMEs experienced a dramatic expansion from 17.28 million units in 2010 to over 41.54 million by 2017, effectively doubling employment from 32.4 million to over 60 million and reaching a record GDP contribution of 49.5% by 2024 despite post-2017 macroeconomic volatility. While the sector dominates the labor market by absorbing up to 87.9% of the workforce and providing 50% of industrial production, the financing preferences dictated by the Pecking Order Theory often trap firms in the "micro" stage, limiting export contributions to just 6.21% due to insufficient capital for scaling. To transition these resilient but vulnerable enterprises into high-growth industries, it is recommended that the government establish a dedicated MSME fund to improve credit accessibility, implement industrial dispersal policies to stimulate rural growth, invest heavily in energy infrastructure, and formalize mentorship programs to enhance institutional capacity.
Keywords
SMEsMSMEsEconomic GrowthEmployment GenerationEntrepreneurshipEconomic Development
References
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