Financial Deepening and Performance of Quoted Small and Medium Enterprises in Nigeria

Ihejirika; Peters. O Anyanwu; G.I.; Obieche; Precious Nkechi

doi:10.56201/ijefm.v11.no5.2026.pg142.157

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Financial Deepening and Performance of Quoted Small and Medium Enterprises in Nigeria

Ihejirika, Peters. O Anyanwu, G.I. and Obieche, Precious Nkechi

Abstract

This study investigated the effect of financial deepening on the performance of Quoted Small and Medium Scale Enterprises in Nigeria for the period 2008 to 2024. The model measured financial deepening with: credit to private sector to GDP ratio (CPS/GDP), broad money supply to GDP ratio (M3/GDP), market capitalization to GDP ratio (MKT/GDP), and value of shares traded to GDP ratio (VST/GDP), and SMEs performance was proxy by Return on Equity . Secondary data were sourced from the CBN Statistical Bulletin (2024) and the Nigerian Exchange Group (2024). Panel estimation techniques were employed. Diagnostic tests revealed the presence of significant firm-specific heterogeneity, thereby justifying the use of the fixed effects estimator. The results showed that all the financial deepening variables were statistically insignificant at the 5% level of significance; they account for 10.94% of total variation in ROE, and demonstrated global significance which suggests that firm-specific characteristics play a crucial role in explaining performance. The individual interactive model showed that CPS/GDP, MKTGDP, and VSTGDP have positive interaction with ROE, while M3GDP has negative interaction with ROE. These results revealed substantial heterogeneity in the impact of financial deepening on SME performance. It suggests that the effect of financial deepening variables on SME performance is not uniform across firms. In conclusion, the findings establish that financial deepening, as currently structured in Nigeria, does not automatically translate into improved financial performance for quoted SMEs. The study recommends among others that policymakers should promote targeted financial deepening measures that prioritize SMEs with viable business models. Key words: financial deepening, SMEs, return on assets, panel analysis, interaction model

Keywords

financial deepeningSMEsreturn on assetspanel analysisinteraction model

References

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Financial Deepening and Performance of Quoted Small and Medium Enterprises in Nigeria

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