IMPACT OF MONETARY POLICY ON THE GROWTHOF SMALLAND MEDIUM SCALE ENTERPRISES IN NIGERIA

This study investigated the impact of monetary policy on the growth of small and medium scale enterprises (SMEs) in Nigeria, with a focus on determining the dynamic responses of each policy on SMEs growth in Nigeria. The model employed in this study is the Autoregressive Distributed lag model (ARDL model) due to the distinction in order of integration. The time frame for this study spanned the years 1981-2019. The study found that money supply has a positive and significant impact on growth of
SMEs at the 5% level of significance, as well as inflation and interest having a negative but significant impact, while exchange plays out not to be a significant factor determining the growth of SMEs. The implication is that the interplay of these variables is important to keep SMEs alive in Nigeria. In response to the dynamics of domestic and global economic events, the policy suggestion is that monetary policy should be designed in such a way that the goal it seeks to attain is clearly and transparently specified. Also, there is a need for a consistent monetary policy framework that should bring about a realistic exchange rate with emphasis on its role to directly promote output and productivity of the SMEs. Exchange rate measures should be considered as a long-term solution to the problem of rising foreign products demand.