Aggregate Demand and the Performance of Small and Medium Scale Enterprises in Nigeria

Abstract

This study attempts to investigate the rudimentary economic factor that affects the performance of Small and Medium Scale Enterprises (SMEs) in Nigeria; this has been necessitated by the numerous amounts of SMEs that go moribund annually in the country and the obvious ineffectiveness of the supply-side policy recommendations of related studies. The study which spans the period 2001-2022 identified aggregate demand as the core determinant of the performance of SMEs in the country and employed the Autoregressive Distributed Lag (ARDL) technique in analyzing the secondary data used in the study. The findings of the study reveal that wage rate and aggregate demand positively affect the performance of SMEs in Nigeria in the short-run and long-run. The study concludes that government's policies that are directed towards increasing aggregate demand can also improve the performance of SMEs. In that light, the study recommends more frequent upward review of minimum wage such that the rate of increase in average wage rate outperforms rate of increase in inflation rate.