Effects of monetary policy instruments on Small and Medium Enterprises (SMEs) loan accessibility in Nigeria

Abstract

This study investigates effects of monetary policy instruments on the accessibility of loans by the SMEs. The study used ex-post facto research design and secondary data were sourced from the statistical bulletin of Central Bank of Nigeria from 1992 to 2018. The study adopted dynamic least square approach by employing multiple regression analysis. Multiple regression and Kao Residual Co-integration Test were employed as data estimation techniques. The study indicated that there was long run relationship between monetary policy instruments and credit given to SMEs in Nigeria during the period. Also, it is indicated that money supply and liquidity ratio have positive and significant effect on loans to SMEs for the period under study but monetary policy rate has a negative and insignificant effect on loans to SMEs. The study suggested that there is need for the monetary authority to realign monetary policies especially the monetary policy rate in a way that it will promote high fund mobilization from all economic sector in order to improve the activities of SMEs to desired position. Also, the Central Bank of Nigeria needs to develop and monitor the monetary policy instruments focusing monetary policy rate to strengthen the financial institutions in the country in discharging their function of financial intermediation.