SOURCES OF FINANCE FOR MICRO, SMALL AND MEDIUM ENTERPRISES IN NIGERIA

Initial attempts of developed and developing countries to eradicate poverty focused on the development of large scale industries, based on the traditional economy of scale theory. However, the economic downturn that followed the collapse of the world oil market in 1980s and the financial crisis in Asia in the 1990s brought to fore the important role of Micro, Small and Medium Enterprises (MSMEs) in industrial and economic development in any given country. It has been recognized that among the constraints to effective development of MSMEs in Nigeria is the limited access of the investors to long term credit. Various credit initiatives have been instituted in the past to improve the access of MSMEs to long term funds. Analysis carried out in this study showed that commercial banks loans constituted over 90 percent of sources of funds to MSMEs in Nigeria and their loans and advances to agriculture and manufacturing sectors combined(where the MSMEs are dominant) grew from N83.40million in 1970 to N1,129,158.30 million in 2009 and averaged N149,106.08 million per annum thereby constituting 17.81% of total commercial banks loans and advances to the Nigerian economy on the average between 1970 and 2009, whereas the MSMEs currently contribute about 50% to the nation’s Gross Domestic Product. Furthermore, the survey results indicated that MSME operators still do not have enough funds for their operations as a frequency analysis indicated that inadequate fund/working capital was the most mentioned problem with a percentage share of 60.7%. In view of the assured role of MSMEs in economic development and poverty alleviation, it is recommended that all the funding apparatus directed at the MSMEs in Nigeria, be sustained and intensified