An appraisal of the role of small and medium enterprises (SMEs) in Nigeria’s economic development: A case study of Lagos State (2000–2020).
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Background of the Study :
Small and medium enterprises (SMEs) are recognized as vital engines of economic growth, innovation, and employment, particularly in developing countries. In Nigeria, Lagos State stands out as a dynamic economic hub where SMEs contribute significantly to economic development (Akinola, 2023). Over the period from 2000 to 2020, SMEs in Lagos have been instrumental in driving local entrepreneurship, generating employment, and fostering socio-economic progress. Their contributions range from introducing innovative business models to creating market niches in various sectors. Government initiatives, coupled with support from financial institutions and development agencies, have aimed to nurture this sector. However, challenges such as limited access to finance, regulatory hurdles, and intense competition from larger corporations continue to restrict the growth potential of SMEs (Babatunde, 2024). This study examines the multifaceted role of SMEs in Lagos State’s economic development, analyzing both their direct economic contributions and their broader social impacts. The research also investigates the constraints that hinder SME growth and explores strategic measures to enhance their performance and sustainability (Olawale, 2025).
Statement of the Problem
Despite the recognized potential of SMEs as drivers of economic development, their expansion in Lagos State has been curtailed by persistent challenges. Limited access to finance, complex regulatory procedures, and stiff competition have impeded the growth and sustainability of these enterprises (Akinola, 2023). The mismatch between the theoretical benefits of SME-driven growth and the practical obstacles faced by entrepreneurs calls for a comprehensive examination of the sector’s constraints. This study seeks to address the gap between the expected and actual contributions of SMEs to the economy. By identifying and analyzing the key barriers to SME development, the research aims to provide evidence-based recommendations to bridge this gap and unlock the full potential of the SME sector (Babatunde, 2024).
Objectives of the Study:
- To evaluate the contribution of SMEs to economic development in Lagos State.
- To identify the challenges hindering SME growth.
- To recommend strategies for enhancing SME performance and sustainability.
Research Questions:
- What role do SMEs play in Lagos State’s economic development?
- What are the main challenges facing SMEs?
- How can policy interventions improve the performance of SMEs?
Research Hypotheses:
- H1: SMEs significantly contribute to economic development.
- H2: Limited access to finance adversely affects SME growth.
- H3: Government support can markedly improve SME sustainability.
Significance of the Study
This study is significant as it elucidates the critical role of SMEs in driving economic development in Lagos State. By highlighting both contributions and challenges, it provides valuable insights for policymakers, financial institutions, and business leaders. The findings will aid in formulating targeted interventions to bolster SME growth, thereby contributing to a more inclusive and resilient economic environment. Ultimately, the study underscores the importance of supporting SMEs as key drivers of sustainable development (Olawale, 2025).
Scope and Limitations of the Study:
This study is limited to analyzing the role and challenges of SMEs in Lagos State, focusing on their economic contributions and the obstacles they face without extending to other regions or sectors.
Definitions of Terms:
– SMEs: Small and medium enterprises that serve as key contributors to local economic activity.
– Economic Development: The process of improving economic well-being and quality of life.
– Lagos State: A major commercial and economic hub in Nigeria serving as the case study.
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