Show Me the Money: Utilizing Applied Time-Series to Increase Credit Access for Small and Medium Businesses in Nigeria

Abstract

One indicator of a country's ability to fund small and medium enterprises (SMEs) is its finance gap–a measurement of how much credit the government owes SMEs. A low finance gap, in short financial access, can positively impact economic growth by sustaining small and medium enterprises. In Nigeria, inadequate financial access hinders some potential small businesses, forces others to look for funding sources outside the country, and precludes most of them from contributing to economic growth. As Africa's youngest, most populous country and largest economy, Nigeria's ability to sustain its SMEs will have significant impact on the continent. This paper employs a methodology consisting of regressions and two types of time series to create a model whereby governments can analyze the macroeconomic factors affecting the amount of money they owe SMEs in their countries; subsequently, it will deploy both time series as a method of forecasting the future finance gap of a country. In addition, it will utilize qualitative research and interviews to develop recommendations for these financial institutions and countries to offer specific policies to fund SME growth. This thesis hopes to verify the usefulness of the finance gap as a tool for economic development in emerging markets.