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Abstract

Financial liberalization and Small and Medium Enterprises (SMEs) performance in Nigeria from 1970 - 2017 was examined in this study, using the Ordinary Least Square (OLS) technique. It specifically analyzed the impact of financial liberalization on the performance of SMEs in the wholesale and retail trade sector where SMEs are commonly found in Nigeria. The periods before and after the liberalization policy in 1986 were compared to determine whether or not the SMEs performed better in the post-policy era. A financial liberalization index was constructed and used as explanatory variable alongside other variables. Empirical results showed that financial liberalization had a significant positive impact on the performance of SMEs in the wholesale and retail trade sector. In comparing the two periods, it was found that after the policy, the performance of SMEs in the sector dropped slightly. The performance of SMEs in the wholesale and retail trade sector could still be improved upon, with a more prudent approach to financial sector reform to supplement the financial liberalization. Thus, the study recommends a sound and stable macroeconomic environment that will provide for prudent fiscal and monetary policies where interest rate, price, and exchange rate stabilities will be guaranteed.