The Determinants of Micro, Small and Medium Enterprises’ (MSMEs) Performance in Nigeria: Evidence from Business Enterprise Survey

Abstract

In this paper, we provide new evidence on the determinants of business enterprise performance by combining the structure conduct performance, efficiency structure and business environment factors. In particular, we focus on the major determining factors of MSMEs performance in Nigeria. We further account for possible regional variation in MSMEs performance using a cross sectional Ordinary Least Squares (OLS) with fixed effects. The latest 2014 World Bank Enterprise Survey (WBES) data for Nigeria was used and the results obtained shows that skilled labor, capital intensity, age, size, foreign ownership, percentage of export, research & development as well as bribe payment have a positive impact on MSMEs performance. Although, bribe payment is positive, it is not significant to MSME performance. This is because bribery does not translate to outright performance, rather it is a form of illegal extortion from MSMEs by government officials in order to allow them remain in business. On the other hand, the study found degree of competition, poor electricity supply, high insecurity and difficulty in accessing finance as major setbacks to MSMEs performance in Nigeria. While we found skilled labor, age of enterprise and size to contribute significantly to MSMEs performance, contrary to some findings in the literature, we found capital intensity, foreign ownership, firm’s export, bribe payment, research & development, degree of competition, outage intensity, insecurity and difficulty in obtaining finance to be insignificant to MSMEs performance in Nigeria