Trade Finance Gap and the Export Performance of Small and Medium-Sized Enterprises (SMEs) in Nigeria

Bala, Isa Marama

doi:10.5281/zenodo.22915974

Bala, Isa Marama The Institute of International Trade and Development, Faculty of Social Sciences, University of Port Harcourt, Rivers State Nigeria.

DOI: https://doi.org/10.5281/zenodo.22915974

Keywords: Trade Finance; Credit Rationing; SME Export Performance; Export Credit; Non-Oil Export Growth; Credit Constraints; Nigeria.

Abstract

The study investigated trade finance gap and effects on the export performance of Nigerian small and medium-sized enterprises (SMEs). The objectives of the study were to examine the effects of commercial bank credit to SMEs and aggregate export credit on non-oil exports, and to determine the roles of the prime lending rate and exchange rate in influencing export performance. The study drew from the Stiglitz-Weiss Credit Rationing Theory, which explains the way informational asymmetries separating lenders from borrowers prompt financial institutions to constrain credit availability even when firms are willing to borrow. Annual data covering 1991–2025 were obtained from the Central Bank of Nigeria, the National Bureau of Statistics, and the World Bank’s World Development Indicators repository, structured around an ex-post facto quantitative research design. The ARDL bounds testing technique and Error Correction Model were used to evaluate both short-term dynamics and long-term co-integration among the specified parameters. The results showed that commercial bank SME financing and total export credit exert a statistically significant positive influence on non-oil export growth (p < 0.01), while the prime lending rate has a significantly negative effect, with a coefficient of -0.045. The exchange rate also enhances export price competitiveness. The ECM coefficient of -0.425 showed that about 42.5% of any short-run disequilibrium is corrected each year. It recommended that monetary authorities, specifically the Central Bank of Nigeria, should introduce a 5% credit allocation requirement for commercial banks to support SMEs engaged in non-oil export activities.

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