An Empirical Investigation of the Impact of Small and Medium- Scale Enterprise Financing on Food Security in Nigeria: Implications for Sustainable Development

Abstract

Small and medium-scale enterprises play a critical role in promoting agricultural productivity, food security, and sustainable development, particularly in developing economies such as Nigeria. Despite several government initiatives and financial interventions aimed at improving agricultural financing, food insecurity remains a persistent challenge due to inadequate access to affordable credit by agricultural SMEs. This study investigates the impact of SME financing on food security in Nigeria and examines its implications for sustainable development. Specifically, the study evaluates the effects of commercial bank financing, cooperative financing, and microfinance on food security among agricultural SMEs. The study adopted a quantitative survey research design. Primary data were collected through structured questionnaires administered to 180 owners and managers of agricultural SMEs in Sagamu, Ogun State, Nigeria, of which 150 valid responses were analyzed. The research instrument was validated by experts and demonstrated satisfactory reliability with a Cronbach's alpha coefficient of 0.81. Data analysis involved descriptive statistics, Pearson correlation analysis, and multiple regression analysis, while the hypotheses were tested using t-statistics. The findings revealed positive relationships between SME financing and food security. However, commercial bank financing, cooperative financing, and microfinance financing each exhibited positive but statistically insignificant effects on food security. Although the regression model explained a substantial proportion of the variation in food security, the results suggest that existing financing mechanisms have not sufficiently enhanced agricultural productivity or strengthened food security outcomes. The study concludes that inadequate access to effective financing remains a major constraint to achieving sustainable food security in Nigeria. It recommends strengthening government commitment to agricultural financing, reforming lending policies to improve accessibility for SMEs, reducing collateral requirements, and expanding financial inclusion in rural communities. Future studies should investigate the effects of borrowing costs, financing accessibility, institutional quality, and other structural factors influencing agricultural productivity and food security across different regions of Nigeria. Keyword: SME Financing: Food Security: Commercial Banks Financing: Cooperative Financing: Micro Financing: Agricultural Productivity.

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