Impact of SMEs on Economic Development in Lagos State

Abstract

This study examines the impact of Small and Medium Enterprises (SMEs) on economic development in Lagos State, Nigeria, addressing the gap in state-specific empirical data on SME contributions to employment, GDP, and innovation.A quantitative, cross-sectional survey design was adopted. Data were collected from 372 SME owners and managers across three sectors (trade, manufacturing, and services) in Lagos State using structured questionnaires. Stratified random sampling ensured sectoral representation. Data were analyzed using descriptive statistics, Pearson correlation, and multiple regression analysis with IBM SPSS v29.Results revealed that SMEs created 4,850 jobs between 2018 and 2023 (r = 0.65, p < 0.001) and contributed ₦67 billion annually to Lagos State's GDP (β = 0.31, p < 0.001). The regression model explained 52% of the variance in economic development (R² = 0.52). Infrastructure deficits (mean = 4.3/5) and multiple taxation (mean = 4.0/5) were identified as the most critical challenges. Access to finance significantly enhanced SME productivity (β = 0.22, p = 0.012).The study concludes that SMEs are pivotal drivers of Lagos State's economic development, with employment generation and GDP contribution being the strongest predictors. Addressing infrastructure gaps and simplifying taxation could significantly amplify SME contributions. Recommendations include establishing a dedicated SME Growth Fund, prioritizing infrastructure upgrades, and consolidating taxes into a single digital portal.