Chapter One — 1.1 Background to the Study

Non-Performing Loans has increasingly attracted the attention of researchers, regulators, and practitioners concerned with economic growth. This growing interest reflects the recognition that non-performing loans does not operate in isolation, but interacts with a wider set of institutional and market conditions found within Selected Small and Medium Enterprises in Nigeria.

Selected Small and Medium Enterprises in Nigeria presents a useful setting for examining this relationship precisely because the conditions there — structural, regulatory, and behavioural — differ from those typically assumed in the broader literature, most of which draws on evidence from more developed economies.

1.2 Statement of the Problem

While non-performing loans is widely discussed in policy and industry circles, empirical evidence on its actual effect on economic growth within Selected Small and Medium Enterprises in Nigeria remains sparse and, in places, contradictory. This lack of localized, rigorous evidence makes it difficult for decision-makers to know with confidence whether current approaches to non-performing loans are helping or hindering economic growth — a gap this study sets out to close.

1.3 Objectives of the Study

1. To examine the effect of Non-Performing Loans on economic growth in Selected Small and Medium Enterprises in Nigeria.
2. To assess the extent to which non-performing loans influences economic growth within the study area.
3. To identify the challenges associated with non-performing loans in relation to economic growth.
4. To recommend strategies for optimizing non-performing loans in order to improve economic growth.

1.4 Research Questions

1. What is the effect of non-performing loans on economic growth in Selected Small and Medium Enterprises in Nigeria?
2. To what extent does non-performing loans influence economic growth within the study area?
3. What challenges are associated with non-performing loans in relation to economic growth?
4. What strategies can be adopted to optimize non-performing loans in order to improve economic growth?

1.5 Significance of the Study

This study is significant to a range of stakeholders. For policymakers and regulators, the findings offer evidence to guide the design of frameworks that support healthier outcomes around economic growth. For managers and practitioners within Selected Small and Medium Enterprises in Nigeria, the study provides practical insight into how non-performing loans can be better managed. Finally, it contributes to the academic literature on finance / banking by extending existing knowledge into a specific empirical context, and offers a reference point for future researchers.

1.6 Scope of the Study

The study is limited to an examination of Non-Performing Loans and its relationship with economic growth within the context of Selected Small and Medium Enterprises in Nigeria. It reflects a BSc-level scope of analysis and relies on data and perspectives available within that scope; generalizing the findings beyond this specific context should therefore be done with appropriate caution.