Financial intermediaries such as banks, acting as agents specifically fill the information gaps between ultimate savers and investors. The funds mobilized from numerous customers are aggregated and disbursed as credit facilities to the deficit sector usually the investors. These facilities in form of loans and advances facilitate the exploration and expansion of productive investment by small, medium and large scale industries. Thus, the study examines effect of banks’ intermediation role on performance of small scale enterprises in Nigeria. Expos-facto research design was used and the population of the study comprises all the deposit money banks operating in Nigeria as 31st December, 2017. This study used secondary data, extracted from the CBN Statistical Bulletin. The data are time series in nature which cover thirty-six years period from 1981 to 2016 and were analyzed through Vector Error Correction Mechanism. The study found that in the long run banks’ loan and advance and lending rate have positive significant effect on performance of small scale enterprises while the inflation rate has negative significant effect on performance of small scale enterprises in the long run. The study concluded banks intermediation role through granting of credit facility has a long-run effect on the performance of the small enterprises and this will enhance the Nigerian economy in the long run. The implication of this study is that an increase in the loan and advances in the long-run will promote more productive investment activities to increase capital formation in the country. In view of this, the study recommends that Central bank of Nigeria should adopt appropriate mechanism to control the inflation rate in the economy as this has a great effect on the loan and advances given to the small scale enterprises.

Banks’ Intermediation Role, VECM, Expos-Facto, Performance of Small Scale Enterprise