Macro-Structural Obstacles to Firm Performance: Evidence from 2,640 Firms in Nigeria

IMF Working Papers, May 22, 2020

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Objective:
- Study firm characteristics associated with more access to finance and export diversification.
- Quantify the impact of these structural obstacles on firm performance.
Data:
- Sample: 2,640 firms (World Bank enterprise survey).

Firm characteristics:
- Larger and export-oriented firms are about 40 percentage points less likely to report access to finance as a business obstacle.
- Firms perceiving access to finance as a constraint are, on average, about 10-40 percentage points less likely to be export-oriented diversified firms.
Effects on firm performance:
- Better access to finance and export diversification can help firm employment — as much as 80 percent higher — and capacity utilization.
Robustness:
- Results are largely robust to different specifications and estimation methods.

Business environment constraints:
- Access to finance identified as the top constraint to Doing Business in Nigeria (per recent World Bank enterprise survey).
Implications for employment and production:
- Improvements in access to finance and export diversification are associated with substantial gains in employment and capacity utilization, including employment increases up to 80 percent.
Targeting interventions:
- Larger and export-oriented firms face materially lower perceived financing constraints (about 40 percentage points lower), suggesting firm size and export orientation mediate access to finance.